REVENUES

Adoption of ASC Topic 606, “Revenue from Contracts with Customers” and Change in Accounting Policies

Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) as amended. The Company adopted the new guidance using the modified retrospective method by recognizing the cumulative effect of adoption as an adjustment to retained earnings as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with Topic 605. The impact of adoption of the new guidance on the Company’s consolidated financial statements as of January 1, 2018 are presented in Note 1 “Summary of Significant Accounting Policies.”

The Company recognizes revenues when control of goods or services is passed to a customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Such control may be transferred over time or at a point in time depending on satisfaction of obligations stipulated by the contract. Consideration expected to be received may consist of both fixed and variable components and is allocated to each separately identifiable performance obligation based on the performance obligation’s relative standalone selling price. Variable consideration is usually presented in the form of cash incentives or credits. Determining the estimated amount of such variable consideration involves assumptions and judgment that can have an impact on the amount of revenue reported.

The Company derives its revenues from a variety of service offerings, which represent specific competencies of its IT professionals. Fees for these contracts may be in the form of time-and-materials or fixed-price arrangements. The majority of the Company’s revenues are generated under time-and-material contracts which are billed using hourly, daily or monthly rates to determine the amounts to be charged directly to the client. The Company applies a practical expedient and revenue related to time-and-material contracts is recognized based on the Company’s right to invoice for services performed.

Fixed-price contracts include maintenance and support arrangements, which may exceed one year in duration, as well as application development arrangements. Maintenance and support arrangements generally relate to the provision of ongoing services. Revenues for such agreements are recognized ratably over the expected service period. Application development arrangements are accounted for using input or output methods for measuring the progress towards satisfaction of the performance obligation. Input methods are used only when there is a direct correlation between hours incurred and the end product delivered. Assumptions, risks and uncertainties inherent in the estimates used to measure progress could affect the amount of revenues, receivables and deferred revenues at each reporting period. Revenues from licenses which have significant stand-alone functionality are recognized at a point in time when control of the license is transferred to the customer. Revenues from licenses which do not have stand-alone functionality are recognized over time.

If there is an uncertainty about the receipt of payment for the services, revenue is deferred until the uncertainty is sufficiently resolved. The Company applies a practical expedient and does not assess the existence of a significant financing component if the period between when the Company transfers the service to a customer and when the customer pays for that service is one year or less.

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 following tables summarize the impacts of changes in accounting policies after adoption of Topic 606 on the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2018, which primarily resulted from deferring the timing of revenue recognition for contracts that were previously recognized on a cash basis and recognizing revenues from certain license agreements at a point-in-time rather than over time:



	As of June 30, 2018
	As Reported		Balances Without Adoption of Topic 606		Effect of Change Higher/(Lower)
Balance Sheet
Liabilities
Accrued expenses and other current liabilities	$	72,443	$	72,426	$	17
Other noncurrent liabilities	16,421		16,424		(3		)
Stockholders’ equity
Retained earnings	$	633,950	$	633,964	$	(14	)



	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
	As Reported		Balances Without Adoption of Topic 606		Effect of Change Higher/(Lower)		As Reported			Balances Without Adoption of Topic 606			Effect of Change Higher/(Lower)
Income Statement
Revenues	$	445,647	$	444,951	$	696	$	869,795		$	869,812		$	(17	)
Income from operations	$	54,237	$	53,541	$	696	$	102,934		$	102,951		$	(17	)
Provision for/(benefit from) income taxes	$	6,864	$	6,728	$	136	$	(9,655	)	$	(9,652	)	$	(3	)
Net income	$	50,255	$	49,695	$	560	$	114,673		$	114,687		$	(14	)

Disaggregation of Revenues

The following tables show the disaggregation of the Company’s revenues by major client location, including a reconciliation of the disaggregated revenue with the reportable segments (Note 12 “Segment Information”) for the three and six months ended June 30, 2018:



	Three Months Ended June 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenue		Other Income Included in Segment Revenues			Consolidated Revenues
Client Locations
North America	$	250,273	$	14,177	$	14	$	264,464	$	(13	)	$	264,451
Europe	3,086		146,998		—		150,084		(280		)	149,804
CIS	2,089		28		17,294		19,411		—			19,411
APAC	1,655		10,292		72		12,019		(38		)	11,981
Revenues	$	257,103	$	171,495	$	17,380	$	445,978	$	(331	)	$	445,647



	Six Months Ended June 30, 2018
Reportable Segments	North America		Europe			Russia			Total Segment Revenue		Other Income Included in Segment Revenues			Consolidated Revenues
Client Locations
North America	$	476,343	$	27,538	—	$	29	—	$	503,910	$	(13	)	$	503,897
Europe	5,826		297,478		—	42		—	303,346		(457		)	302,889
CIS	4,092		91		—	37,008		—	41,191		—			41,191
APAC	2,038		19,731		—	87		—	21,856		(38		)	21,818
Revenues	$	488,299	$	344,838		$	37,166		$	870,303	$	(508	)	$	869,795

The following tables show the disaggregation of the Company’s revenues by industry vertical, including a reconciliation of the disaggregated revenue with the reportable segments (Note 12 “Segment Information”) for the three and six months ended June 30, 2018:



