Heidrick & Struggles International, inc (HSII) Q3 2021 Earnings Call Transcript

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Heidrick & Struggles International, inc (HSII -1.31%)
Q3 2021 Earnings Call
Oct 25, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. I am Blu, today's conference call operator. Welcome to the Heidrick and Struggles 2021 Third Quarter Conference call. Joining today's call is Company's President and CEO, Krishnan Rajagopalan and Chief Financial Officer, Mark Harris. The company has posted third quarter slides on the IR homepage of its website at heidrick.com. Management encourage you see to view the slides for additional context.

Please note that in the materials presented today, management 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 last schedule of the earnings press release. Also in the remarks, management may be making forward-looking statements and I ask that you please refer to the Safe Harbor language contained in today's press release.

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

Krishnan Rajagopalan -- President and Chief Executive Officer

Thank you, operator. Good afternoon, everyone. We delivered a record third quarter and I couldn't be more excited that Heidrick is hitting on all cylinders, showing dynamic year-over-year growth on the topline with more dollars flowing to EBITDA and significant margin expansion on the bottom line. Likewise, if we compare our performance this quarter to the same pre-pandemic period from 2019: number one, today's results show a dramatic 45% increase in net revenue to a record $264 million; number two, our adjusted EBITDA is 50% higher at $36 million; and number 3, our Q3 EBITDA margin has expanded by 55 basis points versus the third quarter of 2019 to almost 14%.

Each of our three segments: Executive Search, Heidrick Consulting and On-Demand Talent contributed to another record-breaking quarter and the agility of the Heidrick team plus the value of our differentiated products and services, coupled with positive macro trends led to our impressive results. Our outlook for Q4 is robust and we expect to finish the year strong.

Today, I'll start with a few thoughts on our strategic priorities, then discuss the important drivers in the quarter, and close noting a promising initiative we have underway that we believe is building the Heidrick brand and laying the foundation for long-term shareholder value creation. On the firm's continuing strategic focus, we feel very good about the business we've been building and expanding at Heidrick and we're positive about the future as we look ahead. We remain intent on increasing the scale and impact of our executive Search, Consulting and new On-Demand Talent business to deliver a unique set of premium services and offerings to our clients.

As we drive forward, our integrated go-to-market approach, our teams across all three of our businesses are collaborating to deepen our client relationships and deliver the best of Heidrick in terms of recruitment, talent market insights, advisory solutions targeting important human capital opportunities, and on-demand talent; all to help our clients navigate the many complexities they face in ensuring their leaders, teams and organizations are future ready. And we will soon include broader tech enabled digital offering in our expanding and powerful portfolio.

Here's a snapshot of the drivers of our business growth in Q3. The results we released today show the impact of our strategic focus and the resiliency and professionalism of the Heidrick team, all in the midst of an environment, where demand for our services and offerings is rebounding. Our net revenue over the last nine months alone of $717 million, exceeded the firm's prior annual full year record net revenue figures set in 2018, which bodes well for the rest of the year and for continued momentum in 2022.

In Search, our net revenue grew by 33% in the third quarter compared to pre-pandemic third quarter 2019. All regions and all industry sector practices showed increases. The Executive Search business is robust for us at Heidrick with the number of confirmations increasing 33% this quarter versus the same quarter in 2019. For a couple of quarters now in 2021, our productivity per consultant has reached a remarkable and historic pinnacle of $2.4 million per consultant. This compares very favorably with our previous peak search productivity per consultant of $1.9 million in 2018 and $1.7 million in 2019.

Balancing our past trends with our current pace, we see our productivity potentially reverting back to still impressive levels of around $2 million per consultant on average over the long run as we will continue to promote from within and higher strategically. In the meantime, I'm very proud of the amazing agility and capacity of the Heidrick team. The high volume of business in Search is the result of a number of key factors where change is creating strong demand from our clients and a more diversified revenue stream. We continue to see lots of change at the top of organizations. No matter if new leadership is needed due to dramatically different business conditions or business model transformation, multiple factors are driving the search for leadership, not only for CEOs, but also across the C-suite. Heidrick is seeking and winning the assignments to fill these roles.

Many searches are underway due to the huge demand for diverse talent. As I mentioned on our last call, our U.S. diverse placements were tracking at over 50% of our total search work and we're seeing that trajectory continue. At the Board level globally, that figure is over 60%. Our sustainability and ESG work continues to grow worldwide as Boards and companies face ongoing pressure from stakeholders to focus on issues like climate change, sustainability and other forward-looking concerns.

