QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of principal executive offices) | (Zip code) |
Title of Each Class | Trading Symbol | Name of Each Exchange on which Registered | ||||||
☒ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
Title of Each Class | Outstanding as of April 28, 2023 | |||||||
Common Stock, par value $0.001 per share |
Page | |||||
As of March 31, 2023 | As of December 31, 2022 | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Trade receivables and contract assets, net of allowance of $ | |||||||||||
Short-term investments | |||||||||||
Prepaid and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use assets, net | |||||||||||
Intangible assets, net | |||||||||||
Goodwill | |||||||||||
Deferred tax assets | |||||||||||
Other noncurrent assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued compensation and benefits expenses | |||||||||||
Accrued expenses and other current liabilities | |||||||||||
Income taxes payable, current | |||||||||||
Operating lease liabilities, current | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Operating lease liabilities, noncurrent | |||||||||||
Other noncurrent liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 13) | |||||||||||
Stockholders’ equity | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Treasury stock | ( | ( | |||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total EPAM Systems Inc. stockholders’ equity | |||||||||||
Noncontrolling interest in consolidated subsidiaries | |||||||||||
Total equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Revenues | $ | $ | |||||||||
Operating expenses: | |||||||||||
Cost of revenues (exclusive of depreciation and amortization) | |||||||||||
Selling, general and administrative expenses | |||||||||||
Depreciation and amortization expense | |||||||||||
Income from operations | |||||||||||
Interest and other income/(loss), net | ( | ||||||||||
Foreign exchange loss | ( | ( | |||||||||
Income before provision for income taxes | |||||||||||
Provision for income taxes | |||||||||||
Net income | $ | $ | |||||||||
Net income per share: | |||||||||||
Basic | $ | $ | |||||||||
Diluted | $ | $ | |||||||||
Shares used in calculation of net income per share: | |||||||||||
Basic | |||||||||||
Diluted |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Net income | $ | $ | |||||||||
Other comprehensive income/(loss): | |||||||||||
Change in foreign currency translation adjustments, net of tax | ( | ||||||||||
Change in unrealized gain/(loss) on hedging instruments, net of tax | ( | ||||||||||
Other comprehensive income/(loss) | ( | ||||||||||
Comprehensive income | $ | $ |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive (Loss)/Income | Non-controlling interest in consolidated subsidiaries | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Restricted stock units vested | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Equity withheld for employee taxes | ( | — | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | ( | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Non-controlling interest in consolidated subsidiaries | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Restricted stock units vested | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Equity withheld for employee taxes | ( | — | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Purchase of subsidiary shares from noncontrolling interest | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | |||||||||||
Depreciation and amortization expense | |||||||||||
Operating lease right-of-use assets amortization expense | |||||||||||
Bad debt expense | |||||||||||
Deferred taxes | ( | ||||||||||
Stock-based compensation expense | |||||||||||
Unrealized (gain)/loss on derivative | ( | ||||||||||
Impairment charges | |||||||||||
Other | ( | ||||||||||
Changes in assets and liabilities: | |||||||||||
Trade receivables and contract assets | ( | ( | |||||||||
Prepaid and other assets | ( | ( | |||||||||
Accounts payable | ( | ||||||||||
Accrued expenses and other liabilities | ( | ( | |||||||||
Operating lease liabilities | ( | ( | |||||||||
Income taxes payable | ( | ( | |||||||||
Net cash provided by/(used in) operating activities | ( | ||||||||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Acquisition of business, net of cash acquired (Note 3) | ( | ||||||||||
Purchases of non-marketable securities | ( | ||||||||||
Other investing activities, net | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of stock under the employee incentive programs | |||||||||||
Payments of withholding taxes related to net share settlements of restricted stock units | ( | ( | |||||||||
Proceeds from debt | |||||||||||
Repayment of debt | ( | ( | |||||||||
Repurchase of common stock | ( | ||||||||||
Payment of contingent consideration for previously acquired business | ( | ( | |||||||||
Purchase of noncontrolling interest | ( | ||||||||||
Other financing activities, net | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ||||||||||
Net increase/(decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ |
As of March 31, 2023 | As of December 31, 2022 | ||||||||||
Balance sheet classification | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash in Prepaid and other current assets | |||||||||||
Total restricted cash | $ | $ | |||||||||
Total cash, cash equivalents and restricted cash | $ | $ |
Cash and cash equivalents | $ | |||||||
Trade receivables and contract assets, net of allowance of $ | ||||||||
Prepaid and other current assets | ||||||||
Total assets in Russia | $ | |||||||
Accounts payable | $ | |||||||
Accrued compensation and benefits expenses | ||||||||
Accrued expenses and other current liabilities | ||||||||
Operating lease liabilities | ||||||||
Other noncurrent liabilities | ||||||||
Total liabilities in Russia | $ |
North America | Europe | Total | |||||||||||||||
Balance as of January 1, 2023 | $ | $ | $ | ||||||||||||||
2022 Acquisitions purchase accounting adjustments | |||||||||||||||||
Effect of net foreign currency exchange rate changes | |||||||||||||||||
Balance as of March 31, 2023 | $ | $ | $ |
As of March 31, 2023 | ||||||||||||||||||||||||||
Balance | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
Foreign exchange derivative assets | $ | $ | $ | $ | ||||||||||||||||||||||
Rights to acquire noncontrolling interest in consolidated subsidiaries | $ | $ | $ | $ | ||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | $ | $ | $ | ||||||||||||||||||||||
Foreign exchange derivative liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
Contingent consideration | ||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | $ | $ | $ |
As of December 31, 2022 | ||||||||||||||||||||||||||
Balance | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
Foreign exchange derivative assets | $ | $ | $ | $ | ||||||||||||||||||||||
Rights to acquire noncontrolling interest in consolidated subsidiaries | ||||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | $ | $ | $ | ||||||||||||||||||||||
Foreign exchange derivative liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
Contingent consideration | ||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | $ | $ | $ |
Amount | ||||||||
Contingent consideration as of January 1, 2023 | $ | |||||||
Changes in fair value of contingent consideration included in Interest and other income/(loss), net | ||||||||
Payment of contingent consideration for previously acquired businesses | ( | |||||||
Effect of foreign currency exchange rate changes, net | ||||||||
Contingent consideration as of March 31, 2023 | $ |
Fair Value Hierarchy | ||||||||||||||||||||||||||||||||
Balance | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
March 31, 2023 | ||||||||||||||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Time deposits | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Total cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Restricted cash | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Time deposits included in Short-term investments | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Financial Liabilities: | ||||||||||||||||||||||||||||||||
Borrowings under the 2021 Credit Agreement | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Deferred consideration for asset acquisition | $ | $ | $ | $ | $ |
Fair Value Hierarchy | ||||||||||||||||||||||||||||||||
Balance | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Total cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Restricted cash | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Time deposits included in Short-term investments | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Financial Liabilities: | ||||||||||||||||||||||||||||||||
Short-term debt | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Borrowings under the 2021 Credit Agreement | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Other long-term debt | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Deferred consideration for asset acquisition | $ | $ | $ | $ | $ |
