Presentation:.

Welcome to the Third Quarter 2022 Heidrick & Struggles Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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..

Thank you, and welcome to our 2022 third quarter conference call. On today's call is our President and CEO, Krishnan Rajagopalan; and Chief Financial Officer, Mark Harris. We posted our third quarter 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. A reconciliation between GAAP and non-GAAP financial measures may be found in the earnings press release. Also in our remarks, we may make certain forward-looking statements.

We ask that you please refer to the safe harbor language also contained in today's press release. Krishnan, I'll now turn the call over to you..

increased ongoing client comfort with remote work; a tight labor market driving the need for faster and more flexible talent solutions; a growing awareness and openness to the on-demand model becoming enterprise-wide and at the C-Suite level; and the changing talent landscape with significant growth in the number of high-end talent choosing to go independent.

External sources who track this indicate that independent workers grew 34% in 2021. We expect organic growth to continue as the market grows and client awareness continues to expand. Building on our leadership position in the space, we're reinvesting in future growth, given the accelerating market opportunity.

We're focused on additional investments in sales and marketing, as well as geographic expansion outside the US and UK. We also expect to benefit from the accelerated growth in the Heidrick Search channel as we add resources to this side of the business.

In Heidrick Consulting, we continue to focus on delivering impactful solutions that develop future-ready leaders, organizations and cultures. In the third quarter, this segment delivered net revenue of $19 million, up 14% on a constant currency basis.

Growth was seen across nearly all our services and demonstrates our ability to drive higher revenue by expanding client relationships across multiple areas as we continue to increase our brand awareness and cross-sell more of our offerings.

Importantly, we continue to see strong demand for our services as clients wrestle with strategic questions around talent, such as, do we have the right leaders in place? Who are our future leaders? And does our culture aligns with our strategy and purpose? In addition, we're advising clients as they confront return to office issues and how to navigate a challenging labor market and economic headwinds.

Lastly, another piece of our diversification strategy and a key future growth area for our firm is the development of our digital assets. Today, many organizations lack the visibility and leadership intelligence systems they need to drive business impact.

Current leadership solutions are often manual and fragmented, leadership data is limited, companies lack an organization wide view of the experiences and capabilities of their leadership.

And as a result, critical needs, such a succession planning don't scale and companies can't effectively identify or map leaders to roles, drive internal mobility or build programs to address impactful development needs. We have been working actively with our partner Eightfold AI on our first digital assets to address these unmet needs.

We've named it Heidrick Navigator and we've been beta testing it clients. The beta program has been positive with strong initial client reception. We're now beginning to expand our beta program to several additional clients.

The feedback from our early adopters will be incorporated into our product roadmaps over the course of the next six to nine months as we look to a full product launch. We're excited about our progress and positive market response to date and look forward to sharing more as we advance our work over the coming quarters.

In closing our results reflect continued growth and successful execution and we're heading in the right direction. With Executive Search as the strong cornerstone of our portfolio, we look forward to seeing faster pace growth from our non-search businesses, Heidrick Consulting, On-Demand Talent, digital assets and other adjacencies still to come.

And as we continue on our multi-year journey we are on an ambitious path to transform Heidrick & Struggles into the world's leading leadership advisory firm providing a new generation of business services that will enable companies to achieve higher performance from their executive level talent in a fast-changing world.

Before I turn the call over to Mark, I'd like to close with how proud I am of the contributions from our global team. In November our team will participate in our Annual Global Day of Service, where we as a firm give back to the communities in which we serve.

I want to thank all of our employees in advance, not only for their time and commitment to this important event, but also for their hard work and many contributions they deliver each and every day towards advancing our client success and generating long-term shareholder value. With that, I'll turn the call over to Mark..

Thank you, Krishnan, and good afternoon, everyone. Thank you for joining our call today. As Krishnan mentioned, given we anticipated this market slowed down, we're very pleased to have kept pace with last year's phenomenal revenue trend on a constant currency basis as the strengthening dollar has hurt our reported currency in Europe and Asian markets.