Our search consultants are engaged in filling important positions with highly sought after experienced professionals including CIO and data analytic roles, chief financial officers and supply chain executives. For example, we have 3 to 4 times the number of supply chain executive search assignments this year versus last year. And we are increasingly being asked to place more than one Director at a time on corporate boards. In fact, approximately one-quarter of all our Board engagements include placing more than one Board member.

For Heidrick Consulting, net revenue for the quarter increased by 14% versus the pre-pandemic third quarter of 2019. Initial projects are developing into longer-term initiatives as our consulting clients define, assess and develop future ready leaders, organizations and cultures. We have a unique ability to serve clients in all facets of their human capital journey and key assignments reflect growing corporate needs in four primary areas. First, with the recognition that top talent is an imperative for success, we have strong demand from clients for Heidrick's guidance on matters of leadership assessment and development and follow-on support and organization design. This is especially resonating in the Americas, Europe and the Middle East for senior and high potential leaders.

Second culture, culture assessments and culture shaping are more important than ever as companies manage through hybrid and return to work environment and begin to reenergize and realign their teams. Third is around DE&I. Clients are seeking help defining and aligning on diversity strategies and embedding new ways of working that are equitable and inclusive. And forth with broad investor expectations increasing, not only for operational success, but also on the ESG front, our consulting teams are advising Boards of Directors on overall strategy and effectiveness.

Turning to our third business segment, you'll remember that on April 1st of this year, we acquired Business Talent Group or BTG, forming the basis of our move into the compelling adjacency of on-demand talent with the leading pioneer in this space. With this move, Heidrick McCain, not only the first, but also the only global leadership advisory firm to offer On-Demand Talent Solutions at scale alongside our Search and Consulting services. We are excited about the $24 million contribution to revenue from On-Demand in Q3, which exceeded our expectations.

In addition to the appeal of our unique high-end offering, external tailwinds such as macroeconomic growth, pent-up demand and talent shortages contributed to our success in the quarter. We saw particular strength from on-demand clients in financial services, consumer goods and healthcare and life sciences. While it is still early days, we view this segment as a key driver to our long-term value creation. The total addressable market for on-demand referrals is large and growing as clients see the need for fast, flexible talent, get more comfortable with filling their interim human capital and short-term project needs with remote or independent professionals. Critically, once our clients recognize the power of on-demand offering, they keep coming back to us to expand their use of on-demand to fill more roles. We believe we will continue to see strong growth in this sector.

The outstanding effort and acumen exhibited by our Heidrick colleagues plus their disciplined attention to implementing our go-to-market strategy, drove our excellent results again this quarter. In addition, the dynamic world of work and other external factors such as new and emerging trends around leadership and culture plus the massive disruption from COVID, have created an imperative for our clients to reimagine themselves and find new ways of working. And in turn, these demands are driving our growth and success as our clients continue to seek quality, diverse and forward thinking talent, we're there every step of the way with our integrated suite of offerings.

Before I turn the call over to Mark for more detail on the quarter, I want to share some background on the start of a new relationship that will help us expand our technology adjacencies and the Heidrick brand over the long term. At Heidrick, as I've said in the past, we're intensively focused on pursuing technological innovation, not only to leverage the way in which we work, but also to differentiate and provide leading-edge offerings to our clients. We're at the start of a multi-year digital journey with a long-term vision that expands Heidrick's suite of leadership solutions with innovative tech-driven digital offerings for future growth and shareholder value creation.

On this dimension of our transformation, it is still very early days, but we expect, we'll be able to share more with you perhaps later next year. For now, in the digital arena, we're delighted with our recently announced partnership with Eightfold AI, a Silicon Valley based leader in the business of HR Tech and artificial intelligence driven talent solutions and platforms. With Eightfold AI, we believe we can offer organizations new, more powerful ways to make faster, smarter and more inclusive leadership decisions at scale and help them position leaders for optimal business success using an innovative digital first approach with AI driven insights, ultimately positioning Heidrick as the leader in driving the transformation of leadership.

In addition, we're very pleased to welcome Meg Bear, Chief Product Officer of SAP SuccessFactors to Heidrick's Board of Directors. Undoubtedly Meg's more than 25 years of experience, building and scaling platforms, as well as for wealth of SaaS development, lifecycle, market and innovation experience will provide invaluable contributions from the boardroom as we continue to transform our business. The Heidrick's story is one of growth and innovation. We continually evolve to keep our core search and consulting business future ready, while we aggressively pursue opportunities and growing adjacent sectors like On-Demand Talent and incubate innovative digital products to continue our transformation.

