UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
x☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20192022
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
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)code: (312) 496-1200

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange On Which Registered
Common Stock, $0.01$.01 par valueHSII
The Nasdaq Stock Market LLC
(Nasdaq Global 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  x☒


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 ofor Section 15(d) of the Act.    Yes  ¨    No  x☒


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  x☒    No  ¨


Indicate by check mark whether the registrantRegistrant 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 Registrantregistrant was required to submit such files).    Yes  x☒    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 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 filerx
Non-Accelerated filer
¨
Accelerated Filer☒Smaller reporting company
¨
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  x☒


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, 201930, 2022 was approximately $484,944,428$523,971,000 based upon the closing market price of $29.97$32.36 on that date of a share of Common Stock as reported on the Nasdaq Global Stock Market. As of February 21, 2020,23, 2023, there were 19,170,35219,861,207 shares of the registrant'sCompany’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 28, 2020,25, 2023, 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.
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Item 1A.
712
Item 1B.
1219
Item 2.
1219
Item 3.
1219
Item 4.
1219
PART II
Item 5.
1320
Item 6.
1522
Item 7.
1622
Item 7A.
3136
Item 8.
3237
Item 9.
6572
Item 9A.
6572
Item 9B.
6673
Item 9C.
73
PART III
Item 10.
6774
Item 11.
6774
Item 12.
6774
Item 13.
6774
Item 14.
6774
PART IV
Item 15.
6875
Item 16.
7277
78


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Note About Forward-Looking Statements

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 factsor 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," 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, the following, as well as those discussed under the Section heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Factorsthat 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 and retain 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 increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted cyber-related attacks that could pose a risk to our systems, networks, solutions, services and data; the impacts, direct and indirect, of the COVID-19 pandemic (including the emergence of variant strains) or other highly infectious or contagious disease on our business, our consultants and employees, and the overall economy; the aggressive competition we face; the fact that our net revenue may be affected by adverse economic conditions including inflation, 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 risks of an expansion or escalation of that conflict; unfavorable tax law changes and tax authority rulings; the timing of the establishment or reversal of valuation allowance on 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 execute and integrate future acquisitions; and the fact that we have anti-takeover provisions that could 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.

PART I
ITEM 1. BUSINESS


Overview


Heidrick & Struggles International, Inc. (“Heidrick & Struggles”) is a human capital leadership advisory firm providing executive search, consulting and consultingon-demand talent services to businesses and business leaders worldwide.worldwide to help them 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 450approximately 460 consultants located in major cities around the world. Heidrick & Struggles and its predecessors have been a leadership advisor for more than 6065 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 globallyacross 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
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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 provides the opportunity for 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, recruiting senior executives whose first-year base salarybasis.

We employ a global approach to executive search built on better insights, more data and bonus averaged approximately $396,000faster 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 2019 on a worldwide basis.greater flexibility, increased productivity and the ability to deliver more insights to our clients.


The executive search industry is highly fragmented, consistingconsists 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;


•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. This segment represented less than 10% of our net revenue in 2022.

Heidrick Consulting. In 2018,As a complement and extension of our search services, we combined our Leadership Consulting and Culture Shaping businesses to createpartner with organizations through Heidrick Consulting to unlock the power of their people. Our tools and experts use data and technology 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 comprehensive offeringwhole.
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Heidrick Consulting offers our clients impactful approaches to human capital development through a myriad of the firm's leadership advisory services. Our consulting services includesolutions, ranging from leadership assessment and development, executive coaching and on-boarding, succession planning, team and board effectiveness, organizational performanceorganization acceleration, workforce planningdigital 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 continue to focus on increasing the scale and impact of our Heidrick Consulting business and expect to improve the operating margins of this important business as we do so. Our consulting services generate revenue

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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 in response to the hybrid work arrangements utilized by our clients around the world. This segment represented less than 10% of our net revenue in 2019.2022.

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;

Governmental, higher education and not-for-profit organizations; and

Other leading private and public entities.

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 Policy Regarding Director Independence Determinations, our Policy on Reporting of Concerns Regarding Accounting and Other Matters, our Corporate Governance Guidelines and our Code of Business Conduct and 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 Business Conduct and 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 executive 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.

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.


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 5455 offices in 28 countries.30 countries including our affiliates in 2022. 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. We face risks associated with political instability, legal requirements and currency fluctuations in our international operations. Examples of such risks include difficulties in managing global operations, social and political instability, legalregulations and regulatory requirements, potential adverse tax consequences and currency fluctuations in our international operations.consequences. For a more complete description of the risks associated with our business see the Section in this Form 10-K entitled “Item 1A - Risk“Risk Factors”.


In addition to our wholly owned subsidiaries during 2022, our worldwide network includesincluded an affiliate relationshipsrelationship in Finland,South Africa. In 2023, we have hired the employees and ended our affiliate relationship in South Africa and Turkey.while also adding a new affiliate in Ukraine. We have no financial investment in these affiliatesthis affiliate but receive licensing fees from them for the use of our name and our databases. Licensing fees arewere less than 1% of our net revenue.revenue in 2022.



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Segment Information.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 segment operatessegments operate globally.


Americas Executive Search. As of December 31, 2019,2022, we had 200203 consultants in our Americas segment. The largest offices in this segment, as defined by net revenue, are located in New York, Chicago, and Boston.


Europe Executive Search. As of December 31, 2019,2022, we had 107113 consultants in our Europe segment. The largest countries in this segment, as defined by net revenue, are the United Kingdom, France,Germany, and Germany.France.


Asia Pacific Executive Search. As of December 31, 2019,2022, we had 7374 consultants in our Asia Pacific segment. The largest countries in this segment, as defined by net revenue, are Australia, China (including Hong Kong), Australia, and Dubai.the United Arab Emirates.


On-Demand Talent. The largest countries in this segment, as defined by net revenue, are the United States and the United Kingdom.

Heidrick Consulting. As of December 31, 2019,2022, we had 7170 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 Dubai.France.


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The relative percentages of net revenue attributable to each segment were as follows:
 Year Ended December 31,
 202220212020
Executive Search
Americas57 %58 %58 %
Europe16 %17 %20 %
Asia Pacific11 %11 %13 %
On-Demand Talent9 %7 %— %
Heidrick Consulting7 %7 %9 %
  Year Ended December 31,
  2019 2018 2017
Executive Search      
Americas 58% 57% 55%
Europe 19% 20% 20%
Asia Pacific 14% 14% 14%
Heidrick Consulting 9% 9% 11%


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 practicesgroups listed below. These industry practicescategories and their relative sizes, as measured by billings for 2019, 20182022, 2021 and 2017,2020, are as follows:
Percentage of Billings
Global Industry Practices202220212020
Financial Services27 %27 %25 %
Global Technology & Services23 23 21 
Industrial20 20 20 
Consumer Markets16 15 17 
Healthcare & Life Sciences11 13 14 
Social Impact3 2 3 
100 %100 %100 %
  Percentage of Billings
Global Industry Practices 2019 2018 2017
Financial Services 26% 28% 27%
Industrial 21
 21
 18
Global Technology & Services 21
 20
 22
Consumer Markets 17
 16
 17
Healthcare & Life Sciences 12
 11
 12
Education, Non-Profit & Social Enterprise 3
 4
 4
  100% 100% 100%


Within each broad industry practicegroup 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.


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Our Global Functional Practices include Chief Executive Officer & Board of Directors; Human Resources Officers,Officers; Financial Officers; Information and Technology Officers,Officers; Legal, Risk, Compliance & Government Affairs,Affairs; Marketing, Sales and Strategy OfficersOfficers; and Supply Chain and Operations.


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.


Seasonality
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ThereClient Base

For many of our clients, our global access to and knowledge of regional and functional markets and candidate talent is no discernible seasonality inan important differentiator of our business, although as a percentagebusiness. Our clients generally fall into one of total annual net revenue, the first quarter typically generates less revenue than the other three quarters. Revenuefollowing categories:
•Fortune 1000 companies;

•Major U.S. and operating income have historically varied by quarternon-U.S. companies;

•Middle market and are hard to predict from quarter to quarter. In addition, the volatility in the global economyemerging growth companies;

•Private equity firms;

•Governmental, higher education and business cycles can impact our quarterly revenuenot-for-profit organizations; and operating income.


•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 clientsclient or to maintain strong client relationships, we may refrain from recruiting certain 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 fromtaking into account the commencementscope, size and length of a search. We seek to mitigate any adverse effects of these off-limits arrangements by strengthening our long-term relationships, allowingthe engagement, as well as the client relationship. Such restrictions allow us to communicatestrengthen and deepen our belief to prospectiveadvisory engagement with clients, and we believe they remain manageable given their tailoring, such that we cancontinue to be able to conduct searches effectively notwithstanding certain off-limits arrangements.


No single client accounted for more than 2%1% of our net revenue in 2019,2022, 2021 and no more than 3% in 2018 or 2017.2020. As a percentage of total revenue, our top ten clients in aggregate accounted for approximately 7% in 2019, 6% in 2018,2022, 2021 and 7% in 2017.2020.


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 technology infrastructure consistsHeidrick 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 internally developed databases containing candidate profiles and client records, coupled withadditional online services, industry reference sources, andtools including our Leadership Accelerator, Leadership Signature an internally developedand 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 tool. We use technologytools. In response to manageworking remotely, our Executive Search teams employed Heidrick Connect to operate effectively and share information on currentefficiently while engaging virtually with our clients. Additionally, we have introduced upgrades to Heidrick Connect, resulting in greater flexibility, increased productivity and potential clients and candidates,the ability to communicatedeliver more insights to both internal and external constituencies and to support administrative functions.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.

Professional Staff and Employees

Our professionals are generally categorized either as consultants or associates. Associates assist consultants by providing research support, coordinating candidate contact and performing other engagement-related functions. As of December 31, 2019, we had a headcount of 1,780, consisting of 451 consultants (380 related to Executive Search and 71 related to Heidrick Consulting), 591 associates and 738 other search, support and Global Operations Support staff.

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We promote our associates to consultants during the annual consultant promotion process, and we recruit our consultants from other executive search or human capital firms, or in the case of Executive Search, consultants new to search who have worked in industries or functions represented by our practices. In the latter case, these are often seasoned executives with extensive contacts and outstanding reputations who are entering the search profession as a second career and whom we train in our techniques and methodologies. Our Heidrick Consulting consultants are recruitedteams have pivoted to create new digital solutions for their executive business experience as well as their skillsLeadership Assessments, Team Acceleration, and
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Organization and Culture Acceleration that can be delivered virtually in consulting and leadership advisory and often are formerresponse to the hybrid work arrangements utilized by our clients who are familiar with our consulting methodology. We are not a party to any U.S.-based collective bargaining agreement, and we consider relations with our employees to be good.around the world.


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, internet-based firms and Internet-based firms.social media. Additionally, our clients or prospective clients may decide to perform executive searches using in-house personnel. Each firm with which we competeof the competitors 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 enable us to compete favorably with other executive search firms.


Competition in the leadership consulting and on-demand talent markets in which we operate is highly fragmented, with no universally recognized market leaders.


Seasonality

There is no discernible seasonality in our business. 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 Resources

As a premier provider of global leadership advisory services including executive search, consulting and on-demand talent services, people are at the center of all we do. Building a more diverse and inclusive firm is a strategic priority, and our culture is a key differentiator we have to attract, develop and retain the highest-performing talent.

Employee Summary. As of December 31, 2022, we employed 2,141 individuals, represented by 1,277 in the Americas, 563 in Europe, and 301 in Asia Pacific. Our headcount includes 460 consultants (390 related to Executive Search and 70 related to Heidrick Consulting), 615 associates and 1,066 other search, consulting, on-demand talent, support, and Global Operations Support employees.

Within Executive Search and Heidrick Consulting, our professionals are generally categorized either as consultants or associates. Associates assist consultants by providing research support, coordinating candidate contact and performing other engagement-related functions. We promote our associates to consultants during the annual consultant promotion process, initially to Principals and ultimately Partners, and we recruit our consultants from other executive search or human capital firms, or in the case of executive search, consultants new to search who have worked in industries or functions represented by our practices. In the latter case, these are often seasoned executives with extensive contacts and outstanding reputations who are entering the search profession as a second career and whom we train in our techniques and methodologies. Our Heidrick Consulting consultants are recruited for their executive business experience as well as their skills in consulting and leadership advisory and often are former clients who are familiar with our consulting methodology. We are not a party to any U.S. or non-U.S.-based collective bargaining agreement, and we consider relations with our employees to be good.

Diversity Equity and Inclusion (“DEI”). We believe our success is grounded in how we operate each and every day as individual professionals and, collectively, as a firm. Our commitment to DEI is a key strategic imperative that is deeply rooted in our organizational Values: Respect and value each individual; Grow with our clients; Win as one firm; Always act with integrity; and Own the results. These Values guide us in how we approach our business, how we treat our colleagues and clients, and how we help build trust and a common understanding of what we stand for and believe in as a firm.

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As part of this, we are committed to fostering an inclusive workforce, where all professionals from diverse backgrounds are represented, engaged and empowered to make meaningful contributions. Our long-term DEI commitments span multiple years and we hold ourselves accountable by measuring our own diversity and inclusion achievements year over year, closely monitoring and tracking our progress. Our commitment to hold ourselves accountable by measuring our own diversity and inclusion is demonstrated by our achievements as of December 31, 2022:

•Women represent 63% of our overall workforce, 64% of our new hires(1) for the year and 64% of our promotions globally for the year.

•People of color(2) represent 26% of our overall U.S. workforce, 33% of our new hires(1) for the year and 18% of our promotions for the year.

•43% of our Board of Directors members are women and 29% of its members are people of color, including three women, one Black man and one Asian man, our Chief Executive Officer.

•Our Management Committee, a global body, is 33% gender diverse, including ten women. This Committee is 20% racially/ethnically diverse, including two Black women, two Hispanic men and one Asian man.

•47% of the Chief Executive Officer's direct reports are women, including our Chief Human Resources Officer, Chief Legal Officer & Corporate Secretary and Global Managing Partner, Head of Search, Go-To-Market, co-head of our CEO & Board practice, and co-CEOs of our On-Demand Talent Business.

•Our Regional Leader, Americas is a Black woman; our Chief Diversity Officer is a Black woman; and our Regional Leader, Europe is a woman.

•The leaders of our Americas CEO & Board practice and global DEI practice are Black men; our Managing Partner, Culture Shaping is a Hispanic woman.

•The Managing Partner of our Global Technology & Services practice is a Hispanic man.

•Women lead our Corporate Officers, Chief Human Resources Officers and Financial Officers practices and two of our largest offices.

(1) Excludes temporary employees deployed to clients in our on-demand talent business
(2) United States employees only

Additional data measurements include the following statistics and inform our DEI strategic priorities towards our firm’s commitment to a diverse and inclusive workforce.

The following table summarizes diversity statistics of our employee population that are vice presidents(1) and above as of December 31, 2022:

GenderAge Group
Race/Ethnicity(2)
Male59%Under 30—%Asian6%
Female41%30-5060%Black or African-American3%
Over 5040%Hispanic or Latino2%
Two or More Races2%
White87%
(1) Includes consultants
(2) United States employees only

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The following table summarizes diversity statistics of our employee population that are below the vice president level as of December 31, 2022:

GenderAge Group
Race/Ethnicity(1)
Male30%Under 3032%Asian10%
Female70%30-5049%Black or African-American8%
Over 5019%Hispanic or Latino8%
Two or More Races4%
White70%
(1) United States employees only

Diversity, equity and inclusion are imperative for our internal culture and integral to driving our firm’s innovation and future growth. We have committed substantial time and resources to advance diversity in our workforce and create a culture of inclusion, where everyone feels valued and supported and encouraged to meaningfully contribute to our success through authentic participation. By cultivating a culture that brings the maximum range of ideas and experiences to our work with clients around the world, we believe we create better solutions for our clients’ business challenges and win as one firm.

In 2022, our DEI efforts were comprised of many initiatives, including:

•Appointed Cecilia Nelson-Hurt as Chief Diversity Officer to lead the firm’s employee-focused DEI strategy and deliver long-term, sustainable programs that build on our Values and commitment to creating the most diverse and inclusive global leadership advisory firm in the industry.

•Continued to support our Accelerating Women’s Excellence ("AWE") program as part of our ongoing commitment to promote gender parity in leadership roles and foster a strong culture of sponsorship by both men and women. In 2022, 52% of Partner promotions were women, and 63% of Principal promotions were women.

•Continued firm-wide DEI learning content through our Inclusive Culture Learning Journeys – a monthly collection of content for our employees to broaden their knowledge around the topics of diversity, inclusion and integrity. Each month, we introduced a new theme and shared relevant articles and learning resources focused on strengthening our inclusive culture and aligning with our Values.

•Our Employee Resource Groups ("ERGs") exemplify our people-first approach and represent a safe space for employees to promote and celebrate affinity and community while providing the firm a window into what the groups represented need. Each month the various ERGs at the Company offer educational programming and networking opportunities to engage and develop employees.

Employee Engagement. In June 2022, we launcheda new Voice of Employee pulse survey platform that offers employees the opportunity to regularly and confidentially share feedback on their experience at Heidrick & Struggles and provides our leaders with additional data on how they can best lead their teams. We use the tool to evaluate three areas of the employee experience: Engagement, Diversity & Inclusion, and Health & Wellbeing. Data from the surveys is shared anonymously with key leaders across geographies, practices and businesses. Additionally, the platform allows us to track our progress and better understand how we are doing in our efforts, while using others in the industry as benchmarks.

Learning & Development. 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 leadership, business development, account management, client service, and change leadership skills among our employees. In addition to building personal and professional capabilities, these programs set a standard for the behaviors we believe will help us realize our business goals and strategies.

In 2022, our Learning & Development team delivered over 17,900 hours of aggregate live training to our colleagues globally. Our programming was deployed in both virtual and in-person formats. Our learning catalog outlines dozens of live and virtual programs as well as thousands of eLearning courses designed to help build and enhance employee leadership, business acumen and business development skills. These programs are continually updated to reflect best practices and feedback received from employees.

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As we strive to build an unrivaled culture for high-performing talent at Heidrick & Struggles, our firm’s leaders continue to play a central role in this work, and we are further investing in our firm’s own leadership capabilities. This includes the launch of a new transformational leadership development program, which is designed to help our leaders maximize their impact in the rapidly evolving workplace and build upon existing leadership skills and experiences, focusing on resilience, vulnerability, trust, and living our firm’s values. In 2022, we launched six cohorts and 119 senior level employees went through the program. The program is a multi-year investment in our leadership that we plan to cascade across multiple cohort groups throughout the organization.

Participation in our Communities. We are proud members and eager participants in supporting the communities where we live and work. We know first-hand from our client work the positive effects that strong leaders can bring to both organizations and communities and encourage employees to contribute to our communities as well.

The Company formed a Global Philanthropic Committee in 2019 to establish a coordinated, global approach to supporting the philanthropic causes and endeavors that impact our employees, clients and communities. In 2022, employees participated in our 4th Global Day of Service where colleagues in over 40 offices around the world donated over 2,400 hours. We also support our employees who bring attention to philanthropic causes and organizations that they engage with independently.

Compensation and Benefits. Our goal is not only to challenge our employees to reach their potential professionally, and reward them for great work, but also to understand and consider their need to be simultaneously healthy, balanced and focused. We believe in fair compensation, based upon demonstrated capabilities and achievement, experience and superior performance. We place great importance on incentivizing, recognizing and rewarding performance and behaviors aligned with our Values in the form of discretionary bonus awards. Through our benefits program, we demonstrate commitment to fostering an environment in which employees are able to maintain a healthy work-life balance. Our benefits are administered on a country-by-country basis, so that benefits are comparable to other employers within each jurisdiction and our industry. We use several measures to ensure that our benefits offerings are up-to-date, competitive in the marketplace, and in line with employee needs, including employee surveys, benchmarking exercises, and other benefits measurement tools. Benefits offered to our employees may include annual leave and other paid time off, medical, dental and vision benefits, prescription drug benefits, flexible spending accounts, employee assistance programs, 401(k) and deferred compensation retirement programs, short and long-term disability insurance, critical illness insurance and life insurance.

Employee Health and Safety. We continue to focus on helping to ensure the health and safety of our employees, clients and the communities where we live and work around the globe. In late 2022, we expanded our flexible working philosophy to provide additional guidance to managers and employees across the Americas, Europe and Asia Pacific on our evolving approach to a hybrid work environment. Our employees have the flexibility to work remotely part of the week, with variations depending upon location and role, and we encourage teams to structure their schedules for a purposeful return to office. We are committed to ensuring our people can safely follow country- and state-level health guidance, while also having the opportunity to grow professionally and personally through in-person collaboration and development.

For our complete ESG story, the Company’s 2021 ESG Report can be found here: https://investors.heidrick.com/static-files/518a94ad-8473-4268-8cd2-a6665ac4d731. The information contained in the Company’s 2021 ESG Report, or otherwise on or connected to the Company’s website, is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the SEC.

Ethics. Employees are encouraged to speak to their colleagues and representatives in Legal and Human Resources whenever an ethical question or situation arises. We also have established the Heidrick & Struggles EthicsLine, a service that provides a mechanism for reporting alleged breaches of any legal or regulatory obligations, financial fraud, including with respect to accounting, internal controls and auditing, or any alleged violation of the Code of Ethics or corporate policies to the Company. The EthicsLine is a web-based and telephonic reporting hotline available to all Company employees, contractors, vendors, stockholders, clients, or other interested parties. The EthicsLine is administered by an independent third party that specializes in running whistleblower hotline programs for companies throughout the U.S. Calls are not recorded and callers may remain anonymous. The EthicsLine is operational 24 hours a day, seven days a week. To contact the EthicsLine, you may visit heidrick.ethicspoint.com or dial 800-735-0589 toll-free in the U.S. For outside the U.S. you may dial one of our local lines, 800 94 50 54 (France); 0800 1819941 (Germany); 0800 048 5486 (UK); or 704-731-7242 (Global).

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.sanctions, and classification of workers as
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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. In the U.S., California has adopted the California Consumer Privacy Act of 2018 (“CCPA”), which became effective January 1, 2020 and which provides a new private right of action for data breaches and requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices and allow consumers to opt out of certain data sharing with third parties. In addition, several other U.S. states are considering adopting laws and regulations imposing obligations regarding the handling of personal 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 European Union'sEU's and UK's General Data Protection Regulation ("GDPR") which became effective on May 25, 2018.. We have a GDPR complianceglobal privacy program to facilitate our ongoing efforts to comply with global privacy regulations, including GDPR regulations.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 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”). The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. 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 Clawback Policy, 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.

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.


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Company Risks

Operational Risks

We depend on attracting, integrating, developing, managing, and retaining qualified consultants and senior leaders.


Our success depends upon our ability to attract, develop, integrate, develop, manage and retain quality consultants with the skills and experience necessary to fulfill our clients’ needs and achieve our operational and financial goals. Our ability to hire and retain 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, and to manage the performance of our consultants.

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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. There is also a risk that unanticipated turnover in senior leadership could stall companyCompany activity, interrupt strategic vision or lower productive output, any of which may adversely affect our business, financial condition and results of operations.


We may not be able to prevent our consultants from taking our clients with them to another firm.


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.


Our success depends on our ability to maintain our professional reputation and brand name.


We depend on our overall professional reputation and brand name recognition to secure new engagements and hire 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. If any factor, including poor performance or the loss of relevant thought leadership, hurts our reputation we may experience difficulties in competing successfully for both new engagements and qualified consultants. Failure to maintain our professional reputation and brand name could adversely affect our business, financial condition and results of operations.

Our net revenue may be affected by adverse economic conditions.

Demand for our services is affected by global economic conditions and the general level of economic activity in the geographic regions in which we operate. During periods of slowed economic activity many companies hire fewer permanent employees, and our business, financial condition and results of operations may be adversely affected. If unfavorable changes in economic conditions occur, our business, financial condition and results of operations could suffer.


Because certain of our clients mayhave arrangements that restrict us from recruiting their employees, we may be unableare constrained in our ability to fill or obtain new executive search assignments.assignments in certain cases.


Clients frequently require us to refrain from recruiting certain of their employees when conducting executive searches on behalf of other clients. These restrictions generally remain in effect for no more than one year following the commencement of an engagement. However, theoften 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 could hinder us from fulfillingcreate 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.


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We rely heavily on information management systems.

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, obsolescence and inadequacy. 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 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 and profitability.

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 and increased expenditures for research and development. 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. 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.

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 and increased costs, which could materially and adversely affect our reputation and our business.

Legal, Regulatory and Compliance Risks

We face the risk of liability in the services we perform.

We are exposed to potential claims with respect to the executive search process. A client could assert a claim for violations of off-limits arrangements, breaches of confidentiality agreements or professional malpractice. In addition, candidates could assert claims against us. Possible claims include failure to maintain the confidentiality of the candidate’s employment search or personal data or for 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. In various countries, we are subject to data protection laws impacting the processing of candidate and client
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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 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 on-demand 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 misclassification 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.

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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. Furthermore, the Company's hybrid work arrangements may make it more vulnerable to targeted activity from cybercriminals and may increase the risk of cyberattacks or other security breaches. We have a program in place designed to detect and respond to data security incidents. However, we remain potentially 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 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 cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action which could result in a negative impact to our results of operations.

Industry and General Economic Risks

A worsening of the ongoing COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, could adversely impact or cause disruption to our business, financial condition, results of operations and cash flows. Further, the COVID-19 pandemic has caused severe disruptions in the U.S. and global economy, may further disrupt financial markets and could potentially create widespread business continuity issues.

The global COVID-19 pandemic and actions taken in response, such as stay-at-home orders, travel restrictions, vaccine mandates and testing requirements, have created significant volatility, uncertainty and economic disruption. Beginning in the 2020 second quarter, we experienced a decline in demand for our executive search and consulting services, a lengthening of the executive search process due to a slow-down in client decision making and an inability to execute in-person consulting engagements, which negatively impacted our results of operations. The sustained economic downturn resulted in the impairment of the goodwill in our Europe and Asia Pacific reporting units. In 2021 and 2022, our results of operations were not materially impacted by the pandemic, however, the extent to which any future worsening of the pandemic (such as future resurgences or the emergence of new variant strains of the COVID-19 virus) might impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including the impact of the pandemic and actions taken in response on our operations, the effect on our clients’ businesses and their demand for our services, supply chain disruptions, travel restrictions, and the general level of economic activity in the countries which we operate.

The impact of a worsening of the COVID-19 pandemic may also exacerbate other risks discussed herein, any of which could have a material effect on us. The ultimate effect that a worsening of the COVID-19 pandemic or other similar outbreaks of highly contagious or infectious diseases may have on our business, financial condition or results of operations is not presently known to us or may present unanticipated risks that cannot be determined at this time.

We face aggressive competition.


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 Internet-based 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.requirements, and our new products and services could encounter significant competition from more mature participants in those areas.


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 Internet-based 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. Our
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inability to meet these competitive challenges could have an adverse effect on our business, financial condition and results of operations.

