Results of Operations
The following table summarizes, for the periods indicated, our results of operations as a percentage of revenue before reimbursements (net revenue):
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2020
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2019
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2020
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2019
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Revenue
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Revenue before reimbursements (net revenue)
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100.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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Reimbursements
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0.7
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2.4
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1.4
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2.7
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Total revenue
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100.7
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102.4
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101.4
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102.7
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Operating expenses
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Salaries and benefits
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72.4
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71.6
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71.6
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70.6
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General and administrative expenses
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20.7
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18.2
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20.4
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19.3
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Impairment
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—
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—
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7.2
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—
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Restructuring
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33.5
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2.3
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10.4
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0.8
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Reimbursed expenses
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0.7
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2.4
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1.4
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2.7
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Total operating expenses
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127.3
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94.4
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111.0
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93.3
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Operating income (loss)
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(26.6)
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7.9
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(9.6)
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9.3
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Non-operating income (expense)
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Interest, net
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(0.1)
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0.4
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—
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0.4
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Other, net
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1.3
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(0.3)
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0.1
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0.4
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Net non-operating income (expense)
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1.1
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0.2
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0.1
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0.7
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Income (loss) before income taxes
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(25.5)
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8.1
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(9.4)
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10.1
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Provision for income taxes
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(7.3)
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2.7
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—
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3.2
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Net income (loss)
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(18.2)
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%
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5.5
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%
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(9.4)
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%
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6.9
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%
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Note: Totals and sub-totals may not equal the sum of individual line items due to rounding.
We operate our executive search services in the Americas; Europe (which includes Africa); and Asia Pacific (which includes the Middle East) and our Heidrick Consulting services globally (See Note 15, Segment Information).
The following tables set forth, for the periods indicated, our revenue and operating income by segment (in thousands):
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2020
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2019
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2020
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2019
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Revenue
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Executive Search
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Americas
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$
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79,947
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$
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108,878
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$
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265,088
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$
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308,700
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Europe
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28,902
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34,827
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92,108
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103,244
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Asia Pacific
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20,394
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22,784
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61,654
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71,394
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Total Executive Search
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129,243
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166,489
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418,850
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483,338
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Heidrick Consulting
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14,301
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15,685
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41,778
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43,552
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Revenue before reimbursements (net revenue)
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143,544
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182,174
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460,628
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526,890
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Reimbursements
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957
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4,344
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6,555
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14,075
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Total revenue
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$
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144,501
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$
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186,518
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$
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467,183
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$
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540,965
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2020
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2019
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2020
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2019
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Operating income (loss)
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Executive Search
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Americas (1)
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$
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(7,934)
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$
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23,211
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$
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40,900
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$
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74,211
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Europe (2)
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(6,856)
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466
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(26,874)
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3,788
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Asia Pacific (3)
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(1,726)
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2,421
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(6,553)
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10,642
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Total Executive Search
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(16,516)
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26,098
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7,473
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88,641
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Heidrick Consulting (4)
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(9,286)
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(3,150)
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(21,699)
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(12,770)
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Total segment operating income (loss)
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(25,802)
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22,948
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(14,226)
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75,871
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Global Operations Support (5)
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(12,431)
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(8,476)
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(29,841)
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(26,655)
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Total operating income (loss)
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$
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(38,233)
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$
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14,472
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$
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(44,067)
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|
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$
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49,216
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|
(1) Includes restructuring charges of $27.6 million and $4.1 million for the three and nine months ended September 30, 2020 and 2019, respectively.
(2) Includes restructuring charges of $9.6 million for the three and nine months ended September 30, 2020, and goodwill impairment charges of $24.5 million for the nine months ended September 30, 2020.
(3) Includes restructuring charges of $4.6 million for the three and nine months ended September 30, 2020, and goodwill impairment charges of $8.5 million for the nine months ended September 30, 2020.
(4) Includes restructuring charges of $4.5 million for the three and nine months ended September 30, 2020.
(5) Includes restructuring charges of $1.9 million for the three and nine months ended September 30, 2020, and restructuring charges of less than $0.1 million for the three and nine months ended September 30, 2019.
Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019
Total revenue. Consolidated total revenue decreased $42.0 million, or 22.5%, to $144.5 million for the three months ended September 30, 2020, from $186.5 million for the three months ended September 30, 2019. The decrease in total revenue was primarily due to the decrease in revenue before reimbursements (net revenue).
