Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Apr. 30, 2014 | |
Document Information [Line Items] | ' | ' |
Entity Registrant Name | 'EPAM Systems, Inc. | ' |
Entity Central Index Key | '0001352010 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Entity Voluntary Filers | 'No | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 46,988,555 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Document Period End Date | 31-Mar-14 | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Trading Symbol | 'EPAM | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets | ' | ' |
Cash and cash equivalents | $174,066 | $169,207 |
Accounts receivable, net of allowance of $1,936 and $1,800 respectively | 89,932 | 95,431 |
Unbilled revenues | 58,791 | 43,108 |
Prepaid and other current assets | 15,111 | 14,355 |
Employee loans, net of allowance of $0 and $0, respectively, current | 2,114 | 1,989 |
Time deposits | 6,884 | 1,188 |
Short-term security deposits under customer contracts | 0 | 298 |
Deferred tax assets, current | 5,366 | 5,392 |
Total current assets | 352,264 | 330,968 |
Property and equipment, net | 53,072 | 53,315 |
Long-term deposits under employee loan programs | 216 | 225 |
Employee loans, net of allowance of $0 and $0, respectively, long-term | 4,234 | 4,401 |
Intangible assets, net | 12,957 | 13,734 |
Goodwill | 26,392 | 22,268 |
Deferred tax assets, long-term | 4,705 | 4,557 |
Other long-term assets | 4,797 | 3,409 |
Total assets | 458,637 | 432,877 |
Current liabilities | ' | ' |
Accounts payable | 11,812 | 2,835 |
Accrued expenses and other liabilities | 15,314 | 20,175 |
Deferred revenue, current | 4,539 | 4,543 |
Due to employees | 17,305 | 12,665 |
Taxes payable | 10,413 | 14,171 |
Deferred tax liabilities, current | 1,072 | 275 |
Total current liabilities | 60,455 | 54,664 |
Deferred revenue, long-term | 340 | 533 |
Taxes payable, long-term | 1,228 | 1,228 |
Deferred tax liabilities, long-term | 334 | 351 |
Total liabilities | 62,357 | 56,776 |
Commitments and contingencies (See Note 10) | ' | ' |
Stockholders' equity | ' | ' |
Common stock, $0.001 par value; 160,000,000 authorized; 47,893,055 and 47,569,463 shares issued, 46,940,797 and 46,614,916 shares outstanding at March 31, 2014 and December 31, 2013, respectively | 47 | 46 |
Additional paid-in capital | 201,955 | 195,585 |
Retained earnings | 208,350 | 190,986 |
Treasury stock | -8,663 | -8,684 |
Accumulated other comprehensive loss | -5,409 | -1,832 |
Total stockholders' equity | 396,280 | 376,101 |
Total liabilities and stockholders' equity | $458,637 | $432,877 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Current assets | ' | ' |
Accounts receivable, allowance | $1,936 | $1,800 |
Employee loans, current, allowance | 0 | 0 |
Noncurrent assets | ' | ' |
Employee loans, long-term, allowance | $0 | $0 |
Stockholders' equity | ' | ' |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized (in shares) | 160,000,000 | 160,000,000 |
Common stock, shares issued (in shares ) | 47,893,055 | 47,569,463 |
Common stock, shares outstanding (in shares) | 46,940,797 | 46,614,916 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) | ' | ' |
Revenues | $160,384 | $124,198 |
Operating expenses: | ' | ' |
Cost of revenues (exclusive of depreciation and amortization) | 102,454 | 77,937 |
Selling, general and administrative expenses | 32,359 | 27,083 |
Depreciation and amortization expense | 3,689 | 3,617 |
Other operating expenses, net | 25 | 25 |
Income from operations | 21,857 | 15,536 |
Interest and other income, net | 976 | 630 |
Foreign exchange loss | -1,241 | -499 |
Income before provision for income taxes | 21,592 | 15,667 |
Provision for income taxes | 4,228 | 2,987 |
Net income | 17,364 | 12,680 |
Foreign currency translation adjustments | -3,577 | -2,343 |
Comprehensive income | $13,787 | $10,337 |
Net income per share: | ' | ' |
Basic (in dollars per share) | $0.37 | $0.28 |
Diluted (in dollars per share) | $0.35 | $0.27 |
Shares used in calculation of net income per share: | ' | ' |
Basic (in shares) | 46,797 | 44,812 |
Diluted (in shares) | 49,207 | 47,646 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flows from operating activities: | ' | ' |
Net income | $17,364 | $12,680 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 3,689 | 3,617 |
Bad debt expense | 368 | 161 |
Deferred taxes | 97 | 268 |
Stock-based compensation expense | 3,208 | 2,576 |
Excess tax benefits on stock-based compensation plans | -995 | -1,529 |
Other | 294 | 586 |
(Increase)/ decrease in operating assets: | ' | ' |
Accounts receivable | 4,908 | 1,664 |
Unbilled revenues | -15,611 | -18,597 |
Prepaid expenses and other assets | 939 | -103 |
Increase/ (decrease) in operating liabilities: | ' | ' |
Accounts payable | 8,563 | 3,009 |
Accrued expenses and other liabilities | -7,908 | -12,094 |
Deferred revenues | 265 | -1,923 |
Due to employees | 4,711 | 3,191 |
Taxes payable | -3,704 | -5,244 |
Net cash provided by/ (used in) operating activities | 16,188 | -11,738 |
Cash flows used in investing activities: | ' | ' |
Purchases of property and equipment | -2,157 | -2,887 |
Payment for construction of corporate facilities | -1,488 | -808 |
Employee housing loans | -294 | -2,834 |
Proceeds from repayments of employee housing loans | 419 | 0 |
(Increase)/decrease in restricted cash and time deposits, net (Note 3) | -5,387 | 177 |
Decrease/(increase) in other long-term assets, net | -350 | -122 |
Acquisition of businesses, net of cash acquired (Note 2) | -2,419 | 0 |
Net cash used in investing activities | -11,676 | -6,474 |
Cash flows from financing activities: | ' | ' |
Proceeds related to stock options exercises | 2,139 | 2,510 |
Excess tax benefits on stock-based compensation plans | 995 | 1,529 |
Net cash provided by financing activities | 3,134 | 4,039 |
Effect of exchange rate changes on cash and cash equivalents | -2,787 | -1,133 |
Net increase/ (decrease) in cash and cash equivalents | 4,859 | -15,306 |
Cash and cash equivalents, beginning of period | 169,207 | 118,112 |
Cash and cash equivalents, end of period | $174,066 | $102,806 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended | |
Mar. 31, 2014 | ||
BASIS OF PRESENTATION [Abstract] | ' | |
BASIS OF PRESENTATION | ' | |
1 | BASIS OF PRESENTATION | |
The accompanying unaudited interim consolidated financial statements of EPAM Systems, Inc. (the “Company” or “EPAM”) have been prepared in accordance with generally accepted accounting principles in the United States and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The accompanying unaudited condensed consolidated financial statements are prepared in thousands, except share and per share amounts, and should be read in conjunction with the Company’s audited consolidated financial statements (and notes thereto) for the year ended December 31, 2013. In the Company’s opinion, all adjustments considered necessary for a fair presentation of the accompanying unaudited condensed consolidated financial statements have been included, and all adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. | ||
EPAM is a leading provider of complex software engineering solutions and a leader in Central and Eastern European (“CEE”) information technology (“IT”) services delivery. The Company provides these solutions primarily to Fortune Global 2000 companies in multiple verticals, including Independent Software Vendors (“ISVs”) and Technology, Banking and Financial services, Business Information and Media, and Travel and Consumer. | ||
Since EPAM’s inception in 1993, the Company has focused on providing software product development services, software engineering and vertically-oriented custom development solutions through its global delivery model. This has served as a foundation for the Company’s other solutions, including custom application development, application testing, platform-based solutions, application maintenance and support, and infrastructure management. | ||
The Company is incorporated in Delaware with headquarters in Newtown, PA, with multiple delivery centers located in Belarus, Ukraine, Russia, Hungary, Kazakhstan and Poland, and client management locations in the United States, Canada, the United Kingdom, Germany, Sweden, Switzerland, Netherlands, Russia, Kazakhstan, Singapore, Hong Kong and Australia. | ||
Emerging growth company status — In April 2012, several weeks after EPAM’s initial public offering in February 2012, President Obama signed into law the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act contains provisions that relax certain requirements for “emerging growth companies” that otherwise apply to larger public companies. For as long as a company retains emerging growth company status, which may be until the fiscal year-end after the fifth anniversary of its initial public offering, it will not be required to (1) provide an auditor’s attestation report on its management’s assessment of the effectiveness of its internal control over financial reporting, otherwise required by Section 404(b) of the Sarbanes-Oxley Act of 2002, (2) comply with any new or revised financial accounting standard applicable to public companies until such standard is also applicable to private companies, (3) comply with certain new requirements adopted by the Public Company Accounting Oversight Board, (4) provide certain disclosure regarding executive compensation required of larger public companies or (5) hold shareholder advisory votes on matters relating to executive compensation. | ||
EPAM is classified as an emerging growth company under the JOBS Act and is eligible to take advantage of the accommodations described above for as long as it retains this status. However, EPAM has elected not to take advantage of the transition period described in (2) above, which is the exemption provided in Section 7(a)(2)(B) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934 (in each case as amended by the JOBS Act) for complying with new or revised financial accounting standards. EPAM will therefore comply with new or revised financial accounting standards to the same extent that a non-emerging growth company is required to comply with such standards. | ||
Reclassifications — The Company reclassified certain prior period amounts to conform to the current period presentation. Such reclassifications had no effect on the Company’s results of operations or total stockholders’ equity. | ||
Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as revenues and expenses during the reporting period. The Company bases its estimates and judgments on historical experience, knowledge of current conditions and its beliefs of what could occur in the future, given available information. Actual results could differ from those estimates, and such differences may be material to the financial statements. | ||