As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||||||||
Balance Sheet Classification | Asset Derivatives | Liability Derivatives | Asset Derivatives | Liability Derivatives | ||||||||||||||||||||||||||||
Foreign exchange forward contracts - Designated as hedging instruments | Prepaid expenses and other current assets | $ | $ | |||||||||||||||||||||||||||||
Accrued expenses and other current liabilities | $ | $ | ||||||||||||||||||||||||||||||
Foreign exchange forward contracts - Not designated as hedging instruments | Accrued expenses and other current liabilities | $ | $ |
Three Months Ended March 31, | ||||||||||||||||||||
Income Statement Classification | 2023 | 2022 | ||||||||||||||||||
Operating lease cost | Selling, general and administrative expenses | $ | $ | |||||||||||||||||
Variable lease cost | Selling, general and administrative expenses | |||||||||||||||||||
Short-term lease cost | Selling, general and administrative expenses | |||||||||||||||||||
Total lease cost | $ | $ |
Three Months Ended March 31, | ||||||||||||||
2023 | 2022 | |||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
Operating cash flows used for operating leases | $ | $ | ||||||||||||
Right-of-use assets obtained in exchange for lease obligations: | ||||||||||||||
Operating leases | $ | $ | ||||||||||||
Non-cash net increase/(decrease) due to lease modifications: | ||||||||||||||
Operating lease right-of-use assets | $ | $ | ( | |||||||||||
Operating lease liabilities | $ | $ | ( |
As of March 31, 2023 | As of March 31, 2022 | |||||||||||||
Weighted average remaining lease term, in years: | ||||||||||||||
Operating leases | ||||||||||||||
Weighted average discount rate: | ||||||||||||||
Operating leases | % | % |
Year ending December 31, | Lease Payments | |||||||
2023 (excluding three months ended March 31, 2023) | $ | |||||||
2024 | ||||||||
2025 | ||||||||
2026 | ||||||||
2027 | ||||||||
Thereafter | ||||||||
Total lease payments | ||||||||
Less: imputed interest | ( | |||||||
Total | $ |
As of March 31, 2023 | As of December 31, 2022 | ||||||||||
Outstanding debt | $ | $ | |||||||||
Interest rate | % | % | |||||||||
Available borrowing capacity | $ | $ | |||||||||
Maximum borrowing capacity | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||
North America | Europe | Russia | Consolidated Revenues | ||||||||||||||||||||
Customer Locations | |||||||||||||||||||||||
Americas | $ | $ | $ | $ | |||||||||||||||||||
EMEA | |||||||||||||||||||||||
APAC | |||||||||||||||||||||||
CEE | |||||||||||||||||||||||
Revenues | $ | $ | $ | $ |
Three Months Ended March 31, 2022 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||
North America | Europe | Russia | Consolidated Revenues | ||||||||||||||||||||
Customer Locations | |||||||||||||||||||||||
Americas | $ | $ | $ | $ | |||||||||||||||||||
EMEA | |||||||||||||||||||||||
APAC | |||||||||||||||||||||||
CEE | |||||||||||||||||||||||
Revenues | $ | $ | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||
North America | Europe | Russia | Consolidated Revenues | ||||||||||||||||||||
Industry Verticals | |||||||||||||||||||||||
Travel & Consumer | $ | $ | $ | $ | |||||||||||||||||||
Financial Services | |||||||||||||||||||||||
Business Information & Media | |||||||||||||||||||||||
Software & Hi-Tech | |||||||||||||||||||||||
Life Sciences & Healthcare | |||||||||||||||||||||||
Emerging Verticals | |||||||||||||||||||||||
Revenues | $ | $ | $ | $ |
Three Months Ended March 31, 2022 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||
North America | Europe | Russia | Consolidated Revenues | ||||||||||||||||||||
Industry Verticals | |||||||||||||||||||||||
Travel & Consumer | $ | $ | $ | $ | |||||||||||||||||||
Financial Services | |||||||||||||||||||||||
Business Information & Media | |||||||||||||||||||||||
Software & Hi-Tech | |||||||||||||||||||||||
Life Sciences & Healthcare | |||||||||||||||||||||||
Emerging Verticals | |||||||||||||||||||||||
Revenues | $ | $ | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||
North America | Europe | Russia | Consolidated Revenues | ||||||||||||||||||||
Contract Types | |||||||||||||||||||||||
Time-and-material | $ | $ | $ | $ | |||||||||||||||||||
Fixed-price | |||||||||||||||||||||||
Licensing and other revenues | |||||||||||||||||||||||
Revenues | $ | $ | $ | $ |
Three Months Ended March 31, 2022 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||
North America | Europe | Russia | Consolidated Revenues | ||||||||||||||||||||
Contract Types | |||||||||||||||||||||||
Time-and-material | $ | $ | $ | $ | |||||||||||||||||||
Fixed-price | |||||||||||||||||||||||
Licensing and other revenues | |||||||||||||||||||||||
Revenues | $ | $ | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||
North America | Europe | Russia | Consolidated Revenues | ||||||||||||||||||||
Timing of Revenue Recognition | |||||||||||||||||||||||
Transferred over time | $ | $ | $ | $ | |||||||||||||||||||
Transferred at a point of time | |||||||||||||||||||||||
Revenues | $ | $ | $ | $ |
Three Months Ended March 31, 2022 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||
North America | Europe | Russia | Consolidated Revenues | ||||||||||||||||||||
Timing of Revenue Recognition | |||||||||||||||||||||||
Transferred over time | $ | $ | $ | $ | |||||||||||||||||||
Transferred at a point of time | |||||||||||||||||||||||
Revenues | $ | $ | $ | $ |
Less than 1 year | 1 Year | 2 Years | 3 Years | Total | |||||||||||||||||||||||||
Contract Type | |||||||||||||||||||||||||||||
Fixed-price | $ | $ | $ | $ | $ |
As of March 31, 2023 | As of December 31, 2022 | ||||||||||
Contract assets included in Trade receivables and contract assets, net | $ | $ | |||||||||
Contract liabilities included in Accrued expenses and other current liabilities | $ | $ | |||||||||
Contract liabilities included in Other noncurrent liabilities | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Cost of revenues (exclusive of depreciation and amortization) | $ | $ | ( | ||||||||
Selling, general and administrative expenses | |||||||||||
Total | $ | $ |
Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Term (in years) | ||||||||||||||||||||
Options outstanding at January 1, 2023 | $ | ||||||||||||||||||||||
Options granted | $ | ||||||||||||||||||||||
Options exercised | ( | $ | |||||||||||||||||||||
Options outstanding at March 31, 2023 | $ | $ | |||||||||||||||||||||
Options vested and exercisable as of March 31, 2023 | $ | $ | |||||||||||||||||||||
Options expected to vest as of March 31, 2023 | $ | $ |
Equity-Classified Equity-Settled Restricted Stock Units | Liability-Classified Cash-Settled Restricted Stock Units | ||||||||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||||||||||||
Unvested service-based awards outstanding at January 1, 2023 | $ | $ | |||||||||||||||||||||
Awards granted | $ | $ | |||||||||||||||||||||
Awards modified | ( | $ | $ | ||||||||||||||||||||
Awards vested | ( | $ | ( | $ | |||||||||||||||||||
Awards forfeited/cancelled | ( | $ | ( | $ | |||||||||||||||||||
Unvested service-based awards outstanding at March 31, 2023 | $ | $ |
Equity-Classified Equity-Settled Restricted Stock | Equity-Classified Equity-Settled Restricted Stock Units | ||||||||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||||||||||||
Unvested performance-based awards outstanding at January 1, 2023 | $ | $ | |||||||||||||||||||||
Awards vested | ( | $ | |||||||||||||||||||||
Awards forfeited/cancelled | ( | $ | |||||||||||||||||||||
Unvested performance-based awards outstanding at March 31, 2023 | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Numerator for basic and diluted earnings per share: | |||||||||||
Net income | $ | $ | |||||||||
Numerator for basic and diluted earnings per share | $ | $ | |||||||||
Denominator: | |||||||||||
Weighted average common shares for basic earnings per share | |||||||||||
Net effect of dilutive stock options, restricted stock units, restricted stock awards and stock issuable under the ESPP | |||||||||||
Weighted average common shares for diluted earnings per share | |||||||||||
Net income per share: | |||||||||||
Basic | $ | $ | |||||||||
Diluted | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Segment revenues: | |||||||||||
North America | $ | $ | |||||||||
Europe | |||||||||||
Russia | |||||||||||
Total segment revenues | $ | $ | |||||||||
Segment operating profit/(loss): | |||||||||||
North America | $ | $ | |||||||||
Europe | |||||||||||
Russia | ( | ( | |||||||||
Total segment operating profit | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Total segment operating profit: | $ | $ | |||||||||
Unallocated amounts: | |||||||||||
Stock-based compensation expense | ( | ( | |||||||||
Amortization of intangibles assets | ( | ( | |||||||||
Other acquisition-related expenses | ( | ( | |||||||||
Other unallocated expenses | ( | ( | |||||||||
Income from operations | |||||||||||
Interest and other income/(loss), net | ( | ||||||||||
Foreign exchange loss | ( | ( | |||||||||
Income before provision for income taxes | $ | $ |
