Ladies and gentlemen, thank you for standing by and welcome to the Heidrick & Struggles Fourth Quarter and Full Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

[Operator Instructions]I would now like to hand the conference over to your speaker today, Suzanne Rosenberg, Vice President of Investor Relations. Thank you. Please go ahead..

Good afternoon, everyone, and thank you for participating in Heidrick & Struggles fourth quarter 2019 conference call. Joining me on today's call is our President and CEO, Krishnan Rajagopalan; and our Chief Financial Officer, Mark Harris.

Our fourth quarter slides are posted on the IR homepage of our website at heidrick.com and we encourage you to view them for additional context, but we won't refer to specific page numbers during our prepared remarks.In our materials we refer to non-GAAP financial measures that we believe provide additional insight into our underlying results.

A reconciliation between GAAP and non-GAAP financial measures can be found in the last schedule of the release. Also, in our remarks, we'll be making forward-looking statements and ask that you please refer to the Safe Harbor language contained in our news release.I would now like to turn the call over to Krishnan..

Suzanne, thank you. Good afternoon, everyone, and thank you for joining our call. We delivered solid 2019 results by successfully navigating global market volatility while maintaining a focus on bottom-line results.

Net revenue in 2019 was approximately 1% below record-setting 2018 results and marked the second consecutive year a full year net revenue over $700 million. I am very proud of all that our team has accomplished.

I'm excited about how we are positioned both strategically and financially for 2020.Our financial strength gives us ample opportunity to prudently invest in growth, innovation and differentiation.

We see attractive opportunities emerging on which we intend to capitalize in 2020 while maintaining our disciplined opportunistic approach to capital allocation.

Let me now share some of the full year highlights of 2019.Our strong results were driven by Executive Search for which net revenue was $646.4 million, a 1% decrease from 2018 but up 1% on a constant currency basis.

The Americas region increased by $10.2 million or 2.5% offset by decreases in Europe and Asia-Pacific.The global technology and services, consumer markets and healthcare and life sciences practices all exhibited growth over the prior year.

We confirmed approximately 4900 engagements 100% of which were executed by Heidrick Connect with strong productivity of $1.7 million per consultant.

We acquired and successfully integrated 2Get in Brazil which expands our growth platform throughout Latin America where we see compelling opportunities for both Executive Search and Heidrick Consulting.During 2019, we expanded our headcount in Heidrick Consulting to 71 consultants from 66 and look forward to ramping up in 2020.

Confirmations in Heidrick Consulting increased 12% sequentially.

We continue to increase Heidrick Consulting presence in key global markets and will continue that in 2020 while entering new emerging markets; importantly an increasing percentage of consulting revenue continues to be driven through search introductions and in 2019 this has reached 33%.Turning back to our consolidated financial results.

We improved general and administrative expenses to 19.4% of net revenue, the lowest level in 12 years. Our continued focus on driving operational efficiencies enabled us to deliver consistent adjusted operating margin on slightly lower revenue. On an adjusted basis we delivered full-year diluted EPS of $2.59 which was our strongest in 11 years.

Key to achieving these financial results is our steadfast focus on increasing the scale and impact of our two businesses, increasing cross enterprise collaboration and driving a premium data-driven tech enabled service experience for our clients while maintaining a focus on our cost structure.As we continue to engage at the top of our client organizations we are deeply entrenched as advisors and are at the forefront of impacting transformational change such as digital transformation, sustainability and diversity inclusion.As we look ahead to 2020 from a macro point of view it certainly will be a complex environment with an election in the U.S.

and with the implementation of BREXIT and trade wars perhaps taking a back seat. In the near term there is significant level of uncertainty associated with the Corona virus in Asia.

While we expect and are feeling some delays due to this fluid situation we remain optimistic and believe that the types of transformational projects we are working on will continue to be strong business imperatives for our clients.As I alluded to earlier in my remarks in 2020 we intend to leverage our market position and strong cash flow to make disciplined investments in innovation and long term growth to support our ability to advance the foundational changes our clients seek to implement.To capitalize on these opportunities we are expanding our product teams and providing new innovative offerings to broaden our capabilities.

For example, we have been investing in the area of better outcomes related to diversity and inclusion.