Fair Value of Financial Instruments — The Company makes significant assumptions about fair values of its financial instruments. Fair value is determined based on the assumptions that market participants would use in pricing the asset or liability. The Company utilizes the following fair value hierarchy in determining fair values: | ||
Level 1 — Quoted prices for identical assets or liabilities in active markets. | ||
Level 2 — Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities, and observable inputs other than quoted prices such as interest rates or yield curves. | ||
Level 3 — Unobservable inputs reflecting our view about the assumptions that market participants would use in pricing the asset or liability. | ||
Where the fair values of financial assets and liabilities recorded in the consolidated balance sheet cannot be derived from an active market, they are determined using a variety of valuation techniques. These valuation techniques include a net present value technique, comparison to similar instruments with market observable inputs, options pricing models and other relevant valuation models. Inputs into these models are taken from observable market data whenever possible, but in instances where it is not feasible, a degree of judgment is required to establish fair values. The Company had no assets or liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013, other than contingent consideration recorded as of March 31, 2014 in connection with the acquisition of Netsoft Holdings, LLC (“Netsoft”) (Note 2). | ||
The Company’s financial assets and liabilities, with the exceptions of employee loans described further herein, are all short term in nature; therefore, the carrying value of these items approximates their fair value. | ||
Employee Housing Loans — The housing loans were classified as Level 3 measurements within the fair value hierarchy because they were valued using significant unobservable inputs. The estimated fair value of these housing loans upon initial recognition was computed by projecting the future contractual cash flows to be received from the loans and discounting those projected net cash flows to a present value, which is the estimated fair value (the “Income Approach”). In applying the Income Approach, the Company analyzed similar loans offered by third-party financial institutions in Belarusian Rubles (“BYR”) and adjusted the interest rates charged on such loans to exclude the effects of underlying economic factors, such as inflation and currency devaluation. The Company also assessed the probability of future defaults and associated cash flows impact. In addition, the Company separately analyzed the rate of return that market participants in Belarus would require when investing in unsecured USD-denominated government bonds with similar maturities (a “risk-free rate”) and evaluated a risk premium component to compensate the market participants for the credit and liquidity risks inherent in the loans’ cash flows, as described in the following paragraph. As a result of the analysis performed, the Company determined the carrying values of the housing loans issued during the three months ended March 31, 2014 approximated their fair values upon initial recognition. The Company also estimated the fair values of the housing loans that were outstanding as of March 31, 2014 using the inputs noted above and determined their fair values approximated the carrying values as of that date. | ||
Employee loans, other — The Company also issues short-term non-interest bearing relocation loans and other employee loans. These loans are considered Level 3 measurements. The Company’s Level 3, unobservable inputs reflect its assumptions about the factors that market participants use in pricing similar receivables, and are based on the best information available in the circumstances. Due to the short-term nature of employee loans (i.e., the relatively short time between the origination of the instrument and its expected realization), the carrying amount is a reasonable estimate of fair value. As of March 31, 2014, the carrying values of these employee loans approximated their fair values. | ||
Goodwill and Other Intangible Assets — The Company accounts for its business combinations using the acquisition accounting method, which requires it to determine the fair value of net assets acquired and the related goodwill and other intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. The Company’s acquisitions usually do not have significant amounts of tangible assets, as the principal assets it typically acquires are customer relationships, trade names, non-competition agreements, and workforce. As a result, a substantial portion of the purchase price is allocated to goodwill and other intangible assets. | ||
Goodwill and intangible assets that have indefinite useful lives are not amortized but are tested annually for impairment. Intangible assets that have finite useful lives are amortized over their estimated useful lives on a straight-line basis. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset’s carrying value, using estimates of undiscounted future cash flows that utilize a discount rate determined by its management to be commensurate with the risk inherent in the Company’s business model over the remaining asset life. The estimates of future cash flows attributable to intangible assets require significant judgment based on the Company’s historical and anticipated results. Any impairment loss is measured by the excess of carrying value over fair value. | ||
Off-Balance Sheet Financial Instruments — include credit instruments, such as commitments to make employee loans and related guarantees, standby letters of credit and guarantees issued under customer contracts. The face amount for these items represents the exposure to loss, before considering available collateral or the borrower’s ability to repay. Such financial instruments are recorded when they are funded. Loss contingencies arising from off-balance sheet credit exposures are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe there are such matters that will have a material effect on the consolidated financial statements. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
ACQUISITIONS [Abstract] | ' | ||||
ACQUISITIONS | ' | ||||
2 | ACQUISITIONS | ||||
Netsoft – On March 5, 2014, the Company acquired substantially all of the assets and assumed certain liabilities of Netsoft Holdings, LLC, a 15-year old company specializing in delivering high-value business and complex IT solutions to healthcare and health insurance companies (“Netsoft”). Concurrently with this transaction, the Company also purchased substantially all of the assets of an Armenia-based Ozsoft, LLC. | |||||
The purchase price was comprised of approximately $5,598 payable with $2,419 in cash upon closing, $1,400 in cash payable upon a 12-month anniversary of March 5, 2014 (the “Closing Date”), and contingent consideration payable in cash, which was valued at $1,825 and was recorded as a liability at the date of acquisition. The contingent consideration payable, if any, is capped at $1,825 and will be based on the formula tied to the EBITDA of Netsoft, as defined in the Asset Purchase Agreement, for the twelve months following the acquisition (the “Earn-Out EBITDA”). | |||||
The Company estimated the contingent consideration based on the expected growth of Netsoft during the earn-out period. As of March 5, 2014, the preliminary purchase consideration paid to acquire Netsoft was as follows: | |||||
Amount | |||||
Cash paid at Closing | $ | 2,419 | |||
Working capital adjustment | (46 | ) | |||
Deferred consideration payable in cash | 1,400 | ||||
Contingent consideration payable in cash | 1,825 | ||||
Total preliminary consideration | $ | 5,598 | |||
In addition, the Company issued to the sellers 2,289 shares of non-vested (“restricted”) common stock contingent on their continued employment with the Company (the “Closing Shares”). These shares have an estimated value of $84 and will be recorded as stock-based compensation expense over an associated service period of three years. The Company also agreed to issue additional shares of restricted stock as part of the earn-out payment. Following the first anniversary of the closing date, the company will calculate the excess of the Earn-Out EBITDA over an estimated amount and issue up to 16,349 shares of restricted stock (the “Earn-Out Shares”). The Earn-Out Shares, if issued, will be subject to the same terms and conditions as the Closing Shares. As of March 5, 2014, the estimated fair value of the Earn-Out shares was $598 and will be recorded as stock-based compensation expense over an associated service period of three years. | |||||
All of the Closing Shares, as well as $256 were placed in escrow for a period of 18 months as a security for the indemnification obligations of the sellers under the asset purchase agreement. | |||||
The purchase price was preliminary allocated to the assets acquired based on their related fair values, as follows: | |||||
Amount | |||||
Trade receivables and other current assets | $ | 788 | |||
Property and equipment | 52 | ||||
Deferred tax asset | 351 | ||||
Goodwill and acquired intangible assets | 4,476 | ||||
Total assets acquired | 5,667 | ||||
Accounts payable and accrued expenses | 69 | ||||
Total liabilities assumed | 69 | ||||
Net assets acquired | $ | 5,598 | |||
The above estimated fair values of the assets acquired and liabilities assumed are provisional and based on the information that was available as of the acquisition date to estimate the fair values of the assets acquired and liabilities assumed. As of March 31, 2014, a balance of $4,476 represented an aggregate value of the acquired intangible assets and goodwill arising from the acquisition of Netsoft and was presented within goodwill on the Company’s condensed consolidated balance sheets. The Company estimates potential value of the acquired intangible assets to be in the range of 35% to 50% of the aggregate balance and is waiting for additional information necessary to finalize the estimated fair values of intangible assets, deferred income taxes, and other amounts. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the Netsoft acquisition date. | |||||
Included in consolidated statements of income and comprehensive income for the three months ended March 31, 2014, were $367 and $76 of revenues and net income of the acquiree, respectively.Total acquisition-related costs were $68 and are presented within selling, general and administrative expenses for the three months ended March 31, 2014. | |||||