Revenue before reimbursements (net revenue). Consolidated net revenue decreased $38.6 million, or 21.2%, to $143.5 million for the three months ended September 30, 2020 from $182.2 million for the three months ended September 30, 2019. Foreign exchange rate fluctuations positively impacted results by $1.4 million, or 1.0%. Executive Search net revenue was $129.2 million for the three months ended September 30, 2020, a decrease of $37.2 million, or 22.4%, compared to the three months ended September 30, 2019. Heidrick Consulting net revenue decreased $1.4 million, or 8.8%, to $14.3 million for the three months ended September 30, 2020. Both Executive Search revenue and Heidrick Consulting revenue were materially impacted by the ongoing COVID-19 pandemic. Significant factors contributing to the decline in revenue include a decline in demand for our executive search and consulting services, a lengthening of the executive search process due to a slow-down in client decision making and an inability to execute in-person consulting engagements.
The number of Executive Search and Heidrick Consulting consultants was 362 and 63, respectively, as of September 30, 2020, compared to 380 and 71, respectively, as of September 30, 2019. Executive Search productivity, as measured by annualized net Executive Search revenue per consultant, was $1.4 million and $1.8 million for the three months ended September 30, 2020 and 2019, respectively. The number of confirmed searches decreased 6.4% compared to 2019.
Salaries and benefits. Consolidated salaries and benefits expense decreased $26.6 million, or 20.4%, to $103.9 million for the three months ended September 30, 2020 from $130.5 million for the three months ended September 30, 2019. Fixed compensation decreased $2.2 million due to retirement and benefits, and talent acquisition and retention costs, partially offset by increases in deferred compensation plan expenses, and base salaries and payroll taxes. Variable compensation decreased $24.2 million due to lower bonus accruals as a result of decreased consultant productivity. Foreign exchange rate fluctuations negatively impacted results by $0.6 million, or 0.6%.
For the three months ended September 30, 2020, we had an average of 1,696 employees compared to an average of 1,692 employees for the three months ended September 30, 2019.
As a percentage of net revenue, salaries and benefits expense was 72.4% for the three months ended September 30, 2020, compared to 71.6% for the three months ended September 30, 2019.
General and administrative expenses. Consolidated general and administrative expenses decreased $3.3 million, or 10.0% to $29.8 million for the three months ended September 30, 2020 from $33.1 million for the three months ended September 30, 2019. The decrease in general and administrative expenses was due to decreases in internal travel, office occupancy, bad debt and hiring fees, partially offset by increases in professional fees and information technology. Foreign exchange rate fluctuations negatively impacted results by $0.2 million, or 0.5%.
As a percentage of net revenue, general and administrative expenses were 20.7% for the three months ended September 30, 2020, compared to 18.2% for the three months ended September 30, 2019.
Restructuring charges. The Company incurred approximately $48.1 million in restructuring charges during the three months ended September 30, 2020. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs. The Company incurred approximately $4.1 million in restructuring charges during the three months ended September 30, 2019 in connection with initiatives to integrate the Company's existing Brazil operations into the 2GET business operation. The expenses were primarily employee-related including the elimination of duplicative positions in the Company's existing Brazil operations. The restructuring charges are recorded within Restructuring charges in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2020 and 2019.
Operating income. Consolidated operating loss was $38.2 million, including restructuring charges of $48.1 million, for the three months ended September 30, 2020, compared to $14.5 million of operating income, including restructuring charges of $4.1 million, for the three months ended September 30, 2019. Foreign exchange rate fluctuations positively impacted operating income by $0.7 million, or 7.6%.
Net non-operating income (expense). Net non-operating income was $1.6 million for the three months ended September 30, 2020, compared to $0.4 million for the three months ended September 30, 2019.
Interest, net, was $0.2 million of expense for the three months ended September 30, 2020, compared to $0.8 million of income for the three months ended September 30, 2019. The decrease in interest, net was primarily the result of reduced yields on the Company's investments in U.S. Treasury bills.
Other, net, was $1.8 million of income for the three months ended September 30, 2020, compared to $0.5 million of expense for the three months ended September 30, 2019. The additional income in the current year is due to an unrealized gain of $1.6 million on the Company’s deferred compensation plan. Investments held in the Company’s deferred compensation plan are recorded at fair value, which improved significantly during the three months ended September 30, 2020 compared to the three months ended September 30, 2019.