In closing, thank you to the entire Heidrick organization for their continued great work and for their valuable contribution, they make each and every day, all around the world for our clients. The Heidrick team like talent and human capital initiatives, we enable, is core to the value we generate and deliver to our shareholders now and into the future. With that, over to Mark.

Mark Harris -- Chief Financial Officer

Thank you, Krishnan, and good afternoon everyone. Thank you for joining our call today. Let me echo Krishnan's comments in that our go-to-market strategy productivity and focus on innovation, together with the favorable external trends, have translated into solid financial performance in the third quarter for Heidrick. We've been able to continue our top line, while expanding margins and we contributed increasingly more absolute dollars to EBITDA net income and earnings per share so far in 2021, all setting new annual records, let alone nine-month ending ones.

Further, Heidrick's performance continues to remain strong into the fourth quarter, which I'm excited to share with you today. As has been a past practice, I'll start this afternoon with a run through on our third quarter results with most of my comments around sequential trends given the dislocation from the COVID period in the third quarter of 2020. I'll make further comments on a few balance sheet items that conclude with our fourth quarter outlook. Following that, we'll be happy to take your questions.

You'll recall, last quarter, we celebrated the milestone of crossing over $200 million quarterly net revenue mark for the first time in Heidrick's history and I'm proud to say that not only did we do that again, but we added to it. Our third quarter net revenue of $263.8 million, which was 83.8% higher than last year's third quarter and 1.5% above the previous quarter in 2021, is a new record for the company. Even more interestingly, is that, for just the nine months ended September 30, 2021, we had cumulative revenue of $717.5 million, which is more than any annual achievement in the history of Heidrick with three more months to go. It's truly an exciting time in our growth cycle, which we see continuing into the near future.

Let me give you some insights on the performance by turning to our three business segments: Executive Search net revenue was $221.6 million in the third quarter of 2021, just slightly lower by $2.5 million or 1.1% when compared to the second quarter of this year. Looking at our search results geographically, the Americas region was up by about 1% with modest downside contraction to about 5% in Europe and Asia when compared to the previous quarter. None of those contractions run expected due to the summer holidays and restrictions around the COVID delta variant and other factors, but the results in those regions were still very strong when compared to previous years.

To give you some perspective, when we look at the Americas, Europe and Asia Executive Search performance in the third quarter and compare that to the average of the third quarters in 2018 and 2019, which were record periods for us, we saw increases in revenue of 38.2% percent, 18.1% and 18.4% in each region respectively. Please remember, those were not COVID periods, but prior historical highs and we are growing that much more. Thus you can see why we believe the third quarter is an exceptional one for Heidrick. We've had astonishing performance in 2021.

Further along the top line growth, we have achieved new records and adjusted operating margins in Executive Search, which held near 21% in the third quarter. We have seen these margins continue to stay at those high levels in both the first and second quarters of this year. This is the result of continuing strong productivity numbers at $2.4 million per consultant this quarter. While this achievement is extraordinary than appears to be industry-leading, it's important to remember that this isn't likely to be sustainable given the promotions, new hires and work life balance we expect to achieve in 2022. Therefore, we would expect this to modulate around $2 million per consultant in the near future, which is still better than our previous historical levels and shows what the new normal is shaping up to be.

For Heidrick Consulting third quarter net revenue rose to $17.9 million, up 4.5% sequentially. Consulting continues to benefit from collaboration within the company with nearly 50% of assignments in the first nine months of the year coming from leads through the Executive Search team in addition to new leads and engagements that are sold directly by the consulting team. The number of consultants was roughly flat at 66 and consulting confirmation value was up meaningfully year-over-year by almost 60%, but this declined 12% sequentially. This was due to lower confirmation values in Europe and Asia as a result of seasonality, such as August vacations in Europe.

So like in Executive Search, it's important to note that the second quarter was a record confirmation value quarter for Heidrick Consulting, so being off on those highs is expected, but we're seeing continued strength at the end of the third quarter in terms of revenue backlog projects. Our newest On-Demand segment was exceeding expectations yet again, with revenue of $24.3 million in the third quarter. This is more than double last year when BTG was a stand-alone company and almost 30% higher than what was reported in the previous quarter. We saw a high number of value engagements with higher average initial project value and more engagement extensions extending beyond their initial agreement timing.

Now let me turn to our expenses. With record setting third quarter net revenue and higher volume of work, naturally this comes with higher compensation and other variable costs. For example, we saw consolidated salaries and benefit expense of $185.9 million in the quarter, essentially flat with the previous quarter. Lower fixed compensation expenses, largely offset by variable compensation increases due to the growth of our business. When we look at general and administrative expenses, we saw $29.2 million in the third quarter, an increase of 6.6% from the previous quarter's results. This increase of $1.8 million stem from some return to travel, build-out cost for our new strategic digital capability and other expansion cost to sustain our growth aspirations.

