Heidrick & Struggles International : 2020 Q4 Financial Results Slides

FOURTH QUARTER 2020 RESULTS

FEBRUARY 22, 2021

SAFE HARBOR STATEMENT

The 2020 fourth quarter news release, conference call webcast, and the following slides contain forward-looking statements. The forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management's beliefs and assumptions. Forward-looking statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted or implied in the forward-looking statements. Factors that may affect the outcome of the forward-looking statements include, among other things, the impacts, direct and indirect, of the COVID-19 pandemic on our business, our consultants and employees, and the overall economy; 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.

FOURTH QUARTER CONSOLIDATED RESULTS

2020 FOURTH QUARTER HIGHLIGHTS

• • Net revenue of $161.0 million increased 12.2% from 2020 third quarter trough

• • Restructuring charge of $4.3 million included in operating income of $8.5 million and operating margin of 5.3%

• • Adjusted operating income of $12.8 million up sequentially from $9.9 million and adjusted operating margin of 7.9% up 100 basis points sequentially

• • Adjusted EBITDA of $18.4 million up from $15.9 million in the 2020 third quarter and adjusted EBITDA margin up 40 basis points

• • General and administrative expenses of $27.4 million, or 17.0% of revenue, improved by $2.4 million sequentially from 20.7% of revenue and prior year quarter's 19.9% of revenue

• • Net income of $5.5 million includes restructuring charge; adjusted net income of $11.6 million and adjusted diluted earnings per share of $0.59

• • Strong cash flow from operations of $96.3 million creating total liquidity of $506.1 million at year end

FOURTH QUARTER 2020 FINANCIAL HIGHLIGHTS (SEQUENTIAL COMPARISON)

$ in millions except Diluted EPS

Consolidated Net Revenue

Consultant Headcount

$161.0	426
425
$143.5
3Q 2020	4Q 2020	3Q 2020	4Q 2020
Executive Search	Heidrick Consulting	Executive Search	Heidrick Consulting

$14.3

$129.2

$146.3

63	65
362	361

Adjusted Profitability*

Adjusted Net Income & EPS*

$18.4

$11.6

Adjusted Operating Income

* Refer to appendix for a reconciliation of non-GAAP measures.

Adjusted EBITDA4Q 2020

Net Income

3Q 2020

Diluted EPS4Q 2020

FOURTH QUARTER 2020 FINANCIAL HIGHLIGHTS (YEAR-OVER-YEAR COMPARISON)

$ in millions except Diluted EPS

Consolidated Net Revenue $180.0

4Q 2019Executive Search

4Q 2020Heidrick Consulting

Consultant Headcount

426

71	65
380	361

451

4Q 2019Executive Search

4Q 2020Heidrick Consulting

Adjusted Profitability*

Adjusted Net Income & EPS*

$10.6 $11.6

Adjusted Operating Income	Adjusted EBITDA	Net Income	Diluted EPS
4Q 2020	4Q 2019	4Q 2020
* Refer to appendix for a reconciliation of non-GAAP measures.

FULL YEAR 2020 FINANCIAL HIGHLIGHTS

$ in millions except Diluted EPS and Headcount

Net Revenue

Consultant Headcount

FY 19Executive Search

FY 20Heidrick Consulting

451

426

71	65
380	361

12/30/2019Executive Search

12/30/2020Heidrick Consulting

Adjusted Profitability* $89.1

Adjusted Net Income & EPS*

$70.3
$49.8	$35.2
$1.77
Operating Income	Adjusted EBITDA	Net Income	Diluted EPS
FY 19	FY 20	FY 19	FY 20
* Refer to appendix for a reconciliation of non-GAAP measures.