Income taxes. See Note 13, Income Taxes.
Executive Search
Americas
The Americas segment reported net revenue of $79.9 million for the three months ended September 30, 2020, a decrease of 26.6% from $108.9 million for the three months ended September 30, 2019. The decrease in net revenue was due to a 4.1% decrease in the number of executive search confirmations and a decrease in average revenue per executive search. No practice groups exhibited growth over the prior year. Foreign exchange rate fluctuations negatively impacted results by $0.3 million, or 0.4%. There were 188 Executive Search consultants as of September 30, 2020, compared to 201 as of September 30, 2019.
Salaries and benefits expense decreased $19.4 million, or 27.7%, compared to the three months ended September 30, 2019. Fixed compensation decreased $2.7 million, due to retirement and benefits, base salaries and payroll taxes, and talent acquisition and retention costs, partially offset by an increase in deferred compensation plan expenses. Variable compensation decreased $16.7 million due to lower bonus accruals as a result of decreased consultant productivity, partially offset by contingent compensation related to the acquisition of 2GET.
General and administrative expenses decreased $1.9 million, or 16.3%, compared to the three months ended September 30, 2019, due to internal travel, office occupancy and bad debt, partially offset by increases in professional fees.
Restructuring charges for the three months ended September 30, 2020 were $27.6 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs. Restructuring charges for the three months ended September 30, 2019 were $4.1 million. The charges were incurred in connection with initiatives to integrate the Company's existing Brazil operations into the 2GET business operation. The expenses were primarily employee-related including the elimination of duplicative positions in the Company's existing Brazil operations.
The Americas reported an operating loss of $7.9 million, including restructuring charges of $27.6 million, for the three months ended September 30, 2020, a decrease of $31.1 million compared to $23.2 million of operating income, including restructuring charges of $4.1 million, for the three months ended September 30, 2019.
Europe
Europe reported net revenue of $28.9 million for the three months ended September 30, 2020, a decrease of 17.0% from $34.8 million for the three months ended September 30, 2019. The decrease in net revenue was primarily due to a 17.5% decrease in the number of executive search confirmations. No practice groups exhibited growth over the prior year. Foreign exchange rate fluctuations positively impacted results by $1.4 million, or 4.9%. There were 103 Executive Search consultants as of September 30, 2020, compared to 108 as of September 30, 2019.
Salaries and benefits expense decreased $5.6 million, or 21.2%, compared to the three months ended September 30, 2019. Fixed compensation increased $0.1 million for the three months ended September 30, 2020, due to talent acquisition and retention costs, and base salaries and payroll taxes, partially offset by a decrease in retirement and benefits. Variable compensation decreased $5.7 million due to lower bonus accruals as a result of decreased consultant productivity.
General and administrative expense decreased $2.6 million, or 32.1%, compared to the three months ended September 30, 2019, due to office occupancy and internal travel, partially offset by the use of external third-party consultants and professional fees.
Restructuring charges for the three months ended September 30, 2020 were $9.6 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs.
Europe reported an operating loss of $6.9 million, including restructuring charges of $9.6 million, for the three months ended September 30, 2020, a decrease of $7.3 million compared to operating income of $0.5 million for the three months ended September 30, 2019.
Asia Pacific
Asia Pacific reported net revenue of $20.4 million for the three months ended September 30, 2020, a decrease of 10.5% compared to $22.8 million for the three months ended September 30, 2019. The decrease in net revenue was due to a decline in average revenue per executive search. The Education and Social Enterprise, and Life Sciences practice groups exhibited growth over the prior year. Foreign exchange rate fluctuations positively impacted results by $0.2 million, or 1.2%. There were 71 Executive Search consultants at both September 30, 2020 and 2019.
Salaries and benefits expense decreased $2.2 million, or 14.0%, compared to the three months ended September 30, 2019. Fixed compensation increased $0.2 million due to increases in base salaries and payroll taxes, talent acquisition and retention costs, and separation, partially offset by a decrease in retirement and benefits. Variable compensation decreased $2.3 million due to lower bonus accruals as a result of a decline in consultant productivity.
General and administrative expenses decreased $0.6 million, or 13.1%, compared to the three months ended September 30, 2019, due to decreases in bad debt, internal travel and hiring fees, partially offset by increases in office occupancy.
Restructuring charges for the three months ended September 30, 2020 were $4.6 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs.