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We rely heavily on information management systems.


Our success depends upon our ability to store, retrieve, processnet revenue and manage substantial amounts of information. To achieve our goals, we must continue to improve and upgrade our information management systems. Weoperating expenses may be unableaffected by adverse economic conditions including inflation.

Demand for our services is affected by global economic conditions and the general level of economic activity in the geographic regions in which we operate. During periods of slowed economic activity many companies hire fewer permanent employees, choose to license, designrely on their own human resources departments rather than third-party search firms to find talent or cut back on human resource initiatives, all of which negatively affect our financial condition and implement,results of operations. We also may experience more competitive pricing pressure during periods of economic decline. If unfavorable changes in a cost-effective and timely manner, improved information systems that allow us to compete effectively. In addition, business process reengineering efforts may result in a change in 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. 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 affecteconomic conditions occur, our business, financial condition and results of operations.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.


We faceA significant currency fluctuation between the risk of liabilityU.S. dollar and other currencies could adversely impact our operating income.

With our operations in the servicesAmericas, Europe and Asia Pacific, we perform.

We are exposed to potential claims with respect to the executive search process. A client could assert a claim for violations of off-limits arrangements, breaches of confidentiality agreements or professional malpractice. The growth and developmentconduct business using various currencies. In 2022, approximately 34% of our consulting services brings with itnet revenue was generated outside the potential for new typesUnited 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 claims. In addition, candidates and client employees could assert claims against us. Possible claims include failure to maintainour subsidiaries, our profitability may be impacted by the confidentialitytranslation 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 candidate’s employment search or for discrimination or other violations of the employment laws or malpractice. In various countries, we are subject to data protection laws impacting the processing of candidate 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 claims or that coverage will always be available. Significant uninsured liabilitiesU.S. dollar against foreign currencies, could have a negative impactan adverse effect on our business, financial condition and results of operations. Currency fluctuations negatively impacted our net revenues and operating income by 3% and 4%, respectively, for the year ended December 31, 2022.


Data security, data privacy and data protection laws, such as GDPR and CCPA , and other evolving regulations and cross-border data transfer restrictions, may limitOur ability to access additional credit could be limited.

Banks can be expected to strictly enforce the useterms of our services and adversely affect our business.

Wecredit agreement. Although we are or may become subject to a variety of laws and regulationscurrently in compliance with the European Union (including GDPR), United States (including CCPA) and abroad regarding data privacy, protection and security. As these laws continue to evolve, we may be required to make changes to, or eliminate altogetherfinancial covenants of our services, solutions and/or products so as to enable the Company and/orrevolving credit facility, a deterioration of economic conditions may negatively impact our clients to meet the new legal requirements, including by taking on more onerous obligationsbusiness resulting in our contracts, limiting or eliminating our storage, transfer and processing of data and, in some cases, limiting or eliminating our service and/or solution offerings in certain locations. Changes in these laws may also increase our potential exposure through significantly higher potential penalties for non-compliance or limitations on the use or transfer of data. The costs of compliance with, and other burdens imposed by, such laws and regulations and client demands in this area may limit the use of, or demand for, our services, solutions and/or products, 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 ofthese covenants, which could inhibit sales oflimit our services, solutions and/ability to borrow funds under our credit facility or products.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, political, regulatory, legal and economic and public health risks.


We generate substantial revenue outside the United States. We offer our services through a global network of offices in 29 countries around the world.world excluding our affiliates. Our ability to effectively serve our clients is dependent upon our ability to successfully leverage our operating model across our existingall 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. We could also be adversely affected by

The ongoing war in Ukraine has had a public health epidemic,number of adverse effects for businesses including the recent outbreaka worsening of coronaviruseconomic conditions in China.  ConsequencesEurope 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 the coronavirus outbreak have included disruptions or restrictions on our ability to travel and temporary closures our China offices.  Our business, financial condition and results of operations could suffer to the extent that the coronavirus outbreak harms the Chinese economy in general.

9


A significant currency fluctuation between the U.S. dollar and other currencies could adversely impact our operating income.

WithUkraine, we ceased our operations in the Americas, Europe and Asia Pacific, we conduct business using various currencies. In 2019, approximately 40%Russia, which represented an immaterial amount of our net revenue was generated outsidetotal revenue. There is substantial uncertainty about the United States. As we typically transact business infuture impact of this war and 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 valueresponse of the U.S. dollar against foreign currencies,international community on the European economy and the global economy generally, including the risk that the conflict 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 ana material adverse effect on our business financial condition and operating results, particularly our European and Asia Pacific operations. In addition, the continuation
17


or extent to which the Russia-Ukraine war may intensify or expand could exacerbate or heighten many of operations.the other risk factors described in this section.

We may not be able to align our cost structure with net revenue.

We must ensure that our costs and workforce continue to be in proportion to demand for our services. Failure to align our cost structure and headcount with net revenue could adversely affect our business, financial condition and results of operations.


Unfavorable tax law changes and tax authority rulings may adversely affect 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.

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 potential 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.

We may experience impairment of our goodwill, other intangible assets and other long-lived assets.


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. Beginning in the second quarter of 2020, in connection with the emergence of the COVID-19 pandemic, we experienced a decline in demand for our executive search and consulting services, a lengthening of the executive search process due to a slow-down in client decision making and an inability to execute in-person consulting engagements, which had a material adverse impact on our results of operations. As a result, we identified a triggering event and performed an interim goodwill impairment evaluation during the three months ended June 30, 2020 resulting in impairment charges of $24.5 million and $8.5 million, to write off all of the goodwill associated with the Europe and Asia Pacific reporting units, respectively. 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.operations, including our recent acquisitions of Business Talent Group and Atreus Group GmbH. The process of executing and integrating an acquired business may subjectsubjects us to a number of risks, including:

•diversion of management attention;


•failure to successfully further develop the acquired business;


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•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;



10


•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 BylawsBy-laws and the laws of Delaware, lawsour 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 BylawsBy-laws include:


limitations on the removal of directors;

•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.


Our ability to access additional credit could be limited.

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.

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.

Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. We have a program in place to detect and respond to data security incidents. However, we remain potentially 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 such information or systems, we may be vulnerable to security breaches, ransomware, theft, lost data, employee errors and/or malfeasance that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems or networks, unauthorized access, use, disclosure, modification or destruction of information. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action which could result in a negative impact to our results of operations.

The expansion of social media platforms presents new risks and challenges that can cause damage to our brand and reputation.
There has been a marked increase in the use of social media platforms, including weblogs (or blogs), social media websites and other forms of Internet-based communications, which allow individuals access to a broad audience of consumers and other interested persons. The inappropriate and/or unauthorized use of such media vehicles by our clients or employees could increase our costs, cause damage to our brand, lead to litigation or result in information leakage, including the improper collection and/or dissemination of personally identifiable information of candidates and clients. In addition, negative or inaccurate posts or comments about us on any social networking platforms could damage our reputation, brand image and goodwill.


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ITEM 1B. UNRESOLVED STAFF COMMENTS


None.


ITEM 2. PROPERTIES


Our corporate headquarters is located in Chicago, Illinois. We have leased office space in 5154 cities in 2529 countries around the world. All of our offices are leased. We do not own any real estate. The aggregate office space under lease was 460,263 square feet as of December 31, 2019. Our office leases callWe believe our existing facilities are in good operating condition and are suitable for our current needs. We do not anticipate any significant difficulty replacing such facilities or locating additional facilities to accommodate future minimum lease payments of approximately $120.6 million and have terms that expire between 2020 and 2030, exclusive of renewal options that we can exercise.growth.


Our office space by geographic segment as of December 31, 2019 is as follows:
Square
Footage
Americas259,661
Europe111,337
Asia Pacific89,265
Total460,263

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.


ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.



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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 Global Stock marketMarket under the symbol "HSII"“HSII”.


Holders of Record

As of February 15, 2023, we had 46 holders of record of our common stock and 19,861,207 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 118 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, 2014.2017.


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.
a5yeargraph.jpg

hsii-20221231_g1.jpg
* AssumingAssumes $100 invested on 12/31/1417 in HSII or index, including reinvestment of dividends.
Prepared by: Zacks Investment Research, Inc.
Copyright:Index Data - Copyright Standard and Poor’s,Poor's, Inc. Used with permission. All rights reserved.


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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. Beginning with the dividend paid on March 22,In 2019, we began paying a quarterly cash dividend of $0.15 per share as approved by our Board of Directors. In 2019,2022, the total cash dividend paid was $0.60 per share.


In February 2020,2023, our Board of Directors approved a quarterly dividend of $0.15 per share on our common stock which will be paid on March 20, 202024, 2023 to shareholders of record as of March 6, 2020.10, 2023. 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 20192022 and 2018,2021, we paid $0.4$0.6 million and $0.2$0.7 million, respectively, in dividend equivalent payments.


Issuer Purchases of Equity Securities


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.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. We did not repurchase any shares of our common stock in 2019.2022 or 2021. The most recent purchase of shares of common stock occurred during the year ended December 31, 2012. As of December 31, 2019,2022, we have purchased 1,038,670 shares of our common stock pursuant to the Repurchase Authorization for a total of $28.3 million and $21.7 million remains available for future purchases under the authorization.Repurchase Authorization.

Unregistered Sales of Equity Securities

During the year ended December 31, 2019, we issued 38,553 shares of our common stock as partial consideration for our acquisition of 2GET Holdings Limited as described in Note 8, Acquisitions. The shares were issued in reliance on Section 4(a)(2) of the Securities Act of 1933 as a transaction not involving any public offering.




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21




ITEM 6. SELECTED FINANCIAL DATARESERVED


The selected financial data presented below has been derived from our audited consolidated financial statements. The data as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017, is derived from the audited current and historical consolidated financial statements, which are included elsewhere in this Form 10-K. Other than noted below, the data as of December 31, 2017, 2016 and 2015, and for the years ended December 31, 2016 and 2015, are derived from audited historical consolidated financial statements, which are not included in this report. The data set forth is qualified in its entirety by, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the audited consolidated financial statements, the notes thereto, and the other financial data and statistical information included in this Form 10-K.
  Year Ended December 31,
  2019 2018 2017 2016 2015
  (in thousands, except per share and other operating data)
Statements of Operations Data:          
Revenue:          
Revenue before reimbursements (net revenue) $706,924
 $716,023
 $621,400
 $582,390
 $531,139
Reimbursements 18,690
 19,632
 18,656
 18,516
 17,172
Total revenue 725,614
 735,655
 640,056
 600,906
 548,311
Operating expenses:          
Salaries and benefits 501,791
 506,349
 434,219
 400,070
 369,385
General and administrative expenses 137,492
 140,817
 147,316
 147,087
 127,692
Impairment charges (1) —
 —
 50,722
 —
 —
Restructuring charges (2) 4,130
 —
 15,666
 —
 —
Reimbursed expenses 18,690
 19,632
 18,656
 18,516
 17,172
Total operating expenses 662,103
 666,798
 666,579
 565,673
 514,249
Operating income (loss) 63,511
 68,857
 (26,523) 35,233
 34,062
Non-operating income (expense):          
Interest, net 2,880
 1,141
 385
 244
 (122)
Other, net 2,898
 494
 (3,280) 2,289
 (2,386)
Net non-operating income (expense) 5,778
 1,635
 (2,895) 2,533
 (2,508)
Income (loss) before income taxes 69,289
 70,492
 (29,418) 37,766
 31,554
Provision for income taxes 22,420
 21,197
 19,217
 22,353
 14,422
Net income (loss) $46,869
 $49,295
 $(48,635) $15,413
 $17,132
Basic weighted average common shares outstanding 19,103
 18,917
 18,735
 18,540
 18,334
Diluted weighted average common shares outstanding 19,551
 19,532
 18,735
 18,939
 18,715
Basic net income (loss) per common share $2.45
 $2.61
 $(2.60) $0.83
 $0.93
Diluted net income (loss) per common share $2.40
 $2.52
 $(2.60) $0.81
 $0.92
Cash dividends paid per share $0.60
 $0.52
 $0.52
 $0.52
 $0.52
Balance Sheet Data (at end of period):          
Working capital (3) $149,140
 $131,916
 $77,998
 $77,838
 $79,533
Total assets (3) 844,173
 700,629
 587,204
 581,502
 572,718
Long-term debt, less current maturities —
 —
 —
 —
 —
Stockholders’ equity 309,115
 267,156
 212,705
 258,590
 254,802

(1)
Includes impairment charges of $50.7 million related to Heidrick Consulting in 2017 (See Note 9, Goodwill and Other Intangible Assets).
(2)
Includes restructuring charges of $4.1 million and $15.7 million in 2019 and 2017, respectively. The 2019 charges primarily consist of employee-related costs associated with severance arrangements. The 2017 charges consist of $13.1 million of employee-related costs associated with severance arrangements, $2.3 million in professional fees and other expenses and $0.3 million in real estate related expenses (See Note 15, Restructuring).
(3)
As adjusted for the adoption of ASU No. 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes in 2015.


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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. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Forward-looking statements are not historical facts, 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. 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 Form 10-K.

Factors that may affect the outcome of the forward-looking statements include, among other things, leadership changes, our ability to attract, integrate, develop, manage and retain 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; the fact that our net revenue may be affected by adverse economic conditions; our clients’ ability to restrict us from recruiting their employees; the aggressive competition we face; our heavy reliance on information management systems; 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; social, political, regulatory and legal risks in markets where we operate; the impact of foreign currency exchange rate fluctuations; the fact that we may not be able to align our cost structure with net revenue; unfavorable tax law changes and tax authority rulings; our ability to realize our tax losses; the timing of the establishment or reversal of valuation allowance on deferred tax assets; any impairment of our goodwill, other intangible assets and other long-lived assets; our ability to execute and integrate future acquisitions; the fact that we have anti-takeover provisions that make an acquisition of us difficult and expensive; our ability to access additional credit; and the increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted cyber-related attacks that could pose a risk to our systems, networks, solutions, services and data. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 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 20192022 and 2018. for2021. For the discussion of changes from 20172020 to 20182021 and other financial information related to 2017,2020, 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, 2018. This document was 2021 asfiled with the SEC on February 26, 2019.28, 2022.


Executive Overview


Our Business


We are a human capital leadership advisory firm providing executive search, on-demand talent and consulting services. We 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.


In additionOur On-Demand Talent business is a market-leader in sourcing high-end, on-demand independent talent and provides clients seamless, on-demand access to executivetop 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 provide consulting services including executive leadership assessment, leadership, teampartner with organizations through Heidrick Consulting to unlock the power of their people. Our tools and boardexperts use data and technology to bring science to the art of human capital development succession planning, talent strategy, people performance, inter-team collaboration, culture shaping and organizational transformation.design. Our services allow our clients to accelerate their strategies and the effectiveness of individual leaders, teams and organizations as a whole.


We provide our services to a broad range of clients through the expertise of over 450approximately 460 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.



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.
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Key Performance Indicators


We manage and assess our performance through various means, with primary financial and operational measures including net revenue, operating income, operating margin, Adjusted EBITDA (non-GAAP) and Adjusted EBITDA margin (non-GAAP). Executive Search and Heidrick Consulting performance is also measured using consultant headcount. Specific to Executive Search, confirmationconfirmed 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 and consulting projects and the average revenue per search or project. With the exception of compensation expense and cost of services, incremental increases in revenue do not necessarily result in proportionate increases in costs, particularly operating and administrative expenses, thus creating the potential to improve operating 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 and operating margin.


Our Compensation Model

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At the Executive Search 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 an executive searcha 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 Executive Search consultants and accrue variable compensation accordingly. The amount of variable compensation that is accrued for each Executive Search 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 our Company as expense.

At the Heidrick Consulting consultant level, there are also fixed and variable components of compensation. Overall compensation is determined based on the total economic contribution of the Heidrick Consulting segment to the business as a whole. Individual consultant compensation can vary and is derived from credits earned for delivering client work plus credits earned for contributions of intellectual and human capital, client relationship development and consulting practice development. Each quarter, we review and update the expected annual performance of all Heidrick Consulting consultants and accrue variable compensation accordingly.


The mix of individual consultants who generate revenue in Executive Search and economic contributions in Heidrick Consulting 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.


AHistorically, a portion of our Executive Searchthe Company’s consultants’ and management cash bonuses iswere 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 iswas recognized on a graded vesting attribution method over the requisite service period. This service period beginsbegan on January 1 of the respective fiscal year and continuescontinued through the deferral date, which coincidescoincided with ourthe Company’s bonus payments in the first quarterhalf 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.


2019In 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, will continue to be 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.

2022 Overview


Consolidated net revenue was $706.9 million for the year ended December 31, 2019, a decrease of $9.1increased $70.5 million, or 1.3%7.0%, compared to 2018.$1.1 billion in 2022 from $1.0 billion in 2021. Foreign exchange rates negatively impacted results by $31.1 million, or 3.1%. Executive Search net revenue was $646.4$901.9 million in 2019, a decrease2022, an increase of $6.5$33.2 million, or 3.8%, compared to 2018.2021. The decreaseincrease in Executive Search net revenue was the result of declines in Europe and Asia Pacific, partially offset by growthprimarily due to an increase in the Americas. Ouraverage revenue per executive search compared to the prior year. On-Demand Talent net revenue was $91.3 million in 2022, an increase of $24.7 million, or 37.1%, compared to 2021. The increase in On-Demand Talent revenue was primarily due an increase in the volume of on-demand projects and the timing of the acquisition of 2GetBusiness Talent Group, LLC ("BTG") in September 2019 also contributedthe prior year. Heidrick Consulting net revenue was $80.2 million in 2022, an increase of $12.6 million, or 18.6%, compared to Executive Search net revenue. 2021. The increase in Heidrick Consulting revenue was primarily due to a 20.9% increase in the number of consulting engagements compared to the prior year.

The number of Executive Search and Heidrick Consulting consultants was 380390 and 70, respectively, as of December 31, 2019,2022, compared to 353365 and 69, respectively, as of December 31, 2018.2021. Executive Search productivity, as measured by annualized net Executive Search revenue per consultant, was $1.7$2.3 million and $1.9$2.4 million for the years ended December 31, 20192022 and 2018,2021, respectively. The number of confirmed searchesExecutive search confirmations decreased 4.6% in 20195.3% compared to 2018.2021. The average revenue per executive search increased to $132,000$143,600 in 20192022 compared to $127,300$131,000 in 2018. Heidrick Consulting net revenue decreased $2.6 million, or 4.1%, to $60.6 million in 2019, from $63.1 million in 2018. The number of Heidrick Consulting consultants was 71 as of December 31, 2019, compared to 66 as of December 31, 2018.the prior year.


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Operating income as a percentage of net revenue was 9.0%10.5% in 2019,2022, compared to 9.6%9.8% in 2018.2021. The change in operating income was primarily due to a decreasean increase in net revenue of $9.1$70.5 million, and $4.1 million ofa decrease in restructuring charges in 2019,of $3.8 million, partially offset by decreasesthe addition of research and development costs of $20.4 million, and increases in salaries and benefits expense, and general and administrative expenseexpenses, and cost of $4.6services of $20.0 million, $1.9 million, and $3.3$17.9 million, respectively. Salaries and benefits expense as a percentage of net revenue was 71.0%68.7% in 2019 and 70.7%2022, compared to 71.5% in 2018.2021. General and administrative expense as a percentage of net revenue was 19.4%12.4% in 2019 and 19.7%2022, compared to 13.0% in 2018.2021. Cost of services expense as a percentage of net revenue was 6.6% in 2022, compared to 5.3% in 2021.


We ended the year with combined cash, cash equivalents, and marketable securities of $332.9$621.6 million, an increase of $53.0$76.4 million compared to $279.9$545.2 million at December 31, 2018. The increase was primarily due to the strong cash inflows from operations partially offset by acquisition spend and larger bonus payments year-over-year.2021. We pay the majority of bonuses in the first quarterhalf of the year following the year in which they were earned. Employee bonuses are accrued throughout the year and are based on the
23


Company’s performance and the performance of the individual employee. We expect to pay approximately $205.0$414.4 million in bonuses related to 20192022 performance in March and April 2020.2023. In January 2020,2023, we paid approximately $17.1$7.6 million in cash bonuses deferred fromin prior years.


20202023 First Quarter Outlook


We are currently forecasting 2020The Company expects 2023 first quarter consolidated net revenue of between $165$235 million and $175 million. Our 2020 first quarter guidance$255 million, while acknowledging that some continued fluidity in external factors such as foreign exchange and interest rate environments, foreign conflicts, inflation and macroeconomic constraints on pricing actions may impact quarterly results. In addition, this outlook is based upon,on the average currency rates in December 2022 and reflects, among other things, management’sfactors, management's assumptions for the anticipated volume of new executive searchExecutive Search confirmations, On-Demand Talent projects, and leadership consulting and culture shaping projects, the current backlog,Heidrick Consulting assignments, consultant productivity, consultant retention, and the seasonality of our business and average currency rates from December 2019.current backlog.


Our 20202023 first quarter guidance is subject to a number of risks and uncertainties, including those disclosed under "Item 1A - Risk"Risk Factors" and in this "Management’s Discussion and Analysis of Financial Condition and Results of Operations". included in this Form 10-K. As such, actual results could vary from these projections.



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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,
 202220212020
Revenue
Revenue before reimbursements (net revenue)$1,073,464 $1,003,001 $621,615 
Reimbursements10,122 5,473 7,755 
Total revenue1,083,586 1,008,474 629,370 
Operating expenses
Salaries and benefits737,430 717,411 450,424 
General and administrative expenses132,678 130,749 116,982 
Cost of services70,676 52,785 4,396 
Research and development20,414 — — 
Impairment charges(1)
— — 32,970 
Restructuring charges(2)
— 3,792 52,372 
Reimbursed expenses10,122 5,473 7,755 
Total operating expenses971,320 910,210 664,899 
Operating income (loss)112,266 98,264 (35,529)
Non-operating income (expense)
Interest, net5,337 302 204 
Other, net(2,367)7,463 3,927 
Net non-operating income2,970 7,765 4,131 
Income (loss) before taxes115,236 106,029 (31,398)
Provision for income taxes35,750 33,457 6,309 
Net income (loss)$79,486 $72,572 $(37,707)
Weighted-average common shares outstanding
Basic19,758 19,515 19,301 
Diluted20,618 20,296 19,301 
Earnings (loss) per common share
Basic$4.02 $3.72 $(1.95)
Diluted$3.86 $3.58 $(1.95)
Cash dividends paid per share$0.60 $0.60 $0.60 
  Year Ended December 31,
  2019 2018 2017
Revenue      
Revenue before reimbursements (net revenue) $706,924
 $716,023
 $621,400
Reimbursements 18,690
 19,632
 18,656
Total revenue 725,614
 735,655
 640,056
Operating Expenses      
Salaries and benefits 501,791
 506,349
 434,219
General and administrative expenses 137,492
 140,817
 147,316
Impairment charges (1) —
 —
 50,722
Restructuring charges (2) 4,130
 —
 15,666
Reimbursed expenses 18,690
 19,632
 18,656
Total operating expenses 662,103
 666,798
 666,579
Operating income (loss) 63,511
 68,857
 (26,523)
Non-operating income (expense)      
Interest, net 2,880
 1,141
 385
Other, net 2,898
 494
 (3,280)
Net non-operating income (expense) 5,778
 1,635
 (2,895)
Income (loss) before taxes 69,289
 70,492
 (29,418)
Provision for income taxes 22,420
 21,197
 19,217
Net income (loss) $46,869
 $49,295
 $(48,635)
Basic weighted average common shares outstanding 19,103
 18,917
 18,735
Diluted weighted average common shares outstanding 19,551
 19,532
 18,735
Basic net income (loss) per common share $2.45
 $2.61
 $(2.60)
Diluted net income (loss) per common share $2.40
 $2.52
 $(2.60)
Cash dividends paid per share $0.60
 $0.52
 $0.52


(1)
Includes impairment charges of $50.7 million related to Heidrick Consulting in 2017 (See Note 9, Goodwill and Other Intangible Assets).
(2)
Includes restructuring charges of $4.1 million in 2019 and $15.7 million in 2017. The 2019 charges consist primarily of employee-related costs associated with severance arrangements. The 2017 charges consist of $13.1 million of employee-related costs associated with severance arrangements, $2.3 million in professional fees and other expenses and $0.3 million in real estate related expenses (See Note 15, Restructuring).

(1)Includes goodwill impairment charges of $33.0 million related to Europe and Asia Pacific in 2020 (See Note 9, Goodwill and Other Intangible Assets).





(2)The 2021 restructuring charges include $3.9 million in the Americas and $0.4 million in Heidrick Consulting, partially offset by restructuring reversals of $0.1 million in Europe, $0.1 million in Asia Pacific, and $0.2 million in Global Operations Support. The 2020 restructuring charges include $30.5 million in the Americas, $8.6 million in Europe, $4.6 million in Asia Pacific, $4.7 million in Heidrick Consulting, and $4.0 million in Global Operations Support. (See Note 15, Restructuring).
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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,
 202220212020
Revenue
Revenue before reimbursements (net revenue)100.0 %100.0 %100.0 %
Reimbursements0.9 0.5 1.2 
Total revenue100.9 100.5 101.2 
Operating expenses
Salaries and benefits68.7 71.5 72.5 
General and administrative expenses12.4 13.0 18.8 
Cost of Services6.6 5.3 0.7 
Research and development1.9 — — 
Impairment charges— — 5.3 
Restructuring charges— 0.4 8.4 
Reimbursed expenses0.9 0.5 1.2 
Total operating expenses90.5 90.7 107.0 
Operating income (loss)10.5 9.8 (5.7)
Non-operating income (expense)
Interest, net0.5 — — 
Other, net(0.2)0.7 0.6 
Net non-operating income0.3 0.8 0.7 
Income (loss) before income taxes10.7 10.6 (5.1)
Provision for income taxes3.3 3.3 1.0 
Net income (loss)7.4 %7.2 %(6.1)%
  Year Ended December 31,
  2019 2018 2017
Revenue:      
Revenue before reimbursements (net revenue) 100.0% 100.0% 100.0 %
Reimbursements 2.6
 2.7
 3.0
Total revenue 102.6
 102.7
 103.0
Operating expenses:     
Salaries and benefits 71.0
 70.7
 69.9
General and administrative expenses 19.4
 19.7
 23.7
Impairment charges —
 —
 8.2
Restructuring charges 0.6
 —
 2.5
Reimbursed expenses 2.6
 2.7
 3.0
Total operating expenses 93.7
 93.1
 107.3
Operating income (loss) 9.0
 9.6
 (4.3)
Non-operating income (expense)   
 
Interest, net 0.4
 0.2
 0.1
Other, net 0.4
 0.1
 (0.5)
Net non-operating income (expense) 0.8
 0.2
 (0.5)
Income (loss) before income taxes 9.8
 9.8
 (4.7)
Provision for income taxes 3.2
 3.0
 3.1
Net income (loss) 6.6% 6.9% (7.8)%


Note: Totals and subtotals may not equal the sum of individual line items due to rounding.





























