Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Oct. 31, 2014 | |
Document Documentand Entity Information [Abstract] | ' | ' |
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 | ' | 47,906,033 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Document Period End Date | 30-Sep-14 | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Trading Symbol | 'EPAM | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets | ' | ' |
Cash and cash equivalents | $191,246 | $169,207 |
Accounts receivable, net of allowance of $2,385 and $1,800, respectively | 113,940 | 95,431 |
Unbilled revenues | 70,926 | 43,108 |
Prepaid and other current assets | 18,188 | 14,355 |
Employee loans, net of allowance of $0 and $0, respectively, current | 2,349 | 1,989 |
Time deposits | 1,061 | 1,188 |
Restricted cash, current | 0 | 298 |
Deferred tax assets, current | 4,230 | 5,392 |
Total current assets | 401,940 | 330,968 |
Property and equipment, net | 54,665 | 53,315 |
Restricted cash, long-term | 208 | 225 |
Employee loans, net of allowance of $0 and $0, respectively, long-term | 4,207 | 4,401 |
Intangible assets, net | 46,280 | 13,734 |
Goodwill | 39,055 | 22,268 |
Deferred tax assets, long-term | 14,929 | 4,557 |
Other long-term assets | 3,747 | 3,409 |
Total assets | 565,031 | 432,877 |
Current liabilities | ' | ' |
Accounts payable | 6,027 | 2,835 |
Accrued expenses and other liabilities | 31,665 | 20,175 |
Deferred revenue, current | 2,282 | 4,543 |
Due to employees | 22,371 | 12,665 |
Taxes payable | 20,317 | 14,171 |
Deferred tax liabilities, current | 1,406 | 275 |
Total current liabilities | 84,068 | 54,664 |
Other long-term liabilities (Note 2 and 4) | 31,672 | 0 |
Deferred revenue, long-term | 113 | 533 |
Taxes payable, long-term | 0 | 1,228 |
Deferred tax liabilities, long-term | 3,478 | 351 |
Total liabilities | 119,331 | 56,776 |
Commitments and contingencies (Note 11) | ' | ' |
Stockholders’ equity | ' | ' |
Common stock, $0.001 par value; 160,000,000 authorized; 48,405,957 and 47,569,463 shares issued, 47,691,502 and 46,614,916 shares outstanding at September 30, 2014 and December 31, 2013, respectively | 48 | 46 |
Additional paid-in capital | 220,722 | 195,585 |
Retained earnings | 242,204 | 190,986 |
Treasury stock | -6,500 | -8,684 |
Accumulated other comprehensive loss | -10,774 | -1,832 |
Total stockholders’ equity | 445,700 | 376,101 |
Total liabilities and stockholders’ equity | $565,031 | $432,877 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Current assets | ' | ' |
Accounts receivable allowance | $2,385 | $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 ) | 48,405,957 | 47,569,463 |
Common stock, shares outstanding (in shares) | 47,691,502 | 46,614,916 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Income Statement [Abstract] | ' | ' | ' | ' |
Revenues | $192,764 | $140,150 | $527,843 | $397,532 |
Operating expenses: | ' | ' | ' | ' |
Cost of revenues (exclusive of depreciation and amortization) | 122,509 | 88,539 | 335,065 | 250,023 |
Selling, general and administrative expenses | 42,875 | 27,893 | 113,905 | 83,517 |
Depreciation and amortization expense | 5,510 | 3,906 | 14,650 | 11,377 |
Other operating expenses, net | 35 | -418 | 2,055 | -686 |
Income from operations | 21,835 | 20,230 | 62,168 | 53,301 |
Interest and other income, net | 1,261 | 846 | 3,401 | 2,245 |
Foreign exchange loss | -718 | -720 | -3,198 | -2,088 |
Income before provision for income taxes | 22,378 | 20,356 | 62,371 | 53,458 |
Provision for income taxes | 3,338 | 3,919 | 11,153 | 10,223 |
Net income | 19,040 | 16,437 | 51,218 | 43,235 |
Foreign currency translation adjustments | -8,260 | 2,975 | -8,943 | -413 |
Comprehensive income | $10,780 | $19,412 | $42,275 | $42,822 |
Net income per share: | ' | ' | ' | ' |
Basic (in dollars per share) | $0.40 | $0.36 | $1.09 | $0.95 |
Diluted (in dollars per share) | $0.38 | $0.34 | $1.03 | $0.90 |
Shares used in calculation of net income per share: | ' | ' | ' | ' |
Basic (in shares) | 47,315 | 46,162 | 47,058 | 45,492 |
Diluted (in shares) | 49,829 | 48,720 | 49,530 | 48,120 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Cash flows from operating activities: | ' | ' |
Net income | $51,218 | $43,235 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 14,650 | 11,377 |
Bad debt expense | 946 | 988 |
Deferred taxes | 275 | 735 |
Stock-based compensation expense | 16,524 | 9,791 |
Excess tax benefit on stock-based compensation plans | -2,551 | -4,924 |
Other | 2,607 | 1,140 |
(Increase)/ decrease in operating assets: | ' | ' |
Accounts receivable | -18,126 | -11,089 |
Unbilled revenues | -26,070 | -31,373 |
Prepaid expenses and other assets | 525 | 1,422 |
Increase/ (decrease) in operating liabilities: | ' | ' |
Accounts payable | -264 | 2,475 |
Accrued expenses and other liabilities | 6,346 | -10,822 |
Deferred revenues | -2,067 | -3,811 |
Due to employees | 7,121 | 2,581 |
Taxes payable | 5,035 | 70 |
Net cash provided by operating activities | 56,169 | 11,795 |
Cash flows from investing activities: | ' | ' |
Purchases of property and equipment | -8,164 | -10,928 |
Payment for construction of corporate facilities | -3,541 | -3,508 |
Employee housing loans | -1,316 | -7,045 |
Proceeds from repayments of employee housing loans | 1,303 | 1,270 |
Decrease in restricted cash and time deposits, net | 307 | 1,679 |
Increase in other long-term assets, net | -499 | -323 |
Acquisition of businesses, net of cash acquired (Note 2) | -26,498 | -20 |
Net cash used in investing activities | -38,408 | -18,875 |
Cash flows from financing activities: | ' | ' |
Proceeds related to stock options exercises | 6,808 | 7,783 |
Excess tax benefit on stock-based compensation plans | 2,551 | 4,924 |
Net cash provided by financing activities | 9,359 | 12,707 |
Effect of exchange rate changes on cash and cash equivalents | -5,081 | -760 |
Net increase in cash and cash equivalents | 22,039 | 4,867 |
Cash and cash equivalents, beginning of period | 169,207 | 118,112 |
Cash and cash equivalents, end of period | 191,246 | 122,979 |
Noncash financing activities: | ' | ' |
Deferred consideration payable | 5,400 | 0 |
Contingent consideration payable | $28,225 | $0 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
BASIS OF PRESENTATION | ' |
BASIS OF PRESENTATION | |
The accompanying unaudited condensed consolidated financial statements ("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 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 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, Bulgaria, China, Armenia and Poland, and client management locations in the United States, Canada, the United Kingdom, Germany, Sweden, Switzerland, Netherlands, Russia, Kazakhstan, Singapore, China, 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, it will not be required to (1) provide an auditor’s attestation report on the Company’s 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 currently 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. As of the end of the current fiscal year, EPAM's filing status will change to large accelerated filer and EPAM will no longer meet the eligibility requirements under the JOBS Act as of January 1, 2015. While EPAM is classified as an emerging growth company, it 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. | |
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 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. | |
Revenue Recognition — The Company recognizes revenue when realized or realizable and earned, which is when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report. If there is an uncertainty about the project completion or receipt of payment for the consulting services, revenues are deferred until the uncertainty is sufficiently resolved. At the time revenues are recognized, the Company provides for any contractual deductions and reduces revenues accordingly. The Company defers amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues as services are performed in subsequent periods. Unbilled revenues represent services provided which are billed subsequent to the period end in accordance with the contract terms. | |
The Company derives its revenues from a variety of service offerings, which represent specific competencies of its IT professionals. Contracts for these services have different terms and conditions based on the scope, deliverables, and complexity of the engagement, which require management to make judgments and estimates in determining appropriate revenue recognition pattern. Fees for these contracts may be in the form of time-and-materials or fixed-price arrangements. | |
From time to time, the Company enters into multiple element arrangements with its customers. In the vast majority of cases such multiple-element arrangements represent fixed-priced arrangements to develop a customized IT solution to meet the customer’s needs combined with warranty support over a specified period of time in the future, to which it refers to as the “warranty period.” Typically, the Company’s customers retain full intellectual property (IP) rights to the results of its services, and the software element created in lieu of such services is no more than incidental to any of the service deliverables, as defined in accordance with ASC 985-605-15-13. For such arrangements the Company follows the guidance set forth in ASC 605-25, Revenue Recognition – Multiple Element Arrangements, as to whether multiple deliverables exist, how the arrangement should be separated, and how the consideration should be allocated. The Company recognizes revenues related to the delivered services only if all revenue recognition criteria are met and the delivered element has a standalone value to the customer and allocates total consideration among the deliverables based on their relative selling prices. Revenues related to the software development services are recognized under the proportional performance method, as described above, while warranty support services are recognized on a straight-line basis over the warranty period. The warranty period is generally three months to two years. | |
The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the condensed consolidated statements of income and comprehensive income. | |
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 sheets 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 reasonably feasible, a degree of judgment is required to establish fair values. | |
Financial Assets and Liabilities Measured At Fair Value on a Recurring Basis | |
The Company had no assets or liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, other than contingent liabilities in connection with the acquisitions of businesses. | |
At September 30, 2014, contingent liabilities measured at fair value on a recurring basis comprised contingent consideration payable in cash and stock, and performance-based awards issued to certain former owners of the acquired businesses in exchange for future services. | |
The Company estimates the fair value of contingent liabilities based on certain performance milestones of the acquired businesses, and estimated probabilities of achievement, then discounts the liabilities to present value using the Company’s cost of debt for the cash component of contingent consideration, and risk free rate for the stock component of a contractual contingency. Contingent liabilities are valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved. Changes in the fair value of contingent consideration liabilities primarily result from changes in the timing and amount of specific milestone estimates and changes in probability assumptions with respect to the likelihood of achieving the various earnout criteria. These changes could cause a material impact to, and volatility in the Company’s operating results. See Note 4 for contingent liabilities activity. | |
Financial Assets and Liabilities Measured At Fair Value on a Non-Recurring Basis | |
The amounts of the Company’s financial assets and liabilities, with the exceptions of employee housing loans and other employee loans described further herein, approximate fair value because of their short-term maturities. | |
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 a result of the analysis performed, the Company determined the carrying values of the housing loans issued during the three and nine months ended September 30, 2014 approximated their fair values upon initial recognition. The Company also estimated the fair values of the housing loans that were outstanding as of September 30, 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 September 30, 2014, the carrying values of these employee loans approximated their fair values. | |
Business Combinations — 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. The Company identifies and attributes fair values and estimated lives to the intangible assets acquired and allocates the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. 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. There are different valuation models for each component, the selection of which requires considerable judgment. These determinations will affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes are reasonable, but recognizes that the assumptions are inherently uncertain. | |
If initial accounting for the business combination has not been completed by the end of the reporting period in which the business combination occurs, provisional amounts are reported for which the accounting is incomplete, with retrospective adjustment made to such provisional amounts during the measurement period to present new information about facts and circumstances that existed as of the acquisition date. Once the measurement period ends, and in no case beyond one year from the acquisition date, revisions of the accounting for the business combination are recorded in earnings. | |
All acquisition-related costs, other than the costs to issue debt or equity securities, are accounted for as expenses in the period in which they are incurred. Changes in fair value of contingent consideration arrangements that are not measurement period adjustments are recognized in earnings. Payments to settle contingent consideration, if any, are reflected in cash flows from financing activities and the changes in fair value are reflected in cash flows from operating activities in the Company’s condensed consolidated statements of cash flows. | |
The Company’s acquisitions usually do not have significant amounts of tangible assets, as the principal assets typically acquired 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 Other Intangible Assets — Goodwill and intangible assets that have indefinite useful lives are treated consistently with ASC 350. They are tested annually for impairment and are not amortized. | |
