Ladies and gentlemen, thank you for standing by, and welcome to the Heidrick & Struggles' Q3 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded..

[Operator Instructions].

I would now like to hand the conference over to your speaker today, Suzanne Rosenberg, Vice President of Investor Relations, you may begin. .

Thank you good afternoon, everyone, and thank you for participating in Heidrick & Struggles 2020 Third Quarter Conference Call. Joining me on today's call is our President and CEO, Krishnan Rajagopalan; and Chief Financial Officer, Mark Harris. .

We have posted our third quarter slides on the IR Home page of our website at heidrick.com, and we encourage you to view them for additional context, but we won't be referring to specific page numbers during our opening comments. .

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 will be making forward-looking statements and ask that you please refer to the safe harbor language contained in our news release. .

With that, Krishnan, I'll now turn the call over to you. .

Suzanne, thank you. Good afternoon, everyone, and thank you for taking the time to join our call. Heidrick continues to rise to the occasion and meet the unprecedented challenges of 2020. We're advising our clients in new and different ways and supporting our colleagues and communities where we live and work.

Amidst this, we posted quarterly results that exceeded our expectations, and we remain focused on gaining market share in what continues to be a dynamic environment. .

Stronger business trends are beginning to come into focus, and we have the financial strength to continue to make strategic investments, which will position us for long-term growth. .

Let me briefly touch on our third quarter results, which Mark will go into further detail shortly. .

Net revenue was $143.5 million, which represents a sequential decline of a little more than 1%, significantly better than what we anticipated in our last call with you.

This translated into an adjusted operating margin of 6.9%, which was up 70 basis points for the second quarter and an adjusted EBITDA margin of 11% or a 250 basis point increase from the prior quarter. These results are adjusted for the restructuring charge. .

As you know, in the beginning of the third quarter, we implemented a restructuring plan to optimize future growth and profitability. Following these actions, we are confident that we have rightsized the business for anticipated demand.

Even as business improves and we invest appropriately to meet increased demand, we see permanent cost savings and efficiencies. .

For example, we see opportunities to further optimize our global real estate footprint as we change the way we work. And Mark will speak more specifically about this later on the call. .

The key takeaway here is that as we eventually emerge from this pandemic, we will be in an even stronger position to navigate through future market uncertainties, while having improved our growth potential and expanded our future opportunities. .

We're especially encouraged by the trend we are seeing in demand for our services. During the quarter, we saw confirmations improve from June to July, August confirmations were lower as is typical for that time of year. And then we saw a rebound in September, which has continued into October. .

While economic uncertainty continues across the markets we serve, we are seeing continued geographic recovery in Asia Pacific markets, such as China, Singapore, India and Korea. In Europe, we're seeing some improvements in the U.K., in Germany, Denmark and Switzerland.

And in the Americas, confirmations are showing signs of improvement from Q2, but these vary by industry and country. .

We remain focused on working at the top of organizations, and our team has been creative and proactive in finding new ways to convene with our clients in this virtual world as we continue to build momentum and emerge from this crisis as an even stronger firm.

Importantly, client feedback has been extremely positive and our team with people around the world is staying resilient and connected through collaborative projects and large-scale engagements across Search and Consulting. .

In terms of key trends across our business, our clients continue to embrace the digital delivery of our services, and we're seeing increased demand across a wide range of areas, including healthcare and life sciences, especially from innovative biotech companies, healthcare technology and healthcare provider segments..

In diversity and inclusion or D&I, where there is a heightened focus on creating inclusive workplace cultures across U.S. and globally. An increasing number of our clients are using our leadership assessments to help them identify and measure agility in leaders.

And there is a growing focus on leading high-performance teams, particularly in a more virtual and distributed working world. .

Let me give you a few recent examples of some interesting client work we have embarked on. On the virtual delivery of our integrated services on a global scale.

This quarter, we worked with a global real estate investment firm and virtually convened the global team of nearly 100 consultants to deliver 100-plus assessments, including organizational design and restructuring and have launched numerous search engagements as a part of that effort. .

On the topic of D&I and linking culture and inclusion to business performance, we began advising a leading beverage company on linking their workplace culture to performance using our ABC methodology, which focuses on accelerating D&I impact in results by building visible representation and creating inclusive cultures. .