Pro forma results of operations for the Netsoft acquisition were not presented because the effects of the acquisition were not material to the Company’s consolidated results of operations. |
RESTRICTED_CASH_AND_TIME_DEPOS
RESTRICTED CASH AND TIME DEPOSITS | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
RESTRICTED CASH AND TIME DEPOSITS [Abstract] | ' | ||||||||
RESTRICTED CASH AND TIME DEPOSITS | ' | ||||||||
3 | RESTRICTED CASH AND TIME DEPOSITS | ||||||||
Restricted cash and time deposits consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Time deposits | $ | 6,884 | $ | 1,188 | |||||
Short-term security deposits under customer contracts | — | 298 | |||||||
Long-term deposits under employee loan programs | 216 | 225 | |||||||
Total | $ | 7,100 | $ | 1,711 | |||||
Included in time deposits as of March 31, 2014, were deposits with varying maturities within 12 months from the reporting date, which earned interest at a weighted average rate of 1.67% during the three months ended March 31, 2014. | |||||||||
Included in time deposits as of December 31, 2013, was a bank deposit of $1,188. The deposit matures on October 15, 2014 and earns interest at the rate of 2.05%. The Company does not intend to withdraw the deposit prior to its maturity. | |||||||||
At December 31, 2013, short-term security deposits under customer contracts included fixed amounts placed in respect of bank guarantees intended to secure appropriate performance under respective contracts. The Company estimates the probability of non-performance under the contracts as remote; therefore, no provision for losses has been created in respect of this amount as of that date. | |||||||||
Also included in restricted cash as of March 31, 2014 and December 31, 2013, were deposits of $216 and $225, respectively, placed in connection with certain employee loan program. |
EMPLOYEE_LOANS_AND_ALLOWANCE_F
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES [Abstract] | ' | ||||||||
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES | ' | ||||||||
4 | EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES | ||||||||
In the third quarter of 2012, the Board of Directors of the Company approved the Employee Housing Program (the “Housing Program”), which assists employees in purchasing housing in Belarus. The Housing Program was designed to be a retention mechanism for the Company’s employees in Belarus and is available to full-time employees who have been with the Company for at least three years. As part of the Housing Program, the Company will extend financing to employees up to an aggregate amount of $10,000. The Company does not bear any market risk in connection with the Housing Program, as the housing will be sold directly to employees by independent third parties. In addition to the housing loans, the Company issues relocation loans in connection with intra-company transfers, as well as certain other individual loans. | |||||||||
During the three months ended March 31, 2014, loans issued by the Company under the Housing Program were denominated in U.S. Dollars with a five-year term and carried an interest rate of 7.5%. | |||||||||
At March 31, 2014 and December 31, 2013, categories of employee loans included in the loan portfolio were as follows: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Housing loans | $ | 5,767 | $ | 5,896 | |||||
Relocation and other loans | 581 | 494 | |||||||
Total employee loans | 6,348 | 6,390 | |||||||
Less: | |||||||||
Allowance for loan losses | — | — | |||||||
Total loans, net of allowance for loan losses | $ | 6,348 | $ | 6,390 | |||||
There were no loans issued to principal officers, directors, and their affiliates during the three months ended March 31, 2014 and 2013. | |||||||||
On a quarterly basis, the Company reviews the aging of its loan portfolio to evaluate information about the ability of employees to service their debt, including historical payment experience, reasons for payment delays and shortfalls, if any, as well as probability of collecting scheduled principal and interest payments based on the knowledge of individual borrowers, among other factors. | |||||||||
As of March 31, 2014 and December 31, 2013, there were no material past due or non-accrual employee loans. The Company determined no allowance for loan losses was required regarding its employee loans as of March 31, 2014 and December 31, 2013 and there were no movements in provision for loan losses during the three months ended March 31, 2014 and 2013. |
LONGTERM_DEBT
LONG-TERM DEBT | 3 Months Ended | ||
Mar. 31, 2014 | |||
LONG-TERM DEBT [Abstract] | ' | ||
LONG-TERM DEBT | ' | ||
5 | LONG-TERM DEBT | ||
Revolving Line of Credit — On January 15, 2013, the Company entered into a revolving loan agreement (the “2013 Credit Facility”) with PNC Bank, National Association (the “Bank”). Under the agreement, the Company’s maximum borrowing capacity was set at $40,000. The 2013 Credit Facility matures on January 15, 2015. Advances under the new line of credit accrue interest at an annual rate equal to the London Interbank Offer Rate, or LIBOR, plus 1.25%. As of March 31, 2014, the borrowing capacity of the Company under the 2013 Credit Facility was $40,000. The Company had no outstanding borrowing as of that date. | |||
The 2013 Credit Facility is collateralized with: (a) all tangible and intangible assets of the Company, and its U.S.-based subsidiaries including all accounts, general intangibles, intellectual property rights, equipment; and (b) all of the outstanding shares of capital stock and other equity interests in U.S.-based subsidiaries of the Company, and 65.0% of the outstanding shares of capital stock and other equity interests in certain of the Company’s foreign subsidiaries. |
EMPLOYEE_BENEFITS
EMPLOYEE BENEFITS | 3 Months Ended | |
Mar. 31, 2014 | ||
EMPLOYEE BENEFITS [Abstract] | ' | |
EMPLOYEE BENEFITS | ' | |
6 | EMPLOYEE BENEFITS | |
The Company has established a 401(k) retirement plan, which is a tax-qualified self-funded retirement plan covering substantially all of the Company’s U.S. employees. Under this plan, employees may elect to defer their current compensation by up to the statutory limit. Effective January 1, 2013, the Company provides discretionary matching contributions to the plan up to a maximum of 2.0% of the employee’s eligible compensation. Employer contributions charged to expense for the three months ended March 31, 2014 and 2013, were $124 and $72, respectively. The Company does not maintain any defined benefit pension plans or any nonqualified deferred compensation plans. |
INCOME_TAXES
INCOME TAXES | 3 Months Ended | |
Mar. 31, 2014 | ||
INCOME TAXES [Abstract] | ' | |
INCOME TAXES | ' | |
7 | INCOME TAXES | |
The Company’s worldwide effective tax rate for the three months ended March 31, 2014 and 2013 was 19.6% and 19.1%, respectively. The increase in the Company’s worldwide effective tax rate for the three months ended March 31, 2014, as compared with the corresponding period of 2013, was primarily due to (a) a larger portion of the Company’s pre-tax profits attributable to tax jurisdictions with relatively higher effective tax rates (as compared to effective tax rates within the Commonwealth of Independent States (“CIS”) region); and (b) a relative shift in offshore services performed in Belarus, where the Company is currently entitled to a 100% exemption from Belarusian income tax, to other countries in the CIS region (specifically Ukraine, and, to a lesser extent, Russia), both of which have higher income tax rates than Belarus. |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
STOCK-BASED COMPENSATION [Abstract] | ' | ||||||||||||
STOCK-BASED COMPENSATION | ' | ||||||||||||
8 | STOCK-BASED COMPENSATION | ||||||||||||
The following costs related to the Company’s stock compensation plans were included in the unaudited consolidated statements of income: | |||||||||||||
Three Months Ended | |||||||||||||
March 31, | |||||||||||||
2014 | 2013 | ||||||||||||
Cost of revenues | $ | 1,403 | $ | 779 | |||||||||
Selling, general and administrative expenses | 1,805 | 1,797 | |||||||||||
Total | $ | 3,208 | $ | 2,576 | |||||||||
On March 5, 2014, the Company completed acquisition of Netsoft (See Note 2). As a result, the Company issued 2,289 shares of non-vested (“restricted”) common stock (the “Closing Shares”). The shares vest 33.33% on each of the first, second and third anniversaries of the closing date. Upon termination of the recipient’s services with the Company with Cause or without Good Reason (in each case, as defined in the escrow agreement), any unvested shares will be forfeited. The fair value of the restricted shares at the time of grant was $84. In addition, the Company agreed to issue additional shares of restricted stock as part of the earn-out payment. Following the first anniversary of the closing date, the company will calculate the excess of the Earn-Out EBITDA over an estimated amount and issue up to 16,349 shares of restricted stock (the “Earn-Out Shares”). The Earn-Out Shares, if issued, will be subject to the same terms and conditions as the Closing Shares. As of March 31, 2014, the Company estimated a total of 16,349 Earn-Out shares to be issued with an estimated fair value of $598. | |||||||||||||
2012 Non-Employee Directors Compensation Plan—On January 11, 2012, the Company approved the 2012 Non-Employee Directors Compensation Plan (“2012 Directors Plan”), which will be used to issue equity grants to its non-employee directors. The Company authorized 600,000 shares of common stock to be reserved for issuance under the plan. The 2012 Directors Plan will expire after ten years and will be administered by the Company’s Board of Directors. | |||||||||||||
2012 Long-Term Incentive Plan — On January 11, 2012, the Company approved the 2012 Long-Term Incentive Plan (“2012 Plan”), which will be used to issue equity grants to employees. As of March 31, 2014, 6,409,034 shares of common stock remained available for issuance under the 2012 Plan. This includes (i) any shares that were available for issuance under the 2006 Plan (as defined below) as of its discontinuance date and that became available for issuance under the 2012 Plan and (ii) any shares that were subject to outstanding awards under the 2006 Plan and have expired or terminated or were cancelled between the discontinuance date of the 2006 Plan and December 31, 2013 and therefore became available for issuance under the 2012 Plan. In addition, up to 2,339,987 shares that are subject to outstanding awards as of March 31, 2014 under the 2006 Plan and that expire or terminate for any reason prior to exercise or that would otherwise have returned to the 2006 Plan’s share reserve under the terms of the 2006 Plan will be available for awards to be granted under the 2012 Plan. | |||||||||||||