We’ve recently completed a global survey of more than 400 companies to gain insights into how organizations are defining diversity and inclusion as well as how they are linking diversity and inclusion to business performance.We recently were awarded a highly integrated piece of work across search and consulting by a financial services client to help them develop a comprehensive diversity strategy and roadmap based on their specific business needs, to engage the leaders to be purposeful in creating and leading an inclusive culture and to embed the diversity into all of their talent practices including Executive Searches.We also received a verbal award from another client for comprehensive work that includes assessing the inclusiveness of the culture, conducting multiple searches and creating a program focused on the development and retention of diverse talent.We recently joined forces with program advisors including EY, Skadden Arps and The Rock Center for Corporate Governance at Stanford University to establish the director institute.

This is a groundbreaking first-of-its-kind program designed to accelerate the development of high potential diverse leaders for corporate director and broader operating roles.

The program utilizes an apprenticeship model where a bored observer is paired with the board of a relevant but non-competitive company for an exceptional executive development experience.We're pleased to announce the establishment of our sustainability office.

We are seeing a spike in the demand in the area of ESG and have organized our capabilities and best practices and are working with numerous clients.

In fact we're even taking our own learnings and applying them internally to critically consider our own office footprints.In terms of product development, our teams are focusing on developing new products, hiring and enhancing our data science capabilities and driving innovation as we continue down the path of transforming into a data-driven tech enabled firm.

For example, we're beginning to harness the power of AI and are pleased to announce that we are currently testing our agile leader potential tool with some of our clients.

To achieve this we're partnering with technology firms to implement an AI based tool that enhances our clients’ existing talent development processes by identifying a differentiating leadership attribute that is critical in today's leader namely agility.In addition, we're investing internally for the long term.

In IT we are upgrading internal platforms and databases. We also continue to shift more on-premise technology delivery platforms to the cloud which we believe will drive meaningful savings in future years.In summary, we are excited by our clients continued desire for Heidrick's talent, leadership and culture solutions.

They are seeking more insights on leadership and talent trends connected to their business strategies.

They're eager to receive more creative and agile solutions for the increasingly complex and fast changing landscape and they need to strike the right balance between strengthening their core business while embracing disruptive change.Heidrick is in a position of strength to meet these needs and we're looking forward to the year ahead.

Again, thank you to all my colleagues around the firm for their hard work this past year. I am truly excited about what we will accomplish as a firm in 2020.Now I would like to turn the call over to Mark to further discuss our financial results..

Thank you Krishnan. Let me extend my greetings to all of you on the call today and thank you for joining us. Krishnan spoke to the annual highlights of 2019 so my remarks will focus on the fourth quarter results.

We are pleased to report net revenue for the fourth quarter of $118 million which surpassed consensus estimates and was at the high end of our guidance range.

Executive Search delivered $163 million of net revenue, down $5.5 million or 3.3% year-over-year.Our global technology and services and consumer market practices grew year-over-year while our financial service and healthcare and life sciences did show some softening compared to the same period.Regionally, Asia-Pacific revenue increased $0.6 million or 2.6% driven by an increase in average revenue per Executive Search as a result of more upticks in the quarter.

Offsetting this growth were decreases in the Americas and Europe.

In the Americas this is due to softness in the financial services and healthcare and life science practices which was partially offset by growth in global technology services and consumer markets practices.In Europe, we experienced softness predominately driven by consumer markets and healthcare and life science practices.

While we did experience some headwinds in the Executive Search overall our team did an excellent job of navigating these headwinds and based on industry data we believe we fared better overall than others in our industry.We saw a nice revenue increase in Heidrick Consulting of 1.4% in the fourth quarter compared to the same period last year making it third consecutive quarter of sequential revenue growth.

We are very encouraged by Heidrick Consulting’s performance in 2019 and look forward to building on the momentum and gaining scale in 2020.Turning to salaries and benefits, we saw a decrease by $3.4 million or 2.6% from 2018s fourth quarter. As a percentage of net revenue, salaries and benefits were 72.1% essentially flat to last year.

While fixed compensation increased $6.1 million primarily related to our deferred compensation plan soft compensation based salaries this was more than offset by $9.6 million decrease and variable compensation associated with lower revenue.As a reminder, deferred compensation is impacted by marked to market asset valuation which impacts both salary and benefit and other non-operating income, neutralizing the impact on the bottom line.