Asia Pacific reported an operating loss of $1.7 million, including restructuring charges of $4.6 million, for the three months ended September 30, 2020, a decrease of $4.1 million compared to operating income of $2.4 million for the three months ended September 30, 2019.
Heidrick Consulting
Heidrick Consulting reported net revenue of $14.3 million for the three months ended September 30, 2020, a decrease of 8.8% compared to $15.7 million for the three months ended September 30, 2019. The decrease in Heidrick Consulting net revenue is due to a 20.7% decrease in the number of consulting engagements compared to the prior year and limitations on the ability to execute in-person consulting engagements. Foreign exchange rate fluctuations positively impacted results by $0.2 million, or 1.4%. There were 63 Heidrick Consulting consultants at September 30, 2020 compared to 71 at September 30, 2019.
Salaries and benefits expense increased $0.2 million, or 1.3%, compared to the three months ended September 30, 2019. Fixed compensation decreased $0.5 million due to increases in retirement and benefits, and talent acquisition and retention costs, partially offset by decreases in base salaries and payroll taxes. Variable compensation increased $0.6 million due to bonus accruals on certain consulting engagements.
General and administrative expenses increased $0.1 million, or 1.9%, compared to the three months ended September 30, 2019, due to increases in professional fees and bad debt, partially offset by decreases in internal travel and office occupancy.
Restructuring charges for the three months ended September 30, 2020 were $4.5 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs.
Heidrick Consulting reported an operating loss of $12.4 million, including restructuring charges of $4.5 million, for the three months ended September 30, 2020, an increase of $4.0 million compared to an operating loss of $8.5 million for the three months ended September 30, 2019.
Global Operations Support
Global Operations Support expenses for the three months ended September 30, 2020, increased $4.0 million, or 46.7%, to $12.4 million from $8.4 million for the three months ended September 30, 2019.
Salaries and benefits expense increased $0.4 million, or 7.6%, due to stock compensation, and base salaries and payroll taxes, partially offset decreases in retirement and benefits, and variable compensation.
General and administrative expenses increased $1.7 million, or 50.0%, due to professional fees and information technology, partially offset by decreases in office occupancy and internal travel.
Restructuring charges for the three months ended September 30, 2020 were $1.9 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs.
Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019
Total revenue. Consolidated total revenue decreased $73.8 million, or 13.6%, to $467.2 million for the nine months ended September 30, 2020, from $541.0 million for the nine months ended September 30, 2019. The decrease in total revenue was primarily due to the decrease in revenue before reimbursements (net revenue).
Revenue before reimbursements (net revenue). Consolidated net revenue decreased $66.3 million, or 12.6%, to $460.6 million for the nine months ended September 30, 2020 from $526.9 million for the nine months ended September 30, 2019. Foreign exchange rate fluctuations negatively impacted results by $2.5 million, or 0.5%. Executive Search net revenue was $418.9 million for the nine months ended September 30, 2020, a decrease of $64.5 million, or 13.3%, compared to the nine months ended September 30, 2019. Heidrick Consulting net revenue decreased $1.8 million, or 4.1%, to $41.8 million for the nine months ended September 30, 2020. Both Executive Search revenue and Heidrick Consulting revenue were materially impacted by the ongoing COVID-19 pandemic. Significant factors contributing to the decline in revenue include a decline in
demand for our executive search and consulting services, a lengthening of the executive search process due to a slow-down in client decision making and an inability to execute in-person consulting engagements.
The number of Executive Search and Heidrick Consulting consultants was 362 and 63, respectively, as of September 30, 2020, compared to 380 and 71, respectively, as of September 30, 2019. Executive Search productivity, as measured by annualized net Executive Search revenue per consultant, was $1.4 million and $1.7 million for the nine months ended September 30, 2020 and 2019, respectively. The number of confirmed searches decreased 10.0% compared to 2019.
Salaries and benefits. Consolidated salaries and benefits expense decreased $42.3 million, or 11.4%, to $329.6 million for the nine months ended September 30, 2020 from $371.9 million for the nine months ended September 30, 2019. Fixed compensation decreased $4.7 million due to talent acquisition and retention costs, retirement and benefits, deferred compensation plan expenses, and stock compensation, partially offset by increases in base salaries and payroll taxes. Variable compensation decreased $37.6 million due to lower bonus accruals as a result of decreased consultant productivity. Foreign exchange rate fluctuations positively impacted results by $2.8 million, or 0.8%.