$50.6

TRAILING 12-MONTH CONSOLIDATED OPERATING MARGIN*

Trailing 12 months adjusted* operating income/ trailing 12 months consolidated net revenue

9.6%

9.9%

10.0%

9.8%

9.6%

9.8%

8.0%

8.7%

8.8%

8.0%

8.0%

6.5%

4.7%

4.9%

5.4%

5.9%

6.4%

6.4%

5.7%

6.0%

5.8%

6.0%

6.7%

6.5%

6.6%

6.7%

7.2%

3.4%

2014

2015

2016

2017

2018

2019

2020

2021

* Operating margins adjusted to exclude restructuring & impairment charges in 2017, 2019 and 2020

EXECUTIVE SEARCH - 4Q 2020 FINANCIAL HIGHLIGHTS (SEQUENTIAL COMPARISON)

$ in millions

19.5%

3Q 2020

Net Revenue by Region

$79.9 $96.3

-0.6%

Americas

* Refer to appendix for a reconciliation of non-GAAP measures.

Net Revenue

Europe

$146.3

4Q 2020

Asia Pacific4Q 2020

Adjusted Operating Margin*

19.0%

3Q 2020

4Q 2020

Adjusted Operating Margin by Region*

24.6% 25.7%

Americas

3Q 2020Europe 4Q 2020Asia Pacific

EXECUTIVE SEARCH - 4Q 2020 FINANCIAL HIGHLIGHTS (YEAR-OVER-YEAR COMPARISON)

$ in millions

$163.0

19.0%

4Q 2019

Net Revenue by Region

$106.8$96.3

24.9% 25.7%

Americas

* Refer to appendix for a reconciliation of non-GAAP measures.

Net Revenue

Europe

4Q 2020

Asia Pacific4Q 2020

Adjusted Operating Margin*

17.7%

4Q 2019

4Q 2020

Adjusted Operating Margin by Region*

Americas

Europe4Q 2019

Asia Pacific4Q 2020

EXECUTIVE SEARCH OPERATIONAL HIGHLIGHTS (SEQUENTIAL COMPARISON)

Consultant Headcount

Executive Search Confirmations

4,518	4,587
362	361
9/30/2020	12/31/2020	TTM 3Q 2020	TTM 4Q 2020

Consultant Productivity

TTM 3Q 2020

TTM 4Q 2020

EXECUTIVE SEARCH OPERATIONAL HIGHLIGHTS (YEAR-OVER-YEAR COMPARISON)

Consultant Headcount

Executive Search Confirmations

380

4,587

12/31/2019

12/31/2020

Consultant Productivity $1,740,000

4,896

FY 19

FY 20

FY 19

FY 20

DIVERSIFIED MIX OF BUSINESS IN SEARCH

Sequential Comparison of Industry Practice Billings

4Q 2020 vs. 3Q 2020

Diversified Mix of Industry Practice Billings

STRONG & FLEXIBLE BALANCE SHEET

Cash & Marketable Securities ($ in millions)

Strong Liquidity ($ in millions, as of 12/31/2020)

Cash & Marketable Securities	$175 Million Credit Facility Availability	Total Liquidity
$336.5	$169.6	$506.1
• Based on its strong cash position, the Company repaid $100 million of borrowings under its credit facility in September 2020. Currently, there are no outstanding borrowings.

* Net of $205 million in bonuses paid in March 2020 related to 2019 performance ** Net of $100 million credit facility payback in September 2020

OUTLOOKS AND INITIATIVES

2021 GROWTH INITIATIVES

Grow scale and impact of both Search and Consulting, 1 delivering a premium service experience and The Heidrick

Way to clients

Invest in new product development and strategic expansion into adjacent/complementary areas, with innovative, tech-driven offerings to drive future growth and shareholder value

APPENDIX

ADJUSTED OPERATING INCOME BY SEGMENT - FOURTH QUARTER 2020

ADJUSTED OPERATING INCOME BY SEGMENT - YEAR TO DATE 2020

ADJUSTED OPERATING INCOME

We define Adjusted Operating Income as operating income excluding impairment charges and restructuring charges.

ADJUSTED NET INCOME & DILUTED EPS

We define Adjusted Net Income as net income excluding impairment charges and restructuring charges, net of tax.

ADJUSTED EBITDA MARGIN

We define Adjusted EBITDA as earnings before interest, taxes, depreciation, intangible amortization, equity-settled stock based compensation expense, acquisition-related earnout accretion, acquisition-related contingent compensation, impairment charges, restructuring charges, and other non-operating income or expense.

Suzanne Rosenberg, VP Investor [e-mail]

212-551-0554

FEBRUARY 22, 2021