As of March 31, 2023 | As of December 31, 2022 | ||||||||||
Ukraine | $ | $ | |||||||||
United States | |||||||||||
Belarus | |||||||||||
Poland | |||||||||||
Hungary | |||||||||||
India | |||||||||||
Other | |||||||||||
Total | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
United States | $ | $ | |||||||||
United Kingdom | |||||||||||
Switzerland | |||||||||||
Netherlands | |||||||||||
Germany | |||||||||||
Canada | |||||||||||
Russia | |||||||||||
Other locations | |||||||||||
Total | $ | $ |
Three Months Ended March 31, | ||||||||||||||
2023 | 2022 | |||||||||||||
Foreign currency translation | ||||||||||||||
Beginning balance | $ | ( | $ | ( | ||||||||||
Foreign currency translation | ( | |||||||||||||
Income tax (expense)/ benefit | ( | |||||||||||||
Foreign currency translation, net of tax | ( | |||||||||||||
Ending balance | $ | ( | $ | ( | ||||||||||
Cash flow hedging instruments | ||||||||||||||
Beginning balance | $ | $ | ( | |||||||||||
Unrealized gain/ (loss) in fair value | ( | |||||||||||||
Net (gain)/ loss reclassified into Cost of revenues (exclusive of depreciation and amortization) | ( | |||||||||||||
Net loss reclassified into Foreign exchange loss | ||||||||||||||
Income tax (expense)/ benefit | ( | |||||||||||||
Cash flow hedging instruments, net of tax | ( | |||||||||||||
Ending balance(1) | $ | $ | ( | |||||||||||
Defined benefit plans | ||||||||||||||
Beginning balance | $ | ( | $ | |||||||||||
Ending balance | $ | ( | $ | |||||||||||
Accumulated other comprehensive loss | $ | ( | $ | ( |
Three Months Ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
(in thousands, except percentages and per share data) | |||||||||||||||||||||||
Revenues | $ | 1,210,941 | 100.0 | % | $ | 1,171,614 | 100.0 | % | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization)(1) | 855,901 | 70.7 | % | 780,836 | 66.6 | % | |||||||||||||||||
Selling, general and administrative expenses(2) | 211,887 | 17.5 | % | 237,277 | 20.3 | % | |||||||||||||||||
Depreciation and amortization expense | 22,782 | 1.9 | % | 24,259 | 2.1 | % | |||||||||||||||||
Income from operations | 120,371 | 9.9 | % | 129,242 | 11.0 | % | |||||||||||||||||
Interest and other income/(loss), net | 11,521 | 1.0 | % | (165) | — | % | |||||||||||||||||
Foreign exchange loss | (4,608) | (0.4) | % | (22,785) | (1.9) | % | |||||||||||||||||
Income before provision for income taxes | 127,284 | 10.5 | % | 106,292 | 9.1 | % | |||||||||||||||||
Provision for income taxes | 24,992 | 2.1 | % | 16,573 | 1.4 | % | |||||||||||||||||
Net income | $ | 102,292 | 8.4 | % | $ | 89,719 | 7.7 | % | |||||||||||||||
Effective tax rate | 19.6 | % | 15.6 | % | |||||||||||||||||||
Diluted earnings per share | $ | 1.73 | $ | 1.52 |
Three Months Ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||
Americas(1) | $ | 709,802 | 58.6 | % | $ | 686,793 | 58.7 | % | |||||||||||||||
EMEA(2) | 463,937 | 38.3 | % | 421,950 | 36.0 | % | |||||||||||||||||
APAC(3) | 26,810 | 2.2 | % | 29,582 | 2.5 | % | |||||||||||||||||
CEE(4) | 10,392 | 0.9 | % | 33,289 | 2.8 | % | |||||||||||||||||
Revenues | $ | 1,210,941 | 100.0 | % | $ | 1,171,614 | 100.0 | % |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Segment revenues: | |||||||||||
North America | $ | 709,957 | $ | 687,711 | |||||||
Europe | 493,147 | 451,970 | |||||||||
Russia | 7,837 | 31,933 | |||||||||
Total segment revenues | $ | 1,210,941 | $ | 1,171,614 | |||||||
Segment operating profit/(loss): | |||||||||||
North America | $ | 122,831 | $ | 126,734 | |||||||
Europe | 59,904 | 56,711 | |||||||||
Russia | (3,005) | (19,484) | |||||||||
Total segment operating profit | $ | 179,730 | $ | 163,961 |
Three Months Ended March 31, | Change | ||||||||||||||||||||||
2023 | 2022 | Dollars | Percentage | ||||||||||||||||||||
Industry Vertical | (in thousands, except percentages) | ||||||||||||||||||||||
Software & Hi-Tech | $ | 149,798 | $ | 156,282 | $ | (6,484) | (4.1) | % | |||||||||||||||
Financial Services | 143,850 | 120,335 | 23,515 | 19.5 | % | ||||||||||||||||||
Travel & Consumer | 123,659 | 122,247 | 1,412 | 1.2 | % | ||||||||||||||||||
Business Information & Media | 116,158 | 110,946 | 5,212 | 4.7 | % | ||||||||||||||||||
Life Sciences & Healthcare | 96,597 | 111,371 | (14,774) | (13.3) | % | ||||||||||||||||||
Emerging Verticals | 79,895 | 66,530 | 13,365 | 20.1 | % | ||||||||||||||||||
Revenues | $ | 709,957 | $ | 687,711 | $ | 22,246 | 3.2 | % |
Three Months Ended March 31, | Change | ||||||||||||||||||||||
2023 | 2022 | Dollars | Percentage | ||||||||||||||||||||
Industry Vertical | (in thousands, except percentages) | ||||||||||||||||||||||
Travel & Consumer | $ | 153,055 | $ | 136,788 | $ | 16,267 | 11.9 | % | |||||||||||||||
Financial Services | 123,608 | 117,330 | 6,278 | 5.4 | % | ||||||||||||||||||
Business Information & Media | 86,108 | 82,901 | 3,207 | 3.9 | % | ||||||||||||||||||
Software & Hi-Tech | 38,682 | 32,454 | 6,228 | 19.2 | % | ||||||||||||||||||
Life Sciences & Healthcare | 14,526 | 12,282 | 2,244 | 18.3 | % | ||||||||||||||||||
Emerging Verticals | 77,168 | 70,215 | 6,953 | 9.9 | % | ||||||||||||||||||
Revenues | $ | 493,147 | $ | 451,970 | $ | 41,177 | 9.1 | % |
Three Months Ended March 31, | Change | ||||||||||||||||||||||
2023 | 2022 | Dollars | Percentage | ||||||||||||||||||||
Industry Vertical | (in thousands, except percentages) | ||||||||||||||||||||||
Financial Services | $ | 3,207 | $ | 22,398 | $ | (19,191) | (85.7) | % | |||||||||||||||
Travel & Consumer | 1,646 | 6,284 | (4,638) | (73.8) | % | ||||||||||||||||||
Software & Hi-Tech | 711 | 747 | (36) | (4.8) | % | ||||||||||||||||||
Life Sciences & Healthcare | 135 | 150 | (15) | (10.0) | % | ||||||||||||||||||
Business Information & Media | 114 | 456 | (342) | (75.0) | % | ||||||||||||||||||
Emerging Verticals | 2,024 | 1,898 | 126 | 6.6 | % | ||||||||||||||||||
Revenues | $ | 7,837 | $ | 31,933 | $ | (24,096) | (75.5) | % |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Condensed Consolidated Statements of Cash Flow Data: | |||||||||||
Net cash provided by/(used in) operating activities | $ | 87,334 | $ | (51,848) | |||||||
Net cash used in investing activities | (17,717) | (34,563) | |||||||||
Net cash used in financing activities | (15,318) | (9,604) | |||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 14,070 | (45,407) | |||||||||
Net increase/(decrease) in cash, cash equivalents and restricted cash | 68,369 | (141,422) | |||||||||
Cash, cash equivalents and restricted cash, beginning of period | 1,683,636 | 1,449,347 | |||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 1,752,005 | $ | 1,307,925 |
Period | Total Number of Shares Purchased | Average Price Paid per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||||||
February 13 to February 28, 2023 | — | — | — | $ | 500,000 | |||||||||||||||||||||
March 1 to March 31, 2023 | 30 | $ | 283.69 | 30 | $ | 491,489 | ||||||||||||||||||||
Total | 30 | 30 |
Exhibit Number | Description | |||||||
10.1*† | ||||||||
10.2*† | ||||||||
10.3*† | ||||||||
10.4*† | ||||||||
10.5*† | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1* | ||||||||
32.2* | ||||||||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
104 | Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
* | Exhibits filed herewith | |||||||
† | Indicates management contracts or compensatory plans or arrangements |
EPAM SYSTEMS, INC. | ||||||||
By: | /s/ Arkadiy Dobkin | |||||||
Name: Arkadiy Dobkin | ||||||||
Title: Chairman, Chief Executive Officer and President (principal executive officer) | ||||||||
By: | /s/ Jason Peterson | |||||||
Name: Jason Peterson | ||||||||
Title: Senior Vice President, Chief Financial Officer and Treasurer (principal financial officer) |
EPAM SYSTEMS, INC. | ||||||||
By: | ||||||||
Name: | ||||||||
Title: | ||||||||
Participant |
EPAM SYSTEMS, INC. | ||||||||
By: | ||||||||
Name: | ||||||||
Title: | ||||||||
The Participant’s signature on this line both (1) acknowledges the Participant’s receipt of the Agreement and agreement to its terms, and (2) indicates the Participant’s consent to the processing of Personal Data as described in Section 12. | ||||||||
Participant |
EPAM SYSTEMS, INC. | |||||||||||
By: | |||||||||||
Name: | |||||||||||
Title: | |||||||||||
Participant |
EPAM SYSTEMS, INC. | |||||||||||
By: | |||||||||||
Name: | |||||||||||
Title: | |||||||||||
The Participant’s signature on this line both (1) acknowledges the Participant’s receipt of the Agreement and agreement to its terms, and (2) indicates the Participant’s consent to the processing of Personal Data as described in Section 11. | |||||||||||
Participant |
/s/ Arkadiy Dobkin | |||||
Arkadiy Dobkin | |||||
Chairman, Chief Executive Officer and President (principal executive officer) |
/s/ Jason Peterson | |||||
Jason Peterson | |||||
Senior Vice President, Chief Financial Officer and Treasurer (principal financial officer) |
/s/ Arkadiy Dobkin | |||||
Arkadiy Dobkin | |||||
Chairman, Chief Executive Officer and President (principal executive officer) |
/s/ Jason Peterson | |||||
Jason Peterson | |||||