And on measuring agility, for one of our global logistics services clients, we are using our proprietary framework and tools to assess high potential leaders and their capabilities, including their ability to lead with agility. .

As we enter fall, we continue to see varying COVID scenarios around the world, with some countries stabilizing and others experiencing a surge or preparing for another potential wave. While we see signs that the markets we serve are on the road to recovery, we know there's still a long way to go.

Nevertheless, our team continues to perform well and we believe we are gaining share in the market. .

What also stands out is that we are continuing to transform our business, and in some cases, the pandemic is accelerating our transformation. In Heidrick Consulting, all of our primary offerings can now be delivered virtually. And despite the unprecedented nature of 2020, year-to-date, we are only 4% below the year ago period. .

Search continues to deliver 100% of engagements on Heidrick Connect, and we're increasing client adoption of our Infinity framework. We have made significant enhancements to our CRM platform that we use in Search and Consulting. .

Our product development team is developing and delivering differentiated, data-rich, and digitally enabled services. We launched our integrated D&I offering this year, and our pipeline is very strong as we expand this offering globally. At the same time, we continue to implement our D&I work internally. .

We are exploring innovative IT solutions for working remotely and even more effectively and efficiently. And as Mark will discuss, I'm also very excited about how we are transforming our real estate strategy.

These are just some of the capabilities and new offerings that are driving our performance and transformation as we continue to win market share. .

Moving forward, we remain committed to going to market as one firm with an integrated value proposition. We're also focused on advancing important, long-term initiatives that we expect will broaden our capabilities and service offerings, leverage our core brand and position our firm for longer-term growth in 2021 and beyond. .

I'd like to reiterate how proud I am of our global team of employees. This month, our employees recently participated in our second global day of service, honoring our commitment to give back to the communities where we live and work. .

In light of the hardships and events so many around the world continue to face in 2020, it is more important than ever that we continue to come together and find ways to give back. .

I want to thank all of our employees, not only for their time and commitment to this important initiative, but also for their hard work and contributions they make each and every day towards advancing our clients' agendas. .

Thanks for joining us. Now let me turn the call over to Mark to elaborate on the quarter. .

Thank you, Krishnan, and good afternoon, everyone. Thank you for joining our call today. Let me start off by congratulating our team here at Heidrick for the incredibly strong performance in the face of very turbulent market conditions. I commented on our last call that I was expecting to see our revenue slip 10% to 15% from the second quarter of 2020.

But due to the hard work of our team, we were only down approximately 1%. .

This performance contributed to our balance sheet strength, demonstrated by our liquidity being over $400 million. These continue to foster access to liquidity, which remains strong and accelerating in the capital markets, as we continue to see opportunities to further enhance our competitive position. .

For purposes of the call today, I'm going to focus more on the sequential trends as I believe these are more meaningful than the previous year's performance given; one, it's pre-pandemic and one is during the pandemic, which is really the driver for most of the variances between those periods. .

We recorded nearly flat third quarter net revenue of $143.5 million when compared to $145.6 million in the second quarter of 2020. This was better than we publicly commented on our last call and coupled with the demand momentum we have been seeing thus far in October it is pointing to continued market strength for the last quarter of 2020. .

Now let me turn to some of the drivers behind the relatively strong performance. Executive Search net revenue was $129.2 million, down 4% sequentially. Looking at our regional performance sequentially, we saw Americas Executive Search revenue down 6%, Europe Executive Search revenue down 4%, but Asia Pacific Executive Search revenue increasing 6%.

The better-than-expected strength across each region was driven by both the higher number of engagements we closed on in the period and the value of these searches. .

We continue to see resilience with our clients, which has been encouraging and appears to be continuing into the fourth quarter. Heidrick Consulting also showed great resilience in the wake of the pandemic.

In fact, while Executive Search revenue was down marginally, Heidrick Consulting revenue was up 25% to $14.3 million compared to $11.4 million in the second quarter of 2020. .

In addition, year-to-date, Heidrick Consulting revenue was only 4% behind the same period last year.

This performance was also higher than we anticipated, driven by increase in demand for talent assessments and adoption and acceptance of our digital delivery services across multiple leadership advisory solutions, resulting in larger client engagements. .

