Heidrick & Struggles International, Inc. (NASDAQ:HSII) Q1 2023 Earnings Call Transcript

Heidrick & Struggles International, Inc. (NASDAQ:HSII) Q1 2023 Earnings Call Transcript April 24, 2023

Heidrick & Struggles International, Inc. beats earnings expectations. Reported EPS is $0.76, expectations were $0.64.

Operator: Welcome, everyone, to the Heidrick & Struggles Q1 2023 Earnings Conference Call. As a reminder, today’s conference is being recorded. It is now my pleasure to turn the conference over to Suzanne Rosenberg, Vice President of Investor Relations. Please go ahead, Ms. Rosenberg.

Suzanne Rosenberg: Thank you, and welcome to our 2023 first quarter conference call. Joining me on today’s call is our President and CEO, Krishnan Rajagopalan; and Chief Financial Officer, Mark Harris. We posted our accompanying slides on the IR home page of our website at heidrick.com and we encourage you to view these slides for additional context. Please note that in the materials presented today, we may refer to non-GAAP financial measures that we believe provide additional insight into underlying results. Reconciliations between these non-GAAP financial measures and the most comparable GAAP measures may be found in the earnings press release. Also in our remarks, we may make certain forward-looking statements based on our current expectations.

Such statements may involve risks and uncertainties that may cause actual results to differ materially. We ask that you please refer to the Safe Harbor language also contained in today’s press release as well as our filings with the Securities and Exchange Commission for information concerning the risk factors that could affect the company. With that, Krishnan, I’ll now turn the call over to you.

Krishnan Rajagopalan: Thank you, Suzanne. Good afternoon, everyone. As anticipated, we saw a slowdown in the first quarter revenue from a year ago, reflecting broader macroeconomic headwinds. Importantly, we acted deliberately and adjusted our costs accordingly, which allowed us to still hold strong first quarter adjusted EBITDA margins of nearly 12%. While we expect to see some continued volatility in our markets, based on our guidance, we believe we’ll continue to navigate through these complexities prudent work. Turning briefly to our first quarter results. Revenue for the quarter was $239 million, which was in line with our previously issued guidance, albeit, at the lower end of the range. Adjusted EBITDA was $27 million, adjusted EBITDA margin was 11.5%, and diluted earnings per share was $0.76.

In terms of strategic achievements, we completed the acquisition of Atreus in the On-Demand Talent space in the first quarter, and on April 1, we completed the acquisition of businessfourzero or B4Z in Heidrick Consulting. Our strategy remains on track as we continue to leverage our strong balance sheet to focus on growth and diversification, while serving our clients on their most pressing leadership challenges at the executive level. Before I provide some color on each of our business segments, I think it’s important to take a step back and acknowledge that since our last call in February, there have been some new and increasing macroeconomic challenges. Sustained higher interest rates are continuing to pressure certain industries, including financial services and technology.

In addition, recent issues have confidence in the banking sector have presented both new challenges and opportunities. For example, at Heidrick, we have a sizable financial services practice. And while we’ve seen some clauses in the banking sector, other areas such as wealth and asset management and insurance remain positive. Naturally, clients are prioritizing against the various macro externalities, just as we are. We’re seeing that the uncertainty that organizations are facing is creating delays in decision-making. We also emphasize the importance of having effective leaders in place to drive critical transformations and position companies for resilience in a world of constant change. In addition, while we are extremely cognizant of the current operating environment, we also see significant opportunities, particularly given the diversification of our business across Executive Search, Consulting and On-Demand Talent.

Opportunities are being driven by several factors, including the ongoing digital transformation of businesses, new role creation across industries, for example, in financial services, new roles comprise over 50% of our new engagements. The critical importance of talent recruitment at the top. In fact, a recent industry report cited the number of CEO changes that U.S. companies alone jumped in February this year, reaching its highest point since January 2020. With the ongoing global economic uncertainty and acute need remains for companies to turn to high-end independent talent with skills enabling them to pivot adeptly in today’s increasingly competitive business environment and rapidly changing markets. Ongoing need to focus on change management, especially in the face of layoffs and maintaining strong cultures to keep workforces engaged, motivated and focused on purpose.