Finally, we saw our cost of service expense increase to $18.7 million in the third quarter compared to $14.7 million in the previous quarter, which was primarily due to the revenue growth in our On-Demand Talent business segment. You will see the company recorded a restructuring credit of $3.3 million in the third quarter, which related to the early termination of our New York lease. This is beneficial for us given our old lease had a tale of another two plus years and now we're completely released from that financial obligation.

Without the real estate credit, adjusted operating income was $30.1 million in the third quarter, leading to adjusted operating margin of 11.4% lower than 12.3% margin we had in the previous quarter. This was the result of very strong revenue achievement in our On-Demand Talent business where this segment has near breakeven margins given the stage of growth cycle that we're in and higher overall G&A from the growth of our business. That being said, we like what we see in our long-term trends expanding margins, where we look at our trailing 12-month consolidated adjusted operating margin, which is at an all time high now. Except for last year's disruption due to COVID, since 2014, our margins have been building steadily over the last 30 quarters, an achievement we are very proud of at Heidrick.

This has all translated to adjusted EBITDA of $36.1 million in the quarter or $102.6 million for the nine-month period ended, which has already surpassed any previous annual adjusted EBITDA performance. In fact, in 2018, our previous record for Heidrick, we saw annual adjusted EBITDA of $90.7 million. So, we are 13.1% ahead, with still one more quarter to add to it. The adjusted EBITDA margin was 14.3% year-to-date compared to the previous high of 12.7% in 2018, demonstrating the value we deliver to our shareholders this year. We finished the quarter with an effective tax rate of 27%, helping us deliver net income of $24.5 million, up 18% from the previous quarter and diluted earnings per share was $1.21 from $1.03 last quarter. Again, when looking at our nine months diluted earnings per share of $2.97, you will see that this is already an annual record with another quarter to go.

Before turning to our balance sheet. I wanted to take a moment just to sum up our financial performance through September 2021 and that we're seeing unprecedented record levels of aggregate dollars and our bottom line achievement with margin expansion around the same. I believe these achievements and continued success will translate to more shareholder value as we continue to drive the business of Heidrick and that becomes understood by the market. Given our historical EBITDA and EPS achievements, which our legacy business are valued on in the market, coupled with our revenue growth in the On-Demand Talent business where there industry is valued on a revenue multiple due to the growth cycle, we believe this will lead us to increase shareholder value in the future on a sum of the parts basis. 2021 has truly become a pivotal year for Heidrick and we believe that can continue into 2022.

Now, let me turn to the balance sheet. We ended the quarter with cash and cash equivalents and marketable securities of $348.3 million, which is $110.7 million more than the same quarter last year. As we discussed before, the Company's cash position typically build throughout the year as employee bonuses are accrued and are traditionally paid down in the first quarter of the following year. Our balance sheet, coupled with the renewed and expanded Heidrick's credit facility of $200 million moves our liquidity to over $0.5 billion. Clearly, our strong balance sheet puts us in a position of considerable strength to pursue the continued growth objectives that Krishnan discussed earlier on our call.

Finally, let me turn to our fourth quarter guidance. Given the strong performance we are seeing in our markets and looking at our models, despite some anticipated and typical holiday slowdown in our business, we believe our first quarter net revenue will be in the range of $255 to $265 million, closing out 2021 very strong. Of course, this can change materially depending on whether we see COVID spikes, how governments and companies respond, as well as impacts on macro and acute business events such as supply chain storages, inflation and other unforeseen matters. Time will tell, but suffice it to say that we expect to set another quarterly record for the fourth quarter results.

In conclusion, as Krishnan noted at the outset, we're very pleased with our performance, showing tremendous growth year-over-year and sustaining or building momentum sequentially. Our strategic initiatives implemented to drive growth in our legacy Search and Consulting businesses plus expansion from our recent On-Demand Talent acquisition and early days of our Eightfold AI partnership are creating springboards for Heidrick's continued success.

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

Questions and Answers:

Operator

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

Josh Vogel -- Sidoti & Company -- Analyst

Thank you. Good afternoon, Krishnan and Mark. Certainly impressive results. I have a couple of questions to start kind of around consultant headcount. I'm curious, expectations for new consultant hires and promotions from within, I guess over the balance of this year and maybe even in early read on next year, and just kind of building off that. I'm curious, which industries or geographies, do you find yourself perhaps sitting with a headcount level that's a little bit lighter than where you want to be today given the end market demand you're seeing?