On the cost side, we saw salary and benefits decline 1% from the second quarter of 2020.

The variable compensation increased $2.5 million sequentially due to Heidrick Consulting's out-performance, but fixed compensation decreased $3.2 million sequentially, primarily due to paid time off by employees, reduction in base salaries and related payroll taxes around our workforce restructurings and our deferred compensation plan. .

General and administrative expenses decreased $2.2 million or 7% sequentially to $29.8 million or 20.7% as a percentage of revenue compared to 22% as a percentage of revenue in the second quarter of 2020.

There were savings achieved in several areas, but the biggest improvement was in office, operational costs and travel and entertainment, partially offset by increases in professional fees. .

Moving forward, we expect continued savings in G&A as more of our team will continue to work from home and from the implementation of our new real estate strategy, which I will discuss next. This aligns to our long-term goal to drive G&A to below 18% of our revenue more consistently. .

As discussed on our last conference call, during the third quarter, we implemented a restructuring plan to optimize future growth and improve profitability.

We recorded a restructuring charge of $48.1 million, with approximately $14 million pertaining to our new real estate strategy, which will have an annual cost savings of approximately $6 million, $15 million pertaining to our workforce reduction, which will have an annual cost savings of approximately $30 million per year, and $19 million pertaining to the elimination of certain programs and benefits, which will have similar savings through the next 3 years with no cash impact.

.

first, match the footprint to the new expected normal, which, in many cases, reduces our footprint by 50%; second, create an open and collaborative environment, including unassigned workspace and facilitate work from anywhere. And third, increase our focus on reducing our carbon footprint as part of our long-term sustainability goals. .

We continue with our real estate -- as we continue with our real estate strategy, we expect there will be more restructuring charges pertaining to our leases in the range of $10 million to $15 million.

We will provide more details during our next call, but we have expectations that these will drive an additional $5 million to $8 million a year of savings. .

Removing the impact of restructuring, adjusted operating income in the third quarter was $9.9 million, up from $9 million in the second quarter of 2020, an increase of 10%. Adjusted operating margin was 6.9%, up from 6.2% sequentially, which we were very pleased with.

This corresponded to adjusted EBITDA of $15.8 million and adjusted EBITDA margin of 11%, which was up 250 basis points sequentially from the second quarter and marked strong performance given the pandemic-related headwinds. .

Our adjusted net income in the third quarter was $7.7 million, up from $7.2 million sequentially, and our adjusted diluted earnings per share was $0.39, up from $0.37 sequentially, more than covering our dividend. .

Before turning to our balance sheet, let me add some color in terms of our tax rate, given the complexities around goodwill and restructuring deductibility. Our tax rate in Q3 2020 was 33.3% before restructuring charges, which is a more normalized rate for the quarter. For your benefit, our Q2 2020 effective tax rate was 38.3% before goodwill.

And this puts our year-to-date effective tax rate at 37.3% and on a normalized basis. .

We have seen some information in the public markets about our tax rate post-implementation of the proposed Biden Tax proposal. To help everyone understand this impact. If we look at our historical 2019 performance, where our effective tax rate was 32.4%. Under the Biden Tax Proposal, this would have been 39.4%, an increase of 7%.

This assumes that we do not take any tax planning into consideration, which we'll certainly always do. .

Now I'll turn to the balance sheet. At the end of the third quarter, our cash and marketable securities continued to strengthen as we saw a sequential increase of $49.8 million to $237.6 million adjusted for the credit facility outstanding at the end of the second quarter. .

As you can see, we repaid our outstanding balance of $100 million in our credit facility in early September, resulting in no borrowings at quarter end.

In terms of overall liquidity, I'm very pleased to report that we finished the quarter with $410 million compared to $360 million at the end of the second quarter of 2020, which demonstrates outstanding balance sheet strength, and positions Heidrick incredibly well to explore opportunities in Search, Consulting and potentially new areas outside of core services, but that are aligned with our premier human capital services strategy.

.

Now let me turn to the fourth quarter. Given the consistent performance we are seeing in our markets, we believe our fourth quarter revenue will be in the range of $140 million to $150 million. Of course, this can change materially.

