Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | Apr. 30, 2015 | |
Document Documentand Entity Information [Abstract] | ||
Entity Registrant Name | EPAM Systems, Inc. | |
Entity Central Index Key | 1352010 | |
Current Fiscal Year End Date | -19 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 48,905,023 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 | |
Document Period End Date | 31-Mar-15 | |
Document Type | 10-Q | |
Amendment Flag | FALSE | |
Trading Symbol | EPAM |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |||
Current assets | |||
Cash and cash equivalents | $192,363 | $220,534 | $169,207 |
Time deposits | 30,000 | 0 | |
Accounts receivable, net of allowance of $2,618 and $2,181, respectively | 104,714 | 124,483 | |
Unbilled revenues | 88,033 | 55,851 | |
Prepaid and other current assets | 14,390 | 9,289 | |
Employee loans, net of allowance of $0 and $0, respectively, current | 2,498 | 2,434 | |
Deferred tax assets, current | 1,817 | 2,496 | |
Total current assets | 433,815 | 415,087 | |
Property and equipment, net | 55,115 | 55,134 | |
Restricted cash, long-term | 114 | 156 | |
Employee loans, net of allowance of $0 and $0, respectively, long-term | 3,806 | 4,081 | |
Intangible assets, net | 45,091 | 47,689 | |
Goodwill | 56,346 | 57,417 | |
Deferred tax assets, long-term | 11,453 | 11,094 | |
Other long-term assets | 3,794 | 3,368 | |
Total assets | 609,534 | 594,026 | |
Current liabilities | |||
Accounts payable | 13,366 | 4,641 | |
Accrued expenses and other liabilities | 20,579 | 32,203 | |
Deferred revenue, current | 3,061 | 3,220 | |
Due to employees | 29,870 | 24,518 | |
Taxes payable | 16,005 | 24,704 | |
Contingent consideration, current (Note 2 and 4) | 33,919 | 35,524 | |
Contingent liability, current (Note 9) | 92 | 0 | |
Deferred tax liabilities, current | 705 | 603 | |
Total current liabilities | 117,597 | 125,413 | |
Deferred tax liabilities, long-term | 4,106 | 4,563 | |
Total liabilities | 121,703 | 129,976 | |
Commitments and contingencies (Note 9) | |||
Stockholders’ equity | |||
Common stock, $0.001 par value; 160,000,000 authorized; 49,111,297 and 48,748,298 shares issued, 48,692,313 and 48,303,811 shares outstanding at March 31, 2015 and December 31, 2014, respectively | 48 | 48 | |
Additional paid-in capital | 241,066 | 229,501 | |
Retained earnings | 275,312 | 260,598 | |
Treasury stock | -3,811 | -4,043 | |
Accumulated other comprehensive loss | -24,784 | -22,054 | |
Total stockholders’ equity | 487,831 | 464,050 | |
Total liabilities and stockholders’ equity | $609,534 | $594,026 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, except Share data, unless otherwise specified | ||
Current assets | ||
Accounts receivable allowance | $2,618 | $2,181 |
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 ) | 49,111,297 | 48,748,298 |
Common stock, shares outstanding (in shares) | 48,692,313 | 48,303,811 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Income Statement [Abstract] | ||
Revenues | $200,045 | $160,384 |
Operating expenses: | ||
Cost of revenues (exclusive of depreciation and amortization) | 125,887 | 102,454 |
Selling, general and administrative expenses | 46,938 | 32,359 |
Depreciation and amortization expense | 4,200 | 3,689 |
Other operating expenses, net | 200 | 25 |
Income from operations | 22,820 | 21,857 |
Interest and other income, net | 1,158 | 976 |
Foreign exchange loss | -5,754 | -1,241 |
Income before provision for income taxes | 18,224 | 21,592 |
Provision for income taxes | 3,510 | 4,228 |
Net income | 14,714 | 17,364 |
Foreign currency translation adjustments | -2,730 | -3,577 |
Comprehensive income | $11,984 | $13,787 |
Net income per share: | ||
Basic (in dollars per share) | $0.31 | $0.37 |
Diluted (in dollars per share) | $0.29 | $0.35 |
Shares used in calculation of net income per share: | ||
Basic (in shares) | 47,886 | 46,797 |
Diluted (in shares) | 51,000 | 49,207 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Cash flows from operating activities: | ||
Net income | $14,714 | $17,364 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 4,200 | 3,689 |
Bad debt expense | 514 | 368 |
Deferred taxes | 95 | 97 |
Stock-based compensation expense | 9,134 | 3,208 |
Excess tax benefit on stock-based compensation plans | -436 | -995 |
Other | 4,964 | 294 |
(Increase)/ decrease in operating assets: | ||
Accounts receivable | 15,262 | 4,908 |
Unbilled revenues | -32,261 | -15,611 |
Prepaid expenses and other assets | 48 | 939 |
Increase/ (decrease) in operating liabilities: | ||
Accounts payable | 9,669 | 8,563 |
Accrued expenses and other liabilities | -10,374 | -7,908 |
Deferred revenues | -9 | 265 |
Due to employees | 3,224 | 4,711 |
Taxes payable | -11,873 | -3,704 |
Net cash provided by operating activities | 6,871 | 16,188 |
Cash flows from investing activities: | ||
Purchases of property and equipment | -1,873 | -2,157 |
Payment for construction of corporate facilities | -1,591 | -1,488 |
Employee housing loans issued | -266 | -294 |
Proceeds from repayments of employee housing loans | 518 | 419 |
Increase in restricted cash and time deposits, net | -29,959 | -5,387 |
Increase in other long-term assets, net | -681 | -350 |
Acquisition of businesses, net of cash acquired (Note 2) | -30 | -2,419 |
Net cash used in investing activities | -33,882 | -11,676 |
Cash flows from financing activities: | ||
Proceeds related to stock options exercises | 3,855 | 2,139 |
Excess tax benefit on stock-based compensation plans | 436 | 995 |
Acquisition of business, deferred consideration (Note 2) | -2,801 | 0 |
Net cash provided by financing activities | 1,490 | 3,134 |
Effect of exchange rate changes on cash and cash equivalents | -2,650 | -2,787 |
Net increase/ (decrease) in cash and cash equivalents | -28,171 | 4,859 |
Cash and cash equivalents, beginning of period | 220,534 | 169,207 |
Cash and cash equivalents, end of period | $192,363 | $174,066 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2015 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
EPAM is a leading global provider of complex software engineering solutions and information technology ("IT") services to clients throughout North America, Western and Eastern Europe, Russia and Asia. The Company serves primarily Fortune Global 2000 companies in various industries with the main focus on Independent Software Vendors (“ISVs”) and technology, banking and financial services, business information and media, and travel and hospitality. Other industries include retail, energy, life sciences, healthcare, telecommunications, and government. | |
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. | |
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 ("GAAP") and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The condensed consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries with all intercompany balances and transactions eliminated. | |
These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2014 included in its Annual Report on Form 10-K. The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and such differences may be material to the financial statements. Additionally, operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. | |
Revenue Recognition — The Company recognizes revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) 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 reported. | |
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. If there is an uncertainty about the project completion or receipt of payment for the consulting services, revenue is deferred until the uncertainty is sufficiently resolved. At the time revenue is recognized, the Company provides for any contractual deductions and reduces the revenue accordingly. 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. | |
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. | |
Fair Value of Financial Instruments — The Company makes significant assumptions about fair values of its financial assets and liabilities in accordance with FASB Accounting Standards Codification (ASC) Topic 820 and utilizes the following fair value hierarchy in determining inputs used for valuation: | |
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. To the extent possible, observable market data is used as inputs into these models but when it is not 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 March 31, 2015 and December 31, 2014, other than contingent liabilities in connection with the acquisitions of businesses. | |
At March 31, 2015, 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. Contingent liabilities are valued using significant inputs that are not observable in the market, which are defined as Level 3 inputs according to fair value measurement accounting. 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. | |
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. | |
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. | |
See Note 4 for disclosures related to fair value. | |
Employee Loans — The Company issues employee housing loans in Belarus and relocation loans to assist employees with relocation needs in connection with intra-company transfers. There are no loans issued to principal officers, directors, and their affiliates. | |
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. Since the initiation of the loan program there have not been material past due or non-accrual employee loans or write offs related to loan losses and, therefore, the Company determined that no allowance for loan losses is required. | |
Employee Housing Loans — In the third quarter of 2012, the Board of Directors of the Company approved the Employee Housing Program (the “Housing Program”), which assists employees with purchasing housing in Belarus in a form of a loan. The Housing Program was designed to be a retention mechanism for the Company’s employees in Belarus and is available to full-time qualified employees who have been with the Company for at least 3 years. The aggregate maximum lending limit of the program is $10,000, with individual loans not exceeding $50. The housing is sold directly to employees by independent third parties. Loans issued under the Housing Program are denominated in U.S. Dollars with a 5-year term and an interest rate of 7.5%. | |
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 months ended March 31, 2015 approximated their fair values upon initial recognition. The Company also estimated the fair values of the housing loans that were outstanding as of March 31, 2015 using the inputs noted above and determined their fair values approximated the carrying values as of that date. | |
Employee Loans, Other — The Company issues short-term, non-interest bearing relocation loans to employees that relocated within the company. Due to the short term of employee loans and high certainty of repayment, their carrying amount is a reasonable estimate of their fair value. | |
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 in accordance with FASB Accounting Standards Codification Topic 805. 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 — The Company recognizes the cost of its share-based incentive awards based on the fair value of the award at the date of grant net of estimated forfeitures. The cost is expensed evenly over the service period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Over time, the forfeiture assumption is adjusted to the actual forfeiture rate and such change may affect the timing of the total amount of expense recognized over the vesting period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that do not meet the criteria for equity classification are recorded as liabilities and adjusted to fair value at the end of each reporting period. | |
Off-Balance Sheet Financial Instruments — Include credit instruments, such as commitments to make employee loans and related guarantees, standby letters of credit and guarantees issued under customer contracts. The face amount for these items represents the exposure to loss, before considering available collateral or the borrower’s ability to repay. Such financial instruments are recorded when they are funded. Loss contingencies arising from off-balance sheet credit exposures are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe there are such matters that will have a material effect on the consolidated financial statements. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS | ACQUISITIONS | ||||||||||||||||||||||||||||||||||||||||