Excluding deferred compensation due to the strong equity performance in the U.S.

in 2019, salary and benefits as a percentage of revenue improved to 71.4% versus 72.8% in last year's fourth quarter.General and administrative expenses was $35.8 million up 1.6% or approximately $0.6 million compared to the prior year's fourth quarter due to increase in professional fees and the use of external third party consultant partially offset by other general operating expense reductions.

G&A as a percentage of revenue was 19.9% in the fourth quarter of 2019 compared to 19% in the same quarter last year due to the timing of the expenditures.When looking at G&A on an annual basis as a percentage of revenue it was the lowest in 12 years at 19.4%.

Adjusted EBITDA in the fourth quarter of 2019 was $20.5 million generating adjusted EBITDA margin of 11.4% compared to $22.2 million in the fourth quarter of 2018 with margins of 12%.

The declines in adjusted EBITDA and adjusted EBITDA margin were primarily driven by lower revenue in the quarter.Interest income earned on all marketable securities including those classified as cash and cash equivalents was $0.7 million for the fourth quarter and $2.5 million for the year increasing significantly from the $1 million in 2018.

This reflects the positive improvement we are seeing from putting our cash to work in liquid low risk investments mostly treasuries and highly rated corporate paper.Our effective tax rate in the fourth quarter came in where we expected in the low 30% range and we expect a similar tax rate in 2020.

Our tax team has done a very good job of proactively managing our tax efficiencies particularly with our global operations.Net income in the fourth quarter of 2019 was $10.6 million and diluted earnings per share was $0.54 as compared to last year's fourth quarter net income of $11.2 million and diluted earnings per share of $0.58.I know my remarks have been focused on the fourth quarter but I really want to highlight what our shareholders achieved this year.

Full year 2019 adjusted diluted earnings per share of $2.59 was both an increase over 2018 diluted EPS of $2.54 and more than doubled as compared to the average adjusted diluted EPS over the prior five years which demonstrates what we can achieve in challenging markets.Now I will turn to our balance sheet.

We ended 2019 with cash and cash equivalents and marketable securities of $332.9 million compared to $279.9 million at the end of 2018 or growth of $53 million or 19% year-over-year.

Thus the income statement performance is clearly translating into increasing cash flows.Please remember our cash position builds throughout the year as we accrue for bonuses.

Earlier this quarter we paid approximately $17 million in compensation related to the portion of consultant bonuses that were deferred prior to 2019 and in March of this year we're expecting to pay out an additional $205 million in variable compensation related to last year's performanceI think it's important to note that we ended the year with the highest net liquidity in the company's history at $286 million with ample ability to fund future investments.

We define net liquidity as cash and cash equivalents and marketable securities plus the availability we have on our credit line less the annual performance bonus payouts discussed above.Finally, I'm pleased to announce the board approved paying a $0.15 per share cash dividend payable on March 20 to shareholders of record at the close of business on March 6.Now let me provide the outlook for the first quarter and some additional information around comments Krishnan made earlier about our internal investment plans.

As a reminder, our guidance is based on the seasonality of search confirmation trends in the previous quarters, search backlog, our expectations for Heidrick consulting assignments, anticipated fees and the economic climate including what we are aware of today regarding the current macro uncertainty related to the Corona virus.

With this in mind we expect a 2020 first quarter net revenue will be in the range of $165 million to $175 million compared to $171.6 million in last year's first quarter.As Krishnan discussed earlier, in 2020 we will utilize our strong financial position to make strategic internal investments in our business.

This will likely create an incremental $5 million to $10 million in expenses in 2020 as we continue to execute our strategy of becoming a data-driven tech enabled leadership advisory firm.

Given what we were able to achieve over the last three years we believe now is the time for Heidrick to be opportunistic with the business opportunities we are seeing both internally and externally.Our capital allocation strategy will always evolve balancing our ability to adequately invest in the future growth and ensure the investments are creative to our shareholders generating further value.With that I'll turn the call back over to the operator to open the call for questions..

[Operator Instructions] Your first question comes from Josh Vogel with Sidoti & Company. Your line is open..

Hey, good evening guys. Thanks for taking my questions.