Krishnan Rajagopalan -- President and Chief Executive Officer

Hey, Josh. Thanks for that question. Look, I think we're going to have a strong promotion cycle. We've got great talent and we're expecting to promote from within as usual. We're in the midst of going through all of that. So, I don't have all the details on that, but great class and strong, strong performances here by everybody. So, I think it will be a good promotion cycle for us. I think if we take a step back there, obviously, our needs in Europe and Asia is what I would say where we might be a bit lighter than where we'd like to be. So, we hope to address some of those needs through that. But look the Americas is just strong and strong performance everywhere and we'll reward those individuals as well through the cycle.

Josh Vogel -- Sidoti & Company -- Analyst

I appreciate those insights. And I guess just thinking about the competitive landscape. Can you talk about any challenges or successes you're seeing in bringing talents aboard. Basically, are there any notable structural shifts you're seeing in the marketplace, whether it's comp structures for the consultants or anything with regard to the physical locations given the enablement to be remote? Just curious general thoughts on that.

Krishnan Rajagopalan -- President and Chief Executive Officer

Yes, Mark, feel free to add to this with what you see as well. Look, I don't think I see in the competitive landscape, too many, what I would say structural things. We have a lot of conversations going and I think the conversations that we've got going are around the platform that we're building, the culture that we've got in place here, how we collaborate and how we're tightly focused on still working at the executive levels at the top end and driving that success. And that resonates with a lot of people in some different platforms as well. So that's what I think is creating those conversations. I haven't seen anything yet structurally out there that is different, that are new things, others are doing that drives that more than these things that I'm saying. So it's about our success and our culture that I see out there.

Josh Vogel -- Sidoti & Company -- Analyst

Great, thank you. And you talked about maybe some compression in consultant productivity, understandable, whether it's coming from promotions or new hires, but given the tech enablement of the business model and you're growing digital capabilities in general, do you think there is long-term upside to that 1 million number on a long-term basis? Kind of at the levels you're at today, do you think that could be a new base longer term once you're leveraging all the tech enablement in digital capabilities?

Mark Harris -- Chief Financial Officer

Hey, Josh, it's Mark. Let me try to answer that for you. And I think in the prepared remarks, which you're going to -- what I discussed was being at $2.4 million today really kind of transitioning itself back to around the $2 million, which is obviously ahead from last year pre-COVID 2019 of $1.7 million. So the answer is it's in there. But as you and I both know the law of average is always going to play out. Right? So the market needs to be there. The hires that we use, which impact our denominator will have an impact on that number, as well as just general global expansion, where we think we need to add talent and where that is.

It will probably be outside of America or the U.S., at least, in particular, which will mean typically lower retainers and that potentially could get productivity in a good way even though the numbers may look like they're averaging down, I think the revenue expansion will be well worth it. So, I think when you look at all those factors in play that's really why it drives itself down. We don't internalize that as we're not getting those efficiencies, we are, but sometimes when we mix it altogether, it can be hard to see and we'll try to give you clarity as we go through the process.

Josh Vogel -- Sidoti & Company -- Analyst

I appreciate those insights. I just wanted to switch gears, maybe this is for you as well, Mark. Looking around the On-Demand Talent business, obviously, really strong result, we're seeing pent-up demand, talent shortages there. When we -- is that a good quarterly base for us to assume that the business can grow off of another -- another way, I guess to ask it is what's baked into your -- is that Q3 rate baked into your Q4 guidance. And I guess it's also a good time to remind me of what the norm -- if the seasonality is in the On-Demand Talent business? Thank you.

Mark Harris -- Chief Financial Officer

No, absolutely. Look the average of the two quarters that we've been public is around that $20 million, $21 million revenue number. We have built into our Q4 guidance, obviously, them continuing their trend, but really it's not going to continue into Q4. There definitely is some seasonality, holiday season approaching, is obviously in terms of how they bill and their revenue recognition etc., is going to be marginally impacted by that. I think the real question is we look at 2022. We still have an expectation that is a growth business and so that's the aspirations we have is to continue the general growth model, but again -- and I think you hit it right on, which is, it's really a function of, as the market continues, in our opinion, to move toward to gig economy and again project interim based work etc., and doing more of that, which is both the clients as well as the talent, wish to continue to explore those types of possibilities.

It will be really interesting to see where this growth cycle goes. So a lot of optimism on our side regarding on how that's going to grow and it's being executed by an outstanding team over on that side. So I think the team over on the on-demand space is just really doing a good job of hitting the market very, very well and you're seeing that come through in the numbers.