Senior Vice President, Chief Financial Officer and Treasurer (principal financial officer) |
D8*L2O IVZ]&W$Y5A!3LU!C2#
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Current assets | ||
Trade receivables and contract assets allowance | $ 14,184 | $ 15,310 |
Stockholders' equity | ||
Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 160,000,000 | 160,000,000 |
Common stock, shares issued (in shares) | 57,862,000 | 57,668,000 |
Common stock, shares outstanding (in shares) | 57,848,000 | 57,655,000 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Income Statement [Abstract] | ||
Revenues | $ 1,210,941 | $ 1,171,614 |
Operating expenses: | ||
Cost of revenues (exclusive of depreciation and amortization) | 855,901 | 780,836 |
Selling, general and administrative expenses | 211,887 | 237,277 |
Depreciation and amortization expense | 22,782 | 24,259 |
Income from operations | 120,371 | 129,242 |
Interest and other income/(loss), net | 11,521 | (165) |
Foreign exchange loss | (4,608) | (22,785) |
Income before provision for income taxes | 127,284 | 106,292 |
Provision for income taxes | 24,992 | 16,573 |
Net income | $ 102,292 | $ 89,719 |
Net income per share: | ||
Basic (in usd per share) | $ 1.77 | $ 1.58 |
Diluted (in usd per share) | $ 1.73 | $ 1.52 |
Shares used in calculation of net income per share: | ||
Basic (in shares) | 57,702 | 56,915 |
Diluted (in shares) | 59,298 | 58,941 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 102,292 | $ 89,719 |
Other comprehensive income/(loss): | ||
Change in foreign currency translation adjustments, net of tax | 13,227 | (30,552) |
Change in unrealized gain/(loss) on hedging instruments, net of tax | 4,134 | (1,391) |
Other comprehensive income/(loss) | 17,361 | (31,943) |
Comprehensive income | $ 119,653 | $ 57,776 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Cash Flows [Abstract] | ||
Cash and cash equivalents | $ 1,749,422 | $ 1,681,344 |
Restricted cash in Prepaid and other current assets | $ 406 | $ 430 |
Restricted Cash and Cash Equivalents, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Other noncurrent assets | Other noncurrent assets |
Restricted cash in Other noncurrent assets | $ 2,177 | $ 1,862 |
Total restricted cash | 2,583 | 2,292 |
Total cash, cash equivalents and restricted cash | $ 1,752,005 | $ 1,683,636 |
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES EPAM Systems, Inc. (the “Company” or “EPAM”) is a leading digital transformation services and product engineering company, providing digital platform engineering and software development services to customers located around the world, primarily in North America, Europe, and Asia. The Company’s industry expertise includes financial services, travel and consumer, software and hi-tech, business information and media, life sciences and healthcare, as well as several other industries. The Company is incorporated in Delaware with headquarters in Newtown, Pennsylvania. Basis of Presentation — The accompanying unaudited condensed consolidated financial statements of EPAM have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP” or “U.S. GAAP”) and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The unaudited condensed consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries with all intercompany balances and transactions eliminated. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in its Annual Report on Form 10-K. The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position as of March 31, 2023 and the results of its operations and its cash flows for the periods presented. Risks and Uncertainties — As a result of its global operations, the Company may be subject to certain inherent risks. Concentration of Credit — Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, short-term investments and trade receivables. The Company maintains cash, cash equivalents and short-term investments with financial institutions. The Company believes its credit policies reflect normal industry terms and business risk and there is no expectation of non-performance by the counterparties. The Company has cash in several countries, including Ukraine, Belarus and Russia, which have been impacted by the invasion of Ukraine (see Note 2 “Impact of the Invasion of Ukraine”) and where the banking sector remains subject to periodic instability; banking and other financial systems generally do not meet the banking standards of more developed markets; and bank deposits made by corporate entities are not insured. As of March 31, 2023, the Company had $68.3 million of cash and cash equivalents in banks in Ukraine, $34.0 million of cash and cash equivalents in banks in Belarus, and $27.1 million of cash and cash equivalents in banks in Russia. Cash in Ukraine and Belarus is used for the operational needs of the local entities and cash balances change with the expected operating needs of these entities. The Company regularly monitors cash held in these countries and, to the extent the cash held exceeds amounts required to support its operations in these countries, the Company distributes the excess funds into markets with more developed banking sectors to the extent it is possible to do so. Due to restrictions imposed by the Russian government, our ability to distribute excess funds from Russia to other countries is limited. On April 7, 2023, we amended and restated the agreement to sell substantially all of our remaining holdings in Russia, including cash and cash equivalents, to a third party. The timing and completion of a sale remains uncertain and any sale would be subject to customary closing conditions, including regulatory approvals by the Russian and U.S. governments. Subsequent to March 31, 2023, the required approvals from the Russian government were received to proceed with the sale. The Company places its cash and cash equivalents with financial institutions considered stable in the region, limits the amount of credit exposure with any one financial institution and conducts ongoing evaluations of the credit worthiness of the financial institutions with which it does business. However, a banking crisis, bankruptcy or insolvency of banks that process or hold the Company’s funds, or sanctions may result in the loss of deposits or adversely affect the Company’s ability to complete banking transactions, which could adversely affect the Company’s business and financial condition. Trade receivables are generally dispersed across many customers operating in different industries; therefore, concentration of credit risk is limited. Historically, credit losses and write-offs of trade receivables have not been material to the consolidated financial statements. If any of the Company’s customers enter bankruptcy protection or otherwise take steps to alleviate their financial distress, the Company’s credit losses and write-offs of trade receivables could increase, which would negatively impact its results of operations. See Note 2 “Impact of the Invasion of Ukraine” for further discussion regarding trade receivables and contract assets from customers located in Russia. Foreign currency risk — The Company’s global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, the Company generates revenues in various currencies, principally, euros, British pounds, Swiss francs and Canadian dollars and incurs expenditures principally in euros, Polish zlotys, British pounds, Indian rupees, Swiss francs, Hungarian forints, Mexican pesos, Canadian dollars, Colombian pesos and Chinese yuan renminbi. The Company’s international operations expose it to risk of adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign currency denominated assets and liabilities (both third-party and intercompany) and translation of earnings and cash flows into U.S. dollars. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee and Hungarian forint transactions. See Note 6, “Derivative Financial Instruments” for further discussion regarding the Company’s termination of the hedging program for the Russian ruble. Interest rate risk — The Company is exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from variable rates related to cash and cash equivalent deposits, short-term investments and the Company’s borrowings, mainly under the 2021 Credit Agreement, which is subject to a variety of rates depending on the type and timing of funds borrowed (See Note 8 “Debt”). The Company does not believe it is exposed to material direct risks associated with changes in interest rates related to these deposits, investments and borrowings. Adoption of New Accounting Standards There were no recently adopted accounting standards which had a material impact on the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows. Pending Accounting Standards From time to time, new accounting pronouncements are issued by the FASB or other standards-setting bodies that the Company will adopt according to the various timetables the FASB specifies. The Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position, results of operations and cash flows upon adoption.