I guess, just, Mark based on your last comments the incremental $5 million to $10 million expenses, can you just give us an idea of how that would trend throughout the year? Is it mostly first half or frontloaded?.

No problem. The $5 million to $10 million will probably more back-weighted than front weighted. So the idea is as we invest in some of the technology we'll start capitalizing and amortizing a lot of the investment decisions we're doing.

So you'll kind of see that come through both in terms of the balance sheet as well as kind of the [amort], but I would tell you more Q3, Q4 is where I would expect that to kind of come through..

Okay. Thank you. And Krishnan you mentioned that 33%, I think search [intros] or consulting revenue came from search [intros]. So that was up from, I believe 20% in 2018.

Do you have an internal or what's your long-term target there?.

Yes. I think if we get about 40% we will be in a pretty good spot on that. We want to maintain a healthy balance there between inside and outside. So we're trying to push towards that number and that's what I think will be pretty healthy for us..

Okay. Great. And obviously it sounds like the 2GET integration is going well.

I was just wondering if you could talk a little bit more on your plans to leverage that office to expand across the region or Latin America and I know it's still early but can you talk to the consulting opportunities down there and how you plan to leverage to get to source more consulting business in that region?.

Yes. Let me try to answer that Josh and then we will have Mark also add to that. Look we see, we've got a great team there that's really engaged in the market in a wide range of conversations and already that's led us down the path of exploring consulting opportunities down there and growing the team.

So I think our first focus there will be on hiring into the consulting opportunity and working with that team to be able to leverage that with some of the services and offerings that we've already got. So that's beginning to, that's already progressing is what I would say.

We're moving on that and hopefully within a quarter we'll be able to start talking about some of the results we get out of that as well. So that's the focus of what we're trying to do outside of the core search business there in Brazil.

Mark I don't know if you want to add to that?.

No, I think the only thing that I would serve as well is that again the team down there is doing a heck of a job in terms of executing on their strategy and as we look at twofold is what I would tell you I think the first one is not just expansion in the region which is obviously the big part of the strategy that we're trying to implement but also expansion of just beyond search is a very important critical step of what we're looking to do in Latin America.

So the team and the leaders down there are doing a great job in terms of focusing and coming up with a strategy we can execute on both of those pillars..

Okay. Great. And Krishnan you did talk about the events going on in 2020 whether it's the election or BREXIT, trade wars and obviously near term with the Corona virus.

I just, knowing that your strategy on the search side is focused on the top of the executive ladder and we know historically your business has done well at the beginning of recessions but I was wondering if you guys can talk or give some insight into how much more resilient your model is today against a recession than your peers? And can you also remind us how the business fared a decade ago and then lastly just building off that, how do you see the consulting business holding up during a potential recession? I guess what portion of that would you classify as non-discretionary? Sorry, I know that was a lot..

Yes. So let me go backwards in time maybe and just build from there. 10 years ago I don't think we were nearly as resilient as we are today in terms of relationships where we work, how we work with clients across a wide range of issues. So I think from a resiliency perspective we are much better.

It was far more transactional at that point in time though, the work was high in brand and it clearly added a lot of value but I think the relationships were a bit more transactional. So I think we moved the dial on that.

When we look at we're just, we're, in February we're coming out of actually Davos as well, in January and I would say that macro environment wise let me just put aside Corona virus for a second because that has some near-term.

It's a fluid situation but I think what most felt is that 2020 felt like 2019 okay, quite a bit in terms of how [building] didn't feel quite like 2018 where perhaps geographies grew synchronously. They were going to be some headwinds that we'd all faced with trade wars and a whole bunch of other things but still it would be a solid robust market.

So that's how we're looking at and with major opportunities for us to grow our consulting business in 2020..

All right. Well, thank you guys taking my questions. I'll hop back in the queue..

Thank you..

Your next question comes from Kevin Steinke with Barrington Research. Your line is open..

Hi. Just maybe talk a little bit about your ability to drive G&A expenses lower. Just your perspective on how lean the organization is now obviously reaching a 12 year low in G&A expenses as a percent of revenue.

I know you talked about the $5 million to $10 million of incremental expenses in 2020 but is there more room to streamline the organization to maybe offset some of the incremental expense. I know you mentioned migrating some of your technology to the cloud, which will result in savings.