	Three Months Ended June 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenue		Other Income Included in Segment Revenues			Consolidated Revenues
Industry Vertical
Financial Services	$	26,732	$	62,496	$	14,091	$	103,319	$	(331	)	$	102,988
Travel & Consumer	47,104		52,120		1,792		101,016		—			101,016
Software & Hi-Tech	64,536		19,857		624		85,017		—			85,017
Business Information & Media	59,532		18,117		—		77,649		—			77,649
Life Sciences & Healthcare	32,876		5,649		—		38,525		—			38,525
Emerging Verticals	26,323		13,256		873		40,452		—			40,452
Revenues	$	257,103	$	171,495	$	17,380	$	445,978	$	(331	)	$	445,647



	Six Months Ended June 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenue		Other Income Included in Segment Revenues			Consolidated Revenues
Industry Vertical
Financial Services	$	48,688	$	128,314	$	30,316	$	207,318	$	(508	)	$	206,810
Travel & Consumer	87,791		101,574		3,465		192,830		—			192,830
Software & Hi-Tech	125,100		40,151		1,388		166,639		—			166,639
Business Information & Media	116,869		36,987		—		153,856		—			153,856
Life Sciences & Healthcare	60,343		10,472		—		70,815		—			70,815
Emerging Verticals	49,508		27,340		1,997		78,845		—			78,845
Revenues	$	488,299	$	344,838	$	37,166	$	870,303	$	(508	)	$	869,795

The following tables show the disaggregation of the Company’s revenues by contract type including a reconciliation of the disaggregated revenue with the Company’s reportable segments (Note 12 “Segment Information”) for the three and six months ended June 30, 2018:



	Three Months Ended June 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenue		Other Income Included in Segment Revenues			Consolidated Revenues
Contract Type
Time-and-material	$	233,747	$	156,637	$	9,765	$	400,149	$	—		$	400,149
Fixed-price	22,483		14,081		7,607		44,171		—			44,171
Licensing	638		327		1		966		—			966
Other revenues	235		450		7		692		(331		)	361
Revenues	$	257,103	$	171,495	$	17,380	$	445,978	$	(331	)	$	445,647



	Six Months Ended June 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenue		Other Income Included in Segment Revenues			Consolidated Revenues
Contract Type
Time-and-material	$	448,063	$	316,103	$	19,861	$	784,027	$	—		$	784,027
Fixed-price	38,475		27,034		17,279		82,788		—			82,788
Licensing	1,300		946		11		2,257		—			2,257
Other revenues	461		755		15		1,231		(508		)	723
Revenues	$	488,299	$	344,838	$	37,166	$	870,303	$	(508	)	$	869,795

Timing of Revenue Recognition

The following tables show the timing of revenue recognition:



	Three Months Ended June 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenue		Other Income Included in Segment Revenues			Consolidated Revenues
Timing of Revenue Recognition
Transferred at a point of time	$	294	$	634	$	—	$	928	$	(331	)	$	597
Transferred over time	256,809		170,861		17,380		445,050		—			445,050
Revenues	$	257,103	$	171,495	$	17,380	$	445,978	$	(331	)	$	445,647



	Six Months Ended June 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenue		Other Income Included in Segment Revenues			Consolidated Revenues
Timing of Revenue Recognition
Transferred at a point of time	$	638	$	1,062	$	10	$	1,710	$	(508	)	$	1,202
Transferred over time	487,661		343,776		37,156		868,593		—			868,593
Revenues	$	488,299	$	344,838	$	37,166	$	870,303	$	(508	)	$	869,795

During the three and six months ended June 30, 2018, the Company recognized $5,452 and $6,618 of revenues, respectively, from performance obligations satisfied in previous periods.

The following table includes the estimated revenue expected to be recognized in the future related to performance obligations that are partially or fully unsatisfied as of June 30, 2018. The Company applies a practical expedient and does not disclose the value of unsatisfied performance obligations for contracts that (i) have an original expected duration of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services provided:



	Less than 1 year		1 Year		2 Years		3 Years		Total
Contract Type
Fixed-price	$	7,897	$	580	$	139	$	—	$	8,616

The Company applies a practical expedient and does not disclose the amount of the transaction price allocated to the remaining performance obligations nor provide an explanation of when the Company expects to recognize that amount as revenue.

Contract Balances

The following table provides information on the classification of contract assets and liabilities in the condensed consolidated balance sheets:



	As of June 30, 2018		As of December 31, 2017
Contract assets included in unbilled revenues	$	18,393	$	7,901
Contract liabilities included in accrued expenses and other current liabilities	$	5,398	$	4,498

Contract assets included in unbilled revenues are recorded when services have been provided but the Company does not have an unconditional right to receive consideration. The Company recognizes an impairment loss when the contract carrying amount is greater than the remaining consideration receivable, less directly related costs to be incurred. Contract assets have increased from December 31, 2017 primarily due to new contracts entered into in 2018 where the Company’s right to bill is contingent upon achievement of contractual milestones.

Contract liabilities comprise amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. During the three and six months ended June 30, 2018, the Company recognized $1,808 and $3,432 of revenue, respectively, that was included in Accrued expenses and other current liabilities at January 1, 2018.