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. | |
Stock-Based Compensation — Equity-based compensation cost relating to the issuance of share-based awards to employees is based on the fair value of the award at the date of grant, which is expensed ratably over the requisite service period, net of estimated forfeitures. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Therefore, changes in the forfeiture assumptions may affect the timing of the total amount of expense recognized over the vesting period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that do not meet criteria for equity classification are recorded in liabilities and adjusted to fair value at the end of each reporting period. Distributions associated with liability-classified awards not expected to vest are accounted for as compensation expense in the consolidated statements of income and comprehensive income. | |
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 | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ' | ||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS | ' | ||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS | |||||||||||||||||||||||||||||||||||||||||
During the nine months ended September 30, 2014, the Company completed acquisitions of the following businesses in exchange for its common stock and/or cash. Among other benefits, the acquisitions allow the Company to expand into desirable geographic locations, further extend its presence across all business verticals, increase the volume and create new offerings of services currently provided. These acquisitions have been accounted for using the acquisition method for recording business combinations: | |||||||||||||||||||||||||||||||||||||||||
Name of Acquisition | Effective Date of Acquisition | Common Shares | Fair Value of Common | Cash, Net of Working Capital and Other Adjustments | Recorded Earnout | Total Recorded Purchase Price | Maximum Potential Earnout Payable | ||||||||||||||||||||||||||||||||||
Shares | Payable | ||||||||||||||||||||||||||||||||||||||||
Issued | Deferred | Issued | Deferred | Paid | Deferred | Cash | Stock | ||||||||||||||||||||||||||||||||||
(in shares) | (in thousands) | ||||||||||||||||||||||||||||||||||||||||
Netsoft | 5-Mar-14 | — | — | $ | — | $ | — | $ | 2,373 | $ | 1,400 | $ | 1,825 | $ | — | $ | 5,598 | $ | 1,825 | ||||||||||||||||||||||
Jointech | 30-Apr-14 | — | 89,552 | — | 2,788 | 10,000 | 4,000 | 15,000 | 5,000 | 36,788 | 20,000 | ||||||||||||||||||||||||||||||
GGA (1) | 6-Jun-14 | — | — | — | — | 13,526 | — | 11,400 | — | 24,926 | |||||||||||||||||||||||||||||||
— | 89,552 | $ | — | $ | 2,788 | $ | 25,899 | $ | 5,400 | $ | 28,225 | $ | 5,000 | $ | 67,312 | ||||||||||||||||||||||||||
-1 | The amount of the maximum potential earnout payable to GGA, if any, is not limited based on the terms of the purchase agreement. | ||||||||||||||||||||||||||||||||||||||||
Common shares issued in connection with acquisitions are valued at closing market prices as of the effective date of the applicable acquisition. The maximum potential earnout payables disclosed in the foregoing table represent the maximum amount of additional consideration that could be paid pursuant to the terms of the purchase agreement for the applicable acquisition. The amounts recorded as earnout payables, which are based upon the estimated future operating results of the acquired businesses within a seven-to twelve-month period subsequent to the acquisition date, are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration in the foregoing table. The Company will record subsequent changes in the fair value of the earnout obligations, if any, in its consolidated income from operations. Please see Note 4 for discussion around significant inputs and assumptions relating to the earnout obligation. | |||||||||||||||||||||||||||||||||||||||||
Netsoft — On March 5, 2014, the Company completed an acquisition of substantially all of the assets and assumed certain specific liabilities of U.S.-based healthcare technology consulting firm Netsoft Holdings, LLC and Armenia-based Ozsoft, LLC (collectively, “Netsoft”). As a result of this transaction, substantially all of the employees of Netsoft, including approximately 40 IT professionals, accepted employment with the Company. In connection with the Netsoft acquisition, the Company agreed to issue a total of 2,289 restricted shares of Company common stock as consideration for future services to key management and employees of Netsoft (the “Netsoft Closing Shares”). Furthermore, subject to attainment of certain performance targets defined in the purchase agreement, the Company will issue up to a maximum of 16,349 restricted shares of Company common stock (collectively with the Netsoft Closing Shares, the “Netsoft Employment Shares”). The Netsoft Employment Shares will vest in equal annual installments over a three-year period starting from the date of acquisition. All unvested shares will be forfeited upon termination of services by the Company for cause or by the employee other than for good reason. The Netsoft Employment Shares had an estimated value of $682 at the time of grant and were recorded as stock-based compensation expense over an associated service period of three years (Note 9). Under the terms of this agreement, all of the Netsoft Closing Shares, as well as $256, were placed in escrow for a period of 18 months as security for the indemnification obligations of the sellers under the asset purchase agreement. | |||||||||||||||||||||||||||||||||||||||||
Jointech — 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 (Shenzhen) 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”). Jointech provides strategic technology services to multi-national organizations in investment banking, wealth and asset management. As a result of this transaction, substantially all employees of Jointech, including approximately 216 IT professionals, accepted employment with the Company. In connection with the Jointech acquisition, the Company agreed to issue a total of 89,552 shares of the Company common stock to a former owner of Jointech as consideration for future services on or about the six-month anniversary from the date of acquisition (the “Jointech Closing Shares”). Furthermore, the Company will pay to that former owner up to a maximum of $5,000 in shares of Company common stock valued based on the average closing price per share for the 30-trading day period preceding April 1, 2015 (collectively with the Jointech Closing Shares, the “Jointech Employment Shares”). The Jointech Employment Shares will vest in equal annual installments over a three-year period starting from the date of acquisition. All unvested Jointech Employment Shares will be forfeited upon termination of services for cause by the Company or other than for good reason (as applicable) by either of the two former owners of the acquired business. The aggregate fair value of the Jointech Employment Shares at the date of grant was $7,788 and will be recorded as stock-based compensation expense over an associated service period of three years (Note 9). | |||||||||||||||||||||||||||||||||||||||||
Under the terms of the agreement, 15% of the total purchase price, in cash and stock, including the Jointech Employment Shares, was placed in an escrow account for a period of 18 months as security for the indemnification obligations of the sellers under the stock purchase agreement. | |||||||||||||||||||||||||||||||||||||||||
GGA — On June 6, 2014, the Company acquired substantially all of the assets and assumed certain specific liabilities of GGA Software Services, LLC, Institute of Theoretical Chemistry, Inc., and GGA’s Russian affiliate (collectively, “GGA”). Established in 1994, GGA develops scientific informatics applications and content databases; creates state-of-the-art algorithms and models; and delivers IT support, maintenance, and QA services to the world’s leading healthcare and life sciences companies. As a result of this transaction, substantially all employees of GGA, including approximately 329 IT professionals and 126 scientists, accepted employment with the Company. In connection with the GGA acquisition, the Company agreed to issue a total of 262,277 shares of the Company common stock to the former owners of GGA as consideration for future services (the “GGA Closing Shares”). Furthermore, subject to attainment of specified performance targets, the Company will issue to the former owners of GGA shares of its common stock based on the formula provided in the purchase agreement (collectively with GGA Closing Shares, the “GGA Employment Shares”). The GGA Employment Shares will vest in equal annual installments over a three-year period starting from the date of acquisition. With respect to each former owner, all unvested shares will be forfeited upon either termination of services by the Company for cause or by the employee other than for good reason. The aggregate fair value of the GGA Employment Shares at the date of grant was $20,655 and will be recorded as stock-based expense over an associated service period of three years (Note 9). Under the terms of the agreement, a total of 102,631 of the GGA Employment Shares were placed into an escrow account as security for the indemnification obligations of the sellers under the asset purchase agreement. | |||||||||||||||||||||||||||||||||||||||||
The following is a summary of the estimated fair values of the net assets acquired at the date of each acquisition made during the nine months ended September 30, 2014: | |||||||||||||||||||||||||||||||||||||||||
Netsoft | Jointech | GGA | Total | ||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 871 | $ | — | $ | 871 | |||||||||||||||||||||||||||||||||
Trade receivables and other current assets | 788 | 784 | 5,157 | 6,729 | |||||||||||||||||||||||||||||||||||||
Property and equipment and other long-term assets | 52 | 338 | 444 | 834 | |||||||||||||||||||||||||||||||||||||
Deferred tax asset | 351 | — | 10,317 | 10,668 | |||||||||||||||||||||||||||||||||||||
Acquired intangible assets | 1,700 | 25,744 | 10,959 | 38,403 | |||||||||||||||||||||||||||||||||||||
Goodwill | 2,776 | 14,145 | 642 | 17,563 | |||||||||||||||||||||||||||||||||||||
Total assets acquired | 5,667 | 41,882 | 27,519 | 75,068 | |||||||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | 69 | 728 | 2,593 | 3,390 | |||||||||||||||||||||||||||||||||||||
Due to employees | — | 1,254 | — | 1,254 | |||||||||||||||||||||||||||||||||||||
Deferred tax liability | — | 3,112 | — | 3,112 | |||||||||||||||||||||||||||||||||||||
Total liabilities assumed | 69 | 5,094 | 2,593 | 7,756 | |||||||||||||||||||||||||||||||||||||
Net assets acquired | $ | 5,598 | $ | 36,788 | $ | 24,926 | $ | 67,312 | |||||||||||||||||||||||||||||||||
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 and updated for any changes. During the three months ended on September 30, 2014 the following updates were made to the initially reported balances. For Jointech, the goodwill balance of $11,033 as of June 30, 2014 has been increased by $3,112 to $14,145 and a deferred tax liability of $3,112 was established as of September 30, 2014. The adjustment represents a reclassification between the balance sheet accounts and does not change the net assets acquired amount for Jointech. For GGA, goodwill amount has been decreased by $5,854 from $6,494 as of June 30, 2014 to $642 as of September 30, 2014 with a corresponding decrease of $5,854 in deferred tax asset from $4,463 to $10,317, respectively. The adjustment represents a reclassification between the balance sheet accounts and does not change the net assets acquired amount for GGA. | |||||||||||||||||||||||||||||||||||||||||
The Company is gathering additional information necessary to finalize the estimated fair values of intangible assets, deferred income taxes, contingent consideration and other amounts. The fair values 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 respective acquisition dates. | |||||||||||||||||||||||||||||||||||||||||
The following is a summary of revenues, net income and acquisition-related costs included in the condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2014: | |||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2014 | Nine Months Ended September 30, 2014 | ||||||||||||||||||||||||||||||||||||||||
Revenues | Net Income | Acquisition-related costs | Revenues | Net Income | Acquisition-related costs | ||||||||||||||||||||||||||||||||||||
Netsoft (1) | $ | 1,539 | $ | 556 | $ | — | $ | 3,173 | $ | 999 | $ | 75 | |||||||||||||||||||||||||||||
Jointech (2) | 5,045 | 435 | — | 8,274 | 556 | 361 | |||||||||||||||||||||||||||||||||||
GGA (3) | 7,989 | 1,406 | — | 10,342 | 1,336 | 325 | |||||||||||||||||||||||||||||||||||
Total | $ | 14,573 | $ | 2,397 | $ | — | $ | 21,789 | $ | 2,891 | $ | 761 | |||||||||||||||||||||||||||||
-1 | Included in net income is $54 and $124 of stock-based compensation expense related to the Netsoft Employment Shares for the three and nine months ended September 30, 2014. | ||||||||||||||||||||||||||||||||||||||||
-2 | Included in net income is $649 and $1,089 of stock-based compensation expense related to the Jointech Employment Shares for the three and nine months ended September 30, 2014. | ||||||||||||||||||||||||||||||||||||||||
-3 | Included in net income is $1,706 and $2,161 of stock-based compensation expense related to the GGA Employment Shares for the three and nine months ended September 30, 2014. | ||||||||||||||||||||||||||||||||||||||||
Aggregate revenues generated by the acquired companies for the year ended December 31, 2013, were approximately $40.5 million. Pro forma results of operations for the acquisition transactions were not presented because the effects of the acquisitions were not material to the Company’s consolidated results of operation, individually or in the aggregate. |
GOODWILL
GOODWILL | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | |||||||||||||||
GOODWILL | ' | |||||||||||||||
GOODWILL | ||||||||||||||||
Goodwill by reportable segment was as follows: | ||||||||||||||||
North America | Europe | Russia | Total | |||||||||||||
Balance as of January 1, 2014 | $ | 16,438 | $ | 2,864 | $ | 2,966 | $ | 22,268 | ||||||||
Acquisition of Netsoft (Note 2) | 2,776 | — | — | 2,776 | ||||||||||||
Acquisition of Jointech (Note 2) | — | 14,145 | — | 14,145 | ||||||||||||
Acquisition of GGA (Note 2) | 642 | — | — | 642 | ||||||||||||
Effect of net foreign currency exchange rate changes | (116 | ) | (159 | ) | (501 | ) | (776 | ) | ||||||||
Balance as of September 30, 2014 | $ | 19,740 | $ | 16,850 | $ | 2,465 | $ | 39,055 | ||||||||
