Heidrick & Struggles International Inc (HSII) Q1 2021 Earnings Call Transcript

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Heidrick & Struggles International Inc (HSII -1.72%)
Q1 2021 Earnings Call
Apr 26, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Heidrick & Struggles Q1 2021 Earnings Conference Call. [Operator Instructions].

I'd now like to hand the conference over to your speaker today, Suzanne Rosenberg, Vice President of Investor Relations. Please go ahead.

Suzanne Rosenberg -- Vice President of Investor Relations

Good afternoon, everyone, and thank you for participating in Heidrick & Struggles 2021 first 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 first quarter slides on the IR homepage 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 remarks. In our materials, we refer to non-GAAP financial measures that we believe provide additional insights into our underlying results. A reconciliation between GAAP and non-GAAP financial measures can be found in 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.

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

Krishnan Rajagopalan -- President and Chief Executive Officer

Thank you, Suzanne. Good afternoon, everyone, and thank you for joining us today.

I'm extremely pleased with our robust financial performance this quarter and the pace of recovery in our business, which exceeded market expectations. While we're not done with COVID yet, our momentum is strong and we're very excited about the opportunities that lie ahead.

Last year, we were very well positioned ahead of the pandemic. We never stopped innovating or finding new ways to serve our clients and we continue to diversify and expand our capabilities. For example, our recently announced acquisition of BTG, which already has this year off to an exciting start. Most important, we're beginning to see the effects of our bolstered efforts in our strong financial and operating results, which Mark will take us through in a moment.

Right now, I'll highlight a few first quarter growth metrics and achievements relative to their prior-year period, much of which, of course, was pre-pandemic. Record net revenues increased approximately 13%. Operating margins returned to double-digit levels, and adjusted net income more than doubled.

Executive Search delivered an excellent performance with a record-breaking level of confirmations that steadily improved each month of the quarter. And we experienced increases in each of our regions.

In terms of our verticals, we saw strong increases from a year ago in Healthcare & Life Sciences, Industrial, Financial Services and Global Technology and Services. We also experienced positive trends in consumer markets as this practice rebounded and increased 38% sequentially. Across all industry groups, private equity activity remains robust.

Heidrick Consulting delivered a solid performance. Revenue was down slightly, reflecting a large project included in the year-ago results; however, confirmations were strong and the pipeline heading into Q2 is encouraging.

Our strong results reflect the dedication and tireless efforts of our team and the strength of our culture. As we recently announced, we remain committed to developing and promoting top talent from within and congratulated a new class of consultants who have demonstrated a strong ability to drive business growth and deliver for our clients. We also have seen very low turnover across the firm.

In addition, we've been hiring strategically and continue to attract new top talent to drive expansion into markets and practices where we see compelling opportunities for growth. As a result, we ended the first quarter with 373 search consultants and 64 Heidrick Consulting consultants.

Overall, our strong first quarter performance combined with the strength of our brand, improving client sentiment and our business momentum heading into the second quarter, all served to underscore my conviction that we are emerging from the pandemic a stronger company.

Our firm's focus remains on expanding client relationships based on our trusted advisor role to top leaders and teams. We've demonstrated great success bringing the full power of Heidrick to our clients to help them accelerate their transformation using our integrated suites of offerings across Executive Search and Heidrick Consulting.

Our collaborative efforts in joint go-to-market strategy has resulted in an attractive opportunities across multiple industries and regions with multi-year large projects. In addition, over the past year, we saw a few key themes emerge and we believe that these will continue to gain strength and serve as longer-term drivers for our business as we look ahead at a post-pandemic environment.

Diversity, equity and inclusion, or DE&I, continues to receive heightened attention across all of our practices and businesses. In particular, there is a strong focus reflected in rising numbers on placing diverse leaders into top executive roles. As organizations put 2020 behind them and charge forward, our search teams across the board are engaged with their clients at the top of the organizations we work with to address pent-up demand. In addition to increased demand at the Board and CEO levels, we're also seeing increased activity across the C-suite, including the CFO, CHRO, and CIO and CTO levels. Executive assessments, succession planning, team acceleration, and more recently, organization design and transformation are other areas where we have seen a rise in demand. Given the unprecedented events over the past year, it is no surprise organizations are focused on driving change and learning new strategies for operating in an agile environment, with people, transformation and culture at the top of their agendas in 2021.