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26




We operate ourThe 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 we operate ourthe Heidrick Consulting businessand On-Demand Talent businesses operate globally (See Note 18, Segment Information).


The following table sets forth, for the periods indicated, our revenue and operating income by segment (in thousands):
 Year Ended December 31,
 202220212020
Revenue
Executive Search
Americas$612,881 $581,440 $361,416 
Europe176,275 170,312 124,243 
Asia Pacific112,766 117,008 79,511 
Total Executive Search901,922 868,760 565,170 
On-Demand Talent91,349 66,636 — 
Heidrick Consulting80,193 67,605 56,445 
Revenue before reimbursements (net revenue)1,073,464 1,003,001 621,615 
Reimbursements10,122 5,473 7,755 
Total revenue$1,083,586 $1,008,474 $629,370 
Operating income (loss)
Executive Search
Americas(1)
$164,225 $142,040 $62,806 
Europe(2)
19,274 18,424 (22,827)
Asia Pacific(3)
18,687 18,167 (6,724)
Total Executive Search202,186 178,631 33,255 
On-Demand Talent(4)
(3,361)(9,272)— 
Heidrick Consulting(5)
(7,155)(16,162)(28,369)
Total segments191,670 153,197 4,886 
Research and development(20,414)— — 
Global Operations Support(6)
(58,990)(54,933)(40,415)
Total operating income (loss)$112,266 $98,264 $(35,529)
  Year Ended December 31,
  2019 2018 2017
Revenue:      
Executive Search      
Americas $415,455
 $405,267
 $339,793
Europe 135,070
 145,348
 125,346
Asia Pacific 95,827
 102,276
 86,905
Total Executive Search 646,352
 652,891
 552,044
Heidrick Consulting 60,572
 63,132
 69,356
Revenue before reimbursements (net revenue) 706,924
 716,023
 621,400
Reimbursements 18,690
 19,632
 18,656
Total revenue $725,614
 $735,655
 $640,056
       
Operating income (loss):      
Executive Search      
Americas (1) $100,833
 $96,880
 $75,337
Europe (2) 3,026
 5,849
 13
Asia Pacific (3) 13,590
 15,999
 537
Total Executive Search 117,449
 118,728
 75,887
Heidrick Consulting (4) (18,499) (13,619) (62,368)
Total segments 98,950
 105,109
 13,519
Global Operations Support (5) (35,439) (36,252) (40,042)
Total operating income (loss) $63,511
 $68,857
 $(26,523)


(1)Operating income for the Americas includes $4.1 million and $0.8 million of restructuring charges in 2019 and 2017, respectively.
(2)Operating income for Europe includes $4.0 million of restructuring charges in 2017.
(3)Operating income for Asia Pacific includes $2.0 million of restructuring charges in 2017.
(4)Operating loss for Heidrick Consulting includes less than $0.1 million of restructuring charges in 2019, and $50.7 million of impairment charges and $3.4 million of restructuring charges in 2017.
(5)Operating loss for Global Operations Support includes less than $0.1 million and $5.5 million of restructuring charges in 2019 and 2017, respectively.

(1)Includes $3.9 million and $30.5 million of restructuring charges in 2021 and 2020, respectively.
(2)Includes a $0.1 million restructuring reversal and $8.6 million of restructuring charges in 2021 and 2020, respectively, and $24.5 million of impairment charges in 2020.
(3)Includes a $0.1 million restructuring reversal and $4.6 million of restructuring charges in 2021 and 2020, respectively, and $8.5 million of impairment charges in 2020.
(4)Includes a $0.5 million and an $11.4 million earnout fair value adjustment in 2022 and 2021, respectively.
(5)Includes $0.4 million and $4.7 million of restructuring charges in 2021 and 2020, respectively.
(6)Includes a $0.2 million restructuring reversal and $4.0 million of restructuring charges in 2021 and 2020, respectively.

Year ended December 31, 20192022 compared to year ended December 31, 20182021


Total revenue. Consolidated total revenue decreased $10.0increased $75.1 million, or 1.4%7.4%, to $725.6 million$1.1 billion in 20192022 from $735.7 million$1.0 billion in 2018.2021. The decreaseincrease in total revenue was primarily due to the decreaseincrease in revenue before reimbursements (net revenue).


Revenue before reimbursements (net revenue). Consolidated net revenue decreased $9.1increased $70.5 million, or 1.3%7.0%, to $706.9 million$1.1 billion in 20192022 from $716.0 million$1.0 billion in 2018.2021. Foreign exchange rates negatively impacted results by $11.3$31.1 million, or 1.6%3.1%. Executive Search net revenue was $646.4$901.9 million in 2019, a decrease2022, an increase of $6.5$33.2 million, or 3.8%, compared to 2018.2021. The decreaseincrease in Executive Search net revenue was the result of declines in both Europe and Asia Pacific, partially offset by growthprimarily due to an increase in the Americas.average revenue per executive search compared to the prior year. On-Demand Talent net revenue was $91.3 million in 2022, an increase of $24.7 million, or 37.1%, compared to 2021. 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 acquisition in the prior year. Heidrick Consulting net revenue decreased $2.6 was $80.2 million in 2022, an increase of $12.6
27


million, or 4.1%18.6%, compared to $60.6 million2021. The increase in 2019 from $63.1 millionHeidrick Consulting revenue was primarily due to a 20.9% increase in 2018.the number of consulting engagements compared to the prior year.


The number of Executive Search and Heidrick Consulting consultants was 380390 and 71,70, respectively, as of December 31, 2019,2022, compared to 353365 and 66,69, respectively, as of December 31, 2018. Specific to2021. Executive Search which is our largest business, productivity, as measured by annualized net Executive Search revenue per consultant, was $1.7$2.3 million and $1.9$2.4 million for the years ended December 31, 20192022 and 2018,2021, respectively. The number of confirmed searchesExecutive search confirmations decreased 4.6%5.3% compared to 2018.2021. The average revenue per executive search increased to $132,000$143,600 in 20192022 compared to $127,300$131,000 in 2018.the prior year.



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Salaries and benefits. Consolidated salaries and benefits expense decreased $4.6increased $20.0 million, or 0.9%2.8%, to $501.8$737.4 million in 20192022 from $506.3$717.4 million in 2018. The decrease was due to lower variable compensation of $17.5 million, partially offset by higher fixed compensation of $12.9 million. Variable compensation decreased due to lower consultant productivity compared to the prior year. Included in variable compensation for the year ended December 31, 2019 is $0.6 million of contingent compensation for the former owners of 2GET, which is based on the achievement of certain revenue and EBITDA milestones for the period from acquisition through 2023.2021. Fixed compensation increased $10.7 million due to the deferred compensation plan, stock compensation, base salaries and payroll taxes, and retirement and benefits, and separation, partially offset by declinesdecreases in talent acquisitionthe deferred compensation plan and retention costs and separation.stock compensation. Variable compensation increased $9.3 million due to higher bonus accruals related to increased consultant productivity. Foreign exchange rate fluctuations positively impacted salaries and benefits expensesexpense by $8.2$22.4 million, or 1.6%3.1%.


In 2019,2022, we had an average of 1,6801,994 employees, compared to an average of 1,6101,714 employees in 2018.2021.


As a percentage of net revenue, salaries and benefits expense was 71.0%68.7% in 20192022, compared to 70.7%71.5% in 2018.2021.


General and administrative expenses. Consolidated general and administrative expenses decreased $3.3increased $1.9 million, or 2.4%1.5%, to $137.5$132.7 million in 20192022 from $140.8$130.7 million in 2018.2021. The decreaseincrease in general and administrative expenses was primarily due to decreases in professionalbusiness development travel, including the global consultants' conference, information technology, hiring fees, intangible amortization, resource library fees,marketing, and office occupancy expenses,bad debt, partially offset by increasesa one-time earnout obligation adjustment for On-Demand Talent of $11.4 million in bad debt,2021, and decreases in taxes and licenses, and the use of external third-party consultants, and taxes and licenses.consultants. Foreign exchange rate fluctuations positively impacted general and administrative expenses by $2.1$3.6 million, or 1.5%2.8%.


As a percentage of net revenue, general and administrative expenses were 19.4%12.4% in 20192022, compared to 19.7%13.0% in 2018.2021.


Restructuring charges. Cost of services. Consolidated cost of services increased $17.9 million, or 33.9%, to $70.7 million in 2022, from $52.8 million in 2021. The increase is primarily due to the timing of the On-Demand Talent acquisition in the prior year and an increase in the volume of on-demand projects and consulting engagements. Foreign exchange rate fluctuations positively impacted cost of services by $0.7 million, or 1.3%.

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 embark upon in the future from time to time, such as our new digital product Heidrick Navigator which we are beta testing. The Company incurred approximately $4.1$20.4 million in R&D costs in 2022, which consist of payroll, employee benefits, stock-based compensation, other employee expenses and third-party professional fees. Prior to formalizing our product development initiative in 2022, we tracked employee time on efforts to enhance existing products and to develop new services and products across our current offerings only to the extent it was required under the Company’s long-lived asset capitalization policy. As such, we cannot definitively determine the actual hours and expense incurred on these efforts in 2021. Based on management estimates, these expenses were less than 1% of net revenue in 2021 and are recorded within Salaries and benefits and General and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss).

Restructuring charges. The Company incurred $3.8 million in restructuring charges duringin 2021. In 2020, the Company announced 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 charges incurred in 2021 primarily relate to a reduction in the Company's real estate footprint. The charges are recorded within Restructuring charges in the Condensed Consolidated Statements of Comprehensive Income for the year ended December 31, 2019 in connection with initiatives to integrate the Company's legacy Brazil operations into the 2GET business operation. The expenses are primarily employee-related including the elimination of duplicative positions in the Company's legacy Brazil operations.2021. There were no similar restructuring charges during the year ended December 31, 2018.or reversals in 2022.


Operating income. Consolidated operating income was $63.5$112.3 million, including a fair value adjustment made to decrease the On-Demand Talent earnout obligation by $0.5 million, in 2019,2022, compared to $98.3 million, including restructuring charges
28


of $4.1$3.8 million comparedand a fair value adjustment made to $68.9increase the On-Demand Talent earnout obligation by $11.4 million, in 2018.2021. Foreign exchange rate fluctuations negatively impacted operating income by $1.1$4.2 million, or 1.6%4.3%. Excluding the impact of restructuring charges in 2019, operating income decreased $1.2 million from $68.9 million to $67.6 million.


Net non-operating income (expense). Net non-operating income was $5.8$3.0 million in 20192022, compared to $1.6$7.8 million in 2018.2021.


Net interest income was $2.9 million in 2019, a $1.7 million increase from $1.1 million in 2018. The increase was primarily due to interest earned on marketable securities, which are primarily comprised of U.S. Treasury bills.

Other,Interest, net was $5.3 million of income of $2.9 million in 20192022, compared to $0.5$0.3 million of income in 2018.2021. The increase was primarily the result of gainsinterest earned on marketable securities investments.

Other, net was $2.4 million of expense in 2022, compared to income of $7.5 million in 2021. The expense in the current year is primarily due to a $6.6 million unrealized loss on the Company's deferred compensation plan, assets.partially offset by foreign exchange gains. The income in the prior year is due to a $4.2 million gain on equity received in exchange for executive search services performed in prior periods and a $3.1 million gain on the Company's 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 $415.5$612.9 million in 2019,2022, an increase of 2.5%5.4% from $405.3$581.4 million in 2018.2021. The increase in net revenue was driven bydue to an increase in average revenue per executive search. All industry practice groups contributed to the increased netgrowth in revenue with the exception of the EducationHealthcare and Social Enterprises, and Financial ServicesLife Sciences practice groups.group. Foreign exchange fluctuations negatively impacted net revenue by $0.8 million, or 0.2%.less than $0.1 million. There were 200203 Executive Search consultants in the Americas as of December 31, 2019,2022, compared to 179193 as of December 31, 2018.2021.


Salaries and benefits expense decreased $0.1increased $6.3 million, from 2018.or 1.6%, compared to 2021. Fixed compensation increased $14.8decreased $0.8 million primarily due to the deferred compensation and stock compensation, partially offset by increases in base salaries and payroll taxes, the deferred compensation plan, stock compensation,separation, and retirement and benefits,benefits. Variable compensation increased $7.1 million due to higher bonus accruals related to increased consultant productivity.

General and administrative expenses increased $6.8 million, or 17.3%, compared to 2021 due to business development travel, including the global consultants' conference, bad debt, marketing, information technology, and office occupancy, partially offset by a decrease in talent acquisition and retention costs. Variable compensation decreased $14.9 million primarily due to the mix of consultant productivity. Included in variable compensation for the year ended December 31, 2019 is $0.6 million of contingent compensation for the former owners of 2GET, which is based on the achievement of certain revenue and EBITDA milestones for the period from acquisition through 2023.


22


General and administrative expenses increased $2.2 million, or 4.8%, from 2018 due to increases in bad debt, internal travel, taxes and licenses, office occupancy expenses, and professional fees, partially offset by decreases in research tool expenses and the use of external third-party consultants.


Restructuring charges were $3.9 million in 2021. The charges are primarily related to a reduction in the Company's real estate footprint. There were no restructuring charges in 2022.

The Americas segment incurred approximately $4.1reported operating income of $164.2 million in restructuring charges during the year ended December 31, 2019 in connection with initiatives to integrate the Company's legacy Brazil operations into the 2GET business operation. The expenses are primarily employee-related including the elimination of duplicative positions in the Company's legacy Brazil operations. There were no similar restructuring charges during the year ended December 31, 2018.

Operating income was $100.8 million in 2019,2022, an increase of $3.9$22.2 million compared to $96.9$142.0 million, including restructuring charges of $3.9 million, in 2018. Excluding the impact of restructuring charges in 2019, operating income increased $8.1 million from $96.9 million in 2018 to $104.9 million in 2019.2021.


Europe


Europe reported net revenue of $135.1$176.3 million in 2019, a decrease2022, an increase of 7.1%3.5% from $145.3$170.3 million in 2018.2021. The decreaseincrease in net revenue was due to a 5.1% decreaseincrease in the number of executive search confirmations. All industry practice groups contributed to the declinegrowth in revenue with the exception of the Global TechnologyHealthcare and Life Sciences and Financial Services practice group.groups. Foreign exchange rate fluctuations negatively impacted net revenue by $6.8$20.4 million, or 4.8%12.0%. There were 107113 Executive Search consultants in Europe as of December 31, 2019,2022, compared to 101103 as of December 31, 2018.2021.


Salaries and benefits expense decreased $4.2increased $1.3 million, or 4.0%1.0%, from 2018.compared to 2021. Fixed compensation decreased $0.2increased $0.6 million primarily due to the talent acquisition and retention costs, and retirement and benefits, partially offset by decreases in base salaries and payroll taxes, and retirement and benefits, partially offset by increases in talent acquisition and retention costs, and stock compensation. Variable compensation decreased $4.0increased $0.7 million due to a decline inhigher bonus accruals related to increased consultant productivity.


General and administrative expenses decreased $3.3increased $3.7 million, or 9.5% from 2018, primarily15.8%, compared to 2021, due to decreases inbusiness development travel, including the global consultants' conference, professional fees, intangible amortization, internal travel, and office occupancy, expenses.partially offset by a decrease in bad debt.


The
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Restructuring reversals for 2021 were $0.1 million due to the settlement of estimated employee severance accruals. There were no restructuring charges or reversals in 2022.

Europe segment reported operating income of $3.0$19.3 million in 20192022, an increase of $0.9 million compared to $5.8an operating income of $18.4 million, including restructuring reversals of $0.1 million, in 2018.2021.


Asia Pacific


Asia Pacific reported net revenue of $95.8$112.8 million in 2019,2022, a decrease of 6.3%3.6% compared to $102.3$117.0 million in 2018.2021. The decrease in net revenue was due to a 12.3%9.0% decrease in the number of executive search confirmations, partially offset by an increase in average revenue per executive search. All industry practice groups contributed to the decline in revenue with the exception of theThe Consumer, Global Technology and Services, and Social Impact practice group.groups experienced revenue growth in 2022. Foreign exchange rate fluctuations negatively impacted net revenue by $2.7$6.5 million, or 2.7%5.6%. There were 7374 Executive Search consultants in Asia Pacific as of both December 31, 2019 and 2018.2022, compared to 69 as of December 31, 2021.


Salaries and benefits expense decreased $3.3$5.3 million, or 5.0%6.4%, from 2018.compared to 2021. Fixed compensation decreased $3.7$2.1 million due to decreases in base salaries and payroll taxes, stock compensation, and talent acquisition and retention costs, partially offset by increasesan increase in retirement and benefits, and stock compensation.benefits. Variable compensation decreased $3.1 million due to lower bonus accruals related to decreased consultant productivity.

General and administrative expenses increased $0.4 million, or 2.2%, compared to 2021 primarily due to business development travel, including the global consultants' conference, and professional fees, partially offset by decreases in office occupancy and bad debt.

Restructuring reversals for 2021 were $0.1 million due to the mixsettlement of consultantestimated employee severance accruals. There were no restructuring charges or reversals in 2022.

Asia Pacific reported operating income of $18.7 million in 2022, an increase of $0.5 million compared to an operating income of $18.2 million, including restructuring reversals of $0.1 million, in 2021.

On-Demand Talent

On-Demand Talent reported net revenue of $91.3 million in 2022, an increase of 37.1% compared to $66.6 million in 2021. The increase in revenue was primarily due to an increase in the volume of on-demand projects and the timing of the On-Demand Talent acquisition of BTG in the prior year. Foreign exchange rate fluctuations negatively impacted net revenue by $0.2 million, or 0.4%.

Salaries and benefits expense increased $8.7 million, or 63.0%, compared to 2021. Fixed compensation increased $7.9 million due to base salaries and payroll taxes, separation, and retirement and benefits. Variable compensation increased $0.8 million due to higher bonus accruals related to increased productivity.


General and administrative expenses decreased $0.7$7.6 million, or 3.5%46.7%, from 2018 primarily due to a decreaseone-time earnout obligation adjustment in office occupancy expenses,the prior year, partially offset by increases in bad debtintangible amortization, business development travel, professional fees, and internal travel.information technology.


The Asia Pacific segmentCost of services increased $17.7 million, or 38.5%, compared to 2021, primarily due to an increase in the volume of on-demand projects and the timing of the On-Demand Talent acquisition in the prior year.

On-Demand Talent reported an operating incomeloss of $13.6$3.4 million in 2019, a2022, including an earnout obligation adjustment to decrease the earnout by $0.5 million resulting from the finalization of $2.4 millionthe earnout payment, compared to $16.0an operating loss of $9.3 million in 2018.2021, including an earnout obligation adjustment to increase the earnout by $11.4 million resulting from forecasted 2022 revenue exceeding expectations.


Heidrick Consulting


The Heidrick Consulting segment reported net revenue of $60.6$80.2 million in 2019, a decrease2022, an increase of 4.1%18.6% compared to $63.1$67.6 million in 2018.2021. The decreaseincrease in net revenue was due to a decrease20.9% increase in revenue perthe number of consulting engagement.confirmations. Foreign exchange rate fluctuations negatively impacted results by $1.1$3.8 million, or 1.7%5.7%. There were 7170 Heidrick Consulting consultants as of December 31, 2019,2022, compared to 6669 as of December 31, 2018.


2021.
23
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Salaries and benefits expense increased $4.0$4.5 million, or 7.5%7.3%, from 2018.compared to 2021. Fixed compensation increased $1.8decreased $0.7 million, primarily due to increases in base salaries and payroll taxes, and retirement and benefits, partially offset by a decrease in talent acquisition and retention costs. Variable compensation increased $2.2 million due to cross collaboration bonuses.

General and administrative expenses decreased $1.7 million, or 7.0%, from 2018, primarily due to decreases in professional fees, information technology, and earnout accretion, partially offset by increases in the use of external third-party consultants and internal travel.

The Heidrick Consulting segment reported an operating loss of $18.5 million in 2019, an increase of $4.9 million compared to an operating loss of $13.6 million in 2018.

Global Operations Support

Global Operations Support expenses decreased $0.8 million, or 2.3%, to $35.4 million from $36.3 million in 2018.

Salariescosts, retirement and benefits, expenses decreased $0.9 million, or 4.4%, due to decreases in management bonuses, separation, and stockthe deferred compensation plan, partially offset by increases in base salaries and payroll taxes, and retirement and benefits.stock compensation. Variable compensation increased $5.2 million due to higher bonus accruals related to increased consultant productivity.


General and administrative expenses increased $0.1decreased $0.8 million, or 5.2%, compared to 2021, due to increases in information technology, the use of external third-party consultants, and taxes and licenses,professional fees, partially offset by decreasesincreased business development travel, including the global consultants' conference.

Cost of services increased $0.2 million, or 3.3%, compared to 2021, due an increase in internal travel, professional fees, and office occupancy expenses.the volume of consulting engagements.


Restructuring charges were $0.4 million in 2021, primarily related to a reduction in the Company's real estate footprint. There were no restructuring charges in 2022.

Heidrick Consulting reported an operating loss of $7.2 million in 2022, an improvement of $9.0 million compared to an operating loss of $16.2 million, including restructuring charges of $0.4 million, in 2021.

Global Operations Support

Global Operations Support incurred less than $0.1expenses increased $4.1 million, or 7.4%, to $59.0 million from $54.9 million in restructuring charges during2021.

Salaries and benefits expenses increased $4.5 million, or 12.7%, compared to 2021 due to base salaries and payroll taxes, and stock compensation, partially offset by decrease in variable compensation, and retirement and benefits.

General and administrative expenses decreased $0.7 million, or 3.4%, compared to 2021 due to taxes and licenses, and professional fees, partially offset by increases in business development travel and hiring fees.

Restructuring reversals in 2021 were $0.2 million due to the year ended December 31, 2019.settlement of estimated employee severance accruals. There were no similar restructuring charges during the year ended December 31, 2018.or reversals in 2022.


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 together with the funds expected to be generated from operations and funds available under our committed revolving credit facility will be sufficient to finance our operations for 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 quarter 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.credit. On February 24, 2023, we entered into the Second Amendment (as amended, the “Second Amendment”) to Credit Agreement, dated as of October 26, 2018 we entered into a new(the “Credit Agreement”) by and among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto. The Second Amendment replaced the interest rate benchmark, from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”). At our option, borrowings under the Second Amendment will bear interest at one-, three- or six-month Term SOFR, or an alternate base rate as set forth in the Second Amendment, in each case plus an applicable margin. Other than the foregoing, the material terms of the Credit Agreement, (the "2018 Credit Agreement")as amended by the First Amendment to replace the Second Amended and Restated Credit Agreement (the "Restated Credit Agreement"(as amended, the “First Amendment”) executed on June 30, 2015. , dated as of July 13, 2021, remain unchanged.

The 2018 Credit AgreementFirst Amendment provides us with a seniorcommitted unsecured revolving line of credit withfacility in an aggregate commitmentamount 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 loan sublimit. The agreement also includesloans, with a $75 million expansion feature. The 2018 Credit Agreement will mature inFirst Amendment matures on July 13, 2026, extended from October 2023. Borrowings under the 2018 Credit Agreement bear interest at our election of the Alternate Base Rate (as defined26, 2023 as set forth in the 2018 Credit Agreement) or Adjusted LIBOR (as defined in the 2018 Credit Agreement) plus a spread as determined by our leverage ratio.Agreement.


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Borrowings under the 2018 Credit AgreementFirst Amendment may be used for working capital, capital expenditures, Permitted Acquisitions (as defined in the 2018 Credit Agreement)permitted acquisitions, restricted payments and for other general purposes.corporate purposes of the Company and its subsidiaries. The obligations under the 2018 Credit AgreementFirst Amendment are guaranteed by certain of ourthe Company’s subsidiaries.


During the year ended December 31, 2020, we borrowed $100.0 million under the Credit Agreement. We capitalized approximately $1.0 million of loan acquisition costs relatedelected to the 2018 Credit Agreement, which will be amortized over the remaining termdraw down a portion of the agreement.

Before October 26, 2018, we were party toavailable funds from the Restated Credit Agreement. The Restated Credit Agreement provided a single senior unsecured revolving line of credit with an aggregate commitment of upas a precautionary measure to $100 million, which included a sublimit of $25 million for letters of credit,increase our cash position and a $50 million expansion feature. Borrowings under the Restated Credit Agreement bore interest atfurther enhance our electionfinancial flexibility in light of the existing Alternate Base Rate (as defineduncertainty in global markets resulting from the Restated Credit Agreement) or the Adjusted LIBOR Rate (as defined in the Restated Credit Agreement) plus a spread as determined by our leverage ratio.

During the three months ended March 31, 2018, we borrowed $20 million under the Restated Credit Agreement and elected the Adjusted LIBOR Rate.COVID-19 outbreak. We subsequently repaid $8$100.0 million during the three monthsyear ended MarchDecember 31, 2018 and $12 million during the three months ended June 30, 2018.2020.

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As of December 31, 2019,2022, and 2018,2021, we had no outstanding borrowings under the 2018 Credit Agreement and were in compliance with the financial and other covenants under the 2018 Credit AgreementFirst Amendment and no event of default existed.


Cash, cash equivalents, and marketable securities. Cash, cash equivalents and marketable securities at December 31, 20192022 were $332.9$621.6 million, an increase of $53.0$76.4 million compared to $279.9$545.2 million at December 31, 2018.2021. The $332.9$621.6 million of cash, cash equivalents, and marketable securities at December 31, 20192022 includes $131.6$211.3 million held by our foreign subsidiaries. The foreign cash balanceA portion of $131.6the $211.3 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 $205.0$414.4 million in variable compensationbonuses related to 20192022 performance in March and April 2020.2023. In January 2020,2023, we paid approximately $17.1$7.6 million in variable compensation that wascash bonuses deferred in prior years.


Cash flows provided by operating activities. For the year ended December 31, 2019,2022, cash provided by operating activities was $78.6$119.3 million, primarily reflecting net income net of non-cash charges of $69.2$112.7 million, an increase in accrued expenses of $32.9 million and a decrease in accounts receivable of $6.9$4.5 million, an increasepartially offset by a decrease in net retirement and pension plan liabilitiesincome taxes payable of $3.3$13.6 million, a decrease in deferred revenue of $7.2 million and an increasea decrease in accrued expensesaccounts payable of $2.4$5.7 million. The increase in accrued expenses primarily reflects approximately $205.0$368.2 million of current year2021 bonuses paid in March and April 2022, offset by 2022 bonus accruals partially offset by $202.0 million of bonus payments for 2018 made in early 2019.$414.4 million.