Irrespective, this management team is steadfastly focused on delivering strong profitability through to the bottom line for our shareholders, which we achieved again this quarter by posting diluted EPS of the $1.2. This marks the fifth time over the past six quarters that this company has generated quarterly EPS in excess of $1.

It's also noteworthy that year-to-date 2022 operating income is only $6 million behind the record-breaking operating income generated for the entire year of 2021, an incredible achievement.

Before speaking to our performance in the third quarter, our fourth quarter guidance reflects continued moderation as the summer holidays are great vacation impact, works its way through our revenue recognition models, as well as the ongoing impact from the strengthening of the US dollar.

While there is much chatter about looming global market downturn, we believe we are well positioned to navigate through the challenging market dynamics as we have done in the past, given our digital transformation and the diversity of our business, along with key account growth and client stickiness resulting from our IP, technology, global reach, data and insights.

Now let me provide some details for our third quarter results. Net revenue on a consolidated basis for the quarter was $255.2 million and on a constant currency basis, net revenue was $265.8 million, compared to $263.8 million last year.

Year-to-date, net revenue increased to $837.7 million compared to year-to-date revenue of $717.5 million, a 17% increase. Let me first turn to Executive Search, where quarterly net revenue declined about 4% year-over-year. However, excluding the fluctuations of currency, search revenue was essentially flat with record levels last year.

Looking at our regions, the Americas decreased 3.4% versus the year ago period, reflecting an increase in the value of engagements, offset by the number of engagements. Europe decreased 3.6% and Asia-Pacific decreased 7.3%.

However, on a constant currency basis, Europe was up 12.7% and Asia was essentially flat, down 0.6% versus last year, both driven by the value of engagements.

Consultant productivity of $2.2 million was below last year, but remains strong and is beginning to reflect the new normal we are seeing in our business where we expect this metric to settle in around $2 million over time, which is below the unsustainable post pandemic rate of $2.6 million and above pre-pandemic levels of $1.7 million in 2019.

On-Demand Talent revenue of $23.2 million was driven by an increase in average project size, which is reflective of the strategic initiatives to expand and penetrate key accounts, along with increasing project extensions, all of which was offset by the anticipated seasonal slowdown.

Nevertheless, third quarter results were up 4% from the second quarter of 2022, but down 4.3% from the third quarter of 2021. Given On-Demand Talent current size and scale, this business is still a bit choppy. But as we grow, we expect increasing consistency over time.

I remind our investors that On-Demand Talent is a key component of our diversification strategy. And it not only serves as a rapidly growing niche in the business services space, but also provide some offsets the economic cyclicality seen in Executive Search.

The environment for this business remains strong and we're seeing continued demand across all company sizes and industries as clients are focusing on growth, while recognizing and becoming more comfortable with the benefits of high-end On-Demand Talent and its expanding use.

Therefore, we continue to invest to fuel the future growth of On-Demand Talent and expect to continue to invest in this segment as long as the market conditions support our growth vision.

This means that we expect On-Demand margins to be dilutive as this segment becomes a higher percentage of our overall revenue, but margin dollars in the aggregate will be higher and most importantly, accretive to our bottom line.

We continue to believe the true value of On-Demand Talent would be missed if one were to apply an EBITDA or PE multiples to today's results, given the nascent of this business with trailing 12-month revenue of $93 million. But again, we see significant growth potential over time. Now let me turn to Heidrick Consulting.

We're pleased to report Heidrick Consulting quarterly revenue increased 6.9% or 14.4% from the prior year period on a constant currency basis. This is primarily driven by leadership assessment and development projects.

Head count also increased year-over-year and we anticipate additional hiring of Heidrick Consulting to capitalize on the market opportunities and the demand we're seeing, in particular, in a tight labor market.

Importantly, Heidrick Consulting’s backlog remains strong in historical highs and this segment continues to benefit from cross collaboration within the company with over 40% of its third-quarter revenue driven by referrals from Executive Search. Turning to operating expenses.

Salary and benefits were lower in the quarter by $14.4 million or 7.8% compared to last year's third quarter. Fixed compensation increased $3.4 million due to base salary and payroll taxes and retirement and benefits, partially offset by decreases in deferred compensation plan and talent acquisition and retention costs.