During the three months ended March 31, 2014, the Company issued a total of 2,311,000 shares underlying stock options under the 2012 Plan with an aggregate grant-date fair value of $31,284 and a vesting period of generally four years from the time of grant. | |||||||||||||
In addition, on March 27, 2014, the Board of Directors of the Company approved the grants of 65,000 restricted share units (“RSUs”) to certain key management personnel under the 2012 Plan, effective as of March 31, 2014. The RSUs are generally scheduled to vest one-fourth on each of the first, second, third and fourth anniversaries of the grant date, subject to the terms of the 2012 Plan and applicable RSU award agreement, including the termination provisions. In the event of the participant’s termination of service for any reason, unvested RSUs are forfeited as of the date of such termination without any payment to the participant. The fair value of the RSUs at the time of grant was $1,829. | |||||||||||||
2006 Stock Option Plan — Effective May 31, 2006, the Board of Directors of the Company adopted the 2006 Stock Option Plan (the “2006 Plan”). The Company’s stock option plan permitted the granting of options to directors, employees, and certain independent contractors. The Compensation Committee of the Board of Directors generally had the authority to select individuals who were to receive options and to specify the terms and conditions of each option so granted, including the number of shares covered by the option, the exercise price, vesting provisions, and the overall option term. In January 2012, the 2006 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2006 Plan and any shares that are subject to an option that was previously granted under the 2006 Plan and that will expire or terminate for any reason prior to exercise will become again available for issuance under the 2012 Plan. All of the options issued pursuant to the 2006 Plan expire ten years from the date of grant. | |||||||||||||
Stock option activity under the Company’s plans is set forth below: | |||||||||||||
Number of | Weighted Average | Aggregate | |||||||||||
Options | Exercise Price | Intrinsic Value | |||||||||||
Options outstanding at January 1, 2014 | 5,823,536 | $ | 13.99 | $ | 122,003 | ||||||||
Options granted | 2,311,000 | 32.14 | 1,756 | ||||||||||
Options exercised | (323,592 | ) | 6.75 | (8,462 | ) | ||||||||
Options forfeited/cancelled | (58,741 | ) | 18.17 | (865 | ) | ||||||||
Options outstanding at March 31, 2014 | 7,752,203 | $ | 19.67 | $ | 102,562 | ||||||||
Options vested and exercisable at March 31, 2014 | 3,008,362 | $ | 9.76 | $ | 69,613 | ||||||||
Options expected to vest | 4,269,150 | $ | 25.72 | $ | 30,670 | ||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line method over the service period (generally the vesting period). Additionally, the Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses a combination of historical data and other factors to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. There were no material changes with respect to the assumptions used in the Black-Scholes option valuation model during the three months ended March 31, 2014, as compared with the assumptions disclosed in Part II. Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. | |||||||||||||
Summary of restricted stock activity as of March 31, 2014, and changes during the three months then ended is presented below: | |||||||||||||
Number of | Weighted Average Grant Date Fair Value Per Share | ||||||||||||
Shares | |||||||||||||
Unvested restricted stock outstanding at January 1, 2014 | 344,928 | $ | 18.74 | ||||||||||
Restricted stock granted | 2,289 | 36.57 | |||||||||||
Restricted stock vested | (3,520 | ) | 14.67 | ||||||||||
Unvested restricted stock outstanding at March 31, 2014 | 343,697 | $ | 18.9 | ||||||||||
As of March 31, 2014, total unrecognized compensation cost related to non-vested share-based compensation awards was $57,589. That cost is expected to be recognized over the next two years using the weighted average method. |
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
EARNINGS PER SHARE [Abstract] | ' | ||||||||
EARNINGS PER SHARE | ' | ||||||||
9 | EARNINGS PER SHARE | ||||||||
The following table sets forth the computation of basic and diluted earnings per share of common stock as follows: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Numerator for common earnings per share: | |||||||||
Net income | $ | 17,364 | $ | 12,680 | |||||
Numerator for basic and diluted earnings per share | $ | 17,364 | $ | 12,680 | |||||
Denominator for basic earnings per share: | |||||||||
Weighted average common shares outstanding | 46,797 | 44,812 | |||||||
Effect of dilutive securities: | |||||||||
Stock options | 2,410 | 2,834 | |||||||
Denominator for diluted earnings per share | 49,207 | 47,646 | |||||||
Net income per share: | |||||||||
Basic | $ | 0.37 | $ | 0.28 | |||||
Diluted | $ | 0.35 | $ | 0.27 | |||||
For the three months ended March 31, 2014 and 2013, options to purchase approximately 1,271 and 1,373 shares of common stock, respectively, were not included in the calculation of the diluted earnings per share in corresponding periods because the effect would have been anti-dilutive. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended | |
Mar. 31, 2014 | ||
COMMITMENTS AND CONTINGENCIES [Abstract] | ' | |
COMMITMENTS AND CONTINGENCIES | ' | |
10 | COMMITMENTS AND CONTINGENCIES | |
Construction in progress — On December 7, 2011, the Company entered into an agreement with IDEAB Project Eesti AS for the construction of an office building within the High Technologies Park in Minsk, Belarus. The building is expected to be operational in 2014. As of March 31, 2014, total outstanding commitment of the Company was $572. | ||
Indemnifications — In the normal course of business, the Company is a party to a variety of agreements under which it may be obligated to indemnify the other party for certain matters. These obligations typically arise in contracts where the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations or covenants for certain matters such as title to assets and intellectual property rights associated with the sale of products. The duration of these indemnifications varies, and in certain cases, is indefinite. | ||
The Company is unable to reasonably estimate the maximum potential amount of future payments under these or similar agreements due to the unique facts and circumstances of each agreement and the fact that certain indemnifications provide for no limitation to the maximum potential future payments under the indemnification. Management is not aware of any such matters that historically had or would have a material effect on the consolidated financial statements of the Company. | ||
Litigation — From time to time, the Company is involved with litigation, claims or other contingencies. Management is not aware of any such matters that would have a material effect on the consolidated financial statements of the Company. |
OPERATING_SEGMENTS
OPERATING SEGMENTS | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
OPERATING SEGMENTS [Abstract] | ' | ||||||||
OPERATING SEGMENTS | ' | ||||||||
11 | OPERATING SEGMENTS | ||||||||
The Company reports segment information based on the managerial responsibility for its client base. Because managerial responsibility for a particular client relationship generally correlates with the client’s geographic location, there is a high degree of similarity between client locations and the geographic boundaries of the Company’s reportable segments. In some specific cases, however, managerial responsibility for a particular client is assigned to a management team in another region, usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In a case like this, the client’s activity would be reported through the management team’s reportable segment. | |||||||||
The Company’s reportable segments are North America, Europe, Russia and Other. The Company’s Chief Operating Decision Maker (“CODM”) evaluates its performance and allocates resources based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment have similar characteristics and are subject to similar factors, pressures and challenges. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain expenses are not allocated to specific segments, as management does not believe it is practical to allocate such costs to individual segments because they are not directly attributable to any specific segment. Further, stock-based compensation expense is not allocated to individual segments in internal management reports used by the CODM. Accordingly, these expenses are separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations. | |||||||||
Revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments for the three months ended March 31, 2014 and 2013, were as follows: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Total segment revenues: | |||||||||
North America | $ | 80,198 | $ | 63,057 | |||||
Europe | 67,659 | 46,153 | |||||||
Russia | 10,748 | 12,353 | |||||||
Other | 1,392 | 2,613 | |||||||
Total segment revenues | $ | 159,997 | $ | 124,176 | |||||
Segment operating profit: | |||||||||
North America | $ | 18,197 | $ | 14,181 | |||||
Europe | 14,135 | 8,371 | |||||||
Russia | (1,135 | ) | 632 | ||||||
Other | (1,318 | ) | 84 | ||||||
Total segment operating profit | $ | 29,879 | $ | 23,268 | |||||
Intersegment transactions were excluded from the above on the basis that they are neither included into the measure of a segment’s profit and loss by the CODM, nor provided to the CODM on a regular basis. | |||||||||
During the three months ended March 31, 2014, revenues from one customer, UBS AG, accounted for more than 10% of total revenues. Revenues from this customer were $20,024 and were included in the Company’s Europe segment. No customer accounted for more than 10% of our revenues in the corresponding period of 2013. | |||||||||
Reconciliation of segment revenues and operating profit to consolidated income before provision for income taxes is presented below: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Total segment revenues | $ | 159,997 | $ | 124,176 | |||||
Unallocated revenue | 387 | 22 | |||||||
Revenues | $ | 160,384 | $ | 124,198 | |||||
Total segment operating profit: | $ | 29,879 | $ | 23,268 | |||||
Unallocated amounts: | |||||||||
Other revenues | 387 | 22 | |||||||
Stock-based compensation expense | (3,208 | ) | (2,576 | ) | |||||
Non-corporate taxes | (546 | ) | (820 | ) | |||||
Professional fees | (1,314 | ) | (1,350 | ) | |||||
Depreciation and amortization | (655 | ) | (715 | ) | |||||
Bank charges | (247 | ) | (332 | ) | |||||