The four acquisitions completed during 2014 allowed the Company to expand into desirable geographic locations, complement the existing vertical markets, increase revenue and create new offerings of services currently provided. The Company used the acquisition method for recording business combinations to account for these acquisitions. Acquisitions were settled in cash and/or stock where a portion of the settlement price may be deferred. In some cases, purchase agreements contain contingent consideration in a form of an earnout obligation. The table below discloses respective details of each acquisition. | |||||||||||||||||||||||||||||||||||||||||
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 | — | — | $ | — | $ | — | $ | 2,403 | $ | 1,022 | $ | 1,825 | $ | — | $ | 5,250 | $ | 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 | — | — | — | — | 14,892 | — | 11,400 | — | 26,292 | |||||||||||||||||||||||||||||||
Great Fridays | 31-Oct-14 | — | — | — | — | 10,777 | — | 1,173 | — | 11,950 | 1,173 | ||||||||||||||||||||||||||||||
— | 89,552 | $ | — | $ | 2,788 | $ | 38,072 | $ | 5,022 | $ | 29,398 | $ | 5,000 | $ | 80,280 | ||||||||||||||||||||||||||
-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”). The Company agreed to pay deferred consideration, consisting partly of 9,154 restricted shares of Company common stock. During the quarter ended on March 31, 2015, the Company issued 16,349 restricted shares of Company common stock to Netsoft for achieving certain performance targets (collectively with the Netsoft Closing Shares, the “Netsoft Employment Shares”). The Netsoft Employment Shares vest in equal annual installments over a three-year period starting from the date of acquisition. The first such installment vested during the quarter ended March 31, 2015. 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 $1,017 at the time of grant and were recorded as stock-based compensation expense over an associated service period of three years (Note 7). 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 issued 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 determined 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 7). | |||||||||||||||||||||||||||||||||||||||||
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 7). 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. | |||||||||||||||||||||||||||||||||||||||||
Great Fridays — On October 31, 2014, the Company acquired all of the outstanding equity of Great Fridays Limited and its subsidiaries with intent 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. In connection with the Great Fridays acquisition, the Company agreed to issue a total of 90,864 shares of the Company common stock to the former owners of Great Fridays as consideration for future services (the “Great Fridays Closing Shares”). Furthermore, subject to attainment of specified performance targets, the Company will pay the former owners of Great Fridays up to a maximum of 10,092 shares of the Company common stock (collectively with Great Fridays Closing Shares, the “GF Employment Shares”). The GF 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 GF Employment Shares at the date of grant was $4,823 and will be recorded as stock-based compensation expense over an associated service period of three years (Note 7). Under the terms of the agreement, a total of 28,390 of the GF 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 respective acquisition during the year ended December 31, 2014 as originally reported in the quarterly condensed consolidated financial statements and at March 31, 2015: | |||||||||||||||||||||||||||||||||||||||||
Netsoft | Jointech | GGA | Great Fridays | Total | |||||||||||||||||||||||||||||||||||||
As Originally Reported | As of | As Originally Reported | As of | As Originally Reported | As of | As Originally Reported | As of | As Originally Reported | As of | ||||||||||||||||||||||||||||||||
March 31, | March 31, | March 31, | March 31, | March 31, | |||||||||||||||||||||||||||||||||||||
2015 | 2015 | 2015 | 2015 | 2015 | |||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 871 | $ | 871 | $ | — | $ | — | $ | 259 | $ | 259 | $ | 1,130 | $ | 1,130 | |||||||||||||||||||||
Trade receivables and other current assets | 788 | 788 | 784 | 784 | 5,157 | 5,377 | 1,825 | 1,825 | 8,554 | 8,774 | |||||||||||||||||||||||||||||||
Property and equipment and other long-term assets | 52 | 52 | 338 | 338 | 444 | 444 | 262 | 262 | 1,096 | 1,096 | |||||||||||||||||||||||||||||||
Deferred tax asset | 351 | — | — | — | 4,463 | — | — | — | 4,814 | — | |||||||||||||||||||||||||||||||
Acquired intangible assets | 1,700 | 1,700 | 25,744 | 22,485 | 10,959 | 10,959 | 5,747 | 5,747 | 44,150 | 40,891 | |||||||||||||||||||||||||||||||
Goodwill | 2,776 | 2,779 | 11,033 | 17,404 | 6,496 | 12,209 | 6,947 | 6,870 | 27,252 | 39,262 | |||||||||||||||||||||||||||||||
Total assets acquired | 5,667 | 5,319 | 38,770 | 41,882 | 27,519 | 28,989 | 15,040 | 14,963 | 86,996 | 91,153 | |||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | 69 | 69 | 728 | 728 | 2,593 | 2,593 | 872 | 872 | 4,262 | 4,262 | |||||||||||||||||||||||||||||||
Deferred revenue | — | — | — | — | — | 104 | 317 | 317 | 317 | 421 | |||||||||||||||||||||||||||||||
Due to employees | — | — | 1,254 | 1,254 | — | — | 624 | 624 | 1,878 | 1,878 | |||||||||||||||||||||||||||||||
Deferred tax liability | — | — | — | 3,112 | — | — | 1,200 | 1,200 | 1,200 | 4,312 | |||||||||||||||||||||||||||||||
Total liabilities assumed | 69 | 69 | 1,982 | 5,094 | 2,593 | 2,697 | 3,013 | 3,013 | 7,657 | 10,873 | |||||||||||||||||||||||||||||||
Net assets acquired | $ | 5,598 | $ | 5,250 | $ | 36,788 | $ | 36,788 | $ | 24,926 | $ | 26,292 | $ | 12,027 | $ | 11,950 | $ | 79,339 | $ | 80,280 | |||||||||||||||||||||
As of March 31, 2015 the fair values of the assets acquired and liabilities assumed and the related purchase price allocation for the Netsoft acquisition have been finalized. For the remaining acquisitions 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 as of March 31, 2015. During the period since the date of each respective acquisition the following updates were made to the initially reported balances. | |||||||||||||||||||||||||||||||||||||||||
For Netsoft, the deferred tax asset and goodwill were adjusted and decreased the net assets acquired by $348. For Jointech, intangible assets were adjusted to reflect the results of a preliminary valuation report obtained and a deferred tax liability was established, both increasing goodwill with no change to the net assets acquired. For GGA, additional accounts receivable and deferred revenue were recognized, deferred tax assets were netted with recognized deferred tax liabilities, and the final working capital adjustment was completed, which in aggregate increased the net assets acquired by $1,366. For Great Fridays, certain non-material adjustments were recognized, which decreased the net assets acquired by $77. These adjustments did not significantly impact previously reported financial results. | |||||||||||||||||||||||||||||||||||||||||
The Company is gathering additional information necessary to finalize the estimated fair values of intangible assets, deferred income taxes, contingent consideration and other amounts associated with the acquisitions for which the purchase price allocation has not been finalized as of March 31, 2015. 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 table presents the estimated fair values and useful lives of intangible assets acquired during the year ended March 31, 2015: | |||||||||||||||||||||||||||||||||||||||||
Netsoft | Jointech | GGA | Great Fridays | ||||||||||||||||||||||||||||||||||||||
Weighted Average | Amount | Weighted Average | Amount | Weighted Average | Amount | Weighted Average | Amount | ||||||||||||||||||||||||||||||||||
Useful Life | Useful Life | Useful Life | Useful Life | ||||||||||||||||||||||||||||||||||||||
(in years) | (in years) | (in years) | (in years) | ||||||||||||||||||||||||||||||||||||||
Customer relationships | 10 | $ | 1,700 | 10 | $ | 22,173 | 10 | $ | 10,959 | 10 | $ | 5,747 | |||||||||||||||||||||||||||||
Trade names | — | — | 2 | 312 | — | — | — | — | |||||||||||||||||||||||||||||||||
Total | $ | 1,700 | $ | 22,485 | $ | 10,959 | $ | 5,747 | |||||||||||||||||||||||||||||||||
Aggregate revenues generated by the acquired companies for the three months ended March 31, 2015 and 2014 were approximately $12.8 million and $0.4 million, respectively, and are included in the condensed consolidated statements of operations for the reporting periods following the closing date of each acquisition. As of the quarter ended March 31, 2015, the acquired companies have been significantly integrated into the Company and as such, it is not possible to precisely report their individual results of operations. Additionally, pro forma results of operations for the acquisition transactions were not presented because the effects of the acquisitions would not have been material to the Company’s consolidated results of operation, individually or in the aggregate. |
GOODWILL
GOODWILL | 3 Months Ended | |||||||||||
Mar. 31, 2015 | ||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||
GOODWILL | GOODWILL | |||||||||||
Goodwill by reportable segment was as follows: | ||||||||||||
North America | Europe | Total | ||||||||||
Balance as of January 1, 2015 | $ | 31,078 | $ | 26,339 | $ | 57,417 | ||||||
Netsoft purchase accounting adjustment (Note 2) | 30 | — | 30 | |||||||||
GGA purchase accounting adjustment (Note 2) | 94 | — | 94 | |||||||||
Great Fridays purchase accounting adjustment (Note 2) | — | (77 | ) | (77 | ) | |||||||
Effect of net foreign currency exchange rate changes | (206 | ) | (912 | ) | (1,118 | ) | ||||||
Balance as of March 31, 2015 | $ | 30,996 | $ | 25,350 | $ | 56,346 | ||||||
Excluded from the table above is the Other and Russia segments. In 2011, the Company recorded an accumulated impairment loss of $1,697 in the Other operating segment. In the fourth quarter of 2014, the Company recorded an accumulated impairment loss of $2,241 for the Russia operating segment. All existing assets that related to the Russia segment, excluding goodwill and including any unrecognized intangible assets, were assessed by management and deemed not to be impaired. | ||||||||||||
There were no accumulated impairments losses in any of the North America or Europe operating segments as of March 31, 2015 or December 31, 2014. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended | |||||||||||||||
Mar. 31, 2015 | ||||||||||||||||
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 March 31, 2015 and December 31, 2014: | ||||||||||||||||
31-Mar-15 | 31-Dec-14 | |||||||||||||||
Balance | Level 3 | Balance | Level 3 | |||||||||||||
Contingent consideration | $ | 35,348 | $ | 35,348 | $ | 37,400 | $ | 37,400 | ||||||||
Performance-based equity awards | 5,446 | 5,446 | 3,223 | 3,223 | ||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 40,794 | $ | 40,794 | $ | 40,623 | $ | 40,623 | ||||||||
As of March 31, 2015 and December 31, 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 three months ended March 31, 2015 and year ended December 31, 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 three months ended March 31, 2015, was as follows: | ||||||||||||||||
Amount | ||||||||||||||||
Contractual contingent liabilities at January 1, 2015 | $ | 40,623 | ||||||||||||||
Liability-classified stock-based awards | 1,347 | |||||||||||||||
Changes in fair value of contractual contingent liabilities included in earnings | 875 | |||||||||||||||
Changes in fair value of contractual contingent liabilities recorded against goodwill | — | |||||||||||||||
Effect of net foreign currency exchange rate changes | (226 | ) | ||||||||||||||
Settlements of contractual contingent liabilities | (1,825 | ) | ||||||||||||||
Contractual contingent liabilities at March 31, 2015 | $ | 40,794 | ||||||||||||||