As companies prepare for some turbulence ahead, we believe we’re well positioned to maintain our market leadership position in the Executive Search, while continuing to take strategic actions within our adjacent businesses and implementing strong operating discipline. Speaking more broadly, while we do anticipate a slowdown in Executive Search this year, we are expecting to drive growth in both On-Demand Talent and Heidrick Consulting. Simultaneously, we are laser focused on the operational excellence we’ve been delivering over the past several years across each of our business lines and regions. And we remain confident in our ability to successfully manage our business through these fluid and dynamic times. Now let me turn to each of our business segments.

In Executive Search, we continue to see a solid market given the level of change at the top, as companies adapt to a new and changing operating environment. Increasingly, we see our clients want exclusive and holistic relationships, which plays well to our positioning in the diversification of our business. High topics and Search include ESG, particularly with a focus on sustainability and renewable energy sources, cyber security and AI. We continue to benefit from our distinguished brands, global presence, and best-in-class service we provide to our clients. These assets, together with our nimble on strategic team, are driving this segment to continue to operate efficiently, despite some headwinds. In addition, we’re encouraged that our backlog indicates a stronger second quarter.

Shifting to On-Demand Talent. Year-over-year revenue growth in the first quarter was primarily driven by the acquisition of Atreus, which closed on February 1. From a strategic perspective, Atreus gives us greater geographic scope and serves as a springboard to establish a strong presence in Continental Europe. The integration of Atreus is now well underway with our integration management office, executing on a strong roadmap. From a go-to-market perspective, we’ve already identified several cross collaboration opportunities. While we continue to see high demand in our On-Demand Talent segment, the pace of decision-making has slowed, impacting revenue and reflecting corporate caution against the macro uncertainty. We have since seen volume rebound in recent months, which we expect will drive growth in the second quarter.

Specifically, we are seeing growth in demand for interim executives driven in part by the shifting needs in executive skills to whether a changing environment. There is no doubt that On-Demand Talent is permittable for us now and for the future of work not only for employers, but for workers as well. The recent Wall Street Journal article cited that an incremental 1 million Americans alone are working part time voluntarily from the prior year. With this segment’s growing demand, we’ll continue to increase its marketing and sales resource, while opportunistically expanding its geographic footprint. In Heidrick Consulting, our clients remain engaged with us in accelerating their performance culture, particularly as it relates to talent retention, strategy, purpose and execution.

While demand remained strong and our new bookings were consistent with internal expectations, we did see some slowdown due to protracted decision-making. Our strategy of partnering with our clients on longer and deeper journey has kept us close to the top of the house, providing us with a positive outlook for the year. We’re also doubling down on our purpose and culture work in Heidrick Consulting. Today, more than ever, leaders are focused on purpose and culture, not only to increase employee engagement, but also to drive strategy implementation can accelerate business transformation. Critically, companies are engaging in the alignment of purpose, culture, and strategy to accelerate performance, create productive engaging workplaces in hybrid environments and retain top talent.

On April 1, we completed the acquisition of B4Z, a London-based consultancy that specializes in working companies to develop and implement purpose-driven change. With B4Z, we would complement our existing culture shaping practice to offer a broader, more robust set of leadership advisory solutions, as we work with clients to help them win purpose and strategy, the leadership and culture and further support their efforts to develop future-ready cultures and organizations. As we discussed on our last call, we continue to build out our digital assets. We’re in beta mode with Heidrick Navigator, and we’re working with several clients to implement and operationalize the platform. We also continue to have productive discussions with clients in our pipeline.

As we previously said Heidrick Navigator will require some time to build a distinguished user base. We expect bookings to begin in early 2024, translating to revenue over time as with most subscription models. Assign contracts increase and total value rises, we expect the platform to meaningfully contribute to top and bottom line results. Overall, as a firm we continue advance our exciting transformational journey was building on offering our clients the next generation of talent and leadership advisory service offerings, which will help their companies to achieve higher-performance levels through their leaders and teams. While we often placed our business into search and answer speaking on these types of calls, from a strategic perspective, we’re focused on helping our clients in two primary capacities; first talent acquisition, and second effectiveness of leaders teams, and organizations.