Josh Vogel -- Sidoti & Company -- Analyst

Really helpful. And I just would love to sneak in one more if I may. It's nice to see the operating loss rapidly narrowing at Heidrick consulting. Given the tech enablement and the digitization of the overall business, have you kind of reset what you think the quarterly run rate you need to get to for that business to get back into the black?

Mark Harris -- Chief Financial Officer

It's a great question. So I know we shouldn't have shown that for sure, Josh, you're going to push me on that one. And my opinion is still very strong that around that $80 million to $85 million annual mark is where you're going to see the breakeven and better. And I don't believe anything is changing that landscape. There might be some investment opportunities that will certainly give you those numbers as we kind of go through it in terms of our future and so you can kind of pro forma those some costs out.

But just generally speaking in terms of what they're doing today and where they want to grow their business that is still a very, very safe bet. So my comment is kind of around if you want a quarterly, do that number, it would be about $21 million, $22 million a quarter. We should start to really get an expectation of seeing some interesting breakeven analytics and then hopefully again as that continues up its trend, which we made comments on as well, we should be able to see margins to the business.

Josh Vogel -- Sidoti & Company -- Analyst

That's great. Well, thank you so much for taking my questions and great to see the business performing so well.

Krishnan Rajagopalan -- President and Chief Executive Officer

Thanks.

Mark Harris -- Chief Financial Officer

Thanks.

Operator

Your next question comes from the line of Tobey Sommer from Truist Securities. Your line is now open.

Tobey Sommer -- Truist Securities -- Analyst

If you could elaborate on the digital journey and transformation. And maybe help me understand what about the business model and income statement, whether its margins or growth that may change if you're successfully able to do what you want to do over the next several years? What are the outward signs we would see of that success?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yes. And Tobey, it's Krishnan. I didn't catch the first part of -- were you speaking about our new digital relationship or were you speaking more broadly than that.

Tobey Sommer -- Truist Securities -- Analyst

More broadly and then I'm going to have a follow-up about the specific recent relationships.

Krishnan Rajagopalan -- President and Chief Executive Officer

Okay. Great. Yes. So if we continue on the tech enablement of all of our current businesses, OK. And it's a journey that we're committed to and we're driving hard and you're going to see that again as you've already seen with our ability to take on this productivity that we've been able to do from the past. I think you'll see that with stickiness of client relationships, our ability to build out accounts. You'll be able to see that there and over time that's going to translate to margin as well. So, you're going to be able to see that. I think, on the existing technology journey that we're on with our new relationships and what we're trying to do here.

If I just summarize that, I think we're in a world today where I kind of say talent, if you want to call it human capital, is the capital that's now most in demand, if you go and I believe if you go in -- I believe if you go to any survey at the end of this year on from CEOs and others, you're going to see that pop its head. So there's going to be this emerging -- and there already is expectation that data and insights on talents and executive talent should be as readily available as we have on other business dimensions. So we think that with our IP insights, the platform and solutions that we're going to build with a company like Eightfold AI, we can bridge that gap and lead the transformation of leadership as well. So that's something that I think that we're headed down the path.

Tobey Sommer -- Truist Securities -- Analyst

Krishnan, let me just ask, does it mean the business becomes more profitable because less is done, less processes have human intervention, what are the financial outcomes that your strategy will achieve?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yes. So, yes, I think that strategy will create new service offerings and new line of business. So, you're going to see -- we're answering some new problems that have been previously solved in bespoke fashion by a myriad of companies. Okay. So I think it's a whole new revenue stream that we believe is going to be higher margin as well just given how one addresses those -- that solutions head as well. So you'll see both.

Tobey Sommer -- Truist Securities -- Analyst

Okay. And then as productivity per consultant revenue per job eventually perhaps comes down to this $2 million figure, will your other smaller businesses that are sub-scale and therefore sub -- it's sort of an ongoing goal of profitability, will those be able to drive sufficient margin such that margin won't have to come down as productivity is coming down or should we think of margin kind of tracking that productivity at some point?

Mark Harris -- Chief Financial Officer

Well, everything is -- and Tobey, it's mark, everything is a function of scale, right? So I think the answer is on a set of service basis on what we're seeing in the prior quarter, if our productivity were to come down and by definition, yes, we'd see some margin creep into that. Having said that, remember when the productivity comes down, which means the revenue comes down and people not going through the tiers, no way that we do kind of our payment so to speak, those would obviously in sync also come down. So it's not exactly a one-to-one ratio. Having said that, and again, as we look at other markets, those are going to be very different profitabilities depending on, we've got the U.S. versus let's say parts of Latin America, etc., which actually can drive even higher margins so to speak, because the cost is very different in terms of the revenue cost distribution.