|
IMPACT OF THE INVASION OF UKRAINE |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
IMPACT OF THE INVASION OF UKRAINE | IMPACT OF THE INVASION OF UKRAINE On February 24, 2022, Russian forces attacked Ukraine and its people and EPAM has repeatedly called for an immediate end to this unlawful and unconscionable attack. As of March 31, 2023, the Company had $69.3 million of Property and equipment, net in Ukraine consisting of a building classified as construction-in-progress located in Kyiv with a net book value of $51.5 million, laptops with a net book value of $10.5 million, most of which are in the possession of employees, various office furniture, equipment and supplies with a net book value of $5.6 million, and leasehold improvements located throughout Ukraine with a net book value of $1.7 million. Additionally, as of March 31, 2023, the Company had Operating lease right-of-use assets located throughout Ukraine with a net book value of $11.0 million. Through the issuance date of these interim financial statements, the Company is not aware of any damage to its long-lived assets in Ukraine and the Company expects to continue to use these assets as part of its global delivery model. On March 4, 2022, the Company announced a $100.0 million humanitarian commitment to support its employees and their families in and displaced from Ukraine. This humanitarian commitment is in addition to donations from EPAM's customers and employees and the work of EPAM volunteers on the ground. During the three months ended March 31, 2023 and 2022, the Company expensed $6.1 million and $25.7 million, respectively, related to this commitment, which included special cash payments to support impacted employees, financial and medical support for impacted families, travel, meals and lodging expenses, and donations to third-party humanitarian organizations. Of the expensed amount for the three months ended March 31, 2023, $2.5 million is classified in Cost of revenues (exclusive of depreciation and amortization) and $3.6 million is classified in Selling, general and administrative expense on the condensed consolidated financial statements. Of this expensed amount for the three months ended March 31, 2022, $19.2 million is classified in Cost of revenues (exclusive of depreciation and amortization) and $6.5 million is classified in Selling, general and administrative expense on the condensed consolidated financial statements. As of March 31, 2023, the Company has $49.1 million remaining to be expensed under this humanitarian commitment. The Company executed its business continuity plans following the invasion to assist relocating employees residing in Ukraine and the surrounding region impacted by the war and geopolitical uncertainty to other countries and to assign delivery personnel in locations outside of the region to serve in unbilled standby or backup capacities to ensure the continuity of delivery for its customers who have substantial delivery exposure to Ukraine or other delivery concerns resulting from the invasion and ongoing war. In addition to costs incurred as part of EPAM’s humanitarian commitment to Ukraine, during the three months ended March 31, 2023, the Company incurred expenses of $0.2 million related to its geographic repositioning efforts, classified as Selling, general and administrative expenses and $7.4 million related to these standby resources, classified as Cost of revenues (exclusive of depreciation and amortization). During the three months ended March 31, 2022, the Company incurred expenses of $18.7 million related to its geographic repositioning efforts, classified as Selling, general and administrative expenses and $2.6 million related to these standby resources, classified as Cost of revenues (exclusive of depreciation and amortization). During the three months ended March 31, 2022, the Company also recorded an impairment charge of $1.3 million, classified as Other income/(expense) related to a financial asset in Ukraine which the Company believed to be unrealizable due to the events in Ukraine. In response to the attacks on Ukraine, EPAM announced on March 4, 2022, it would discontinue services to customers located in Russia. Based on this change in facts and circumstances, the long-term cash flow forecast for the Company’s operations in Russia and its Russia reporting unit were significantly reduced. The reduction in the long-term cash flow forecasts indicated that the carrying amounts of goodwill and long-lived assets associated with the Company’s Russia reporting unit and operations in Russia may not be recoverable, and the carrying value of these assets was tested for impairment. The Company relied on the income approach to estimate the fair values of the Russia reporting unit and long-lived assets and considered multiple scenarios including the continuing operation and exit of operations in Russia. Reflecting the negative long-term cash flow forecasts that each of these scenarios produced for these assets, during the three months ended March 31, 2022, the Company recorded impairments of Property and equipment, net of $15.1 million, Operating lease right-of-use assets, net of $3.8 million, and Goodwill of $0.7 million. These asset impairment charges are included in Selling, general and administrative expenses in the interim condensed consolidated financial statements for the three months ended March 31, 2022. Additionally, the Company evaluated trade receivables and contract assets for estimated future credit losses from customers located in Russia and recorded a bad debt expense of $8.4 million, reflecting the deterioration of creditworthiness of its customers in Russia during the three months ended March 31, 2022. The Company recorded a benefit to bad debt expense of $0.4 million during the three months ended March 31, 2023, reflecting better than previously expected credit collections from customers located in Russia. Bad debt expense is included in Selling, general and administrative expenses in the condensed consolidated statements of income. On April 7, 2023, the Company amended and restated the agreement to sell substantially all of its remaining holdings in Russia to a third party. The timing and completion of the sale is subject to customary closing conditions, including regulatory approvals by the Russian and U.S. governments. Subsequent to March 31, 2023 and prior to the issuance of these interim financial statements, the required approvals from the Russian government were received to proceed with the sale. Due to the significant uncertainty of obtaining the necessary regulatory approvals as of March 31, 2023, the Company does not believe a sale was probable to be completed as of March 31, 2023 and has not reported the assets and liabilities to be sold as held for sale in its condensed consolidated balance sheet. As of March 31, 2023, the Company had the following assets and liabilities in Russia: As of March 31, 2023, based on the Company’s expected net proceeds from sale and recognition of the accumulated currency translation loss currently included in Accumulated other comprehensive loss, the Company expects to record a loss upon the earlier of classification of the assets and liabilities to be sold as held for sale or closing of a sale. Such loss is not expected to be material based on the information available through the date of issuance of these financial statements.Fluctuations in foreign currency exchange rates could impact the gain or loss the Company could recognize in the future. If unable to complete a sale, the Company could recognize other charges including restructuring costs.
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ACQUISITIONS |
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Mar. 31, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
ACQUISITIONS | ACQUISITIONS2022 Acquisitions — During the year ended December 31, 2022, the Company completed two acquisitions with a total purchase price of $13.6 million including contingent consideration with total acquisition-date fair value of $2.6 million. These acquisitions expanded EPAM’s capabilities to deliver end-to-end solutions for designing and building sophisticated commerce platforms, provided opportunities for geographic expansion as well as added $3.4 million of intangible assets, consisting of customer relationships. Pro forma results of operations have not been presented because the effect of these acquisitions on the Company’s condensed consolidated financial statements was not material individually or in the aggregate. |
GOODWILL |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL | GOODWILL Goodwill by reportable segment was as follows:
The Russia segment had accumulated goodwill impairment losses of $2.9 million as of March 31, 2023 and December 31, 2022. There were no accumulated impairment losses in the North America or Europe reportable segments as of March 31, 2023 or December 31, 2022.
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FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The Company carries certain assets and liabilities at fair value on a recurring basis on its condensed consolidated balance sheets. The following tables present the fair values of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022:
The foreign exchange derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange data at the measurement date. See Note 6 “Derivative Financial Instruments” in the condensed consolidated interim financial statements for additional information regarding derivative financial instruments. The fair value of the contingent consideration was determined using a probability-weighted expected return method and is based on the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. Although there is significant judgment involved, the Company believes its estimates and assumptions are reasonable. In determining fair value, the Company considered a variety of factors, including future performance of the acquired businesses using financial projections developed by the Company and market risk assumptions that were derived for revenue growth and earnings before interest and taxes. The Company estimated future payments using the earnout formula and performance targets specified in the purchase agreements and adjusted those estimates to reflect the probability of their achievement. Those weighted-average estimated future payments were then discounted to present value using a rate based on the weighted-average cost of capital of guideline companies. The discount rates used to determine the fair value of contingent consideration both as of March 31, 2023 and December 31, 2022, were at a maximum of 20.0%, if a rate was applied. Changes in financial projections, market risk assumptions, discount rates or probability assumptions related to achieving the various earnout criteria would result in a change in the fair value of the recorded contingent liabilities. Such changes, if any, are recorded within Interest and other income/(loss), net in the Company’s condensed consolidated statement of income. A reconciliation of the beginning and ending balances of Level 3 contingent consideration using significant unobservable inputs for the three months ended March 31, 2023 is as follows:
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis Estimates of fair value of financial instruments not carried at fair value on a recurring basis on the Company’s condensed consolidated balance sheets are generally subjective in nature and are determined as of a specific point in time based on the characteristics of the financial instruments and relevant market information. The generally short maturities of certain assets and liabilities result in a number of assets and liabilities for which fair value equals or closely approximates the amount recorded on the Company’s condensed consolidated balance sheets. The following tables present the estimated fair values of the Company’s financial assets and liabilities not measured at fair value on a recurring basis as of the dates indicated:
During the year ended December 31, 2022, the Company completed an asset acquisition of software licenses for use in the regular course of business for a purchase price of $66.1 million, which included an upfront payment of $13.3 million and fixed deferred consideration, payable in annual installments, with an acquisition-date fair value of $52.8 million. To estimate fair value, the future payments were discounted to present value using a discount rate based on the estimated borrowing rate of the Company. The weighted average discount rate used to determine the acquisition-date fair value was 5.20%. See Note 13 “Commitments and Contingencies” for more information regarding the deferred consideration. Non-Marketable Securities Without Readily Determinable Fair Values The Company holds investments in equity securities that do not have readily determinable fair values. These investments are recorded at cost and are remeasured to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $30.3 million and $28.4 million as of March 31, 2023 and December 31, 2022, respectively, and is classified as Other noncurrent assets in the Company’s condensed consolidated balance sheets.
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DERIVATIVE FINANCIAL INSTRUMENTS |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTSIn the normal course of business, the Company uses derivative financial instruments to manage the risk of fluctuations in foreign currency exchange rates. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Hungarian forint and Indian rupee transactions. During the three months ended March 31, 2022, in response to the invasion of Ukraine, the Company de-designated its Russian ruble foreign exchange forward contracts as hedges and entered into offsetting foreign exchange forward contracts with the same counterparty. The Company determined it was probable the underlying forecasted foreign currency transactions which were hedged would not occur and reclassified the accumulated loss of $43.9 million on the underlying hedges into income which is classified as foreign exchange loss in the condensed consolidated statement of income. As of March 31, 2023, all of the Company’s Russian ruble foreign exchange forwards contracts had settled. As of March 31, 2023, all of the Company’s foreign exchange forward contracts were designated as hedges and there is no financial collateral (including cash collateral) required to be posted by the Company related to the foreign exchange forward contracts. The fair value of derivative instruments on the Company’s condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 were as follows:
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LEASES |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | LEASES The Company leases office space, corporate apartments, office equipment, and vehicles. Many of the Company’s leases contain variable payments including changes in base rent and charges for common area maintenance or other miscellaneous expenses. Due to this variability, the cash flows associated with these variable payments are not included in the minimum lease payments used in determining the right-of-use assets and associated lease liabilities and are recognized in the period in which the obligation for such payments is incurred. The Company’s leases have remaining lease terms ranging from 0.1 to 8.8 years. Certain lease agreements, mainly for office space, include options to extend or terminate the lease before the expiration date. The Company considers such options when determining the lease term when it is reasonably certain that the Company will exercise that option. The Company leases and subleases a portion of its office space to third parties. Lease income and sublease income were immaterial for the three months ended March 31, 2023 and 2022. See Note 2 “Impact of the Invasion of Ukraine” for discussion of impairment of right-of-use assets in Russia. During the three months ended March 31, 2023 and 2022, the components of lease expense were as follows:
Supplemental cash flow information related to leases for the three months ended March 31, 2023 and 2022 was as follows:
Weighted average remaining lease term and discount rate as of March 31, 2023 and 2022 were as follows:
As of March 31, 2023, operating lease liabilities will mature as follows:
The Company had committed to payments of $14.2 million related to operating lease agreements that had not yet commenced as of March 31, 2023. These operating leases will commence on various dates during 2023 with lease terms ranging from 0.2 to 7.3 years. The Company did not have any material finance lease agreements that had not yet commenced.