The former includes our Executive Search and On-Demand Talent businesses, the latter includes our Heidrick Consulting segment and currently under development, digital assets that will further support our ability to provide clients with a systematic and holistic approach at scale to manage and developed their leadership teams as an asset. When we look at these two areas, certain segments and service offerings, present higher growth opportunities and are vital in our continued efforts to diversify our revenue stream. Importantly, these aren’t new shoots of growth, but rather accelerating shoots in businesses, there are already a part of our strategy. We will continue to invest in these prospects both organically and inorganically as supported by our strong balance sheet and cash generation capabilities.

From an inorganic perspective, we have a proven track record of success. As a result of our due diligence process predicated on identifying opportunities that are aligned with our strategy, our culture, while maintaining our strong financial discipline. For example, sustained demand for On-Demand Talent services and culture purpose related consulting fueled our recent Atreus and B4Z acquisitions. We believe these inorganic investments will expedite our attainment to desired growth rates in these segments, and we will remain opportunistic with our M&A practices, particularly in the event valuations turn more favorable due to economic uncertainty. We also see significant opportunities for reinvestment across our business. More specifically, within our portfolio of digital assets, spanning all three segments, in addition to our standalone product, Heidrick Navigator.

Here we will continue investing R&D dollars towards these assets rather than looking to acquire them as we are truly developing unique solutions, critical to address complex client issues. We look forward to continuing the strategy of supporting these high growth opportunities within our company to further diversify our business. To conclude, I’m pleased with the performance of the team in the first quarter, particularly given the broader macroeconomic challenges. Our results speak towards strong operating discipline, nimble execution and strength of our diversification strategy. As we progress through 2023, we remain focused on advancing the growth and diversification of our business. And I’m very excited about our current and future investments that will drive sustainable, long-term growth and deliver value to our stakeholders globally.

I’d like to now turn the call over to Mark.

Mark Harris: Thank you, Krishnan, and good afternoon, everyone. Let me start by commenting that while our first quarter revenue was what we expected, you can see the effects of our operating discipline as we maintain strong profitability in the face of very challenging macroeconomic environment by printing an adjusted EBITDA margin of 11.5% in the first quarter of 2023 compared to 12.7% in all of 2022. Our financial strength is also evident in our debt-free balance sheet as we ended the quarter with over $200 million in cash even after funding the acquisition of Atreus, the BTG performance-based earn-out payment, 2022 bonus payments and our quarterly cash dividend. In addition, we’ve added the flexibility of a $200 million credit facility available to us, giving us over $400 million of liquidity.

As we move forward, our focus is on growth and diversification, and we will continue to leverage our balance sheet to drive organic and inorganic growth through innovation and differentiation. Please remember, the businesses we’re adding do carry lower margins versus Executive Search. However, these are higher growth businesses and over time, we expect the aggregate dollars flowing to the bottom line will be EPS accretive, a trade that we believe brings greater returns to our shareholders. In addition, the second quarter guidance we are providing demonstrates that even in the face of certain headwinds and diversified revenue is potentially on track for another year on par with the previous two years. I think this speaks volumes to the ongoing success of that strategy, and we have been able to achieve thus far as we continue to execute on our strategic road map.

Without further ado, I’ll now provide a financial summary of the quarter. As a reminder, first quarter results include two months of the Atreus business and no operational performance of businessfourzero as this acquisition closed on April 1. On a consolidated basis, first quarter revenue was $239.3 million, which was within our guidance range. But on a constant currency, revenue was $244.8 million, which was at the midpoint of our guidance range. This compares to historical level achieved 2022 and reflect the broader market slowdown. Now let’s shift to our three business segments. In Executive Search, revenue was in line with expectations at $190.5 million, with decreases in each region. As previously stated, the segment’s performance was hindered by certain macro conditions.

Consultant productivity of $2.1 million on a trailing 12-month basis compares to $2.5 million in 2022 and reflects the lower level of production, coupled with 38 more consultants versus last year. For On-Demand Talent, revenue was $31.1 million, which is an increase of 33% compared to the year ago period. This comparison includes Atreus in the first quarter of 2023. But taking that out, we were down about 13% in our existing platform. This was due to having 339 active engagements at the end of the first quarter of 2023, compared to 379 at the end of the first quarter of 2022, so a decrease of 11%. This was a result of a slower fourth quarter that initially bled into January and early February, but March came in very strong and indicates a much stronger second quarter.

