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 usually takes the form of volume-based discounts, service level credits, price concessions or incentives. Determining the estimated amount of such variable consideration involves assumptions and judgment that can have an impact on the amount of revenues 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 revenues related to time-and-material contracts are 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 nine months ended September 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 September 30, 2018
	As Reported		Balances Without Adoption of Topic 606		Effect of Change Higher/(Lower)
Balance Sheet
Liabilities
Accrued expenses and other current liabilities	$	98,442	$	98,354	$	88
Other noncurrent liabilities	11,804		11,823		(19		)
Stockholders’ equity
Retained earnings	$	699,568	$	699,637	$	(69	)



	Three Months Ended September 30, 2018							Nine Months Ended September 30, 2018
	As Reported		Balances Without Adoption of Topic 606		Effect of Change			As Reported			Balances Without Adoption of Topic 606			Effect of Change
Income Statement
Revenues	$	468,186	$	468,257	$	(71	)	$	1,337,981		$	1,338,069		$	(88	)
Income from operations	$	64,560	$	64,631	$	(71	)	$	167,494		$	167,582		$	(88	)
Provision for/(benefit from) income taxes	$	369	$	385	$	(16	)	$	(9,286	)	$	(9,267	)	$	(19	)
Net income	$	65,618	$	65,673	$	(55	)	$	180,291		$	180,360		$	(69	)

Disaggregation of Revenues

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



	Three Months Ended September 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenues		Other Income Included in Segment Revenues			Consolidated Revenues
Client Locations
North America	$	271,551	$	12,536	$	17	$	284,104	$	(27	)	$	284,077
Europe	5,408		146,990		3		152,401		(166		)	152,235
CIS	2,208		142		16,184		18,534		—			18,534
APAC	1,671		11,814		4		13,489		(149		)	13,340
Revenues	$	280,838	$	171,482	$	16,208	$	468,528	$	(342	)	$	468,186



	Nine Months Ended September 30, 2018
Reportable Segments	North America		Europe			Russia			Total Segment Revenues		Other Income Included in Segment Revenues			Consolidated Revenues
Client Locations
North America	$	747,894	$	40,074	—	$	46	—	$	788,014	$	(40	)	$	787,974
Europe	11,234		444,468		—	45		—	455,747		(623		)	455,124
CIS	6,300		233		—	53,192		—	59,725		—			59,725
APAC	3,709		31,545		—	91		—	35,345		(187		)	35,158
Revenues	$	769,137	$	516,320		$	53,374		$	1,338,831	$	(850	)	$	1,337,981

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



	Three Months Ended September 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenues		Other Income Included in Segment Revenues			Consolidated Revenues
Industry Verticals
Financial Services	$	30,488	$	61,713	$	12,786	$	104,987	$	(189	)	$	104,798
Travel & Consumer	45,690		53,634		1,891		101,215		(122		)	101,093
Software & Hi-Tech	68,572		19,035		569		88,176		—			88,176
Business Information & Media	64,152		17,650		—		81,802		—			81,802
Life Sciences & Healthcare	39,550		5,078		12		44,640		(31		)	44,609
Emerging Verticals	32,386		14,372		950		47,708		—			47,708
Revenues	$	280,838	$	171,482	$	16,208	$	468,528	$	(342	)	$	468,186



	Nine Months Ended September 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenues		Other Income Included in Segment Revenues			Consolidated Revenues
Industry Verticals
Financial Services	$	79,176	$	190,027	$	43,102	$	312,305	$	(697	)	$	311,608
Travel & Consumer	133,481		155,208		5,356		294,045		(122		)	293,923
Software & Hi-Tech	193,672		59,186		1,957		254,815		—			254,815
Business Information & Media	181,021		54,637		—		235,658		—			235,658
Life Sciences & Healthcare	99,893		15,550		12		115,455		(31		)	115,424
Emerging Verticals	81,894		41,712		2,947		126,553		—			126,553
Revenues	$	769,137	$	516,320	$	53,374	$	1,338,831	$	(850	)	$	1,337,981

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



	Three Months Ended September 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenues		Other Income Included in Segment Revenues			Consolidated Revenues
Contract Types
Time-and-material	$	256,549	$	155,797	$	9,441	$	421,787	$	—		$	421,787
Fixed-price	23,241		15,001		6,759		45,001		—			45,001
Licensing	798		173		1		972		—			972
Other revenues	250		511		7		768		(342		)	426
Revenues	$	280,838	$	171,482	$	16,208	$	468,528	$	(342	)	$	468,186



	Nine Months Ended September 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenues		Other Income Included in Segment Revenues			Consolidated Revenues
Contract Types
Time-and-material	$	704,612	$	471,900	$	29,302	$	1,205,814	$	—		$	1,205,814
Fixed-price	61,716		42,035		24,038		127,789		—			127,789
Licensing	2,098		1,119		12		3,229		—			3,229
Other revenues	711		1,266		22		1,999		(850		)	1,149
Revenues	$	769,137	$	516,320	$	53,374	$	1,338,831	$	(850	)	$	1,337,981

Timing of Revenue Recognition

The following tables show the timing of revenue recognition:



	Three Months Ended September 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenues		Other Income Included in Segment Revenues			Consolidated Revenues
Timing of Revenue Recognition
Transferred at a point of time	$	194	$	289	$	—	$	483	$	(342	)	$	141
Transferred over time	280,644		171,193		16,208		468,045		—			468,045
Revenues	$	280,838	$	171,482	$	16,208	$	468,528	$	(342	)	$	468,186



	Nine Months Ended September 30, 2018
Reportable Segments	North America		Europe		Russia		Total Segment Revenues		Other Income Included in Segment Revenues			Consolidated Revenues
Timing of Revenue Recognition
Transferred at a point of time	$	832	$	1,351	$	10	$	2,193	$	(850	)	$	1,343
Transferred over time	768,305		514,969		53,364		1,336,638		—			1,336,638
Revenues	$	769,137	$	516,320	$	53,374	$	1,338,831	$	(850	)	$	1,337,981

During the three and nine months ended September 30, 2018, the Company recognized $3,610 and $6,627 of revenues, respectively, from performance obligations satisfied in previous periods.

The following table includes the estimated revenues expected to be recognized in the future related to performance obligations that are partially or fully unsatisfied as of September 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 revenues 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	$	4,590	$	568	$	126	$	—	$	5,284

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 for certain variable consideration.

Contract Balances

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



	As of September 30, 2018		As of December 31, 2017
Contract assets included in unbilled revenues	$	19,180	$	7,901
Contract liabilities included in accrued expenses and other current liabilities	$	3,376	$	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 collected from the Company’s 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 nine months ended September 30, 2018, the Company recognized $258 and $3,690 of revenues, respectively, that were included in Accrued expenses and other current liabilities at January 1, 2018.