An increasing number of clients who are also implementing our culture and inclusion solution as they continue to navigate the challenges of leading teams in a virtual environment. Our clients are seeking our leadership assessment and development capability to better understand how to operate in a highly volatile and distributed working environment.

Environmental, social and governance, or ESG, issues are being addressed in boardrooms and organizations around the world as leaders assess how these areas will influence their future business opportunities, stakeholder strategies and long-term success. With the growing focus on ESG and sustainability, we're seeing more demand for our services in both search and consulting.

Also, as you may have seen, we are proud to have recently launched our firm's inaugural ESG report highlighting the work we have been doing within the firm and with our clients on the ESG initiatives. In tandem with this report, we announced a new partnership with Indigo Ag. As part of our collaboration with Indigo Ag, we will begin to address how to offset our firm's carbon emission and raise the profile of environmental sustainability among our employees and clients. This is an important milestone for us as we are the first in our industry to issue a comprehensive ESG report, providing an in-depth look into our sustainability efforts while also outlining the commitment to offset our carbon impact.

All of the secular trends I've taken you through played to Heidrick's strength and current macro business and economic trends are supportive. Demand at the start of this year has outpaced our initial expectations and our pipeline is strong. Against this backdrop, Heidrick is well positioned not only to continue to producing the strong results we have been generating, but also to optimize our positioning for the future. While we caution that the economic trends remain fluid and we do expect our current growth rate to moderate, we are certainly on solid footing in making important strategic moves to drive our future success.

We remain committed to driving strategic investments in diversification, innovation, data and tech enablement to capitalize on even more growth opportunities in the future. One important example of this journey is our recent acquisition of BTG. After two years of a very successful exclusive partnership, we are thrilled to welcome BTG, the pioneer of high-end on-demand independent talent marketplace, to the Heidrick family. It is clear that clients want agility, flexibility and speed, along with the right talent and the right solution. And they want it now.

A recent study highlighted that almost 90% of corporate leaders believe that on-demand talent will be core to their ability to compete in the future. The seismic changes over the past year have only accelerated the future of work and underscored the importance of agile leaders and workforces as companies look to close critical leadership gaps and as professional seek to work differently.

With this acquisition, Heidrick is the first global leadership advisory firm to offer the full spectrum of executive and high-end talent solutions. From on-demand independent professionals, who can lead critical project-based initiatives, to interim executives to permanent placements alongside our consulting services. As we've seen, there isn't a one-size-fits-all approach to talent acquisition and the combination of Heidrick & BTG's capabilities creates a strong differentiated offering for the on-demand independent model with our clients.

Among many advantages, three key themes emerge: first, BTG aligns with our firm's overall global account strategy and go-to-market approach and allows us to diversify and offer an expanded range of talent solutions; second, Heidrick serves as a tremendous growth engine for BTG's platform; and third, perhaps most importantly, there is a clear culture fit with BTG having already been embraced by our organization over the past few years.

In addition to BTG, we continue to build on our strategy as we seek to diversify and expand our capabilities and invest in new ideas. This involves broadening our service offerings across search and consulting while moving into adjacent and complementary areas with an increasingly tech-driven approach. We see technology as the backbone for our expanded service offering, allowing us to deliver our solution in a more rapid, automated and scalable way. And in the coming quarters, we plan to make additional investments in both our technology solutions and new service offerings.

All of this exciting news to date is just the beginning and perfectly reflects the long-term direction of Heidrick. We remain focused on executing our three growth initiatives, which include: number one, growing the scale and impact of both search and consulting and delivering a premium service experience in the Heidrick way to clients; number two, expanding the development of leadership solutions and capabilities to address new and ongoing client comparative, such as on-demand talent; and number three, investing in new product development and strategic expansion into adjacent and complementary areas with innovative tech-driven offerings to drive future growth and shareholder value.

In closing, I'd like to thank our teams around the world, welcome our colleagues from BTG, and express how excited I am about all the opportunities we have ahead.

With that, I'm going to hand the call over to Mark to walk us through Heidrick's very strong quarterly performance. Mark?

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Thank you, Krishnan, and good afternoon, everyone. Thank you for joining our call today.