Excluded from the table above is the Other segment. In the third quarter of 2013, the Company recorded an accumulated impairment loss of $1,697 in the Other operating segment. As of September 30, 2014 and December 31, 2013 the book value of the Other segment was $0. There were no accumulated impairments losses in any of the North America, Europe or Russia operating segments as of September 30, 2014 or December 31, 2013. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Fair Value Disclosures [Abstract] | ' | |||||||
FAIR VALUE MEASUREMENTS | ' | |||||||
FAIR VALUE MEASUREMENTS | ||||||||
As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future operating results of those businesses as developed by the Company’s management and the probability of achievement of those operating forecasts. Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels. | ||||||||
The following tables show the fair values of the Company’s financial liabilities measured at fair value on a recurring basis: | ||||||||
As of September 30, 2014 | ||||||||
Balance | Level 3 | |||||||
Contingent consideration | $ | 33,153 | $ | 33,153 | ||||
Performance-based equity awards | 1,622 | 1,622 | ||||||
Total liabilities measured at fair value on a recurring basis | $ | 34,775 | $ | 34,775 | ||||
There were no liabilities measured at fair value on a recurring basis as of December 31, 2013. | ||||||||
As of September 30, 2014, contingent consideration and performance-based equity awards included amounts payable in cash and stock in connection with the acquisitions of businesses completed in the nine months ended September 30, 2014 (Note 2). | ||||||||
Sensitivity to Changes in Significant Unobservable Inputs | ||||||||
The fair value of the contingent consideration is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. In determining fair value, the Company considered a variety of factors, including third party valuation experts and future performance of the acquired businesses using financial projections developed by the Company and market risk assumptions that were derived for revenue growth and/or earnings before interest, tax, and depreciation and amortization (“EBITDA”). The Company estimated future payments using the earnout formula and performance targets specified in each purchase agreement and adjusted those estimates to reflect the ability of the acquired entities to achieve the targets. It then discounted the payments to present value using the Company’s cost of debt for the cash component, and a risk-free rate for the stock component of the earnout for all of the Company’s 2014 acquisitions. Changes in financial projections, market risk assumptions for revenue growth and/or EBITDA, or the discount rates, would result in a change in the fair value of recorded contingent liabilities. In addition, inputs used in the valuation of the stock component of the earnout include term, stock price volatility, current stock price, and exercise price, with the Company current stock price factor being the input subject to the most variation. A significant increase in the Company stock price, in isolation, would result in a significantly higher fair value measurement. As the Company’s common stock does not have sufficient trading history, volatility was determined by measuring the volatility of a representative group of its peers, in conjunction with the volatility of the Company’s available trading history. | ||||||||
A reconciliation of the beginning and ending balances of acquisition-related contractual contingent liabilities using significant unobservable inputs (Level 3) for the nine months ended September 30, 2014, was as follows: | ||||||||
Amount | ||||||||
Contractual contingent liabilities at January 1, 2014 | $ | — | ||||||
Acquisition date fair value of contractual contingent liabilities — Netsoft | 1,825 | |||||||
Acquisition date fair value of contractual contingent liabilities — Jointech | 20,000 | |||||||
Acquisition date fair value of contractual contingent liabilities — GGA | 11,400 | |||||||
Liability-classified stock-based awards | 1,642 | |||||||
Changes in fair value of contractual contingent liabilities included in earnings | (20 | ) | ||||||
Changes in fair value of contractual contingent liabilities recorded against goodwill | — | |||||||
Effect of net foreign currency exchange rate changes | (72 | ) | ||||||
Settlements of contractual contingent liabilities | — | |||||||
Contractual contingent liabilities at September 30, 2014 | $ | 34,775 | ||||||
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the nine months ended September 30, 2014. Changes in the values of the financial liabilities, if any, are recorded within other expense (income) in operating income on the Company’s condensed consolidated statements of income and comprehensive income. |
EMPLOYEE_LOANS_AND_ALLOWANCE_F
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Loans and Leases Receivable, Related Parties Disclosure [Abstract] | ' | |||||||
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES | ' | |||||||
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 nine months ended September 30, 2014, loans issued by the Company under the Housing Program were denominated in U.S. Dollars with a 5-year term and carried an interest rate of 7.5%. | ||||||||
At September 30, 2014 and December 31, 2013, categories of employee loans included in the loan portfolio were as follows: | ||||||||
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Housing loans | $ | 5,910 | $ | 5,896 | ||||
Relocation and other loans | 646 | 494 | ||||||
Total employee loans | 6,556 | 6,390 | ||||||
Less: | ||||||||
Allowance for loan losses | — | — | ||||||
Total loans, net of allowance for loan losses | $ | 6,556 | $ | 6,390 | ||||
There were no loans issued to principal officers, directors, and their affiliates during each of the nine months ended September 30, 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 September 30, 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 September 30, 2014 and December 31, 2013 and there were no movements in provision for loan losses during the nine months ended September 30, 2014 and 2013. |
LONGTERM_DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2014 | |
Debt Disclosure [Abstract] | ' |
LONG-TERM DEBT | ' |
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. Advances under the 2013 Credit Facility accrued interest at an annual rate equal to the London Interbank Offer Rate, or LIBOR, plus 1.25%. | |
On September 12, 2014, the Company terminated the 2013 Credit Facility and entered into a new credit facility (the “2014 Credit Facility”) with PNC Bank, National Association; Santander Bank, N.A; and Silicon Valley Bank (collectively the “Lenders”). The 2014 Credit Facility provides for a borrowing capacity of $100,000, with potential to increase the credit facility up to $200,000 if certain conditions are met. The 2014 Credit Facility matures on September 12, 2019. | |
Borrowings under the 2014 Credit Facility may be denominated in United States Dollars or, up to a maximum of $50,000 in British Pounds Sterling, Canadian Dollars, Euros or Swiss Francs (or other currencies as may be approved by the lenders). Borrowings under the 2014 Credit Facility bear interest at either a base rate or Euro-rate plus a margin based on the Company’s leverage ratio. Base rate is equal to the highest of (a) the Federal Funds Open Rate, plus 0.5%, (b) the Prime Rate, and (c) the Daily LIBOR Rate, plus 1.0%. | |
The 2014 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 and 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. | |
As of September 30, 2014, the Company had no outstanding debt under the 2014 Credit Facility. |
EMPLOYEE_BENEFITS
EMPLOYEE BENEFITS | 9 Months Ended |
Sep. 30, 2014 | |
Compensation and Retirement Disclosure [Abstract] | ' |
EMPLOYEE BENEFITS | ' |
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 September 30, 2014 and 2013, were $144 and $112, respectively. Employer contributions charged to expense for the nine months ended September 30, 2014 and 2013, were $405 and $286, respectively. The Company does not maintain any defined benefit pension plans or any nonqualified deferred compensation plans. |
INCOME_TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2014 | |
Income Tax Disclosure [Abstract] | ' |
INCOME TAXES | ' |
INCOME TAXES | |
The Company’s worldwide effective tax rate for the three months ended September 30, 2014 and 2013 was 14.9% and 19.3%, respectively, and 17.9% and 19.1% during the nine months ended September 30, 2014 and 2013, respectively. There were several factors that led to the movement in the Company’s worldwide effective tax rate for the three and nine months ended September 30, 2014, as compared to the corresponding periods of 2013. The primary factors that caused this decrease in the rate for the above-mentioned periods are: (a) favorable adjustments to the statutory rates in several countries, primarily the United Kingdom and Ukraine and (b) release of the ASC 740-10 reserve during the third quarter of 2014 in the amount $1.2 million. This reserve was initially posted as a tax expense in 2010 as the Company's position in 2010 was deemed uncertain. This reserve remained on the balance sheet through the initial tax year and subsequent tax years until the federal statute expired in the quarter ended September 30, 2014 and the whole reserve was properly released. The other primary factors represented below would have increased the effective tax rate in 2014 if it were not for (a) and (b) above: the acquisitions completed in the second quarter of 2014, which added other tax jurisdictions into the Company’s worldwide effective tax rate analysis; also 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) were seen in 2014 and 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 | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | |||||||||||||||
STOCK-BASED COMPENSATION | ' | |||||||||||||||
STOCK-BASED COMPENSATION | ||||||||||||||||
The following costs related to the Company’s stock compensation plans were included in the unaudited condensed consolidated statements of income: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Cost of revenues | $ | 2,463 | $ | 1,498 | $ | 6,391 | $ | 3,356 | ||||||||
Selling, general and administrative expenses | 4,962 | 1,867 | 10,133 | 6,435 | ||||||||||||
Total | $ | 7,425 | $ | 3,365 | $ | 16,524 | $ | 9,791 | ||||||||
Equity Plans | ||||||||||||||||
2012 Non-Employee Directors Compensation Plan — On January 11, 2012, the Company approved the 2012 Non-Employee Directors Compensation Plan (“2012 Directors Plan”) to 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 10 years and is 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”) to be used to issue equity grants to company personnel. As of September 30, 2014, 4,761,397 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 September 30, 2014 and therefore became available for issuance under the 2012 Plan. In addition, up to 1,975,437 shares that are subject to outstanding awards as of September 30, 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. | ||||||||||||||||
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 2006 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 award 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 10 years from the date of grant. | ||||||||||||||||
Stock Options | ||||||||||||||||
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 | 2,373,500 | 32.33 | 27,200 | |||||||||||||
Options exercised | (828,756 | ) | 8.54 | (29,214 | ) | |||||||||||
Options forfeited/cancelled | (162,829 | ) | 24.41 | (3,156 | ) | |||||||||||
Options outstanding at September 30, 2014 | 7,205,451 | $ | 20.42 | $ | 168,391 | |||||||||||
Options vested and exercisable at September 30, 2014 | 2,708,228 | $ | 9.87 | $ | 91,863 | |||||||||||
Options expected to vest | 4,101,056 | $ | 26.58 | $ | 70,579 | |||||||||||
Aggregate grant-date fair value of stock options issued under the 2012 Plan during the nine months ended September 30, 2014 was $32,414. The options typically vest over four years from the time of grant. | ||||||||||||||||
As of September 30, 2014, a total of 35,515 shares underlying options exercised through September 30, 2014, were in transfer with the Company’s transfer agent. | ||||||||||||||||
As of September 30, 2014, total remaining unrecognized compensation cost related to unvested stock options, net of forfeitures, was approximately $45,182, and is expected to be recognized over a weighted-average period of 2.1 years. The weighted average remaining contractual term of the outstanding options as of September 30, 2014 was 5.4 years for fully vested and exercisable options and 8.8 years for options expected to vest, respectively. | ||||||||||||||||
There were no material changes with respect to the assumptions used in the Black-Scholes option valuation model during the nine months ended September 30, 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. | ||||||||||||||||
Other Awards | ||||||||||||||||
Other awards include awards of restricted stock and restricted stock units (“RSUs”) under the Company’s 2012 Directors Plan and 2012 Plan, as well as certain other individual awards. In addition, the Company has in the past, and may in the future, issue its equity securities to compensate employees of acquired businesses for future services, upon such terms and at such prices as it deems appropriate. Equity-based awards granted in connection with acquisitions of businesses are generally issued in the form of service-based awards and performance-based awards. The awards issued in connection with acquisitions of businesses are subject to the terms and conditions contained in the applicable award agreement and acquisition documents. Summarized activity related to the Company’s service-based awards for the nine months ended September 30, 2014, was as follows: | ||||||||||||||||
Number of | Weighted Average Grant Date | |||||||||||||||
Shares | Fair Value Per Share | |||||||||||||||
Unvested service-based awards outstanding at January 1, 2014 | 344,928 | $ | 18.74 | |||||||||||||
Awards granted | 432,356 | 39.93 | ||||||||||||||
Awards vested | (67,357 | ) | (17.62 | ) | ||||||||||||
Awards forfeited/cancelled | (16,924 | ) | 20.81 | |||||||||||||
Unvested service-based awards outstanding at September 30, 2014 | 693,003 | $ | 32.02 | |||||||||||||
During the nine months ended September 30, 2014, the Company issued a total of 7,738 shares of non-vested (“restricted”) common stock under its 2012 Non-Employee Directors Compensation Plan with an aggregate grant date fair value of $325. As of September 30, 2014, aggregate fair value of unvested awards under the 2012 Non-Employee Directors Compensation Plan was $360. This cost is expected to be recognized over the next 1.5 years using the weighted average method. | ||||||||||||||||