For the nine months ended September 30, 2020, we had an average of 1,746 employees compared to an average of 1,653 employees for the nine months ended September 30, 2019.
As a percentage of net revenue, salaries and benefits expense was 71.6% for the nine months ended September 30, 2020, compared to 70.6% for the nine months ended September 30, 2019.
General and administrative expenses. Consolidated general and administrative expenses decreased $7.7 million, or 7.6% to $94.0 million for the nine months ended September 30, 2020 from $101.6 million for the nine months ended September 30, 2019. The decrease in general and administrative expenses was due to internal travel, office occupancy, hiring fees, taxes and licenses, marketing, intangible amortization and earnout accretion, partially offset by increases in professional fees, bad debt and information technology. Foreign exchange rate fluctuations positively impacted results by $0.6 million, or 0.6%.
As a percentage of net revenue, general and administrative expenses were 20.4% for the nine months ended September 30, 2020, compared to 19.3% for the nine months ended September 30, 2019.
Impairment charges. During the nine months ended September 30, 2020, and as a direct result of the economic impact of COVID-19, the Company experienced a decline in demand for our executive search services and a lengthening of the executive search process due to a slow-down in client decision making, which had a material adverse impact on our results of operations. As a result, the Company identified a triggering event in and performed an interim goodwill impairment evaluation during the nine months ended September 30, 2020. Based on the results of the of the impairment evaluation, the Company recorded an impairment charge of $24.5 million in Europe and $8.5 million in Asia Pacific to write-off all of the goodwill associated with each reporting unit. The impairment charge is recorded within Impairment charges in the Condensed Consolidated Statement of Comprehensive Income (Loss) for the nine months ended September 30, 2020. The impairment was non-cash in nature and did not affect our current liquidity, cash flows, borrowing capability or operations; nor did it impact the debt covenants under our credit agreement.
Restructuring charges. The Company incurred approximately $48.1 million in restructuring charges during the nine months ended September 30, 2020. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs. The Company incurred approximately $4.1 million in restructuring charges during the nine months ended September 30, 2019 in connection with initiatives to integrate the Company's existing Brazil operations into the 2GET business operation. The expenses were primarily employee-related including the elimination of duplicative positions in the Company's existing Brazil operations. The restructuring charges are recorded within Restructuring charges in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2020 and 2019.
Operating income. Consolidated operating loss was $44.1 million, including impairment and restructuring charges of $81.1 million, for the nine months ended September 30, 2020, compared to $49.2 million of operating income, including restructuring charges of $4.1 million, for the nine months ended September 30, 2019. Foreign exchange rate fluctuations positively impacted operating income by $0.9 million, or 2.4%.
Net non-operating income (expense). Net non-operating income was $0.6 million for the nine months ended September 30, 2020, compared to $3.9 million for the nine months ended September 30, 2019.
Interest, net, was $0.2 million of income for the nine months ended September 30, 2020, compared to $2.0 million of income for the nine months ended September 30, 2019. The decrease in interest, net was primarily the result of reduced yields on the Company's investments in U.S. Treasury bills.
Other, net, was $0.5 million of income for the nine months ended September 30, 2020, compared to $1.9 million of income for the nine months ended September 30, 2019. The decrease in other, net is primarily due to smaller unrealized gains on the Company’s deferred compensation plan compared to the prior year.
Income taxes. See Note 13, Income Taxes.
Executive Search
Americas
The Americas segment reported net revenue of $265.1 million for the nine months ended September 30, 2020, a decrease of 14.1% from $308.7 million for the nine months ended September 30, 2019. The decrease in net revenue was primarily due to a 9.5% decrease in the number of executive search confirmations. No practice groups exhibited growth over the prior year. Foreign exchange rate fluctuations negatively impacted results by $1.4 million or 0.5%. There were 188 Executive Search consultants as of September 30, 2020, compared to 201 as of September 30, 2019.
Salaries and benefits expense decreased $31.1 million, or 16.0%, compared to the nine months ended September 30, 2019. Fixed compensation decreased $6.4 million, due to talent acquisition and retention costs, retirement and benefits, deferred compensation plan expenses, and stock compensation, partially offset by an increase in base salaries and payroll taxes. Variable compensation decreased $24.7 million due to lower bonus accruals as a result of decreased consultant productivity, partially offset by contingent compensation related to the acquisition of 2GET.