As Krishnan mentioned, we continue to view On-Demand Talent as a higher growth opportunity and an important avenue for Heidrick to further diversify. Future growth from this segment will likely be a mix of organic and inorganic. In the U.S., growth will be organic as we have a great foothold with a dominant position. In Europe, we have built a strong organic business in the U.K. and now with the acquisition of Atreus in Germany, we are further developing our presence in Continental Europe. Importantly, we’ve identified the markets that we need and want to cover, and we’ll continue to reinvest in the business as demonstrated by our recent actions. Heidrick Consulting’s first quarter revenue was $17.7 million, basically flat with the first quarter of 2022.

Given the environment, we’ve seen more delays in certain in-flight projects with no material cancellations, coupled with strong new engagements coming in and leads to a stronger backlog that will eventually come through in revenue. Companies are focused on reenergizing their workforces and aligning around purpose, strategy and structures, especially those that will enable them to manage within a hybrid working environment. This bodes well, especially for our recent acquisition of businessfourzero, which will deepen our existing consulting offerings and is expected to meaningfully contribute to the segment’s revenue. Overall, we look forward to further scaling Heidrick Consulting while working to achieve appropriate levels of profitability as we add that scale.

Turning to operating expenses. Salaries and benefits to being a variable cost, our lower revenue translated to lower compensation costs. Salary and benefits for the first quarter was $158.9 million versus $201.4 million in the first quarter of 2022. And as a percentage of revenue, it was 66.4% versus 71% in the year ago period. General and administrative expenses were $34.3 million compared to $29.8 million in the first quarter of 2022. As a percentage of revenue, it was 14.3% versus 10.5% in the year-ago period. The increase in dollars as a result of business development, intangible amortization and accretion, office occupancy, IT and professional services. In a more normalized environment, we would expect to see G&A as a percentage of net revenue to be approximately 15% or slightly lower, but this number is in line with our expectations.

In cost of services, we saw an increase of $4.8 million to $22.8 million in the first quarter compared to $18 million in the previous year quarter, which was mostly due to an increase in volume of On-Demand projects. As a reminder, this line item is where we expense our payments to independent consultants who perform high-level projects and Inter and On-Demand Talent, which is a percentage of revenue. We continue to invest in the digitization of our products and solutions across the enterprise, including Heidrick Navigator through R&D spend. R&D spend in the first quarter was $5.5 million versus $4.4 million last year. We expect the return on these investments to generate strong benefits as we leverage technology in our search, consulting and On-Demand Talent segments while providing a systemic and holistic approach to leadership asset management through our digital portfolio.

In terms of profitability, we view adjusted EBITDA as the best long-term proxy of our underlying operating performance, especially given M&A activity in our business and associated noise from purchase accounting. In the first quarter, adjusted EBITDA was $27.5 million compared to $35.7 million last year. Adjusted EBITDA margin remained strong at 11.5% compared to 12.6% in the prior year period. On a segment basis, Executive Search finished the quarter with adjusted EBITDA of $48.4 million and a 25.4% margin compared to $51.9 million with a 21.4% margin in the first quarter of 2022. On-Demand Talent recorded adjusted EBITDA loss of $1.3 million versus a gain of $0.3 million in the year ago period, stemming from the hiring mandate we have for 2023 in our U.S. business.

Hydro Consulting reported adjusted EBITDA loss of $2.7 million compared to a $1.8 million loss in the prior year period, again, stemming from hiring mandate we have for 2023 and our cost of sales pertaining to certain services that need to be delivered outside of our core businesses. Our first quarter effective tax rate was 31.7% and continues our company’s trend of a tax rate consistently in the low 30% range. Finally, net income for the quarter was $15.6 million and diluted earnings per share was $0.76. While down from 2022, it should be noted that annualized we’re still in a $3 handle for EPS despite the headwinds in 2023. As we look to our balance sheet, and as I mentioned earlier, we ended the quarter in a strong cash position of $204.7 million compared to $268 million at the end of March 2022.