During the nine months ended September 30, 2014, the Company issued a total of 70,500 RSUs to certain key management personnel under the 2012 Plan. The fair value of the RSUs at the time of grant was $2,085. As of September 30, 2014, the aggregate fair value of unvested RSUs under the 2012 Plan was $1,771. This cost is expected to be recognized over the next 2.3 years using the weighted average method. | ||||||||||||||||
During the nine months ended September 30, 2014, the Company granted a total of 354,118 service-based awards in connection with the acquisitions of businesses completed during that period. The aggregate grant date fair value of the awards was $14,590. As of September 30, 2014, a total of 556,240 shares underlying service-based awards with an aggregate fair value of $18,779 were unvested and outstanding in connection with the Company’s acquisitions activity. This cost is expected to be recognized over the next 1.8 years using the weighted average method. | ||||||||||||||||
During the nine months ended September 30, 2014, the Company granted performance-based awards in connection with the acquisitions completed during that period. Total number of the awards varies based on attainment of certain performance targets pursuant to provisions of the relevant purchase agreements. Typically, the performance period is three years, with one third of the awards granted, vesting on the first anniversary of the grant. The remaining awards vest in equal installments on the second and third anniversaries of the grant. If an eligible employee leaves the Company prior to a vesting date, the unvested portion of the award will be forfeited, generally. The Company periodically evaluates the achievement of the related performance conditions during requisite service period and the number of shares expected to be delivered, and resulting compensation expense is adjusted accordingly. | ||||||||||||||||
Summarized activity related to the Company’s performance-based awards for the nine months ended September 30, 2014, was as follows: | ||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | |||||||||||||||
Unvested performance-based awards outstanding at January 1, 2014 | — | $ | — | |||||||||||||
Awards granted | 376,966 | 38.55 | ||||||||||||||
Awards vested | — | — | ||||||||||||||
Awards forfeited/cancelled | (817 | ) | 36.57 | |||||||||||||
Changes in the number of awards expected to be delivered | (46,331 | ) | 31.13 | |||||||||||||
Unvested performance-based awards outstanding at September 30, 2014 | 329,818 | $ | 39.6 | |||||||||||||
As of September 30, 2014, total unrecognized compensation cost related to unvested performance-based awards was $12,586. That cost is expected to be recognized over the next 1.8 years using the weighted average method. |
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Earnings Per Share [Abstract] | ' | |||||||||||||||
EARNINGS PER SHARE | ' | |||||||||||||||
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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator for common earnings per share: | ||||||||||||||||
Net income | $ | 19,040 | $ | 16,437 | $ | 51,218 | $ | 43,235 | ||||||||
Numerator for basic and diluted earnings per share | $ | 19,040 | $ | 16,437 | $ | 51,218 | $ | 43,235 | ||||||||
Denominator for basic earnings per share: | ||||||||||||||||
Weighted average common shares outstanding | 47,315 | 46,162 | 47,058 | 45,492 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Stock options, RSUs and performance-based awards | 2,514 | 2,558 | 2,472 | 2,628 | ||||||||||||
Denominator for diluted earnings per share | 49,829 | 48,720 | 49,530 | 48,120 | ||||||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.4 | $ | 0.36 | $ | 1.09 | $ | 0.95 | ||||||||
Diluted | $ | 0.38 | $ | 0.34 | $ | 1.03 | $ | 0.9 | ||||||||
During the three and nine months ended September 30, 2014, a total of 2,691 and 2,152 shares underlying equity-based awards, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect was anti-dilutive. During the three and nine months ended September 30, 2013, a total of 1,873 and1,399 shares underlying equity-based awards, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect was anti-dilutive. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | |
Construction in progress — On December 7, 2011, the Company entered into an agreement with IDEAB Project Eesti AS (“IDEAB”) for the construction of an office building within the High Technologies Park in Minsk, Belarus (the “Construction Agreement”). At the same time, the Company entered into a related investment agreement with the Minsk Executive Committee acting on behalf of the Republic of Belarus (the “Investment Agreement”) permitting the Company to use land located in the government’s High Technologies Park to construct the new office building and granting certain tax benefits. The Investment Agreement specified a completion deadline for construction of September 15, 2012 (later extended by the parties to December 31, 2014) which, if not met, may result in a monthly penalty and, if the Investment Agreement is terminated, disgorgement of certain tax benefits received by the Company in connection with the project and potential full restoration of the land to its original condition. | |
The Construction Agreement committed IDEAB to construct an office building for the Company in Minsk with a committed completion date of February 28, 2014. The building has not yet been completed, when in April 2014 IDEAB stopped its construction for reasons unrelated to the Company’s performance under the Construction Agreement. In May 2014, IDEAB notified the Company that it was unable to continue as general contractor to complete the construction of the building in time and on the terms agreed. As a result, the Company took control over the construction site and is seeking alternatives to complete the project. On July 7, 2014, the Company provided IDEAB with notice of termination of the Construction Agreement. The effective date of termination was on or about July 11, 2014. The Company filed a legal action against IDEAB in Belarus in August 2014, claiming breach of contract. In September 2014, the court decided in the Company’s favor and directed IDEAB to pay the Company $1,000 plus reimbursement of certain expenses. The Company is pursuing recovery from IDEAB of this amount. | |
At September 30, 2014, the Company had approximately $17,500 of capitalized construction costs and estimated up to $7,000 of additional investment required to complete the construction and put the building into operation. The Company estimates that an additional nine months will be needed for completion of the building construction. In addition, up to $4,500 of advance payments issued to IDEAB for future work and construction materials under the Construction Agreement may not be recoverable. As of September 30, 2014, the Company estimated the amount of probable losses under the Construction Agreement at $2,000. These costs were recorded within the Company’s consolidated income from operations during the nine months ended September 30, 2014. | |
Based on the information known to the Company at this time, any additional liability related to this matter is not reasonably estimable. | |
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 certain arrangements. 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 financial statements of the Company. | |
Litigation — From time to time, the Company is involved in litigation, claims or other contingencies. Management is not aware of any such matters that would have a material effect on the financial statements of the Company. |
OPERATING_SEGMENTS
OPERATING SEGMENTS | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Segment Reporting [Abstract] | ' | |||||||||||||||
OPERATING SEGMENTS | ' | |||||||||||||||
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 and nine months ended September 30, 2014 and 2013, were as follows: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Total segment revenues: | ||||||||||||||||
North America | $ | 99,393 | $ | 73,480 | $ | 267,866 | $ | 205,613 | ||||||||
Europe | 78,074 | 51,531 | 217,247 | 146,108 | ||||||||||||
Russia | 14,762 | 12,050 | 38,881 | 37,901 | ||||||||||||
Other | 530 | 3,078 | 3,445 | 7,867 | ||||||||||||
Total segment revenues | $ | 192,759 | $ | 140,139 | $ | 527,439 | $ | 397,489 | ||||||||
Segment operating profit: | ||||||||||||||||
North America | $ | 22,557 | $ | 18,133 | $ | 62,283 | $ | 48,527 | ||||||||
Europe | 12,200 | 8,049 | 36,049 | 24,538 | ||||||||||||
Russia | 3,779 | 391 | 4,843 | 2,710 | ||||||||||||
Other | (1,508 | ) | 1,024 | (3,726 | ) | 960 | ||||||||||
Total segment operating profit | $ | 37,028 | $ | 27,597 | $ | 99,449 | $ | 76,735 | ||||||||
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 and nine months ended September 30, 2014, revenues from one customer, UBS AG, were $27,012 and $70,259, respectively, and accounted for more than 10% of total revenues. During the three and nine months ended September 30, 2013, revenues from one customer, Barclays Capital, were $14,489 and $40,070, respectively, and accounted for more than 10% of our total revenues in the corresponding periods. Revenues from these customers included reimbursable expenses and were included in the Company’s Europe segment in the periods indicated. | ||||||||||||||||
Trade accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. As of September 30, 2014, billed and unbilled trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 10.0% and 15.5% of our total billed and unbilled trade receivables, respectively, as of that date. | ||||||||||||||||
Reconciliation of segment revenues and operating profit to consolidated income before provision for income taxes is presented below: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Total segment revenues | $ | 192,759 | $ | 140,139 | $ | 527,439 | $ | 397,489 | ||||||||
Unallocated revenue | 5 | 11 | 404 | 43 | ||||||||||||
Revenues | $ | 192,764 | $ | 140,150 | $ | 527,843 | $ | 397,532 | ||||||||
Total segment operating profit: | $ | 37,028 | $ | 27,597 | $ | 99,449 | $ | 76,735 | ||||||||
Unallocated amounts: | ||||||||||||||||
Other revenues | 5 | 11 | 404 | 43 | ||||||||||||
Stock-based compensation expense | (7,425 | ) | (3,365 | ) | (16,524 | ) | (9,791 | ) | ||||||||
Non-corporate taxes | (789 | ) | (690 | ) | (1,944 | ) | (2,190 | ) | ||||||||
Professional fees | (839 | ) | (594 | ) | (3,380 | ) | (2,668 | ) | ||||||||
Depreciation and amortization | (2,589 | ) | (732 | ) | (5,470 | ) | (2,162 | ) | ||||||||
Bank charges | (708 | ) | (261 | ) | (1,211 | ) | (914 | ) | ||||||||
Asset impairment | — | — | (2,000 | ) | — | |||||||||||
Other corporate expenses | (2,848 | ) | (1,736 | ) | (7,156 | ) | (5,752 | ) | ||||||||
Income from operations | 21,835 | 20,230 | 62,168 | 53,301 | ||||||||||||
Interest and other income, net | 1,261 | 846 | 3,401 | 2,245 | ||||||||||||
Foreign exchange loss | (718 | ) | (720 | ) | (3,198 | ) | (2,088 | ) | ||||||||
Income before provision for income taxes | $ | 22,378 | $ | 20,356 | $ | 62,371 | $ | 53,458 | ||||||||
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 was as follows: | ||||||||||||||||
September 30, | December 31, | |||||||||||||||
2014 | 2013 | |||||||||||||||
Belarus | $ | 41,243 | $ | 38,697 | ||||||||||||
Ukraine | 4,511 | 5,525 | ||||||||||||||
Russia | 2,673 | 3,414 | ||||||||||||||
Hungary | 2,703 | 2,644 | ||||||||||||||
United States | 1,931 | 2,217 | ||||||||||||||
Other | 1,604 | 818 | ||||||||||||||
Total | $ | 54,665 | $ | 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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
United States | $ | 84,276 | $ | 62,871 | $ | 228,504 | $ | 180,067 | ||||||||
United Kingdom | 35,222 | 26,637 | 102,642 | 81,416 | ||||||||||||
Switzerland | 22,508 | 13,920 | 63,873 | 33,934 | ||||||||||||
Russia | 14,351 | 11,534 | 37,513 | 36,464 | ||||||||||||
Canada | 13,518 | 9,162 | 34,973 | 22,980 | ||||||||||||
Germany | 6,459 | 5,141 | 18,951 | 14,211 | ||||||||||||
China | 5,058 | — | 8,268 | — | ||||||||||||
Netherlands | 2,174 | 1,895 | 6,636 | 6,665 | ||||||||||||
Sweden | 1,734 | 1,382 | 6,213 | 3,986 | ||||||||||||
Kazakhstan | 525 | 2,921 | 3,141 | 7,414 | ||||||||||||
Other locations | 4,476 | 2,501 | 11,027 | 5,261 | ||||||||||||
Reimbursable expenses and other revenues | 2,463 | 2,186 | 6,102 | 5,134 | ||||||||||||
Revenues | $ | 192,764 | $ | 140,150 | $ | 527,843 | $ | 397,532 | ||||||||
Service Offering Information | ||||||||||||||||
Information about the Company’s revenues by service offering is as follows: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Software development | $ | 134,000 | $ | 93,870 | $ | 364,539 | $ | 267,948 | ||||||||
Application testing services | 37,155 | 27,773 | 103,121 | 78,473 | ||||||||||||
Application maintenance and support | 14,824 | 11,758 | 40,715 | 33,245 | ||||||||||||
Infrastructure services | 3,502 | 3,754 | 10,740 | 10,625 | ||||||||||||
Licensing | 820 | 809 | 2,626 | 2,107 | ||||||||||||
Reimbursable expenses and other revenues | 2,463 | 2,186 | 6,102 | 5,134 | ||||||||||||
Revenues | $ | 192,764 | $ | 140,150 | $ | 527,843 | $ | 397,532 | ||||||||
RECENT_ACCOUNTING_PRONOUNCEMEN
RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2014 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ' |
RECENT ACCOUNTING PRONOUNCEMENTS | ' |
RECENT ACCOUNTING PRONOUNCEMENTS | |
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments in this update provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. These amendments aim to reduce diversity in the timing and content of footnote disclosures. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter, with early adoption permitted. The implementation of this standard is not expected to have a material effect on the Company’s condensed consolidated financial statements. | |
In June 2014, the FASB issued ASU 2014-12, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation - Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The standard is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015 with early adoption permitted. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The implementation of this standard is not expected to have a material effect on the Company’s condensed consolidated financial statements. | |
In May 2014, the FASB issued ASU 2014-09, which impacts virtually all aspects of an entity’s revenue recognition. The ASU introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal periods beginning after December 15, 2016, including interim periods within that reporting periods. The Company is currently evaluating the new guidance to determine the impact it will have on its condensed consolidated financial statements. | |