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the three months ended March 31, 2015 and 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. |
LONGTERM_DEBT
LONG-TERM DEBT | 3 Months Ended |
Mar. 31, 2015 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | LONG-TERM DEBT |
On September 12, 2014, the Company entered into a credit facility (the “2014 Credit Facility”) with PNC Bank, National Association; Santander Bank, N.A; and Silicon Valley Bank (collectively the “Lenders”) to replace its former revolving loan agreement. 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 March 31, 2015, the Company had no outstanding debt under the 2014 Credit Facility. |
INCOME_TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES |
The Company’s worldwide effective tax rate for the three months ended March 31, 2015 and 2014 was 19.3% and 19.6%, respectively. The primary factors that caused a decrease in the Company’s worldwide effective tax rate are the changes in the geographic mix of the current year earnings towards countries with lower statutory rates and also the mix of new tax jurisdictions from acquisitions in the US, western Europe and Asia during 2014. |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
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 | |||||||||||
March 31, | |||||||||||
2015 | 2014 | ||||||||||
Cost of revenues | $ | 2,484 | $ | 1,403 | |||||||
Selling, general and administrative expenses - Acquisition related | 4,492 | 793 | |||||||||
Selling, general and administrative expenses - All other | 2,158 | 1,012 | |||||||||
Total | $ | 9,134 | $ | 3,208 | |||||||
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. As of March 31, 2015, 559,365 shares of common stock remained available for issuance under the 2012 Directors Plan. | |||||||||||
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 March 31, 2015, 2,702,383 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 March 31, 2015 and therefore became available for issuance under the 2012 Plan. In addition, up to 1,542,847 shares that are subject to outstanding awards as of March 31, 2015 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, 2015 | 6,838,746 | $ | 20.98 | $ | 183,073 | ||||||
Options granted | 2,069,300 | 61.38 | (186 | ) | |||||||
Options exercised | (346,499 | ) | 12.84 | (16,788 | ) | ||||||
Options forfeited/cancelled | (33,922 | ) | 28.22 | (1,122 | ) | ||||||
Options outstanding at March 31, 2015 | 8,527,625 | $ | 31.09 | $ | 257,534 | ||||||
Options vested and exercisable at March 31, 2015 | 3,329,962 | $ | 15.56 | $ | 152,279 | ||||||
Options expected to vest | 4,741,728 | $ | 40.53 | $ | 98,438 | ||||||
During the three months ended March 31, 2015, the Company issued annual grants consisting of 2,069,300 shares underlying stock options under the 2012 Plan with an aggregate grant-date fair value of $43,992. The options are generally scheduled to vest in equal 25% installments on each of the first four anniversaries of the grant date, subject to the terms of the 2012 Plan and applicable stock options award agreement, including the termination provisions. In the event of the participant’s termination of service for any reason, unvested options are forfeited as of the date of such termination without any payment to the participant. | |||||||||||
As of March 31, 2015, total remaining unrecognized compensation cost related to unvested stock options, net of forfeitures, was approximately $81,547, and is expected to be recognized over a weighted-average period of 2.4 years. The weighted average remaining contractual term of the outstanding options as of March 31, 2015 was 6.1 years for fully vested and exercisable options and 9.0 years for options expected to vest, respectively. | |||||||||||
As of March 31, 2015, a total of 30,246 shares underlying options exercised through March 31, 2015, were in transfer with the Company’s transfer agent. | |||||||||||
There were no material changes with respect to the assumptions used in the Black-Scholes option valuation model during the three months ended March 31, 2015, as compared with the assumptions disclosed in Note 14 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. | |||||||||||
Other Awards | |||||||||||
Other awards include awards of restricted stock and restricted stock units (“RSUs”) under the Company’s 2012 Directors Plan and 2012 Plan. 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 dependent on continuing employment only and performance-based awards, which are granted only if certain specified performance conditions are met. 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. | |||||||||||
Service-Based Awards | |||||||||||
Summarized activity related to the Company’s service-based awards for the three months ended March 31, 2015, was as follows: | |||||||||||
Number of | Weighted Average Grant Date | ||||||||||
Shares | Fair Value Per Share | ||||||||||
Unvested service-based awards outstanding at January 1, 2015 | 633,442 | $ | 36.88 | ||||||||
Awards granted | 48,000 | 61.38 | |||||||||
Awards vested | (21,442 | ) | 28.68 | ||||||||
Awards forfeited/cancelled | — | — | |||||||||
Unvested service-based awards outstanding at March 31, 2015 | 660,000 | $ | 38.93 | ||||||||
As of March 31, 2015, aggregate unrecognized compensation expense under the 2012 Directors Plan was $205. This cost is expected to be recognized over the next 1.8 years using the weighted average method. There was no issuance of non-vested (“restricted”) common stock under the 2012 Directors Plan during the quarter ended March 31, 2015. | |||||||||||
Included in service-based awards are RSUs issued to certain key management personnel under the 2012 Plan. During the three months ended March 31, 2015, the Company issued a total of 48,000 RSUs with the fair value of $2,946. As of March 31, 2015, the aggregate unrecognized compensation expense related to unvested RSUs under the 2012 Plan was $4,450. This cost is expected to be recognized over the next 2.6 years using the weighted average method. The RSUs are generally scheduled to vest in equal 25% installments on each annual anniversary of the grant date, subject to the terms of the 2012 Plan and applicable RSU award agreement, including the termination provisions. In the event of the participant’s termination of service for any reason, unvested RSUs are forfeited as of the date of such termination without any payment to the participant. | |||||||||||
In connection with the Company’s acquisitions, a total of 544,692 shares underlying service-based awards with an aggregate fair value of $25,176 were unvested and outstanding as of March 31, 2015. As of March 31, 2015, unrecognized compensation cost related to unvested service-based awards granted in connection with acquisitions was $15,748. This cost is expected to be recognized over the next 1.8 years using the weighted average method. | |||||||||||
Performance -Based Awards | |||||||||||
In 2014, the Company granted performance-based awards in connection with the acquisitions completed during that year. The total number of the awards varies based on attainment of certain performance targets pursuant to the terms of the relevant purchase agreements. Typically, the vesting period is three years, with one third of the awards granted vesting in equal installments on the first, 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 the applicable performance measurement period and the number of shares expected to be delivered, and resulting compensation expense is adjusted accordingly. During the three months ended March 31, 2015, one-third of performance-based awards for Netsoft vested. | |||||||||||
Summarized activity related to the Company’s performance-based awards for the three months ended March 31, 2015, was as follows: | |||||||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Unvested performance-based awards outstanding at January 1, 2015 | 371,510 | $ | 39.34 | ||||||||
Awards granted | — | — | |||||||||
Awards vested | (8,501 | ) | 36.57 | ||||||||
Awards forfeited/cancelled | — | — | |||||||||
Changes in the number of awards expected to be delivered | (20,583 | ) | 56.74 | ||||||||
Unvested performance-based awards outstanding at March 31, 2015 | 342,426 | $ | 37.91 | ||||||||
As of March 31, 2015, total unrecognized compensation cost related to unvested performance-based awards was $14,898. This cost is expected to be recognized over the next 1.8 years using the weighted average method. |
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Earnings Per Share [Abstract] | ||||||||
EARNINGS PER SHARE | ||||||||
EARNINGS PER SHARE | ||||||||
Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, unvested restricted stock and unvested RSUs. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. | ||||||||
The following table sets forth the computation of basic and diluted earnings per share of common stock as follows: | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Numerator for common earnings per share: | ||||||||
Net income | $ | 14,714 | $ | 17,364 | ||||
Numerator for basic and diluted earnings per share | $ | 14,714 | $ | 17,364 | ||||
Denominator for basic earnings per share: | ||||||||
Weighted average common shares outstanding | 47,886 | 46,797 | ||||||
Effect of dilutive securities: | ||||||||
Stock options, RSUs and performance-based awards | 3,114 | 2,410 | ||||||
Denominator for diluted earnings per share | 51,000 | 49,207 | ||||||
Net income per share: | ||||||||
Basic | $ | 0.31 | $ | 0.37 | ||||
Diluted | $ | 0.29 | $ | 0.35 | ||||
During the three months ended March 31, 2015 and 2014, a total of 121 and 1,271 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 | 3 Months Ended |
Mar. 31, 2015 | |
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 extended by the parties to December 31, 2014, and further extended to July 1, 2015. Per the Investment Agreement, if the Company does not meet the completion deadline, monthly penalties may be imposed; the recent extension of the Investment Agreement increases the monthly penalty to $20 per month for the period beginning January 1, 2015. There may be further terms and conditions imposed on the Company in a further extension of the Investment Agreement. If the Investment Agreement is terminated, the Company could be required to disgorge certain tax benefits received by the Company in connection with the project and could potentially be required to fully restore the land to its original condition. The Company has not been required to pay any penalties to date. The Company has secured the required building construction permits and is working toward completion of the building. The Company believes that the building will be completed and available for its use in 2015, and that any penalties or loss of tax benefits will not be material to the accompanying financial statements. | |
The Construction Agreement committed IDEAB to construct an office building for the Company in Minsk with a completion date of February 28, 2014. In April 2014 IDEAB stopped its construction before the building’s completion, 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. On July 7, 2014, the Company provided IDEAB with notice of termination of the Construction Agreement, effective 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. The Company has filed other lawsuits seeking recovery from IDEAB of additional amounts (including future work and construction materials) from IDEAB. These lawsuits are in various stages of litigation and it is not possible to estimate the likelihood of recovery. | |
At March 31, 2015, the Company had approximately $18,700 of capitalized construction costs and estimated up to $4,549 of additional investment required to complete the construction and put the building into operation. The Company estimates that the building construction will be completed by June 30, 2015. | |
Based on the information known to the Company at this time, any additional liability related to this matter is not reasonably estimable. | |
Indemnification Obligations — 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 consolidated financial statements of the Company. |
OPERATING_SEGMENTS