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DEBT |
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DEBT | DEBTRevolving Credit Facility — On October 21, 2021, the Company replaced its 2017 credit facility with a new unsecured credit agreement (the “2021 Credit Agreement”) with PNC Bank, National Association; PNC Capital Markets LLC; Citibank N.A.; Wells Fargo Bank, National Association; Santander Bank, N.A.; and Raiffeisen Bank International AG (collectively the “Lenders”). The 2021 Credit Agreement provides for a revolving credit facility (the “2021 Revolving Facility”) with a borrowing capacity of $700.0 million, with the potential to increase the borrowing capacity up to $1.000 billion if certain conditions are met. The 2021 Credit Agreement matures on October 21, 2026. Borrowings under the 2021 Revolving Facility may be denominated in U.S. dollars or up to a maximum of $150.0 million equivalent in British pounds sterling, Canadian dollars, euros or Swiss francs and other currencies as may be approved by the administrative agent and the Lenders. Borrowings under the 2021 Revolving Facility bear interest at either a base rate or Euro-rate plus a margin based on the Company’s leverage ratio. The base rate is equal to the highest of (a) the Overnight Bank Funding Rate, plus 0.5%, (b) the Prime Rate, or (c) the Daily LIBOR Rate, plus 1.0%, so long as the Daily LIBOR Rate is offered, ascertainable and not unlawful. The 2021 Credit Agreement includes customary business and financial covenants that may restrict the Company’s ability to make or pay dividends (other than certain intercompany dividends) if a potential or an actual event of default has occurred or would be triggered. As of March 31, 2023, the Company was in compliance with all covenants contained in the 2021 Credit Agreement. The following table presents the outstanding debt and borrowing capacity of the Company under the 2021 Credit Agreement:
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REVENUES |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUES | REVENUES Disaggregation of Revenues The following tables present the disaggregation of the Company’s revenues by customer location, including a reconciliation of the disaggregated revenues with the reportable segments (Note 14 “Segment Information”) for the periods indicated:
The following tables present the disaggregation of the Company’s revenues by industry vertical, including a reconciliation of the disaggregated revenues with the reportable segments (Note 14 “Segment Information”) for the periods indicated:
The following tables present the disaggregation of the Company’s revenues by contract type including a reconciliation of the disaggregated revenues with the Company’s reportable segments (Note 14 “Segment Information”) for the periods indicated:
Timing of Revenue Recognition The following tables present the timing of revenue recognition reconciled with the Company’s reportable segments (Note 14 “Segment Information”) for the periods indicated:
During the three months ended March 31, 2023, the Company recognized $7.2 million of revenues from performance obligations satisfied in previous periods compared to $6.0 million during the three months ended March 31, 2022. 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 March 31, 2023. The Company applies a practical expedient and does not disclose the value of unsatisfied performance obligations for contracts (i) that have an original expected duration of one year or less and (ii) for which it recognizes revenues at the amount to which it has the right to invoice for services provided.
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:
Contract assets comprise amounts where the Company’s right to bill is contingent on something other than the passage of time such as achievement of contractual milestones. Contract assets have increased since December 31, 2022 primarily due to contracts where the Company’s right to bill is contingent upon achievement of contractual milestones. Contract liabilities comprise amounts collected from the Company’s customers for revenues not yet earned and such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. During the three months ended March 31, 2023, the Company recognized $19.2 million of revenues that were included in Accrued expenses and other current liabilities at December 31, 2022. During the three months ended March 31, 2022, the Company recognized $26.3 million of revenues that were included in Accrued expenses and other current liabilities at December 31, 2021.
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STOCKHOLDERS’ EQUITY |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS’ EQUITY | STOCKHOLDERS’ EQUITY Stock-Based Compensation The following table summarizes the components of stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the periods indicated:
Stock Options Stock option activity under the Company’s plans is set forth below:
As of March 31, 2023, $33.8 million of total remaining unrecognized stock-based compensation cost related to unvested stock options, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.6 years. Restricted Stock and Restricted Stock Units Service-Based Awards The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the three months ended March 31, 2023:
As of March 31, 2023, $271.0 million of total remaining unrecognized stock-based compensation cost related to service-based equity-classified restricted stock units (“RSUs”), net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 3.1 years. As of March 31, 2023, $26.8 million of total remaining unrecognized stock-based compensation cost related to service-based liability-classified cash-settled RSUs, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.9 years. The liability associated with the service-based liability-classified RSUs as of March 31, 2023 and December 31, 2022, was $3.7 million and $10.2 million, respectively, and was classified as Accrued compensation and benefits expenses in the condensed consolidated balance sheets. Performance-Based Awards The table below summarizes activity related to the Company’s equity-classified performance-based awards for the three months ended March 31, 2023:
As of March 31, 2023, $0.2 million of total remaining unrecognized stock-based compensation cost related to performance-based equity-classified restricted stock is expected to be recognized over the weighted-average remaining requisite service period of 0.4 years. As of March 31, 2023, $3.0 million of total remaining unrecognized stock-based compensation cost related to performance-based equity-classified RSUs is expected to be recognized over the weighted-average remaining requisite service period of 2.3 years. 2021 Employee Stock Purchase Plan The 2021 Employee Stock Purchase Plan ("ESPP") enables eligible employees to purchase shares of EPAM’s common stock at a discount at the end of each designated offering period, which occurs every six months in April and November. The purchase price is equal to 85% of the fair market value of a share of EPAM’s common stock on the first date of an offering or the date of purchase, whichever is lower. During the three months ended March 31, 2023 and 2022, no purchases of common stock have been made under the ESPP. The Company recognizes compensation expense related to share issuances pursuant to the ESPP on a straight-line basis over the six-month offering period. For the three months ended March 31, 2023 and 2022, the Company recognized $3.2 million and $1.7 million, respectively, of stock-based compensation expense related to the ESPP. As of March 31, 2023, total unrecognized stock-based compensation cost related to the ESPP was $1.1 million, which is expected to be recognized over a period of 0.1 years. Commitments for Future Equity Awards In connection with the Company’s acquisitions of businesses as discussed in Note 3 “Acquisitions,” EPAM enters into agreements that contractually commit it to granting equity awards at future dates. The agreements are unique to each acquisition and terms vary to specify the number of future awards to be issued or a monetary value that will be settled with equity awards valued at future stock prices. As of March 31, 2023, the Company has commitments to grant up to $26.1 million of equity awards with the number of awards to be determined based on future stock prices. These awards contain performance criteria that will determine the number of future awards to be issued and there is a service-based vesting requirement after the grant date associated with these awards. As these awards are considered granted for accounting purposes, in determining the expense, the Company adjusts the expected settlement based on the probability of achievement of the performance criteria. Related to these awards, the amount of stock-based compensation expense recorded in the condensed consolidated statements of income for the three months ended March 31, 2023 was not material. As of March 31, 2023, the Company has issued 2 thousand performance-based equity-classified RSUs which are not considered granted for accounting purposes as the future vesting conditions have not yet been determined. Share Repurchases On February 13, 2023, the Board of Directors authorized a share repurchase program for up to $500.0 million of the Company's outstanding common stock. EPAM may repurchase shares of its common stock on a discretionary basis from time to time through open market purchases, privately negotiated transactions or other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program has a term of 24 months, may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock. During the three months ended March 31, 2023, the Company repurchased 30 thousand shares of its common stock at an average price of $283.69 for a total of $8.5 million in cash. All of the repurchased shares have been retired. As of March 31, 2023, a remaining balance of $491.5 million of the Company's common stock was available for purchase under share repurchase authorizations by its Board of Directors.
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INCOME TAXES |
3 Months Ended |
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Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES In determining its interim provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. During the first quarter of 2022, the Company recorded its interim tax provision using the discrete method rather than using an estimated annual effective tax rate. The discrete method treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. During the second, third and fourth quarters of 2022, the Company used an estimated annual effective tax rate. The change did not have a material impact on the condensed consolidated interim financial statements. The Company’s worldwide effective tax rates for the three months ended March 31, 2023 and 2022 were 19.6% and 15.6%, respectively. The Company’s effective tax rates benefited from excess tax benefits recorded upon vesting or exercise of stock-based awards of $6.0 million and $13.1 million during the three months ended March 31, 2023 and 2022, respectively.