Cash provided by operating activities forFor the year ended December 31, 2018,2021, cash provided by operating activities was $102.9$271.4 million, primarily reflecting net income net of non-cash charges of $68.6$98.0 million, an increase in accrued expenses of $71.5$230.2 million, a decrease in deferred revenue of $12.8 million and a decrease in income taxes payable of $11.4 million, partially offset by a decrease in other liabilities of $37.1 million and an increase in accounts receivable of $16.8 million and restructuring payments of $11.6$36.8 million. The increase in accrued expenses primarily reflects approximately $202.0$180.4 million of 2020 bonuses paid in March 2021, offset by 2021 bonus accruals partially offset by $148.0 million of bonus payments for 2017 made$368.2 million. The decrease in early 2018.other liabilities primarily relates to a reduction in the Company's lease liabilities due to office closures.


Cash flows used in investing activities. For the year ended December 31, 2019,2022, cash used in investing activities was $69.3$279.6 million, primarily due to purchases of marketable securities andavailable for sale investments of $130.4 million, the acquisition of 2GET for $3.5$269.8 million and capital expenditures of $3.4$11.1 million, partially offset by proceeds from the maturity and sales of marketable securities and investments of $68.0 million. The decrease in capital expenditures is primarily the result of reduced office build-outs.

Cash used in investing activities for the year ended December 31, 2018, was $8.2 million, primarily due to capital expenditures of $6.0 million, the acquisition in January 2018 of Amrop A/S ("Amrop") for $3.1 million and purchases of available for sale securities of $2.2 million, partially offset by proceeds from the sale of available for sale securitiesinvestments of $3.0$1.4 million. The increase incash outflow for capital expenditures is primarily the result of office build-outs and a global information technology update.software capitalization related to new product development.


Cash flows used in financing activities.For the year ended December 31, 2019,2021, cash used in investing activities was $21.3 million, primarily due to cash used in acquisitions net of cash acquired of $33.5 million, capital expenditures of $6.2 million, and purchases of available for sale investments of $2.3 million, partially offset by proceeds from the maturity and sale of available for sale investments of $20.8 million. The cash outflow for capital expenditures is primarily the result of office build-outs.

Cash flows used in financing activities. For the year ended December 31, 2022, cash used in financing activities was $18.2$15.7 million, primarily due to cash dividend payments of $11.8$12.5 million and payment of employee tax withholdings on equity transactions of $4.6 million, and earnout payments related to the Scambler MacGregor and DSI acquisitions of $1.9$3.2 million.


Cash used in financing activities forFor the year ended December 31, 2018,2021, cash used in financing activities was $17.0$15.5 million, primarily due to cash dividend payments of $10.2$12.4 million earnout payments related to the JCA Group acquisition of $3.6 million and the payment of employee tax withholdings on equity transactions of $2.2$3.1 million. Gross proceeds and payments on the Company's line of credit were each $20.0 million during the year ended December 31, 2018.


Stock repurchase program.On February 11, 2008, we announced that our Boarda Repurchase Authorization of Directors authorized management to repurchase shares of our common stock with an aggregate total amount up to $50 million. 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. We did not repurchase any shares of our common stock in 2019.2022 or 2021. The most recent purchase of shares of common stock occurred during the year ended December 31, 2012. As of December 31, 2019,2022 we have purchased 1,038,670 shares of our common stock pursuant to the Repurchase Authorization for a total of $28.3 million and $21.7 million remains available for future purchases under the authorization. Unless terminated or extended earlier by resolution of the Board of Directors, the program will expire when the amount authorized for repurchases has been spent.Repurchase Authorization.

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Off-balance sheet arrangements. We do not have material off-balance sheet arrangements, special purpose entities, trading activities of non-exchange traded contracts or transactions with related parties.



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Contractual obligations. The following table presents our known contractual obligations asOur lease portfolio is comprised of operating leases for office space and equipment. As of December 31, 2019, and the expected timing2022, we had lease payment obligations of cash payments related to these contractual$92.6 million, with $18.9 million payable within 12 months. Associated with our lease portfolio, we have asset retirement obligations (in millions):
  Payments due for the years ended December 31,
  2020 2021 2022 2023 2024 Thereafter Total
Contractual obligations:              
Operating lease obligations $30.2
 $27.2
 $23.6
 $20.6
 $10.0
 $9.0
 $120.6
Asset retirement obligations (1) 0.6
 0.9
 0.1
 0.5
 0.8
 0.1
 3.0
Total $30.8
 $28.1
 $23.7
 $21.1
 $10.8
 $9.1
 $123.6

(1) Represents the fair value of the obligation associated withfor the retirement of tangible long-lived assets primarily 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, 2022, we had asset retirement obligations of $2.8 million, with $0.1 million payable within 12 months.


In addition to thelease related contractual obligations, included in the above table, we also have liabilities related to certain employee benefit plans. These liabilities are recorded in our Consolidated Balance Sheet at December 31, 2019.2022. 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 the timing of cash disbursements related to these employee benefit plans is uncertain,December 31, 2022, we did not have not included these obligations in the above table. The table excludes oura liability for uncertain tax positions including accrued interest and penalties, which totaled $0.2 million as of December 31, 2019, since we cannot predict with reasonable reliability the timing of cash settlements to the respective taxing authorities.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. ActualHistorically, we have not made significant changes to the methods for determining these estimates as our actual results mayhave 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 thesethose 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 containcontains 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 CompanyWe generally bills itsbill our clients for itsthe 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 iswe are often authorized to bill the client for one-third of the excess compensation. The Company refersWe refer to this additional billing as uptick revenue. In most contracts, variable consideration is comprised of uptick revenue and direct expenses. The Company bills itsWe 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, the Company estimateswe 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 recordsrecord 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

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known. The Company doesWe 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 the Company'sour performance.  Revenue from executive search engagements is
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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 the Companyus 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 doeswe 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. The Company accountsWe 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 we satisfy our performance obligations 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 expectswe expect to receive under each contract is generally fixed. Most of our 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 both input and output methods. Contracts that contain coaching sessions, training sessions or the completion of assessments are recognized using the output method as each session or assessment is delivered to the client. Contracts that contain general consulting work are recognized using the input method utilizing a measure of progress that is based on time incurred on the project.
The Company entersWe enter into enterprise agreements with clients to provide a license for online access, via the Company'sour Culture Connect platform, to training and other proprietary material related to the Company'sour culture shaping programs. The consideration the Company expectswe expect to receive under the terms of an enterprise agreement is comprised of a single fixed fee. Our enterprise agreements contain multiple performance obligations, the delivery of materials via Culture Connect and material rights related to options to renew enterprise agreements at a significant discount. The Company allocatesWe allocate the transaction price to the performance obligations in the contract on a stand-alone selling price basis. The stand-alone selling price for the initial term of the enterprise agreement is outlined in the contract and is equal to the price paid by the client for the agreement over the initial term of the contract. The stand-alone selling price for the options to renew, or material right, are not directly observable and must be estimated. This estimate is required to reflect the discount the client would obtain when exercising the option to renew, adjusted for the likelihood that the option will be exercised. The Company estimatesWe estimate the likelihood of renewal using a historical analysis of client renewals. Access to Culture Connect represents a right to access the Company’sour intellectual property that the client simultaneously receives and consumes as the Company performswe perform under the agreement, and therefore the Company recognizeswe recognize revenue over time. Given the continuous nature of this commitment, the Company utilizeswe utilize straight-line ratable revenue recognition over the estimated subscription period as the Company'sour clients will receive and consume the benefits from Culture Connect equally throughout the contract period. Revenue related to client renewals of enterprise agreements is recognized over the term of the renewal, which is generally twelve months. Enterprise agreements do not comprise a significant portion of the Company'sour revenue.


Each of the Company'sour contracts with clients has an expected duration of one year or less.Accordingly, the Company haswe have elected to utilize the available practical expedient related to the disclosure of the transaction price allocated to the remaining performance obligations under itsour contracts. The Company hasWe 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. The Company chargesWe charge and collectscollect from itsour clients, sales tax and value added taxes as required by certain jurisdictions. The Company hasWe have made an accounting policy election to exclude these items from the transaction price in itsour contracts.


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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

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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 and other intangible assets. We reviewperform assessments of the carrying value of goodwill for impairment annually. We also review goodwillat least annually and long-lived assets, including identifiable intangible assets, for impairment whenever events occur or changes in circumstances indicate that it is more-likely-than-not that the fair value has fallen below thea carrying amount of an asset. We review factors such asgoodwill 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 to determine if an impairment test is necessary. Our annual impairment test begins with a qualitative assessment to determine whether it is necessary to perform a fair value-based goodwill impairment test. The qualitative assessment includes evaluating whether events and circumstances indicate that it is more-likely-than-not that fair values offactors.

We operate five reporting units are greater thanunits: the carrying values. If the qualitative factors do not indicate that it is more-likely-than-not that the fair values of the reporting units are greater than the carrying values, then we perform the fair value test.

The Company operates four 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.amount, including goodwill. The fair value of each of the Company’sour 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 growth in the near and long term; (2) the discount rate; (3) working capital investments; (4) macroeconomic conditions; and (5) other factors. 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. The Company continuesWe continue to monitor potential triggering events including changes in the business climate in which it operates, the Company’swe operate, our market capitalization compared to itsour book value, and the Company’sour 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 carrying amount;fair value; however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit.

Additionally, we review long-lived assets, such as property, equipment, and purchased intangibles subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge, equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset, is recognized.


We believe that the accounting estimate related to goodwill and other intangible asset 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.


Other intangible assets and long-lived assets. We review our 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.

We believe that the accounting estimate related to other intangible and long-lived asset impairment is a critical accounting estimate because the assumptions used are highly susceptible to changes in operating results and cash flows.

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
35


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 estimate the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. We estimate future payments using the formula and performance targets specified in each purchase agreement and these financial projections. We then discount these payments to present value using a risk-adjusted rate that takes into consideration market-based rates of return that reflect the ability of the acquired entity to achieve the targets. Changes in financial projections, market participant assumptions for revenue growth and/or profitability, or the risk-adjusted discount rate, 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.

Recently Issued and Adopted Financial Accounting Standards


On January 1, 2019, we adopted Accounting Standards Update ("ASU") No. 2016-02, Leases, ASU No. 2018-10, Codification Improvements to Topic 842 (Leases) and ASU No. 2018-11, Targeted Improvements to Topic 842 (Leases). The guidance is intended to increase transparency and comparability among companies for leasing transactions, including a requirement for companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations created by those leases. The guidance also provides for disclosures that allow the users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

We adopted the guidance using the modified retrospective method without restatement of comparative periods. As such, periods prior to the date of adoption areinformation presented in accordance with ASC 840 - Leases. We utilized the available practical expedient that allowed for companiesNote 2, Summary of Significant Accounting Policies, to not reassess whether existing contracts contain a lease under the new definition of a lease,our Consolidated Financial Statements within this Annual Report on Form 10-K is incorporated herein by reference.


28



lease classification for existing leases and whether previously capitalized initial direct costs would qualify for capitalization under the new guidance.

The adoption of this guidance had a material impact on the Condensed Consolidated Balance Sheet as of December 31, 2019 due to the recognition of equal right-of-use assets and lease liabilities for our portfolio of operating leases. The right-of-use asset balance was then adjusted by the reclassification of pre-existing prepaid and accrued rent balances from other line items within the Condensed Consolidated Balance Sheet. The adoption had an immaterial impact on the Condensed Consolidated Statement of Comprehensive Income and Condensed Consolidated Statement of Cash Flows for the year ended December 31, 2019. The adoption had no impact on the Condensed Consolidated Statement of Changes in Stockholders' Equity for the year ended December 31, 2019.

Additional information and disclosures required by the new standard are contained in Note 6, Leases.

On January 1, 2019, we adopted ASU No. 2018-02, Income Statement - Reporting Comprehensive Income, which is intended to improve the usefulness of information reported as a result of the Tax Cuts and Jobs Act. The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The adoption of this guidance did not have an impact on our consolidated financial statements for the year ended December 31, 2019.

Recent Financial Accounting Standards

In December 2019, the Financial Accounting Standards Board ("FASB"), issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The guidance simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Accounting Standards Codification ("ASC") 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of this accounting guidance. The effect is not known or reasonably estimable at this time.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The standard is effective for fiscal years beginning after December 15, 2019. The Company will adopt this guidance in its fiscal year beginning January 1, 2020. The adoption of this guidance is not anticipated to have a material impact on our consolidated financial statements.

Quarterly Financial Information (Unaudited)

The following table sets forth certain financial information for each quarter of 2019 and 2018. The information is derived from our quarterly consolidated financial statements which are unaudited but which, in the opinion of management, have been prepared on the same basis as the audited annual consolidated financial statements included in this document. The consolidated financial data shown below should be read in conjunction with the consolidated financial statements and notes thereto. The operating results for any quarter are not necessarily indicative of results for any future period. 

29


  Quarter Ended
  2019 2018
  Mar. 31 Jun. 30 Sept. 30 Dec. 31 Mar. 31 Jun. 30 Sept. 30 Dec. 31
Revenue before reimbursements (net revenue) $171,594
 $173,122
 $182,174
 $180,034
 $160,071
 $183,059
 $187,588
 $185,305
Operating income (1) 16,391
 18,353
 14,472
 14,295
 13,121
 18,461
 20,583
 16,692
Income before income taxes 18,842
 19,473
 14,827
 16,147
 12,912
 18,411
 23,187
 15,982
Provision for income taxes 6,755
 5,193
 4,880
 5,592
 2,744
 6,948
 6,718
 4,787
Net income $12,087
 $14,280
 $9,947
 $10,555
 $10,168
 $11,463
 $16,469
 $11,195
Basic earnings per common share $0.64
 $0.75
 $0.52
 $0.55
 $0.54
 $0.61
 $0.87
 $0.59
Diluted earnings per common share $0.62
 $0.73
 $0.51
 $0.54
 $0.53
 $0.59
 $0.85
 $0.58
Cash dividends paid per share $0.15
 $0.15
 $0.15
 $0.15
 $0.13
 $0.13
 $0.13
 $0.13

(1) Includes $4.1 million of restructuring charges for the three months ended September 30, 2019.


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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Currency market risk.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. A 10% change in the average exchange rate for currencies of all foreign countries in which we operate would have increased or decreased our 2019 net income by approximately $0.9 million. However, because certain assets and liabilities are denominated in currencies other than their respective functional currency,the U.S. dollar, changes in currency rates may cause fluctuations in the valuation of such assets and liabilities. Based on balances exposed to fluctuation in exchange rates as of December 31, 2019, a 10% increase or decrease equally in the value of currencies could result in a foreign exchange gain or loss of approximately $1.4 million. In addition, asAs 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 2022 net income by approximately $4.1 million. For financial information by segment, see Note 18, Segment Information, in the Notes to Condensed Consolidated Financial Statements.



31
36




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
PAGE
3338
3641
3742
3843
3944
4045

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32



Report of Independent Registered Public Accounting Firm




To the Stockholders and the Board of Directors
Heidrick & Struggles International, Inc.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Heidrick & Struggles International, Inc. (the Company) as of December 31, 20192022 and 2018,2021, the related consolidated statements of comprehensive income (loss), changes in stockholders' equity and cash flows for each of the twothree years in the period ended December 31, 2019,2022, 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, 20192022 and 2018,2021, and the results of its operations and its cash flows for each of the twothree years in the period ended December 31, 2019,2022, 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, 2019,2022, 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 February 24, 202027, 2023 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Lease Accounting
As discussed in Note 6 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of ASC 842 - Leases.

Segment Reporting
As discussed in Note 18 to the financial statements, the Company changed the composition of its segment information in 2018. We audited the adjustments necessary to restate the 2017 segment information provided in Note 18. In our opinion, such adjustments are appropriate and have been properly applied.

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 audits 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 Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition
As described in Note 3 of the consolidated financial statements, revenue before reimbursements from executive search and from consulting engagements of $901,922,000 and $80,193,000, respectively, 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 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 from executive search and consulting engagements as a critical audit matter because of certain significant assumptions management makes when estimating progress over time for executive search and consulting engagements, and estimating the average uptick revenue earned on executive search engagements. Auditing these
38


assumptions involved a high degree of judgment and subjectivity as changes in these assumptions could have a significant impact on the amount of revenue recognized.

How the Critical Audit Matter Was Addressed in the Audit

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, such as internal controls related to management’s review of the completeness and accuracy of data compiled and used in the estimate vs. excluded from the estimate, and tested such controls for design and operating effectiveness.
•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 mathematical accuracy of management’s revenue calculations and recalculated deferred revenue at period end, if any.

/s/ RSM US LLP

We have served as the Company's auditor since 20182018.

Chicago, Illinois
February 24, 202027, 2023



33
39





Report of Independent Registered Public Accounting Firm




To the Stockholders and the Board of Directors
Heidrick & Struggles International, Inc.


Opinion on the Internal Control Over Financial Reporting
We have audited Heidrick & Struggles International, Inc.'s (the Company) internal control over financial reporting as of December 31, 2019,2022, 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, 2019,2022, 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, 20192022 and 2018,2021, and the related consolidated statements of comprehensive income (loss), changes in stockholders'to stockholders’ equity and cash flows of the Company for each of the twothree years in the period ended December 31, 2019,2022, and our report dated February 24, 202027, 2023 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
February 24, 202027, 2023




34
40




Report of Independent Registered Public Accounting Firm


To the Stockholders and Board of Directors
Heidrick & Struggles International, Inc.:

Opinion on the Consolidated Financial Statements
We have audited, before the effects of the adjustments to retrospectively apply the change in accounting described in Note 18, the consolidated statements of comprehensive loss, changes in stockholders’ equity, and cash flows of Heidrick & Struggles International, Inc. and subsidiaries (the Company) for the year ended December 31, 2017, and the related notes (collectively, the consolidated financial statements). The 2017 consolidated financial statements before the effects of the adjustments described in Note 18 are not presented herein. In our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively apply the change in accounting described in Note 18, present fairly, in all material respects, the results of operations of the Company and its cash flows for the year ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in accounting described in Note 18 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the 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 the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ KPMG LLP

We served as the Company’s auditor from 2002 to 2018.

Chicago, Illinois
March 13, 2018





35


HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 
December 31,
2022		December 31,
2021
 December 31,
2019		 December 31,
2018
Current assets:    
Current assetsCurrent assets
Cash and cash equivalents $271,719
 $279,906
Cash and cash equivalents$355,447 $545,225 
Marketable securities 61,153
 —
Marketable securities266,169 — 
Accounts receivable, net 109,163
 114,977
Accounts receivable, net of allowances of $6,643 and $5,666, respectivelyAccounts receivable, net of allowances of $6,643 and $5,666, respectively126,437 133,750 
Prepaid expenses 20,185
 22,766
Prepaid expenses24,098 21,754 
Other current assets 27,848
 29,598
Other current assets40,722 41,449 
Income taxes recoverable 4,414
 3,620
Income taxes recoverable10,946 3,210 
Total current assets 494,482

450,867
Total current assets823,819 745,388 
Non-current assets:    
Non-current assetsNon-current assets
Property and equipment, net 28,650
 33,871
Property and equipment, net30,207 27,085 
Operating lease right-of-use assets 99,391
 —
Operating lease right-of-use assets71,457 72,320 
Assets designated for retirement and pension plans 13,978
 15,035
Assets designated for retirement and pension plans11,332 12,715 
Investments 25,409
 19,442
Investments34,354 36,051 
Other non-current assets 20,434
 22,276
Other non-current assets25,788 23,377 
Goodwill 126,831
 122,092
Goodwill138,361 138,524 
Other intangible assets, net 1,935
 2,216
Other intangible assets, net6,333 9,169 
Deferred income taxes, net 33,063
 34,830
Deferred income taxes, net33,987 42,169 
Total non-current assets 349,691
 249,762
Total non-current assets351,819 361,410 
Total assets $844,173
 $700,629
Total assets$1,175,638 $1,106,798 
Current liabilities:    
Current liabilitiesCurrent liabilities
Accounts payable $8,633
 $9,166
Accounts payable$14,613 $20,374 
Accrued salaries and benefits 234,306
 227,653
Accrued salaries and benefits451,161 409,026 
Deferred revenue 41,267
 40,673
Deferred revenue43,057 51,404 
Operating lease liabilities 30,955
 —
Operating lease liabilities19,554 19,332 
Other current liabilities 26,253
 33,219
Other current liabilities56,016 24,554 
Income taxes payable 3,928
 8,240
Income taxes payable4,076 10,004 
Total current liabilities 345,342
 318,951
Total current liabilities588,477 534,694 
Non-current liabilities:    
Non-current liabilitiesNon-current liabilities
Accrued salaries and benefits 59,662
 57,234
Accrued salaries and benefits59,467 73,779 
Retirement and pension plans 46,032
 39,865
Retirement and pension plans48,456 55,593 
Operating lease liabilities 79,388
 —
Operating lease liabilities63,299 65,625 
Other non-current liabilities 4,634
 17,423
Other non-current liabilities5,293 41,087 
Total non-current liabilities 189,716
 114,522
Total non-current liabilities176,515 236,084 
Total liabilities 535,058
 433,473
Total liabilities764,992 770,778 
Commitments and contingencies (Note 20) 
 
Commitments and contingencies (Note 20)
Stockholders’ equity:    
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued at December 31, 2019 and December 31, 2018 —
 —
Common stock, $0.01 par value, 100,000,000 shares authorized, 19,585,777 shares issued, 19,165,954 and 18,954,275 shares outstanding at December 31, 2019 and December 31, 2018, respectively 196
 196
Treasury stock at cost, 419,823 and 631,502 shares at December 31, 2019 and December 31, 2018, respectively (14,795) (20,298)
Stockholders’ equityStockholders’ equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued at December 31, 2022 and 2021.Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued at December 31, 2022 and 2021.— — 
Common stock, $0.01 par value, 100,000,000 shares authorized, 19,866,287 and 19,596,607 shares issued, 19,861,207 and 19,591,527 shares outstanding at December 31, 2022 and 2021, respectivelyCommon stock, $0.01 par value, 100,000,000 shares authorized, 19,866,287 and 19,596,607 shares issued, 19,861,207 and 19,591,527 shares outstanding at December 31, 2022 and 2021, respectively199 196 
Treasury stock at cost, 5,080 shares at December 31, 2022 and 2021, respectivelyTreasury stock at cost, 5,080 shares at December 31, 2022 and 2021, respectively(191)(191)
Additional paid in capital 228,807
 227,147
Additional paid in capital246,630 233,163 
Retained earnings 91,083
 56,049
Retained earnings168,197 101,177 
Accumulated other comprehensive income 3,824
 4,062
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(4,189)1,675 
Total stockholders’ equity 309,115
 267,156
Total stockholders’ equity410,646 336,020 
Total liabilities and stockholders’ equity $844,173
 $700,629
Total liabilities and stockholders’ equity$1,175,638 $1,106,798 
The accompanying notes to Consolidated Financial Statements are an integral part of these statements.

41
36



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
 
December 31,
 December 31, 202220212020
 2019 2018 2017
Revenue:      
RevenueRevenue
Revenue before reimbursements (net revenue) $706,924
 $716,023
 $621,400
Revenue before reimbursements (net revenue)$1,073,464 $1,003,001 $621,615 
Reimbursements 18,690
 19,632
 18,656
Reimbursements10,122 5,473 7,755 
Total revenue 725,614
 735,655
 640,056
Total revenue1,083,586 1,008,474 629,370 
Operating expenses:      
Operating expensesOperating expenses
Salaries and benefits 501,791
 506,349
 434,219
Salaries and benefits737,430 717,411 450,424 
General and administrative expenses 137,492
 140,817
 147,316
General and administrative expenses132,678 130,749 116,982 
Cost of servicesCost of services70,676 52,785 4,396 
Research and developmentResearch and development20,414 — — 
Impairment charges —
 —
 50,722
Impairment charges— — 32,970 
Restructuring charges 4,130
 —
 15,666
Restructuring charges— 3,792 52,372 
Reimbursed expenses 18,690
 19,632
 18,656
Reimbursed expenses10,122 5,473 7,755 
Total operating expenses 662,103
 666,798
 666,579
Total operating expenses971,320 910,210 664,899 
Operating income (loss) 63,511
 68,857
 (26,523)Operating income (loss)112,266 98,264 (35,529)
Non-operating income (expense):   
  
Non-operating income (expense)Non-operating income (expense)
Interest, net 2,880
 1,141
 385
Interest, net5,337 302 204 
Other, net 2,898
 494
 (3,280)Other, net(2,367)7,463 3,927 
Net non-operating income (expense) 5,778
 1,635
 (2,895)
Net non-operating incomeNet non-operating income2,970 7,765 4,131 
Income (loss) before income taxes 69,289
 70,492
 (29,418)Income (loss) before income taxes115,236 106,029 (31,398)
Provision for income taxes 22,420
 21,197
 19,217
Provision for income taxes35,750 33,457 6,309 
Net income (loss) 46,869
 49,295
 (48,635)Net income (loss)79,486 72,572 (37,707)
Other comprehensive income (loss), net of tax:      Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment 844
 (3,885) 6,853
Foreign currency translation adjustment(8,457)(1,890)82 
Net unrealized gain on available-for-sale investments 13
 —
 2,660
Net unrealized loss on available-for-sale investmentsNet unrealized loss on available-for-sale investments(41)— (13)
Pension gain (loss) adjustment (1,095) 721
 480
Pension gain (loss) adjustment2,634 148 (476)
Other comprehensive income (loss), net of tax (238) (3,164) 9,993
Other comprehensive loss, net of taxOther comprehensive loss, net of tax(5,864)(1,742)(407)
Comprehensive income (loss) $46,631
 $46,131
 $(38,642)Comprehensive income (loss)$73,622 $70,830 $(38,114)
      
Basic weighted average common shares outstanding 19,103
 18,917
 18,735
Diluted weighted average common shares outstanding 19,551
 19,532
 18,735
Weighted-average common shares outstandingWeighted-average common shares outstanding
BasicBasic19,758 19,515 19,301 
DilutedDiluted20,618 20,296 19,301 
      
Basic net income (loss) per common share $2.45
 $2.61
 $(2.60)
Diluted net income (loss) per common share $2.40
 $2.52
 $(2.60)
Earnings (loss) per common shareEarnings (loss) per common share
BasicBasic$4.02 $3.72 $(1.95)
DilutedDiluted$3.86 $3.58 $(1.95)
Cash dividends paid per share $0.60
 $0.52
 $0.52
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.