OPERATING SEGMENTS | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Segment Reporting [Abstract] | ||||||||
OPERATING SEGMENTS | ||||||||
OPERATING SEGMENTS | ||||||||
The Company determines its operating segments and reports segment information in accordance with the management approach, which designates internal reporting used by management to make operating decisions and assess performance as the source of the Company’s reportable segments. | ||||||||
The Company manages its business primarily based on the geographic managerial responsibility for its client base. As 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 cases, managerial responsibility for a particular client is assigned to a management team in another region and is usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In such a case, 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 performance and allocates resources based on the segment's 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, such as stock-based compensation are not allocated to specific segments, as management does not believe it is practical as these expenses are not directly attributable to any specific segment and consequently are not allocated to individual segments in internal management reports used by the CODM. Such expenses are separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations. | ||||||||
Revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments for the three months ended March 31, 2015 and 2014, were as follows: | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Total segment revenues: | ||||||||
North America | $ | 100,269 | $ | 80,198 | ||||
Europe | 91,152 | 67,659 | ||||||
Russia | 7,513 | 10,748 | ||||||
Other | 1,260 | 1,392 | ||||||
Total segment revenues | $ | 200,194 | $ | 159,997 | ||||
Segment operating profit: | ||||||||
North America | $ | 24,068 | $ | 18,197 | ||||
Europe | 15,340 | 14,135 | ||||||
Russia | (271 | ) | (1,135 | ) | ||||
Other | (457 | ) | (1,318 | ) | ||||
Total segment operating profit | $ | 38,680 | $ | 29,879 | ||||
Intersegment transactions were excluded from the above on the basis that they are neither included into the measure of a segment’s profit and loss by the CODM, nor provided to the CODM on a regular basis. | ||||||||
During the three months ended March 31, 2015 and 2014, revenues from one customer, UBS AG, were $30,933 and $20,024, respectively, and accounted for more than 10% of total revenues. Revenues from this customer 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 March 31, 2015, billed trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 15.6% of our total billed trade receivables. As of March 31, 2015, unbilled trade receivables from two customers, UBS AG and Barclays, individually exceeded 10% and together accounted for 27.1% of our total unbilled trade receivables. | ||||||||
Reconciliation of segment revenues and operating profit to consolidated income before provision for income taxes is presented below: | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Total segment revenues | $ | 200,194 | $ | 159,997 | ||||
Unallocated (loss)/revenue | (149 | ) | 387 | |||||
Revenues | $ | 200,045 | $ | 160,384 | ||||
Total segment operating profit: | $ | 38,680 | $ | 29,879 | ||||
Unallocated amounts: | ||||||||
Other revenues | (149 | ) | 387 | |||||
Stock-based compensation expense | (9,134 | ) | (3,208 | ) | ||||
Non-corporate taxes | (825 | ) | (546 | ) | ||||
Professional fees | (1,822 | ) | (1,314 | ) | ||||
Depreciation and amortization | (1,329 | ) | (655 | ) | ||||
Bank charges | (367 | ) | (247 | ) | ||||
Other corporate expenses | (2,234 | ) | (2,439 | ) | ||||
Income from operations | 22,820 | 21,857 | ||||||
Interest and other income, net | 1,158 | 976 | ||||||
Foreign exchange loss | (5,754 | ) | (1,241 | ) | ||||
Income before provision for income taxes | $ | 18,224 | $ | 21,592 | ||||
Geographic Area Information | ||||||||
Long-lived assets include property and equipment, net of accumulated depreciation and amortization, and management has determined that it is not practical to allocate these 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: | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Belarus | $ | 42,060 | $ | 41,652 | ||||
Ukraine | 4,377 | 4,392 | ||||||
Hungary | 2,523 | 2,773 | ||||||
Russia | 2,121 | 2,196 | ||||||
United States | 1,779 | 2,001 | ||||||
Other | 2,255 | 2,120 | ||||||
Total | $ | 55,115 | $ | 55,134 | ||||
Information about the Company’s revenues by client location is as follows: | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
United States | $ | 92,182 | $ | 69,136 | ||||
United Kingdom | 38,565 | 34,244 | ||||||
Switzerland | 26,351 | 20,532 | ||||||
Canada | 12,485 | 9,981 | ||||||
Russia | 7,259 | 10,390 | ||||||
Germany | 6,498 | 6,132 | ||||||
Hong Kong | 5,210 | — | ||||||
Netherlands | 2,046 | 2,118 | ||||||
Sweden | 2,013 | 2,312 | ||||||
Belgium | 1,525 | 641 | ||||||
Kazakhstan | 1,259 | 1,242 | ||||||
Ireland | 1,187 | — | ||||||
Other locations | 1,608 | 1,689 | ||||||
Reimbursable expenses and other revenues | 1,857 | 1,967 | ||||||
Revenues | $ | 200,045 | $ | 160,384 | ||||
Service Offering Information | ||||||||
Information about the Company’s revenues by service offering is as follows: | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Software development | $ | 140,035 | $ | 110,687 | ||||
Application testing services | 37,030 | 31,770 | ||||||
Application maintenance and support | 17,132 | 11,378 | ||||||
Infrastructure services | 3,173 | 3,754 | ||||||
Licensing | 818 | 828 | ||||||
Reimbursable expenses and other revenues | 1,857 | 1,967 | ||||||
Revenues | $ | 200,045 | $ | 160,384 | ||||
RECENT_ACCOUNTING_PRONOUNCEMEN
RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Mar. 31, 2015 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS |
In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidations Analysis, which changes the guidance for evaluating whether to consolidate certain legal entities. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The implementation of this standard is not expected to have a material effect on the Company’s consolidated financial statements. | |
In November 2014, the FASB issued ASU 2014-17, Business Combinations (Topic 805): Pushdown Accounting. The update provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may also elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. The amendment is effective on November 18, 2014. The implementation of this standard does not have a material effect on the Company’s consolidated financial statements. | |
In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The update aims to eliminate the use of different methods in practice and thereby reduce existing diversity under GAAP in the accounting for hybrid financial instruments issued in the form of a share. The amendments are effective for annual period and interim periods within those annual periods, beginning after December 15, 2015 with early adoption permitted. The implementation of this standard is not expected to have a material effect on the Company’s consolidated financial statements as the Company currently does not issue hybrid instruments. | |
In August 2014, the FASB issued 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 will be effective for the Company beginning in its first quarter of 2017. In April 2015, the FASB issued a tentative proposal to defer the effective date until the annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. The Company is currently evaluating the impact this new standard 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 does not have a material impact on the Company’s condensed consolidated financial statements, but may impact the reporting of any future dispositions. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Accounting Policies [Abstract] | |
Nature of Operations | EPAM is a leading global provider of complex software engineering solutions and information technology ("IT") services to clients throughout North America, Western and Eastern Europe, Russia and Asia. The Company serves primarily Fortune Global 2000 companies in various industries with the main focus on Independent Software Vendors (“ISVs”) and technology, banking and financial services, business information and media, and travel and hospitality. Other industries include retail, energy, life sciences, healthcare, telecommunications, and government. |
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. | |
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 ("GAAP") and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The condensed consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries with all intercompany balances and transactions eliminated. |
These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2014 included in its Annual Report on Form 10-K | |
Use of Estimates | The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and such differences may be material to the financial statements. Additionally, operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. |
Revenue Recognition | Revenue Recognition — The Company recognizes revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) 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 reported. |
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. If there is an uncertainty about the project completion or receipt of payment for the consulting services, revenue is deferred until the uncertainty is sufficiently resolved. At the time revenue is recognized, the Company provides for any contractual deductions and reduces the revenue accordingly. 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. | |
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. | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments — The Company makes significant assumptions about fair values of its financial assets and liabilities in accordance with FASB Accounting Standards Codification (ASC) Topic 820 and utilizes the following fair value hierarchy in determining inputs used for valuation: |
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. To the extent possible, observable market data is used as inputs into these models but when it is not 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 March 31, 2015 and December 31, 2014, other than contingent liabilities in connection with the acquisitions of businesses. | |
At March 31, 2015, 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. Contingent liabilities are valued using significant inputs that are not observable in the market, which are defined as Level 3 inputs according to fair value measurement accounting. 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. | |
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. | |
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. | |
See Note 4 for disclosures related to fair value. | |
Employee Loans — The Company issues employee housing loans in Belarus and relocation loans to assist employees with relocation needs in connection with intra-company transfers. There are no loans issued to principal officers, directors, and their affiliates. | |
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. Since the initiation of the loan program there have not been material past due or non-accrual employee loans or write offs related to loan losses and, therefore, the Company determined that no allowance for loan losses is required. | |
Employee Housing Loans — In the third quarter of 2012, the Board of Directors of the Company approved the Employee Housing Program (the “Housing Program”), which assists employees with purchasing housing in Belarus in a form of a loan. The Housing Program was designed to be a retention mechanism for the Company’s employees in Belarus and is available to full-time qualified employees who have been with the Company for at least 3 years. The aggregate maximum lending limit of the program is $10,000, with individual loans not exceeding $50. The housing is sold directly to employees by independent third parties. Loans issued under the Housing Program are denominated in U.S. Dollars with a 5-year term and an interest rate of 7.5%. | |