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure requirements. To qualify as a discontinued operation the standard requires a disposal to represent a strategic shift that has, or will have, a major effect on an entity's operations and financial results. The standard also expands the disclosures for discontinued operations and requires new disclosures related to individually material dispositions that do not qualify as discontinued operations. The standard is effective prospectively for fiscal periods beginning after December 15, 2014, including interim periods within that reporting periods, with early adoption permitted. The implementation of this standard is not expected to have a material impact on the Company’s condensed consolidated financial statements, but will impact the reporting of any future dispositions. | |
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 became 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 condensed consolidated financial statements. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2014 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | |
On October 31, 2014, the Company acquired 100% of the equity interests of Great Fridays Limited and its subsidiaries to expand the Company's product and design service portfolio. Great Fridays Limited, headquartered in Manchester, UK, with offices in London, San Francisco and New York, focuses on bridging the gap between business and design. The acquisition of Great Fridays added approximately 50 creative design professionals to the Company's headcount. The Company expects this acquisition to further expand its product and design services. According to the purchase agreement, the aggregate purchase price, including any additional earn-out payments, was approximately $11,800. The Company expects to finalize the valuation of the acquired assets and liabilities and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. |
BASIS_OF_PRESENTATION_Policies
BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Basis of Presentation | ' |
The accompanying unaudited condensed consolidated financial statements ("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 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 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, Bulgaria, China, Armenia and Poland, and client management locations in the United States, Canada, the United Kingdom, Germany, Sweden, Switzerland, Netherlands, Russia, Kazakhstan, Singapore, China, 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, it will not be required to (1) provide an auditor’s attestation report on the Company’s 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 currently 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. As of the end of the current fiscal year, EPAM's filing status will change to large accelerated filer and EPAM will no longer meet the eligibility requirements under the JOBS Act as of January 1, 2015. While EPAM is classified as an emerging growth company, it 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. | |
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 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. | |
Revenue Recognition | ' |
Revenue Recognition — The Company recognizes revenue when realized or realizable and earned, which is when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report. If there is an uncertainty about the project completion or receipt of payment for the consulting services, revenues are deferred until the uncertainty is sufficiently resolved. At the time revenues are recognized, the Company provides for any contractual deductions and reduces revenues accordingly. The Company defers amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues as services are performed in subsequent periods. Unbilled revenues represent services provided which are billed subsequent to the period end in accordance with the contract terms. | |
The Company derives its revenues from a variety of service offerings, which represent specific competencies of its IT professionals. Contracts for these services have different terms and conditions based on the scope, deliverables, and complexity of the engagement, which require management to make judgments and estimates in determining appropriate revenue recognition pattern. Fees for these contracts may be in the form of time-and-materials or fixed-price arrangements. | |
From time to time, the Company enters into multiple element arrangements with its customers. In the vast majority of cases such multiple-element arrangements represent fixed-priced arrangements to develop a customized IT solution to meet the customer’s needs combined with warranty support over a specified period of time in the future, to which it refers to as the “warranty period.” Typically, the Company’s customers retain full intellectual property (IP) rights to the results of its services, and the software element created in lieu of such services is no more than incidental to any of the service deliverables, as defined in accordance with ASC 985-605-15-13. For such arrangements the Company follows the guidance set forth in ASC 605-25, Revenue Recognition – Multiple Element Arrangements, as to whether multiple deliverables exist, how the arrangement should be separated, and how the consideration should be allocated. The Company recognizes revenues related to the delivered services only if all revenue recognition criteria are met and the delivered element has a standalone value to the customer and allocates total consideration among the deliverables based on their relative selling prices. Revenues related to the software development services are recognized under the proportional performance method, as described above, while warranty support services are recognized on a straight-line basis over the warranty period. The warranty period is generally three months to two years. | |
The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the condensed consolidated statements of income and comprehensive income. | |
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 sheets 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 reasonably feasible, a degree of judgment is required to establish fair values. | |
Financial Assets and Liabilities Measured At Fair Value on a Recurring Basis | |
The Company had no assets or liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, other than contingent liabilities in connection with the acquisitions of businesses. | |
At September 30, 2014, contingent liabilities measured at fair value on a recurring basis comprised contingent consideration payable in cash and stock, and performance-based awards issued to certain former owners of the acquired businesses in exchange for future services. | |
The Company estimates the fair value of contingent liabilities based on certain performance milestones of the acquired businesses, and estimated probabilities of achievement, then discounts the liabilities to present value using the Company’s cost of debt for the cash component of contingent consideration, and risk free rate for the stock component of a contractual contingency. Contingent liabilities are valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved. Changes in the fair value of contingent consideration liabilities primarily result from changes in the timing and amount of specific milestone estimates and changes in probability assumptions with respect to the likelihood of achieving the various earnout criteria. These changes could cause a material impact to, and volatility in the Company’s operating results. See Note 4 for contingent liabilities activity. | |
Financial Assets and Liabilities Measured At Fair Value on a Non-Recurring Basis | |
The amounts of the Company’s financial assets and liabilities, with the exceptions of employee housing loans and other employee loans described further herein, approximate fair value because of their short-term maturities. | |
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 a result of the analysis performed, the Company determined the carrying values of the housing loans issued during the three and nine months ended September 30, 2014 approximated their fair values upon initial recognition. The Company also estimated the fair values of the housing loans that were outstanding as of September 30, 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 September 30, 2014, the carrying values of these employee loans approximated their fair values. | |
Business Combinations | ' |
Business Combinations — 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. The Company identifies and attributes fair values and estimated lives to the intangible assets acquired and allocates the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. 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. There are different valuation models for each component, the selection of which requires considerable judgment. These determinations will affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes are reasonable, but recognizes that the assumptions are inherently uncertain. | |
If initial accounting for the business combination has not been completed by the end of the reporting period in which the business combination occurs, provisional amounts are reported for which the accounting is incomplete, with retrospective adjustment made to such provisional amounts during the measurement period to present new information about facts and circumstances that existed as of the acquisition date. Once the measurement period ends, and in no case beyond one year from the acquisition date, revisions of the accounting for the business combination are recorded in earnings. | |
All acquisition-related costs, other than the costs to issue debt or equity securities, are accounted for as expenses in the period in which they are incurred. Changes in fair value of contingent consideration arrangements that are not measurement period adjustments are recognized in earnings. Payments to settle contingent consideration, if any, are reflected in cash flows from financing activities and the changes in fair value are reflected in cash flows from operating activities in the Company’s condensed consolidated statements of cash flows. | |
The Company’s acquisitions usually do not have significant amounts of tangible assets, as the principal assets typically acquired 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 Other Intangible Assets | ' |
Goodwill and Other Intangible Assets — Goodwill and intangible assets that have indefinite useful lives are treated consistently with ASC 350. They are tested annually for impairment and are not amortized. | |
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. | |
Stock-based Compensation | ' |
Stock-Based Compensation — Equity-based compensation cost relating to the issuance of share-based awards to employees is based on the fair value of the award at the date of grant, which is expensed ratably over the requisite service period, net of estimated forfeitures. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Therefore, changes in the forfeiture assumptions may affect the timing of the total amount of expense recognized over the vesting period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that do not meet criteria for equity classification are recorded in liabilities and adjusted to fair value at the end of each reporting period. Distributions associated with liability-classified awards not expected to vest are accounted for as compensation expense in the consolidated statements of income and comprehensive income. | |
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) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ' | ||||||||||||||||||||||||||||||||||||||||
Summary of Acquisitions in Exchange for Common Stock and/or Cash | ' | ||||||||||||||||||||||||||||||||||||||||
During the nine months ended September 30, 2014, the Company completed acquisitions of the following businesses in exchange for its common stock and/or cash. Among other benefits, the acquisitions allow the Company to expand into desirable geographic locations, further extend its presence across all business verticals, increase the volume and create new offerings of services currently provided. These acquisitions have been accounted for using the acquisition method for recording business combinations: | |||||||||||||||||||||||||||||||||||||||||
Name of Acquisition | Effective Date of Acquisition | Common Shares | Fair Value of Common | Cash, Net of Working Capital and Other Adjustments | Recorded Earnout | Total Recorded Purchase Price | Maximum Potential Earnout Payable | ||||||||||||||||||||||||||||||||||
Shares | Payable | ||||||||||||||||||||||||||||||||||||||||
Issued | Deferred | Issued | Deferred | Paid | Deferred | Cash | Stock | ||||||||||||||||||||||||||||||||||
(in shares) | (in thousands) | ||||||||||||||||||||||||||||||||||||||||
Netsoft | 5-Mar-14 | — | — | $ | — | $ | — | $ | 2,373 | $ | 1,400 | $ | 1,825 | $ | — | $ | 5,598 | $ | 1,825 | ||||||||||||||||||||||
Jointech | 30-Apr-14 | — | 89,552 | — | 2,788 | 10,000 | 4,000 | 15,000 | 5,000 | 36,788 | 20,000 | ||||||||||||||||||||||||||||||
GGA (1) | 6-Jun-14 | — | — | — | — | 13,526 | — | 11,400 | — | 24,926 | |||||||||||||||||||||||||||||||
— | 89,552 | $ | — | $ | 2,788 | $ | 25,899 | $ | 5,400 | $ | 28,225 | $ | 5,000 | $ | 67,312 | ||||||||||||||||||||||||||
-1 | The amount of the maximum potential earnout payable to GGA, if any, is not limited based on the terms of the purchase agreement. | ||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | ' | ||||||||||||||||||||||||||||||||||||||||
The following is a summary of the estimated fair values of the net assets acquired at the date of each acquisition made during the nine months ended September 30, 2014: | |||||||||||||||||||||||||||||||||||||||||
Netsoft | Jointech | GGA | Total | ||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 871 | $ | — | $ | 871 | |||||||||||||||||||||||||||||||||
Trade receivables and other current assets | 788 | 784 | 5,157 | 6,729 | |||||||||||||||||||||||||||||||||||||
Property and equipment and other long-term assets | 52 | 338 | 444 | 834 | |||||||||||||||||||||||||||||||||||||
Deferred tax asset | 351 | — | 10,317 | 10,668 | |||||||||||||||||||||||||||||||||||||
Acquired intangible assets | 1,700 | 25,744 | 10,959 | 38,403 | |||||||||||||||||||||||||||||||||||||
Goodwill | 2,776 | 14,145 | 642 | 17,563 | |||||||||||||||||||||||||||||||||||||
Total assets acquired | 5,667 | 41,882 | 27,519 | 75,068 | |||||||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | 69 | 728 | 2,593 | 3,390 | |||||||||||||||||||||||||||||||||||||