If we see another spike in COVID-19 within the countries we operate, if governments choose to restrict business or access or governments do not take necessary steps in stimulus as well as other macro events and acute business events that are unforeseen at this time. .

In summary, our third quarter performance continues to reflect the impact of the pandemic, but clearly demonstrate our resilience in difficult markets by our team. We remain focused on strong execution, long-term planning and adding value to our clients. With that, we'd be glad to take your questions. .

Operator, over to you. .

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

First question, Krishnan, you mentioned that all the offerings at Heidrick Consulting are being delivered digitally today.

I'm curious, do you have any thoughts about what percent of the business could be delivered that way longer term?.

Yes. Look, it's not going to be 100%. I think there's still some gatherings and things that we do, convening that's required and will continue to be required. But I fully expect that well in excess, if we really started off with pre-COVID at almost 0 for Consulting, I suspect that we will be somewhere between 50% and 60%.

And the rest of it is still going to be delivered in person. .

So that -- I think a number like that sounds reasonable to me. .

Okay. Great. And the number of Executive Search consultants were down about 30-plus sequentially.

And I was curious if that was a function of the restructuring activities or natural attrition?.

Yes, that was the restructuring activities, I believe. .

Okay.

And can you maybe remind me what consultant attrition looked like in the prior 2 cycles or downturns? And maybe how that compares to today and what you're specifically doing in recent months to retain your top talent?.

Yes. I'm not -- I mean, if I go back to the previous cycle, I mean, and when you think about attrition, I mean, I think you're talking about it outside of restructuring.

Is that kind of what you mean by that an outside of economic impact?.

Yes. .

Yes so look, I think that in general, it's really quite low for us right now. It's going to be in the low single digits for us at this point in time.

And what we're doing to maintain that is just -- I mean it's the connectivity inside the firm, okay? It's everything that we do with how we treat each other, how we deal with each other, all the Zoom calls, all the practice calls. .

We continue to provide development programs for everybody, and we're doing it virtually, we're committed to promoting. So we've got a promotion cycles going. So we're doing all of those things, which I think help us create a very strong culture. We collaborate on so many projects across not only Search but across Search and Consulting.

So I think there's a very strong culture and fabric that we've built here. .

Great. And just 2 quick ones for Mark maybe.

The restructuring charges that you mentioned of $10 million to $15 million tied to real estate, is that all expected to be taken in Q4?.

No. I think we'll -- the goal there is -- it is probably really Q4 and potentially very early part of next year. A lot of it is really more about when we can strike agreements either with our current landlords or with new landlords. So we'll see. .

Okay. Great. And just lastly, if Biden takes office and the tax proposal passes. You mentioned that 2019 would have been 7% higher, but that didn't take into account any tax planning on your end.

So do you think that longer term, we should expect a high 30% tax rate if he takes office and that passes? Or do you think you can get it down into the mid-30s? I know it's a tough question, but I'm just curious your general kind of thoughts there. .

Yes. My general thoughts are, I don't think there's anything real low-hanging fruit from a structural point of view will impact us right away. So I think the first year will be that kind of preplanning, so to speak, and then we'd really start to look at potential structures to try to obviously be as effective as we can with our tax rate.

So it usually happens that way, Josh, for the first year is kind of that bump and then next years, again, assuming that there's efficiencies that can be built in and they'll be built in. .

[Operator Instructions] Your next question comes from the line of Tobey Sommer with Truist. .

If you could comment on what your appetite is to deploy capital on acquisitions in areas that you might be interested.

If you could you refresh us on what spendable cash looks like if we kind of strip out your accrued bonus and other -- on the kind of items that you would consider not necessarily spendable at this moment?.

Sure. So I think in terms of the restricted cash, I guess, that's kind of either caught up on other currencies, et cetera, that isn't immediately deployable. You'd use around a $20 million, $25 million plus or minus, back of the envelope. The remaining part of our $410 million less that is completely open to strategy. .

The second comment, I think the first part of your question, Tobey, if I heard it correctly, is we're always obviously trying to be opportunistic.

When we look at the capital structure, the way that I always try to describe just kind of 3 priority pillars, right? The first one is where we're looking at it from our own current ship that we have and making sure that we have proper investments into our teams and to the strategies that we deploy. .