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 months ended March 31, 2015 approximated their fair values upon initial recognition. The Company also estimated the fair values of the housing loans that were outstanding as of March 31, 2015 using the inputs noted above and determined their fair values approximated the carrying values as of that date. | |
Employee Loans, Other — The Company issues short-term, non-interest bearing relocation loans to employees that relocated within the company. Due to the short term of employee loans and high certainty of repayment, their carrying amount is a reasonable estimate of their fair value. | |
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 in accordance with FASB Accounting Standards Codification Topic 805. 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 — The Company recognizes the cost of its share-based incentive awards based on the fair value of the award at the date of grant net of estimated forfeitures. The cost is expensed evenly over the service period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Over time, the forfeiture assumption is adjusted to the actual forfeiture rate and such change may affect the timing of the total amount of expense recognized over the vesting period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that do not meet the criteria for equity classification are recorded as liabilities and adjusted to fair value at the end of each reporting period. |
Off-Balance Sheet Financial Instruments | Off-Balance Sheet Financial Instruments — Include credit instruments, such as commitments to make employee loans and related guarantees, standby letters of credit and guarantees issued under customer contracts. The face amount for these items represents the exposure to loss, before considering available collateral or the borrower’s ability to repay. Such financial instruments are recorded when they are funded. Loss contingencies arising from off-balance sheet credit exposures are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe there are such matters that will have a material effect on the consolidated financial statements. |
ACQUISITIONS_Tables
ACQUISITIONS (Tables) | 3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Summary of Acquisitions in Exchange for Common Stock and/or Cash | |||||||||||||||||||||||||||||||||||||||||
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 | — | — | $ | — | $ | — | $ | 2,403 | $ | 1,022 | $ | 1,825 | $ | — | $ | 5,250 | $ | 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 | — | — | — | — | 14,892 | — | 11,400 | — | 26,292 | |||||||||||||||||||||||||||||||
Great Fridays | 31-Oct-14 | — | — | — | — | 10,777 | — | 1,173 | — | 11,950 | 1,173 | ||||||||||||||||||||||||||||||
— | 89,552 | $ | — | $ | 2,788 | $ | 38,072 | $ | 5,022 | $ | 29,398 | $ | 5,000 | $ | 80,280 | ||||||||||||||||||||||||||
-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 respective acquisition during the year ended December 31, 2014 as originally reported in the quarterly condensed consolidated financial statements and at March 31, 2015: | ||||||||||||||||||||||||||||||||||||||||
Netsoft | Jointech | GGA | Great Fridays | Total | |||||||||||||||||||||||||||||||||||||
As Originally Reported | As of | As Originally Reported | As of | As Originally Reported | As of | As Originally Reported | As of | As Originally Reported | As of | ||||||||||||||||||||||||||||||||
March 31, | March 31, | March 31, | March 31, | March 31, | |||||||||||||||||||||||||||||||||||||
2015 | 2015 | 2015 | 2015 | 2015 | |||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 871 | $ | 871 | $ | — | $ | — | $ | 259 | $ | 259 | $ | 1,130 | $ | 1,130 | |||||||||||||||||||||
Trade receivables and other current assets | 788 | 788 | 784 | 784 | 5,157 | 5,377 | 1,825 | 1,825 | 8,554 | 8,774 | |||||||||||||||||||||||||||||||
Property and equipment and other long-term assets | 52 | 52 | 338 | 338 | 444 | 444 | 262 | 262 | 1,096 | 1,096 | |||||||||||||||||||||||||||||||
Deferred tax asset | 351 | — | — | — | 4,463 | — | — | — | 4,814 | — | |||||||||||||||||||||||||||||||
Acquired intangible assets | 1,700 | 1,700 | 25,744 | 22,485 | 10,959 | 10,959 | 5,747 | 5,747 | 44,150 | 40,891 | |||||||||||||||||||||||||||||||
Goodwill | 2,776 | 2,779 | 11,033 | 17,404 | 6,496 | 12,209 | 6,947 | 6,870 | 27,252 | 39,262 | |||||||||||||||||||||||||||||||
Total assets acquired | 5,667 | 5,319 | 38,770 | 41,882 | 27,519 | 28,989 | 15,040 | 14,963 | 86,996 | 91,153 | |||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | 69 | 69 | 728 | 728 | 2,593 | 2,593 | 872 | 872 | 4,262 | 4,262 | |||||||||||||||||||||||||||||||
Deferred revenue | — | — | — | — | — | 104 | 317 | 317 | 317 | 421 | |||||||||||||||||||||||||||||||
Due to employees | — | — | 1,254 | 1,254 | — | — | 624 | 624 | 1,878 | 1,878 | |||||||||||||||||||||||||||||||
Deferred tax liability | — | — | — | 3,112 | — | — | 1,200 | 1,200 | 1,200 | 4,312 | |||||||||||||||||||||||||||||||
Total liabilities assumed | 69 | 69 | 1,982 | 5,094 | 2,593 | 2,697 | 3,013 | 3,013 | 7,657 | 10,873 | |||||||||||||||||||||||||||||||
Net assets acquired | $ | 5,598 | $ | 5,250 | $ | 36,788 | $ | 36,788 | $ | 24,926 | $ | 26,292 | $ | 12,027 | $ | 11,950 | $ | 79,339 | $ | 80,280 | |||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | The following table presents the estimated fair values and useful lives of intangible assets acquired during the year ended March 31, 2015: | ||||||||||||||||||||||||||||||||||||||||
Netsoft | Jointech | GGA | Great Fridays | ||||||||||||||||||||||||||||||||||||||
Weighted Average | Amount | Weighted Average | Amount | Weighted Average | Amount | Weighted Average | Amount | ||||||||||||||||||||||||||||||||||
Useful Life | Useful Life | Useful Life | Useful Life | ||||||||||||||||||||||||||||||||||||||
(in years) | (in years) | (in years) | (in years) | ||||||||||||||||||||||||||||||||||||||
Customer relationships | 10 | $ | 1,700 | 10 | $ | 22,173 | 10 | $ | 10,959 | 10 | $ | 5,747 | |||||||||||||||||||||||||||||
Trade names | — | — | 2 | 312 | — | — | — | — | |||||||||||||||||||||||||||||||||
Total | $ | 1,700 | $ | 22,485 | $ | 10,959 | $ | 5,747 | |||||||||||||||||||||||||||||||||
GOODWILL_Tables
GOODWILL (Tables) | 3 Months Ended | |||||||||||
Mar. 31, 2015 | ||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||
Schedule of Goodwill By Reportable Segment | Goodwill by reportable segment was as follows: | |||||||||||
North America | Europe | Total | ||||||||||
Balance as of January 1, 2015 | $ | 31,078 | $ | 26,339 | $ | 57,417 | ||||||
Netsoft purchase accounting adjustment (Note 2) | 30 | — | 30 | |||||||||
GGA purchase accounting adjustment (Note 2) | 94 | — | 94 | |||||||||
Great Fridays purchase accounting adjustment (Note 2) | — | (77 | ) | (77 | ) | |||||||
Effect of net foreign currency exchange rate changes | (206 | ) | (912 | ) | (1,118 | ) | ||||||
Balance as of March 31, 2015 | $ | 30,996 | $ | 25,350 | $ | 56,346 | ||||||
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended | |||||||||||||||
Mar. 31, 2015 | ||||||||||||||||
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 March 31, 2015 and December 31, 2014: | |||||||||||||||
31-Mar-15 | 31-Dec-14 | |||||||||||||||
Balance | Level 3 | Balance | Level 3 | |||||||||||||
Contingent consideration | $ | 35,348 | $ | 35,348 | $ | 37,400 | $ | 37,400 | ||||||||
Performance-based equity awards | 5,446 | 5,446 | 3,223 | 3,223 | ||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 40,794 | $ | 40,794 | $ | 40,623 | $ | 40,623 | ||||||||
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 three months ended March 31, 2015, was as follows: | |||||||||||||||
Amount | ||||||||||||||||
Contractual contingent liabilities at January 1, 2015 | $ | 40,623 | ||||||||||||||
Liability-classified stock-based awards | 1,347 | |||||||||||||||
Changes in fair value of contractual contingent liabilities included in earnings | 875 | |||||||||||||||
Changes in fair value of contractual contingent liabilities recorded against goodwill | — | |||||||||||||||
Effect of net foreign currency exchange rate changes | (226 | ) | ||||||||||||||
Settlements of contractual contingent liabilities | (1,825 | ) | ||||||||||||||
Contractual contingent liabilities at March 31, 2015 | $ | 40,794 | ||||||||||||||
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
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 | |||||||||||
March 31, | |||||||||||
2015 | 2014 | ||||||||||
Cost of revenues | $ | 2,484 | $ | 1,403 | |||||||
Selling, general and administrative expenses - Acquisition related | 4,492 | 793 | |||||||||
Selling, general and administrative expenses - All other | 2,158 | 1,012 | |||||||||
Total | $ | 9,134 | $ | 3,208 | |||||||
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, 2015 | 6,838,746 | $ | 20.98 | $ | 183,073 | ||||||
Options granted | 2,069,300 | 61.38 | (186 | ) | |||||||
Options exercised | (346,499 | ) | 12.84 | (16,788 | ) | ||||||
Options forfeited/cancelled | (33,922 | ) | 28.22 | (1,122 | ) | ||||||
Options outstanding at March 31, 2015 | 8,527,625 | $ | 31.09 | $ | 257,534 | ||||||
Options vested and exercisable at March 31, 2015 | 3,329,962 | $ | 15.56 | $ | 152,279 | ||||||
Options expected to vest | 4,741,728 | $ | 40.53 | $ | 98,438 | ||||||
Service-based Awards Activity | Summarized activity related to the Company’s service-based awards for the three months ended March 31, 2015, was as follows: | ||||||||||
Number of | Weighted Average Grant Date | ||||||||||
Shares | Fair Value Per Share | ||||||||||
Unvested service-based awards outstanding at January 1, 2015 | 633,442 | $ | 36.88 | ||||||||
Awards granted | 48,000 | 61.38 | |||||||||
Awards vested | (21,442 | ) | 28.68 | ||||||||
Awards forfeited/cancelled | — | — | |||||||||
Unvested service-based awards outstanding at March 31, 2015 | 660,000 | $ | 38.93 | ||||||||
Performance-based Awards Activity | Summarized activity related to the Company’s performance-based awards for the three months ended March 31, 2015, was as follows: | ||||||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Unvested performance-based awards outstanding at January 1, 2015 | 371,510 | $ | 39.34 | ||||||||
Awards granted | — | — | |||||||||
Awards vested | (8,501 | ) | 36.57 | ||||||||
Awards forfeited/cancelled | — | — | |||||||||
Changes in the number of awards expected to be delivered | (20,583 | ) | 56.74 | ||||||||
Unvested performance-based awards outstanding at March 31, 2015 | 342,426 | $ | 37.91 | ||||||||
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Earnings Per Share [Abstract] | ||||||||
Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share of common stock as follows: | |||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Numerator for common earnings per share: | ||||||||
Net income | $ | 14,714 | $ | 17,364 | ||||
Numerator for basic and diluted earnings per share | $ | 14,714 | $ | 17,364 | ||||
Denominator for basic earnings per share: | ||||||||
Weighted average common shares outstanding | 47,886 | 46,797 | ||||||
Effect of dilutive securities: | ||||||||
Stock options, RSUs and performance-based awards | 3,114 | 2,410 | ||||||
Denominator for diluted earnings per share | 51,000 | 49,207 | ||||||
Net income per share: | ||||||||
Basic | $ | 0.31 | $ | 0.37 | ||||
Diluted | $ | 0.29 | $ | 0.35 | ||||
OPERATING_SEGMENTS_Tables
OPERATING SEGMENTS (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
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 months ended March 31, 2015 and 2014, were as follows: | |||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Total segment revenues: | ||||||||
North America | $ | 100,269 | $ | 80,198 | ||||
Europe | 91,152 | 67,659 | ||||||
Russia | 7,513 | 10,748 | ||||||
Other | 1,260 | 1,392 | ||||||
Total segment revenues | $ | 200,194 | $ | 159,997 | ||||
Segment operating profit: | ||||||||
North America | $ | 24,068 | $ | 18,197 | ||||
Europe | 15,340 | 14,135 | ||||||
Russia | (271 | ) | (1,135 | ) | ||||
Other | (457 | ) | (1,318 | ) | ||||
Total segment operating profit | $ | 38,680 | $ | 29,879 | ||||
