Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Cash and Cash Equivalents The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. Concentration of Risk The Company is potentially exposed to concentrations of risk associated with its accounts receivable. However, this risk is limited due to the Company’s large number of clients and their dispersion across many different industries and geographies. At December 31, 2018 and 2017, the Company had no significant concentrations of risk. Accounts Receivable The Company’s accounts receivable consist of trade receivables. The allowance for doubtful accounts is developed based upon several factors including the age of the Company’s accounts receivable, historical write-off experience and specific account analysis. These factors may change over time, impacting the allowance level. Fair Value of Financial Instruments Cash equivalents are stated at cost, which approximates fair value. The carrying value for receivables from clients, accounts payable, deferred revenue and other accrued liabilities reasonably approximate fair value due to the nature of the financial instruments and the short term nature of the items. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful life of the asset or, for leasehold improvements, the shorter of the lease term or the estimated useful life of the asset, as follows: Office furniture, fixtures and equipment 5–10 years Computer equipment and software 3–7 years Leasehold improvements are depreciated over the lesser of the lease term or life of the asset improvement, which typically range from three to ten years. Depreciation is calculated for tax purposes using accelerated methods, where applicable. Long-lived Assets The Company reviews its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge, equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset, is recognized. Investments The Company’s investments consist primarily of available-for-sale investments within the U.S. non-qualified deferred compensation plan (the “Plan”). Available-for-sale investments are reported at fair value with changes in unrealized gains (losses) and realized gains (losses), resulting from an employee’s termination from the Plan, recorded as a non-operating expense in Other, net in the Consolidated Statements of Comprehensive Income (Loss). Goodwill and Other Intangible Assets Goodwill represents the difference between the purchase price of acquired companies and the related fair value of the net assets acquired, which is accounted for by the acquisition method of accounting. Other intangible assets include client relationships and employee non-compete agreements. The Company performs assessments of the carrying value of goodwill at least annually and of its goodwill and other intangible assets whenever events occur or circumstances indicate that a carrying amount of these assets may not be recoverable. These circumstances include a significant change in business climate, attrition of key personnel, changes in financial condition or results of operations, a prolonged decline in the Company’s stock price and market capitalization, competition, and other factors. The goodwill impairment test compares the fair value of a reporting unit to its carrying amount, including goodwill. The Company operates four reporting units: Americas, Europe (which includes Africa), Asia Pacific (which includes the Middle East) and Heidrick Consulting. The goodwill impairment test is completed by comparing the fair value of a reporting unit with its carrying amount. The fair value of each of the Company’s reporting units is determined using a discounted cash flow methodology. An impairment charge is recognized for the amount by which the carrying value of the reporting unit exceeds its fair value; however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit. The other intangible asset impairment review compares the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge, equal to the amount by which the carrying amount of the asset exceeds the fair value, is recognized. Other intangible assets acquired are amortized either using the straight-line method over their estimated useful lives or based on the projected cash flow associated with the respective intangible assets. Restructuring Charges The Company accounts for restructuring charges by recognizing a liability at fair value when the costs are incurred. Revenue Recognition As a result of the adoption of ASU No. 2014-09, Revenue from Contracts with Customers, the Company's accounting policy for revenue recognition has been updated. See Note 3, Revenue . Reimbursements The Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue and expense in its Consolidated Statements of Comprehensive Income (Loss). Salaries and Employee Benefits Salaries and employee benefits consist of compensation and benefits paid to consultants, executive officers, and administrative and support personnel, of which the most significant elements are salaries and annual performance-related bonuses. Other items in this category are expenses related to sign-on