Operating Segments

9 Months Ended

Sep. 30, 2012

Operating Segments

11. OPERATING SEGMENTS

The Company’s reportable segments are: North America, Europe, Russia and Other. This determination is based on the unique business practices and market specifics of each region and that each region engages in business activities from which it earns revenues and incurs expenses. The Company’s Chief Operating Decision Maker (CODM) evaluates the Company’s performance and allocates resources based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment have similar characteristics and are subject to similar factors, pressures and challenges. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain expenses are not specifically allocated to specific segments as management does not believe it is practical to allocate such costs to individual segments because they are not directly attributable to any specific segment. Further, stock based compensation expense is not allocated to individual segments in internal management reports used by the CODM. Accordingly, this expense is separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations.

Revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments for the three and nine months ended September 30, 2012 and 2011, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Total segment revenues:
North America	$	52,767	$	39,000	$	142,333	$	109,390
Europe		42,505		32,035		123,160		87,804
Russia		11,688		11,934		30,943		32,787
Other		3,115		3,443		11,786		9,210
Total segment revenues	$	110,075	$	86,412	$	308,222	$	239,191
Segment operating profit:
North America	$	10,450	$	8,855	$	30,616	$	25,812
Europe		8,798		6,919		24,461		17,697
Russia		1,680		3,507		3,498		7,156
Other		1,230		1,336		4,550		1,383
Total segment operating profit	$	22,158	$	20,617	$	63,125	$	52,048

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.

Reconciliation of segment revenues and operating profit to consolidated income from operations is presented below:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Total segment revenues	$	110,075		$	86,412		$	308,222		$	$239,191
Unallocated revenue		3			11			39			210
Revenues	$	110,078		$	86,423		$	308,261		$	239,401
Total Segment operating profit:	$	22,158		$	20,617		$	63,125		$	52,048
Unallocated amounts:
Other revenues		3			11			39			210
Stock-based compensation expense		(2,046	)		(785	)		(5,369	)		(2,154	)
Stock charge (Note 2)		—			—			(640	)		—
Non-corporate taxes		(391	)		(584	)		(1,630	)		(2,179	)
Professional fees		(493	)		(812	)		(1,811	)		(2,193	)
Depreciation and amortization		(448	)		(192	)		(756	)		(668	)
Bank charges		(278	)		(200	)		(823	)		(529	)
Goodwill impairment loss (Note 4)		—			—			—			(1,697	)
Other corporate expenses		(1,769	)		(1,164	)		(4,785	)		(3,257	)
Income from operations	$	16,736		$	16,891		$	47,350		$	39,581

Geographic Area Information

Management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably amongst the segments. Geographical information about the Company’s long-lived assets based on physical location of the assets was as follows:

	As of September 30, 2012		As of December 31, 2011
Belarus	$	40,435	$	26,001
Ukraine		5,105		4,314
Russia		3,021		2,011
United States		2,012		1,445
Hungary		1,742		1,108
Other		633		603
Total	$	52,948	$	35,482

Long-lived assets include property and equipment, net of accumulated depreciation and amortization.

Information about the Company’s revenues by client location is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
United States	$	50,365	$	41,775	$	145,629	$	118,419
United Kingdom		25,651		19,307		70,777		50,267
Russia		10,554		11,229		29,045		31,041
Switzerland		8,496		3,781		21,438		11,153
Germany		4,325		1,947		11,766		5,029
Canada		3,270		609		5,816		882
Kazakhstan		2,967		1,946		6,300		5,600
Ukraine		181		661		4,556		1,506
Sweden		1,006		1,221		3,478		3,958
Netherlands		750		925		2,408		3,189
Other locations		1,120		1,516		2,862		4,045
Reimbursable expenses and other revenues		1,393		1,506		4,186		4,312
Revenues	$	110,078	$	86,423	$	308,261	$	239,401

Revenues by client location differ from the segment information above, which is not solely based on the geographic location of the clients but rather is based on managerial responsibility for a particular client regardless of where the client is located.

Service Offering Information

Information about the Company’s revenues by service offering is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Service Offering
Software development	$	73,894	$	56,580	$	206,045	$	157,025
Application testing services		22,001		17,859		61,297		48,523
Application maintenance and support		8,806		7,101		25,775		20,502
Infrastructure services		3,213		2,299		8,965		6,353
Licensing		771		1,078		1,993		2,686
Reimbursable expenses and other revenues		1,393		1,506		4,186		4,312
Revenues	$	110,078	$	86,423	$	308,261	$	239,401