So maybe just any more perspective on how you can just continue to streamline cost..

Sure, Let me try to handle that one. So, G&A right now as we talked about is [on nice] 19.4% range.

I think on today's revenue, given our current infrastructure trying to get that marginally down maybe another 20 basis points 30 basis points to be the best we're going to be able to achieve.I think we're going to need to see is really kind of a material catalyst to move that dial below 19 and I think you hit it right on the head which is, it’s going to be a combination of some technology enablement that allows us to accelerate and we'll just talk about search, accelerate searches that helps us get to shortlist faster that helps our clients make decisions quicker.Those types of tech enabled abilities would obviously help us drive that G&A further down.

And I don’t think you really are ever going to see it fall dramatically below.

I mean, even if we get into the 18's getting below that would be pretty difficult without a much bigger revenue streams so to speak so.I think based on what we're looking at today were pretty thin to be honest with you and I think the only way really we can move that all maturely where you'll see it is through that major catalyst..

Okay, that's helpful.

And so, the incremental $5 million to $10 million of expenses this year, is that all related to technology investments or does that incorporate some headcount investments as well?.

Yes. So yes, look, it includes quite a few things really. I mean, the conversations we're having with clients, they're asking us a lot of questions in creating a lot of interesting opportunities and permission.

I talked a little bit about diversity and inclusion and what we're seeing they were investing in that area in creating some new offerings.I talked a little bit about sustainability and what we're doing with standing up with sustainability office and what we're seeing on that the Director Institute is an investment we continue to make.

Clearly we are hiring a bit more into our each client's organization, we are hiring data scientists and others to help us with insights associated with our data and with new products.For example, the one that I've referenced before, the utility leader tool that we've got as well.

So, those I mean we're doing a variety of investments across the board like that that we think are going to really add value to our clients..

Okay, good. And then on the Heidrick Consulting business, you saw some good sequential revenue growth as you moved throughout 2019, although the business is still generating operating losses as you invest there. You mentioned potentially gaining more scale on the business in 2020.

How should we think about the balance of investments versus greater scale in that business in 2020 and how it maybe plays out in the operating loss as it relates to 2019; how that might trend?.

I think we kind of see a three different buckets just to explain 2019 a little bit. So you saw some expansion on the operating losses really kind of came from one.

We are very focused in the tail end of the year on hiring to bring in the right partners, consultants to help build the platform.We had a couple of really strong engagements in both Q3 and Q4. So we got some outside service cost that we add to basically take on to continue the service. And that’s pertained to those contracts.

So you really kind of seeing a little bit of a different bucket of what's compressing. I think what’s going to be interesting for us to see in 2020, especially as we kind of go through Q1 and Q2 which is a little bit easier for me to see.

Is where we're again very hopeful on our revenue expansion continuing and to watch that and watch obviously the margins?We still, it's a scale issue in Heidrick Consulting. So I think the – and we talked about this before where we need to get up to a certain level of revenue and operational efficiency to try that breakeven metric.

We still believe we can achieve that obviously, we got lot of models in strategic thoughts around that and how to try and get that done and what I will call the near-term in next year or two. So as we kind of go up and throw it I think that's really we're going to see the benefits in terms of the model we're trying to do..

Okay, got it.

Can you remind us, I fully we've discussed before but kind of the revenue level you had you think you need to achieve to get more to that breakeven level in Heidrick consulting?.

Yes. I mean, we've talked about with people. We still believe somewhere between that kind of $80 million $85 million revenue cadence is based on the services and products we have today.

Not taking any expenses in terms of build outs for example.But based on the core business of what we have will get us to that kind of breakeven spot but again we're trying to make some investments in H Labs etc that Krishnan rightly pointed out.

So some of that will kind of be noise in the numbers but we'll certainly be able to, as we get up to show you in terms what the core is doing versus the reinvestment is doing..

Okay great, that's helpful. And maybe you mentioned the uncertainty around the Corona virus and it's a fluid situation, I guess it doesn't sound like it's you had a major impact on U.S.

of now.But just any more color on what you're seeing over the last couple of months and say the ability of your people that travel or just reduced business activity among your clients if at all from that uncertainty?.