Other corporate expenses | (2,439 | ) | (1,961 | ) | |||||
Income from operations | 21,857 | 15,536 | |||||||
Interest and other income, net | 976 | 630 | |||||||
Foreign exchange loss | (1,241 | ) | (499 | ) | |||||
Income before provision for income taxes | $ | 21,592 | $ | 15,667 | |||||
Geographic Area Information | |||||||||
Management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably among the segments. Geographical information about the Company’s long-lived assets based on physical location of the assets is as follows: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Belarus | $ | 38,924 | $ | 38,697 | |||||
Ukraine | 5,544 | 5,525 | |||||||
Russia | 3,027 | 3,414 | |||||||
Hungary | 2,592 | 2,644 | |||||||
United States | 1,983 | 2,217 | |||||||
Other | 1,002 | 818 | |||||||
Total | $ | 53,072 | $ | 53,315 | |||||
Long-lived assets include property and equipment, net of accumulated depreciation and amortization. | |||||||||
Information about the Company’s revenues by client location is as follows: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
United States | $ | 69,136 | $ | 57,450 | |||||
United Kingdom | 34,244 | 27,068 | |||||||
Switzerland | 20,532 | 9,280 | |||||||
Russia | 10,390 | 11,738 | |||||||
Canada | 9,981 | 5,425 | |||||||
Germany | 6,132 | 4,533 | |||||||
Sweden | 2,312 | 1,255 | |||||||
Netherlands | 2,118 | 2,386 | |||||||
Kazakhstan | 1,242 | 2,465 | |||||||
Belgium | 641 | — | |||||||
France | 373 | — | |||||||
Italy | 223 | 9 | |||||||
Norway | 189 | — | |||||||
Ukraine | 165 | 188 | |||||||
Spain | 106 | 632 | |||||||
Other locations | 633 | 331 | |||||||
Reimbursable expenses and other revenues | 1,967 | 1,438 | |||||||
Revenues | $ | 160,384 | $ | 124,198 | |||||
Service Offering Information | |||||||||
Information about the Company’s revenues by service offering is as follows: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Software development | $ | 110,687 | $ | 83,780 | |||||
Application testing services | 31,770 | 24,153 | |||||||
Application maintenance and support | 11,378 | 10,839 | |||||||
Infrastructure services | 3,754 | 3,410 | |||||||
Licensing | 828 | 578 | |||||||
Reimbursable expenses and other revenues | 1,967 | 1,438 | |||||||
Revenues | $ | 160,384 | $ | 124,198 |
RECENT_ACCOUNTING_PRONOUNCEMEN
RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended | |
Mar. 31, 2014 | ||
RECENT ACCOUNTING PRONOUNCEMENTS [Abstract] | ' | |
RECENT ACCOUNTING PRONOUNCEMENTS | ' | |
12 | RECENT ACCOUNTING PRONOUNCEMENTS | |
In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 is a new accounting standard on the financial statement presentation of unrecognized tax benefits. The new standard provides that a liability related to an unrecognized tax benefit would be presented as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. The new standard becomes effective for the periods commencing January 1, 2014, and it should be applied prospectively to unrecognized tax benefits that exist at the effective date with retrospective application permitted. The Company adopted the ASU effective January 1, 2014. The adoption of this standard did not have any effect on the Company’s financial conditions, results of operating and cash flows. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended | |
Mar. 31, 2014 | ||
SUBSEQUENT EVENTS [Abstract] | ' | |
SUBSEQUENT EVENTS | ' | |
13 | SUBSEQUENT EVENTS | |
On April 30, 2014, the Company acquired all of the outstanding equity of Joint Technology Development Limited, a company organized under the laws of Hong Kong, including its wholly-owned subsidiaries Jointech Software (Shenzen) Co., Ltd., a company organized under the laws of China, and Jointech Software Pte. Ltd., a company organized under the laws of Singapore (collectively, “Jointech”). The aggregate initial consideration was $20,000 payable in a combination of cash and common stock of the Company and is subject to customary adjustments. In addition, contingent consideration of up to $25,000 payable in cash and common stock may become payable post-closing based on achievement by Jointech of metrics measured over a specified 12-month period ending March 31, 2015 (the “Earn-Out”). |
BASIS_OF_PRESENTATION_Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
BASIS OF PRESENTATION [Abstract] | ' |
Basis of Presentation | ' |
The accompanying unaudited interim consolidated financial statements of EPAM Systems, Inc. (the “Company” or “EPAM”) have been prepared in accordance with generally accepted accounting principles in the United States and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The accompanying unaudited condensed consolidated financial statements are prepared in thousands, except share and per share amounts, and should be read in conjunction with the Company’s audited consolidated financial statements (and notes thereto) for the year ended December 31, 2013. In the Company’s opinion, all adjustments considered necessary for a fair presentation of the accompanying unaudited condensed consolidated financial statements have been included, and all adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. | |
Nature of Operations | ' |
EPAM is a leading provider of complex software engineering solutions and a leader in Central and Eastern European (“CEE”) information technology (“IT”) services delivery. The Company provides these solutions primarily to Fortune Global 2000 companies in multiple verticals, including Independent Software Vendors (“ISVs”) and Technology, Banking and Financial services, Business Information and Media, and Travel and Consumer. | |
Since EPAM’s inception in 1993, the Company has focused on providing software product development services, software engineering and vertically-oriented custom development solutions through its global delivery model. This has served as a foundation for the Company’s other solutions, including custom application development, application testing, platform-based solutions, application maintenance and support, and infrastructure management. | |
The Company is incorporated in Delaware with headquarters in Newtown, PA, with multiple delivery centers located in Belarus, Ukraine, Russia, Hungary, Kazakhstan and Poland, and client management locations in the United States, Canada, the United Kingdom, Germany, Sweden, Switzerland, Netherlands, Russia, Kazakhstan, Singapore, Hong Kong and Australia. | |
Emerging Growth Company Status | ' |
Emerging growth company status — In April 2012, several weeks after EPAM’s initial public offering in February 2012, President Obama signed into law the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act contains provisions that relax certain requirements for “emerging growth companies” that otherwise apply to larger public companies. For as long as a company retains emerging growth company status, which may be until the fiscal year-end after the fifth anniversary of its initial public offering, it will not be required to (1) provide an auditor’s attestation report on its management’s assessment of the effectiveness of its internal control over financial reporting, otherwise required by Section 404(b) of the Sarbanes-Oxley Act of 2002, (2) comply with any new or revised financial accounting standard applicable to public companies until such standard is also applicable to private companies, (3) comply with certain new requirements adopted by the Public Company Accounting Oversight Board, (4) provide certain disclosure regarding executive compensation required of larger public companies or (5) hold shareholder advisory votes on matters relating to executive compensation. | |
EPAM is classified as an emerging growth company under the JOBS Act and is eligible to take advantage of the accommodations described above for as long as it retains this status. However, EPAM has elected not to take advantage of the transition period described in (2) above, which is the exemption provided in Section 7(a)(2)(B) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934 (in each case as amended by the JOBS Act) for complying with new or revised financial accounting standards. EPAM will therefore comply with new or revised financial accounting standards to the same extent that a non-emerging growth company is required to comply with such standards. | |
Reclassifications | ' |
Reclassifications — The Company reclassified certain prior period amounts to conform to the current period presentation. Such reclassifications had no effect on the Company’s results of operations or total stockholders’ equity. | |
Use of Estimates | ' |
Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as revenues and expenses during the reporting period. The Company bases its estimates and judgments on historical experience, knowledge of current conditions and its beliefs of what could occur in the future, given available information. Actual results could differ from those estimates, and such differences may be material to the financial statements. | |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments — The Company makes significant assumptions about fair values of its financial instruments. Fair value is determined based on the assumptions that market participants would use in pricing the asset or liability. The Company utilizes the following fair value hierarchy in determining fair values: | |
Level 1 — Quoted prices for identical assets or liabilities in active markets. | |
Level 2 — Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities, and observable inputs other than quoted prices such as interest rates or yield curves. | |
Level 3 — Unobservable inputs reflecting our view about the assumptions that market participants would use in pricing the asset or liability. | |
Where the fair values of financial assets and liabilities recorded in the consolidated balance sheet cannot be derived from an active market, they are determined using a variety of valuation techniques. These valuation techniques include a net present value technique, comparison to similar instruments with market observable inputs, options pricing models and other relevant valuation models. Inputs into these models are taken from observable market data whenever possible, but in instances where it is not feasible, a degree of judgment is required to establish fair values. The Company had no assets or liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013, other than contingent consideration recorded as of March 31, 2014 in connection with the acquisition of Netsoft Holdings, LLC (“Netsoft”) (Note 2). | |
The Company’s financial assets and liabilities, with the exceptions of employee loans described further herein, are all short term in nature; therefore, the carrying value of these items approximates their fair value. | |