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EARNINGS PER SHARE |
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EARNINGS PER SHARE | EARNINGS PER SHARE Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. For purposes of computing basic earnings per share, any nonvested shares of restricted stock that have been issued by the Company and are contingently returnable to the Company are excluded from the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, unvested restricted stock, unvested equity-settled RSUs and the stock to be issued under the Company’s ESPP. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:
The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was 260 thousand and 137 thousand during the three months ended March 31, 2023 and 2022, respectively.
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
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Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIESIndemnification Obligations — In the normal course of business, the Company is a party to a variety of agreements under which it may be obligated to indemnify the other party for certain matters. These obligations typically arise in contracts where the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations or covenants for certain matters, infringement of third-party intellectual property rights, data privacy violations, and certain tortious conduct in the course of providing services. The duration of these indemnifications varies, and in certain cases, is indefinite. The Company is unable to reasonably estimate the maximum potential amount of future payments under these or similar agreements due to the unique facts and circumstances of each agreement and the fact that certain indemnifications provide for no limitation to the maximum potential future payments under the indemnification. Management is not aware of any such matters that would have a material effect on the condensed consolidated financial statements of the Company. Litigation — From time to time, the Company is involved in litigation, claims or other contingencies arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, if decided adversely, is not expected to have a material effect on the Company’s business, financial condition, results of operations or cash flows. Ukraine Humanitarian Commitment — On March 4, 2022, EPAM announced that it has established a $100.0 million humanitarian commitment to support its employees in Ukraine and their families. See Note 2 “Impact of the Invasion of Ukraine” for more information regarding commitments to humanitarian aid for Ukraine. Deferred Consideration — During the year ended December 31, 2022, the Company purchased software licenses for use in the regular course of business in exchange for an upfront payment and fixed, future annual payments due over the next 4 years. As of March 31, 2023, the undiscounted deferred consideration amounts owed totaled approximately $60.0 million and are expected to be paid as follows: $14.2 million during the remainder of 2023, $14.0 million in 2024, $15.1 million in 2025, and $16.7 million in 2026. Contractual Commitment — On March 31, 2023, the Company entered into a 5-year agreement for cloud services through which it committed to spending at least $75 million over the term of the agreement. The Company has the ability to cancel the commitment whereby it would incur a cancellation penalty of 20% of the remaining contractual commitment.
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SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION The Company determines its business segments and reports segment information in accordance with how the Company’s chief operating decision maker (“CODM”) organizes the segments to evaluate performance, allocate resources and make business decisions. Segment results are based on the segment’s revenues and operating profit, where segment operating profit is defined as income from operations before unallocated costs. 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 corporate expenses are not allocated to specific segments as these expenses are not controllable at the segment level. Such expenses include certain types of professional fees, certain taxes included in operating expenses, compensation to non-employee directors and certain other general and administrative expenses, including compensation of specific groups of non-production employees. In addition, the Company does not allocate amortization of intangible assets acquired through business combinations, goodwill and other asset impairment charges, stock-based compensation expenses, acquisition-related costs and certain other one-time charges and benefits. These unallocated amounts are combined with total segment operating profit to arrive at consolidated income from operations as reported below in the reconciliation of segment operating profit to consolidated income before provision for income taxes. Additionally, management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably among the segments. The Company manages its business primarily based on the managerial responsibility for its client base and market. As managerial responsibility for a particular customer relationship generally correlates with the customer’s geographic location, there is a high degree of similarity between customer locations and the geographic boundaries of the Company’s reportable segments. In some cases, managerial responsibility for a particular customer is assigned to a management team in another region and is usually based on the strength of the relationship between customer executives and particular members of EPAM’s senior management team. In such cases, the customer’s activity would be reported through the management team’s reportable segment. See Note 2 “Impact of the Invasion of Ukraine” for more information regarding the Company’s decisions to no longer serve customers in Russia and the subsequent decision to exit its operations in Russia. Revenues from external customers and operating profit/(loss), before unallocated expenses, by reportable segment for the three months ended March 31, 2023 and 2022, were as follows:
Intersegment transactions were excluded from the above on the basis that they are neither included in the measure of a segment’s profit and loss results, nor considered by the CODM during the review of segment results. There were no customers that accounted for more than 10% of total segment revenues during the three months ended March 31, 2023 and 2022. Reconciliation of segment operating profit to consolidated income before provision for income taxes is presented below:
Geographic Area Information Long-lived assets presented in the table below include property and equipment, net of accumulated depreciation and amortization, and management has determined that it is not practical to allocate these assets by segment since such assets are used interchangeably among the segments. Physical locations and values of the Company’s long-lived assets are presented below:
See Note 2 “Impact of the Invasion of Ukraine” for more information regarding the Company’s decisions to no longer serve customers in Russia, impairment of long-lived assets in Russia and the subsequent decision to exit its operations in Russia. The table below presents information about the Company’s revenues by customer location for the three months ended March 31, 2023 and 2022:
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ACCUMULATED OTHER COMPREHENSIVE LOSS |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED OTHER COMPREHENSIVE LOSSThe following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss:
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BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Nature of Operations | EPAM Systems, Inc. (the “Company” or “EPAM”) is a leading digital transformation services and product engineering company, providing digital platform engineering and software development services to customers located around the world, primarily in North America, Europe, and Asia. The Company’s industry expertise includes financial services, travel and consumer, software and hi-tech, business information and media, life sciences and healthcare, as well as several other industries. The Company is incorporated in Delaware with headquarters in Newtown, Pennsylvania. |
Basis of Presentation | Basis of Presentation — The accompanying unaudited condensed consolidated financial statements of EPAM have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP” or “U.S. GAAP”) and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The unaudited condensed consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries with all intercompany balances and transactions eliminated. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in its Annual Report on Form 10-K. |
Use of Estimates | The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position as of March 31, 2023 and the results of its operations and its cash flows for the periods presented. |
Concentration of Credit And Interest Rate Risk | Concentration of Credit — Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, short-term investments and trade receivables. The Company maintains cash, cash equivalents and short-term investments with financial institutions. The Company believes its credit policies reflect normal industry terms and business risk and there is no expectation of non-performance by the counterparties.The Company has cash in several countries, including Ukraine, Belarus and Russia, which have been impacted by the invasion of Ukraine (see Note 2 “Impact of the Invasion of Ukraine”) and where the banking sector remains subject to periodic instability; banking and other financial systems generally do not meet the banking standards of more developed markets; and bank deposits made by corporate entities are not insured. Trade receivables are generally dispersed across many customers operating in different industries; therefore, concentration of credit risk is limited. Historically, credit losses and write-offs of trade receivables have not been material to the consolidated financial statements. If any of the Company’s customers enter bankruptcy protection or otherwise take steps to alleviate their financial distress, the Company’s credit losses and write-offs of trade receivables could increase, which would negatively impact its results of operations. Interest rate risk — The Company is exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from variable rates related to cash and cash equivalent deposits, short-term investments and the Company’s borrowings, mainly under the 2021 Credit Agreement, which is subject to a variety of rates depending on the type and timing of funds borrowed (See Note 8 “Debt”). The Company does not believe it is exposed to material direct risks associated with changes in interest rates related to these deposits, investments and borrowings. |
Foreign currency risk | Foreign currency risk — The Company’s global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, the Company generates revenues in various currencies, principally, euros, British pounds, Swiss francs and Canadian dollars and incurs expenditures principally in euros, Polish zlotys, British pounds, Indian rupees, Swiss francs, Hungarian forints, Mexican pesos, Canadian dollars, Colombian pesos and Chinese yuan renminbi. The Company’s international operations expose it to risk of adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign currency denominated assets and liabilities (both third-party and intercompany) and translation of earnings and cash flows into U.S. dollars. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee and Hungarian forint transactions. |
Adoption of New Accounting Standards and Pending Accounting Standards | Adoption of New Accounting Standards There were no recently adopted accounting standards which had a material impact on the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows. Pending Accounting Standards From time to time, new accounting pronouncements are issued by the FASB or other standards-setting bodies that the Company will adopt according to the various timetables the FASB specifies. The Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position, results of operations and cash flows upon adoption.
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Fair Value of Financial Instruments | The foreign exchange derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange data at the measurement date. See Note 6 “Derivative Financial Instruments” in the condensed consolidated interim financial statements for additional information regarding derivative financial instruments. The fair value of the contingent consideration was determined using a probability-weighted expected return method and is based on the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. Although there is significant judgment involved, the Company believes its estimates and assumptions are reasonable. In determining fair value, the Company considered a variety of factors, including future performance of the acquired businesses using financial projections developed by the Company and market risk assumptions that were derived for revenue growth and earnings before interest and taxes. The Company estimated future payments using the earnout formula and performance targets specified in the purchase agreements and adjusted those estimates to reflect the probability of their achievement. Those weighted-average estimated future payments were then discounted to present value using a rate based on the weighted-average cost of capital of guideline companies. The discount rates used to determine the fair value of contingent consideration both as of March 31, 2023 and December 31, 2022, were at a maximum of 20.0%, if a rate was applied. Changes in financial projections, market risk assumptions, discount rates or probability assumptions related to achieving the various earnout criteria would result in a change in the fair value of the recorded contingent liabilities. Such changes, if any, are recorded within Interest and other income/(loss), net in the Company’s condensed consolidated statement of income.