Reconciliation of Segment Revenues and Operating Profit to Consolidated Income Before Provision for Income Taxes | Reconciliation of segment revenues and operating profit to consolidated income before provision for income taxes is presented below: | |||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Total segment revenues | $ | 200,194 | $ | 159,997 | ||||
Unallocated (loss)/revenue | (149 | ) | 387 | |||||
Revenues | $ | 200,045 | $ | 160,384 | ||||
Total segment operating profit: | $ | 38,680 | $ | 29,879 | ||||
Unallocated amounts: | ||||||||
Other revenues | (149 | ) | 387 | |||||
Stock-based compensation expense | (9,134 | ) | (3,208 | ) | ||||
Non-corporate taxes | (825 | ) | (546 | ) | ||||
Professional fees | (1,822 | ) | (1,314 | ) | ||||
Depreciation and amortization | (1,329 | ) | (655 | ) | ||||
Bank charges | (367 | ) | (247 | ) | ||||
Other corporate expenses | (2,234 | ) | (2,439 | ) | ||||
Income from operations | 22,820 | 21,857 | ||||||
Interest and other income, net | 1,158 | 976 | ||||||
Foreign exchange loss | (5,754 | ) | (1,241 | ) | ||||
Income before provision for income taxes | $ | 18,224 | $ | 21,592 | ||||
Geographical Information of Long-Lived Assets Based on Physical Location | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Belarus | $ | 42,060 | $ | 41,652 | ||||
Ukraine | 4,377 | 4,392 | ||||||
Hungary | 2,523 | 2,773 | ||||||
Russia | 2,121 | 2,196 | ||||||
United States | 1,779 | 2,001 | ||||||
Other | 2,255 | 2,120 | ||||||
Total | $ | 55,115 | $ | 55,134 | ||||
Revenues by Client Location | Information about the Company’s revenues by client location is as follows: | |||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
United States | $ | 92,182 | $ | 69,136 | ||||
United Kingdom | 38,565 | 34,244 | ||||||
Switzerland | 26,351 | 20,532 | ||||||
Canada | 12,485 | 9,981 | ||||||
Russia | 7,259 | 10,390 | ||||||
Germany | 6,498 | 6,132 | ||||||
Hong Kong | 5,210 | — | ||||||
Netherlands | 2,046 | 2,118 | ||||||
Sweden | 2,013 | 2,312 | ||||||
Belgium | 1,525 | 641 | ||||||
Kazakhstan | 1,259 | 1,242 | ||||||
Ireland | 1,187 | — | ||||||
Other locations | 1,608 | 1,689 | ||||||
Reimbursable expenses and other revenues | 1,857 | 1,967 | ||||||
Revenues | $ | 200,045 | $ | 160,384 | ||||
Revenues by Service Offering | Information about the Company’s revenues by service offering is as follows: | |||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Software development | $ | 140,035 | $ | 110,687 | ||||
Application testing services | 37,030 | 31,770 | ||||||
Application maintenance and support | 17,132 | 11,378 | ||||||
Infrastructure services | 3,173 | 3,754 | ||||||
Licensing | 818 | 828 | ||||||
Reimbursable expenses and other revenues | 1,857 | 1,967 | ||||||
Revenues | $ | 200,045 | $ | 160,384 | ||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Accounting Policies [Abstract] | ||
Assets, Fair Value Disclosure, Recurring | $0 | $0 |
Liabilities excluding Contingent Consideration, Fair Value, Recurring | $0 | $0 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Loans issued to principal officers, directors, or their affiliates | 0 |
Allowance for employee loans | 0 |
Non-accrual employee loans | 0 |
Material loans past due | 0 |
Loans Under Employee Housing Program | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Interest rate on loan (as a percent) | 7.50% |
Loan term (in years) | 5 years |
Minimum service period | 3 years |
Loans Under Employee Housing Program | Maximum | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Individual loan original amount limit | 50 |
Authorized loan program amount | 10,000 |
ACQUISITIONS_Details
ACQUISITIONS (Details) (USD $) | 3 Months Ended | 0 Months Ended | ||||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | Jun. 06, 2014 | Oct. 31, 2014 | |
Business Acquisition [Line Items] | ||||||
Revenues | $200,045,000 | $160,384,000 | ||||
Minimum | ||||||
Business Acquisition [Line Items] | ||||||
Estimated Future Operating Results Period, Subsequent to Acquisition Date | 7 months | |||||
Maximum | ||||||
Business Acquisition [Line Items] | ||||||
Estimated Future Operating Results Period, Subsequent to Acquisition Date | 12 months | |||||
Netsoft | ||||||
Business Acquisition [Line Items] | ||||||
Cash Consideration Placed In Escrow | 256,000 | |||||
Consideration Placed In Escrow, Period | 18 months | |||||
Netsoft | IT professionals | ||||||
Business Acquisition [Line Items] | ||||||
Number of professionals | 40 | |||||
Jointech | ||||||
Business Acquisition [Line Items] | ||||||
Business Acquisition, Number of Former Owners | 2 | |||||
Consideration Placed In Escrow, Percentage | 15.00% | |||||
Jointech | IT professionals | ||||||
Business Acquisition [Line Items] | ||||||
Number of professionals | 216 | |||||
GGA | IT professionals | ||||||
Business Acquisition [Line Items] | ||||||
Number of professionals | 329 | |||||
GGA | Scientists | ||||||
Business Acquisition [Line Items] | ||||||
Number of professionals | 126 | |||||
Great Fridays Limited | Designers | ||||||
Business Acquisition [Line Items] | ||||||
Number of professionals | 50 | |||||
Total | ||||||
Business Acquisition [Line Items] | ||||||
Revenues | 12,800,000 | 400,000 | ||||
Employment Shares | Netsoft | ||||||
Business Acquisition [Line Items] | ||||||
Share vesting term | 3 years | 3 years | ||||
Stock issued or issuable, value assigned | 1,017,000 | |||||
Employment Shares | Jointech | ||||||
Business Acquisition [Line Items] | ||||||
Share vesting term | 3 years | 3 years | ||||
Stock issued or issuable, value assigned | 7,788,000 | |||||
Consideration Placed In Escrow, Period | 18 months | |||||
Employment Shares | GGA | ||||||
Business Acquisition [Line Items] | ||||||
Share vesting term | 3 years | 3 years | ||||
Stock issued or issuable, value assigned | 20,655,000 | |||||
Employment Shares | Great Fridays Limited | ||||||
Business Acquisition [Line Items] | ||||||
Share vesting term | 3 years | 3 years | ||||
Stock issued or issuable, value assigned | 4,823,000 | |||||
Employment Shares, Closing Shares | Netsoft | ||||||
Business Acquisition [Line Items] | ||||||
Stock issued or issuable, number of shares | 2,289 | |||||
Employment Shares, Closing Shares | Jointech | ||||||
Business Acquisition [Line Items] | ||||||
Stock issued or issuable, number of shares | 89,552 | |||||
Employment Shares, Closing Shares | GGA | ||||||
Business Acquisition [Line Items] | ||||||
Stock issued or issuable, number of shares | 262,277 | |||||
Consideration Placed In Escrow, Shares | 102,631 | |||||
Employment Shares, Closing Shares | Great Fridays Limited | ||||||
Business Acquisition [Line Items] | ||||||
Stock issued or issuable, number of shares | 90,864 | |||||
Consideration Placed In Escrow, Shares | 28,390 | |||||
Employment Shares, Earn-Out Shares | Netsoft | ||||||
Business Acquisition [Line Items] | ||||||
Stock issued or issuable, number of shares | 16,349 | |||||
Deferred restricted shares | 9,154 | |||||
Employment Shares, Earn-Out Shares | Jointech | Maximum | ||||||
Business Acquisition [Line Items] | ||||||
Stock issued or issuable, value assigned | $5,000,000 | |||||
Employment Shares, Earn-Out Shares | Great Fridays Limited | Maximum | ||||||
Business Acquisition [Line Items] | ||||||
Stock issued or issuable, number of shares | 10,092 |
ACQUISITIONS_Details_1
ACQUISITIONS (Details 1) (USD $) | 3 Months Ended | 0 Months Ended | |||||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | Jun. 06, 2014 | Oct. 31, 2014 | ||
Business Acquisition [Line Items] | |||||||
Cash, Net of Working Capital and Other Adjustments, Deferred | $2,801,000 | $0 | |||||
Netsoft | |||||||
Business Acquisition [Line Items] | |||||||
Cash, Net of Working Capital and Other Adjustments, Paid | 2,403,000 | ||||||
Cash, Net of Working Capital and Other Adjustments, Deferred | 1,022,000 | ||||||
Recorded Earnout Payable, Cash | 1,825,000 | ||||||
Recorded Earnout Payable, Stock | 0 | ||||||
Total Recorded Purchase Price | 5,250,000 | ||||||
Jointech | |||||||
Business Acquisition [Line Items] | |||||||
Cash, Net of Working Capital and Other Adjustments, Paid | 10,000,000 | ||||||
Cash, Net of Working Capital and Other Adjustments, Deferred | 4,000,000 | ||||||
Recorded Earnout Payable, Cash | 15,000,000 | ||||||
Recorded Earnout Payable, Stock | 5,000,000 | ||||||
Total Recorded Purchase Price | 36,788,000 | ||||||
GGA | |||||||
Business Acquisition [Line Items] | |||||||
Cash, Net of Working Capital and Other Adjustments, Paid | 14,892,000 | ||||||
Cash, Net of Working Capital and Other Adjustments, Deferred | 0 | ||||||
Recorded Earnout Payable, Cash | 11,400,000 | [1] | |||||
Recorded Earnout Payable, Stock | 0 | [1] | |||||
Total Recorded Purchase Price | 26,292,000 | ||||||
Great Fridays Limited | |||||||
Business Acquisition [Line Items] | |||||||
Cash, Net of Working Capital and Other Adjustments, Paid | 10,777,000 | ||||||
Cash, Net of Working Capital and Other Adjustments, Deferred | 0 | ||||||
Recorded Earnout Payable, Cash | 1,173,000 | ||||||
Recorded Earnout Payable, Stock | 0 | ||||||
Total Recorded Purchase Price | 11,950,000 | ||||||
Total | |||||||
Business Acquisition [Line Items] | |||||||
Cash, Net of Working Capital and Other Adjustments, Paid | 38,072,000 | ||||||
Cash, Net of Working Capital and Other Adjustments, Deferred | 5,022,000 | ||||||
Recorded Earnout Payable, Cash | 29,398,000 | ||||||
Recorded Earnout Payable, Stock | 5,000,000 | ||||||
Total Recorded Purchase Price | 80,280,000 | ||||||
Common Stock | Netsoft | |||||||
Business Acquisition [Line Items] | |||||||
Stock issued, number of shares | 0 | ||||||
Stock deferred, number of shares | 0 | ||||||
Fair value of stock issued | 0 | ||||||
Fair value of deferred stock | 0 | ||||||
Common Stock | Jointech | |||||||
Business Acquisition [Line Items] | |||||||
Stock issued, number of shares | 0 | ||||||
Stock deferred, number of shares | 89,552 | ||||||
Fair value of stock issued | 0 | ||||||
Fair value of deferred stock | 2,788,000 | ||||||
Common Stock | GGA | |||||||
Business Acquisition [Line Items] | |||||||
Stock issued, number of shares | 0 | ||||||
Stock deferred, number of shares | 0 | ||||||
Fair value of stock issued | 0 | ||||||
Fair value of deferred stock | 0 | ||||||
Common Stock | Great Fridays Limited | |||||||
Business Acquisition [Line Items] | |||||||
Stock issued, number of shares | 0 | ||||||
Stock deferred, number of shares | 0 | ||||||
Fair value of stock issued | 0 | ||||||
Fair value of deferred stock | 0 | ||||||
Common Stock | Total | |||||||
Business Acquisition [Line Items] | |||||||
Stock issued, number of shares | 0 | ||||||
Stock deferred, number of shares | 89,552 | ||||||
Fair value of stock issued | 0 | ||||||
Fair value of deferred stock | 2,788,000 | ||||||
Maximum | Netsoft | |||||||
Business Acquisition [Line Items] | |||||||
Maximum Potential Earnout Payable | 1,825,000 | ||||||
Maximum | Jointech | |||||||
Business Acquisition [Line Items] | |||||||
Maximum Potential Earnout Payable | 20,000,000 | ||||||
Maximum | Great Fridays Limited | |||||||
Business Acquisition [Line Items] | |||||||
Maximum Potential Earnout Payable | $1,173,000 | ||||||
[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 $) | 3 Months Ended | |||||
Mar. 31, 2015 | Dec. 31, 2014 | Mar. 05, 2014 | Apr. 30, 2014 | Jun. 06, 2014 | Oct. 31, 2014 | |
Business Acquisition [Line Items] | ||||||
Goodwill | $56,346,000 | $57,417,000 | ||||
Netsoft | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 0 | |||||
Trade receivables and other current assets | 788,000 | |||||
Property and equipment and other long-term assets | 52,000 | |||||
Deferred tax asset | 0 | |||||
Acquired intangible assets | 1,700,000 | |||||
Goodwill | 2,779,000 | |||||
Total assets acquired | 5,319,000 | |||||
Accounts payable and accrued expenses | 69,000 | |||||
Deferred revenue | 0 | |||||
Due to employees | 0 | |||||
Deferred tax liability | 0 | |||||
Total liabilities assumed | 69,000 | |||||
Net assets acquired | 5,250,000 | |||||
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | ||||||
Adjustment to net assets acquired | -348,000 | |||||
Netsoft | As Originally Reported [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 0 | |||||
Trade receivables and other current assets | 788,000 | |||||
Property and equipment and other long-term assets | 52,000 | |||||