Due to employees | — | 1,254 | — | 1,254 | |||||||||||||||||||||||||||||||||||||
Deferred tax liability | — | 3,112 | — | 3,112 | |||||||||||||||||||||||||||||||||||||
Total liabilities assumed | 69 | 5,094 | 2,593 | 7,756 | |||||||||||||||||||||||||||||||||||||
Net assets acquired | $ | 5,598 | $ | 36,788 | $ | 24,926 | $ | 67,312 | |||||||||||||||||||||||||||||||||
Summary of Revenues, Net Income/(Losses) And Acquisition-Related Costs | ' | ||||||||||||||||||||||||||||||||||||||||
The following is a summary of revenues, net income and acquisition-related costs included in the condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2014: | |||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2014 | Nine Months Ended September 30, 2014 | ||||||||||||||||||||||||||||||||||||||||
Revenues | Net Income | Acquisition-related costs | Revenues | Net Income | Acquisition-related costs | ||||||||||||||||||||||||||||||||||||
Netsoft (1) | $ | 1,539 | $ | 556 | $ | — | $ | 3,173 | $ | 999 | $ | 75 | |||||||||||||||||||||||||||||
Jointech (2) | 5,045 | 435 | — | 8,274 | 556 | 361 | |||||||||||||||||||||||||||||||||||
GGA (3) | 7,989 | 1,406 | — | 10,342 | 1,336 | 325 | |||||||||||||||||||||||||||||||||||
Total | $ | 14,573 | $ | 2,397 | $ | — | $ | 21,789 | $ | 2,891 | $ | 761 | |||||||||||||||||||||||||||||
-1 | Included in net income is $54 and $124 of stock-based compensation expense related to the Netsoft Employment Shares for the three and nine months ended September 30, 2014. | ||||||||||||||||||||||||||||||||||||||||
-2 | Included in net income is $649 and $1,089 of stock-based compensation expense related to the Jointech Employment Shares for the three and nine months ended September 30, 2014. | ||||||||||||||||||||||||||||||||||||||||
-3 | Included in net income is $1,706 and $2,161 of stock-based compensation expense related to the GGA Employment Shares for the three and nine months ended September 30, 2014. |
GOODWILL_Tables
GOODWILL (Tables) | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | |||||||||||||||
Schedule of Goodwill By Reportable Segment | ' | |||||||||||||||
Goodwill by reportable segment was as follows: | ||||||||||||||||
North America | Europe | Russia | Total | |||||||||||||
Balance as of January 1, 2014 | $ | 16,438 | $ | 2,864 | $ | 2,966 | $ | 22,268 | ||||||||
Acquisition of Netsoft (Note 2) | 2,776 | — | — | 2,776 | ||||||||||||
Acquisition of Jointech (Note 2) | — | 14,145 | — | 14,145 | ||||||||||||
Acquisition of GGA (Note 2) | 642 | — | — | 642 | ||||||||||||
Effect of net foreign currency exchange rate changes | (116 | ) | (159 | ) | (501 | ) | (776 | ) | ||||||||
Balance as of September 30, 2014 | $ | 19,740 | $ | 16,850 | $ | 2,465 | $ | 39,055 | ||||||||
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Fair Value Disclosures [Abstract] | ' | |||||||
Liabilities Measured at Fair Value on Recurring Basis | ' | |||||||
The following tables show the fair values of the Company’s financial liabilities measured at fair value on a recurring basis: | ||||||||
As of September 30, 2014 | ||||||||
Balance | Level 3 | |||||||
Contingent consideration | $ | 33,153 | $ | 33,153 | ||||
Performance-based equity awards | 1,622 | 1,622 | ||||||
Total liabilities measured at fair value on a recurring basis | $ | 34,775 | $ | 34,775 | ||||
Reconciliation of Liabilities Measured on Recurring Basis, Unobservable Input | ' | |||||||
A reconciliation of the beginning and ending balances of acquisition-related contractual contingent liabilities using significant unobservable inputs (Level 3) for the nine months ended September 30, 2014, was as follows: | ||||||||
Amount | ||||||||
Contractual contingent liabilities at January 1, 2014 | $ | — | ||||||
Acquisition date fair value of contractual contingent liabilities — Netsoft | 1,825 | |||||||
Acquisition date fair value of contractual contingent liabilities — Jointech | 20,000 | |||||||
Acquisition date fair value of contractual contingent liabilities — GGA | 11,400 | |||||||
Liability-classified stock-based awards | 1,642 | |||||||
Changes in fair value of contractual contingent liabilities included in earnings | (20 | ) | ||||||
Changes in fair value of contractual contingent liabilities recorded against goodwill | — | |||||||
Effect of net foreign currency exchange rate changes | (72 | ) | ||||||
Settlements of contractual contingent liabilities | — | |||||||
Contractual contingent liabilities at September 30, 2014 | $ | 34,775 | ||||||
EMPLOYEE_LOANS_AND_ALLOWANCE_F1
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Loans and Leases Receivable, Related Parties Disclosure [Abstract] | ' | |||||||
Categories of Employee Loans Included in Loans Portfolio | ' | |||||||
At September 30, 2014 and December 31, 2013, categories of employee loans included in the loan portfolio were as follows: | ||||||||
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Housing loans | $ | 5,910 | $ | 5,896 | ||||
Relocation and other loans | 646 | 494 | ||||||
Total employee loans | 6,556 | 6,390 | ||||||
Less: | ||||||||
Allowance for loan losses | — | — | ||||||
Total loans, net of allowance for loan losses | $ | 6,556 | $ | 6,390 | ||||
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | |||||||||||||||
Costs Related to Stock Compensation Plans | ' | |||||||||||||||
The following costs related to the Company’s stock compensation plans were included in the unaudited condensed consolidated statements of income: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Cost of revenues | $ | 2,463 | $ | 1,498 | $ | 6,391 | $ | 3,356 | ||||||||
Selling, general and administrative expenses | 4,962 | 1,867 | 10,133 | 6,435 | ||||||||||||
Total | $ | 7,425 | $ | 3,365 | $ | 16,524 | $ | 9,791 | ||||||||
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 | 2,373,500 | 32.33 | 27,200 | |||||||||||||
Options exercised | (828,756 | ) | 8.54 | (29,214 | ) | |||||||||||
Options forfeited/cancelled | (162,829 | ) | 24.41 | (3,156 | ) | |||||||||||
Options outstanding at September 30, 2014 | 7,205,451 | $ | 20.42 | $ | 168,391 | |||||||||||
Options vested and exercisable at September 30, 2014 | 2,708,228 | $ | 9.87 | $ | 91,863 | |||||||||||
Options expected to vest | 4,101,056 | $ | 26.58 | $ | 70,579 | |||||||||||
Service-based Awards Activity | ' | |||||||||||||||
Summarized activity related to the Company’s service-based awards for the nine months ended September 30, 2014, was as follows: | ||||||||||||||||
Number of | Weighted Average Grant Date | |||||||||||||||
Shares | Fair Value Per Share | |||||||||||||||
Unvested service-based awards outstanding at January 1, 2014 | 344,928 | $ | 18.74 | |||||||||||||
Awards granted | 432,356 | 39.93 | ||||||||||||||
Awards vested | (67,357 | ) | (17.62 | ) | ||||||||||||
Awards forfeited/cancelled | (16,924 | ) | 20.81 | |||||||||||||
Unvested service-based awards outstanding at September 30, 2014 | 693,003 | $ | 32.02 | |||||||||||||
Performance-based Awards Activity | ' | |||||||||||||||
Summarized activity related to the Company’s performance-based awards for the nine months ended September 30, 2014, was as follows: | ||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | |||||||||||||||
Unvested performance-based awards outstanding at January 1, 2014 | — | $ | — | |||||||||||||
Awards granted | 376,966 | 38.55 | ||||||||||||||
Awards vested | — | — | ||||||||||||||
Awards forfeited/cancelled | (817 | ) | 36.57 | |||||||||||||
Changes in the number of awards expected to be delivered | (46,331 | ) | 31.13 | |||||||||||||
Unvested performance-based awards outstanding at September 30, 2014 | 329,818 | $ | 39.6 | |||||||||||||
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 9 Months Ended | |||||||||||||||
Sep. 30, 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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator for common earnings per share: | ||||||||||||||||
Net income | $ | 19,040 | $ | 16,437 | $ | 51,218 | $ | 43,235 | ||||||||
Numerator for basic and diluted earnings per share | $ | 19,040 | $ | 16,437 | $ | 51,218 | $ | 43,235 | ||||||||
Denominator for basic earnings per share: | ||||||||||||||||
Weighted average common shares outstanding | 47,315 | 46,162 | 47,058 | 45,492 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Stock options, RSUs and performance-based awards | 2,514 | 2,558 | 2,472 | 2,628 | ||||||||||||
Denominator for diluted earnings per share | 49,829 | 48,720 | 49,530 | 48,120 | ||||||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.4 | $ | 0.36 | $ | 1.09 | $ | 0.95 | ||||||||
Diluted | $ | 0.38 | $ | 0.34 | $ | 1.03 | $ | 0.9 | ||||||||
OPERATING_SEGMENTS_Tables
OPERATING SEGMENTS (Tables) | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Segment Reporting [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 and nine months ended September 30, 2014 and 2013, were as follows: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Total segment revenues: | ||||||||||||||||
North America | $ | 99,393 | $ | 73,480 | $ | 267,866 | $ | 205,613 | ||||||||
Europe | 78,074 | 51,531 | 217,247 | 146,108 | ||||||||||||
Russia | 14,762 | 12,050 | 38,881 | 37,901 | ||||||||||||
Other | 530 | 3,078 | 3,445 | 7,867 | ||||||||||||
Total segment revenues | $ | 192,759 | $ | 140,139 | $ | 527,439 | $ | 397,489 | ||||||||
Segment operating profit: | ||||||||||||||||
North America | $ | 22,557 | $ | 18,133 | $ | 62,283 | $ | 48,527 | ||||||||
Europe | 12,200 | 8,049 | 36,049 | 24,538 | ||||||||||||
Russia | 3,779 | 391 | 4,843 | 2,710 | ||||||||||||
Other | (1,508 | ) | 1,024 | (3,726 | ) | 960 | ||||||||||
Total segment operating profit | $ | 37,028 | $ | 27,597 | $ | 99,449 | $ | 76,735 | ||||||||
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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Total segment revenues | $ | 192,759 | $ | 140,139 | $ | 527,439 | $ | 397,489 | ||||||||
Unallocated revenue | 5 | 11 | 404 | 43 | ||||||||||||
Revenues | $ | 192,764 | $ | 140,150 | $ | 527,843 | $ | 397,532 | ||||||||
Total segment operating profit: | $ | 37,028 | $ | 27,597 | $ | 99,449 | $ | 76,735 | ||||||||
Unallocated amounts: | ||||||||||||||||
Other revenues | 5 | 11 | 404 | 43 | ||||||||||||
Stock-based compensation expense | (7,425 | ) | (3,365 | ) | (16,524 | ) | (9,791 | ) | ||||||||
Non-corporate taxes | (789 | ) | (690 | ) | (1,944 | ) | (2,190 | ) | ||||||||
Professional fees | (839 | ) | (594 | ) | (3,380 | ) | (2,668 | ) | ||||||||
Depreciation and amortization | (2,589 | ) | (732 | ) | (5,470 | ) | (2,162 | ) | ||||||||
Bank charges | (708 | ) | (261 | ) | (1,211 | ) | (914 | ) | ||||||||
Asset impairment | — | — | (2,000 | ) | — | |||||||||||
Other corporate expenses | (2,848 | ) | (1,736 | ) | (7,156 | ) | (5,752 | ) | ||||||||
Income from operations | 21,835 | 20,230 | 62,168 | 53,301 | ||||||||||||
Interest and other income, net | 1,261 | 846 | 3,401 | 2,245 | ||||||||||||
Foreign exchange loss | (718 | ) | (720 | ) | (3,198 | ) | (2,088 | ) | ||||||||
Income before provision for income taxes | $ | 22,378 | $ | 20,356 | $ | 62,371 | $ | 53,458 | ||||||||
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 was as follows: | ||||||||||||||||
September 30, | December 31, | |||||||||||||||
2014 | 2013 | |||||||||||||||
Belarus | $ | 41,243 | $ | 38,697 | ||||||||||||
Ukraine | 4,511 | 5,525 | ||||||||||||||
Russia | 2,673 | 3,414 | ||||||||||||||
Hungary | 2,703 | 2,644 | ||||||||||||||
United States | 1,931 | 2,217 | ||||||||||||||
Other | 1,604 | 818 | ||||||||||||||
Total | $ | 54,665 | $ | 53,315 | ||||||||||||
Revenues by Client Location | ' | |||||||||||||||
Information about the Company’s revenues by client location is as follows: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
United States | $ | 84,276 | $ | 62,871 | $ | 228,504 | $ | 180,067 | ||||||||
United Kingdom | 35,222 | 26,637 | 102,642 | 81,416 | ||||||||||||
Switzerland | 22,508 | 13,920 | 63,873 | 33,934 | ||||||||||||
Russia | 14,351 | 11,534 | 37,513 | 36,464 | ||||||||||||
Canada | 13,518 | 9,162 | 34,973 | 22,980 | ||||||||||||
Germany | 6,459 | 5,141 | 18,951 | 14,211 | ||||||||||||
China | 5,058 | — | 8,268 | — | ||||||||||||
Netherlands | 2,174 | 1,895 | 6,636 | 6,665 | ||||||||||||
Sweden | 1,734 | 1,382 | 6,213 | 3,986 | ||||||||||||
Kazakhstan | 525 | 2,921 | 3,141 | 7,414 | ||||||||||||
Other locations | 4,476 | 2,501 | 11,027 | 5,261 | ||||||||||||
Reimbursable expenses and other revenues | 2,463 | 2,186 | 6,102 | 5,134 | ||||||||||||
Revenues | $ | 192,764 | $ | 140,150 | $ | 527,843 | $ | 397,532 | ||||||||
Revenues by Service Offering | ' | |||||||||||||||
Information about the Company’s revenues by service offering is as follows: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Software development | $ | 134,000 | $ | 93,870 | $ | 364,539 | $ | 267,948 | ||||||||
Application testing services | 37,155 | 27,773 | 103,121 | 78,473 | ||||||||||||
Application maintenance and support | 14,824 | 11,758 | 40,715 | 33,245 | ||||||||||||
Infrastructure services | 3,502 | 3,754 | 10,740 | 10,625 | ||||||||||||
Licensing | 820 | 809 | 2,626 | 2,107 | ||||||||||||
Reimbursable expenses and other revenues | 2,463 | 2,186 | 6,102 | 5,134 | ||||||||||||
Revenues | $ | 192,764 | $ | 140,150 | $ | 527,843 | $ | 397,532 | ||||||||
ACQUISITIONS_Details
ACQUISITIONS (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Mar. 05, 2014 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Apr. 30, 2014 | Jun. 06, 2014 | Jun. 06, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 05, 2014 | Mar. 05, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Jun. 06, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | Jun. 06, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | Mar. 05, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | Apr. 30, 2014 | Jun. 06, 2014 | Jun. 06, 2014 | ||
Minimum | Maximum | Netsoft | Netsoft | Jointech | Jointech | Jointech | Jointech | GGA | GGA | GGA | GGA | Employment Shares | Employment Shares | Employment Shares | Employment Shares | Employment Shares | Employment Shares | Employment Shares | Employment Shares, Closing Shares | Employment Shares, Closing Shares | Employment Shares, Closing Shares | Employment Shares, Earn-Out Shares | Employment Shares, Earn-Out Shares | Common Stock | Common Stock | Common Stock | Common Stock | Common Stock | Common Stock | |||||
ITprofessional | ITprofessional | Owner | scientist | ITprofessional | Netsoft | Netsoft | Jointech | Jointech | GGA | GGA | Netsoft | Jointech | GGA | Netsoft | Jointech | Netsoft | Netsoft | Jointech | Jointech | GGA | GGA | |||||||||||||