As Krishnan mentioned and by all accounts, this was an outstanding first quarter for our Company with record-breaking results. Net revenue in the first quarter marked a double-digit improvement, both sequentially and year-over-year, driven by broad-based strength across all regions and nearly all practices. This record growth coupled with operational savings resulted in return to double-digit operating margins with significant improvements in bottom-line profitability. While COVID still presents many challenges for our business, clearly our performance exceeded our own expectations through the continued hard work of our great Heidrick team.

When discussing our first quarter results, I will focus on year-over-year comparisons as the first quarter of 2020 was predominantly a pre-pandemic. And this is a good comparison to years given the seasonality we usually experience in our business.

With that, I'm pleased to report record net revenue of $193.7 million, which was 12.9% above the $171.5 million reported in the first quarter of 2020, which was also a near-record quarter of its own. On a constant currency basis, our net revenue increased 10.2%. Let me provide some details for you on how this was achieved.

Turning to Executive Search, we delivered a record-breaking performance in the first quarter with net revenue of $179.6 million, up $24.2 million or 15.5% on a constant currency basis. Net revenue increased $19.9 million or 12.8%. We experienced growth in all regions, with the Americas up 16.2% or 16.5% on a constant currency basis. Europe increasing 13.8% or 4.8% on a constant currency basis with particular strength in Germany, Italy, the UK and France. And in Asia Pacific, we saw growth of 15.4% or 8.2% on a constant currency basis, with strong performance in Korea, China, Hong Kong and India. This growth is reflected in our Company's new confirmation record, which increased 21.4% to nearly 1,600 confirmations compared to the 1,300 in the same period a year ago. We believe much of the strength in the market reflects suppressed demand from the COVID lockdowns, a reassessment of talent by our clients after navigating through such an impactful event, as well as an increased number of candidates looking for new opportunities post pandemic.

Turning to Heidrick Consulting, net revenue was $14 million, which was down compared to the $16 million last year due to a large consulting engagement included in last year's results and the impact of COVID on the team's ability to conduct consulting engagements in person today. Despite the headwinds they had to contend with, Heidrick Consulting's net revenue was ahead of our expectations as we saw confirmations increased 17.5%, giving us a strong pipeline as we enter the second quarter, which we were very pleased with.

Turning to expenses, we saw salary and employee benefits increase, with fixed compensation increasing modestly by $0.2 million and variable compensation increasing by $20.1 million, primarily due to the record revenue performance in the quarter. Salary benefits as a percentage of revenue was 73% compared to 70.6% in 2020's first quarter and compared to 75% in the 2020 fourth quarter. This increase was due to the revenue outperformance, which will unlock bonus tiers [Phonetic] earlier in the year than usual, but we believe our annual rate will remain intact.

General and administrative expenses improved year-over-year by 10.6% to $28.8 million, primarily due to office occupancy savings, travel and entertainment reductions, and partially offset by increases in professional services, bad debt and use of external third-party consultants. As a percentage of net revenue, general and administrative expenses were 14.9% compared to 18.8% in the 2020 first quarter, a 390 basis point improvement. While we're very pleased to see G&A move down to under 15%, our annual expectations would be that we would see a return to a more normalized annual rate of approximately 18%, which is much lower than the historical rate of 23% or the 19.5% annual rate we had in 2020.

As previously discussed, we recorded a restructuring charge of $3.9 million in the first quarter due to our real estate strategy. This charge is accounting related and due to the specific timing of office closings. Moving forward, we do expect additional restructuring charges pertaining to real estate in the second quarter of approximately $3 million to $4 million and in the third quarter of approximately $1 million.

Excluding the restructuring charge I just discussed, we are very pleased to report that our adjusted operating income in the first quarter of 2021 was $23.5 million or 29.1% increase from the $18.2 million in the first quarter of 2020. Further, adjusted operating margin expanded 150 basis points to 12.1% from 10.6%, driven by record revenue performance in the quarter and the G&A reductions discussed. This translated to adjusted EBITDA of $28.9 million and adjusted EBITDA margin of 14.9%, which was 110 basis points up from last year's first quarter.

Our adjusted net income in the first quarter of 2021 of $17.4 million more than doubled from $8.7 million in the 2020 first quarter. And the adjusted diluted earnings per share of $0.86 nearly doubled from $0.44 in last year's first quarter.

