ACQUISITIONS

12 Months Ended

Dec. 31, 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. See Note 11“Fair Value Measurements” for more information regarding this earnout payment.

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 is 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 based on exchange rates at the date of acquisition of $8,156 subject to attainment of specified performance targets in the 12 months after the acquisition date. During the year ended December 31, 2019, the Company paid $185 of net true-up payments which increased the purchase price. See Note 11“Fair Value Measurements” for more information regarding the earnout payment.

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 as updated for any changes as of December 31, 2019 for each respective acquisition:



	Continuum		Think		test IO
Cash and cash equivalents	$	2,251	$	2,344	$	663
Trade receivables and contract assets	9,139		2,637		688
Prepaid and other current assets	936		900		96
Goodwill	26,617		20,477		12,150
Intangible assets	14,450		6,882		6,219
Property and equipment and other noncurrent assets	8,902		1,214		151
Total assets acquired	$	62,295	$	34,454	$	19,967
Accounts payable, accrued expenses and other current liabilities	$	3,746	$	2,025	$	910
Long-term debt (Note 8)	3,220		—		—
Other noncurrent liabilities	490		—		1,734
Total liabilities assumed	$	7,456	$	2,025	$	2,644
Net assets acquired	$	54,839	$	32,429	$	17,323

During 2018, the Company adjusted initially recognized intangible assets acquired with Continuum and their useful lives, 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.

During 2019, the Company recorded purchase price adjustments which increased the original purchase price for Think by $185, with a corresponding adjustment to net assets acquired. In addition, the Company recorded a $1,497 increase in deferred tax assets and other insignificant adjustments to other accounts with corresponding decreases to goodwill. During the fourth quarter of 2019, the Company finalized the fair value of the assets acquired and liabilities assumed in the acquisition of Think.

As of December 31, 2019, the Company finalized the valuation of intangible assets acquired in connection with the acquisition of test IO. For the acquisition of test IO, estimated fair values of the income tax-related assets acquired and liabilities assumed remain provisional and based on the facts and circumstances that existed as of the acquisition date. The Company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. During 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 during the year ended December 31, 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 $4,539 for the year ended December 31, 2019.

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

Other 2019 Acquisitions — During the year ended December 31, 2019, the Company completed four additional acquisitions with an aggregate cash purchase price of $24,786 and committed to making cash earnout payments with a maximum amount payable of $3,000 subject to attainment of specified performance targets ranging from 12 months to 24 months after the respective acquisition dates. These acquisitions increased EPAM’s educational service and platform offerings and expanded the Company’s geographical reach, as well as added $7,488 in intangible assets, consisting mainly of customer relationships. Revenues generated by these other 2019 acquisitions totaled $9,336 during the year ended December 31, 2019. Pro forma results of operations have not been presented because the effect of these acquisitions on the Company’s consolidated financial statements was not material individually or in the aggregate.

During the year ended December 31, 2017, the Company completed acquisitions with aggregated purchase price of $6,980. These acquisitions individually and in the aggregate are not material to the Company’s consolidated financial statements.