Owner | Maximum | Maximum | ||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Estimated Future Operating Results Period, Subsequent to Acquisition Date | ' | ' | '7 months | '12 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Number of professionals | ' | ' | ' | ' | 40 | ' | 216 | ' | ' | ' | 126 | 329 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Stock issued or issuable, number of shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,289 | 89,552 | 262,277 | 16,349 | ' | 0 | ' | 0 | ' | 0 | [1] | ' | |
Share vesting term | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '3 years | '3 years | '3 years | ' | '3 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Stock issued or issuable, value assigned | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $682,000 | ' | ' | ' | $7,788,000 | ' | $20,655,000 | ' | ' | ' | ' | $5,000,000 | ' | $0 | ' | $0 | ' | $0 | [1] | |
Business Acquisition, Number of Former Owners | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Cash Consideration Placed In Escrow | ' | ' | ' | ' | 256,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Consideration Placed In Escrow, Period | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '18 months | ' | ' | ' | '18 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Consideration Placed In Escrow, Percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Consideration Placed In Escrow, Shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 102,631 | ' | ' | ' | ' | ' | ' | ' | ' | ||
Goodwill | 39,055,000 | 22,268,000 | ' | ' | ' | 2,776,000 | ' | 14,145,000 | 11,033,000 | ' | ' | ' | 642,000 | 6,494,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Increase (decrease) in goodwill | ' | ' | ' | ' | ' | ' | ' | 3,112,000 | ' | ' | ' | ' | -5,854,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Deferred tax liability | ' | ' | ' | ' | ' | 0 | ' | 3,112,000 | ' | ' | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Decrease in deferred tax assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,854,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Deferred tax asset | ' | ' | ' | ' | ' | $351,000 | ' | $0 | ' | ' | ' | ' | $10,317,000 | $4,463,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
[1] | (1)The amount of the maximum potential earnout payable to GGA, if any, is not limited based on the terms of the purchase agreement. |
ACQUISITIONS_Details_1
ACQUISITIONS (Details 1) (USD $) | 0 Months Ended | 0 Months Ended | 0 Months Ended | 9 Months Ended | 0 Months Ended | 0 Months Ended | 0 Months Ended | 9 Months Ended | 0 Months Ended | |||||||||||
Mar. 05, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | Apr. 30, 2014 | Jun. 06, 2014 | Jun. 06, 2014 | Sep. 30, 2014 | Mar. 05, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | Apr. 30, 2014 | Jun. 06, 2014 | Jun. 06, 2014 | Sep. 30, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | |||||
Netsoft | Netsoft | Jointech | Jointech | GGA | GGA | Total | Common Stock | Common Stock | Common Stock | Common Stock | Common Stock | Common Stock | Common Stock | Maximum | Maximum | |||||
Netsoft | Netsoft | Jointech | Jointech | GGA | GGA | Total | Netsoft | Jointech | ||||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||
Stock issued, number of shares | ' | ' | ' | ' | ' | ' | ' | 0 | ' | 0 | ' | 0 | [1] | ' | 0 | ' | ' | |||
Stock deferred, number of shares | ' | ' | ' | ' | ' | ' | ' | 0 | ' | 89,552 | ' | 0 | [1] | ' | 89,552 | ' | ' | |||
Fair value of stock issued | ' | ' | ' | ' | ' | ' | ' | ' | $0 | ' | $0 | ' | $0 | [1] | $0 | ' | ' | |||
Fair value of deferred stock | ' | ' | ' | ' | ' | ' | ' | ' | 0 | ' | 2,788,000 | ' | 0 | [1] | 2,788,000 | ' | ' | |||
Cash, Net of Working Capital and Other Adjustments, Paid | 2,373,000 | ' | 10,000,000 | ' | 13,526,000 | [1] | ' | 25,899,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Cash, Net of Working Capital and Other Adjustments, Deferred | 1,400,000 | ' | 4,000,000 | ' | 0 | [1] | ' | 5,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Recorded Earnout Payable, Cash | 1,825,000 | ' | 15,000,000 | ' | 11,400,000 | [1] | ' | 28,225,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Recorded Earnout Payable, Stock | ' | 0 | ' | 5,000,000 | ' | 0 | [1] | 5,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Total Recorded Purchase Price | 5,598,000 | ' | 36,788,000 | ' | 24,926,000 | [1] | ' | 67,312,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Maximum Potential Earnout Payable | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1,825,000 | $20,000,000 | ||||
[1] | (1)The amount of the maximum potential earnout payable to GGA, if any, is not limited based on the terms of the purchase agreement. |
ACQUISITIONS_Details_2
ACQUISITIONS (Details 2) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2014 |
In Thousands, unless otherwise specified | Netsoft | Jointech | Jointech | GGA | GGA | Total | ||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' |
Cash and cash equivalents | ' | ' | $0 | $871 | ' | $0 | ' | $871 |
Trade receivables and other current assets | ' | ' | 788 | 784 | ' | 5,157 | ' | 6,729 |
Property and equipment and other long-term assets | ' | ' | 52 | 338 | ' | 444 | ' | 834 |
Deferred tax asset | ' | ' | 351 | 0 | ' | 10,317 | 4,463 | 10,668 |
Acquired intangible assets | ' | ' | 1,700 | 25,744 | ' | 10,959 | ' | 38,403 |
Goodwill | 39,055 | 22,268 | 2,776 | 14,145 | 11,033 | 642 | 6,494 | 17,563 |
Total assets acquired | ' | ' | 5,667 | 41,882 | ' | 27,519 | ' | 75,068 |
Accounts payable and accrued expenses | ' | ' | 69 | 728 | ' | 2,593 | ' | 3,390 |
Due to employees | ' | ' | 0 | 1,254 | ' | 0 | ' | 1,254 |
Deferred tax liability | ' | ' | 0 | 3,112 | ' | 0 | ' | 3,112 |
Total liabilities assumed | ' | ' | 69 | 5,094 | ' | 2,593 | ' | 7,756 |
Net assets acquired | ' | ' | $5,598 | $36,788 | ' | $24,926 | ' | $67,312 |
ACQUISITIONS_Details_3
ACQUISITIONS (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | ||||||
Netsoft | Netsoft | Jointech | Jointech | GGA | GGA | Total | Total | Total | |||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Revenues | $192,764 | $140,150 | $527,843 | $397,532 | $1,539 | [1] | $3,173 | [1] | $5,045 | [2] | $8,274 | [2] | $7,989 | [3] | $10,342 | [3] | $14,573 | $21,789 | $40,500 |
Net income | 19,040 | 16,437 | 51,218 | 43,235 | 556 | [1] | 999 | [1] | 435 | [2] | 556 | [2] | 1,406 | [3] | 1,336 | [3] | 2,397 | 2,891 | ' |
Acquisition related costs | ' | ' | ' | ' | 0 | [1] | 75 | [1] | 0 | [2] | 361 | [2] | 0 | [3] | 325 | [3] | 0 | 761 | ' |
Stock-based compensation expense | ' | ' | ' | ' | $54 | $124 | $649 | $1,089 | $1,706 | $2,161 | ' | ' | ' | ||||||
[1] | Included in net income is $54 and $124 of stock-based compensation expense related to the Netsoft Employment Shares for the three and nine months ended September 30, 2014. | ||||||||||||||||||
[2] | Included in net income is $649 and $1,089 of stock-based compensation expense related to the Jointech Employment Shares for the three and nine months ended September 30, 2014. | ||||||||||||||||||
[3] | Included in net income is $1,706 and $2,161 of stock-based compensation expense related to the GGA Employment Shares for the three and nine months ended September 30, 2014. |
GOODWILL_Details
GOODWILL (Details) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Jun. 30, 2014 |
Goodwill [Roll Forward] | ' | ' |
Balance as of January 1, 2014 | $22,268 | ' |
Effect of net foreign currency exchange rate changes | -776 | ' |
Balance as of September 30, 2014 | 39,055 | ' |
North America | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Balance as of January 1, 2014 | 16,438 | ' |
Effect of net foreign currency exchange rate changes | -116 | ' |
Balance as of September 30, 2014 | 19,740 | ' |
Europe | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Balance as of January 1, 2014 | 2,864 | ' |
Effect of net foreign currency exchange rate changes | -159 | ' |
Balance as of September 30, 2014 | 16,850 | ' |
Russia | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Balance as of January 1, 2014 | 2,966 | ' |
Effect of net foreign currency exchange rate changes | -501 | ' |
Balance as of September 30, 2014 | 2,465 | ' |
Netsoft | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 2,776 | ' |
Balance as of September 30, 2014 | 2,776 | ' |
Netsoft | North America | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 2,776 | ' |
Netsoft | Europe | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 0 | ' |
Netsoft | Russia | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 0 | ' |
Jointech | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Balance as of January 1, 2014 | ' | 11,033 |
Acquisition | 14,145 | ' |
Balance as of September 30, 2014 | 14,145 | 11,033 |
Jointech | North America | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 0 | ' |
Jointech | Europe | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 14,145 | ' |
Jointech | Russia | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 0 | ' |
GGA | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Balance as of January 1, 2014 | ' | 6,494 |
Acquisition | 642 | ' |
Balance as of September 30, 2014 | 642 | 6,494 |
GGA | North America | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 642 | ' |
GGA | Europe | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | 0 | ' |
GGA | Russia | ' | ' |
Goodwill [Roll Forward] | ' | ' |
Acquisition | $0 | ' |
GOODWILL_Details_2
GOODWILL (Details 2) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2013 |
Goodwill [Line Items] | ' | ' | ' |
Goodwill | $39,055,000 | $22,268,000 | ' |
North America | ' | ' | ' |
Goodwill [Line Items] | ' | ' | ' |
Goodwill | 19,740,000 | 16,438,000 | ' |
Accumulated impairment loss | 0 | 0 | ' |
Europe | ' | ' | ' |
Goodwill [Line Items] | ' | ' | ' |
Goodwill | 16,850,000 | 2,864,000 | ' |
Accumulated impairment loss | 0 | 0 | ' |
Russia | ' | ' | ' |
Goodwill [Line Items] | ' | ' | ' |
Goodwill | 2,465,000 | 2,966,000 | ' |
Accumulated impairment loss | 0 | 0 | ' |
Other | ' | ' | ' |
Goodwill [Line Items] | ' | ' | ' |
Goodwill | 0 | 0 | ' |
Accumulated impairment loss | ' | ' | $1,697,000 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 |
Level 3 | Fair Value, Measurements, Recurring | Fair Value, Measurements, Recurring | ||
Level 3 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ' | ' |
Contingent consideration | ' | ' | $33,153,000 | $33,153,000 |
Performance-based equity awards | ' | ' | 1,622,000 | 1,622,000 |
Total liabilities measured at fair value on a recurring basis | $0 | $0 | $34,775,000 | $34,775,000 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (Level 3, USD $) | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2014 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ' |
Contractual contingent liabilities at January 1, 2014 | $0 |
Liability-classified stock-based awards | 1,642 |
Changes in fair value of contractual contingent liabilities included in earnings | -20 |
Changes in fair value of contractual contingent liabilities recorded against goodwill | 0 |
Effect of net foreign currency exchange rate changes | -72 |
Settlements of contractual contingent liabilities | 0 |
Contractual contingent liabilities at September 30, 2014 | 34,775 |
Netsoft | ' |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ' |
Acquisition date fair value of contractual contingent liabilities | 1,825 |
Jointech | ' |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ' |
Acquisition date fair value of contractual contingent liabilities | 20,000 |
GGA | ' |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ' |
Acquisition date fair value of contractual contingent liabilities | $11,400 |
EMPLOYEE_LOANS_AND_ALLOWANCE_F2
EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details) (USD $) | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' | ' |
Total employee loans | $6,556,000 | ' | $6,390,000 |
Less: Allowance for loan losses | 0 | ' | 0 |
Total loans, net of allowance for loan losses | 6,556,000 | ' | 6,390,000 |
Loans issued to principal officers, directors and affiliates | 0 | 0 | ' |
Loans Under Employee Housing Program | ' | ' | ' |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' | ' |
Minimum service period for employee housing program | '3 years | ' | ' |
Loans authorized for issuance, amount | 10,000,000 | ' | ' |
Loan term | '5 years | ' | ' |
Interest rate on loan | 7.50% | ' | ' |
Total employee loans | 5,910,000 | ' | 5,896,000 |
Loans, recorded investment, past due | 0 | ' | 0 |
Loans, recorded investment, nonaccrual status | 0 | ' | 0 |
Provision for loan losses | 0 | 0 | ' |
Relocation and Other Loans | ' | ' | ' |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' | ' |
Total employee loans | $646,000 | ' | $494,000 |
LONGTERM_DEBT_Details
LONG-TERM DEBT (Details) (Revolving Credit Facility, USD $) | Jan. 15, 2013 | Jan. 15, 2013 | Sep. 30, 2014 | Sep. 12, 2014 | Sep. 12, 2014 | Sep. 12, 2014 |
2013 Credit Facility | 2013 Credit Facility | 2014 Credit Facility | 2014 Credit Facility | 2014 Credit Facility | 2014 Credit Facility | |
LIBOR | LIBOR | Federal Funds Open Rate | ||||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' |
Line of credit, maximum borrowing capacity | $40,000,000 | ' | ' | $200,000,000 | ' | ' |
Variable rate spread | ' | 1.25% | ' | ' | 1.00% | 0.50% |
Line of credit, maximum borrowing capacity in foreign currency | ' | ' | ' | 50,000,000 | ' | ' |
Percentage of foreign subsidiaries outstanding shares of capital stock serves as collateral | ' | ' | 65.00% | ' | ' | ' |
Line of credit, current borrowing capacity | ' | ' | ' | 100,000,000 | ' | ' |
Outstanding debt | ' | ' | $0 | ' | ' | ' |
EMPLOYEE_BENEFITS_Details
EMPLOYEE BENEFITS (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Compensation and Retirement Disclosure [Abstract] | ' | ' | ' | ' |
Discretionary matching contribution to retirement plan by employer | ' | ' | 2.00% | ' |
Contribution by employer for retirement plan | $144 | $112 | $405 | $286 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Income Taxes [Line Items] | ' | ' | ' | ' |
Effective tax rate | 14.90% | 19.30% | 17.90% | 19.10% |
ASC 740-10 reserve amount released | $1.20 | ' | ' | ' |
Belarus | ' | ' | ' | ' |
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 | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' | ' | ' |
Stock-based compensation expense | $7,425 | $3,365 | $16,524 | $9,791 |
Cost of revenues | ' | ' | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' | ' | ' |
Stock-based compensation expense | 2,463 | 1,498 | 6,391 | 3,356 |
Selling, general and administrative expenses | ' | ' | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' | ' | ' |
Stock-based compensation expense | $4,962 | $1,867 | $10,133 | $6,435 |
STOCKBASED_COMPENSATION_StockB
STOCK-BASED COMPENSATION, Stock-Based Compensation - Additional Information (Details) (USD $) | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Jan. 11, 2012 | Jan. 11, 2012 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 |