Now let me turn to our balance sheet. We ended the first quarter with cash and cash equivalents of $184.1 million compared to $151.0 million at March 31, 2020, after adjusting for the outstanding facility we had at the time, allowing us to finish the 2021 first quarter with cash and cash equivalents up $33.1 million or 21% over the same period last year. As a reminder, in March of last year, we proactively drew down $100 million of our $175 million unsecured revolving credit facility, but this was subsequently repaid in September of 2020.

Given our performance in the first quarter, our Board of Directors approved and we announced that we will pay a $0.15 per share cash dividend in May for all shareholders of record on May 7th.

Before I turn to the expectation for the second quarter, I'd just like to reiterate how pleased we are with the acquisition of BTG, which closed on April 1st. As you can see in today's press release, we acquired BTG for an initial consideration of $32.6 million, which was paid in the second quarter of this year and with an anticipated future payment in 2023, subject to achievement of certain agreed upon financial performance targets. For your reference, BTG generated revenue of approximately $50 million in 2020. And from an EBITDA perspective, there's minimal impact until we grow the business, which you will see in our segment reporting beginning in the second quarter. For your reference, the on-demand market is a rapidly developing high-growth industry that the market value strongly given the expectations around the potential levels of EBITDA when they hit maturity inflection point, we believe we can catapult their growth with Heidrick's global scale and account platform. Finally, we're equally excited that BTG provides us with another avenue of diversification in our revenue stream along with Heidrick Consulting.

Now, let me turn to the second quarter outlook. Given the strong performance we are seeing in our markets and looking at our models, we believe our second quarter revenue will be in the range of $215 million to $225 million. Of course, this can change materially if we see other spikes in COVID-19 within the countries we operate and how those respective governments choose to respond or if the governments not take necessary steps and stimulus, as well as other macro events or acute business events that are unforeseen at Heidrick at this time.

In summary, we delivered truly outstanding quarter and have every intention of continuing our growth trajectory. We will maintain discipline with regard to our balance sheet investments for future growth, and as always, continue to be cost conscience.

With that, we'd be happy to take your questions. Operator, over to you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question will come from Josh Vogel of Sidoti & Company. Please go ahead.

Josh Vogel -- Sidoti & Company -- Analyst

Thank you. Good evening, guys. Thanks for taking my questions. First question -- obviously, very, very impressive results here. I guess you are more than halfway through the quarter when you issued Q1 guidance, yet you came in, I think, it was like 14% above the high end of your range and clearly is showing up in your Q2 guidance. But what and where specifically drove the delta between what you were seeing on February 22nd versus the rest of the quarter?

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Hey, Josh, it's Mark. Thanks for the question. So, here's kind of what we saw. We started to see ourselves ramp up in terms of the amount of engagements that were coming in through the quarter. What I would tell you is that the month of March was an absolutely robust month in terms of what we saw. The amount of engagements that kind of came through were not just beyond anything we could have expected, it was beyond any month we had ever seen in the history of our firm. That just was not expected.

So we saw that kind of come in. We saw our average engagements in terms of the average retainers were very strong as well and maintained their strength even more so into March. And then as always the more difficult one to predict is the upticks and those obviously came in very strong as well. So, not to sell an overused phrase, but it really was kind of a perfect storm of those three really coming together at the end of the quarter, in the last month of the quarter. And that impacted two things. One, it absolutely changed and moved obviously in terms of the guidance we gave and what we accomplished it. But as you can tell by Q2, because a lot of that March is going to be recognized through our backlog into the second quarter, you're really seeing it come through there.

Josh Vogel -- Sidoti & Company -- Analyst

Right. Great. Thanks for the insights there. Had a question around consultant productivity. Obviously, given the strong revenue performance, but nearing an all-time high that mean that the 373 consultants are at or new capacity? And could you maybe just talk about plans for headcount additions over the balance of [Technical Issues] outside of recent promotions?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah. Josh, it's Krishnan. Thank you. Look, I think those productivity numbers are heady [Phonetic] numbers, number one, so let me acknowledge that, everybody is very, very busy. We are also completing searches faster. So that's another part of the equation that didn't change before but we're noticing that with our tech platform and how people are working as well. And we plan on adding headcount. I mean we're strategically continuing to hire into markets. So that's what I would say. And we've got people starting and have already started in April and in our headcount, so there is an opportunity to continue to grow. But I think those are -- I think I would say that people are very busy right now and those are very high productivity numbers that we hope to try to maintain.