42
37



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
 Year Ended December 31, 202220212020
 2019 2018 2017
Cash flows - operating activities:      
Cash flows - operating activitiesCash flows - operating activities
Net income (loss) $46,869
 $49,295
 $(48,635)Net income (loss)$79,486 $72,572 $(37,707)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 10,371
 12,522
 14,774
Depreciation and amortization10,603 19,560 26,656 
Deferred income taxes 1,644
 (3,496) (1,690)Deferred income taxes7,088 (7,481)(1,680)
Stock-based compensation expense 10,298
 8,947
 4,935
Stock-based compensation expense16,689 12,760 10,199 
Accretion expense related to earnout payments 668
 1,285
 1,038
Accretion expense related to earnout payments820 486 — 
Impairment charges —
 —
 50,722
Impairment charges— — 32,970 
Gain on marketable securities (595) —
 —
Gain on marketable securities(2,406)(1)(154)
Loss on disposal of property and equipmentLoss on disposal of property and equipment392 135 287 
Changes in assets and liabilities, net of effects of acquisitions:      Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable 6,899
 (16,759) (1,882)Accounts receivable4,522 (36,819)22,644 
Accounts payable (994) (526) 1,474
Accounts payable(5,731)(332)451 
Accrued expenses 2,441
 71,526
 18,330
Accrued expenses32,892 230,177 (26,513)
Restructuring accrual 1,959
 (11,617) 13,025
Restructuring accrual— (5,061)2,479 
Deferred revenue 175
 (1,899) 2,010
Deferred revenue(7,237)12,783 (3,688)
Income taxes (payable) recoverable, net (5,450) 757
 3,381
Income taxes recoverable (payable), netIncome taxes recoverable (payable), net(13,606)11,377 (4,016)
Retirement and pension plan assets and liabilities 3,258
 (1,492) 3,065
Retirement and pension plan assets and liabilities(479)1,145 1,794 
Prepaid expenses (455) (893) 797
Prepaid expenses(2,850)(2,776)1,642 
Other assets and liabilities, net 1,557
 (4,748) 5,626
Other assets and liabilities, net(895)(37,124)(2,011)
Net cash provided by operating activities 78,645
 102,902
 66,970
Net cash provided by operating activities119,288 271,401 23,353 
Cash flows - investing activities:      
Cash flows - investing activitiesCash flows - investing activities
Acquisition of businesses, net of cash acquired (3,520) (3,083) (364)Acquisition of businesses, net of cash acquired— (33,518)— 
Capital expenditures (3,352) (5,960) (14,022)Capital expenditures(11,134)(6,240)(7,322)
Purchases of available for sale investments (130,411) (2,201) (2,269)Purchases of available for sale investments(269,824)(2,323)(118,904)
Proceeds from sale of available for sale investments 67,968
 2,995
 1,404
Proceeds from sale of available for sale investments1,359 20,822 158,852 
Net cash used in investing activities (69,315) (8,249) (15,251)
Cash flows - financing activities:      
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities(279,599)(21,259)32,626 
Cash flows - financing activitiesCash flows - financing activities
Proceeds from line of credit —
 20,000
 40,000
Proceeds from line of credit— — 100,000 
Payments on line of credit —
 (20,000) (40,000)Payments on line of credit— — (100,000)
Debt issuance costs —
 (981) —
Cash dividends paid (11,835) (10,181) (10,111)Cash dividends paid(12,466)(12,377)(12,063)
Payment of employee tax withholdings on equity transactions (4,552) (2,234) (2,392)Payment of employee tax withholdings on equity transactions(3,219)(3,140)(1,550)
Acquisition earnout payments (1,853) (3,592) (4,557)Acquisition earnout payments— — (2,789)
Net cash used in financing activities (18,240) (16,988) (17,060)Net cash used in financing activities(15,685)(15,517)(16,402)
Effect of exchange rates fluctuations on cash, cash equivalents and restricted cash 367
 (5,565) 7,933
Effect of exchange rates fluctuations on cash, cash equivalents and restricted cash(13,774)(5,855)5,193 
Net increase (decrease) in cash, cash equivalents and restricted cash (8,543) 72,100
 42,592
Net increase (decrease) in cash, cash equivalents and restricted cash(189,770)228,770 44,770 
Cash, cash equivalents and restricted cash at beginning of period 280,262
 208,162
 165,570
Cash, cash equivalents and restricted cash at beginning of period545,259 316,489 271,719 
Cash, cash equivalents and restricted cash at end of period $271,719
 $280,262
 $208,162
Cash, cash equivalents and restricted cash at end of period$355,489 $545,259 $316,489 
      
Supplemental disclosures of cash flow information      Supplemental disclosures of cash flow information
Cash paid for      Cash paid for
Income taxes $27,338
 $22,616
 $14,814
Income taxes$41,910 $28,623 $12,154 
Interest $—
 $67
 $193
Interest$— $— $761 
The accompanying notes to Consolidated Financial Statements are an integral part of these statements.

43
38



HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
 
Common StockTreasury StockAdditional
Paid in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income		Total
 Common Stock Treasury Stock Additional
Paid in
Capital		 Retained
Earnings (Deficit)		 Accumulated
Other
Comprehensive
Income		 Total SharesAmountSharesAmount
 Shares Amount Shares Amount 
Balance at December 31, 2016 19,586
 $196
 1,008
 $(32,915) $229,957
 $58,030
 $3,322
 $258,590
Balance at December 31, 2019Balance at December 31, 201919,586 $196 420 $(14,795)$228,807 $91,083 $3,824 $309,115 
Net loss —
 —
 —
 —
 —
 (48,635) —
 (48,635)Net loss— — — — — (37,707)— (37,707)
Other comprehensive income, net of tax —
 —
 —
 —
 —
 —
 9,993
 9,993
Treasury and common stock transactions:                
Stock-based compensation —
 —
 —
 —
 4,935
 —
 —
 4,935
Vesting of equity, net of tax withholdings —
 —
 (188) 6,311
 (8,716) —
 —
 (2,405)
Re-issuance of treasury stock —
 —
 (15) 508
 (170) —
 —
 338
Cash dividends declared ($0.52 per share) —
 —
 —
 —
 —
 (9,762) —
 (9,762)
Dividend equivalents on restricted stock units —
 —
 —
 —
 —
 (349) —
 (349)
Balance at December 31, 2017 19,586
 196
 805
 (26,096) 226,006
 (716) 13,315
 212,705
Net income —
 —
 —
 —
 —
 49,295
 —
 49,295
Adoption of accounting standards —
 —
 —
 —
 —
 15,043
 (6,089) 8,954
Adoption of accounting standards— — — — — (332)— (332)
Other comprehensive loss, net of tax —
 —
 —
 —
 —
 —
 (3,164) (3,164)Other comprehensive loss, net of tax— — — — — — (407)(407)
Treasury and common stock transactions:                
Stock-based compensation —
 —
 —
 —
 8,947
 —
 —
 8,947
Vesting of equity, net of tax withholdings —
 —
 (167) 5,604
 (7,837) —
 —
 (2,233)
Re-issuance of treasury stock —
 —
 (6) 194
 31
 —
 —
 225
Cash dividends declared ($0.39 per share) —
 —
 —
 —
 —
 (7,389) —
 (7,389)
Dividend equivalents on restricted stock units —
 —
 —
 —
 —
 (184) —
 (184)
Balance at December 31, 2018 19,586
 196
 632
 (20,298) 227,147
 56,049
 4,062
 267,156
Net income —
 —
 —
 —
 —
 46,869
 —
 46,869
Other comprehensive loss, net of tax —
 —
 —
 —
 —
 —
 (238) (238)
Treasury and common stock transactions:                
Common and treasury stock transactions:Common and treasury stock transactions:
Stock-based compensation —
 —
 —
 —
 10,298
 —
 —
 10,298
Stock-based compensation— — — — 10,199 — — 10,199 
Vesting of equity, net of tax withholdings —
 —
 (163) 5,154
 (9,706) —
 —
 (4,552)Vesting of equity, net of tax withholdings— — (179)6,225 (7,775)— — (1,550)
Re-issuance of treasury stock —
 —
 (49) 349
 1,068
 —
 —
 1,417
Re-issuance of treasury stock— — (15)529 (183)— — 346 
Cash dividends declared ($0.60 per share) —
 —
 —
 —
 —
 (11,461) —
 (11,461)Cash dividends declared ($0.60 per share)— — — — — (11,576)— (11,576)
Dividend equivalents on restricted stock units —
 —
 —
 —
 —
 (374) —
 (374)Dividend equivalents on restricted stock units— — — — — (486)— (486)
Balance at December 31, 2019 19,586
 $196
 420
 $(14,795) $228,807
 $91,083
 $3,824
 $309,115
Balance at December 31, 2020Balance at December 31, 202019,586 196 226 (8,041)231,048 40,982 3,417 267,602 
Net incomeNet income— — — — — 72,572 — 72,572 
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — — — (1,742)(1,742)
Common and treasury stock transactions:Common and treasury stock transactions:
Stock-based compensationStock-based compensation— — — — 12,760 — — 12,760 
Vesting of equity, net of tax withholdingsVesting of equity, net of tax withholdings11 — (213)7,570 (10,710)— — (3,140)
Re-issuance of treasury stockRe-issuance of treasury stock— — (8)280 65 — — 345 
Cash dividends declared ($0.60 per share)Cash dividends declared ($0.60 per share)— — — — — (11,708)— (11,708)
Dividend equivalents on restricted stock unitsDividend equivalents on restricted stock units— — — — — (669)— (669)
Balance at December 31, 2021Balance at December 31, 202119,597 196 5 (191)233,163 101,177 1,675 336,020 
Net incomeNet income— — — — — 79,486 — 79,486 
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — — — (5,864)(5,864)
Common and treasury stock transactions:Common and treasury stock transactions:
Stock-based compensationStock-based compensation— — — — 16,689 — — 16,689 
Vesting of equity, net of tax withholdingsVesting of equity, net of tax withholdings269 3 — — (3,222)— — (3,219)
Cash dividends declared ($0.60 per share)Cash dividends declared ($0.60 per share)— — — — — (11,857)— (11,857)
Dividend equivalents on restricted stock unitsDividend equivalents on restricted stock units— — — — — (609)— (609)
Balance at December 31, 2022Balance at December 31, 202219,866 $199 5 $(191)$246,630 $168,197 $(4,189)$410,646 
The accompanying notes to Consolidated Financial Statements are an integral part of these statements.

44
39



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

1.    Basis of Presentation

Heidrick & Struggles International, Inc. and subsidiaries (the “Company”) is engaged ina leadership advisory firm providing executive search, consulting and consulting services toon-demand talent services. We help our clients on a retained basis.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 regions.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, and the assessment of goodwill, and other intangible assets and long-lived assets for impairment. Estimates are subject to a degree of uncertainty and actual results could differ from these estimates.
 
2.
Summary of Significant Accounting Policies

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 accounts receivable. However, this risk is limited due to the Company’s large number of clients and their dispersion across many different industries and geographies. At December 31, 20192022 and 2018,2021, the Company had no significant concentrations of risk.


Accounts Receivable


The Company’s accounts receivable consists of trade receivables. The Company’s expected credit loss allowance methodology for doubtful accounts receivable is developed based upon several factors including the ageusing historical collection experience, current and future economic and market conditions, and a review of the Company’scurrent status of customers' trade accounts receivable, historical write-off experience and specific account analysis.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 approximateapproximates 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:    
Office furniture, fixtures and equipment5–10 years
Computer equipment and software3–7 years


45


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.



40


Long-livedOther 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 assetsasset 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.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, Operating Lease Liabilities - Current and Operating Lease Liabilities - Non-Current 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 equity 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 and Other Intangible Assets


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. Other intangible assets include client relationships, trade names, and employee non-compete agreements. The Company performs assessments of the carrying value of goodwill at least annually and of its goodwill and other intangible assets whenever events occur or circumstances indicate that a carrying amount of these assetsgoodwill 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 fourfive 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 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 other intangible asset impairment review compares the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge, equal to the amount by which the carrying amount of the asset exceeds the fair value, is recognized.
46


Other intangible assets acquired are amortized either using the straight-line method over their estimated useful lives or based on the projected cash flow associated with the respective intangible assets.


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 third-party 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 (“R&D”) consist of payroll, employee benefits, stock-based compensation, other employee expenses and third-party professional fees associated with the development of new technologies to enhance existing products and services and to expand the range of the Company's offerings. The benefits from our R&D efforts are intended to 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 embark upon in the future from time to time.

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

41


in connection with the hiring of new consultants), restricted stock unit, phantom stock unit and performance sharestock 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.


AHistorically, a portion of the Company’s consultants’ and management cash bonuses arewere deferred and paid over a three-year vesting period. The portion of the bonus iswas approximately 15% depending on the employee’s level or position. The compensation expense related to the amounts being deferred iswas recognized on a graded vesting attribution method over the requisite service period. This service period beginsbegan on January 1 of the respective fiscal year and continuescontinued through the deferral date, which coincidescoincided with the Company’s bonus payments in the first quarterhalf of the following year and for an additional three-year vesting period.

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, will continue to be 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.


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.

47


Earnings per Common Share


Basic earnings per common share is computed by dividing net income (loss) by weighted average common shares outstanding for the year. Diluted earnings (loss) 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 (loss) per share:
December 31,
202220212020
Net income (loss)$79,486 $72,572 $(37,707)
Weighted average shares outstanding:
Basic19,758 19,515 19,301 
Effect of dilutive securities:
Restricted stock units644 587 — 
Performance stock units216 194 — 
Diluted20,618 20,296 19,301 
Basic earnings (loss) per share$4.02 $3.72 $(1.95)
Diluted earnings (loss) per share$3.86 $3.58 $(1.95)
 December 31,
 2019 2018 2017
Net income (loss)$46,869
 $49,295
 $(48,635)
Weighted average shares outstanding:     
Basic19,103
 18,917
 18,735
Effect of dilutive securities:     
Restricted stock units285
 406
 —
Performance stock units163
 209
 —
Diluted19,551
 19,532
 18,735
Basic earnings (loss) per share$2.45
 $2.61
 $(2.60)
Diluted earnings (loss) per share$2.40
 $2.52
 $(2.60)


Weighted average restricted stock units and performance stock units outstanding that could be converted into approximately 327,000472,000 and 80,000120,000 common shares, respectively, for the year ended December 31, 2017,2020, were not included in the computation of diluted lossearnings per share because the effects would be anti-dilutive.


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.


Restricted Cash


Historically,Periodically, the Company had leaseis party to agreements and business licenses with terms that requiredrequire 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 Condensed Consolidated Balance Sheets.

42




The following table provides a reconciliation of the cash and cash equivalents between the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statement of Cash Flows as of December 31, 2019, 20182022, 2021 and 2017:2020:
December 31,
202220212020
Cash and cash equivalents$355,447 $545,225 $316,473 
Restricted cash included within other non-current assets42 34 16 
Total cash, cash equivalents and restricted cash$355,489 $545,259 $316,489 
 December 31,
 2019 2018 2017
Cash and cash equivalents$271,719
 $279,906
 $207,534
Restricted cash included within other current assets—
 108
 526
Restricted cash included within other non-current assets—
 248
 102
Total cash, cash equivalents and restricted cash$271,719
 $280,262
 $208,162


Recently Issued Financial Accounting Standards


In December 2019,March 2020, the Financial Accounting Standards Board ("FASB"),FASB issued ASU No. 2019-12, Simplifying2020-04, Facilitation of the Accounting for Income Taxes.Effects of Reference Rate Reform on Financial Reporting. The guidance simplifies the accounting for income taxes by eliminating certainis intended to provide temporary optional expedients and exceptions to the guidance in Accounting Standards Codification ("ASC") 740on contract modifications and hedge accounting to ease the financial reporting burdens related to the approach for intraperiod tax allocation,expected market transition from the methodology for calculating income taxes in an interim periodLondon Interbank Offered Rate (LIBOR) and the recognition of deferred tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws orother interbank offered rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. Theto alternative reference rates. This guidance is effective for fiscal years,March 12, 2020, and interim periods within those fiscal years, beginning afterthe Company may elect to apply the amendments prospectively through December 15, 2021. Early adoption is permitted.31, 2024. The Company is currently evaluating the impact of this accounting guidance. The effect is not known or reasonably estimable at this time.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The standard is effective for fiscal years beginning after December 15, 2019. The Company will adopt this guidance in its fiscal year beginning January 1, 2020. The adoption of this guidance is not anticipated to have a material impact on ourthe consolidated financial statements.

Recently Adopted Financial Accounting Standards

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases, ASU No. 2018-10, Codification Improvements to Topic 842 (Leases) and ASU No. 2018-11, Targeted Improvements to Topic 842 (Leases). The guidance is intended to increase transparency and comparability among companies for leasing transactions, including a requirement for companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations created by those leases. The guidance also provides for disclosures that allow the users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company adopted the guidance on January 1, 2019 using the modified retrospective method without restatement of comparative periods. As such, periods prior to the date of adoption are presented in accordance with ASC 840 - Leases. The Company utilized the available practical expedient that allowed for the Company to not reassess whether existing contracts contain a lease under the new definition of a lease, lease classification for existing leases and whether previously capitalized initial direct costs would qualify for capitalization under the new guidance.

The adoption of this guidance had a material impact on the Condensed Consolidated Balance Sheet as of December 31, 2019 due to the recognition of equal right-of-use assets and lease liabilities for the Company's portfolio of operating leases. The right-of-use asset balance was then adjusted by the reclassification of pre-existing prepaid and accrued rent balances from other line items within the Condensed Consolidated Balance Sheet. The adoption had an immaterial impact on the Condensed Consolidated Statement of Comprehensive Income and Condensed Consolidated Statement of Cash Flows for the year ended December 31, 2019. The adoption had no impact on the Condensed Consolidated Statement of Changes in Stockholders' Equity for the year ended December 31, 2019.

Additional information and disclosures required by the new standard are contained in Note 6, Leases.

On January 1, 2019, the Company adopted ASU No. 2018-02, Income Statement - Reporting Comprehensive Income, which is intended to improve the usefulness of information reported as a result of the Tax Cuts and Jobs Act. The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The adoption of this guidance did not have an impact on the Company's consolidated financial statements.



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48




3.Revenue
3.
Revenue


Executive Search


Revenue is recognized as we satisfy our performance obligations are satisfied by transferring a good or service to a client. Generally, each of our executive search contracts containcontract 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 its clients for itsthe 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.


As required under ASU No. 2014-09, theThe Company now 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 thatthe 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 our executive search engagement performance obligationobligations is recognized over time as our 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 ourthe obligations under the executive search contract. Revenue is generally recognized over a period of approximately six months.


OurThe 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.


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 we satisfy our 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 ourthe 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 both input and output methods. Contracts that contain coaching
49


sessions, training sessions or the completion of assessments are recognized using the output method as each session or assessment is delivered to the client. Contracts that contain general consulting work are recognized using the input method utilizing a measure of progress that is based on time incurred on the project.

The Company enters into enterprise agreements with clients to provide a license for online access, via the Company's Culture Connect platform, to training and other proprietary material related to the Company's culture shaping programs. The consideration the Company expects to receive under the terms of an enterprise agreement is comprised of a single fixed fee. OurThe enterprise agreements contain multiple performance obligations, the delivery of materials via Culture Connect and material rights related to options to renew enterprise agreements at a significant discount. The Company allocates the transaction price to the performance obligations in the contract on a stand-alone selling price basis. The stand-alone selling price for the initial term of the enterprise agreement is outlined in the contract and is equal to the price paid by the client for the agreement over the initial term of the contract. The stand-alone selling price for the options to renew, or material right, are not directly observable and must be estimated. This estimate is required to reflect the discount the client would obtain when exercising the option to renew, adjusted for the likelihood that the option will be exercised. The Company estimates the likelihood of renewal using a historical analysis of client renewals. Access to Culture Connect represents a right to access the Company’s intellectual property that the client simultaneously receives and consumes as the Company performs under the agreement, and therefore the Company recognizes revenue over time.

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Given the continuous nature of this commitment, the Company utilizes straight-line ratable revenue recognition over the estimated subscription period as the Company's clients will receive and consume the benefits from Culture Connect equally throughout the contract period. Revenue related to client renewals of enterprise agreements is recognized over the term of the renewal, which is generally twelve months. Enterprise agreements do not comprise a significant portion of the Company's revenue.


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 Assetscurrent assets on the Condensed Consolidated Balance Sheets.


Unbilled receivables: Unbilled revenue 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 atfor the end of and during the period:years ended:
December 31,
20222021Change
Contract assets
Unbilled receivables, net$13,940 $17,947 $(4,007)
Contract assets21,348 18,995 2,353 
Total contract assets35,288 36,942 (1,654)
Contract liabilities
Deferred revenue$43,057 $51,404 $(8,347)
 December 31,
2019		 December 31,
2018		 Variance
Contract assets     
Unbilled receivables$7,585
 $8,684
 $(1,099)
Contract assets14,672
 15,291
 (619)
Total contract assets22,257
 23,975
 (1,718)
      
Contract liabilities     
Deferred revenue$41,267
 $40,673
 $594


During the year ended December 31, 2019,2022, we recognized revenue of $26.6$46.2 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, 20192022, from performance obligations partially satisfied in previous periods as a result of changes in the estimates of variable consideration was $19.4 million. During the year ended December 31, 2018, we recognized revenue of $28.0 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, 2018, from performance obligations partially satisfied in previous periods as a result of changes in the estimates of variable consideration was $21.8$22.3 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
50


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.
Allowance for Doubtful Accounts

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 ofin the allowance for doubtful accountscredit losses on the Company's trade receivables is as follows:
 December 31,
 202220212020
Balance at January 1,$5,666 $6,557 $5,140 
Provision for credit losses7,938 4,991 6,696 
Write-offs(6,830)(5,730)(5,418)
Foreign currency translation(131)(152)139 
Balance at December 31,$6,643 $5,666 $6,557 
The fair value and unrealized losses on available for sale debt securities, aggregated by investment category and the years ended:length of time the security has been in an unrealized loss position, are as follows:
  December 31,
  2019 2018 2017
Balance at January 1, $3,502
 $2,534
 $2,575
Provision charged to income 5,900
 3,790
 963
Write-offs (4,270) (2,708) (1,134)
Foreign currency translation 8
 (114) 130
Balance at December 31, $5,140
 $3,502
 $2,534


Less Than 12 MonthsBalance Sheet Classification
Balance at December 31, 2022Fair ValueUnrealized LossCash and Cash EquivalentsMarketable Securities
U.S. Treasury securities$194,056 $56 $11,918 $182,138 
45

The unrealized loss on one investment in U.S. Treasury securities at December 31, 2022 was caused by fluctuations in market interest rates. The contractual cash flows of these investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the investments would not be settled at a price less than the amortized cost basis. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before the recovery of the amortized cost basis. There were no investments with unrealized losses at December 31, 2021.



5.
Property and Equipment, net

5.    Property and Equipment, net

The components of the Company’s property and equipment are as follows:
 December 31,
 20222021
Leasehold improvements$40,829 $42,252 
Office furniture, fixtures and equipment14,322 14,933 
Computer equipment and software30,085 24,293 
Property and equipment, gross85,236 81,478 
Accumulated depreciation(55,029)(54,393)
Property and equipment, net$30,207 $27,085 

51

  December 31,
  2019 2018
Leasehold improvements $47,269
 $48,455
Office furniture, fixtures and equipment 17,740
 17,919
Computer equipment and software 27,531
 27,063
Property and equipment, gross 92,540
 93,437
Accumulated depreciation (63,890) (59,566)
Property and equipment, net $28,650
 $33,871


Depreciation expense for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, was $9.5$7.4 million, $11.0$7.1 million and $10.4$8.1 million, respectively.

As part of the Company's 2020 Plan (as defined below), property and equipment located at certain of the Company's offices was abandoned and the useful life of the assets were shortened to correspond with the cease-use date. As a result of the change in the useful life, approximately $0.9 million and $4.2 million of depreciation expense was accelerated and recorded in Restructuring charges in the Consolidated Statements of Comprehensive Income (Loss) and Depreciation and amortization in the Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020, respectively.
6.Leases

6.    Leases

The Company's lease portfolio is comprised 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 Company's lease term.


As most of the Company's leases do not provide an implicit interest rate, the Company utilizes itsan 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;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.


As of December 31, 2019, officeOffice leases have remaining lease terms that range from less than one year to 10.410.6 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.


As part of the Company's 2020 Plan (as defined below), a lease component related to one of the Company's offices was abandoned and the useful life of the associated right-of-use asset was shortened to correspond with the cease-use date. As a result of the change in useful life, approximately $8.7 million of right-of-use asset amortization was accelerated and recorded in Restructuring charges in the Condensed Consolidated Statements of Comprehensive Income (Loss) and Depreciation and amortization in the Condensed Consolidated Statements of Cash Flows during the year ended December 31, 2019, equipment2021. In September 2021, the Company entered into a termination and surrender agreement for this lease component. Under the terms of the agreement, the Company made a one-time payment of $11.7 million to release the Company from all remaining obligations under the lease. At the time of payment, the Company had accrued approximately $17.4 million of lease liabilities related to future payments under the remaining lease term. Upon making the one-time payment, the lease liabilities were relieved, resulting in a gain on termination of approximately $5.7 million, which is recorded in Restructuring charges in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2021.

Equipment leases, which are comprised of vehicle and office equipment leases, have remaining terms that range from less than one year to 4.85.5 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 Condensed Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2019, were as follows:
December 31,
20222021
Operating lease cost$17,408 $18,912 
Variable lease cost6,116 4,949 
Total lease cost$23,524 $23,861 

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Operating lease cost $24,928
Variable lease cost 7,932
Total lease cost $32,860


Rent expense, as previously defined under ASC 840, which includes the base rent, maintenance costs, operating expenses and real estate taxes, and the costs of equipment leases for the years ended December 31, 2018, and 2017, was $33.2 million and $32.2 million, respectively.


46




Supplemental cash flow information related to the Company's operating leases for the year ended December 31, 2019, wasis as follows:
December 31,
20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$18,865 $40,473 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$18,055 $11,397 
Cash paid for amounts included in the measurement of lease liabilities:  
Operating cash flows from operating leases $33,797
Right-of-use assets obtained in exchange for lease obligations:  
Operating leases $19,640


The weighted average remaining lease term and weighted average discount rate for our operating leases as of December 31, 2019 wasis as follows:
December 31,
20222021
Weighted Average Remaining Lease Term
Operating leases6.3 years6.4 years
Weighted Average Discount Rate
Operating leases3.48 %3.22 %
Weighted Average Remaining Lease Term
Operating leases4.7 years
Weighted Average Discount Rate
Operating leases3.9%


The future maturities of the Company's operating lease liabilities for the years ended December 31, wereis as follows:
Operating Lease Maturity
2023$18,914 
202419,521 
202511,982 
202610,491 
20277,886 
Thereafter23,799 
Total lease payments92,593 
Less: Interest(9,740)
Present value of lease liabilities$82,853 
 Operating Lease Maturity
2020$30,246
202127,229
202223,577
202320,555
20249,981
Thereafter8,983
Total lease payments120,571
Less: Interest(10,228)
Present value of lease liabilities$110,343


The minimum future operating lease payments due in each of the next five years as recorded under ASC 840 at December 2018, were as follows:
2019$34,456
202031,808
202127,381
202223,445
202320,087
Thereafter14,448
Total$151,625

The Company has an obligation at the end of the lease term to return certain offices to the landlord in theirits original condition, which is recorded at fair value at the time the liability is incurred. The Company had $3.0$2.8 million and $2.7$3.2 million of asset retirement obligations as of December 31, 20192022 and 2018,2021, respectively, which are recorded within Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets.
7.
Financial Instruments and Fair Value

7.    Financial Instruments and Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:Value

Level 1 – Quoted prices in active markets for identical assets and liabilities.
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.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.