Employee Housing Loans — The housing loans were classified as Level 3 measurements within the fair value hierarchy because they were valued using significant unobservable inputs. The estimated fair value of these housing loans upon initial recognition was computed by projecting the future contractual cash flows to be received from the loans and discounting those projected net cash flows to a present value, which is the estimated fair value (the “Income Approach”). In applying the Income Approach, the Company analyzed similar loans offered by third-party financial institutions in Belarusian Rubles (“BYR”) and adjusted the interest rates charged on such loans to exclude the effects of underlying economic factors, such as inflation and currency devaluation. The Company also assessed the probability of future defaults and associated cash flows impact. In addition, the Company separately analyzed the rate of return that market participants in Belarus would require when investing in unsecured USD-denominated government bonds with similar maturities (a “risk-free rate”) and evaluated a risk premium component to compensate the market participants for the credit and liquidity risks inherent in the loans’ cash flows, as described in the following paragraph. As a result of the analysis performed, the Company determined the carrying values of the housing loans issued during the three months ended March 31, 2014 approximated their fair values upon initial recognition. The Company also estimated the fair values of the housing loans that were outstanding as of March 31, 2014 using the inputs noted above and determined their fair values approximated the carrying values as of that date. | |
Employee loans, other — The Company also issues short-term non-interest bearing relocation loans and other employee loans. These loans are considered Level 3 measurements. The Company’s Level 3, unobservable inputs reflect its assumptions about the factors that market participants use in pricing similar receivables, and are based on the best information available in the circumstances. Due to the short-term nature of employee loans (i.e., the relatively short time between the origination of the instrument and its expected realization), the carrying amount is a reasonable estimate of fair value. As of March 31, 2014, the carrying values of these employee loans approximated their fair values. | |
Goodwill and Other Intangible Assets | ' |
Goodwill and Other Intangible Assets — The Company accounts for its business combinations using the acquisition accounting method, which requires it to determine the fair value of net assets acquired and the related goodwill and other intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. The Company’s acquisitions usually do not have significant amounts of tangible assets, as the principal assets it typically acquires are customer relationships, trade names, non-competition agreements, and workforce. As a result, a substantial portion of the purchase price is allocated to goodwill and other intangible assets. | |
Goodwill and intangible assets that have indefinite useful lives are not amortized but are tested annually for impairment. Intangible assets that have finite useful lives are amortized over their estimated useful lives on a straight-line basis. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset’s carrying value, using estimates of undiscounted future cash flows that utilize a discount rate determined by its management to be commensurate with the risk inherent in the Company’s business model over the remaining asset life. The estimates of future cash flows attributable to intangible assets require significant judgment based on the Company’s historical and anticipated results. Any impairment loss is measured by the excess of carrying value over fair value. | |
Off-Balance Sheet Financial Instruments | ' |
Off-Balance Sheet Financial Instruments — include credit instruments, such as commitments to make employee loans and related guarantees, standby letters of credit and guarantees issued under customer contracts. The face amount for these items represents the exposure to loss, before considering available collateral or the borrower’s ability to repay. Such financial instruments are recorded when they are funded. Loss contingencies arising from off-balance sheet credit exposures are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe there are such matters that will have a material effect on the consolidated financial statements. |
ACQUISITIONS_Tables
ACQUISITIONS (Tables) | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Business Acquisition [Line Items] | ' | ||||
Schedule of Purchase Price Allocation by Component | ' | ||||
The Company estimated the contingent consideration based on the expected growth of Netsoft during the earn-out period. As of March 5, 2014, the preliminary purchase consideration paid to acquire Netsoft was as follows: | |||||
Amount | |||||
Cash paid at Closing | $ | 2,419 | |||
Working capital adjustment | (46 | ) | |||
Deferred consideration payable in cash | 1,400 | ||||
Contingent consideration payable in cash | 1,825 | ||||
Total preliminary consideration | $ | 5,598 | |||
Purchase Price Allocation | ' | ||||
The purchase price was preliminary allocated to the assets acquired based on their related fair values, as follows: | |||||
Amount | |||||
Trade receivables and other current assets | $ | 788 | |||
Property and equipment | 52 | ||||
Deferred tax asset | 351 | ||||
Goodwill and acquired intangible assets | 4,476 | ||||
Total assets acquired | 5,667 | ||||
Accounts payable and accrued expenses | 69 | ||||
Total liabilities assumed | 69 | ||||
Net assets acquired | $ | 5,598 |
RESTRICTED_CASH_AND_TIME_DEPOS1
RESTRICTED CASH AND TIME DEPOSITS (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
RESTRICTED CASH AND TIME DEPOSITS [Abstract] | ' | ||||||||
Components of Restricted Cash and Time Deposits | ' | ||||||||
Restricted cash and time deposits consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Time deposits | $ | 6,884 | $ | 1,188 | |||||
Short-term security deposits under customer contracts | — | 298 | |||||||
Long-term deposits under employee loan programs | 216 | 225 | |||||||
Total | $ | 7,100 | $ | 1,711 |
EMPLOYEE_LOANS_AND_ALLOWANCE_F1
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES [Abstract] | ' | ||||||||
Categories of Employee Loans Included in Loans Portfolio | ' | ||||||||
At March 31, 2014 and December 31, 2013, categories of employee loans included in the loan portfolio were as follows: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Housing loans | $ | 5,767 | $ | 5,896 | |||||
Relocation and other loans | 581 | 494 | |||||||
Total employee loans | 6,348 | 6,390 | |||||||
Less: | |||||||||
Allowance for loan losses | — | — | |||||||
Total loans, net of allowance for loan losses | $ | 6,348 | $ | 6,390 |
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
STOCK-BASED COMPENSATION [Abstract] | ' | ||||||||||||
Costs Related to Stock Compensation Plans | ' | ||||||||||||
The following costs related to the Company’s stock compensation plans were included in the unaudited consolidated statements of income: | |||||||||||||
Three Months Ended | |||||||||||||
March 31, | |||||||||||||
2014 | 2013 | ||||||||||||
Cost of revenues | $ | 1,403 | $ | 779 | |||||||||
Selling, general and administrative expenses | 1,805 | 1,797 | |||||||||||
Total | $ | 3,208 | $ | 2,576 | |||||||||
Stock Option Activity | ' | ||||||||||||
Stock option activity under the Company’s plans is set forth below: | |||||||||||||
Number of | Weighted Average | Aggregate | |||||||||||
Options | Exercise Price | Intrinsic Value | |||||||||||
Options outstanding at January 1, 2014 | 5,823,536 | $ | 13.99 | $ | 122,003 | ||||||||
Options granted | 2,311,000 | 32.14 | 1,756 | ||||||||||
Options exercised | (323,592 | ) | 6.75 | (8,462 | ) | ||||||||
Options forfeited/cancelled | (58,741 | ) | 18.17 | (865 | ) | ||||||||
Options outstanding at March 31, 2014 | 7,752,203 | $ | 19.67 | $ | 102,562 | ||||||||
Options vested and exercisable at March 31, 2014 | 3,008,362 | $ | 9.76 | $ | 69,613 | ||||||||
Options expected to vest | 4,269,150 | $ | 25.72 | $ | 30,670 | ||||||||
Restricted Stock Activity | ' | ||||||||||||
Summary of restricted stock activity as of March 31, 2014, and changes during the three months then ended is presented below: | |||||||||||||
Number of | Weighted Average Grant Date Fair Value Per Share | ||||||||||||
Shares | |||||||||||||
Unvested restricted stock outstanding at January 1, 2014 | 344,928 | $ | 18.74 | ||||||||||
Restricted stock granted | 2,289 | 36.57 | |||||||||||
Restricted stock vested | (3,520 | ) | 14.67 | ||||||||||
Unvested restricted stock outstanding at March 31, 2014 | 343,697 | $ | 18.9 |
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
EARNINGS PER SHARE [Abstract] | ' | ||||||||
Computation of Basic and Diluted Earnings Per Share | ' | ||||||||
The following table sets forth the computation of basic and diluted earnings per share of common stock as follows: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Numerator for common earnings per share: | |||||||||
Net income | $ | 17,364 | $ | 12,680 | |||||
Numerator for basic and diluted earnings per share | $ | 17,364 | $ | 12,680 | |||||
Denominator for basic earnings per share: | |||||||||
Weighted average common shares outstanding | 46,797 | 44,812 | |||||||
Effect of dilutive securities: | |||||||||
Stock options | 2,410 | 2,834 | |||||||
Denominator for diluted earnings per share | 49,207 | 47,646 | |||||||
Net income per share: | |||||||||
Basic | $ | 0.37 | $ | 0.28 | |||||
Diluted | $ | 0.35 | $ | 0.27 |
OPERATING_SEGMENTS_Tables
OPERATING SEGMENTS (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
OPERATING SEGMENTS [Abstract] | ' | ||||||||
Revenues from External Customers and Segment Operating Profit before Unallocated Expenses | ' | ||||||||
Revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments for the three months ended March 31, 2014 and 2013, were as follows: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Total segment revenues: | |||||||||
North America | $ | 80,198 | $ | 63,057 | |||||
Europe | 67,659 | 46,153 | |||||||
Russia | 10,748 | 12,353 | |||||||
Other | 1,392 | 2,613 | |||||||
Total segment revenues | $ | 159,997 | $ | 124,176 | |||||
Segment operating profit: | |||||||||
North America | $ | 18,197 | $ | 14,181 | |||||
Europe | 14,135 | 8,371 | |||||||
Russia | (1,135 | ) | 632 | ||||||
Other | (1,318 | ) | 84 | ||||||
Total segment operating profit | $ | 29,879 | $ | 23,268 | |||||
Reconciliation of Segment Revenues and Operating Profit to Consolidated Income Before Provision for Income Taxes | ' | ||||||||