Most of the change in the cash is due to our M&A activity. This shows that our balance sheet is a very powerful asset, and we believe that right now, our greatest returns will come from reinvesting in our business, both organically and inorganically. In addition, as we enter a bit of a down cycle here, we see more opportunities on the real estate side of the equation to further shape and reduce global square footage and create even more oxygen for our shareholders without the need to add liquidity. Now turning to second quarter 2023 revenue guidance. We expect the range to be between $260 million and $280 million. For now, our diversification strategy provides us with new businesses that carry different macro risks which tend to be less cyclical, which has always been our goal.

So our guidance contemplates a slowdown in Executive Search this year, we do expect to see stronger relative performance from our On-Demand Talent and Heidrick Consulting as the demand within these businesses still looks robust. To conclude, our management of the business continues to deliver meaningful profitability and a strong bottom line performance, always our key focus here at Heidrick. We believe we’re extremely well positioned to continue to navigate successfully through this rapidly changing global market. In addition to driving the financial performances, we remain steadfast in our strategy to transform our firm through the diversification of the business model and revenue stream. We believe this strategy will drive long-term profitable growth and deliver sustainable value to our shareholders.

With that, Krishnan and I would be happy to take your questions.

Operator: We’ll go first to Tobey Sommer, Truist Securities.

Q&A Session

Tobey Sommer: Thanks. Good afternoon. I’ll start with a question on the results themselves in the quarter. Was there anything special from a margin perspective, particularly in Executive Search? It was a pretty big year-over-year decline yet the, I think, 21% in terms of revenue, but EBITDA only down 7%. Any kind of swing factors you would point to explain that very low decremental margin?

Krishnan Rajagopalan: Yes, absolutely. Good question there, Tobey. Most of it has to do with the way that we do our PSB tiering in Executive Search. So when the revenue kind of comes in, much well working out set a lot of people haven’t broken to their tiers like we had in ’21 and ’22. And so sometimes that accelerates, especially when it’s a strong quarter as we saw in the previous two years and initially because of the slow start, it really just kind of underspent on the salaries and benefit side of it. Now as we kind of ramp that up during the year and we will start going through different hearings, we expect a little bit of catch up. But overall, that’s really what was generating it.

Tobey Sommer: Okay. That makes sense. What would the normal to the extent we can even recall because I know the last few years have kind of been anything but normal. But what kind of seasonal change would you expect sequentially or year-over-year in confirmations in Executive Search in the first quarter compared to the prior quarter?

Krishnan Rajagopalan: Well, again, a fair question. I think you have to kind of go back and look at 2018 and 2019 in terms of those kind of confirmation numbers. And what you would typically see in the first quarter versus the other quarters first quarter, you kind of come out a little bit lighter. You really get the roll from December and November and on the revenue side of it. Confirmations are coming in pretty strong in Q1, much stronger in Q2. I mean we typically see a little bit of a lighter load in Q3, mainly stemming from the August holiday period. And then as you know, Q4 is typically a lot lighter would be with both the holidays in November and December year-end, et cetera. Some people trying to get their head count in, if they got budget allocation, they don’t want to try to move it over the year following. But those are the typical type trends, but as you rightly point out in ’21 and ’22, it was anything but normal. So that’s just how that kind of comes out.

Tobey Sommer: Okay. From a strategic standpoint, do you expect to invest in R&D at a couple of points of sales over the long-term. Is that how you think about managing the business and developing technologies and sort of an edge internally? Or is this more discrete in associated with the projects and initiatives that you have sort of in the business now, but maybe won’t have five or 10 years from now? How do you think about that?

Krishnan Rajagopalan: Yes. Let me take a crack at that. Look, I think we can see that we will be investing at this rate currently given the project work that we do. We think we’ll continue to invest. I think the revenue lines will change. So the equation of the points required will be less from that perspective. But I think that in the capital business, reinvention, innovation is going to be pretty critical going ahead. So expect to see an R&D type of a line is what I would say. How that will modulate might change because we’re in a bit of a heavier investment side.

Tobey Sommer: Okay. And last question for me. Could you help me understand the contribution from acquisitions to the 2Q guidance and maybe juxtapose how that’s feathered in just so I can try to get to an organic number because you’re buying things at relatively small dollar increments so we’re not getting sort of explicit numbers to know for our modeling? Thank you.