47



Cash, Cash Equivalents and Marketable Securities


The Company's investments in marketable debt securities, which consist of U.S. Treasury bills, and commercial paper, 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.


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The Company's cash, cash equivalents, and marketable securities by significant investment category are as follows:
Amortized CostUnrealized GainsUnrealized LossesFair ValueCash and Cash EquivalentsMarketable Securities
Balance at December 31, 2022
Cash$247,198 $— 
Level 1(1):
Money market funds62,338 
U.S. Treasury securities312,121 15 (56)312,080 45,911 266,169 
Total Level 1312,121 15 (56)312,080 108,249 266,169 
Total$312,121 $15 $(56)$312,080 $355,447 $266,169 
 Fair Value Balance Sheet Classification
 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities
Balance at December 31, 2019           
Cash        $177,493
 $—
            
Level 1:           
Money market funds      15,661
 15,661
 —
U.S. Treasury securities139,705
 13
 —
 139,718
 78,565
 61,153
Total Level 1155,366
 13
 —
 155,379
 94,226
 61,153
            
Total$155,366
 $13
 $—
 $155,379
 $271,719
 $61,153


Cash and Cash Equivalents
Balance at December 31, 2021
Cash$265,233 
Level 1(1):
Money market funds80,798 
U.S. Treasury securities199,194 
Total Level 1279,992 
Total$545,225 

 Fair Value Balance Sheet Classification
 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities
Balance at December 31, 2018           
Cash        $279,829
 $—
            
Level 1:           
Money market funds
 
 
 77
 77
 —
            
Total$—
 $—
 $—
 $77
 $279,906
 $—
(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 $17.2$29.1 million and $14.6$22.9 million as of December 31, 20192022 and December 31, 2018,2021, 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.



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54




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 ValueOther Current AssetsAssets Designated for Retirement and Pension PlansInvestmentsOther Current LiabilitiesRetirement and Pension Plans
Balance at December 31, 2022
Measured on a recurring basis:
Level 1(1):
U.S. non-qualified deferred compensation plan$34,354 $— $— $34,354 $— $— 
Level 2(2):
Retirement and pension plan assets12,584 1,252 11,332 — — — 
Pension benefit obligation(13,951)— — — (1,252)(12,699)
Total Level 2(1,367)1,252 11,332 — (1,252)(12,699)
Total$32,987 $1,252 $11,332 $34,354 $(1,252)$(12,699)
Balance Sheet Classification
Fair ValueOther Current AssetsAssets Designated for Retirement and Pension PlansInvestmentsOther Current LiabilitiesRetirement and Pension Plans
Balance at December 31, 2021Balance at December 31, 2021
Measured on a recurring basis:Measured on a recurring basis:
Level 1(1):
Level 1(1):
U.S. non-qualified deferred compensation planU.S. non-qualified deferred compensation plan$36,051 $— $— $36,051 $— $— 
Level 2(2):
Level 2(2):
Retirement and pension plan assetsRetirement and pension plan assets14,048 1,333 12,715 — — — 
Pension benefit obligationPension benefit obligation(19,594)— — — (1,333)(18,261)
Total Level 2Total Level 2(5,546)1,333 12,715 — (1,333)(18,261)
   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, 2019            
            
Level 1:            
U.S. non-qualified deferred compensation plan $25,409
 $—
 $—
 $25,409
 $—
 $—
            
Level 2:            
Retirement and pension plan assets 15,296
 1,318
 13,978
 —
 —
 —
Pension benefit obligation (20,918) —
 —
 —
 (1,318) (19,600)
Total Level 2 (5,622) 1,318
 13,978
 —
 (1,318) (19,600)
            
Total $19,787
 $1,318
 $13,978
 $25,409
 $(1,318) $(19,600)Total$30,505 $1,333 $12,715 $36,051 $(1,333)$(18,261)



    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, 2018            
             
Level 1:            
U.S. non-qualified deferred compensation plan $19,442
 $—
 $—
 $19,442
 $—
 $—
             
Level 2:            
Retirement and pension plan assets 16,384
 1,349
 15,035
 —
 —
 —
Pension benefit obligation (20,908) —
 —
 —
 (1,349) (19,559)
Total Level 2 (4,524) 1,349
 15,035
 —
 (1,349) (19,559)
             
Total $14,918
 $1,349
 $15,035
 $19,442
 $(1,349) $(19,559)
(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 the entitiesCompany's acquired by the Companybusinesses are generally eligible to receive additional cash consideration based on the attainment of certain operating metrics in the periods subsequent to acquisition. Contingent consideration isand 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 discounted cash flow models. As of December 31, 2019, all contingent consideration accruals are recorded within Other current liabilities on the Consolidated Balance Sheets.



49
55




The following table provides a reconciliation of the beginning and ending balance of Level 3 liabilities for the year ended December 31, 2019:2022:
EarnoutContingent Compensation
Balance at December 31, 2021$(35,654)$(4,141)
Earnout accretion(820)— 
Compensation expense— (3,885)
Fair value adjustment464 — 
Foreign currency translation— (166)
Balance at December 31, 2022$(36,010)$(8,192)

Earnout accruals of $36.0 million and zero were recorded within Other current liabilities as of December 31, 2022 and December 31, 2021, respectively, and earnout accruals of zero and $35.7 million were recorded within Other non-current liabilities as of December 31, 2022 and December 31, 2021, respectively. Contingent compensation accruals of $1.5 million and $6.7 million are recorded within current Accrued salaries and benefits and non-current Accrued salaries and benefits, respectively, at December 31, 2022. Contingent compensation accruals of $4.1 million are recorded within non-current Accrued salaries and benefits at December 31, 2021.

8.    Acquisitions
  Acquisition
Earnout
Accruals
Balance at December 31, 2018 $(6,627)
Earnout accretion (668)
Earnout payments 3,009
Earnout adjustment (1,062)
Foreign currency translation 70
Balance at December 31, 2019 $(5,278)


8.
Acquisitions

2Get Holdings Limited

In September 2019,On April 1, 2021, the Company acquired 2GET Holdings LimitedBusiness Talent Group, LLC ("2GET"BTG"), a Brazil-based provider of executive search services, and its wholly owned subsidiaries.market-leader in sourcing high-end, on-demand independent talent. Under the terms of the purchasemerger agreement, the Company paid $5.2$32.6 million of initial consideration from existing cash for substantially all of the outstanding equity of 2GET. The acquisition was funded with $4.1 million of existing cash at closing and $1.1 million of the Company's common stock transferred in October 2019. The common stock transferred as consideration was reissued from the Company's treasury stock.BTG. The former owners of 2GETBTG are eligible to receive additional cash consideration, which the Company estimatesestimated to be between $5.0$20.0 million and $15.0$30.0 million on the acquisition date, based on the achievement of certain revenue and EBITDAoperating income milestones for the period from acquisition through 2023. The additional consideration is linked to future service with the Company and is accounted for as compensation expense. The Company recorded $0.7 million of intangible assets, consisting of the trade name of $0.4 million and customer relationships of $0.3 million, $3.8 million of goodwill, and $0.7 million of net working capital. The goodwill is primarily related to the acquired workforce and strategic fit. The Company will not be able to deduct the recorded goodwill for tax purposes.

Amrop A/S

In January 2018, the Company acquired Amrop A/S ("Amrop"), a Denmark-based provider of executive search services for 24.3 million Danish Kroner (equivalent to $3.9 million on the acquisition date) of initial consideration which was funded from existing cash. The former owners of Amrop are expected to receive additional cash consideration based on fee revenue generated during the two-year period following the completion of the acquisition.2022. When estimating the present value of future cash consideration, the Company has accrued $5.3$23.8 million as of the acquisition date for the earnout liability. During the year ended December 31, 2019.2021, the Company increased the fair value of the earnout liability by $11.4 million due to BTG outperforming initial revenue and operating income estimates. As of December 31, 2022 and 2021, the Company has accrued $36.0 million and $35.7 million, respectively, for the earnout liability. The Company recorded $5.8 million for customer relationships, $3.1 million for software, $1.7 million of intangible assets related to customer relationshipsfor a trade name and $5.5$45.5 million of goodwill. The goodwill is primarily related to the acquired workforce and strategic fit. As of the acquisition date, the Company expected that all of the goodwill would be deductible for tax purposes. Included in the Company's results of operations for the year ended December 31, 2021 are $66.6 million of revenue, and $9.3 million of operating loss, from the acquired entity.


On October 15, 2021, the Company acquired Heidrick & Struggles Finland OY ("H&S Finland"), a Finland-based executive search firm, for initial consideration of $1.6 million with an anticipated future payment to the former owners in 2023, subject to the achievement of certain agreed upon financial performance and operational targets, and continued employment with the Company through the payment date. As of December 31, 2022 and 2021, the Company has accrued $1.5 million and $0.1 million, respectively, for the contingent payment. The Company previously had an affiliate relationship with H&S Finland, whereby the Company had no financial investment in H&S Finland, but received licensing fees for the use of the Company's name and database. The Company recorded $1.5 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, 2021 are $1.1 million of revenue, and $0.5 million of operating income, from the acquired entity.
9.
Goodwill and Other Intangible Assets


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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, 2019 December 31, 2018
Executive Search   
Americas$92,497
 $88,410
Europe25,579
 24,924
Asia Pacific8,755
 8,758
Total Executive Search126,831
 122,092
Heidrick Consulting36,257
 36,257
Goodwill, gross163,088
 158,349
Accumulated impairment(36,257) (36,257)
Goodwill, net$126,831
 $122,092
December 31, 2022December 31, 2021
Executive Search
Americas$91,383 $91,463 
Europe1,449 1,532 
Total Executive Search92,832 92,995 
On-Demand Talent45,529 45,529 
Total goodwill$138,361 $138,524 


50



Changes in the carrying amount of goodwill by segment for the years ended December 31, 2019, 2018,2022, 2021, and 20172020 were as follows:
Executive Search
AmericasEuropeAsia PacificOn-Demand TalentTotal
Goodwill$92,497 $25,579 $8,755 $— $126,831 
Accumulated impairment losses— — — — — 
Balance at December 31, 201992,497 25,579 8,755 — 126,831 
Impairment— (24,475)(8,495)— (32,970)
Foreign currency translation(854)(1,104)(260)— (2,218)
Balance at December 31, 202091,643 — — — 91,643 
BTG acquisition— — — 45,529 45,529 
Finland acquisition— 1,532 — — 1,532 
Foreign currency translation(180)— — — (180)
Balance at December 31, 202191,463 1,532 — 45,529 138,524 
Foreign currency translation(80)(83)— — (163)
Goodwill91,383 25,924 8,495 45,529 171,331 
Accumulated impairment losses— (24,475)(8,495)— (32,970)
Balance at December 31, 2022$91,383 $1,449 $— $45,529 $138,361 
  Executive Search    
  Americas Europe Asia Pacific Heidrick Consulting Total
Balance as of December 31, 2016          
Goodwill $88,101
 $19,092
 $8,893
 $35,758
 $151,844
Accumulated impairment —
 —
 —
 —
 —
Goodwill, net as of December 31, 2016 88,101
 19,092
 8,893
 35,758
 151,844
Philosophy IB acquisition 357
 —
 —
 7
 364
Foreign currency translation 232
 1,808
 409
 492
 2,941
Impairment —
 —
 —
 (36,257) (36,257)
Goodwill, net as of December 31, 2017 88,690
 20,900
 9,302
 —
 118,892
Amrop acquisition —
 5,478
 —
 —
 5,478
Foreign currency translation (280) (1,454) (544) —
 (2,278)
Goodwill, net as of December 31, 2018 88,410
 24,924
 8,758
 —
 122,092
2GET acquisition 3,793
 —
 —
 —
 3,793
Foreign currency translation 294
 655
 (3) —
 946
Goodwill, net as of December 31, 2019 $92,497
 $25,579
 $8,755
 $—
 $126,831

In September 2019,April 2021, the Company acquired 2GETBTG and included $3.8recorded $45.5 million of goodwill related to the acquisition in the AmericasOn-Demand Talent operating segment.


In October 2021, the Company acquired H&S Finland, and recorded $1.5 million of goodwill related to the acquisition in the Europe operating segment.

During the 20192022 fourth quarter, the Company conducted its annual goodwill impairment evaluation as of October 31, 20192022 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 fourfive reporting units: Americas, Europe (which includes Africa), Asia Pacific (which includes the Middle East), On-Demand Talent, and Heidrick Consulting. As of October 31, 2019,2022, only the Americas, Europe, and Asia PacificOn-Demand Talent reporting units had recorded goodwill.


57


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 growth in the near and long term; (2) the discount rate; (3) working capital investments; and (4) other factors.


Based on the results of the impairment analysis, the fair values of the Americas, Europe, and Asia PacificOn-Demand Talent reporting units exceeded their carrying values by 329%220%, 21%8% and 30%13%, respectively.


During the twelve months ended December 31, 2017,2020, the Company determined that the goodwill within the former Culture ShapingEurope and Leadership ConsultingAsia Pacific reporting units was impaired, which resulted in impairment charges of $29.3$24.5 million and $6.9$8.5 million, respectively, to write off all of the goodwill associated with each of the reporting units. The impairment charges are recorded within Impairment charges in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the twelve months ended December 31, 2017.2020. The impairments were non-cash in nature and did not affect our current liquidity, cash flows, borrowing capability or operations, nor did they impact the debt covenants under our credit agreement. Effective January 1, 2018, the Company completed its integration of the Culture Shaping and Leadership Consulting reporting units into the newly created Heidrick Consulting reporting unit.


51



Other Intangible Assets, net


The Company’s other intangible assets, net by segment (for the segments that had recorded intangible assets), are as follows:
 
December 31, 2022December 31, 2021
Executive Search
Americas$51 $103 
Europe216 463 
Asia Pacific15 33 
Total Executive Search282 599 
On-Demand Talent6,051 8,570 
Total Other Intangible Assets, Net$6,333 $9,169 
  December 31, 2019 December 31, 2018
Executive Search    
Americas $557
 $52
Europe 1,314
 2,086
Asia Pacific 64
 78
Total Executive Search 1,935
 2,216
Heidrick Consulting —
 —
Total Other Intangible Assets, Net $1,935
 $2,216


In September 2019,April 2021, the Company acquired 2GETBTG and recorded customer relationships, software and trade name intangible assets in the AmericasOn-Demand Talent operating segment of $0.3$5.8 million, $3.1 million and $0.4$1.7 million, respectively.

During The combined weighted-average amortization period for the twelve months ended December 31, 2017, the Company determined that theacquired intangible assets within the Culture Shapingis 7.4 years with amortization periods of 11.0, 3.0 and Leadership Consulting reporting units were impaired, which resulted in impairment charges of $9.9 million and $4.6 million, respectively, to write off all intangible assets associated with each reporting unit. The impairment charges are recorded within Impairment charges in the Condensed Consolidated Statement of Comprehensive Income (Loss)3.0 years for the twelve months ended December 31, 2017. The impairment charges were non-cash in naturecustomer relationships, software and did not affect current liquidity, cash flows, borrowing capability or operations, nor did they impact the debt covenants under our credit agreement.trade name, respectively.


The carrying amount of amortizable intangible assets and the related accumulated amortization were as follows:
   December 31, 2019 December 31, 2018  December 31, 2022December 31, 2021
 Weighted
Average
Life (in
years)		 Gross Carrying Amount Accumulated Amortization Net
Carrying
Amount		 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted
Average
Life (in
years)		Gross Carrying AmountAccumulated AmortizationNet
Carrying
Amount		Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Client relationships 6.6 $16,302
 $(14,683) $1,619
 $15,910
 $(13,694) $2,216
Client relationships10.7$10,720 $(6,164)$4,556 $22,127 $(16,495)$5,632 
Trade name 5.0 362
 (46) 316
 —
 —
 —
Trade name3.12,406 (1,925)$481 2,441 (1,237)1,204 
SoftwareSoftware3.03,110 (1,814)1,296 3,110 (777)2,333 
Total intangible assets 6.3 $16,664
 $(14,729) $1,935
 $15,910
 $(13,694) $2,216
Total intangible assets8.6$16,236 $(9,903)$6,333 $27,678 $(18,509)$9,169 


Intangible asset amortization expense for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, was $0.9$3.2 million, $1.5$2.9 million and $4.4$0.7 million, respectively.

58



The Company's estimated future amortization expense related to intangible assets as of December 31, 20192022 for the years ended December 31st31, is as follows:
20232,723 
20241,151 
2025762 
2026527 
2027384 
Thereafter786 
Total6,333 

10.    Other Current Assets and Liabilities
2020$798
2021507
2022319
2023188
202476
Thereafter47
Total$1,935


52



10.
Other Current Assets and Non-Current Liabilities


The components of other current assets are as follows:
December 31, 2022December 31, 2021
Contract assets$35,288 $36,942 
Other5,434 4,507 
Total other current assets$40,722 $41,449 
  December 31, 2019 December 31, 2018
Contract assets $22,257
 $23,975
Other 5,591
 5,623
Total other current assets $27,848
 $29,598


The components of other non-currentcurrent liabilities are as follows:
December 31,
2022		December 31,
2021
Earnout liability$36,010 $— 
Other20,006 24,554 
Total other current liabilities$56,016 $24,554 

11.    Line of Credit
  December 31, 2019 December 31, 2018
Premise related costs $2,392
 $15,473
Other 2,242
 1,950
Total other non-current liabilities $4,634
 $17,423

11.
Line of Credit


On October 26, 2018,July 13, 2021, the Company entered into a newFirst Amendment (as amended, the "First Amendment") to the Credit Agreement, dated as of October 26, 2018 (the "2018 Credit"Credit Agreement") to replace the Second Amended and Restated Credit Agreement (the "Restated Credit Agreement") executed on June 30, 2015.. The 2018 Credit AgreementFirst Amendment provides the Company with a seniorcommitted unsecured revolving line of credit withfacility in an aggregate commitmentamount of $200 million, increased from $175 million as set forth in the original agreement, which includes a sublimit of $25 million for letters of credit and a sublimit of $10 million for swingline loan sublimit. The agreement also includesloans, with a $75 million expansion feature. The 2018 Credit Agreement will mature inFirst Amendment matures on July 13, 2026, extended from October 2023. Borrowings under the 2018 Credit Agreement bear interest at the Company's election of the Alternate Base Rate (as defined26, 2023 as set forth in the 2018 Credit Agreement) or Adjusted LIBOR (as defined in the 2018 Credit Agreement) plus a spread as determined by the Company’s leverage ratio.Agreement.


Borrowings under the 2018 Credit AgreementFirst Amendment may be used for working capital, capital expenditures, Permitted Acquisitions (as defined in the 2018 Credit Agreement)permitted acquisitions, restricted payments and for other general corporate purposes of the Company and its subsidiaries. The obligations under the 2018 Credit AgreementFirst Amendment are guaranteed by certain of the Company'sCompany’s subsidiaries.


The Company capitalized approximately $1.0 million of loan acquisition costs related toDuring the 2018 Credit Agreement, which will be amortized over the remaining term of the agreement.

Before October 26, 2018,year ended December 31, 2020, the Company was party to its Restatedborrowed $100.0 million under the Credit Agreement. The Restated Credit Agreement providedCompany elected to draw down a single senior unsecuredportion of the available funds from its revolving line of credit with an aggregate commitment of upas a precautionary measure to $100 million, which includes a sublimit of $25 million for letters of credit,increase its cash position and a $50 million expansion feature (the “Replacement Facility”). Borrowings under the Restated Credit Agreement bore interest at the Company’s electionfurther enhance its financial flexibility in light of the existing Alternate Base Rate (as defineduncertainty in global markets resulting from the Restated Credit Agreement) or Adjusted LIBOR Rate (as defined in the Restated Credit Agreement) plus a spread as determined by the Company’s leverage ratio.

During the three months ended March 31, 2018, the Company borrowed $20 million under the Restated Credit Agreement and elected the Adjusted LIBOR Rate.COVID-19 outbreak. The Company subsequently repaid $8$100.0 million during the three monthsyear ended MarchDecember 31, 2018 and $12 million during the three months ended June 30, 2018.2020.

During the three months ended March 31, 2017, the Company borrowed $40 million under the Restated Credit Agreement and elected the Adjusted LIBOR rate. The Company subsequently repaid $15 million during the three months ended March 31, 2017 and $25 million during the three months ended June 30, 2017.

As of December 31, 2019,2022, and 2018,2021, the Company had no outstanding borrowings under the 2018 Credit Agreement.borrowings. The Company was in compliance with the financial and other covenants under the 2018 Credit AgreementFirst Amendment and no event of default existed.


12.
Employee Benefit Plans

12.    Employee Benefit Plans

Qualified Retirement Plan


53



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 after-taxRoth contributions, from 1% to 50% of their eligible compensation up to a combined
59


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, 2019, 20182022, 2021 and 2017.2020. Employees are eligible for the Company match immediately upon entry into the Plan. Those contributions vest annually, provided that they are workingthe 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 annually 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, 2019, 20182022, 2021 and 2017.2020. The expense that the Company incurred for matching employee contributions for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, was $6.3$7.8 million, $6.8 million and $5.7 million, and $5.6 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.

Deferred Compensation Plans


The Company 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 20192022 and 2018,2021, all deferrals in the U.S. Plan were funded. The compensation deferred in the U.S. Plan was $23.8$33.4 million and $18.3$34.9 million at December 31, 20192022 and 2018,2021, 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, 20192022 and 2018.2021.


The Company 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, 20192022, and 2018,2021, the total amounts deferred under the plan were $1.6$1.0 million and $1.1 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, 20192022 and 2018.2021.


The U.S. and Non-Employee Directors Voluntary Deferred Compensation Plans 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

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.
20222021
Benefit obligation at January 1,$19,594 $22,351 
Interest cost181 150 
Actuarial loss(3,361)(11)
Benefits paid(1,257)(1,400)
Cumulative translation adjustment(1,206)(1,496)
Benefit obligation at December 31,$13,951 $19,594 
  2019 2018
Benefit obligation at January 1, $20,908
 $23,886
Interest cost 338
 373
Actuarial (gain) loss 1,506
 (886)
Benefits paid (1,375) (1,450)
Cumulative translation adjustment (459) (1,015)
Benefit obligation at December 31, $20,918
 $20,908


The benefit obligation amounts recognized in the Consolidated Balance Sheets are as follows:
 December 31, December 31,
 2019 2018 20222021
Current liabilities $1,318
 $1,349
Current liabilities$1,252 $1,333 
Noncurrent liabilities 19,600
 19,559
Noncurrent liabilities12,699 18,261 
Total $20,918
 $20,908
Total$13,951 $19,594 
54
60





The components of and assumptions used to determine the net periodic benefit cost are as follows:
 December 31,
202220212020
Net period benefit cost:
Interest cost$181 $150 $212 
Amortization of net loss195 211 140 
Net periodic benefit cost$376 $361 $352 
Weighted average assumptions
Discount rate (1)1.03 %0.72 %1.03 %
Rate of compensation increase— %— %— %
  December 31,
  2019 2018 2017
Net period benefit cost:      
Interest cost $338
 $373
 $362
Amortization of net loss 35
 92
 111
Net periodic benefit cost $373
 $465
 $473
Weighted average assumptions      
Discount rate (1) 1.71% 1.64% 1.49%
Rate of compensation increase —% —% —%


Assumptions to determine the Company’s benefit obligation are as follows:
 December 31, December 31,
 2019 2018 2017202220212020
Discount rate (1) 1.03% 1.71% 1.64%Discount rate (1)4.09 %1.03 %0.72 %
Rate of compensation increase —% —% —%Rate of compensation increase— %— %— %
Measurement Date 12/31/2019
 12/31/2018
 12/31/2017
Measurement Date12/31/202212/31/202112/31/2020
 
(1)The discount rates are based on long-term bond indices adjusted to reflect the longer duration of the benefit obligation.

(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, 20192022 and 2018,2021, that had not yet been recognized as components of net periodic benefit cost were $4.0$0.7 million and $2.6$4.5 million, respectively. As of December 31, 2022, an insignificant amount of the accumulated other comprehensive income is expected to be recognized as a component of net periodic benefit cost in 2023.


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, 20192022 and 2018,2021, was $15.3$12.6 million and $16.4$14.0 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, 20192022 and 2018,2021, 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:
2023$1,252 
20241,237 
20251,216 
20261,190 
20271,160 
2028 through 20325,167 

14.    Stock-Based Compensation
2020$1,318
20211,305
20221,288
20231,269
20241,245
2025 through 20295,713

14.
Stock-Based Compensation


The Company's SecondThird Amended and Restated 2012 Heidrick & Struggles GlobalShare Program (the "2012 Program'"Third A&R Program") provides for grants of stock options, stock appreciation rights, restricted stock units, performance stock units, phantom stock units and other stock-based compensation awards that are valued based upon the grant date fair value of shares.awards. These awards may be granted to directors, selected employees and independent contractors.



61


As of December 31, 2019, 2,551,441 shares2022, 3,769,836 awards have been issued under the 2012Third A&R Program, including 758,632 forfeited awards, and 981,682338,796 shares remain available for future awards, which includes 683,123 forfeited shares.awards. The 2012Third A&R Program provides that no awards can be granted after May 24,28, 2028.

In September 2017, the Company entered into an agreement with its former Chief Executive Officer pursuant to which Mr. Wolstencroft voluntarily agreed, with the concurrence of the Board of Directors, to forfeit 100 percent of his 2017 restricted stock unit and performance stock unit grants totaling 39,352 restricted stock units and 39,352 performance stock units.

55


Mr. Wolstencroft vested in 41,667 restricted stock units, or 100 percent of his 2014 sign-on restricted stock unit grant, without proration. With respect to his 2015 and 2016 restricted stock unit and performance stock unit grants, Mr. Wolstencroft vested an agreed upon pro-rata portion of the tranches scheduled to vest in 2017 through 2019 (and with the performance goals for performance stock units deemed to have been achieved at target level performance) totaling 9,948 restricted stock units and 50,007 performance stock units, and he agreed to forfeit the remaining portions of such 2015 and 2016 restricted stock unit and performance stock unit awards totaling 28,903 restricted stock units and 26,246 performance stock units.

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,
 202220212020
Salaries and employee benefits (1)$14,651 $20,081 $12,968 
General and administrative expenses810 345 460 
Income tax benefit related to stock-based compensation included in net income4,263 5,539 3,571 
  December 31,
  2019 2018 2017
Salaries and employee benefits (1) $12,857
 $9,548
 $4,597
General and administrative expenses 460
 562
 338
Income tax benefit related to stock-based compensation included in net income 3,529
 2,674
 1,948


(1) Includes $3.0$1.2 million of income and $7.8 million and $1.2$3.2 million of expense related to cash settled restricted stock units for the years ended December 31, 2019,2022, 2021 and 2018,2020, respectively.


Restricted Stock Units


Restricted stock units are generally subject to ratable vesting over a three-year period. Beginning in 2018, a portion of the Company's restricted stock units are subject to ratable vesting over a three-year or four-year period.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.