Variable compensation decreased to $17.9 million related to lower production in the quarter. As a result, salary and benefit expenses improved 330 basis points to 67.2% of revenue, compared to 70.5% in the third quarter of 2021.

General and administrative expenses were $32.2 million, compared to $29.2 million in the third quarter of last year, primarily related to internal travel associated with business development.

Despite the increase, as a percentage of net revenue, general and administrative expenses remained low at 12.6% and this was down sequentially from $35.2 million in the second quarter of 2022. In the third quarter, we reported $5.4 million in research and development or 2.1% of net revenue.

Year-to-date, we've expensed $14.3 million, which is in line with the anticipated $20 million run rate for R&D on a full-year spend basis, and we have capitalized $3.8 million that will be amortized upon product introduction into the market.

At this stage in 2023, we expect R&D investment to be similar to 2022 and we'll continue to evaluate it as part of our annual planning process.

We're very pleased to report our continued focus on profitability was evident in our third quarter results and exceeded expectations, even as we continue to invest in our research and development initiatives for the future.

Specifically, operating income was $28.3 million and operating income margin was strong at 11.1%, even though we invested $5.4 million in R&D discussed earlier. This resulted in adjusted EBITDA where it was also strong at $33.3 million with robust EBITDA margin of 13%.

Our third quarter effective tax rate was 29.5% and year-to-date effective tax rate of 31.3%, continues with our company's two-year trend of a tax rate consistently in the low to mid 30% range. We anticipate this to continue into the fourth quarter, subject to any tax rule changes.

Finally, net income for the quarter was $20.8 million and diluted earnings per share was $1.02. On a year-to-date basis, we're very pleased to report that net income rose to $63.4 million compared to $60.1 million in the same period last year.

Now I'd like to turn to our balance sheet, which has the company's highest third quarter cash balance of $456 million. As a reminder, our cash position typically builds through the year as employee bonuses accrue. Employee bonuses are paid in the first quarter along with their associated taxes and related costs.

With no debt on our balance sheet, we're well positioned to fund our growth initiatives and be very strategic about future opportunities. We have complete access to our $200 million credit facility and robust cash and receivables, putting our liquidity in a strong position.

Looking at our fourth quarter revenue guidance, we expect the range between $215 million to $235 million. You will note that we broaden our range given the scale of our business, which is on pace to do another $1 billion in revenue and the diversification strategy that we have embarked upon.

We have built in an expectation for Executive Search to slow down in the near term, coupled with normal seasonality that impacts new businesses into the fourth quarter. In summary, considering global market dynamics and a tremendous year ago comparisons, we're extremely pleased with both our third quarter end year-to-date performance.

Our management of the business continues to deliver meaningful improvements to our profitability and the bottom line. We're within the range of our record-setting company performance in 2021, which is a terrific accomplishment by everyone at the company.

We're on an exciting path and we continue our transformation journey and focus on accelerating the growth of both our search and non-search businesses, which in-turn will give us more resilient business model in the future.

Lastly, given our market position and liquidity strength, we have great flexibility to be highly strategic and capitalizing on the right opportunities, which we expect will create further value for our shareholders. With that Krish and I are happy to take your questions. Operator, over to you..

[Operator Instructions] Your first question comes from the line of Tobey Sommer with Truist Securities. Your line is open..

Thanks. Good afternoon. In terms of Executive Search, what are you expecting annual productivity, annual production to measure and settle out at on a per consultant basis. It sound like the confirmation is down sequentially about 18%. So wondering where you kind of see that as we get into next couple of quarters..

Hey, Tobey, it's Mark. So here's the answer to the question. The first one is, as you know, in 2021 and into 2022 we made comments that the rate of $2.5 million, $2.6 million of productivity was just too high and not really sustainable over the long term.

We also made comments that back at the $1.7 million productivity that we saw in 2018 and 2019, we still feel like we have gains achieved, either through technology or just redevelopment of the process and how we do our Executive Search are going to be able to give us some permanent gains.