Josh Vogel -- Sidoti & Company -- Analyst

Okay. Great. Thank you. A couple of quick ones on BTG. Very interesting deal. I think it's a great fit for you. If I inferred what you're saying correctly, Mark, you're going to be breaking that out as its own segment for reporting purposes starting in Q2?

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Correct. That's the -- we'll -- because it's on demand and is very different to Heidrick Consulting and different to Executive Search, yet obviously pretty adjacent, but we believe for our investor base, we want to break that out separately for you.

Josh Vogel -- Sidoti & Company -- Analyst

Sure. Okay. And can you just give directional commentary just what the margin profile was on that business in 2020? And then also when we think about the balance of this year and the $50 million that they did in 2021: one, is there any seasonality to the business? And can you maybe give us a sense of what was built into your guidance for Q2 knowing that's some -- participating for the full quarter?

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Yeah, I mean, so we want to get away from segmental guidance, if you will, Josh. I think the way to do it is, as I mentioned, they did about $50 million last year. You could break that out on a quarterly basis and you're going to be in the ballpark. Obviously, we expect some growth as we would on -- in a high growth area.

In terms of the margin, my comment would be, it's just not meaningful margin, negative nor positive. So, it's very much near breakeven as you would expect in that sense, and would maintain that because it is in a high growth market like you see with others in that space. Even though they play further downstream, it's a business that you want to continue to make reinvestment in as it's such an early point of its development and we expect the same. So, I don't want to kind of get into margin expectations until it really hits the maturity inflection point.

Josh Vogel -- Sidoti & Company -- Analyst

Totally understand [Technical Issues]. Just last question. Is there any other restructurings or one-time items that we should expect to hit up in Q2 or even later quarters? And any sort of drag from integration-related costs related to BTG?

Mark R. Harris -- Executive Vice President and Chief Financial Officer

No. So, as I kind of gave in my script, there'll be restructuring charge in Q2 between $3 million and $4 million and in Q3 of about $1 million. That really pertains to the real estate stuff we started back in Q3 last year. So, nothing related to BTG on that sense. The synergy side of it, again, it's a smaller business. Obviously, we'll be looking at synergies with them and see what makes sense and what doesn't. But right now I think what's really is to do no harm is the internal way that we're seeing it. That is to have them really go on their own. They're very different business. It's not like you can be leveraged with Executive Search per se in terms of how they're doing and how they need to attack the market. So, I wouldn't expect a lot there. And then, again, as they grow the business, as we hit maturity inflection point, I think that's really when you start looking at the business and saying, OK, now might be a good time to turn to that, but that's a long way down the road, because the growth of the business that they have in front of them.

Josh Vogel -- Sidoti & Company -- Analyst

All right. Well, thanks for taking my questions. And again, really impressive results.

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Thank you. Appreciate that.

Operator

Your next question will come from Kevin Steinke of Barrington Research. Please go ahead.

Kevin Steinke -- Barrington Research -- Analyst

Hey, good afternoon. I wanted to follow up on the discussion about BTG. Maybe if you can just give us a sense as to how the relationship between BTG and Heidrick blossomed over the last couple of years and how that maybe benefited their ability to grow kind of the synergies that you were able to build and that you see going forward between those two businesses?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah. Kevin, thank you. Look, we -- this has been a great relationship. We started as an exclusive partnership with them a little over two years ago. And we dedicated resources to making that relationship work and BTG did as well. And over time, there was so many projects that popped up across the radar screen, joint projects that we were able to work on together. We recognized that Heidrick along that journey could be a really important part of helping BTG grow as well. There were so many go-to-market synergies with our clients, we saw that. So that's been the great part of this relationship. And as I mentioned in my opening, a real test out the culture, the values and see what the alignment is like. So, we've been really pleased with all of that. That's what makes us excited about this deal as well.

Kevin Steinke -- Barrington Research -- Analyst

Okay, great. Can you maybe give us a sense as to how the BTG's visitors performed kind of during the downturn of the last few quarters or in 2020? I mean, was there something for that -- for their business model -- there was maybe a little more resilient or just any comments on how they performed last year specifically?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah. Let me just -- at a high level, I mean, look, we were incredibly impressed with their outperformance during COVID. I mean, this was the kind of market offering the clients were looking at and looking for. They wanted it fast. They wanted right there and then, and BTG was there. So, their business model held up really well. And Mark, maybe you could add more to that, but we're very, very pleased to see that very resilient through that downturn.