General and administrative expenses decreased $2.7 million, or 7.4%, compared to the nine months ended September 30, 2019, due to internal travel and office occupancy, partially offset by increases in bad debt and professional fees.
Restructuring charges for the nine months ended September 30, 2020 were $27.6 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs. Restructuring charges for the nine months ended September 30, 2019 were $4.1 million. The charges were incurred in connection with initiatives to integrate the Company's existing Brazil operations into the 2GET business operation. The expenses were primarily employee-related including the elimination of duplicative positions in the Company's existing Brazil operations.
The Americas reporting operating income of $40.9 million, including restructuring charges of $27.6 million, for the nine months ended September 30, 2020, a decrease of $33.3 million compared to $74.2 million, including restructuring charges of $4.1 million, for the nine months ended September 30, 2019.
Europe
Europe reported net revenue of $92.1 million for the nine months ended September 30, 2020, a decrease of 10.8% from $103.2 million for the nine months ended September 30, 2019. The decrease in net revenue was due to a 12.6% decrease in the number of executive search confirmations. The Education and Social Enterprises, and Life Sciences practice groups exhibited growth over the prior year. Foreign exchange rate fluctuations negatively impacted results by $0.1 million, or 0.5%. There were 103 Executive Search consultants as of September 30, 2020, compared to 108 as of September 30, 2019.
Salaries and benefits expense decreased $9.2 million, or 12.1%, compared to the nine months ended September 30, 2019. Fixed compensation increased $0.1 million due to base salaries and payroll taxes, partially offset by a decrease in retirement and benefits. Variable compensation decreased $9.3 million due to lower bonus accruals as a result of decreased consultant productivity.
General and administrative expense decreased $5.3 million, or 22.6%, compared to the nine months ended September 30, 2019, due to internal travel, office occupancy, intangible amortization and earnout accretion, partially offset by increases in bad debt and the use of external third-party consultants.
Impairment charges for the nine months ended September 30, 2020 were $24.5 million as a result of an interim impairment evaluation on the goodwill of the Europe reporting unit.
Restructuring charges for the nine months ended September 30, 2020 were $9.6 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs.
Europe reported an operating loss of $26.9 million, including impairment and restructuring charges of $34.0 million, for the nine months ended September 30, 2020, a decrease of $30.7 million compared to operating income of $3.8 million for the nine months ended September 30, 2019.
Asia Pacific
Asia Pacific reported net revenue of $61.7 million for the nine months ended September 30, 2020, a decrease of 13.6% compared to $71.4 million for the nine months ended September 30, 2019. The decrease in net revenue was primarily due to a 7.9% decrease in the number of executive search confirmations compared to the prior year. The Education and Social Enterprise, and Life Sciences practice groups exhibited growth over the prior year. Foreign exchange rate fluctuations negatively impacted results by $1.0 million, or 1.7%. There were 71 Executive Search consultants at both September 30, 2020 and 2019.
Salaries and benefits expense decreased $4.6 million, or 10.1%, compared to the nine months ended September 30, 2019. Fixed compensation increased $1.0 million due to talent acquisition and retention costs, and retirement and benefits, partially offset by a decrease in base salaries and payroll taxes. Variable compensation decreased $5.7 million due to lower bonus accruals as a result of a decline in consultant productivity.
General and administrative expenses decreased $1.0 million, or 6.5%, compared to the nine months ended September 30, 2019, due to internal travel, partially offset by increases in bad debt and office occupancy.
Impairment charges for the nine months ended September 30, 2020 were $8.5 million as a result of an interim impairment evaluation on the goodwill of the Asia Pacific reporting unit.
Restructuring charges for the nine months ended September 30, 2020 were $4.6 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs.
Asia Pacific reported an operating loss of $6.6 million, including impairment and restructuring charges of $13.1 million, for the nine months ended September 30, 2020, a decrease of $17.2 million compared to operating income of $10.6 million for the nine months ended September 30, 2019.
Heidrick Consulting
Heidrick Consulting reported net revenue of $41.8 million for the nine months ended September 30, 2020, a decrease of 4.1% compared to $43.6 million for the nine months ended September 30, 2019. The decrease in Heidrick Consulting net revenue is due to a 14.1% decrease in the number of consulting engagements compared to the prior year and an inability to execute in-person consulting engagements, partially offset by one large consulting project in the first quarter. Foreign exchange rate fluctuations did not impact results. There were 63 Heidrick Consulting consultants at September 30, 2020, compared to 71 at September 30, 2019.