Our view is still pretty consistent that we think trailing 12 months this will maintain around plus or minus $2 million as we kind of go into what we consider probably more of a steady state. But as you know, it would fluctuate a little bit between recessions, expansions coming out of those recessions potentially, et cetera.

And of course, our promotional that we do in the first quarter, but I think that's a pretty safe range to be guiding our productivity levels. So I think we've gained some there. Krish, I don’t know if you want to add to that..

No I think -- look, that makes sense to us. The productivity levels shot up by well over 40%, so that wasn't that sustainable, but I think at about $2 million, we feel pretty confortable..

Thanks. And as we look at the geographic [Technical Difficulty] confirmation you try to kind of model out.

Are there any -- could you give us any color on the strength or weakness on a relative basis among the geographies within Executive Search?.

Yeah, let me start with that and Mark can -- Look, I think relatively speaking we've been very happy with Europe. Europe has maintained its pace in a very nice way. So remains to be seen with -- there is a war going on there still, et cetera. As to what happens, but we've been rather pleased with that.

We saw, as we mentioned some declines in the Americas, which was a big growth engine. But look, I think we're still forecasting really that if we kind of drew in boundary lines over here that we're not running at 100 mile an hour, we're still running faster than we were running in 2018.

In 2019, there is still a good pace here for us in Executive Search. So that's how we're looking at the business, right now at least.

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

No, I don't think I would comment, Tobey. We are seeing a little bit of a different mix than usual. We've seen actually strength coming out of Europe. Obviously, there's been a little bit less in the Americas and some strength coming out of Asia. So as we kind of look through some of the mixes and they're coming up.

I would imagine that's going to shuffle us a little bit differently, just because of the weight and the strength that we're getting from particular parts of those regions, but overall they are still pretty consistent, what we've been watching over the last 18 months post COVID.

So I don't think we've seen a big shift in that sense with the exception of minor inflationary amounts..

Okay. How do you -- you indicated that the capitalized investments and so forth in some of your transformational initiatives you expect to kind of maybe stay on stable as you look into next year when you're doing your planning.

How do you -- in this environment with some forward indicators coming down, your guidance is sequentially down pretty meaningfully.

Do you shuffle the deck in managing the emerging more rapidly growing but money-losing businesses any differently?.

Yeah. Tobey, Krishnan here. Yeah, look, I think the way we think about it is, we think about it through a long lens at some investments we need to make today for us to be able to see those returns. We see markets in places that we think investment is required. We see the On-Demand Talent as being a reasonably strong market.

I mean, if we look at the macros, the tight labor market, we’re entering a market where we believe the variable talent, variable costs are going to be valued. We're seeing an acceptance of that solution that hasn't existed before as well.

So awareness is going up and external research shows us that large groups of people are opting into this model as well. So it leaves us bullish to say, hey, investing and growing and scaling that, it's for the benefit of the shareholder and the enterprise over the long term. So we're going to continue to focus on things like that.

We'll have to -- we'll be thoughtful in managing our costs as we've been in this quarter. Okay. And we'll continue to do that, but I think the investment thesis that we have, we're going to be prudent on this and not get ahead of the market, but where we see the market, we're going to continue to double down on that..

Okay. I'll get back in the queue. Thank you..

Thank you..

Thanks, Tobey..

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

Hey, good afternoon. So you talked about the inevitable market slowdown that was unanticipated.

I'm just trying to maybe parse out a little bit more, how do you think the slowdown is evolving here? Is it more weighted towards just you coming off those record high kind of unsustainable confirmation levels that you had seen in the first quarter of 2022 and just kind of the market normalizing versus how much of the slowdown do you think is related to macro concerns among your clients? You mentioned in the press release rooming a recessionary concerns.

So just kind of wanted to get a sense of how you would weight those factors in terms of the market slowdown you're seeing?.

Yeah. So I think the first thing to remember on that Kevin is, again, when you are actually kind of taken a look at constant currency, dollar clearly has been playing a very big part of that.

So when we take a look at the revenue side of it, right? The revenue is actually been pretty flat compared to Q3 last year, when you look at it in terms of our performance this year.