Reconciliation of segment revenues and operating profit to consolidated income before provision for income taxes is presented below: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Total segment revenues | $ | 159,997 | $ | 124,176 | |||||
Unallocated revenue | 387 | 22 | |||||||
Revenues | $ | 160,384 | $ | 124,198 | |||||
Total segment operating profit: | $ | 29,879 | $ | 23,268 | |||||
Unallocated amounts: | |||||||||
Other revenues | 387 | 22 | |||||||
Stock-based compensation expense | (3,208 | ) | (2,576 | ) | |||||
Non-corporate taxes | (546 | ) | (820 | ) | |||||
Professional fees | (1,314 | ) | (1,350 | ) | |||||
Depreciation and amortization | (655 | ) | (715 | ) | |||||
Bank charges | (247 | ) | (332 | ) | |||||
Other corporate expenses | (2,439 | ) | (1,961 | ) | |||||
Income from operations | 21,857 | 15,536 | |||||||
Interest and other income, net | 976 | 630 | |||||||
Foreign exchange loss | (1,241 | ) | (499 | ) | |||||
Income before provision for income taxes | $ | 21,592 | $ | 15,667 | |||||
Geographical Information of Long-Lived Assets Based on Physical Location | ' | ||||||||
Management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably among the segments. Geographical information about the Company’s long-lived assets based on physical location of the assets is as follows: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Belarus | $ | 38,924 | $ | 38,697 | |||||
Ukraine | 5,544 | 5,525 | |||||||
Russia | 3,027 | 3,414 | |||||||
Hungary | 2,592 | 2,644 | |||||||
United States | 1,983 | 2,217 | |||||||
Other | 1,002 | 818 | |||||||
Total | $ | 53,072 | $ | 53,315 | |||||
Revenues by Client Location | ' | ||||||||
Information about the Company’s revenues by client location is as follows: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
United States | $ | 69,136 | $ | 57,450 | |||||
United Kingdom | 34,244 | 27,068 | |||||||
Switzerland | 20,532 | 9,280 | |||||||
Russia | 10,390 | 11,738 | |||||||
Canada | 9,981 | 5,425 | |||||||
Germany | 6,132 | 4,533 | |||||||
Sweden | 2,312 | 1,255 | |||||||
Netherlands | 2,118 | 2,386 | |||||||
Kazakhstan | 1,242 | 2,465 | |||||||
Belgium | 641 | — | |||||||
France | 373 | — | |||||||
Italy | 223 | 9 | |||||||
Norway | 189 | — | |||||||
Ukraine | 165 | 188 | |||||||
Spain | 106 | 632 | |||||||
Other locations | 633 | 331 | |||||||
Reimbursable expenses and other revenues | 1,967 | 1,438 | |||||||
Revenues | $ | 160,384 | $ | 124,198 | |||||
Revenues by Service Offering | ' | ||||||||
Information about the Company’s revenues by service offering is as follows: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Software development | $ | 110,687 | $ | 83,780 | |||||
Application testing services | 31,770 | 24,153 | |||||||
Application maintenance and support | 11,378 | 10,839 | |||||||
Infrastructure services | 3,754 | 3,410 | |||||||
Licensing | 828 | 578 | |||||||
Reimbursable expenses and other revenues | 1,967 | 1,438 | |||||||
Revenues | $ | 160,384 | $ | 124,198 |
ACQUISITIONS_Details
ACQUISITIONS (Details) (Netsoft, USD $) | 0 Months Ended | 3 Months Ended |
In Thousands, except Share data, unless otherwise specified | Mar. 05, 2014 | Mar. 31, 2014 |
Business Acquisition, Cost of Acquired Entity [Abstract] | ' | ' |
Total consideration | $5,598 | ' |
Cash paid at Closing | 2,419 | ' |
Working capital adjustment | -46 | ' |
Deferred Consideration Payable In Cash | 1,400 | ' |
Contingent consideration payable in cash | 1,825 | ' |
Business acquisition, deferred consideration payment period | ' | '12 months |
Consideration Placed In Escrow, Period | ' | '18 months |
Cash Consideration Placed In Escrow | 256 | ' |
Vesting period | ' | '3 years |
Business acquisition, purchase price allocation [Abstract] | ' | ' |
Trade receivables and other current assets | 788 | ' |
Property and equipment | 52 | ' |
Deferred tax asset | 351 | ' |
Goodwill and acquired intangible assets | 4,476 | ' |
Total assets acquired | 5,667 | ' |
Net assets acquired | 5,598 | ' |
Accounts payable and accrued expenses | 69 | ' |
Total liabilities assumed | 69 | ' |
Business acquisition, purchase price allocation, amortizable intangible assets, estimated fair value of acquired intangible assets, percentage | ' | 35.00% |
Business acquisition, purchase price allocation, status | ' | 'The above estimated fair values of the assets acquired and liabilities assumed are provisional and based on the information that was available as of the acquisition date to estimate the fair values of the assets acquired and liabilities assumed. As of March 31, 2014, a balance of $4,476 represented an aggregate value of the acquired intangible assets and goodwill arising from the acquisition of Netsoft and was presented within goodwill on the Companybs condensed consolidated balance sheets. The Company estimates potential value of the acquired intangible assets to be in the range of 35% to 50% of the aggregate balance and is waiting for additional information necessary to finalize the estimated fair values of intangible assets, deferred income taxes, and other amounts. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the Netsoft acquisition date. |
Revenue of acquiree included in consolidated statements of income | ' | 367 |
Net income (losses) of acquiree included in consolidated statements of income | ' | 76 |
Acquisition related costs | ' | 68 |
Closing Shares [Member] | ' | ' |
Business Acquisition, Cost of Acquired Entity [Abstract] | ' | ' |
Restricted (non-vested) stock issued or issuable, number of shares | 2,289 | ' |
Restricted (non-vested) stock issued or issuable, value assigned | 84 | ' |
Earn-Out Shares [Member] | ' | ' |
Business Acquisition, Cost of Acquired Entity [Abstract] | ' | ' |
Restricted (non-vested) stock issued or issuable, number of shares | 16,349 | ' |
Restricted (non-vested) stock issued or issuable, value assigned | 598 | ' |
Maximum [Member] | ' | ' |
Business Acquisition, Cost of Acquired Entity [Abstract] | ' | ' |
Business acquisition, contingent consideration, potential cash payment | ' | $1,825 |
Business acquisition, purchase price allocation [Abstract] | ' | ' |
Business acquisition, purchase price allocation, amortizable intangible assets, estimated fair value of acquired intangible assets, percentage | ' | 50.00% |
RESTRICTED_CASH_AND_TIME_DEPOS2
RESTRICTED CASH AND TIME DEPOSITS (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Schedule Of Deposits Assets Current And Noncurrent [Line Items] | ' | ' |
Time deposits | $6,884 | $1,188 |
Short-term security deposits under customer contracts | 0 | 298 |
Long-term deposits under employee loan programs | 216 | 225 |
Total | 7,100 | 1,711 |
Interest rate of time deposits | 1.67% | 2.05% |
Provision for losses | ' | $0 |
EMPLOYEE_LOANS_AND_ALLOWANCE_F2
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' | ' |
Total employee loans | $6,348 | ' | $6,390 |
Less: Allowance for loan losses | 0 | ' | 0 |
Total loans, net of allowance for loan losses | 6,348 | ' | 6,390 |
Loans issued to principal officers, directors and affiliates | 0 | ' | 0 |
Loans Under Employee Housing Program [Member] | ' | ' | ' |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' | ' |
Minimum service period for employee housing program | '3 years | ' | ' |
Loans authorized for issuance, amount | 10,000 | ' | ' |
Loan term | '5 years | ' | ' |
Interest rate on loan | 7.50% | ' | ' |
Total employee loans | 5,767 | ' | 5,896 |
Loans, recorded investment, past due | 0 | ' | 0 |
Loans, recorded investment, nonaccrual status | 0 | ' | 0 |
Provision for loan losses | 0 | 0 | ' |
Relocation and Other Loans [Member] | ' | ' | ' |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' | ' |
Total employee loans | $581 | ' | $494 |
LONGTERM_DEBT_Details
LONG-TERM DEBT (Details) (2013 Credit Facility, USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2014 |
2013 Credit Facility | ' |
Debt Instrument [Line Items] | ' |
Line of credit, maximum borrowing capacity | $40,000 |
Line of credit, expiration date | 15-Jan-15 |
Line of credit, current borrowing capacity | $40,000 |
Variable rate in addition to LIBOR | 1.25% |
Percentage of foreign subsidiaries outstanding shares of capital stock serves as collateral | 65.00% |
EMPLOYEE_BENEFITS_Details
EMPLOYEE BENEFITS (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
EMPLOYEE BENEFITS [Abstract] | ' | ' |
Discretionary matching contribution to retirement plan by employer | 2.00% | 2.00% |
Contribution by employer for retirement plan | $124 | $72 |
INCOME_TAXES_Details
INCOME TAXES (Details) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Income Taxes [Line Items] | ' | ' |
Effective tax rate | 19.60% | 19.10% |
Belarus [Member] | ' | ' |
Income Taxes [Line Items] | ' | ' |
Tax exempt income | 100.00% | ' |
STOCKBASED_COMPENSATION_Costs_
STOCK-BASED COMPENSATION, Costs Related To Stock Compensation Plans (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Stock-based compensation expense | $3,208 | $2,576 |
Cost of revenues [Member] | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Stock-based compensation expense | 1,403 | 779 |
Selling, general and administrative expenses [Member] | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Stock-based compensation expense | $1,805 | $1,797 |
STOCKBASED_COMPENSATION_StockB
STOCK-BASED COMPENSATION, Stock-Based Compensation - Additional Information (Details) (USD $) | 3 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | |||||||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 05, 2014 | Mar. 31, 2014 | Mar. 05, 2014 | Jan. 11, 2012 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 05, 2017 | Mar. 05, 2016 | Mar. 05, 2015 |
Restricted Stock [Member] | Restricted Stock [Member] | Restricted Stock [Member] | 2012 Non Employee Directors Compensation Plan | 2012 Long Term Incentive Plan | 2012 Long Term Incentive Plan | 2012 Long Term Incentive Plan | 2006 Stock Option Plan | 2006 Stock Option Plan | Scenario, Forecast | Scenario, Forecast | Scenario, Forecast | ||
Netsoft | Netsoft | Netsoft | Restricted Stock Units (RSUs) | Restricted Stock Units (RSUs) | Stock Options [Member] | Stock Options [Member] | Stock Options [Member] | Restricted Stock [Member] | Restricted Stock [Member] | Restricted Stock [Member] | |||
Earn-Out Stock [Member] | Earn-Out Stock [Member] | Maximum | Netsoft | Netsoft | Netsoft | ||||||||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Deferred compensation, shares issued | ' | ' | 16,349 | ' | ' | 65,000 | ' | ' | ' | ' | ' | ' | ' |
Deferred compensation arrangement, fair value of shares issued | ' | ' | $598 | ' | ' | $1,829 | ' | ' | ' | ' | ' | ' | ' |