Salaries and benefits expense increased $3.3 million, or 8.2%, compared to the nine months ended September 30, 2019. Fixed compensation increased $0.7 million due to base salaries and payroll taxes, partially offset by a decrease in talent acquisition and retention costs. Variable compensation increased $2.6 million due to bonus accruals on certain consulting engagements.
General and administrative expenses decreased $0.6 million, or 3.7%, compared to the nine months ended September 30, 2019, due to internal travel and the use of external third-party consultants, partially offset by increases in professional fees and bad debt.
Restructuring charges for the nine months ended September 30, 2020 were $4.5 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs.
Heidrick Consulting reported an operating loss of $21.7 million, including restructuring charges of $4.5 million, for the nine months ended September 30, 2020, an increase of $8.9 million, or 70.0%, compared to an operating loss of $12.8 million for the nine months ended September 30, 2019.
Global Operations Support
Global Operations Support expenses for the nine months ended September 30, 2020, increased $3.2 million, or 12.0%, to $29.8 million from $26.7 million for the nine months ended September 30, 2019.
Salaries and benefits expense decreased $0.6 million, or 3.7%, due to retirement and benefits, stock compensation and variable compensation, partially offset by increases in separation, and base salaries and payroll taxes.
General and administrative expenses increased $1.9 million, or 16.6%, due to professional fees and information technology, partially offset by decreases in internal travel and office occupancy.
Restructuring charges for the nine months ended September 30, 2020 were $1.9 million. The primary components of the restructuring include a workforce reduction, a reduction of the Company’s real estate expenses and professional fees, and the future elimination of certain deferred compensation programs.
Liquidity and Capital Resources
General. We continually evaluate our liquidity requirements, capital needs and availability of capital resources based on our operating needs. We believe that our available cash balances, funds expected to be generated from operations and funds available under our committed revolving credit facility will be sufficient to finance our operations for the foreseeable future, as well as to finance the cash payments associated with our cash dividends and stock repurchase program.
We pay the non-deferred portion of annual bonuses in the first quarter following the year in which they are earned. Employee bonuses are accrued throughout the year and are based on our performance and the performance of the individual employee.
Lines of credit. On October 26, 2018, we entered into a new Credit Agreement (the "2018 Credit Agreement") to replace the Second Amended and Restated Credit Agreement (the "Restated Credit Agreement") executed on June 30, 2015. The 2018 Credit Agreement provides us with a senior unsecured revolving line of credit with an aggregate commitment of $175 million, which includes a sublimit of $25 million for letters of credit and a $10 million swingline loan sublimit. The agreement also includes a $75 million expansion feature. The 2018 Credit Agreement will mature in October 2023. Borrowings under the 2018 Credit Agreement bear interest at our election of the Alternate Base Rate (as defined in the 2018 Credit Agreement) or Adjusted LIBOR (as defined in the 2018 Credit Agreement) plus a spread as determined by our leverage ratio.
Borrowings under the 2018 Credit Agreement may be used for working capital, capital expenditures, Permitted Acquisitions (as defined in the 2018 Credit Agreement) and for other general purposes. The obligations under the 2018 Credit Agreement are guaranteed by certain of our subsidiaries.
We capitalized approximately $1.0 million of loan acquisition costs related to the 2018 Credit Agreement, which will be amortized over the remaining term of the agreement.
During the nine months ended June 30, 2020, we borrowed $100 million under the 2018 Credit Agreement. We elected to draw down a portion of the available funds from our revolving line of credit as a precautionary measure to increase our cash position and further enhance our financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak. We believed that we had more than sufficient liquidity, even prior to taking this action, but elected to draw down available funds out of an abundance of caution in this period of uncertainty. The draw-down proceeds from the revolving line of credit were invested in short-term securities and we subsequently repaid $100.0 million during the three months ended September 30, 2020.
As of September 30, 2020 and December 31, 2019, we had no outstanding borrowings. In both periods, we were in compliance with the financial and other covenants under the facility and no event of default existed.