So I don't want to underscore that too much, because I think that's really kind of important is the dollars been impacting both Asia, Europe and they become bigger part of our platforms as well with our On-Demand Talent, who has got a European business and Heidrick Consulting which has a European/Asia business.

So I think there's that element, the slowdown in of itself wasn't unanticipated, we were expecting it, but it just slower off the insanity of what we're watching in 2021 and 2022. The levels that we're seeing in even these revenue multiples are still clearly very much higher than 2018 and 2019.

I think what that really does is, put acute focus on us [indiscernible] focus on the profitability side of it. So, which we've done I think a really good job even back in the insanity of the COVID crisis.

This management team, I think we did a really excellent job of maintaining strong single-digit margins, making sure that we understand kind of the different levels -- levers, excuse me, that we can pull, which we did in real estate, we reshaped our real estate strategy, reshaped our technology play, added On-Demand Talent.

I think we've done a really good job in that to just kind bully ourselves during the ebbs and flows of this. So it is slowing down as expected. And we, again, I think are probably in pretty good course of how to maintain it.

And I think Krishnan can certainly go into how we work with our relationships, which we think we've positioned ourselves to be much more attached to our clients during these times versus maybe back in the historical days where we’re much more transactional, Krishnan if I could say it like that..

Yeah. No, I think our accounts programs are really working well. We're able to -- we measure that and the stickiness of the relationships over there, I think are really outstanding and we are able to introduce in the other service offerings as well which kind of allows that to be traditionally sticky.

I think fundamentally one of the things that gives us some confidence with where we are is that, we in a fundamentally tight labor market from a talent perspective. Okay. So the problems haven't changed. People need to solve them and they're looking for solutions. And so it's a supply side -- there is a supply-side issue still, okay, in terms of that.

So we're going to continue to be in the market and we're going to continue to be in demand as a result of that..

All right. Great. So I mean, I guess -- I mean, I guess it sounds like given the tight labor market and if it continues to remain tight, do you think you could perform pretty well. I guess even as the economy slows..

Yeah. I mean, as we’ve said here, I mean, again trying draw some guardrails into this thing here. We see ourselves at this point in time as we look at the market, when we talk to our clients. Performing at a level that's greater than 2018 and 2019. So we thought those were pretty ready markets for us as well. So we think that'll be a good performance..

Okay. Hey, Mark. You mentioned currency there and just trying to get a sense of specific to the third quarter revenue results, $255.2 million, on a constant currency basis $265.8. So the constant currency was within your range, but I mean does that imply that currency weakened more than you expected as the quarter progressed.

My belief is that, you already had some currency headwinds built into the $260 million to $270 million guidance range.

So does the $255.2 imply that the headwinds were greater than you had expected?.

No, [indiscernible] answer was. I think two fundamentally different questions. Like the first one is, how did we do compared to the same period last year. And my comment is, [indiscernible] constant currency between those periods, we would have been at $265.8 million versus $263.8 million, which is our performance.

Actually revenue would have been up 1%. I mean, I think that's important because when you look at $255. I think the first thing you think of it is, it's slowing down a lot. And answer is, what currency is really aggravating the situation, so to speak. And you can see that in the search.

I think we on a constant currency basis, we would have done $222 million versus $222 million last year's third quarter. Almost identically flat. So that's all I'm trying to convey is that, the result actually you're seeing this Q3, why it looks down to Q3 last year, on a constant currency it was pretty flat.

I think the second part of your question, which -- or the first part of question, excuse me is, how did the FX been change between the two periods? That's a different answer. The answer there is, we probably saw about $260 million from Q2 to Q3 FX if we were to use Q2's FX rate versus the $255 million that we actually reported.

So again, it would have been at the bottom end of the range in terms of our guidance and then we had about a $5 million impact that just really related stuff over to the currency situation. So it was a bit off. Now typically, we like to try to be within the range somewhere, but that slowness was because of the great vacation.

A lot of people took off in July, the last two weeks of July, which was a little bit unanticipated. August is pretty much what we thought it was going to be with people pretty much shutting it down. I think September rolled in very slow and I still think people rush back into it.

So we were again -- I think we were caught off a little bit on that, but they weren't drastic number differentials that we're really we were saying.