Maximum number of Earn-Out shares issuable | ' | ' | ' | 16,349 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares authorized to be reserved for issuance (in shares) | ' | ' | ' | ' | 600,000 | ' | ' | ' | ' | ' | ' | ' | ' |
2012 Directors Plan expiration period | ' | ' | ' | ' | '10 years | ' | ' | ' | ' | ' | ' | ' | ' |
Non-vested common stock shares issued (in shares) | ' | 2,289 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of restricted shares vested (in hundredths) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 33.33% | 33.33% | 33.30% |
Fair value of share based payment award | ' | 84 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock shares subject to outstanding awards that expire or terminate that are available for awards to be granted (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,339,987 | ' | ' | ' |
Common stock shares available for issuance (in shares) | ' | ' | ' | ' | ' | ' | ' | 6,409,034 | ' | ' | ' | ' | ' |
Stock options issued (in shares) | ' | ' | ' | ' | ' | ' | ' | 2,311,000 | ' | ' | ' | ' | ' |
Stock options issued, grant date fair value | ' | ' | ' | ' | ' | ' | ' | 31,284 | ' | ' | ' | ' | ' |
Options issued expiration period | ' | ' | ' | ' | ' | ' | ' | ' | '10 years | ' | ' | ' | ' |
Stock options vesting term | ' | ' | ' | ' | ' | ' | '4 years | '4 years | ' | ' | ' | ' | ' |
Total unrecognized compensation cost related to non-vested share-based compensation awards granted | $57,589 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total unrecognized compensation cost related to non-vested share-based compensation awards granted, period for recognition | '2 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
STOCKBASED_COMPENSATION_Stock_
STOCK-BASED COMPENSATION, Stock Option Activity (Details) (USD $) | 3 Months Ended |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 |
Number of Options | ' |
Options outstanding at January 1, 2014 | 5,823,536 |
Options granted | 2,311,000 |
Options exercised | -323,592 |
Options forfeited/cancelled | -58,741 |
Options outstanding at March 31, 2014 | 7,752,203 |
Options vested and exercisable at March 31, 2014 | 3,008,362 |
Options expected to vest | 4,269,150 |
Weighted-Average Exercise Price | ' |
Options outstanding at January 1, 2014 | $13.99 |
Options granted | $32.14 |
Options exercised | $6.75 |
Options forfeited/cancelled | $18.17 |
Options outstanding at March 31, 2014 | $19.67 |
Options vested and exercisable at March 31, 2014 | $9.76 |
Options expected to vest | $25.72 |
Aggregate Intrinsic Value | ' |
Options outstanding at January 1, 2014 | $122,003 |
Options granted | 1,756 |
Options exercised | -8,462 |
Options forfeited/cancelled | -865 |
Options outstanding at March 31, 2014 | 102,562 |
Options vested and exercisable at March 31, 2014 | 69,613 |
Options expected to vest | $30,670 |
STOCKBASED_COMPENSATION_Stock_1
STOCK-BASED COMPENSATION, Stock Compensation Plans (Details) (Restricted Stock [Member], USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Restricted Stock [Member] | ' |
Number of Shares | ' |
Unvested restricted stock outstanding at January 1, 2014 | 344,928 |
Restricted stock granted | 2,289 |
Restricted stock vested | -3,520 |
Unvested restricted stock outstanding at March 31, 2014 | 343,697 |
Weighted-Average Grant Date Fair Value Per Share | ' |
Unvested restricted stock outstanding at January 1, 2014 | $18.74 |
Restricted stock granted | $36.57 |
Restricted stock vested | $14.67 |
Unvested restricted stock outstanding at March 31, 2014 | $18.90 |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Numerator for earnings per share: | ' | ' |
Net income | $17,364 | $12,680 |
Net income attributable to common stockholders, basic and diluted earnings per shares | $17,364 | $12,680 |
Denominator for basic earnings per share: | ' | ' |
Weighted average common shares outstanding (in shares) | 46,797 | 44,812 |
Effect of dilutive securities (in shares): | ' | ' |
Stock options | 2,410 | 2,834 |
Denominator for diluted earnings per share (in shares) | 49,207 | 47,646 |
Net income per share: | ' | ' |
Basic (in dollars per share) | $0.37 | $0.28 |
Diluted (in dollars per share) | $0.35 | $0.27 |
Anti-dilutive options not included in the calculation (in shares) | 1,271 | 1,373 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (Construction in Progress [Member], USD $) | Mar. 31, 2014 |
In Thousands, unless otherwise specified | |
Construction in Progress [Member] | ' |
Commitments and Contingencies [Line Items] | ' |
Total commitment | $572 |
OPERATING_SEGMENTS_Revenues_fr
OPERATING SEGMENTS, Revenues from External Customers and Segment Operating Profit Before Unallocated Expenses (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Customer | Customer | |
Segment Reporting Information [Line Items] | ' | ' |
Revenues | $160,384 | $124,198 |
Operating profit | 21,857 | 15,536 |
Number Of Customers Accounted For More Than Ten Percentage Of Revenue | 1 | 0 |
UBS AG [Member] | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Entity-Wide Revenue, Major Customer, Amount | 20,024 | ' |
Russia [Member] | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Revenues | 10,390 | 11,738 |
Operating Segments [Member] | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Revenues | 159,997 | 124,176 |
Operating profit | 29,879 | 23,268 |
Operating Segments [Member] | North America [Member] | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Revenues | 80,198 | 63,057 |
Operating profit | 18,197 | 14,181 |
Operating Segments [Member] | Europe [Member] | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Revenues | 67,659 | 46,153 |
Operating profit | 14,135 | 8,371 |
Operating Segments [Member] | Russia [Member] | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Revenues | 10,748 | 12,353 |
Operating profit | -1,135 | 632 |
Operating Segments [Member] | Other Reportable Segments [Member] | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Revenues | 1,392 | 2,613 |
Operating profit | ($1,318) | $84 |
OPERATING_SEGMENTS_Reconciliat
OPERATING SEGMENTS, Reconciliation of Segment Revenues and Operating Profit to Consolidated Income From Operations (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | $160,384 | $124,198 |
Segment Reporting Information [Line Items] | ' | ' |
Income from operations | 21,857 | 15,536 |
Other revenues | 387 | 22 |
Stock-based compensation expense | -3,208 | -2,576 |
Non-corporate taxes | -546 | -820 |
Professional fees | -1,314 | -1,350 |
Depreciation and amortization | -3,689 | -3,617 |
Bank charges | -247 | -332 |
Other corporate expenses | -2,439 | -1,961 |
Interest and other income, net | 976 | 630 |
Foreign exchange loss | -1,241 | -499 |
Income before provision for income taxes | 21,592 | 15,667 |
Operating Segments [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 159,997 | 124,176 |
Segment Reporting Information [Line Items] | ' | ' |
Income from operations | 29,879 | 23,268 |
Unallocated Amounts [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 387 | 22 |
Segment Reporting Information [Line Items] | ' | ' |
Depreciation and amortization | ($655) | ($715) |
OPERATING_SEGMENTS_Geographica
OPERATING SEGMENTS, Geographical Information of Long-Lived Assets Based on Physical Location (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | $53,072 | $53,315 |
Belarus [Member] | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 38,924 | 38,697 |
Ukraine [Member] | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 5,544 | 5,525 |
Russia [Member] | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 3,027 | 3,414 |
Hungary [Member] | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 2,592 | 2,644 |
United States [Member] | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 1,983 | 2,217 |
Other locations [Member] | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | $1,002 | $818 |
OPERATING_SEGMENTS_Revenues_by
OPERATING SEGMENTS, Revenues by Client Location (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | $160,384 | $124,198 |
Reimbursable expenses and other revenues [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 1,967 | 1,438 |
United States [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 69,136 | 57,450 |
United Kingdom [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 34,244 | 27,068 |
Switzerland [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 20,532 | 9,280 |
Russia [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 10,390 | 11,738 |
Canada [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 9,981 | 5,425 |
Germany [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 6,132 | 4,533 |
Sweden [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 2,312 | 1,255 |
Netherlands [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 2,118 | 2,386 |
Kazakhstan [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 1,242 | 2,465 |
Belgium [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 641 | 0 |
France [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 373 | 0 |
Italy [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 223 | 9 |
Norway [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 189 | 0 |
Ukraine [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 165 | 188 |
Spain [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | 106 | 632 |
Other Countries [Member] | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' |
Revenues | $633 | $331 |
OPERATING_SEGMENTS_Revenues_by1
OPERATING SEGMENTS, Revenues by Service Offering (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Revenue from External Customer [Line Items] | ' | ' |
Revenues | $160,384 | $124,198 |
Software development [Member] | ' | ' |
Revenue from External Customer [Line Items] | ' | ' |
Revenues | 110,687 | 83,780 |
Application testing services [Member] | ' | ' |
Revenue from External Customer [Line Items] | ' | ' |
Revenues | 31,770 | 24,153 |
Application maintenance and support [Member] | ' | ' |
Revenue from External Customer [Line Items] | ' | ' |
Revenues | 11,378 | 10,839 |
Infrastructure services [Member] | ' | ' |
Revenue from External Customer [Line Items] | ' | ' |
Revenues | 3,754 | 3,410 |
Licensing [Member] | ' | ' |
Revenue from External Customer [Line Items] | ' | ' |
Revenues | 828 | 578 |
Reimbursable expenses and other revenues [Member] | ' | ' |
Revenue from External Customer [Line Items] | ' | ' |
Revenues | $1,967 | $1,438 |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (Business Acquisition [Member], Jointech [Member], USD $) | 0 Months Ended |
In Thousands, unless otherwise specified | Apr. 30, 2014 |
Subsequent Event [Line Items] | ' |
Earn-Out Period, Months | '12 months |
Maximum | ' |
Subsequent Event [Line Items] | ' |
Contingent consideration, maximum | 25,000 |
Business combination, consideration transferred, total | 20,000 |