The second really strength of pillars is more about how are we going to grow with the growth rate and that could be inorganic or organic acquisitions. Obviously, that's a very big focus of ours, especially given market conditions, where valuations, and I think some things have receded, so to speak. .

And then kind of that third capital pillar is then what you really have that true excess amount, if you will. How do you return it back to shareholders? And of course, everything is open for discussion around that being yields like we increased it a bit ago, could be buyback, could be onetime, et cetera. So we're always evaluating that for the excess.

.

The answer -- the sub-answer to your question in terms of how much of it is for bonuses. As you know, we did, I think, about $202 million of cash bonuses last year at 2019 revenue levels. So clearly, that will come down from those levels. But my best guess is that's the way I would think about it generally proportionately, so to speak. .

Okay. That's helpful. Two other kind of numeric questions.

How much larger would Consulting have to be to get it up to what you think the right kind of scaled margin would be?.

And could you quantify the savings associated with travel and entertainment year-to-date or even in for the full year, if you just assume the midpoint of your guidance range? Kind of want to get a look at what that might look like as it maybe feathers back into the income statement in '21 and '22?.

Sure. Krishnan, do you want to try to -- want me to give the quantifiable [ comp ]. .

I'll follow-up. Why don't you go ahead. .

Sure. So Heidrick Consulting is, I think, we've always been -- again, if we're managing to breakeven, that really kind of that $80 million to $85 million revenue would really kind of get us in the ballpark. And that's breakeven, not the answer to your question.

I think your question is, when you get it up to the margin levels you would expect, where do you see revenue to be? And that's very difficult because depending on if it's assessment, if it's culture shaping, if it's leadership, what are we going to kind of place us are very different margin implications.

And again, some of the new things in D&I that they're focused on as well. .

Again, I would imagine that steady-state margin would obviously be beyond the $100 million mark, but it's really difficult to tell you when we can get kind of into that low to potentially mid-teens type margin where you would expect the steady state to come in. .

Krishnan, I don't know if you have some insights on that. .

Yes. Look, I think that's right. I think sort of in the $100 million, $120 million dollar range, we'd start to be able to see the margins that one could expect in a steady state operation as well that could handle a little bit of shocks to the system as well. So that's kind of the number we're targeting for that. .

And the answer to your T&E question, so we usually run about $10 million, $12 million a year on T&E that we kind of have flowing through the G&A. During COVID, obviously, it pretty much dried up to next to nothing. I mean maybe on an annualized run rate, about $1 million. So 90% of it was completely shaved off. .

And to try to give you an answer in terms of where do you think that's going to come back to it. I don't see it coming back to where it was. I think a lot of the consultants that I speak to they kind of bifurcated.

I think the ones where they have really good and strong relationships, they don't see a lot of travel necessary as much as they may have before. .

And I think when there's new relationships where, again, once you get past COVID and people become a little bit more secure getting on planes and traveling, I think you'd see that to be more normalized to where it was, even though it still wonder if it'll get back up, so at least from my vision.

Krishnan, I don't know if you can add on that as well, maybe. .

Yes. Look, I think the way we work is continuing to evolve, and will work with our clients in a far more hybrid model. So there will be some level of travel that's going to be required. But a lot of the upfront work will be done more virtually.

Then there's going to be for new clients and relationship development of them getting to know us, us getting to know them. And that's going to be required. We continue to work with new clients, which is really exciting, okay..

So it's one of the tests of a COVID world as you develop new accounts and new clients or not and 22% of our revenue came from Search clients that we haven't worked with the previous 24 months. So that's great.

The real question is, can we continue to make those into large accounts or not, or are they going to be one-off clients? And look, there's a test there, and we need the test of time to be able to figure out whether we can develop deep relationships over there as well. .

I could sneak in a follow-up. Mark, you cited the mix of margin profiles within Consulting as being necessary to kind of predict what the future margin could look like.

Could you just kind of highlight some of the higher-margin lines of service and then some of the lower margins, just to give us a sense for where those sit?.

Yes. Really -- Tobey, it really comes down to which one is more labor-intensive than the other.

So if you think about it from an assessment point of view, if it was a very large company with lots and lots of assessments, you'd be able to get really great scale from that, and the margins would obviously be much stronger than what I would say would be individual leadership assessments and ability to help and coach where it's more 1 on 1, 1 on 2, 1 on 5.