I think the real answer there is, currency and then a little bit more of a great vacation drag and then again in Q4 as you can imagine is, it's always the same and that's typically it's a lighter quarter, typically because you've got two major holidays in there with -- in the US, at least with Thanksgiving and the holidays of December.

We would normally see those numbers go down about the same type of pace. So again, when I think about the $215 million to $235 million from the $255 million, that sounds about right for a Q4 drop between Q3 and Q4. So nothing uncommon there, just a slowing of pace.

But again at those rates, please keep in mind Kevin, those are still very strong revenue, certainly far exceeding 2018 and 2019, where we did $716 million and $707 million, I believe, or $706 million, respectively. So we're still well above that even on those annual run rate, so that’s quarterly basis. Hope that helps..

Okay. Great. Yeah, no -- Yeah, I understood. Thank you. That's helpful. So yes, the 17% decline in search confirmations in the third quarter, you called out -- you've talked quite a bit thereabout the increased vacation time, do you think you can tie.

I don't know if you can -- how specifically you can do it, but would you tie a meaningful proportion of that decline to this heightened vacation time relative to the year ago quarter?.

I mean, when you look at the summer months that we had back, again, using a similar type of comparative -- excuse me. When you take a look at kind of how we would have performed at similar levels, the answer is, absolutely, we saw a very big difference.

So we were probably, again, just kind of looking at the metrics, you're looking at about -- I'd say, we were about 12%, 15% higher in Q3 last year compared to what we saw in Q3 this year. I think a lot of that is just as we talked about, that was really the resignation side of the equation.

Sorry, the vacation side of the equation -- vacation, excuse me..

All right, great. Okay. And then I guess, lastly, you talked about Heidrick Navigator there. It sounds like nearing a broader pilot or an eventual launch and I guess should we think about that is the first in a series of product and services launches on the digital side.

Just trying to get a sense as to how broad the offering will be, the number of offerings that are going to be come out of the digital R&D spend that you've been doing in 2022 and going into ’23?.

Yeah. So look, I think that's appropriate to think about it as the first of several. We're thinking about big chunky ones though rather than small little ones. So Heidrick Navigator is in beta right now and we've done the first amount of investment into that.

So you kind of go to a cycle of learnings, probably do a little additional investments going back into it based on the learnings before we can really get out to product launch. So we've got a couple other ideas we're working on in parallel. So -- which will be sequenced subsequently afterwards to be clear. Okay.

So I think that's right way to think about it. But generally, once that are median big is what we're going after here..

Okay. Thanks for taking the questions. Appreciate it..

Welcome..

Your next question comes from the line of Marc Riddick with Sidoti. Your line is open..

Hi, good evening..

Hey..

So, I was wondering if you can touch a little bit about some of the differentiation you're seeing in industry verticals. Would you sort of have in the slides around sort of what's taking place in the financial and technology areas. You had commentary specifically on Life Sciences.

But I was wondering can talk a little bit about what your expectations are going forward to be fairly similar as far as industry composition and contributions and maybe what you're seeing as maybe some potential areas that are maybe doing a little better or maybe you could bring us up to speed on that?.

Sure. Mark, let me kick that often then you probably got some thoughts to add. So I think broadly speaking, our industry pricing and structure will remain the same for the recent -- for at least if we look out a couple of quarters.

I mean, we think we've got opportunities for growth clearly in Healthcare Life Sciences and industrial where we will continue to see some growth as well. Inside places like FS, Fintech is still relatively hot Asset Management Consumer Finance, transaction banking.

These were the kinds of things that were fairly robust for us in terms of the opportunities that we saw in technology. The spike was probably closer to IT services and things that we saw. Recently we continue -- we expect that to continue. You hear a lot about supply chain, transportation and logistics. So that's an opportunity inside industrial.

The whole consumer products and hospitality space affords opportunity as well. And inside Healthcare Life Sciences, we've got strength in biotech and managed care as well, we saw opportunities over there. So I expect somebody these at least in the foreseeable future will continue.