Restricted stock unit activity for the years ended December 31, 2019, 20182022 and 20172021 is as follows:
Number of
Restricted
Stock Units		Weighted-
Average
Grant-date
Fair Value
Outstanding on December 31, 2020707,864 $28.35 
Granted257,070 38.89 
Vested and converted to common stock(218,950)30.65 
Forfeited(18,333)30.80 
Outstanding on December 31, 2021727,651 31.32 
Granted287,954 34.05 
Vested and converted to common stock(273,565)32.29 
Forfeited(13,755)34.63 
Outstanding on December 31, 2022728,285 $31.97 
  Number of
Restricted
Stock Units		 Weighted-
Average
Grant-date
Fair Value
Outstanding on December 31, 2017 491,154
 $21.92
Granted 297,664
 34.64
Vested and converted to common stock (199,550) 21.66
Forfeited (76,822) 25.76
Outstanding on December 31, 2018 512,446
 28.83
Granted 270,488
 33.55
Vested and converted to common stock (175,792) 24.19
Forfeited (8,154) 34.29
Outstanding on December 31, 2019 598,988
 $32.25


As of December 31, 2019,2022, there was $11.4$6.0 million of pre-tax unrecognized compensation expense related to unvested restricted stock units, which is expected to be recognized over a weighted average of 2.52.3 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 operating income goalscertain performance and market conditions over the three-year vesting period. The performance stock units are expensed on a straight-line basis over the three-year vesting period.

During the year ended December 31, 2019, performance stock units were granted to certain employeesHalf of the Company, subject to a cliff vesting period of three years and certain other performance conditions. Half of award is based on the achievement of certain operating 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 based onsubject to total shareholder return wasmetrics is determined using the Monte-CarloMonte 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.
56
62




Performance sharestock unit activity for the years ended December 31, 2019, 20182022 and 2017 was2021 is as follows:
Number of
Performance
Stock Units		Weighted-
Average
Grant-date
Fair Value
Outstanding on December 31, 2020234,934 $35.09 
Granted106,357 42.07 
Vested and converted to common stock(90,284)30.60 
Forfeited(18,150)36.83 
Outstanding on December 31, 2021232,857 39.88 
Granted97,379 49.59 
Vested and converted to common stock(69,784)52.91 
Forfeited— — 
Outstanding on December 31, 2022260,452 $40.02 
  Number of
Performance
Stock Units		 Weighted-
Average
Grant-date
Fair Value
Outstanding on December 31, 2017 185,891
 $23.82
Granted 102,138
 25.81
Vested and converted to common stock (43,361) 23.64
Forfeited (47,551) 23.87
Outstanding on December 31, 2018 197,117
 24.88
Granted 81,661
 35.58
Vested and converted to common stock (99,219) 25.04
Forfeited —
 —
Outstanding on December 31, 2019 179,559
 $32.63


As of December 31, 2019,2022, there was $3.4$5.3 million of pre-tax unrecognized compensation expense related to unvested performance stock units, which is expected to be recognized over a weighted average of 1.81.7 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 period of four years and certain other conditions, including continued service to the Company. As a result of the cash-settlement feature of the awards, the Company considersclassifies the awards to beas 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 and is included within Accrued salaries and benefits - non-current on the Consolidated Balance Sheets.date.


The Company recorded phantom stock-based compensation income of $1.2 million and expense of $3.0$7.8 million and $1.2$3.2 million for the years ended December 31, 20192022, 2021 and December 31, 2018,2020, respectively.


Phantom stock unit activity for the years ended December 31, 2019, 2018,2022 and 2017 was2021 is as follows:
Number of

Phantom

Stock Units
Outstanding on December 31, 20172020—351,634 
Granted111,67363,575 
Vested—(61,539)
Forfeited—(4,807)
Outstanding on December 31, 20182021111,673348,863 
Granted154,38795,675 
Vested—(119,333)
Forfeited—(4,050)
Outstanding on December 31, 20192022266,060321,155 


As of December 31, 2019,2022, there was $5.2$2.2 million of pre-tax unrecognized compensation expense related to unvested phantom stock units, which is expected to be recognized over a weighted average of 3.32.9 years.


15.
Restructuring

63
Restructuring Charges


15.Restructuring

During the year ended December 31, 2019,2020, the Company recordedimplemented a restructuring charges of $4.1 million relatedplan (the "2020 Plan") to the closing of the Company's legacy Brazil operations due to the acquisition of 2GET (see Note 8, Acquisitions). The restructuring charges

57


primarily consist of employee-related costs for the Company's legacy Brazil operations. The America's incurred $4.1 million in restructuring charges, while Global Operations Support incurred less than $0.1 million in restructuring charges.

In 2017, the Company recorded restructuring charges of $15.7 million in connection with initiatives to reduce overall costsoptimize future growth and improve operational efficiencies.profitability. The primary components of the restructuring included: the elimination of two executive officer roles for a flatter leadership structure,2020 Plan included a workforce reduction, as the firm aligned its support resources to better meet operational needs and recognize synergies with the combination of Leadership Consulting and Culture Shaping, a reduction of the firm’sCompany's real estate expenses and support costs by consolidating or closing three of its locations across its global footprintprofessional fees, and the accelerationelimination of certain deferred compensation programs. The Company continued to incur charges related to the 2020 Plan during the year ended December 31, 2021, which primarily related to finalizing a reduction in the Company's real estate footprint.

The Company did not incur any charges under the 2020 Plan during the year ended December 31, 2022 and does not anticipate incurring any future expensescharges under certain contractual obligations.the 2020 Plan.

These charges consisted of $13.1 million of employee-related costs, including severance associated with reductions in our workforce of 251 employees globally, $2.3 million of other professional and consulting fees and $0.3 million of expenses associated with closing three office locations.


Restructuring charges by operating segment(reversals) for the yearsyear ended December 31, were2021 by type of charge (reversal) and operating segment are as follows:

Executive Search
AmericasEuropeAsia PacificHeidrick ConsultingGlobal Operations SupportTotal
Employee related$20 $(97)$(124)$(44)$62 $(183)
Office related3,859 — — 399 (296)3,962 
Other3 — — — 10 13 
Total$3,882 $(97)$(124)$355 $(224)$3,792 

Restructuring charges (reversals) for the year ended December 31, 2020 by type of charge (reversal) and operating segment are as follows:
Executive Search
AmericasEuropeAsia PacificHeidrick ConsultingGlobal Operations SupportTotal
Employee related$16,206 $8,353 $4,234 $2,633 $1,354 $32,780 
Office related14,242 226 374 1,953 2,115 18,910 
Other31 24 6 71 550 682 
Total$30,479 $8,603 $4,614 $4,657 $4,019 $52,372 

Restructuring charges incurred to date under the 2020 Plan, which are solely comprised of prior period charges, by type of charge and reportable segment are as follows:

Executive Search
AmericasEuropeAsia PacificHeidrick ConsultingGlobal Operations SupportTotal
Employee related$16,226 $8,256 $4,110 $2,589 $1,416 $32,597 
Office related18,101 226 374 2,352 1,819 22,872 
Other34 24 6 71 560 695 
Total$34,361 $8,506 $4,490 $5,012 $3,795 $56,164 

64


  December 31,
  2019 2018 2017
Executive Search      
Americas $4,102
 $—
 $784
Europe —
 —
 3,993
Asia Pacific —
 —
 2,046
Total Executive Search 4,102
 —
 6,823
Heidrick Consulting —
 —
 3,393
Global Operations Support 28
 —
 5,450
Total restructuring $4,130
 $—
 $15,666
As part of the Company's reduction in real estate expenses under the 2020 Plan, a lease component related to one of the Company's offices was abandoned. In September 2021, the Company entered into a termination and surrender agreement for this lease component. Under the terms of the agreement, the Company made a one-time payment of $11.7 million to release the Company from all remaining obligations under the lease. At the time of payment, the Company had accrued approximately $17.4 million of lease liabilities related to future payments under the remaining lease term. Upon making the one-time payment, the lease liabilities were relieved, resulting in a gain on termination of approximately $5.7 million, which is recorded in Restructuring charges in the Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2021.


Changes in the restructuring accrual for the years ended December 31, 2019, 2018,2022, 2021, and 20172020 were as follows:
Employee RelatedOffice RelatedOtherTotal
Accrual balance at December 31, 20193,245 — — 3,245 
Restructuring charges32,780 18,910 682 52,372 
Cash payments(11,443)(138)(682)(12,263)
Non-cash write-offs(1,633)(17,823)— (19,456)
Other(173)— — (173)
Exchange rate fluctuations(464)4 — (460)
Accrual balance at December 31, 202022,312 953 — 23,265 
Restructuring charges(183)3,962 13 3,792 
Cash payments(13,702)(738)(13)(14,453)
Non-cash write-offs44 (4,190)— (4,146)
Exchange rate fluctuations(77)13 — (64)
Accrual balance at December 31, 20218,394 — — 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 

Restructuring accruals are recorded within current Accrued salaries and benefits in the Consolidated Balance Sheets as of December 31, 2022. Accruals associated with the elimination of certain deferred compensation programs of $4.9 million and $3.6 million are recorded within current and non-current Accrued salaries and benefits, respectively, as of December 31, 2021.

65

  Employee Related Office Related Other Total
Accrual balance at December 31, 2016 $—
 $—
 $—
 $—
Restructuring charges 13,065
 308
 2,293
 15,666
Cash payments (1,199) (5) (1,282) (2,486)
Non-cash write-offs —
 (155) —
 (155)
Accrual balance at December 31, 2017 11,866
 148
 1,011
 13,025
Cash payments (8,689) (248) (993) (9,930)
Non-cash write-offs —
 195
 —
 195
Other (1,843) (95) 5
 (1,933)
Exchange rate fluctuations (65) —
 (6) (71)
Accrual balance at December 31, 2018 1,269
 —
 17
 1,286
Restructuring charges 4,130
 —
 —
 4,130
Cash payments (2,213) —
 —
 (2,213)
Non-cash write-offs —
 —
 (17) (17)
Other 4
 —
 —
 4
Exchange rate fluctuations 55
 —
 —
 55
Accrual balance at December 31, 2019 $3,245
 $—
 $—
 $3,245


16.Income Taxes
16.
Income Taxes


The sources of income (loss) before income taxes are as follows:

 December 31,
 202220212020
United States$57,274 $68,122 $11,346 
Foreign57,962 37,907 (42,744)
Income (loss) before income taxes$115,236 $106,029 $(31,398)
58


  December 31,
  2019 2018 2017
United States $53,461
 $47,191
 $(28,577)
Foreign 15,828
 23,301
 (841)
Income (loss) before income taxes $69,289
 $70,492
 $(29,418)


The provision for (benefit from) income taxes are as follows:
 December 31,
 202220212020
Current
Federal$13,405 $21,200 $4,469 
State and local6,748 9,341 1,948 
Foreign8,813 9,802 2,172 
Current provision for income taxes28,966 40,343 8,589 
Deferred
Federal3,702 (3,373)(2,416)
State and local1,113 (1,825)(697)
Foreign1,969 (1,688)833 
Deferred provision (benefit) for income taxes6,784 (6,886)(2,280)
Total provision for income taxes$35,750 $33,457 $6,309 
  December 31,
  2019 2018 2017
Current      
Federal $11,311
 $12,311
 $10,107
State and local 4,422
 4,843
 2,372
Foreign 4,423
 6,907
 8,257
Current provision for income taxes 20,156
 24,061
 20,736
Deferred      
Federal 2,031
 6,403
 5,642
State and local 698
 (354) (2,951)
Foreign (465) (8,913) (4,210)
Deferred provision (benefit) for income taxes 2,264
 (2,864) (1,519)
Total provision for income taxes $22,420
 $21,197
 $19,217


A reconciliation of the provision for income taxes to income taxes at the statutory U.S. federal income tax rate of 21% for the years ended December 31, 2019 and 2018, and 35% for the year ended December 31, 2017 is as follows:
 December 31, December 31,
 2019 2018 2017 202220212020
Income tax provision (benefit) at the statutory U.S. federal rate $14,551
 $14,803
 $(10,296)Income tax provision (benefit) at the statutory U.S. federal rate$24,199 $22,266 $(6,594)
State income tax provision (benefit), net of federal tax benefit 3,509
 3,242
 (593)
State income tax provision, net of federal tax benefitState income tax provision, net of federal tax benefit5,475 4,994 735 
Nondeductible expenses, net 1,570
 1,651
 3,282
Nondeductible expenses, net4,036 2,833 6,950 
Foreign taxes (includes rate differential and changes in foreign valuation allowance) 698
 (35) 5,465
Foreign taxes (includes rate differential and changes in foreign valuation allowance)1,647 1,910 4,470 
Release of valuation allowance (117) (43) (3,200)
Establishment (release) of valuation allowanceEstablishment (release) of valuation allowance— (157)566 
Additional U.S. tax on foreign operations 2,550
 1,628
 —
Additional U.S. tax on foreign operations436 242 115 
Current/deferred true-up (157) (1,199) 567
Tax reform —
 —
 23,732
Other, net (184) 1,150
 260
Other, net(43)1,369 67 
Total provision for income taxes $22,420
 $21,197
 $19,217
Total provision for income taxes$35,750 $33,457 $6,309 
59
66





The deferred tax assets and liabilities are attributable to the following components:
 December 31,
 20222021
Deferred tax assets attributable to:
Operating lease liability and accrued rent$16,693 $16,118 
Foreign net operating loss carryforwards14,528 15,555 
Accrued compensation and employee benefits20,776 25,844 
Deferred compensation17,994 21,289 
Foreign tax credit carryforwards5,522 5,382 
Other accrued expenses6,257 3,083 
Deferred tax assets, before valuation allowance81,770 87,271 
Valuation allowance(20,724)(20,396)
Deferred tax assets, after valuation allowance61,046 66,875 
Deferred tax liabilities attributable to:
Operating lease, right-of-use assets13,020 12,820 
Goodwill9,493 7,526 
Depreciation on property and equipment3,449 3,169 
Other1,592 1,310 
Deferred tax liabilities27,554 24,825 
Net deferred tax assets$33,492 $42,050 
  December 31,
  2019 2018
Deferred tax assets attributable to:    
Foreign net operating loss carryforwards $17,940
 $18,259
Accrued compensation and employee benefits 14,506
 15,442
Deferred compensation 17,110
 15,587
Foreign tax credit carryforwards 6,493
 8,163
Accrued rent 2,655
 3,096
Other accrued expenses 5,882
 6,290
Deferred tax assets, before valuation allowance 64,586
 66,837
Valuation allowance (24,200) (26,460)
Deferred tax assets, after valuation allowance 40,386
 40,377
Deferred tax liabilities attributable to:    
Goodwill 5,440
 2,203
Taxes provided on unremitted earnings —
 765
Depreciation on property and equipment 1,652
 2,040
Other 533
 686
Deferred tax liabilities 7,625
 5,694
Net deferred tax assets $32,761
 $34,683


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. Certain of the Company'sCompany’s deferred tax liabilities, based on jurisdictional netting, of $0.3$0.5 million and $0.2$0.1 million do not qualify for deferred tax netting and are included in Other non-current liabilities on the Consolidated Balance Sheets at December 31, 20192022 and 2018,2021, respectively.


The valuation allowance decreasedincreased from $26.5$20.4 million at December 31, 20182021 to $24.2$20.7 million at December 31, 2019.2022. The valuation allowance at December 31, 20192022 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, 2019,2022, the Company had a net operating loss carryforward of $116.1$103.4 million related to its foreign tax filings. Of the $116.1$103.4 million net operating loss carryforward, $76.9$64.0 million is subject to a valuation allowance. Depending on the tax rules of the tax jurisdictions, the losses can be carried forward indefinitely or for periods ranging from five years to twenty years.indefinitely. The Company also has a foreign tax credit carryforward of $6.5$5.5 million subject to a valuation allowance of $6.5$5.5 million.


At December 31, 2018,2021, the Company had a net operating loss carryforward of $118.0$111.0 million related to its foreign tax filings. Of the $118.0$111.0 million net operating loss carryforward, $59.8$64.7 million is subject to a valuation allowance. Depending on the tax rules of the tax jurisdictions, the losses can be carried forward indefinitely or for periods ranging from five years to twenty years.indefinitely. The Company also hashad a foreign tax credit carryforward of $8.2$5.4 million subject to a valuation allowance of $8.2$5.4 million.


As of December 31, 2018,2022 and 2021, the Company had $1.1 million of unrecognized tax benefits. As of December 31, 2019, the Company had $0.1 million ofdoes not have any unrecognized tax benefits, due to the settlement of which, if recognized, would be recorded as a component of incomeall previous unrecognized tax expense.benefits.



60
67




A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
 December 31,
 202220212020
Gross unrecognized tax benefits at January 1,$— $416 $130 
Gross increases for tax positions of prior years— 6 500 
Gross decreases for tax positions of prior years— (14)(31)
Settlements— (408)(183)
Gross unrecognized tax benefits at December 31,$— $— $416 
  December 31,
  2019 2018 2017
Gross unrecognized tax benefits at January 1, $1,128
 $740
 $1,038
Gross increases for tax positions of prior years 389
 608
 167
Gross decreases for tax positions of prior years (377) —
 —
Settlements (1,010) (220) (465)
Lapse of statute of limitations —
 —
 —
Gross unrecognized tax benefits at December 31, $130
 $1,128
 $740


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 20162019 through 2018 are subject to examination by the state taxing authorities. The years 2016 through 20182021 are subject to examination by the federal and state taxing authority. There are certain foreign jurisdictions thatauthorities. The years 2018 and prior are subject to examination for years prior to 2016.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 twelve months. No significant increases or decreases in unrecognized tax benefits are expected to occur by December 31, 2020.2023.


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). Accrued interest and penalties are less than $0.1 million as of December 31, 2019.


The “Tax Cuts and Jobs Act” was enacted in December 22, 2017. The Tax Act includeda territorial tax system, beginning in 2018, and it included two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions.
The Global Intangible Low-Taxed Income ("GILTI") provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company became subject to incremental U.S. tax on GILTI income beginning in 2018 due to expense allocations required by the U.S. foreign tax credit rules. The Company has elected to account for GILTIGlobal 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, 2019.2022.

The Base Erosion and Anti-Abuse Tax ("BEAT") provisions
17.Changes in the Tax Reform Act eliminates the deduction of certain base-erosion payments made to related foreign corporations and impose a minimum tax if greater than regular tax. The Company does not expect it will be subject to this tax and therefore has not included any tax impacts of BEAT in its consolidated financial statements for the year ended December 31, 2019.Accumulated Other Comprehensive Income


17.
Changes in Accumulated Other Comprehensive Income

The changes in Accumulated other comprehensive income (“AOCI”) by component for the year ended December 31, 2019,2022, are summarized below:
Available-
for-
Sale
Securities		Foreign
Currency
Translation		PensionAOCI
Balance at December 31, 2021$— $4,294 $(2,619)$1,675 
Other comprehensive income (loss) before classification, net of tax(41)(8,457)2,634 (5,864)
Balance at December 31, 2022$(41)$(4,163)$15 $(4,189)

18.    Segment Information
  Available-
for-
Sale
Securities		 Foreign
Currency
Translation		 Pension AOCI
Balance at December 31, 2018 $—
 $5,258
 $(1,196) $4,062
Other comprehensive income before classification, net of tax 13
 844
 (1,095) (238)
Balance at December 31, 2019 $13
 $6,102
 $(2,291) $3,824


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18.
Segment Information


In 2018,April 2021, the Company completedacquired BTG, a market-leader in sourcing high-end, on-demand independent talent. As a result of the integration of its Leadership Consulting and Culture Shaping businesses into one combined service offering, Heidrick Consulting. In conjunction with the integration,acquisition, the Company reorganized its Management Committee, which the Company considers to be its chief operating decision maker, so as to regularly assess performance and make resource allocations decisions for the Heidrick Consulting business. Therefore, the Company now reports Leadership Consulting and Culture Shaping as one operating segment, Heidrick Consulting. In conjunction with the change in operating segments, the Company modified its corporate cost allocation methodology. Previously reported operating segment results for the twelve months ended December 31, 2017, have been recast to conform to theidentified a new operating segment, structure and corporate cost allocation methodology.

On-Demand Talent. The Company now has fourfive 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 business operatesand On-Demand Talent businesses operate globally.


For segment purposes, reimbursements of out-of-pocket expenses classified as revenue and other operating income are reported separately and, therefore, are not included in the results of each segment. The Company believes that analyzing trends in revenue before reimbursements (net revenue), analyzing operating expenses as a percentage of net revenue, and analyzing operating income (loss), more appropriately reflectsreflect its core operations.


62



The revenue, operating income (loss), depreciation and amortization, and capital expenditures, by segment, wereare as follows:
68
  December 31,
  2019 2018 2017
Revenue      
Executive Search      
Americas $415,455
 $405,267
 $339,793
Europe 135,070
 145,348
 125,346
Asia Pacific 95,827
 102,276
 86,905
Total Executive Search 646,352
 652,891
 552,044
Heidrick Consulting 60,572
 63,132
 69,356
Revenue before reimbursements 706,924
 716,023
 621,400
Reimbursements 18,690
 19,632
 18,656
Total revenue $725,614
 $735,655
 $640,056
       
Operating income (loss)      
Executive Search      
Americas (1) $100,833
 $96,880
 $75,337
Europe (2) 3,026
 5,849
 13
Asia Pacific (3) 13,590
 15,999
 537
Total Executive Search 117,449
 118,728
 75,887
Heidrick Consulting (4) (18,499) (13,619) (62,368)
Total segments 98,950
 105,109
 13,519
Global Operations Support (5) (35,439) (36,252) (40,042)
Total operating income (loss) $63,511
 $68,857
 $(26,523)
       
Depreciation and amortization      
Executive Search      
Americas $4,204
 $4,605
 $4,794
Europe 2,784
 3,735
 3,328
Asia Pacific 1,472
 1,646
 1,565
Total Executive Search 8,460
 9,986
 9,687
Heidrick Consulting 1,079
 1,577
 4,099
Total segments 9,539
 11,563
 13,786
Global Operations Support 832
 959
 988
Total depreciation and amortization $10,371
 $12,522
 $14,774
       
Capital expenditures      
Executive Search      
Americas $1,121
 $601
 $7,123
Europe 1,070
 3,557
 1,460
Asia Pacific 295
 440
 2,633
Total Executive Search 2,486
 4,598
 11,216
Heidrick Consulting 541
 581
 1,172
Total segments 3,027
 5,179
 12,388
Global Operations Support 325
 1,006
 3,298
Total capital expenditures $3,352
 $6,185
 $15,686


(1)Operating income for the Americas includes restructuring charges of $4.1 million in 2019 and $0.8 million in 2017.
(2)Operating income for Europe includes restructuring charges of $4.0 million in 2017.
(3)Operating income for Asia Pacific includes restructuring charges of $2.0 million in 2017.
(4)Operating loss for Heidrick Consulting includes impairment charges of $50.7 million and restructuring charges of $3.4 million in 2017.
(5)Operating loss for Global Operations Support includes restructuring charges of less than $0.1 million in 2019 and $5.5 million in 2017.


63



 December 31,
 202220212020
Revenue
Executive Search
Americas$612,881 $581,440 $361,416 
Europe176,275 170,312 124,243 
Asia Pacific112,766 117,008 79,511 
Total Executive Search901,922 868,760 565,170 
On-Demand Talent91,349 66,636 — 
Heidrick Consulting80,193 67,605 56,445 
Revenue before reimbursements1,073,464 1,003,001 621,615 
Reimbursements10,122 5,473 7,755 
Total revenue$1,083,586 $1,008,474 $629,370 
Operating income (loss)
Executive Search
Americas (1)$164,225 $142,040 $62,806 
Europe (2)19,274 18,424 (22,827)
Asia Pacific (3)18,687 18,167 (6,724)
Total Executive Search202,186 178,631 33,255 
On-Demand Talent (4)(3,361)(9,272)— 
Heidrick Consulting (5)(7,155)(16,162)(28,369)
Total segments191,670 153,197 4,886 
Research and development(20,414)— — 
Global Operations Support (6)(58,990)(54,933)(40,415)
Total operating income (loss)$112,266 $98,264 $(35,529)
Depreciation and amortization
Executive Search
Americas$3,498 $12,843 $20,937 
Europe1,451 1,802 2,270 
Asia Pacific1,126 1,399 1,837 
Total Executive Search6,075 16,044 25,044 
On-Demand Talent2,669 2,010 — 
Heidrick Consulting878 1,045 953 
Total segments9,622 19,099 25,997 
Research and development524 — — 
Global Operations Support457 461 659 
Total depreciation and amortization$10,603 $19,560 $26,656 
Capital expenditures
Executive Search
Americas$1,890 $4,487 $4,258 
Europe683 372 409 
Asia Pacific1,497 209 2,015 
Total Executive Search4,070 5,068 6,682 
On-Demand Talent732 — — 
Heidrick Consulting128 174 116 
Total segments4,930 5,242 6,798 
Research and development4,878 — — 
Global Operations Support1,326 998 524 
Total capital expenditures$11,134 $6,240 $7,322 

(1)Includes $3.9 million and $30.5 million of restructuring charges in 2021 and 2020, respectively.
(2)Includes a $0.1 million restructuring reversal and $8.6 million of restructuring charges in 2021 and 2020, respectively, and $24.5 million of impairment charges in 2020.
(3)Includes a $0.1 million restructuring reversal and $4.6 million of restructuring charges in 2021 and 2020, respectively, and $8.5 million of impairment charges in 2020.
69


(4)Includes a $0.5 million fair value adjustment to reduce the earnout and an $11.4 million fair value adjustment to increase the earnout in 2022 and 2021, respectively.
(5)Includes $0.4 million and $4.7 million of restructuring charges in 2021 and 2020, respectively.
(6)Includes a $0.2 million restructuring reversal and $4.0 million of restructuring charges in 2021 and 2020, respectively.

Identifiable assets, and goodwill and other intangible assets, net, by segment, are as follows:
 December 31,
 20222021
Current assets
Executive Search
Americas$566,015 $459,077 
Europe82,935 123,865 
Asia Pacific104,445 99,510 
Total Executive Search753,395 682,452 
On-Demand Talent20,237 22,478 
Heidrick Consulting47,154 36,640 
Total segments820,786 741,570 
Global Operations Support3,033 3,818 
Total allocated current assets823,819 745,388 
Unallocated non-current assets207,125 213,717 
Goodwill and other intangible assets, net
Executive Search
Americas91,434 91,566 
Europe1,665 1,995 
Asia Pacific15 33 
Total Executive Search93,114 93,594 
On-Demand Talent51,580 54,099 
Heidrick Consulting— — 
Total goodwill and other intangible assets, net144,694 147,693 
Total assets$1,175,638 $1,106,798 
  December 31,
  2019 2018
Current assets    
Executive Search    
Americas $286,818
 $255,889
Europe 96,230
 85,355
Asia Pacific 78,967
 74,169
Total Executive Search 462,015
 415,413
Heidrick Consulting 30,628
 34,174
Total segments 492,643
 449,587
Global Operations Support 1,839
 1,280
Total allocated current assets 494,482
 450,867
Unallocated non-current assets 220,925
 125,454
Goodwill and other intangible assets, net    
Executive Search    
Americas 93,054
 88,462
Europe 26,893
 27,010
Asia Pacific 8,819
 8,836
Total Executive Search 128,766
 124,308
Heidrick Consulting —
 —
Total goodwill and other intangible assets, net 128,766
 124,308
Total assets $844,173
 $700,629

The only country to account for more than 10% of the Company's net revenue and total long-lived assets is the United States. Net revenue in the United States for the years ended December 31, 2022, 2021 and 2020 was $703.7 million, $650.9 million, and $377.8 million, respectively. Total long-lived assets in the United States as of December 31, 2022 and 2021 were $260.6 million and $257.9 million, respectively.
 