Deferred tax asset | 351,000 | |||||
Acquired intangible assets | 1,700,000 | |||||
Goodwill | 2,776,000 | |||||
Total assets acquired | 5,667,000 | |||||
Accounts payable and accrued expenses | 69,000 | |||||
Deferred revenue | 0 | |||||
Due to employees | 0 | |||||
Deferred tax liability | 0 | |||||
Total liabilities assumed | 69,000 | |||||
Net assets acquired | 5,598,000 | |||||
Jointech | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 871,000 | |||||
Trade receivables and other current assets | 784,000 | |||||
Property and equipment and other long-term assets | 338,000 | |||||
Deferred tax asset | 0 | |||||
Acquired intangible assets | 22,485,000 | |||||
Goodwill | 17,404,000 | |||||
Total assets acquired | 41,882,000 | |||||
Accounts payable and accrued expenses | 728,000 | |||||
Deferred revenue | 0 | |||||
Due to employees | 1,254,000 | |||||
Deferred tax liability | 3,112,000 | |||||
Total liabilities assumed | 5,094,000 | |||||
Net assets acquired | 36,788,000 | |||||
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | ||||||
Adjustment to net assets acquired | 0 | |||||
Jointech | As Originally Reported [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 871,000 | |||||
Trade receivables and other current assets | 784,000 | |||||
Property and equipment and other long-term assets | 338,000 | |||||
Deferred tax asset | 0 | |||||
Acquired intangible assets | 25,744,000 | |||||
Goodwill | 11,033,000 | |||||
Total assets acquired | 38,770,000 | |||||
Accounts payable and accrued expenses | 728,000 | |||||
Deferred revenue | 0 | |||||
Due to employees | 1,254,000 | |||||
Deferred tax liability | 0 | |||||
Total liabilities assumed | 1,982,000 | |||||
Net assets acquired | 36,788,000 | |||||
GGA | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 0 | |||||
Trade receivables and other current assets | 5,377,000 | |||||
Property and equipment and other long-term assets | 444,000 | |||||
Deferred tax asset | 0 | |||||
Acquired intangible assets | 10,959,000 | |||||
Goodwill | 12,209,000 | |||||
Total assets acquired | 28,989,000 | |||||
Accounts payable and accrued expenses | 2,593,000 | |||||
Deferred revenue | 104,000 | |||||
Due to employees | 0 | |||||
Deferred tax liability | 0 | |||||
Total liabilities assumed | 2,697,000 | |||||
Net assets acquired | 26,292,000 | |||||
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | ||||||
Adjustment to net assets acquired | 1,366,000 | |||||
GGA | As Originally Reported [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 0 | |||||
Trade receivables and other current assets | 5,157,000 | |||||
Property and equipment and other long-term assets | 444,000 | |||||
Deferred tax asset | 4,463,000 | |||||
Acquired intangible assets | 10,959,000 | |||||
Goodwill | 6,496,000 | |||||
Total assets acquired | 27,519,000 | |||||
Accounts payable and accrued expenses | 2,593,000 | |||||
Deferred revenue | 0 | |||||
Due to employees | 0 | |||||
Deferred tax liability | 0 | |||||
Total liabilities assumed | 2,593,000 | |||||
Net assets acquired | 24,926,000 | |||||
Great Fridays Limited | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 259,000 | |||||
Trade receivables and other current assets | 1,825,000 | |||||
Property and equipment and other long-term assets | 262,000 | |||||
Deferred tax asset | 0 | |||||
Acquired intangible assets | 5,747,000 | |||||
Goodwill | 6,870,000 | |||||
Total assets acquired | 14,963,000 | |||||
Accounts payable and accrued expenses | 872,000 | |||||
Deferred revenue | 317,000 | |||||
Due to employees | 624,000 | |||||
Deferred tax liability | 1,200,000 | |||||
Total liabilities assumed | 3,013,000 | |||||
Net assets acquired | 11,950,000 | |||||
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | ||||||
Adjustment to net assets acquired | -77,000 | |||||
Great Fridays Limited | As Originally Reported [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 259,000 | |||||
Trade receivables and other current assets | 1,825,000 | |||||
Property and equipment and other long-term assets | 262,000 | |||||
Deferred tax asset | 0 | |||||
Acquired intangible assets | 5,747,000 | |||||
Goodwill | 6,947,000 | |||||
Total assets acquired | 15,040,000 | |||||
Accounts payable and accrued expenses | 872,000 | |||||
Deferred revenue | 317,000 | |||||
Due to employees | 624,000 | |||||
Deferred tax liability | 1,200,000 | |||||
Total liabilities assumed | 3,013,000 | |||||
Net assets acquired | 12,027,000 | |||||
Total | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 1,130,000 | |||||
Trade receivables and other current assets | 8,774,000 | |||||
Property and equipment and other long-term assets | 1,096,000 | |||||
Deferred tax asset | 0 | |||||
Acquired intangible assets | 40,891,000 | |||||
Goodwill | 39,262,000 | |||||
Total assets acquired | 91,153,000 | |||||
Accounts payable and accrued expenses | 4,262,000 | |||||
Deferred revenue | 421,000 | |||||
Due to employees | 1,878,000 | |||||
Deferred tax liability | 4,312,000 | |||||
Total liabilities assumed | 10,873,000 | |||||
Net assets acquired | 80,280,000 | |||||
Total | As Originally Reported [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | 1,130,000 | |||||
Trade receivables and other current assets | 8,554,000 | |||||
Property and equipment and other long-term assets | 1,096,000 | |||||
Deferred tax asset | 4,814,000 | |||||
Acquired intangible assets | 44,150,000 | |||||
Goodwill | 27,252,000 | |||||
Total assets acquired | 86,996,000 | |||||
Accounts payable and accrued expenses | 4,262,000 | |||||
Deferred revenue | 317,000 | |||||
Due to employees | 1,878,000 | |||||
Deferred tax liability | 1,200,000 | |||||
Total liabilities assumed | 7,657,000 | |||||
Net assets acquired | $79,339,000 |
ACQUISITIONS_Details_3
ACQUISITIONS (Details 3) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 |
Netsoft | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Amount | $1,700 |
Netsoft | Customer Relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life (in years) | 10 years |
Amount | 1,700 |
Netsoft | Trade Names | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Amount | 0 |
Jointech | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Amount | 22,485 |
Jointech | Customer Relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life (in years) | 10 years |
Amount | 22,173 |
Jointech | Trade Names | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life (in years) | 2 years |
Amount | 312 |
GGA | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Amount | 10,959 |
GGA | Customer Relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life (in years) | 10 years |
Amount | 10,959 |
GGA | Trade Names | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Amount | 0 |
Great Fridays Limited | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Amount | 5,747 |
Great Fridays Limited | Customer Relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life (in years) | 10 years |
Amount | 5,747 |
Great Fridays Limited | Trade Names | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Amount | $0 |
GOODWILL_Details
GOODWILL (Details) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Goodwill [Roll Forward] | |
Balance as of January 1, 2015 | $57,417,000 |
Purchase accounting adjustments | -77,000 |
Effect of net foreign currency exchange rate changes | -1,118,000 |
Balance as of March 31, 2015 | 56,346,000 |
North America | |
Goodwill [Roll Forward] | |
Balance as of January 1, 2015 | 31,078,000 |
Effect of net foreign currency exchange rate changes | -206,000 |
Balance as of March 31, 2015 | 30,996,000 |
Europe | |
Goodwill [Roll Forward] | |
Balance as of January 1, 2015 | 26,339,000 |
Effect of net foreign currency exchange rate changes | -912,000 |
Balance as of March 31, 2015 | 25,350,000 |
Netsoft | |
Goodwill [Roll Forward] | |
Purchase accounting adjustments | 30,000 |
Balance as of March 31, 2015 | 2,779,000 |
Netsoft | North America | |
Goodwill [Roll Forward] | |
Purchase accounting adjustments | 30,000 |
Netsoft | Europe | |
Goodwill [Roll Forward] | |
Purchase accounting adjustments | 0 |
GGA | |
Goodwill [Roll Forward] | |
Purchase accounting adjustments | 94,000 |
Balance as of March 31, 2015 | 12,209,000 |
GGA | North America | |
Goodwill [Roll Forward] | |
Purchase accounting adjustments | 94,000 |
GGA | Europe | |
Goodwill [Roll Forward] | |
Purchase accounting adjustments | 0 |
Great Fridays Limited | |
Goodwill [Roll Forward] | |
Balance as of March 31, 2015 | 6,870,000 |
Great Fridays Limited | North America | |
Goodwill [Roll Forward] | |
Purchase accounting adjustments | 0 |
Great Fridays Limited | Europe | |
Goodwill [Roll Forward] | |
Purchase accounting adjustments | ($77,000) |
GOODWILL_Details_2
GOODWILL (Details 2) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Goodwill [Line Items] | |||
Goodwill | $56,346,000 | $57,417,000 | |
North America | |||
Goodwill [Line Items] | |||
Goodwill | 30,996,000 | 31,078,000 | |
Accumulated impairment loss | 0 | 0 | |
Europe | |||
Goodwill [Line Items] | |||
Goodwill | 25,350,000 | 26,339,000 | |
Accumulated impairment loss | 0 | 0 | |
Russia | |||
Goodwill [Line Items] | |||
Goodwill | 0 | 0 | |
Accumulated impairment loss | 2,241,000 | 2,241,000 | |
Other | |||
Goodwill [Line Items] | |||
Goodwill | 0 | 0 | |
Accumulated impairment loss | $1,697,000 | $1,697,000 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (Fair Value, Measurements, Recurring, USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | $35,348 | $37,400 |
Performance-based equity awards | 5,446 | 3,223 |
Total liabilities measured at fair value on a recurring basis | 40,794 | 40,623 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 35,348 | 37,400 |
Performance-based equity awards | 5,446 | 3,223 |
Total liabilities measured at fair value on a recurring basis | $40,794 | $40,623 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (Level 3, USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 |
Level 3 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Contractual contingent liabilities at January 1, 2015 | $40,623 |
Liability-classified stock-based awards | 1,347 |
Changes in fair value of contractual contingent liabilities included in earnings | 875 |
Changes in fair value of contractual contingent liabilities recorded against goodwill | 0 |
Effect of net foreign currency exchange rate changes | -226 |
Settlements of contractual contingent liabilities | -1,825 |
Contractual contingent liabilities at March 31, 2015 | $40,794 |
FAIR_VALUE_MEASUREMENTS_Detail2
FAIR VALUE MEASUREMENTS (Details 3) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Transfers, Net [Abstract] | ||
Transfers Into Level 3 | $0 | $0 |
Transfers out of Level 3 | $0 | $0 |
LONGTERM_DEBT_Details
LONG-TERM DEBT (Details) (2014 Credit Facility, Revolving Credit Facility, USD $) | 3 Months Ended | 0 Months Ended |
Mar. 31, 2015 | Sep. 12, 2014 | |
Debt Instrument [Line Items] | ||
Line of credit, maximum borrowing capacity | 200,000,000 | |
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 | |
LIBOR | ||
Debt Instrument [Line Items] | ||
Variable rate spread | 1.00% | |
Federal Funds Open Rate | ||
Debt Instrument [Line Items] | ||
Variable rate spread | 0.50% |
INCOME_TAXES_Details
INCOME TAXES (Details) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 19.30% | 19.60% |
STOCKBASED_COMPENSATION_Costs_
STOCK-BASED COMPENSATION, Costs Related To Stock Compensation Plans (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | $9,134 | $3,208 |
Cost of revenues | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | 2,484 | 1,403 |
Organic growth | Selling, general and administrative expenses | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | 2,158 | 1,012 |
Business acquisitions | Selling, general and administrative expenses | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | $4,492 | $793 |
STOCKBASED_COMPENSATION_StockB
STOCK-BASED COMPENSATION, Stock-Based Compensation - Additional Information (Details) (USD $) | 3 Months Ended | 0 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Jan. 11, 2012 | Dec. 31, 2014 |
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Options granted | 2,069,300 | ||