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

I'd say -- the only thing I would add there is, when you look at kind of Q2 compared to Q3, we saw pretty gradual slowdown in pretty much across the Board. I think the only one that was really kind of difference, that was the consumer side, that maintains some good strength through the summer months.

But when you look at financial services, GTS, healthcare, all of them were down, again, a reasonable proximity, which is really just more of a fundamental. The slowdown during the summer months, as I said, the last two weeks in July and certainly the month of August were very, very, very quiet, again.

And I think that's really kind of what was driving some of those. So I don't think I could specify one, I would specify, as Krishnan rightly articulated that. As you go into 2023 depending on the economic outlook is looking, some industries will not perform as well as the other industries.

But at least right now, we're not getting a good indication of which we’re seeing as of yet into the Q4, it's just started, but we'll start to see kind of how things start to reshape themselves and have a better understanding of it..

Yeah. And I think -- I would just add. We are beginning to clearly see the tech as a horizontal, not only as a vertical cutting across consumer tech, industrial [indiscernible] healthcare tech, so big themes that are out there still..

Great. And then I was wondering if you could sort of touch a little bit on some of the activity as far as the types of order flow or types of assignments, have those gradually changed a bit going into these last few weeks.

Are you beginning to see clients sort of mix, sort of changes to those top priorities, or is that still to come in your view?.

Yes, that's still to come. We have not seen any mark change in terms of the kinds of projects that we're getting. I think there is still some that are quite hot if you double click CFOs functional position, these are all still remain quite hot as they were last quarter as well..

And then I was wondering if you touched a little bit about head count expectations on your side.

I think they -- if I remember seeing correctly and bear with me on that? Too many windows open right now, but I think it's about a 5%, 6% year-over-year sort of maybe what we're looking forward to end the year with and sort of how you're planning going forward there?.

Yeah. So I think if we look at it as different businesses, I think we will -- in the roughly January timeframe we will continue with our promotions cycle. It's been an important element of growth for us. And so we'll have a new class of partners that will come through that process. Our Executive Search hiring will be very strategic.

We've got some pockets and gaps that we see. So it's going to be pretty select from that perspective. We've got opportunities as we've referenced in On-Demand Talent to continue to grow that with sales, additional sales headcounts. So we'll continue to make those investments.

Heidrick Consulting gives us an opportunity to continue to grow as well, particularly along the lines of the Leadership Journey that we support. So, we're going to be very targeted in our growth as we look at it. And so, I don't think that’s going to be enormous headcount growth, but we still see it in target pockets..

And is there room for, or maybe you could sort of update on your thoughts, maybe sort of given the current environment to what maybe some potential acquisition opportunities.

If you think there might be something that is desirable, what your appetite would be or maybe if there's --maybe you could sort of talk a little bit about what that pipeline might look like for you, maybe you could sort of bring us up to speed on sort of how you looking at things right now..

I think there's kind of three different ways that we're looking at the acquisition. I think the first one is, On-Demand Talent, we're always looking and seeing what's going on in the markets and where we think we need extra air cover.

I think the element of it with Heidrick Consulting could be in specific products that we really wanted to add to help benefit of what they do and allow us to continue delivering on their services that they have into the market. And I think the other one is, again, as Krishnan rightly pointed out, which is Heidrick Digital.

That’s really more of investment than acquisition. It's just really, again as we kind of see our path and really think that this is going to be an excellent part of our future and making that investment and working probably with partnerships and vendors versus acquisitions is probably how we're going to look at those.

So I think what's been really intriguing at this point, Marc, is that, it's like the valuations, I mean it's putting which [indiscernible] you kind of look at the market, but they have started to come down, people's expectations, I think, have become more normalized. And I think it's engaging into interesting conversations.

The right answer is, if we really can get that one plus one equal three and then execute on that, but always willing to entertain conversations around the same..

Excellent. I appreciate it. Thank you very much..

Sure, Marc..

There are no further questions. I'd like to turn the call back to CEO, Krishnan Rajagopalan for closing remarks..

Thank you everyone for your participation and ongoing support. We're very pleased with the progress we're making on our diversification journey and we're excited to continue on our transformation. And we look forward to updating you again next quarter. Thank you so much..

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