Cash, cash equivalents and marketable securities. Cash, cash equivalents and marketable securities at September 30, 2020, December 31, 2019, and September 30, 2019 were $237.6 million, $332.9 million and $218.9 million, respectively. The $237.6 million of cash, cash equivalents and marketable securities at September 30, 2020, includes $90.2 million held by our foreign subsidiaries. A portion of the $90.2 million is considered permanently reinvested in these foreign subsidiaries. If these funds were required to satisfy obligations in the U.S., the repatriation of these funds could cause us to incur additional U.S. income taxes or foreign withholding taxes.
Cash flows used in operating activities. Cash used in operating activities was $72.9 million for the nine months ended September 30, 2020. This use of cash was primarily the result of cash bonus payments related to 2019 and prior year cash bonus deferrals of $222.1 million partially offset by 2020 bonus accruals, net loss of $43.2 million, a decrease in income taxes payable of $11.5 million, and an increase in accounts receivable of $9.6 million, partially offset by impairment charges of $33.0 million, depreciation and amortization of $20.6 million, stock compensation of $7.1 million, and an increase in the restructuring accrual of $6.3 million
Cash used in operating activities was $35.4 million for the nine months ended September 30, 2019. This use of cash was primarily the result of cash bonus payments related to 2018 and prior year cash bonus deferrals partially offset by an increase in 2019 bonus accruals, and an increase in accounts receivable of $37.0 million, partially offset by net income of $36.3 million.
Cash flows used in investing activities. Cash used in investing activities was $14.2 million for the nine months ended September 30, 2020, primarily due to purchases of available for sale investments of $118.7 million and capital expenditures of $7.1 million for office build-outs, partially offset by proceeds from available for sale investments of $111.6 million.
Cash used in investing activities was $50.1 million for the nine months ended September 30, 2019, primarily due to purchases of available for sale investments of $83.1 million, the $3.5 million acquisition of 2GET and capital expenditures of $2.6 million for office build-outs, partially offset by proceeds from available for sale investments of $39.2 million.
Cash flows used in financing activities. Cash used in financing activities was $13.4 million for the nine months ended September 30, 2020, primarily due to dividend payments of $9.0 million, the final earnout payment for the Amrop acquisition of $2.8 million, and employee tax withholding payments on equity transactions of $1.6 million. Gross borrowings and payments on the line of credit were each $100.0 million during the nine months ended September 30, 2020.
Cash used by financing activities was $15.3 million for the nine months ended September 30, 2019, primarily due to dividend payments of $8.9 million, employee tax withholding payments on equity transactions of $4.6 million, and the final earnout payments for the Scambler MacGregor and DSI acquisitions of $1.9 million.
COVID-19 Considerations We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times. We expect that all of our business segments, across all of our geographies, will continue to be impacted to some degree by the pandemic and actions taken in response to the pandemic, but the significance of the impact of the pandemic on our business and liquidity, and the duration for which it may have an impact cannot be determined at this time. In the event we require additional liquidity, our 2018 Credit Agreement provides us with a senior unsecured revolving line of credit with an aggregate commitment of $175 million, which includes a sublimit of $25 million for letters of credit and a $10 million swingline loan sublimit. The agreement also includes a $75 million expansion feature.
Off-Balance Sheet Arrangements. We do not have material off-balance sheet arrangements, special purpose entities, trading activities of non-exchange traded contracts or transactions with related parties.
Application of Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared using accounting principles generally accepted in the United States of America. Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 24, 2020, and in Note 2, Summary of Significant Accounting Policies, in the Notes to Condensed Consolidated Financial Statements included in Item 1. The
preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. If actual amounts are ultimately different from previous estimates, the revisions are included in our results of operations for the period in which the actual amounts become known.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes its critical accounting policies that reflect its more significant estimates and assumptions relate to revenue recognition, income taxes, interim effective tax rate and assessment of goodwill and other intangible assets for impairment. See Application of Critical Accounting Policies and Estimates in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 24, 2020.
Recently Adopted Financial Accounting Standards
On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Measurement of Credit Losses on Financial Instruments, and all related amendments, using the modified retrospective method. The guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The adoption had an immaterial impact on the Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Balance Sheet, Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2020.
Recently Issued Financial Accounting Standards
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance is intended to provide temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of this accounting guidance. The effect is not known or reasonably estimable at this time.
In December 2019, the FASB, issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The guidance simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Accounting Standards Codification ("ASC") 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of this accounting guidance. The effect is not known or reasonably estimable at this time.