|
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
223536104
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
41 University Drive, Suite 202
Newtown, Pennsylvania
|
18940
|
(Address of principal executive offices)
|
(Zip code)
|
Large accelerated filer
|
x
|
Accelerated filer
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¨
|
|
|
|
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
Title of Each Class
|
Outstanding as of April 30, 2015
|
Common Stock, par value $0.001 per share
|
48,905,023 shares
|
|
|
Page
|
|
As of
March 31, 2015 |
|
As of
December 31, 2014 |
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
192,363
|
|
|
$
|
220,534
|
|
Time deposits
|
30,000
|
|
|
—
|
|
||
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
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
|
||
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
|
|
|
—
|
|
||
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
|
|
|
Three Months Ended
March 31, |
||||||
|
2015
|
|
2014
|
||||
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
|
$
|
0.31
|
|
|
$
|
0.37
|
|
Diluted
|
$
|
0.29
|
|
|
$
|
0.35
|
|
Shares used in calculation of net income per share:
|
|
|
|
||||
Basic
|
47,886
|
|
|
46,797
|
|
||
Diluted
|
51,000
|
|
|
49,207
|
|
(US Dollars in thousands)
|
Three Months Ended
March 31, |
||||||
|
2015
|
|
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
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
(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
|
)
|
|
—
|
|
||
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
|
|
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
ACQUISITIONS
|
Name of Acquisition
|
|
Effective Date of Acquisition
|
|
Common Shares
|
|
Fair Value of Common
Shares
|
|
Cash, Net of Working Capital and Other Adjustments
|
|
Recorded Earnout
Payable
|
|
Total Recorded Purchase Price
|
|
Maximum Potential Earnout Payable
|
||||||||||||||||||||||||||
|
|
Issued
|
|
Deferred
|
|
Issued
|
|
Deferred
|
|
Paid
|
|
Deferred
|
|
Cash
|
|
Stock
|
|
|
||||||||||||||||||||||
|
|
|
|
(in shares)
|
|
(in thousands)
|
||||||||||||||||||||||||||||||||||
Netsoft
|
|
March 5, 2014
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,403
|
|
|
$
|
1,022
|
|
|
$
|
1,825
|
|
|
$
|
—
|
|
|
$
|
5,250
|
|
|
$
|
1,825
|
|
Jointech
|
|
April 30, 2014
|
|
—
|
|
|
89,552
|
|
|
—
|
|
|
2,788
|
|
|
10,000
|
|
|
4,000
|
|
|
15,000
|
|
|
5,000
|
|
|
36,788
|
|
|
20,000
|
|
||||||||
GGA
(1)
|
|
June 6, 2014
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,892
|
|
|
—
|
|
|
11,400
|
|
|
—
|
|
|
26,292
|
|
|
|
|||||||||
Great Fridays
|
|
October 31, 2014
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
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.
|
|
Netsoft
|
|
Jointech
|
|
GGA
|
|
Great Fridays
|
|
Total
|
||||||||||||||||||||||||||||||
|
As Originally Reported
|
|
As of
March 31, 2015 |
|
As Originally Reported
|
|
As of
March 31, 2015 |
|
As Originally Reported
|
|
As of
March 31, 2015 |
|
As Originally Reported
|
|
As of
March 31, 2015 |
|
As Originally Reported
|
|
As of
March 31, 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
|
|
|
Netsoft
|
|
Jointech
|
|
GGA
|
|
Great Fridays
|
|||||||||||||||||||
|
Weighted Average
Useful Life (in years) |
|
Amount
|
|
Weighted Average
Useful Life (in years) |
|
Amount
|
|
Weighted Average
Useful Life (in years) |
|
Amount
|
|
Weighted Average
Useful Life (in years) |
|
Amount
|
|||||||||||
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
|
|
|
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
|
|
4.
|
FAIR VALUE MEASUREMENTS
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||
|
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
|
|
|
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
|
|
5.
|
LONG-TERM DEBT
|
6.
|
INCOME TAXES
|
7.
|
STOCK-BASED COMPENSATION
|
|
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
|
|
|
Number of
Options
|
|
Weighted Average
Exercise Price
|
|
Aggregate
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
|
|
|
Number of
Shares
|
|
Weighted Average Grant Date
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
|
|
|
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
|
|
8.
|
EARNINGS PER SHARE
|
|
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
|
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
10.
|
OPERATING SEGMENTS
|
|
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
|
|
|
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
|
|
|
March 31,
2015 |
|
December 31,
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
|
|
|
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
|
|
|
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
|
|
11.