Yes, look, I think it's a great question and it’s fluid. So what we tried to do -- I mean, look, first let me start off by saying when we think about this we think about our employees. Number one, making sure that they're safe.

Making sure that we're able to provide them appropriate work environment.Safety is important, masks, etc things like that that all of that's available on the ground as well. We spent some amount of time making sure that our teams are taken care of and we so we start there.

Then as we begin to really look at the impact of this, our numbers in our guidance reflects pretty much or what we saw through last Thursday, Friday. Okay.And we tried to bake that in. In China in particular, it typically generate February a bit slower because of the Lunar New Year and the holidays that are taking there.

So we've embedded that in and then probably some of the news is changing from even Thursday, Friday, of last week.And what we're seeing so. We do expect that it's had some delays.

We've embedded that in and want to continue to have additional delays.But underlying that, we don’t see the types of projects changing or the demand changing in digital transformation and innovation, in diversity, all of those topics that we're really working on and trying to help companies grow.So, we're going to stay tuned with this and report back on this.

But I think that's sort of how we're feeling about it right now from a fact base perspective. I mean, it can impact consulting businesses as well because they tend to gather a bit more to create some of the change that's required from management teams.So, it's put a few delays into group meetings that are going on in Asia right now.

So, that is causing some delays and we just need to keep our eye on this..

Okay, well, thanks for all the insight. That's all I had, thank you..

Thank you..

Thank you..

Your next question comes from Kevin McVeigh with Credit Suisse. Your line is open..

Great, thank you. Hey, I wonder how much have we factored in to the Q1 guidance for the Corona uncertainty. It sounds like just based on the prepared remarks. You factored some of that in.

any sense of how much of that is in the Q1 guide?.

Yes, I mean so -- in terms of -- I mean, just give you some numbers in terms of 2019. When you look at the impact at countries for Asia Pacific, it's about 8% of our global staff and it's about 5% of our revenue.

So in the guidance itself, that's really the 5% that we're focused on without getting into the algorithms that we use.We use three different models. But it's really a little bit in there so to speak in terms of where we think both initiated searches. And deferrals, Heidrick consulting assignments and completion.

Obviously, it's still got to complete a search at the top without meeting up with that person.And so, we expect some slowness on in that 5%, naturally we're baked into the guidance. So I think we're okay in terms of where we gave the guidance clearly.

You've just heard about Italy, and if for some reason, it becomes a bigger issue for Europe that is really we focused a great deal of time on Europe..

That's helpful.

And then, on the 5 million to 10 million of investment, anyway to think about what the potential impact can be on the model mark in terms of the benefit of that and then when we should start to see that surface?.

Yes. so, the $5 million to $10 million is obviously the P&L number, not the cash flow number and that's the one really where I think it's more second half and first half. It's probably the best I can give you in terms of the one-time impact on the model.The benefit side of the equation is really a 2021 outlook.

So as we acquire, as we hire, as we get the people on board, as they're starting to develop the systems and the process enhancements etc., I believe it's going to be a real 2020 focused.And we'll start to see that kind of come through in 2021 and 2022 especially in terms of again efficiency.

So where all we sit, really kind of more G&A process, I wouldn’t imagine showering benefits to be monumental.So I think that's what we're going to see that real ROI start to come through, so to speak..

That's helpful. And then, can you remind us, would you expect any impact on the business, I'm thinking more positive, heading into the election just to -- is there any kind of change in client behavior around that within any particular verticals is, does that vary based on kind of a sitting president as opposed to a nonincumbent --.

So I mean, it's not so much incumbent or nonincumbent, okay. So I think which need a focus on the Presidential elections.

And this kind of happened last time when I was in venture capital.And if you think about it from either a technology or bioscience and the difference between Hillary Clinton or President Trump, both are going to do two different things in terms of its take medical compounds, medical and life sciences.And I would imagine that similarly in terms of either suppression of revenue or suppression of the ability to charge certain cost as it pertains to those compounds.

Ms. Clinton sat in one area that was very different where Mr. Trump was sitting at that time.And those would have very different impact in terms of who got elected. So it's hard for me to kind of speculate in terms of the impact on us.

I think the easiest way to say it is when you have an incumbent like President Trump get reelected, I think people have made their management efficient in terms of what they expect the markets to do.I would imagine if it was, again a Democrat candidate that was very different to President Trump.