So, it's always hard to answer that question because it's really a function of where it's coming from, it's not necessarily. I would tell you is unless focused on that and I'm not focused on, I'm less focused on that, what I like to see is how it trans all the way down to the bottom line, where again, our equity shareholders are seeing again nearly $3 EPS year-to-date. We typically were $2.50 all-in for the year before that and that's really where I think you're going to see that accretive value come in because what we're able to achieve is more net income without additional equity and that shareholder dilution, so to speak, is not there. And the more we can execute on the strategy that Krishnan was rightly pointing out in terms of potential other products and services, we'll continue that path. So, I think it's still very, very accretive for the shareholders in terms of what we're doing, less so again about the operating margin side of it from my perspective.

Tobey Sommer -- Truist Securities -- Analyst

Okay. And then, Krishnan, I had promised you a follow-up on the specific new relationships that you've -- that you press released and discussed in your prepared remarks. I know you're laying down some breadcrumbs as to exactly what that is. But could you maybe give us an example of what that will solves for our customer? Thanks.

Krishnan Rajagopalan -- President and Chief Executive Officer

Yes, look I'm going to be pretty high level on this just given where we are and some of the breadcrumbs and what we're trying to build over here. But I think, when I think about complex problems that are bespoke that executives also face visibility into their DE&I pipelines, etc., and things like that. These are real problems that are occurring in today's world and how do we create that and how do they understand that. So that just would be an example. Okay. But let's just say a small example and part and parcel to a larger solutions that we could drive, there would be things like that.

Tobey Sommer -- Truist Securities -- Analyst

Okay. And then I had just a broad market question and I'll get back in the queue. Does -- how is the ability to do remote work at all levels within an organization all the way up to [Indecipherable], how is that influencing wage rates and therefore fee levels because I guess it could go both ways where you can get some more expensive people to do work remote in different locations, but potentially it could go the other way too. How is that working in the business?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yes, let me start off with that and Mark you probably have some numbers behind our searches. So I think on the Executive Search side, we don't really see it having a huge impact right now. Okay. Our retainers and our average fee for search etc., are all very, very strong. And we do see balancing that perhaps on the On-Demand Talent side, a desire to be able to leverage talent in a different way and driven by the ability to work remotely and talent to be residing remotely as well. So we see another avenue opening up over there as well and all kind of being driven by the same thing. So, I still kind of see it currently as a net positive for us.

Mark Harris -- Chief Financial Officer

Yes, I'll -- just a little bit on the math side of it. What we're starting to see in terms of average retainers and our engagements is trending back toward the kind of work pre-COVID, maybe a little bit higher, but I would say meaningfully. Obviously, it's the volume of work that's generating a lot of revenue value, but having said that, we are seeing uptick on certain engagement come in strong, again not so much, obviously, I would say in the CEO board side of it, but there are other aspects that we're starting to see a little bit of the war on talent kind of creeping itself in. But for the most part, Tobey, what I'd tell you is clearly the the pure demand side of it is really what's driving those results for the most part.

Tobey Sommer -- Truist Securities -- Analyst

Thank you very much.

Operator

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

Kevin Steinke -- Barrington Research -- Analyst

Hey, good afternoon. So we've obviously been talking a lot here about the digitization and tech enablement of your business model. With -- specifically with regard to search, have you kind of dove in, in terms of productivity metrics and besides annualized revenue per consultant and how maybe those are changing and how sustainable maybe some of those changes are? I'm thinking of to speed at which you can complete an Executive Search or the number of searches per consultant, maybe how much that has improved or could improve given digitization in tech enablement? So, I guess any commentary on those specific metrics or any others you might be monitoring would be helpful?

Mark Harris -- Chief Financial Officer

Sure. Let me try to give you some color on that. I think the first one is on your question on the closure rate and the speed at which we're transacting. Obviously, it has been accelerated through COVID without people needing to travel on planes and go through their interview process. We've seen our days to close pre-COVID to even today fall of about 20% in terms of the average days to close. We're starting to see a very slight uptick in that and for the most part its spanning is up pretty well and we would expect again with Zoom and other technologies that our digital assessment ability etc., would hopefully roll into the fact that we can keep that pretty constant and that should obviously help us in terms and that's obviously been quite efficient.