Underlying options, in shares | 30,246 | ||
Stock Options | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Unrecognized compensation cost, net of forfeitures | 81,547 | ||
Weighted average remaining contractual term, exercisable | 6 years 1 month 17 days | ||
Weighted average remaining contractual term, outstanding | 9 years | ||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted, period for recognition | 2 years 5 months 5 days | ||
Restricted Stock | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Stock options issued (in shares) | 48,000 | ||
Underlying service-based awards, unvested and outstanding (in shares) | 660,000 | 633,442 | |
Service-Based Awards | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted | 15,748 | ||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted, period for recognition | 1 year 9 months 21 days | ||
Underlying service-based awards, unvested and outstanding (in shares) | 544,692 | ||
Underlying options, value at grant date | 25,176 | ||
Performance-Based Awards | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted | 14,898 | ||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted, period for recognition | 1 year 10 months 2 days | ||
Stock options issued (in shares) | 0 | ||
Underlying service-based awards, unvested and outstanding (in shares) | 342,426 | 371,510 | |
2012 Directors Plan | |||
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) | 559,365 | ||
2012 Directors Plan | Restricted Stock | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Non-vested common stock shares issued (in shares) | 0 | ||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted | 205 | ||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted, period for recognition | 1 year 9 months | ||
2012 Plan | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Common stock shares available for issuance (in shares) | 2,702,383 | ||
2012 Plan | Stock Options | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Options granted | 2,069,300 | ||
Aggregate grant-date fair value of stock options | 43,992 | ||
2012 Plan | Restricted Stock Units (RSUs) | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted | 4,450 | ||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted, period for recognition | 2 years 7 months | ||
Deferred compensation, shares issued | 48,000 | ||
Deferred compensation arrangement, fair value of shares issued | 2,946 | ||
Vesting percentage | 25.00% | ||
2006 Plan | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Common stock shares subject to outstanding awards that expire or terminate that are available for awards to be granted (in shares) | 1,542,847 | ||
2006 Plan | Stock Options | |||
Compensation Related Costs Share Based Payments Disclosure [Line Items] | |||
Options issued expiration period | 10 years |
STOCKBASED_COMPENSATION_Stock_
STOCK-BASED COMPENSATION, Stock Option Activity (Details) (USD $) | 3 Months Ended |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 |
Number of Options | |
Options outstanding at January 1, 2015 | 6,838,746 |
Options granted | 2,069,300 |
Options exercised | -346,499 |
Options forfeited/cancelled | -33,922 |
Options outstanding at March 31, 2015 | 8,527,625 |
Options vested and exercisable at March 31, 2015 | 3,329,962 |
Options expected to vest | 4,741,728 |
Weighted Average Exercise Price | |
Options outstanding at January 1, 2015 | $20.98 |
Options granted | $61.38 |
Options exercised | $12.84 |
Options forfeited/cancelled | $28.22 |
Options outstanding at March 31, 2015 | $31.09 |
Options vested and exercisable at March 31, 2015 | $15.56 |
Options expected to vest | $40.53 |
Aggregate Intrinsic Value | |
Options outstanding at January 1, 2015 | $183,073 |
Options granted | -186 |
Options exercised | -16,788 |
Options forfeited/cancelled | -1,122 |
Options outstanding at March 31, 2015 | 257,534 |
Options vested and exercisable at March 31, 2015 | 152,279 |
Options expected to vest | $98,438 |
STOCKBASED_COMPENSATION_Stock_1
STOCK-BASED COMPENSATION, Stock Compensation Plans (Details) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Service-Based Awards | |
Number of Shares | |
Unvested awards outstanding at January 1, 2014 | 633,442 |
Awards granted | 48,000 |
Awards vested | -21,442 |
Awards forfeited/cancelled | 0 |
Unvested awards outstanding at September 30, 2014 | 660,000 |
Weighted Average Grant Date Fair Value Per Share | |
Unvested awards outstanding at January 1, 2014 | $36.88 |
Awards granted | $61.38 |
Awards vested | $28.68 |
Awards forfeited/cancelled | $0 |
Unvested awards outstanding at September 30, 2014 | $38.93 |
Performance-Based Awards | |
Number of Shares | |
Unvested awards outstanding at January 1, 2014 | 371,510 |
Awards granted | 0 |
Awards vested | -8,501 |
Awards forfeited/cancelled | 0 |
Changes in the number of awards expected to be delivered | -20,583 |
Unvested awards outstanding at September 30, 2014 | 342,426 |
Weighted Average Grant Date Fair Value Per Share | |
Unvested awards outstanding at January 1, 2014 | $39.34 |
Awards granted | $0 |
Awards vested | $36.57 |
Awards forfeited/cancelled | $0 |
Changes in the number of awards expected to be delivered | $56.74 |
Unvested awards outstanding at September 30, 2014 | $37.91 |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Numerator for common earnings per share: | ||
Net income | $14,714 | $17,364 |
Numerator for basic and diluted earnings per share | $14,714 | $17,364 |
Denominator for basic earnings per share: | ||
Weighted average common shares outstanding (in shares) | 47,886 | 46,797 |
Effect of dilutive securities (in shares): | ||
Stock options, RSUs and performance-based awards (in shares) | 3,114 | 2,410 |
Denominator for diluted earnings per share (in shares) | 51,000 | 49,207 |
Net income per share: | ||
Basic (in dollars per share) | $0.31 | $0.37 |
Diluted (in dollars per share) | $0.29 | $0.35 |
Anti-dilutive options not included in the calculation (in shares) | 121 | 1,271 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 |
Commitments and Contingencies [Line Items] | |
Estimate of probable losses | $20 |
Construction in Progress | |
Commitments and Contingencies [Line Items] | |
Capitalized construction costs | 18,700 |
Estimate additional costs | 4,549 |
Breach of Contract Against IDEAB | |
Commitments and Contingencies [Line Items] | |
Legal settlement amount | $1,000 |
OPERATING_SEGMENTS_Revenues_fr
OPERATING SEGMENTS, Revenues from External Customers and Segment Operating Profit Before Unallocated Expenses (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Segment Reporting Information [Line Items] | ||
Revenues | $200,045 | $160,384 |
Operating profit | 22,820 | 21,857 |
Russia | ||
Segment Reporting Information [Line Items] | ||
Revenues | 7,259 | 10,390 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Revenues | 200,194 | 159,997 |
Operating profit | 38,680 | 29,879 |
Operating Segments | North America | ||
Segment Reporting Information [Line Items] | ||
Revenues | 100,269 | 80,198 |
Operating profit | 24,068 | 18,197 |
Operating Segments | Europe | ||
Segment Reporting Information [Line Items] | ||
Revenues | 91,152 | 67,659 |
Operating profit | 15,340 | 14,135 |
Operating Segments | Russia | ||
Segment Reporting Information [Line Items] | ||
Revenues | 7,513 | 10,748 |
Operating profit | -271 | -1,135 |
Operating Segments | Other | ||
Segment Reporting Information [Line Items] | ||
Revenues | 1,260 | 1,392 |
Operating profit | -457 | -1,318 |
Accounts Receivable | Customer Concentration Risk | Billed | UBS AG | ||
Segment Reporting Information [Line Items] | ||
Number of customers | 1 | |
Percentage of total revenues | 15.60% | |
Accounts Receivable | Customer Concentration Risk | Unbilled | UBS AG and Barclays Capital | ||
Segment Reporting Information [Line Items] | ||
Number of customers | 2 | |
Percentage of total revenues | 27.10% | |
Segment Revenues | Customer Concentration Risk | UBS AG | ||
Segment Reporting Information [Line Items] | ||
Number of customers | 1 | 1 |
Segment Revenues | Customer Concentration Risk | Operating Segments | UBS AG | ||
Segment Reporting Information [Line Items] | ||
Revenues | $30,933 | $20,024 |
OPERATING_SEGMENTS_Reconciliat
OPERATING SEGMENTS, Reconciliation of Segment Revenues and Operating Profit to Consolidated Income From Operations (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | $200,045 | $160,384 |
Segment Reporting Information [Line Items] | ||
Income from operations | 22,820 | 21,857 |
Stock-based compensation expense | -9,134 | -3,208 |
Depreciation and amortization | -4,200 | -3,689 |
Interest and other income, net | 1,158 | 976 |
Foreign exchange loss | -5,754 | -1,241 |
Income before provision for income taxes | 18,224 | 21,592 |
Operating Segments | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 200,194 | 159,997 |
Segment Reporting Information [Line Items] | ||
Income from operations | 38,680 | 29,879 |
Unallocated Amounts | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | -149 | 387 |
Segment Reporting Information [Line Items] | ||
Other revenues | -149 | 387 |
Stock-based compensation expense | -9,134 | -3,208 |
Non-corporate taxes | -825 | -546 |
Professional fees | -1,822 | -1,314 |
Depreciation and amortization | -1,329 | -655 |
Bank charges | -367 | -247 |
Other corporate expenses | ($2,234) | ($2,439) |
OPERATING_SEGMENTS_Geographica
OPERATING SEGMENTS, Geographical Information of Long-Lived Assets Based on Physical Location (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | $55,115 | $55,134 |
Belarus | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 42,060 | 41,652 |
Ukraine | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 4,377 | 4,392 |
Hungary | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 2,523 | 2,773 |
Russia | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 2,121 | 2,196 |
United States | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 1,779 | 2,001 |
Other | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | $2,255 | $2,120 |
OPERATING_SEGMENTS_Revenues_by
OPERATING SEGMENTS, Revenues by Client Location (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | $200,045 | $160,384 |
Reimbursable expenses and other revenues | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 1,857 | 1,967 |
United States | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 92,182 | 69,136 |
United Kingdom | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 38,565 | 34,244 |
Switzerland | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 26,351 | 20,532 |
Canada | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 12,485 | 9,981 |
Russia | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 7,259 | 10,390 |
Germany | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 6,498 | 6,132 |
Hong Kong | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 5,210 | 0 |
Netherlands | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 2,046 | 2,118 |
Sweden | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 2,013 | 2,312 |
Belgium | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 1,525 | 641 |
Kazakhstan | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 1,259 | 1,242 |
Ireland | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 1,187 | 0 |
Other locations | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | $1,608 | $1,689 |
OPERATING_SEGMENTS_Revenues_by1
OPERATING SEGMENTS, Revenues by Service Offering (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Revenue from External Customer [Line Items] | ||
Revenues | $200,045 | $160,384 |
Software development | ||
Revenue from External Customer [Line Items] | ||
Revenues | 140,035 | 110,687 |
Application testing services | ||
Revenue from External Customer [Line Items] | ||
Revenues | 37,030 | 31,770 |
Application maintenance and support | ||
Revenue from External Customer [Line Items] | ||
Revenues | 17,132 | 11,378 |
Infrastructure services | ||
Revenue from External Customer [Line Items] | ||
Revenues | 3,173 | 3,754 |
Licensing | ||
Revenue from External Customer [Line Items] | ||
Revenues | 818 | 828 |
Reimbursable expenses and other revenues | ||
Revenue from External Customer [Line Items] | ||
Revenues | $1,857 | $1,967 |