19.
Guarantees

19.Guarantees

The Company has utilized letters of credit to support certain obligations, primarily the payment offor office lease obligationsagreements and business license requirements for certain of its subsidiaries in Europe and Asia Pacific. The letters of credit were made to secure the respective agreements and are for the terms of the agreements, which extend through 2030.2033. For each letter of credit issued, the Company would have to use 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 wasis approximately $2.5$4.6 million as of December 31, 2019.2022. The Company has not accrued for these arrangements as no event of default exists or is expected to exist.
 
20.
Commitments and Contingencies

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.



64
70



21.Subsequent Events

On February 1, 2023, the Company acquired Atreus Group GmbH ("Atreus"). Atreus is one of the leading providers of executive interim management in Germany. Total initial consideration is comprised of $33.5 million paid in the 2023 first quarter and an estimated subsequent payment, which the Company estimates to be between $9.0 million and $13.0 million, to be paid in 2023 upon the completion of Atreus' statutory audit for the year ended December 31, 2022, subject to customary working capital adjustments. The former owners of Atreus are also eligible to receive additional cash consideration, which the Company estimates to be between $30.0 million and $40.0 million on the acquisition date, based on the achievement of certain revenue and operating income milestones for the period from acquisition through 2025.

On February 24, 2023, the Company entered into the Second Amendment (as amended, the “Second Amendment”) to the Credit Agreement by and among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto. The Second Amendment replaced the interest rate benchmark, from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”). At the Company’s option, borrowings under the Second Amendment will bear interest at one-, three- or six-month Term SOFR, or an alternate base rate as set forth in the Second Amendment, in each case plus an applicable margin. Other than the foregoing, the material terms of the Credit Agreement, as amended by the First Amendment remain unchanged.

71



PART II (continued)


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


The Audit and Finance Committee of the Board of Directors (the “Audit Committee”) of the Company conducted a competitive process to select a firm to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018. The Audit Committee invited several firms to participate in this process.Not applicable.


As a result of this process, on June 13, 2018, the Audit Committee appointed RSM US LLP (“RSM”) as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2018. In conjunction with the selection of RSM to serve as the Company’s independent registered public accounting firm, the Audit Committee dismissed KPMG LLP (“KPMG”) from that role effective on June 13, 2018.

KPMG’s audit reports on the consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2017, did not contain any adverse opinion or disclaimers of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the fiscal year ended December 31, 2017, and the interim period through June 13, 2018, there were (i) no disagreements between the Company and KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG would have caused KPMG to make reference to the subject matter of the disagreement in their reports on the Company’s consolidated financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
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 (the “SEC”) 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, 2019.2022. 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, 2019.2022.


(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.


65



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, 2019.2022.


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.


72


(c) Changes in Internal Control over Financial Reporting


Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases, and implemented changes to the relevant business processes, and related control activities within them, in order to monitor and maintain appropriate controls over financial reporting. There werehave been no other changes in our internal control over financial reporting that occurred during the period covered by this Annual Report on Form 10-KCompany's fiscal quarter ended December 31, 2022, 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.
66
73




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 2020Company's definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 25, 2023 (the "2023 Proxy Statement") and is incorporated herein by reference.
 
ITEM 11. EXECUTIVE COMPENSATION


The informationInformation required by this Item isrelating to our executive officer and director compensation and the compensation committee of the Board of Directors will be included in our 2020the 2023 Proxy Statement 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 2023 Proxy Statement and is incorporated herein by reference.

Information required by this Item relating to securities authorized for issuance under our equity compensation plans is presented below.

Equity Compensation Plan Information


The following table sets forth additional information as of December 31, 2019,2022, 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 SecondThird Amended and Restated 2012 Heidrick & Struggles GlobalShare Program. SeeProgram, see Note 14, Stock-Based Compensation.
 (a) (b) (c)(a)(b)(c)
Plan Category 
Number of
securities
to be
issued upon
exercise of
outstanding
options
 
Weighted-
average
exercise
price of
outstanding
options
 
Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in column (a))
Plan CategoryNumber of
securities
to be
issued upon
exercise of
outstanding
options, warrants and rights		 Weighted-
average
exercise
price of
outstanding
options, warrants and rights		Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by stockholders 778,547
(1) 
$—
 981,682
Equity compensation plans approved by stockholders1,249,189 (1)$— 78,344 
Equity compensation plans not approved stockholders —
  —
 —
Equity compensation plans not approved stockholders—   — — 
Total equity compensation plans 778,547
  —
 981,682
Total equity compensation plans1,249,189   — 78,344 
 
(1)Includes 598,988 restricted stock units and 179,559 performance stock units at their target levels and no options. The performance stock units represent the maximum amount of shares to be awarded at target levels, and accordingly, may overstate expected dilution.

(1)Includes 728,285 restricted stock units and 520,904 performance stock units and no options. The performance stock units represent the maximum amount of shares to be awarded, and accordingly, may overstate expected dilution.
The other information required by this Item is included in our 2020 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


The informationInformation required by this Item isregarding certain relationships and related transactions and director independence will be in included in our 2020the 2023 Proxy Statement and is incorporated herein by reference.
 
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES


The information required by this Item is included inincorporated by reference to the discussion under the caption “Audit Fees”captions “Fees Paid to Auditor” and "Audit & Finance Committee Policy and Procedures" in our 20202023 Proxy Statement and is incorporated herein by reference.Statement.



67
74




PART IV
 
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
(a)THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:

(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 3235.


2.    Exhibits:

Incorporated by Reference
Exhibit
No.		  Exhibit DescriptionFormExhibitFiling Date/Period End Date
3.01  
Amended and Restated Certificate of Incorporation of the Registrant
10-Q3.014/27/2020
3.02
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant
10-Q3.024/27/2020
3.03
Amended and Restated By-laws of the Registrant
8-K3.112/19/2022
4.01  
Specimen Stock Certificate
S-44.012/12/1999
*4.02
Description of Securities
10-K4.022/24/2020
10.01
Employment Agreement of Richard W. Greene **
8-K99.013/27/2015
10.02
Employment Agreement of Krishnan Rajagopalan dated April 9, 2015**
8-K99.14/20/2015
10.03
Heidrick & Struggles International, Inc. Management Severance Pay Plan and Summary Plan Description as Amended and Restated Effective December 31, 2010**
8-K10.110/25/2011
10.04
2007 Heidrick & Struggles GlobalShare Program**
DEF 14AApp. A4/25/2011
10.05
Heidrick & Struggles Incentive Plan, as Amended and Restated Effective January 1, 2008**
10-K10.202/27/2009
10.06
Form of Non-Qualified Stock Option Grant Agreement**
8-K10.52/5/2012
10.07
Form of Restricted Stock Unit Participation Agreement **
8-K10.32/5/2012
10.08
Form of Performance Stock Unit Participation Agreement **
8-K10.42/5/2012
10.09
Form of Non-Employee Director Restricted Stock Unit Participation Agreement **
10-K10.193/14/2012
10.10
Heidrick & Struggles International, Inc. U.S. Employees Deferred Compensation Plan**
10-K10.103/10/2006
10.11
Heidrick & Struggles International, Inc. Deferred Compensation Plan **
S-84.12/8/2002
10.12
First Amendment to the Heidrick & Struggles International, Inc. U.S. Employees Deferred Compensation Plan **
10-K10.252/27/2009
10.13
Heidrick & Struggles Non-Employee Directors’ Voluntary Deferred Compensation Plan - Amended and Restated as of September 30, 2016 **
8-K2.110/5/2016
10.14
Heidrick & Struggles International, Inc. Change in Control Severance Plan, as amended and restated effective December 29, 2011 **
8-K10.21/5/2012
10.15
Business Protection Agreement by and between Heidrick & Struggles (UK) Limited and Mr. Colin Price dated January 18, 2016 **
8-K99.21/19/2017
75
Exhibit
No.
Description
3.01Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.02 of this Registrant’s Registration Statement on Form S-4 (File No. 333-61023))
3.02
Amended and Restated By-laws of the Registrant (Incorporated by reference to Exhibit 3.03 of the Registrant's Form 8-K filed May 30, 2017)
4.01
Specimen Stock Certificate (Incorporated by reference to Exhibit 4.01 of this Registrant’s Registration Statement on Form S-4 (File No. 333-61023)
*4.02
Description of Securities
10.01
Credit Agreement dated as of June 22, 2011, among Heidrick & Struggles International, Inc., certain foreign subsidiary borrowers thereto, the lenders party thereto, JPMorgan Chase Bank, as Administrative Agent and Bank of America, N.A., as Syndication Agent (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K, dated June 22, 2011, filed on June 27, 2011)
10.02
Amendment and Restatement Agreement among Heidrick & Struggles International, Inc., certain foreign subsidiary borrowers thereto, the lenders party thereto and JPMorgan Chase Bank, as Administrative Agent, dated January 31, 2013 (Incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K, dated January 31, 2013)
10.03
Second Amended and Restated Credit Agreement among Heidrick & Struggles International, Inc., the Foreign Subsidiary Borrowers from time to time party thereto, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Bank of America, N.A., as Syndication Agent, dated June 30, 2015 (Incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K, dated July 1, 2015)
10.04
Eighth Lease Amendment between 233 S. WACKER LLC and Heidrick & Struggles International, Inc. dated October 1, 2014 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on October 9, 2014)
10.05
Lease between 1114 6th Avenue Co., LLC and Heidrick & Struggles International, Inc., and Heidrick & Struggles, Inc., dated August 31, 2007 (Incorporated by reference to Exhibit 10.04 of the Registrant’s Form 10-K filed on February 28, 2008)
10.06
Employment Agreement of Richard W. Pehlke dated August 15, 2011 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K, dated August 15, 2011, filed August 16, 2011) **
10.07
Amended and Restated Employment Letter Agreement of Stephen Beard dated May 18, 2011 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q filed on August 1, 2011)**
10.08
Employment Agreement of Tracy R. Wolstencroft dated February 2, 2014 (Incorporated by reference to exhibit 99.1 of the Registrant’s Form 8-K filed February 6, 2014)**
10.09
Employment Agreement of Richard W. Greene (Incorporated by reference to Exhibit 99.01 of the Registrant’s Form 8-K filed March 27, 2015) **
10.10
Employment Agreement of Krishnan Rajagopalan dated April 9, 2015 (Incorporated by reference to Exhibit 99.1 of the Registrant’s Form 8-K filed April 20, 2015) **
10.11
Restricted Stock Unit Participation Agreement issued to Tracy R. Wolstencroft dated February 3, 2014 (Incorporated by reference to exhibit 99.2 of the Registrant’s Form 8-K filed February 6, 2014)**
10.12
Performance Stock Unit Participation Agreement issued to Tracy R. Wolstencroft dated February 3, 2014 (Incorporated by reference to exhibit 99.3 of the Registrant’s Form 8-K filed February 6, 2014)**
10.13
Employment Agreement of Colin Price dated January 18, 2017 (Incorporated by reference to Exhibit 99.1 of the Registrant’s Form 8-K filed January 19, 2017.)**

68



Incorporated by Reference
Exhibit
No.		  Exhibit DescriptionFormExhibitFiling Date/Period End Date
10.16
Amended and Restated 2012 Heidrick & Struggles GlobalShare Plan**
DEF 14AApp. A4/18/2014
10.17
Employment Agreement of Krishnan Rajagopalan dated September 21, 2017**
8-K99.19/21/2017
10.18
Employment Agreement between Heidrick & Struggles International, Inc. and Kamau Coar dated January 4, 2018 **
8-K10.11/10/2018
10.19
Employment Agreement between Heidrick & Struggles International, Inc. Andrew LeSueur dated January 9, 2018 **
8-K10.21/10/2018
10.20
Heidrick & Struggles International, Inc. Management Severance Pay Plan as amended and restated effective December 31, 2017
8-K10.31/10/2018
10.21
Employment Agreement between Heidrick & Struggles International, Inc. and Mark Harris dated March 19, 2018 **
8-K99.13/21/2018
10.22
Second Amended and Restated 2012 Heidrick & Struggles GlobalShare Program**
DEF 14AApp. A5/11/2018
10.23
Form of Phantom Stock Unit Participation Agreement **
10-Q10.110/29/2018
10.24
Form of Restricted Stock Unit Participation Agreement **
10-Q10.110/29/2018
10.25
Employment Agreement between Heidrick & Struggles International, Inc. and Sarah Payne dated December 5, 2018 **
8-K10.112/6/2018
10.26
Employment Agreement between Heidrick & Struggles International, Inc. and Michael Cullen dated February 6, 2019 **
8-K10.12/8/2019
10.27
Form of Performance Stock Unit Participation Agreement **
10-Q10.17/29/2019
10.28
Form of Performance Stock Unit Participation Agreement **
10-K10.537/24/2020
10.29
Form of Restricted Stock Unit Participation Agreement **
10-Q10.17/27/2020
10.30
Form of Performance Stock Unit Participation Agreement **
10-Q10.27/27/2020
10.31
Form of Non-Employee Director Restricted Stock Unit Participation Agreement **
10-Q10.37/27/2020
10.32
Third Amended and Restated 2012 Heidrick & Struggles GlobalShare Program**
S-86/22/2020
10.33
Heidrick & Struggles International, Inc. Management Severance Pay Plan and Summary Plan Description As Amended and Restated effective December 31, 2020**
10-K10.582/24/2021
10.34
Separation Agreement and General Release, dated June 30, 2021, by and between Heidrick & Struggles International, Inc. and Kamau Coar**
8-K10.17/2/2021
10.35
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-K10.17/19/2021
10.36
Director and Officer Indemnification Agreement
10-Q10.110/25/2021
10.37
Heidrick & Struggles International, Inc. Management Severance Pay Plan and Summary Plan Description as amended and restated effective April 12, 2022**
8-K10.14/15/2022
10.38
Employment Agreement between Heidrick & Struggles International, Inc. and Tracey Heaton dated October 31, 2021**
10-Q10.14/25/2022
76
10.14
Membership Interest Purchase Agreement, dated as of December 31, 2012, among Heidrick & Struggles International, Inc., Senn-Delaney Leadership Consulting Group, LLC and the members of Senn-Delaney Leadership Consulting Group, LLC (Incorporated by reference to exhibit 2.1 of the Registrant’s Form 8-K filed January 4, 2013).
10.15
Share Purchase Agreement, dated October 1, 2015, by and among Heidrick & Struggles International, Inc. and Heidrick & Struggles (UK) Limited and Sharon Lee Toye, Tammy Ann Mitchell-Fisher, Catherine Elizabeth Powell and Colin Price (Incorporated by reference to exhibit 2.1 of the Registrant’s Form 8-K filed October 6, 2015).
10.16
Asset Purchase Agreement, dated as of February 9, 2016, by and among Decision Strategies International, Inc., Decision Strategies International (UK) Limited, The Shareholders set forth on Annex I thereto, Paul J. H. Schoemaker, as the Shareholders' Representative, Heidrick & Struggles, Inc., Hedirick & Struggles Leadership Consulting Ltd. and Heidrick & Struggles International, Inc. (Incorporated by reference to exhibit 2.1 of the Registrant’s Form 8-K filed February 11, 2016).
10.17
Heidrick & Struggles International, Inc. Management Severance Pay Plan and Summary Plan Description as Amended and Restated Effective December 31, 2010 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K dated, October 25, 2011, filed on October 25, 2011) **
10.18
2007 Heidrick & Struggles GlobalShare Program (Incorporated by reference to Appendix A to the Registrant’s Proxy Statement dated April 25, 2011)**
10.19
Heidrick & Struggles Incentive Plan, as Amended and Restated Effective January 1, 2008 (Incorporated by reference to Exhibit 10.20 of the Registrant’s From 10-K filed on February 27, 2009)**
10.20
Form of Non-Qualified Stock Option Grant Agreement (Incorporated by reference to Exhibit 10.5 of the Registrant’s Form 8-K dated December 29, 2011, filed on January 5, 2012)**
10.21
Form of Restricted Stock Unit Participation Agreement (Incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K dated December 29, 2011, filed on January 5, 2012)**
10.22
Form of Performance Stock Unit Participation Agreement (Incorporated by reference to Exhibit 10.4 of the Registrant’s Form 8-K dated December 29, 2011, filed on January 5, 2012)**
10.23
Form of Non-Employee Director Restricted Stock Unit Participation Agreement (Incorporated by reference to Exhibit 10.19 of the Registrant’s 10-K dated March 14, 2012)**
10.24
Heidrick & Struggles International, Inc. U.S. Employees Deferred Compensation Plan (Incorporated by reference to Exhibit 10.10 of the Registrant’s Form 10-K for the year ended December 31, 2005, filed on March 10, 2006)**
10.25
Heidrick & Struggles International, Inc. Deferred Compensation Plan (Incorporated by reference to Exhibit 4.1 of this Registrant’s Registration Statement on Form S-8 (File No. 333-82424))**
10.26
First Amendment to the Heidrick & Struggles International, Inc. U.S. Employees Deferred Compensation Plan (Incorporated by reference to Exhibit 10.25 of the Registrant’s Form 10-K for the year ended December 31, 2008, filed on February 27, 2009)**
10.27
Heidrick & Struggles Non-Employee Directors’ Voluntary Deferred Compensation Plan - Amended and Restated as of September 30, 2016 (Incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed October 5, 2016.)**
10.28
Heidrick & Struggles International, Inc. Change in Control Severance Plan, as amended and restated effective December 29, 2011 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K dated December 29, 2011, filed on January 5, 2012).**
10.29
Share Purchase Agreement, dated August 4, 2016 for the sale and purchase of the entire issued share capital of JCA Group Limited and the entire partnership interest in JCA Partners LLP by and among JCA Events Limited, the persons listed in Schedule 1 thereto, Heidrick & Struggles (UK) Limited, and Heidrick & Struggles International, Inc. (Incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed August 4, 2016.)

10.30
Asset Purchase Agreement by and among Philosophy IB, LLP, Christine H. Lotze, Kaveh Naficy and Heidrick & Struggles, Inc. dated August 12, 2016 (Incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed August 16, 2016.)
10.31
Deed of Amendment dated August 25, 2016 by and among Heidrick & Struggles International, Inc., Heidrick & Struggles (UK) Limited, and Sharon Lee Toye, Tammy Ann Mitchell-Fisher, Catherine Elizabeth Powell and Colin Price (Incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed August 29, 2016.)
10.32
Business Protection Agreement by and between Heidrick & Struggles (UK) Limited and Mr. Colin Price dated January 18, 2016 (Incorporated by reference to Exhibit 99.2 of the Registrant’s Form 8-K filed January 18, 2017.)**

69



10.33
Amended and Restated 2012 Heidrick & Struggles GlobalShare Plan (Incorporated by reference to Appendix B to the Registrant’s Proxy Statement dated April 18, 2014)**
10.34
Earn Out Buyout Agreement between Tammy Ann Mitchell-Fisher, Catherine Elizabeth Powell, Colin Price, Sharon Lee Toye, Heidrick & Struggles (UK) Limited, and Heidrick & Struggles International, Inc. dated June 14, 2017 (Incorporated by reference to Exhibit 2.1 of the Registrant's Form 8-K filed June 20, 2017)
10.35
Employment Agreement of Krishnan Rajagopalan dated September 21, 2017 (Incorporated by reference to Exhibit 99.1 of the Registrant's Form 8-K filed September 21, 2017)**
10.36
Agreement Regarding Equity Awards of Tracy R. Wolstencroft dated September 21, 2017 (Incorporate by reference to Exhibit 99.2 of the Registrant's Form 8-K filed September 21, 2017)
10.37
Share Purchase Agreement, dated September 19, 2017 between Porma APS and Heidrick & Struggles, Inc. (Incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed September 28, 2017)
10.38
Memorandum of Clarification relating to the Share Purchase Agreement among Hedirick & Struggles International, Inc., Heidrick & Struggles (UK) Limited, JCA Events Limited, and the persons listed on Schedule 1 thereto made on August 4, 2016 (Incorporated by reference to Exhibit 2.1 of the Registrant's Form 8-K filed November 15, 2017)
10.39
Separation Agreement by and between Heidrick & Struggles International, Inc. and Stephen W. Beard dated January 4, 2018 (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K filed January 5, 2018)
10.40
Separation Agreement by and between Heidrick & Struggles International, Inc. and Michael Marino dated December 31, 2017 (Incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K filed January 5, 2018)
10.41
Employment Agreement between Heidrick & Struggles International, Inc. and Kamau Coar dated January 4, 2018 (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K filed January 10, 2018)**
10.42
Employment Agreement between Heidrick & Struggles International, Inc. Andrew LeSueur dated January 9, 2018 (Incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K filed January 10, 2018)**
10.43
Heidrick & Struggles International, Inc. Management Severance Pay Plan as amended and restated effective December 31, 2017 (Incorporated by reference to Exhibit 10.3 of the Registrant's Form 8-K filed January 10, 2018)
10.44
Employment Agreement between Heidrick & Struggles International, Inc. and Mark Harris dated March 19, 2018 (Incorporated by reference to Exhibit 99.1 of the Registrant's Form 8-K filed March 21, 2018)**
10.45
Letter of KPMG LLP dated June 15, 2018 to the SEC (Incorporated by reference to Exhibit 16.1 of the Registrant's Form 8-K filed June 15, 2018)
10.46
Second Amended and Restated 2012 Heidrick & Struggles GlobalShare Program (Incorporated by reference to Annex A in the Registrant's Schedule 14A filed May 11, 2018)
10.47
Credit Agreement dated as of October 26, 2018 among Heidrick & Struggles International, Inc., the foreign subsidiary borrowers hereto, the lenders party thereto, Bank of America, N.A., as Administrative Agent, SunTrust Bank, as Syndication Agent and HSBC Bank USA, national Association, as Documentation Agent (Incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed October 29, 2018)
10.48
Form of Phantom Stock Unit Participation Agreement (Incorporated by reference to Exhibit 10.1 of Registrant's Form 10-Q filed October 29, 2018)**
10.49
Form of Restricted Stock Unit Participation Agreement (Incorporated by reference to Exhibit 10.1 of Registrant's Form 10-Q filed October 29, 2018)**
10.50
Employment Agreement between Heidrick & Struggles International, Inc. and Sarah Payne dated December 5, 2018 (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K filed December 6, 2018)**
10.51
Employment Agreement between Heidrick & Struggles International, Inc. and Michael Cullen dated February 6, 2019 (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K filed February 8, 2019)**
10.52
Form of Performance Stock Unit Participation Agreement (Incorporated by reference to Exhibit 10.1 of Registrant's Form 10-Q filed July 29, 2019)**
*10.53
Form of Performance Stock Unit Participation Agreement**
*21.01
Subsidiaries of the Registrant
*23.01
Consent of Independent Registered Public Accounting Firm - RSM LLP

70


*23.02
Consent of Independent Registered Public Accounting Firm - KPMG 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
*101.INSXBRL Instance document
*101.SCHXBRL Taxonomy Extension Schema Document
*101.CALXBRL Taxonomy Calculation Linkbase Document
*101.DEFXBRL Taxonomy Extension Definition Linkbase Document
*101.LABXBRL Taxonomy Extension Label Linkbase Document
*101.PREXBRL Taxonomy Extension Presentation Linkbase Document
Incorporated by Reference
Exhibit
No.		  Exhibit DescriptionFormExhibitFiling Date/Period End Date
10.39
Employment Agreement between Heidrick & Struggles International, Inc. and Michael Cullen dated April 25, 2022**
10-Q10.17/25/2022
*10.40
Second Amendment to Credit Agreement, dated February 24, 2023, by and among Heidrick & Struggles International, Inc, the Foreign Subsidiary Borrowers Party party hereto, the other Subsidiary Guarantors party hereto, the Lenders party hereto and Bank of America, N.A., as administrative agent
10-K10.402/27/2023
*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
*101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema Document
*101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
*101.LABInline XBRL Taxonomy Extension Label Linkbase Document
*101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
*104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
*    Filed herewith.

**    Denotes a management contract or compensatory plan or arrangement.
†    Furnished herewith.
(b)SEE EXHIBIT INDEX ABOVE

(c)FINANCIAL STATEMENTS NOT PART OF ANNUAL REPORT

(b)SEE EXHIBIT INDEX ABOVE

(c)FINANCIAL STATEMENTS NOT PART OF ANNUAL REPORT

None.



ITEM 16. FORM 10-K SUMMARY

None.
71
77




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 on February 24, 2020.authorized.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
/s/ Stephen A. Bondi
By:Stephen A. Bondi
Title:Vice President, Controller
Date:February 27, 2023(Duly authorized on behalf of the registrant and in his capacity as Principal 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 February 24, 2020.
27 , 2023.
SignatureTitle
/s/ Krishnan RajagopalanChief Executive Officer & Director
Krishnan Rajagopalan
(Principal Executive Officer)
/s/ Mark R. HarrisExecutive Vice President, Chief Financial Officer
Mark R. Harris
(Principal Financial Officer)
/s/ Stephen A. BondiVice President, Controller
Stephen A. Bondi
(Principal Accounting Officer)
/s/ Elizabeth L. AxelrodDirector
Elizabeth L. Axelrod
Signature/s/ Mary E. G. BearTitleDirector
Mary E. G. Bear
/s/ Krishnan RajagopalanChief Executive Officer & Director
Krishnan Rajagopalan
(Principal Executive Officer)
/s/ Mark R. HarrisExecutive Vice President, Chief Financial Officer
Mark R. Harris
(Principal Financial Officer)
/s/ Stephen A. BondiVice President, Controller
Stephen A. Bondi
(Principal Accounting Officer)
/s/ Elizabeth L. AxelrodDirector
Elizabeth L. Axelrod
/s/ Clare M. ChapmanDirector
Clare M. Chapman
/s/ Gary E. KnellDirector
Gary E. Knell
/s/ Lyle LoganDirector
Lyle Logan
/s/ T. Willem MesdagDirector
T. Willem Mesdag
/s/ Stacey RauchDirector
Stacey Rauch
/s/ Adam WarbyDirector
Adam Warby

78
72