Mark Harris: So in terms of the guidance, the amount of, I’ll say, last 12 months, I think that was your question last time around, so we still use that as my threshold of new stuff, really sub-10%, right? So really around 7%, 8%, all that revenue is being contributed by the new acquisition. So it’s still very much core growth. And you actually think about the growth of our, I’ll call it, core business, which is defined as outside of the last acquisitions over the last 12 months, which is really just HFs and businessfourzero, that our growth is 90% out of our core between Q1 and kind of Q2 midpoint. And then, of course, we’ve got the lettering in of the new acquisition. So there’s a couple of different ways to cut it if you want, but I mean, it’s impacting it a little bit, but it’s not the lion’s share by far the growth in the core is really being generated between Q1 and Q2.

Tobey Sommer: Okay. And so maybe to just draw a finer point on it, of the incremental acquisitions that have taken place in one year-to-date, what’s the dollar contribution to the 2Q guidance?

Krishnan Rajagopalan: Yes. We don’t disclose the actual dollar amount, Tobey, so it’s not broken out. But as I said, I think the core side of it is still growing at the 9% to 10% clip and then the rest would be the acquisition of revenue that would be in there.

Tobey Sommer: Okey-dokey. Thank you.

Krishnan Rajagopalan: Thank you.

Operator: Next we’ll hear from Kevin Steinke, Barrington Research.

Kevin Steinke: Good afternoon. You mentioned maybe more macroeconomic headwinds since your last call, you specifically talked about uncertainty in the banking sector. Have you seen that uncertainty bleeding over into other industry practices? Or is financial services where you’re seeing it mostly appear, I guess?

Krishnan Rajagopalan: Yes. I mean, look, I think that in our comments, we have seen general macro uncertainty leading to some delays in projects, in cycles. So I think it’s actually more than just industry is actually impacting across the businesses a little bit. We haven’t seen cancellations or anything, but just delayed in getting started as people had to address other topics that are popping up on the radar screen, et cetera, things like that. So I think it has had an impact overall.

Kevin Steinke: Okay. And you noted a slower January and February in Search, but then a nice pickup in March. Would you just attribute that mostly just to typical seasonality or maybe some increased confidence among your clients? Just any comments on kind of those monthly fluctuations you mentioned there.

Mark Harris: Let me try to run it on that, Kevin. I think what we saw was January and February pretty much being on target slightly ahead. I think March started to show a little bit, again, very, very modestly in terms of a differentiation off of what our expectations were. In terms of the overall quarter, it definitely performs, again, modestly above our expectations. So I think for the most part, there wasn’t a lot of shock to the system. There was some currency and other stuff that took us up our midpoint. But we’re pretty much in some sort of comments. So I think that was all kind of as we expected, plus or minus 1%, so to say, for 2% to help clarify the comment.

Kevin Steinke: All right. So you mentioned in your financial services practice, new roles representing, I think you said over 50% of your new engagements. Could you just maybe give a little more color on the — some of the new roles that you’re seeing in the financial services sector that’s driving that work?

Krishnan Rajagopalan: Sure. I can help with that a bit. Thanks. All kinds of new roles and titles, if I look at existing business, I’ll just give you a snapshot of some things we saw that the Chief Policy Officers that maybe all companies don’t have and some are hiring Chief Purpose and Brand Officer, the Chief Scientific Officer, Financial Services, Head of Agile Transformation, Head of Digital Business and Ecosystem. So these kinds of things are just existing companies were titles that they didn’t have. And then you have a whole bunch of new businesses that get launched as well where they need as part of that Chief Commercial Officer, Heads of things like Advice and Planning and Investments, all kinds of new opportunities that begin to look like that we’re popping up both the new businesses as well as existing businesses.

Kevin Steinke: Okay. Great. You’ve talked again about Navigator being continued being in beta mode there. And I believe you said bookings will start in early 2024. Just any other color there in terms of — have you started up any other new pilots? And then for — Navigator specifically? And then any comment on any other digital products in addition to Navigator that those R&D dollars might be going towards?

Krishnan Rajagopalan: Yes. Sure. Yes. We have started up a couple more pilots instant, and the first ones are moving along in a nice way where the clients are beginning to use it, maybe even elevated a bit inside their organization and we’re really awaiting feedback and working with them on that. So yes, the progress being made on Navigator with a couple of new clients as well, which is great. We’re also taking some of those investments and digitizing our assessment processes and creating a platform that is feed into Navigator as well. provide assessment work and standalone at the same time. So that’s another product, which takes some digital dollars, R&D dollars.