bonuses, forgivable employee loans and minimum guaranteed bonuses (often incurred in connection with the hiring of new consultants), restricted stock unit and performance share unit amortization, payroll taxes, profit sharing and retirement benefits, and employee insurance benefits. Salaries and employee benefits are recognized on an accrual basis. Certain sign-on bonuses, retention awards, and minimum guaranteed compensation are capitalized and amortized in accordance with the terms of the respective agreements. A portion of the Company’s consultants’ and management cash bonuses are deferred and paid over a three -year vesting period. The portion of the bonus is approximately 15% depending on the employee’s level or position. The compensation expense related to the amounts being deferred is recognized on a graded vesting attribution method over the requisite service period. This service period begins on January 1 of the respective fiscal year and continues through the deferral date, which coincides with the Company’s bonus payments in the first quarter of the following year and for an additional three -year vesting period. The deferrals are recorded in Accrued salaries and employee benefits within both Current liabilities and Non-current liabilities in the Consolidated Balance Sheets. Income Taxes Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the tax differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Reclassifications Certain prior year amounts have been recast as a result of the change in the Company's operating segments and adoption of ASU No. 2016-18, Statement of Cash Flows: Restricted Cash. The reclassifications had no impact on net income, net cash flows or stockholders' equity. Earnings per Common Share Basic earnings per common share is computed by dividing net income by weighted average common shares outstanding for the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Common equivalent shares are excluded from the determination of diluted earnings per share in periods in which they have an anti-dilutive effect. The following table sets forth the computation of basic and diluted earnings (loss) per share: December 31, 2018 2017 2016 Net income (loss) $ 49,295 $ (48,635 ) $ 15,413 Weighted average shares outstanding: Basic 18,917 18,735 18,540 Effect of dilutive securities: Restricted stock units 406 — 347 Performance stock units 209 — 151 Diluted 19,532 18,735 19,038 Basic earnings (loss) per share $ 2.61 $ (2.60 ) $ 0.83 Diluted earnings (loss) per share $ 2.52 $ (2.60 ) $ 0.81 Weighted average restricted stock units and performance stock units outstanding that could be converted into approximately 327,000 and 80,000 common shares, respectively, for the year ended December 31, 2017, were not included in the computation of diluted earnings per share because the effects would be anti-dilutive. Translation of Foreign Currencies The Company generally designates the local currency for all its subsidiaries as the functional currency. The Company translates the assets and liabilities of its subsidiaries into U.S. dollars at the current rate of exchange prevailing at the balance sheet date. Revenue and expenses are translated at a monthly average exchange rate for the period. Translation adjustments are reported as a component of Accumulated other comprehensive income . Restricted Cash The Company has lease agreements and business licenses with terms that require the Company to restrict cash through the termination dates of the agreements, which extend through 2024. Current and non-current restricted cash is included in Other current assets and Other non-current assets , respectively, on the Consolidated Balance Sheet. The following table provides a reconciliation of the cash and cash equivalents between the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statement of Cash Flows as of December 31, 2018 , 2017 and 2016 : December 31, 2018 2017 2016 Cash and cash equivalents $ 279,906 $ 207,534 $ 165,011 Restricted cash included within other current assets 108 526 139 Restricted cash included within other non-current assets 248 102 420 Total cash, cash equivalents and restricted cash $ 280,262 $ 208,162 $ 165,570 Recently Issued Financial Accounting Standards In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-02, Leases, intended to improve financial reporting about leasing transactions. The guidance requires entities that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations created by those leases and to disclose key information about the leasing arrangements. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842 (Leases), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, Targeted Improvements to Topic 842 (Leases), which provides an additional, optional transition method that allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. An entity that adopts this method must report comparative periods in accordance with current guidance (Topic 840). The guidance is effective for interim and annual periods beginning after December 15, 2018 with early adoption permitted. The Company will adopt the guidance on January 1, 2019 using the modified retrospective method without restatement of the prior periods. As such, prior periods will continue to be presented under the existing guidance in Topic 840. The Company is currently performing its evaluation of the guidance. The Company's lease portfolio is primarily comprised of office leases, which are currently classified as operating leases and will continue to be classified as operating leases under the new guidance. The adoption of the guidance will have a material impact on the Company's Consolidated Balance Sheets with respect to recording a right-of-use asset and lease liability for each of the Company's leases. The Company will utilize the available practical expedient to not separate the non-lease components from the lease components in its office leases. The Company is currently assessing the impact of utilizing the practical expedient, however,the use of the practical expedient will increase the total lease liability. The Company does not anticipate a significant change in expense recognition as it relates to the new guidance. Recently Adopted Financial Accounting Standards In 2018, the Company adopted ASU No. 2018-02, Income Statement - Reporting Comprehensive Income, intended to improve the usefulness of information reported as a result of the Tax Cuts and Jobs Act. The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. ASU 2018-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company elected not to utilize the available option to reclassify stranded tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act to retained earnings. On January 1, 2018, the Company adopted ASU No. 2017-09, Compensation - Stock Compensation, Scope of Modification Accounting, which is intended to provide clarity and reduce diversity in practice, cost and complexity when implementing a change in the terms or conditions of a share-based payment award. ASU No. 2017-09 requires that an entity should account for the effects of a modification unless the fair value, vesting conditions and whether the award is classified as a liability instrument or an equity instrument remain unchanged in the modification. The adoption of this guidance did not have an impact on the Company's financial statements. The future impact of this accounting guidance will be dependent on future modification events including the number of awards modified. On January 1, 2018, the Company adopted ASU No. 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost, which is intended to improve the consistency, transparency and usefulness of net benefit cost disclosures. ASU No. 2017-07 requires that an employer report the service cost component of net benefit cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. Additionally, the other components of net benefit costs are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The adoption of this guidance did not have an impact on the Company's financial statements. On January 1, 2018, the Company adopted ASU No. 2016-18, Statement of Cash Flows: Restricted Cash, which requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The adoption of this guidance increased the Company's beginning and ending balances of cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows by approximately $0.4 million and $0.6 million, respectively for the year ended December 31, 2018. Beginning and ending balances of cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows increased by approximately $0.6 million and $0.6 million, respectively for the year ended December 31, 2017. Beginning and ending balances of cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows increased by approximately $7.8 million and $0.6 million, respectively for the year ended December 31, 2016. On January 1, 2018, the Company adopted ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice as to how certain cash receipts and cash payments should be presented and classified. The adoption of this guidance did not have a material impact on the Company's financial statements for the years ended December 31, 2018 and 2017. For the year ended December 31, 2016, the Company reclassified approximately $2.9 million of earnout payments from cash flows used in financing activities to cash flows provided by operating activities. The reclassified amount represents the amount of the earnout payement that is in excess of the earnout accrual established at the acquisition date. On January 1, 2018, the Company adopted ASU No. 