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
•
|
The North American geography increased the most, generating revenue growth of
$25.6 million
during the
three
months ended
March 31, 2015
, or
32.3%
over the corresponding period of
2014
;
|
•
|
Revenue increased in all our key verticals, and in particular within the ISVs and Technology and Life Sciences and Healthcare verticals, which grew
$9.7 million
and
$9.5 million
, respectively, in the
first
quarter of
2015
over the corresponding period of
2014
.
|
•
|
Income from operations grew by
4.4%
during the
three
months ended
March 31, 2015
compared with the
three
months ended
March 31, 2014
. Income from operations decreased by
2.2%
as a percentage of revenues over the same period. The decrease was due to a combination of factors, including an increase of
$5.9 million
in stock-based compensation expense, of which
$4.0 million
relates to our 2014 acquisitions; and increase in salaries for the non-production personnel to support our aggressive growth.
|
•
|
Net income decreased by
15.3%
during the
first
quarter of
2015
compared with the corresponding period of
2014
. Expressed as a percentage of revenues, net income decreased
3.4%
during the three months ended
March 31, 2015
, as compared to the prior year period due to the items noted above, as well as the effects of significant adverse foreign exchange rate changes to date in
2015
as compared to 2014 for currencies including the euro.
|
•
|
Non-GAAP income from operations is the income from operations as reported on our consolidated statements of income and comprehensive income exclusive of certain expenses and benefits.
|
•
|
Non-GAAP operating margin is the non-GAAP income from operations as a percentage of reported revenues.
|
|
Three Months Ended
March 31, |
||||||
|
2015
|
|
2014
|
||||
|
(in thousands, except percentages)
|
||||||
GAAP income from operations
|
$
|
22,820
|
|
|
$
|
21,857
|
|
Stock-based compensation expense
|
9,134
|
|
|
3,208
|
|
||
Amortization of purchased intangible assets
|
1,418
|
|
|
650
|
|
||
Acquisition-related costs
|
62
|
|
|
581
|
|
||
Non-GAAP income from operations
|
$
|
33,434
|
|
|
$
|
26,296
|
|
|
|
|
|
||||
GAAP operating margin
|
11.4
|
%
|
|
13.6
|
%
|
||
Effect of the adjustments detailed above
|
5.3
|
%
|
|
2.8
|
%
|
||
Non-GAAP operating margin
|
16.7
|
%
|
|
16.4
|
%
|
|
Three Months Ended
March 31, |
|
Increase/(Decrease)
|
|||||||||||
|
2015
|
|
2014
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Revenues
|
$
|
200,045
|
|
|
$
|
160,384
|
|
|
$
|
39,661
|
|
|
24.7
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|||||
Cost of revenues (exclusive of depreciation and amortization)
(1)
|
125,887
|
|
|
102,454
|
|
|
23,433
|
|
|
22.9
|
%
|
|||
Selling, general and administrative expenses
(2)
|
46,938
|
|
|
32,359
|
|
|
14,579
|
|
|
45.1
|
%
|
|||
Depreciation and amortization expense
|
4,200
|
|
|
3,689
|
|
|
511
|
|
|
13.9
|
%
|
|||
Other operating expenses, net
|
200
|
|
|
25
|
|
|
175
|
|
|
700.0
|
%
|
|||
Income from operations
|
22,820
|
|
|
21,857
|
|
|
963
|
|
|
4.4
|
%
|
|||
Interest and other income, net
|
1,158
|
|
|
976
|
|
|
182
|
|
|
18.6
|
%
|
|||
Foreign exchange loss
|
(5,754
|
)
|
|
(1,241
|
)
|
|
(4,513
|
)
|
|
363.7
|
%
|
|||
Income before provision for income taxes
|
18,224
|
|
|
21,592
|
|
|
(3,368
|
)
|
|
(15.6
|
)%
|
|||
Provision for income taxes
|
3,510
|
|
|
4,228
|
|
|
(718
|
)
|
|
(17.0
|
)%
|
|||
Net income
|
$
|
14,714
|
|
|
$
|
17,364
|
|
|
$
|
(2,650
|
)
|
|
(15.3
|
)%
|
|
|
(1)
|
Included
$2,484
and
$1,403
of stock-based compensation expense for the three months ended
March 31, 2015
and
2014
, respectively;
|
(2)
|
Included
$6,650
and
$1,805
of stock-based compensation expense for the three months ended
March 31, 2015
and
2014
, respectively.