In Thousands, except Share data, unless otherwise specified | Stock Options | Restricted Stock | Restricted Stock | Service-Based Awards | Performance-Based Awards | Performance-Based Awards | 2012 Directors Plan | 2012 Directors Plan | 2012 Directors Plan | 2012 Plan | 2012 Plan | 2012 Plan | 2006 Plan | 2006 Plan | |
Restricted Stock | Stock Options | Restricted Stock Units (RSUs) | Maximum | Stock Options | |||||||||||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares authorized to be reserved for issuance (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | 600,000 | ' | ' | ' | ' | ' | ' |
2012 Directors Plan expiration period | ' | ' | ' | ' | ' | ' | ' | '10 years | ' | ' | ' | ' | ' | ' | ' |
Common stock shares available for issuance (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4,761,397 | ' | ' | ' | ' |
Common stock shares subject to outstanding awards that expire or terminate that are available for awards to be granted (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,975,437 | ' |
Options issued expiration period | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '10 years |
Aggregate grant-date fair value of stock options | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $32,414 | ' | ' | ' |
Stock options vesting term | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '4 years | ' | ' | ' |
Underlying options, in shares | 35,515 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized compensation cost, net of forfeitures | ' | 45,182 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average remaining contractual term, exercisable | ' | '5 years 4 months 26 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average remaining contractual term, outstanding | ' | '8 years 10 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Non-vested common stock shares issued (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7,738 | ' | ' | ' | ' | ' |
Restricted stock issued, value at grant date | ' | ' | ' | ' | ' | ' | ' | ' | ' | 325 | ' | ' | ' | ' | ' |
Total unrecognized compensation cost related to non-vested share-based compensation awards granted | ' | ' | ' | ' | ' | 12,586 | ' | ' | ' | 360 | ' | ' | 1,771 | ' | ' |
Total unrecognized compensation cost related to non-vested share-based compensation awards granted, period for recognition | ' | '2 years 0 months 19 days | ' | ' | '1 year 9 months | '1 year 10 months | ' | ' | ' | '1 year 6 months 16 days | ' | ' | '2 years 3 months 17 days | ' | ' |
Deferred compensation, shares issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 70,500 | ' | ' |
Deferred compensation arrangement, fair value of shares issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,085 | ' | ' |
Stock options issued (in shares) | ' | ' | 432,356 | ' | 354,118 | 376,966 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock options issued, grant date fair value | ' | ' | ' | ' | 14,590 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Underlying service-based awards, unvested and outstanding (in shares) | ' | ' | 693,003 | 344,928 | 556,240 | 329,818 | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Underlying options, value at grant date | ' | ' | ' | ' | $18,779 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
STOCKBASED_COMPENSATION_Stock_
STOCK-BASED COMPENSATION, Stock Option Activity (Details) (USD $) | 9 Months Ended |
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 |
Number of Options | ' |
Options outstanding at January 1, 2014 | 5,823,536 |
Options granted | 2,373,500 |
Options exercised | -828,756 |
Options forfeited/cancelled | -162,829 |
Options outstanding at September 30, 2014 | 7,205,451 |
Options vested and exercisable at September 30, 2014 | 2,708,228 |
Options expected to vest | 4,101,056 |
Weighted Average Exercise Price | ' |
Options outstanding at January 1, 2014 | $13.99 |
Options granted | $32.33 |
Options exercised | $8.54 |
Options forfeited/cancelled | $24.41 |
Options outstanding at September 30, 2014 | $20.42 |
Options vested and exercisable at September 30, 2014 | $9.87 |
Options expected to vest | $26.58 |
Aggregate Intrinsic Value | ' |
Options outstanding at January 1, 2014 | $122,003 |
Options granted | 27,200 |
Options exercised | -29,214 |
Options forfeited/cancelled | -3,156 |
Options outstanding at September 30, 2014 | 168,391 |
Options vested and exercisable at September 30, 2014 | 91,863 |
Options expected to vest | $70,579 |
STOCKBASED_COMPENSATION_Stock_1
STOCK-BASED COMPENSATION, Stock Compensation Plans (Details) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Service-Based Awards | ' |
Number of Shares | ' |
Unvested awards outstanding at January 1, 2014 | 344,928 |
Awards granted | 432,356 |
Awards vested | -67,357 |
Awards forfeited/cancelled | -16,924 |
Unvested awards outstanding at September 30, 2014 | 693,003 |
Weighted Average Grant Date Fair Value Per Share | ' |
Unvested awards outstanding at January 1, 2014 | $18.74 |
Awards granted | $39.93 |
Awards vested | ($17.62) |
Awards forfeited/cancelled | $20.81 |
Unvested awards outstanding at September 30, 2014 | $32.02 |
Performance-Based Awards | ' |
Number of Shares | ' |
Unvested awards outstanding at January 1, 2014 | 0 |
Awards granted | 376,966 |
Awards vested | 0 |
Awards forfeited/cancelled | -817 |
Changes in the number of awards expected to be delivered | -46,331 |
Unvested awards outstanding at September 30, 2014 | 329,818 |
Weighted Average Grant Date Fair Value Per Share | ' |
Unvested awards outstanding at January 1, 2014 | $0 |
Awards granted | $38.55 |
Awards vested | $0 |
Awards forfeited/cancelled | $36.57 |
Changes in the number of awards expected to be delivered | $31.13 |
Unvested awards outstanding at September 30, 2014 | $39.60 |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Numerator for common earnings per share: | ' | ' | ' | ' |
Net income | $19,040 | $16,437 | $51,218 | $43,235 |
Numerator for basic and diluted earnings per share | $19,040 | $16,437 | $51,218 | $43,235 |
Denominator for basic earnings per share: | ' | ' | ' | ' |
Weighted average common shares outstanding (in shares) | 47,315 | 46,162 | 47,058 | 45,492 |
Effect of dilutive securities (in shares): | ' | ' | ' | ' |
Stock options, RSUs and performance-based awards (in shares) | 2,514 | 2,558 | 2,472 | 2,628 |
Denominator for diluted earnings per share (in shares) | 49,829 | 48,720 | 49,530 | 48,120 |
Net income per share: | ' | ' | ' | ' |
Basic (in dollars per share) | $0.40 | $0.36 | $1.09 | $0.95 |
Diluted (in dollars per share) | $0.38 | $0.34 | $1.03 | $0.90 |
Anti-dilutive options not included in the calculation (in shares) | 2,691 | 1,873 | 2,152 | 1,399 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 9 Months Ended | 1 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 |
Construction in Progress | Maximum | Breach of Contract Against IDEAB | ||
Construction in Progress | ||||
Commitments and Contingencies [Line Items] | ' | ' | ' | ' |
Legal settlement amount | ' | ' | ' | $1,000 |
Capitalized construction costs | ' | 17,500 | ' | ' |
Estimate additional costs | ' | 7,000 | ' | ' |
Additional period to complete construction | '9 months | ' | ' | ' |
Estimate of probable losses | ' | $2,000 | $4,500 | ' |
OPERATING_SEGMENTS_Revenues_fr
OPERATING SEGMENTS, Revenues from External Customers and Segment Operating Profit Before Unallocated Expenses (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Revenues | $192,764 | $140,150 | $527,843 | $397,532 |
Operating profit | 21,835 | 20,230 | 62,168 | 53,301 |
Entity-wide revenue, major customer, amount | 192,764 | 140,150 | 527,843 | 397,532 |
UBS AG | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Number of customers accounted for more than ten percentage of revenue | 1 | ' | 1 | ' |
Entity-wide revenue, major customer, amount | 27,012 | ' | 70,259 | ' |
Barclays Capital | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Number of customers accounted for more than ten percentage of revenue | ' | 1 | ' | 1 |
Entity-wide revenue, major customer, amount | ' | 14,489 | ' | 40,070 |
Russia | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Revenues | 14,351 | 11,534 | 37,513 | 36,464 |
Operating Segments | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Revenues | 192,759 | 140,139 | 527,439 | 397,489 |
Operating profit | 37,028 | 27,597 | 99,449 | 76,735 |
Entity-wide revenue, major customer, amount | 192,759 | 140,139 | 527,439 | 397,489 |
Operating Segments | North America | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Revenues | 99,393 | 73,480 | 267,866 | 205,613 |
Operating profit | 22,557 | 18,133 | 62,283 | 48,527 |
Operating Segments | Europe | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Revenues | 78,074 | 51,531 | 217,247 | 146,108 |
Operating profit | 12,200 | 8,049 | 36,049 | 24,538 |
Operating Segments | Russia | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Revenues | 14,762 | 12,050 | 38,881 | 37,901 |
Operating profit | 3,779 | 391 | 4,843 | 2,710 |
Operating Segments | Other | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Revenues | 530 | 3,078 | 3,445 | 7,867 |
Operating profit | ($1,508) | $1,024 | ($3,726) | $960 |
Accounts Receivable | Customer Concentration Risk | Billed | UBS AG | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Percentage of total revenues | ' | ' | 10.00% | ' |
Accounts Receivable | Customer Concentration Risk | Unbilled | UBS AG | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Percentage of total revenues | ' | ' | 15.50% | ' |
OPERATING_SEGMENTS_Reconciliat
OPERATING SEGMENTS, Reconciliation of Segment Revenues and Operating Profit to Consolidated Income From Operations (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | $192,764 | $140,150 | $527,843 | $397,532 |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Income from operations | 21,835 | 20,230 | 62,168 | 53,301 |
Stock-based compensation expense | -7,425 | -3,365 | -16,524 | -9,791 |
Depreciation and amortization | -5,510 | -3,906 | -14,650 | -11,377 |
Interest and other income, net | 1,261 | 846 | 3,401 | 2,245 |
Foreign exchange loss | -718 | -720 | -3,198 | -2,088 |
Income before provision for income taxes | 22,378 | 20,356 | 62,371 | 53,458 |
Operating Segments | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 192,759 | 140,139 | 527,439 | 397,489 |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Income from operations | 37,028 | 27,597 | 99,449 | 76,735 |
Unallocated Amounts | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 5 | 11 | 404 | 43 |
Segment Reporting Information [Line Items] | ' | ' | ' | ' |
Other revenues | 5 | 11 | 404 | 43 |
Stock-based compensation expense | -7,425 | -3,365 | -16,524 | -9,791 |
Non-corporate taxes | -789 | -690 | -1,944 | -2,190 |
Professional fees | -839 | -594 | -3,380 | -2,668 |
Depreciation and amortization | -2,589 | -732 | -5,470 | -2,162 |
Bank charges | -708 | -261 | -1,211 | -914 |
Asset impairment | 0 | 0 | -2,000 | 0 |
Other corporate expenses | ($2,848) | ($1,736) | ($7,156) | ($5,752) |
OPERATING_SEGMENTS_Geographica
OPERATING SEGMENTS, Geographical Information of Long-Lived Assets Based on Physical Location (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | $54,665 | $53,315 |
Belarus | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 41,243 | 38,697 |
Ukraine | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 4,511 | 5,525 |
Russia | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 2,673 | 3,414 |
Hungary | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 2,703 | 2,644 |
United States | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | 1,931 | 2,217 |
Other | ' | ' |
Long-Lived Assets by Geographical Areas [Line Items] | ' | ' |
Long-lived assets | $1,604 | $818 |
OPERATING_SEGMENTS_Revenues_by
OPERATING SEGMENTS, Revenues by Client Location (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | $192,764 | $140,150 | $527,843 | $397,532 |
Reimbursable expenses and other revenues | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 2,463 | 2,186 | 6,102 | 5,134 |
United States | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 84,276 | 62,871 | 228,504 | 180,067 |
United Kingdom | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 35,222 | 26,637 | 102,642 | 81,416 |
Switzerland | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 22,508 | 13,920 | 63,873 | 33,934 |
Russia | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 14,351 | 11,534 | 37,513 | 36,464 |
Canada | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 13,518 | 9,162 | 34,973 | 22,980 |
Germany | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 6,459 | 5,141 | 18,951 | 14,211 |
China | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 5,058 | 0 | 8,268 | 0 |
Netherlands | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 2,174 | 1,895 | 6,636 | 6,665 |
Sweden | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 1,734 | 1,382 | 6,213 | 3,986 |
Kazakhstan | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 525 | 2,921 | 3,141 | 7,414 |
Other locations | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | $4,476 | $2,501 | $11,027 | $5,261 |
OPERATING_SEGMENTS_Revenues_by1
OPERATING SEGMENTS, Revenues by Service Offering (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Revenue from External Customer [Line Items] | ' | ' | ' | ' |
Revenues | $192,764 | $140,150 | $527,843 | $397,532 |
Software development | ' | ' | ' | ' |
Revenue from External Customer [Line Items] | ' | ' | ' | ' |
Revenues | 134,000 | 93,870 | 364,539 | 267,948 |
Application testing services | ' | ' | ' | ' |
Revenue from External Customer [Line Items] | ' | ' | ' | ' |
Revenues | 37,155 | 27,773 | 103,121 | 78,473 |
Application maintenance and support | ' | ' | ' | ' |
Revenue from External Customer [Line Items] | ' | ' | ' | ' |
Revenues | 14,824 | 11,758 | 40,715 | 33,245 |
Infrastructure services | ' | ' | ' | ' |
Revenue from External Customer [Line Items] | ' | ' | ' | ' |
Revenues | 3,502 | 3,754 | 10,740 | 10,625 |
Licensing | ' | ' | ' | ' |
Revenue from External Customer [Line Items] | ' | ' | ' | ' |
Revenues | 820 | 809 | 2,626 | 2,107 |
Reimbursable expenses and other revenues | ' | ' | ' | ' |
Revenue from External Customer [Line Items] | ' | ' | ' | ' |
Revenues | $2,463 | $2,186 | $6,102 | $5,134 |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (Great Fridays Limited, Subsequent Event, USD $) | 0 Months Ended | |
In Thousands, unless otherwise specified | Oct. 31, 2014 | Oct. 31, 2014 |
CreativeProfessional | ||
Great Fridays Limited | Subsequent Event | ' | ' |
Subsequent Event [Line Items] | ' | ' |
Percent of equity interest acquired | ' | 100.00% |
Number of professionals | 50 | ' |
Aggregate purchase price | $11,800 | ' |