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments including the recognition of unrealized changes in fair value within net income. The adoption of this guidance resulted in a reclassification of accumulated unrealized gains of approximately $6.1 million from accumulated other comprehensive income to retained earnings. The impact of the adoption of this guidance on the Company's Condensed Consolidated Statement of Comprehensive Income for the year ended December 31, 2018, was not material. The comparative periods have not been restated and continue to be reported under the accounting standards in effect for those periods. On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers, using the modified retrospective method. The Company applied the guidance to all contracts that were not complete as of the adoption date. The guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for these goods or services. The Company recognized the cumulative effect of initially applying the new guidance as an adjustment to the opening balance of retained earnings. The comparative periods have not been restated and continue to be reported under the accounting standards in effect for those periods. See Note 3, Revenue in the Notes to Consolidated Financial Statements. Impacts on Financial Statements of Recently Adopted Financial Accounting Standards The cumulative effect of the changes made to our Condensed Consolidated Balance Sheet as of January 1, 2018, as a result of the adoption of ASU No. 2014-09, Revenue from Contracts with Customers, and ASU No. 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets Financial Liabilities was as follows: December 31, ASU 2014-09 Adjustments ASU 2016-01 Adjustments January 1, Current assets Other current assets $ 11,620 $ 14,689 $ — $ 26,309 Total current assets 343,790 14,689 — 358,479 Non-current assets Deferred income taxes 35,402 (3,099 ) — 32,303 Total non-current assets 243,414 (3,099 ) — 240,315 Total assets $ 587,204 $ 11,590 $ — $ 598,794 Current liabilities Deferred revenue 31,272 (1,059 ) — 30,213 Other current liabilities 40,346 3,695 — 44,041 Total current liabilities 265,792 2,636 — 268,428 Total liabilities $ 374,499 $ 2,636 $ — $ 377,135 Stockholders' equity Retained earnings (deficit) (716 ) 8,954 6,089 14,327 Accumulated other comprehensive income 13,315 — (6,089 ) 7,226 Total stockholders’ equity 212,705 8,954 — 221,659 Total liabilities and stockholders’ equity $ 587,204 $ 11,590 $ — $ 598,794 The impact of ASU No. 2014-09, Revenue from Contracts with Customers, on our Condensed Consolidated Balance Sheet as of December 31, 2018 , was as follows: December 31, 2018 As Reported Balances Without Adoption of ASU 2014-09 Effect of Adoption Higher/(Lower) Current assets Other current assets $ 29,598 $ 11,461 $ 18,137 Total current assets 450,867 432,730 18,137 Non-current assets Deferred income taxes 34,830 37,929 (3,099 ) Total non-current assets 249,762 252,861 (3,099 ) Total assets $ 700,629 $ 685,591 $ 15,038 Current liabilities Accrued salaries and employee benefits 227,653 224,657 2,996 Deferred revenue 40,673 43,823 (3,150 ) Other current liabilities 33,219 28,224 4,995 Income taxes payable 8,240 7,866 374 Total current liabilities 318,951 313,736 5,215 Total liabilities $ 433,473 $ 428,258 $ 5,215 Stockholders' equity Retained earnings (deficit) 56,049 46,227 9,822 Total stockholders’ equity 267,156 257,334 9,822 Total liabilities and stockholders’ equity $ 700,629 $ 685,591 $ 15,038 The impact of ASU No. 2014-09, Revenue from Contracts with Customers, on our Condensed Consolidated Statement of Comprehensive Income for the three and twelve months ended December 31, 2018 , was as follows: Three Months Ended December 31, 2018 (Unaudited) Twelve Months Ended December 31, 2018 As Reported Balances Without Adoption of ASU 2014-09 Effect of Adoption Higher/(Lower) As Reported Balances Without Adoption of ASU 2014-09 Effect of Adoption Higher/(Lower) Revenue Revenue before reimbursements (net revenue) $ 185,305 $ 182,413 $ 2,892 $ 716,023 $ 711,785 $ 4,238 Reimbursements 5,662 5,662 — 19,632 19,632 — Total revenue 190,967 188,075 2,892 735,655 731,417 4,238 Operating expenses Salaries and employee benefits 133,328 131,278 2,050 506,349 503,353 2,996 General and administrative expenses 35,285 35,285 — 140,817 140,817 — Reimbursed expenses 5,662 5,662 — 19,632 19,632 — Total operating expenses 174,275 172,225 2,050 666,798 663,802 2,996 Operating income 16,692 15,850 842 68,857 67,615 1,242 Non-operating income (expense) Interest, net 645 645 — 1,141 1,141 — Other, net (1,355 ) (1,355 ) — 494 494 — Net non-operating income (expense) (710 ) (710 ) — 1,635 1,635 — Income before income taxes 15,982 15,140 842 70,492 69,250 1,242 Provision for income taxes 4,787 4,533 254 21,197 20,823 374 Net income $ 11,195 $ 10,607 $ 588 $ 49,295 $ 48,427 $ 868 Basic earnings per share $ 0.59 $ 0.56 $ 0.03 $ 2.61 $ 2.56 $ 0.05 Diluted earnings per share $ 0.58 $ 0.55 $ 0.03 $ 2.52 $ 2.48 $ 0.04 The impact of ASU 2014-09, Revenue from Contracts with Customers, on our Condensed Consolidated Statement of Cash Flows for the twelve months ended December 31, 2018 , was as follows: Twelve Months Ended December 31, 2018 As Reported Balances Without Adoption of ASU 2014-09 Effect of Adoption Higher/(Lower) Cash flows - operating activities Net income $ 49,295 $ 48,427 $ 868 Changes in assets and liabilities, net of effects of acquisitions: Accrued expenses 71,526 62,372 9,154 Deferred revenue (1,899 ) 3,248 (5,147 ) Income taxes payable, net 757 383 374 Other assets and liabilities, net (4,748 ) (663 ) (4,085 ) Net cash provided by operating activities $ 102,902 $ 102,902 $ — |