Kevin Steinke: Okay. Great. That’s all I had. Thanks for taking the questions.

Krishnan Rajagopalan: Thank you.

Operator: We’ll go to Marc Riddick, Sidoti.

Marc Riddick: Hi, good afternoon.

Krishnan Rajagopalan: Hi.

Marc Riddick: So several of my questions have already been covered. I did want to touch on a couple of things though. I was wondering if — I know that was in the prepared remarks some commentary around banking sector activities. I was wondering if there were any other industry vertical type callouts that were worth noting that folks might learn something from?

Krishnan Rajagopalan: Yes. I mean I think we’ve seen some good momentum in the Industrial segment. It’s we continue to see momentum in there. So I think that’s worth a call. We referenced that tech was a little slower, but we’re beginning to see some — there’s lots of energy inside of the world of AI, as you can imagine as well. So that might be worthwhile a drill into in the next call to see where we go with that. There’s lots of energy associated with that. We’ve seen in consumer, the retail segment come back a bit as well. So that’s been a positive feed for us.

Marc Riddick: Okay. Great. And then I was wondering — I think you made — there are also some comments around real estate footprint. I was wondering if we should be thinking about sort of — is there a timing aspect that you’re looking at? I would imagine that part of that, is it going to be a function of when these renewals come up, so it’s only lumpiness or visibility as to maybe when some of those real estate efforts might take place?

Mark Harris: I think that’s right. I think the way to think about it is of the time, you’re absolutely right you would articulate. The other 20%, keep in mind, if the real estate location is suffering a major setback or we think in into a new lease that’s much cheaper. We’ll accelerate that process like we did in New York and where we go, we engaged, we get a location that’s either a better fit from either a cost or just a square footage point of view, and then we’ll take our old lease and work with the landlord from an exit strategy to exit that on an early termination basis, which, as you can imagine, is really just a net present value calculation of some sort. So most of it I messaged it right, we wait for leases and we kind of go through that process.

But — and that’s usually when there’s really not much of a difference. It’s not worth the early termination cause. But if we see the opportunity set where there it is, and we can make our real estate side that makes a lot of sense for our team and the long-term G&A side of the equation, then and we will accelerate that path itself. So hopefully, that helps you.

Marc Riddick: It does. Thanks. And then I guess the last one for me. I was wondering if you’re seeing much in the way of any macroeconomic impact or benefit on acquisition pipeline, be it availability or pricing or the like? Thanks.

Krishnan Rajagopalan: Sure. I think in terms of the valuation side of the equation which gives us comps to have discussions about potential acquisitions and clearly been helpful is, there hasn’t been a dramatic impact on the valuation side in terms of the plays that we’ve looked at. Now I think it’s more of a question of how long that’s going to last and how many people are going to trying to stay off from doing a down round, et cetera, and that might bring more sensitivity into the pipeline. But the way I would characterize it is we’ve got a strong pipeline. We know kind of what we want to do and how we want to do it, and we’ll run the playbook but everything is a function of economics. So we do want to make sure that it’s going to be accretive to our shareholders or we’ll hold off for maybe partnerships the other ways that we look at it.

So we always weighted cost to organic and inorganic. We obviously the timing of the two, and we really hope that the valuations kind of come down. But I think the pipeline is still very similar as it was before. And I think what you’re saying with the management team and the company is what makes a lot of sense with Atreus, with businessfourzero and BTG in Brazil and everything before that is we’ll definitely pull the trigger. We’re not shy about that, when we think we’ve got these locked up in an accretive manner.

Marc Riddick: Excellent. Thank you very much.

Krishnan Rajagopalan: Sure.

Operator: And everyone, at this time, there are no further questions. I’ll hand back to management for any additional or closing remarks.

Krishnan Rajagopalan: Thank you, everyone, for your participation, your ongoing support. We’re very pleased with the progress we’re making on our diversification journey as we develop a more resilient business model, while providing our clients with an unparalleled suite of services in the capital arena. We look forward to updating you again next quarter. Thank you very much.

Operator: Once again, everyone, that does conclude today’s conference. We would like to thank you all for your participation. You may now disconnect.