So those are obviously going to be much more labor-intensive and cost focused. .

And our D&I initiatives kind of is that, what I would call that in between, right, where you're really trying to help both from a culture point of view, a company point of view, a leadership point of view, again, there's some good scale, but yet a lot of heavy lifting that needs to go on, which our teams are just doing a phenomenal job of. .

So I wish I could really break it down, it really depends on what kind of client we have, the scale of the client and what is the lifting that needs to be done and specifically to the bespoke model that they're looking for from us. .

Our next question comes from the line of Kevin Steinke with Barrington Research. .

Obviously, you talked about revenue trending better than you had expected in the third quarter. I wonder if you could maybe just -- could give us a little more context around what changed relative to what you had initially expected, down 10% to 15% sequentially to where it came in.

Just maybe in terms of customer attitudes or what you're hearing from the market that enable that better-than-expected performance?.

Sure, Kevin, I'm happy to try to take that question for you. So I think we saw really kind of 3 events that took place that really was surprising on the upside, right? I think the first 1 is but number of engagements. The market was there, more than we thought it may be, especially going into the summer months.

We were expecting it to slow down a little bit more, which it didn't do. And I think our team just did a phenomenal job executing and ensuring to grab the market share while it was there. .

The second is the value. So we didn't see as much softness in the value of the engagements that we were doing. And so again, and that came from strength in our industrial practice, strength and obviously, our healthcare, life sciences was very strong.

So we saw some really interesting acute situations where it came in much better than we had anticipated. .

And I would say the third one was the upticks. The upticks really delivered about 30% ahead of anything that we were estimating on our side. And I think that's just going back to the resilience of the market where people are still looking for good talent, especially given the complexities of everything the headwinds, not just COVID.

I mean you can look at it from the question was just asked. You got new tax regimes potentially coming in. You've got the elections coming. You've got Brexit to deal with and of course, you've got COVID. .

So really skilled individuals coming to really help companies out in sea of complexity. And people willing to pay for the talent to get them in the door to help them achieve that. So all 3 of those really kind of weighed.

Again, this made us a bit off in our average swing, but I would always boil it back to the team that did a fantastic job in executing and really doing a good job in the market. .

Let me just add to that. Look, I think that the clients really liked our transition and how seamlessly we transitioned to the digital offerings as well, particularly on large complex projects. So I referenced one when I spoke earlier.

I mean look, we were able to convene 100-plus consultants to solve a client's problem, okay, using our platform and how we could do that. So we're solving some pretty complex problems, and I think that the ability for our terrific team and the platform to be able to drive that was terrific. .

I mean -- and we, maybe had underestimated that a little bit. .

Okay. No, that's great color. And you talked about reducing your real estate footprint. I believe you said to match the new normal. I just want to make sure I clarify what you mean by new normal.

Is that just kind of new normal in terms of way of working or some sort of change in the demand environment, I guess?.

Yes. It was more intended in the way of working. I mean we fully expect people will be coming into offices, but more on a hybrid model. So I think it's to reflect that, not demand. .

Okay.

So does the new real estate footprint contemplate some folks working at home permanently? Or is it more kind of that office hoteling?.

It's both. It's both. We are -- we'll be publishing our remote policy for next year. And there are people who will elect to work remotely as a result of that policy as well. We'll respect that. So it's going to be a mix. .

And I think in that mix, we know some people will be wanting to come in to the office, nevertheless, to be part of collaboration, innovation, culture. There's lots of reasons to do that, and we're going to have the right space, and we'll be using a different approach with how we utilize that space. .

Okay. Great. And I wanted to ask about a comment you made about significant enhancements to your CRM platform.

Just maybe if you could talk more about that and the benefits you're seeing from that initiative?.

Sure. Yes. So this was the -- we completed implementing our upgrade to our platform.

And as a result of that, the insights that we can glean across searches has gone up by a factor, okay?.

So we can now go to clients and be able to talk to them in a very analytic way about how long it takes to be complete searches. What happens in typical search, so there's a lot more data-rich stuff that's flowing through that allows us to run analytics and it allows us to have a very different conversation with clients.

So this is for Search and for Consulting. So it's a terrific new platform. We're excited about. .