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Yeah, correct. That was really kind of the attraction side of it. Look, nothing is really counter cyclical, but it is absolutely less cyclical than you normally would see in Executive Search business. Their business was impacted single digit, low single-digits in terms of the COVID impact. As you can imagine when you turn the economy off, everybody gets kind of knocked around on that one. So, that really was a very, very pleasant surprise to us, not to their company. They understood how it was going to play out, they did a great job forecasting it. So, it was one of the attractions for our diversification strategy, Kevin, which you know we've been working quite hard and trying to figure out the proper way to do it to ensuring that we still have a product suite that is still very much appealing at the top where we play. So, it's definitely less cyclical than what we see typically in our business.

Kevin Steinke -- Barrington Research -- Analyst

Okay. That's helpful. So, with the month-to-month confirmation growth in the first quarter on the Executive Search side and you mentioned kind of perfect storm, the great month of March that you had, I don't know if there is any way for you to pinpoint kind of how much you would attribute that to pent-up demand just coming back in terms of searches that were may be put on hold or delayed? Obviously, you said you didn't expect this type of growth to continue. That would be -- that's pretty lofty. But I'm just trying to get a sense for how the overall market feels and -- going forward and how much, like I said, do you think is pent-up demand coming back here?

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Sure. So, I mean, obviously the first answer is it's hard to unscramble scrambled eggs. What I can tell you from the on hold is, it isn't as relevant in terms of what we saw kind of come through, because that would be able to be some predictive analytics, right. What we know is a lot of the COVID searches that went on hold came off, they came up actually more in Q3, Q4 than in Q1. So, we had a pretty good line of sight on that. It really is new engagements that came through, not on hold reversals. And the reason I think it caught many of us off guard, the industry and certainly our side of it, is just the ferociousness of it. So, what I comment is we were expecting that more toward the second half of this year versus the first half of this year.

And now to your question, how much of that is pent-up demand from people putting things on hold just generally versus what we're seeing, and my answer is I think there is a couple of things, right. Systemically, first, we saw in all three regions, right. So, it wasn't just an Americas' issue. We saw that in Americas. We saw in Europe. We saw in Asia Pacific. So, we know globally, it was kind of a global demand curve shift. Then the second element to it is I think there is new roles, new ways of looking at the market going forward, new norm as people like to refer to it as [Phonetic]. So, I think there was kind of recasting and reposition themselves for that.

I think the other area was kind of when the tide goes out, right, you can kind of see what's underneath it and I think there was some upgrade opportunities and that some companies have also decided to double-click down on. So, I can't give you a percentage of how much is one over the other. We'd have to go back by each of the respective engagements and almost categorize them, which we don't do like that. So we just know generally that's kind of what's happening.

And I guess to the question of trend, well, obviously, we saw kind of come through and you can see it in the guidance that I gave you, we're expecting Q2 to be somewhat similar. I think it will abate a little bit. So I don't think it'll be as continuous from the month of March into April, May, June. And, of course, the summer months will have better insights from the account of our Q2 earnings. How we think that's going to plan? I really don't know yet, but as we get close to it, hopefully, I'll have some better vision for you.

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah. I'd just add that the current month feels quite healthy to us. So, it doesn't feel maybe record level the way March may have been, but quite healthy.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Great. That's all very helpful commentary. I appreciate it. I'll jump back in the queue, and thanks for taking the questions.

Operator

Your next question will come from Tobey Sommer of Truist Securities. Please go ahead.

Tobey Sommer -- Truist Securities -- Analyst

Thanks. Wanted to start out by asking your opinion of how you think of this cycle and expansion? Do you consider it and you're hearing from customers that it's sort of a reset of an economic cycle because it was very violence and happening very quickly, but it was kind of briefing condensed, or is this an extension of the prior extent -- expansion, sort of how are you thinking about it in terms of the potential duration? Thanks.

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah. I don't know if I can answer your duration question. I think about it as a reset in some -- in how people are doing work, the things that they're focus on, the driving of digital transformation, the amount of dollars on the sidelines, and for private equity and how they want to leverage that to be able to drive business growth, these are all the factors that are creating this. So, some of that is reset, some of that is stuff that was there before and people were worried about cycles ending maybe and sitting on the sidelines. So, but -- so that's where I draw a line to say, I think, people are looking ahead right now and saying, how we're going to work is different as well and the opportunities that have been created as a result of this look different, and let's go. So that's what's happening.

