ACQUISITIONS

9 Months Ended

Sep. 30, 2019

Continuum — On March 15, 2018, the Company acquired all of the outstanding equity of Continuum Innovation LLC together with its subsidiaries (“Continuum”) to enhance the Company’s consulting capabilities as well as its digital and service design practices. Continuum, headquartered in Boston with offices located in Milan, Seoul, and Shanghai, focuses on four practices including strategy, physical and digital design, technology and its Made Real Lab. The acquisition of Continuum added approximately 125 design consultants to the Company’s headcount. In connection with the Continuum acquisition, the Company paid $52,515 of cash and committed to making a cash earnout payment with a maximum amount payable of $3,135, subject to attainment of specified performance targets in the 12 months after the acquisition date.

Think — On November 1, 2018, the Company acquired all of the equity interests of Think Limited (“Think”), a digital transformation agency headquartered in London, UK. This acquisition was intended to strengthen EPAM’s digital and organizational consulting capabilities in the UK and Western European markets and enhance the Company’s global product and design offerings. In connection with the Think acquisition, the Company paid $26,254 at closing and committed to making a cash earnout payment with a maximum amount payable of $8,156, subject to attainment of specified performance targets in the 12 months after the acquisition date. During the three months ended September 30, 2019, the Company received $271 as a true-up payment which reduced the purchase price.

test IO — On April 30, 2019, the Company acquired 100% of the equity interests of a crowdtesting company, test IO GmbH, and its subsidiary (“test IO”). In connection with the test IO acquisition, the Company paid $17,323 of cash.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition and updated for any changes as of September 30, 2019 for each respective acquisition:



	Continuum		Think		test IO
Cash and cash equivalents	$	2,251	$	2,344	$	668
Accounts receivable	6,676		2,259		727
Unbilled revenues	2,463		284		—
Prepaid expenses and other current assets	936		609		96
Goodwill	26,617		22,211		12,084
Intangible assets	14,450		6,882		6,219
Property and equipment and other noncurrent assets	8,902		642		154
Total assets acquired	$	62,295	$	35,231	$	19,948
Accounts payable, accrued expenses and other current liabilities	$	2,745	$	2,205	$	877
Due to employees	1,001		13		42
Long-term debt	3,220		—		—
Other noncurrent liabilities	490		1,040		1,706
Total liabilities assumed	$	7,456	$	3,258	$	2,625
Net assets acquired	$	54,839	$	31,973	$	17,323

During 2018, the Company adjusted initially recognized intangible assets acquired with Continuum and their useful lives as well as recognized an additional intangible asset in the form of a favorable lease, removed a noncurrent liability associated with an initially recognized unfavorable lease and revised the initial fair value of contingent consideration. The Company also finalized a working capital adjustment that resulted in cash collection in the amount of $76 reducing the original amount of the net assets acquired. These adjustments resulted in a corresponding decrease to the originally recognized value of acquired goodwill. During the first quarter of 2019, the Company finalized the fair value of the assets acquired and liabilities assumed in the acquisition of Continuum and no additional adjustments were recorded.

For the acquisitions of Think and test IO, estimated fair values of the assets acquired and liabilities assumed remain provisional and based on the facts and circumstances that existed as of the acquisition dates. The Company expects to complete the purchase price allocations as soon as practicable but no later than one year from the acquisition dates. During the three months ended September 30, 2019, the Company recorded purchase price adjustments which reduced the original purchase price for Think by $271, with a corresponding decrease to the originally recognized value of acquired goodwill. During the three months ended September 30, 2019, the Company recorded purchase price adjustments which increased the original purchase price for test IO and adjusted related working capital accounts increasing the original amount of the net assets acquired by $119. In addition for the test IO acquisition, the Company reduced the value of acquired intangible assets by $145 with a corresponding increase to goodwill.

The following table presents the estimated fair values and useful lives of intangible assets acquired from Continuum, Think, and test IO as of the date of acquisition and updated for any changes as of September 30, 2019 for each respective acquisition:



	Continuum			Think			test IO
	Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount
Customer relationships	6.5	$	5,800	7	$	6,117	7	$	2,456
Favorable lease	11.2	5,500		—	—		—	—
Software	—	—		—	—		6	3,461
Contract royalties	8	1,900		—	—		—	—
Trade names	5	1,250		5	765		4	302
Total		$	14,450		$	6,882		$	6,219

In connection with the adoption of Topic 842, effective January 1, 2019, the Company reclassified the favorable lease intangible asset to Operating lease right-of-use assets.

The goodwill recognized as a result of the acquisitions is attributable primarily to strategic and synergistic opportunities related to the consulting and design businesses, the assembled workforces acquired and other factors. The goodwill acquired as a result of the Continuum acquisition is expected to be deductible for income tax purposes while the goodwill acquired as a result of the Think and test IO acquisitions is not expected to be deductible for income tax purposes.

Revenues generated by test IO, acquired on April 30, 2019, totaled $1,692 and $2,606 during the three and nine months ended September 30, 2019, respectively.

Pro forma results of operations have not been presented because the effect of the acquisitions on the Company’s condensed consolidated financial statements was not material individually or in the aggregate.

Other 2019 Acquisitions — During the three months ended September 30, 2019, the Company completed three additional acquisitions with an aggregate cash purchase price of $14,080 and committed to making cash earnout payments with a maximum amount payable of $3,000 subject to attainment of specified performance targets in the 12 months and 24 months after the respective acquisition dates. These acquisitions increased EPAM’s educational services and platform offerings and expanded the Company’s geographical reach. Revenues generated by the Other 2019 Acquisitions totaled $3,009 during both the three and nine months ended September 30, 2019. Pro forma results of operations have not been presented because the effect of the acquisitions on the Company’s condensed consolidated financial statements was not material individually or in the aggregate.