I think the other element, kind of what you're thinking through, Kevin, is when we look at the G&A, right? So, we thought G&A fall away to 11% as a percentage of revenue, where it used to be 18% and almost nearly 25% at its peak before that, I don't see us playing in that space in terms of 18%, 19%. I think it will be somewhere in the midpoint between the two, long term or at least medium term I should say versus long term because we do not see the return back to people flying all over the place and -- or again candidates, etc., and again in terms of our business development, etc., everything has been pretty unanimously accepted by doing things. By assume, it still requires a touch point, so we will see a bit of decline.

And that's why I'm using the midpoint of the G&A side of it, but we'll see some of that come back, but not nearly to what it used to be. And I think that is what I would call the permanent leverage side of it and then as we go through the way that we want to digitally transcend ourselves in Search and Heidrick Consulting and On-Demand Talent as well, that's where it's really going to be very, very interesting in terms of what we're able to achieve as we kind of go through that in the next 12, 24 months in terms of the platforms that we're trying to create over here and really seeing what that can generate in terms of efficiencies on our core business, as well as our potential new business lines that we're thinking through.

Kevin Steinke -- Barrington Research -- Analyst

Okay, great, that's helpful. Appreciate that. And when you're -- you've been talking about the normalization to more of the $2 million revenue per consultant level. I believe you said you see that happening in the near term. Are we just kind of thinking about -- should we think about the next promotion cycle, kind of first quarter 2022, we start to normalize to that level or I guess it depends on what's happening with revenue and demand as well. But just how are you thinking about it in your planning?

Mark Harris -- Chief Financial Officer

We don't see in terms of kind of the current market conditions, at least, what we're experiencing at Heidrick a big drop off. We still talk to our clients. We're still getting a lot of that showing that it still seems to be full-court press. Obviously, we gave a guidance number. I think that's assuming we come out within our range and that's still showing very, very good strength in the Q4 and we'll see, obviously, it's always hard to predict this market if you wanted to. But we do think that will continue its pace. Yes, the promotional side of it will impact the denominator in the trailing 12 months.

So, it's not necessarily spike down. It will average back down on its own even if we kept to those levels. But I think what we're really trying to say is look as you assume this kind of normalizes, if I can use that word Q4 next year that's really where I think again if I did the math, it would kind of come down to that $2 million and potentially really hold at that level again because of the efficiencies and the way that we do our searches, days to close and ability to help people do more without obviously over taxing them is really what we're trying to achieve.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Yes. Great. That's helpful. I guess just lastly, you've touched on it, quite a bit, but just you mentioned there that the demand is still strong. I mean, what --and some of the factors you see going on here in terms of the demand picture leadership changes, a lot of leadership changes in the C-suite, ESG, diversity and inclusion; are you thinking about these as having some real kind of multiyear legs in terms of the growth in demand cycle or I guess are you feeling like we're in the earlier or later innings of some of these things that are [Speech Overlap]?

Krishnan Rajagopalan -- President and Chief Executive Officer

Yes, Kevin, it's Krishnan here. Yes, I still think we are in the early innings of that, OK. Sustainability very early innings, OK. We've made some nice progress on on DE&I, but it's still the early innings on that. There's still digital transformation that's occurring in many industries. Still, there's lots of private equity capital that's still sitting out on the sidelines. So, there's a lot of things going on in their new trends out there as well that we can capture. So, I think this is -- there are trend lines out there that will continue for a bit.

Kevin Steinke -- Barrington Research -- Analyst

Okay, that's helpful. Thanks a lot for taking the questions. Congratulations on the results.

Mark Harris -- Chief Financial Officer

Thanks.

Krishnan Rajagopalan -- President and Chief Executive Officer

Thank you.

Operator

There are no further questions at this time, I'll now turn the conference back to Mr. Rajagopalan for closing remarks.

Krishnan Rajagopalan -- President and Chief Executive Officer

Thank you for joining us. Clearly, look the results we announced today were outstanding. We're working very hard to continue to deliver growth and value to Heidrick clients into our shareholders, all within the framework of our strategic pillars that we've spoken to before: first, growing the scale and impact of both our search and consulting lines of business and delivering that premium services experience. Second, expanding the development of leadership solutions and capabilities to address new and ongoing client imperatives such as the On-Demand Talent space. And third, investing in new product development and strategic expansion into adjacent and complementary areas with innovative, tech driven offerings as well. We look forward to updating you again next quarter. Until then, thank you all so much and take care.

Operator

[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Krishnan Rajagopalan -- President and Chief Executive Officer

Mark Harris -- Chief Financial Officer

Josh Vogel -- Sidoti & Company -- Analyst

Tobey Sommer -- Truist Securities -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

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