That people may boards may want to re-shift a little bit in terms of what they expect the economic environment to be as well as where the pressure points may come from a new candidate in terms of focused on technology.

Focused on compounds, focused on financial service regulations, those types of things kind of kick in and that could just change the landscape of what type of manager you may want in the seats depending on what you're looking at going forward..

Helpful..

[Operator Instructions] Your next question comes from Tobey Sommer with SunTrust. Your line is open..

Thanks. I'd like to start out by doing a followup question on the cyclicality and how that's changed over time. Krishnan, you seem to mention relationships and the strengthening and change of those with their clients as being a driver of a potential change.

In my experience, you need kind of a contract change or a business model change to change the cyclicality.

Is there something else in addition to the relationships from the Executive Search that have changed to improve what you think the business might look like during a downturn?.

Yes I mean, I think what we're trying to do is cross-collaboration. I mean, reviewed by those clients who were working within that context in a wider lens that’s providing a different value proposition.So I think that changes the nature of the relationship. And each and every day we have more-and-more conversations surrounding that as well.

So I think it's that rounding out that changes out that relationship and are focused at the top on that set of issues that's important to the C-Suite.So I think those are the things that I would say create a different conversation and a different relationship that we got..

So if we went through a similar downturn as 2007 to 2009, did you think that those relationship changes would be sufficient so as to alter how the business performs?.

Yes. I mean look, I think you go through a downturn, you'll go through a downturn. I think sort of it would be the trajectory and shape of that curve that we think that we could realign to be more solid, I mean it will be down, okay. But I want to pretend it's immunized from that but I think the slope of that curve looks different..

Okay that's fair. You had mentioned in prepared remarks that the firm may be faring better than the competition or may have it towards the end of the year.

Could you describe how much and maybe why do you think the firm fared better?.

We look at -- obviously we look at a lot of different public companies that are kind of in our space. We also look at the association of Executive Search in terms of the data that comes out there as well. So one thing we do is we kind of we know our numbers.

So it's pretty easy for us to back our numbers out and redo the average and see how we're performing and that's really kind of how we run the mathematics and we can see how others look like they're flowing more than we are if you want to look at it that way in terms of recent we've seen our expansion in [18%] with our expansion and some of 19 as well in terms of our trajectory when you run the linear regression on it.

So the slope of our line seems to be either steeper on the expansion or less steep if you will on the contraction. So that's kind of where we come with those prepared remarks. I think we've got enough data that more or less supports what we're saying..

Okay. And then Mark, you gave some numbers about the cash balance and bonus for prior years as well as the bonus payout that's expected well.

What should we think of as spendable cash to the company once you do have that bonus payout?.

I kind of gave the number of the $281 million odd. You can probably figure about $50 million of that is what I would call, difficult to use cash that it's overseas or in tax restrictions, it's kind of difficult to bring back. Remember, that has the $175 million of liquidity also on top of it, saved for back end -- again, back that up.

That's [Indecipherable] liquidity comment that I think that was made.

I think that's the -- what I would call disposable cash for lack of a better word, and our ability to then use that either on internal investments that we made comments that generate the $5 million to $10 million of expense in 2020 that's expected or again pipeline and acquisition and as you know, we've made comments previously.We're very focused in terms of looking at acute situations that really benefit the strategy and execution that we want to kind of go on and that's really what that cash, plus the facility is going to be used for.

And what we are seeing, Tobey, which is a really good question, we're seeing a lot more in that pipeline it seems, what I would call realistic that is, real potential to potentially have a meeting of the minds and doing something versus the craziness of 2018 and the valuation expectations.

I think they've really subsided and have come down to very reasonable terms and I think that's going to hopefully unlock potential opportunities for us..

I appreciate that addition. Thanks..

Yes, no problem..

There are no further questions at this time. I will now turn the call back over to Krishnan for closing remarks..

Thank you. Thank you to our team for a solid 2019 and a strong start to 2020. 2020 is a pivotal year as we continue to transform our business. Look, we're going to continue to monitor the impact of the Corona virus and we will update you in April on that as well and I just want to say thank you to our investors for your continued support.

Good afternoon, everyone..

This concludes today's conference call. You may now disconnect..