Your next question comes from the line of Tobey Sommer with Truist. .

I just wanted to see if you could give us some color about your monthly trends. You said that business rebounded after a seasonal low over the summer and was strong in September and that carried through in October.

Is October running at the same rate as September? It Is my understanding is it might even seasonally be a little bit stronger in a normal year. .

I mean, so what we saw, what we expected to see was obviously August being a summer month, and again, I would expect people to kind of slow it up, especially after the amount of shelter-in-place during the COVID. .

What we saw in September was very strong, certainly not what it was in 2019 levels, but certainly, up in escalation beyond the old trends that we saw at the beginning of the COVID period. .

October seems to be trending in a very similar fashion. It's difficult because we haven't closed the month yet, but my comment would be is it's definitely going to be within both striking distance of similar numbers, but we'll see where it comes out. We still don't know yet. .

Okay. And then I just have sort of an acquisition-related follow-up.

The write-off goodwill in Brazil, how does that compare to the size of the overall business acquired?.

And is there anything to be gleaned from this experience in terms of the size and scale of a potential target acquisition in the future, something that might be kind of bigger or more resilient, I think, as Krishnan mentioned able to kind of get you to a scale where you can resist some ebbs and flows in the business from a profit perspective?.

Sure. I mean, I think just to correct something. We did not -- the goodwill in Brazil was very minor. The goodwill -- the impairment that you saw in Q3 was really focused on acquisitions, older acquisitions in Europe and in Asia Pacific. Acquisitions like 12 -- 15 years ago.

So the new acquisition we just did with our Brazil entity is not in the cards, just to be clear. .

And with respect to the second question about scale in your acquisition outlook?. .

Tobey, can repeat that part of the question. You threw me off with the Brazil. .

Yes. Sorry. Sure. I was wondering if you could comment on the scale, what you've done in recent years is relatively small. It seems like to get the consulting business, you got to get something a little chunkier.

Is that how we should think about it? Or are you comfortable [ kneading ] together multiple smaller acquisitions to get you where you need to be. .

Yes. And this is one that I -- I know Krishnan will definitely jump in on. I think our overall comment is when we look at what we want to do strategically, obviously, there's a lot that needs to be done from an internal point of view, but we know that inorganic is going to be a careful component of our strategy.

So we would expect, as we kind of go through the growth that we want to see over the next couple of years, it will definitely be a combination and some of that will be a function of competencies in-house when we marry them and look at them [ competence, the out house ] and put it in acceleration acquisition to do, we will, in terms of its size. .

As you know, it's really more of a function of fit and making sure it's in the right sweet spot from a return to our shareholders versus anything else at, that's a big ticket acquisition. We'll pull it, if it's a lot of small tickets, we'll pull that too.

But Krishnan, let me turn it over to you because I think you've got some pretty good insights on this. .

Yes. Look, I think, Mark, you hit it on the head. I think we tend to think about it in terms of fit, both the strategic fit and what will drive -- and the culture fit, and how does it plug into what we are building as a culture here as well.

So I think those are the 2 main lenses that kind of create interest and then obviously through the financials underneath that so. That's how we tend to think about it.

So it could be large and it could be smaller, but it's going to have to fit, and it's going to have to continue to focus at the top, and it's going to have to continue to drive the agenda and be something where we still can go to it to market as one firm as well inside of that Consulting umbrella.

So is inside Consulting, that's what it's going to look like. .

[Operator Instructions] There are no further questions at this time. I will turn the call back over to Krishnan. .

Look, let me just quickly summarize. As you can see, we continue to operate and transform this business in a highly dynamic world. And as you can see, we are focused on driving some results as well. And in that context, what we talked about today, we have rightsized this firm.

We're winning both new clients, and we believe winning share, we're innovating our offerings. We're innovating our operating model. You heard Mark speak to our real estate strategy and what we'll be doing there. .

And we continue to focus on our more valuable asset, our people. And we will continue to not only develop but also to promote. And that cycle is underway, and it's a really important part of our refresh cycle as well. So in short, look, we're setting ourselves up for success in 2021 and beyond.

And we're kind of happy with the progress in this last quarter and look forward to continuing to drive ahead. .

Thank you all for joining our call. .

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..