Tobey Sommer -- Truist Securities -- Analyst

And how do you look at your -- what's your intention to deploy capital and manage the balance sheet? You've got surging demand in the core business. You've done a little bit, but could you -- here recently. But could you clue us in the sort of the multi-year view on how you would like to not only deploy cash, but thresholds that you would like to manage the balance sheet too?

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Sure. Let me try to take that one on, Tobey. So, obviously, look, we're sensitive to our balance sheet and our capital structure. We're always evaluating what we want to do with it, etc. I think the way that we looked at it we finished, in terms of our cash position, strong. Clearly, the Q1 cash position doesn't have the transaction price that we just did at the $32.6 million for BTG, so we had a pro forma that now.

With our current pipeline in terms of potential M&A partnerships etc. is still very strong and robust. I think it's on an accelerated curve in that sense that we're continuing to look more aggressively at those as we pivot into our strategic journey that we started last year even a little bit the year before that. So, unfortunately valuation is still not cooperating, as you can imagine when you look at the Dow or the S&P. They're still pretty high valuations, but nonetheless, our view is that we'll have to use some of that cash for our strategic sense. It's where we think the good growth rate is.

And to the extent, we have the discretionary cash that we don't need, then I think that's what we'll start looking at our capital options, as you can imagine, stock buyback, dividends, one-time dividends, all sorts of ideas are on the table. But we think pretty strongly that it's going to be capital we want to use and we want to deploy for our growth strategy.

Krishnan Rajagopalan -- President and Chief Executive Officer

Let me just add it. I think the -- we've become a bit more sophisticated in how we think about the markets as well. We kind of think there's an ecosystem out there and there are opportunities to learn and partner as well. So, it isn't all just pure acquisition play. There is partnership opportunities, some of which require capital as well, by the way, so our lens is broaden and we thought that was a positive experience with BTG and what we learned through our partnership that we did them.

Tobey Sommer -- Truist Securities -- Analyst

Thank you. That's helpful. And what are you hearing from clients about what's driving turnover in Executive Search? Any feeling you have for demographic changes would be helpful.

Krishnan Rajagopalan -- President and Chief Executive Officer

Yeah. So look, I think there are some underlying themes that are out there. We alluded to them in the -- in our comments earlier. Look, there was a lot of -- there is some C-suite pent-up demand, I would say, from last year for individuals who want to change roles, who are planning on changing roles, maybe looking at the next five years of their career, and COVID delta a bit of a reset. I think great leaders, they wanted to stay with their teams, and now they sort of solidified some of those teams and ready to move on. So, on an individual level, you have that trend line that's out there. Then you've got businesses that are transforming as well and that mismatch between, hey, do I want to be here to transform the business or not, creates opportunities in Executive Search. Clearly, diversity is a huge theme that's out there as well. And so we see a lot of mandates out there, particularly at the Board level and others related to that topic. So, that'll create some demand as well. So, these are all the things that we're seeing that are fueling the Executive Search market.

Tobey Sommer -- Truist Securities -- Analyst

Thank you.

Operator

[Operator Instruction] And we have no further questions. So, I'll turn the call back over to Krishnan for closing remarks.

Krishnan Rajagopalan -- President and Chief Executive Officer

Okay. Hey, look, thank you for joining us on the call today. I'd like to close by saying thank you to our global team for all your hard work. And I would be remiss if I didn't also acknowledge that COVID is a long battle, and it continues to be a battle that's far around the world, I mean, particularly in countries like India and Brazil where it's still surging. Together our teams are working through this very difficult situation. We're doing everything we can to support our colleagues and clients in those areas and markets as well. We continue to forge ahead and remain excited about the good work and the opportunities in front of us. We look forward to working closely with BTG as we continue to execute on our growth initiatives. Thanks again, and we'll speak with you soon.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Suzanne Rosenberg -- Vice President of Investor Relations

Krishnan Rajagopalan -- President and Chief Executive Officer

Mark R. Harris -- Executive Vice President and Chief Financial Officer

Josh Vogel -- Sidoti & Company -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

Tobey Sommer -- Truist Securities -- Analyst

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