|
|
Three Months Ended
March 31, |
||||||
|
2015
|
|
2014
|
||||
|
(in thousands)
|
||||||
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
|
|
|
Three Months Ended
March 31, |
||||||
|
2015
|
|
2014
|
||||
|
(in thousands)
|
||||||
Condensed Consolidated Statements of Cash Flow Data:
|
|
|
|
||||
Net cash provided by operating activities
|
$
|
6,871
|
|
|
$
|
16,188
|
|
Net cash used in investing activities
|
(33,882
|
)
|
|
(11,676
|
)
|
||
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 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
|
|
|
Total
|
|
Less than 1
Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than 5
Years
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Operating lease obligations
|
$
|
46,867
|
|
|
$
|
16,505
|
|
|
$
|
18,747
|
|
|
$
|
8,555
|
|
|
$
|
3,060
|
|
Other short-term obligations
(1)
|
4,549
|
|
|
4,549
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Employee Housing Program
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
$
|
51,416
|
|
|
$
|
21,054
|
|
|
$
|
18,747
|
|
|
$
|
8,555
|
|
|
$
|
3,060
|
|
|
|
(1)
|
As of
March 31, 2015
, we estimated up to
$4.5 million
of additional investment could be required to complete construction of a 14,071 square meter office building within the High Technologies Park in Minsk, Belarus. Please see Note 9 to our unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” for further information.
|
(2)
|
In the third quarter of 2012, our Board of Directors approved the Employee Housing Program, which assists employees in purchasing housing in Belarus. As part of the program, we will extend financing to employees up to an aggregate amount of
$10.0 million
.
|
Exhibit
Number
|
|
Description
|
|
|
|
10.1
|
|
Form of Chief Executive Officer Restricted Stock Unit Award Agreement
|
10.2
|
|
Form of Senior Management Restricted Stock Unit Award Agreement
|
10.3
|
|
Amended 2012 Non-Employee Directors Compensation Plan
|
10.4
|
|
Amended Non-Employee Director Compensation Policy
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
32.1
|
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2
|
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
EPAM SYSTEMS, INC.
|
|
|
|
|
|
By:
|
/s/ Arkadiy Dobkin
|
|
|
Name: Arkadiy Dobkin
|
|
|
Title: Chairman, Chief Executive Officer and President
(principal executive officer)
|
|
|
|
|
By:
|
/s/ Anthony J. Conte
|
|
|
Name: Anthony J. Conte
|
|
|
Title: Vice President, Chief Financial Officer and Treasurer
(principal financial officer and principal accounting officer)
|
|
EPAM SYSTEMS, INC.
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
|
|
|
|
|
|
|
Participant
|
|
EPAM SYSTEMS, INC.
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
|
|
|
|
|
|
|
Participant
|
SECTION 4.
|
Administration.
|
SECTION 5.
|
Shares Available for Awards.
|
a)
|
Subject to adjustment as provided in Section 5(c), the maximum number of Shares available for issuance under the Plan shall not exceed 600,000 Shares in the aggregate.
|
b)
|
Any Shares subject to an Award that expires, is canceled, forfeited or otherwise terminates without the delivery of such Shares, including (i) the number of Shares surrendered or withheld in payment of any grant, purchase, exercise or hurdle price of an Award or taxes related to an Award and (ii) any Shares subject to an Award to the extent that Award is settled without the issuance of Shares, shall again be, or shall become, available for issuance under the Plan.
|
c)
|
In the event that the Board determines that, as a result of any dividend or other distribution (whether in the form of cash, Shares or other securities), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, issuance of Shares pursuant to the anti-dilution provisions of securities of the Company, or other similar corporate transaction or event affecting the Shares, or of changes in applicable laws, regulations or accounting principles, an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Board shall adjust equitably any or all of:
|
d)
|
Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or Shares acquired by the Company.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of EPAM Systems, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Arkadiy Dobkin
|
|
Arkadiy Dobkin
|
|
|
|
Chairman, Chief Executive Officer and President
(principal executive officer)
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of EPAM Systems, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Anthony J. Conte
|
|
Anthony J. Conte
|
|
|
|
Vice President, Chief Financial Officer and Treasurer
(principal financial officer and principal accounting officer)
|
|
/s/ Arkadiy Dobkin
|
|
Arkadiy Dobkin
|
|
|
|
Chairman, Chief Executive Officer and President
(principal executive officer)
|
|
/s/ Anthony J. Conte
|
|
Anthony J. Conte
|
|
|
|
Vice President, Chief Financial Officer and Treasurer
(principal financial officer and principal accounting officer)
|
|