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Non-Marketable Securities Without Readily Determinable Fair Values | Non-Marketable Securities Without Readily Determinable Fair ValuesThe Company holds investments in equity securities that do not have readily determinable fair values. These investments are recorded at cost and are remeasured to fair value based on certain observable price changes or impairment events as they occur. |
IMPACT OF THE INVASION OF UKRAINE (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets and Liabilities in Russia | As of March 31, 2023, the Company had the following assets and liabilities in Russia:
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GOODWILL (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill by Reportable Segment | Goodwill by reportable segment was as follows:
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FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following tables present the fair values of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022:
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Schedule of Acquisition-Related Contingent Consideration Roll Forward | A reconciliation of the beginning and ending balances of Level 3 contingent consideration using significant unobservable inputs for the three months ended March 31, 2023 is as follows:
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Schedule of Estimated Fair Values of Financial Assets and Liabilities not Measured at Fair Value on Recurring Basis | The following tables present the estimated fair values of the Company’s financial assets and liabilities not measured at fair value on a recurring basis as of the dates indicated:
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DERIVATIVE FINANCIAL INSTRUMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Derivative Instruments | The fair value of derivative instruments on the Company’s condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 were as follows:
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LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Lease Expenses | During the three months ended March 31, 2023 and 2022, the components of lease expense were as follows:
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Schedule of Supplemental Cash Flow Information | Supplemental cash flow information related to leases for the three months ended March 31, 2023 and 2022 was as follows:
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Schedule of Weighted Average Lease Terms and Discount Rates | Weighted average remaining lease term and discount rate as of March 31, 2023 and 2022 were as follows:
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Schedule of Maturity of Operating Lease Liabilities | As of March 31, 2023, operating lease liabilities will mature as follows:
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DEBT (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Outstanding Debt And Borrowing Capacity | The following table presents the outstanding debt and borrowing capacity of the Company under the 2021 Credit Agreement:
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REVENUES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregation of Revenues | The following tables present the disaggregation of the Company’s revenues by customer location, including a reconciliation of the disaggregated revenues with the reportable segments (Note 14 “Segment Information”) for the periods indicated:
The following tables present the disaggregation of the Company’s revenues by industry vertical, including a reconciliation of the disaggregated revenues with the reportable segments (Note 14 “Segment Information”) for the periods indicated:
The following tables present the disaggregation of the Company’s revenues by contract type including a reconciliation of the disaggregated revenues with the Company’s reportable segments (Note 14 “Segment Information”) for the periods indicated:
Timing of Revenue Recognition The following tables present the timing of revenue recognition reconciled with the Company’s reportable segments (Note 14 “Segment Information”) for the periods indicated:
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Schedule of Revenue Expected to be Recognized in Future Related to Remaining Performance Obligations | 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 March 31, 2023. The Company applies a practical expedient and does not disclose the value of unsatisfied performance obligations for contracts (i) that have an original expected duration of one year or less and (ii) for which it recognizes revenues at the amount to which it has the right to invoice for services provided.
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Schedule of Contract Balances | The following table provides information on the classification of contract assets and liabilities in the condensed consolidated balance sheets:
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STOCKHOLDERS’ EQUITY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Stock-Based Compensation Expenses | The following table summarizes the components of stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the periods indicated:
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Schedule of Stock Options Activity | Stock option activity under the Company’s plans is set forth below:
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Schedule of Service-Based Awards Activity | The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the three months ended March 31, 2023:
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Schedule of Performance-Based Awards Activity | The table below summarizes activity related to the Company’s equity-classified performance-based awards for the three months ended March 31, 2023:
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EARNINGS PER SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:
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SEGMENT INFORMATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenues from External Customers and Operating Profit/(Loss), Before Unallocated Expenses | Revenues from external customers and operating profit/(loss), before unallocated expenses, by reportable segment for the three months ended March 31, 2023 and 2022, were as follows:
|
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Schedule of Reconciliation of Segment Operating Profit to Consolidated Income Before Provision for Income Taxes | Reconciliation of segment operating profit to consolidated income before provision for income taxes is presented below:
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Schedule of Physical Location and Values of Long-Lived Assets | Physical locations and values of the Company’s long-lived assets are presented below:
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Schedule of Revenues by Customer Location | The table below presents information about the Company’s revenues by customer location for the three months ended March 31, 2023 and 2022:
|
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Loss | The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss:
|
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Risks and Uncertainties) (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Concentration Risk [Line Items] | ||
Cash and cash equivalents | $ 1,749,422 | $ 1,681,344 |
Ukraine | ||
Concentration Risk [Line Items] | ||
Cash and cash equivalents | 68,300 | |
Belarus | ||
Concentration Risk [Line Items] | ||
Cash and cash equivalents | 34,000 | |
Russia | ||
Concentration Risk [Line Items] | ||
Cash and cash equivalents | $ 27,100 |
IMPACT OF THE INVASION OF UKRAINE (Assets and Liabilities) (Details) - Russia - Discontinued Operations, Held-for-sale or Disposed of by Sale $ in Thousands |
Mar. 31, 2023
USD ($)
|
---|---|
Unusual or Infrequent Item, or Both [Line Items] | |
Cash and cash equivalents | $ 26,696 |
Allowance | 4,724 |
Trade receivables and contract assets, net of allowance of $4,724 | 4,329 |
Prepaid and other current assets | 242 |
Total assets in Russia | 31,267 |
Accounts payable | 65 |
Accrued compensation and benefits expenses | 5,508 |
Accrued expenses and other current liabilities | 1,127 |
Operating lease liabilities | 122 |
Other noncurrent liabilities | 71 |
Total liabilities in Russia | $ 6,893 |
ACQUISITIONS (Narrative) (Details) - 2022 Acquisitions purchase accounting adjustments $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2022
USD ($)
business
| |
Business Acquisition [Line Items] | |
Number of acquisitions | business | 2 |
Purchase price including contingent consideration | $ 13.6 |
Contingent consideration fair value | 2.6 |
Customer Relationships | |
Business Acquisition [Line Items] | |
Finite-lived intangible assets acquired, amount | $ 3.4 |
GOODWILL (Goodwill Roll Forward) (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Total | |
Beginning balance | $ 529,072 |
2022 Acquisitions purchase accounting adjustments | 87 |
Effect of net foreign currency exchange rate changes | 4,571 |
Ending balance | 533,730 |
North America | |
Total | |
Beginning balance | 216,960 |
2022 Acquisitions purchase accounting adjustments | 0 |
Effect of net foreign currency exchange rate changes | 128 |
Ending balance | 217,088 |
Europe | |
Total | |
Beginning balance | 312,112 |
2022 Acquisitions purchase accounting adjustments | 87 |
Effect of net foreign currency exchange rate changes | 4,443 |
Ending balance | $ 316,642 |
GOODWILL (Goodwill Accumulated Impairment Losses) (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Russia | ||
Goodwill [Line Items] | ||
Accumulated impairment loss | $ 2,900,000 | $ 2,900,000 |
North America | ||
Goodwill [Line Items] | ||
Accumulated impairment loss | 0 | 0 |
Europe | ||
Goodwill [Line Items] | ||
Accumulated impairment loss | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS (Acquisition-Related Contingent Consideration Roll Forward) (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023
USD ($)
|
Dec. 31, 2022 |
|
Level 3 | ||
Amount | ||
Beginning balance | $ 24,308 | |
Payment of contingent consideration for previously acquired businesses | (5,520) | |
Effect of foreign currency exchange rate changes, net | 129 | |
Ending balance | 19,214 | |
Level 3 | Changes in fair value of contingent consideration included in Interest and other income/(loss), net | ||
Amount | ||
Changes in fair value of contingent consideration included in Interest and other income/(loss), net | $ 297 | |
Discount Rate | Maximum | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Measurement input to determine fair value of contingent consideration | 0.200 | 0.200 |
FAIR VALUE MEASUREMENTS (Deferred Consideration for Asset Acquisition) (Details) - Software Licenses $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2022
USD ($)
| |
Asset Acquisition [Line Items] | |
Purchase price | $ 66.1 |
Payment to acquire assets | 13.3 |
Deferred contingent consideration | $ 52.8 |
Discount Rate | |
Asset Acquisition [Line Items] | |
Discount rate | 5.20% |
FAIR VALUE MEASUREMENTS (Non Marketable Securities Without Readily Determinable Fair Value) (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Restricted cash in Other noncurrent assets | ||
Equity Securities without Readily Determinable Fair Value [Line Items] | ||
Carrying amount of equity securities that do not have readily determinable fair values | $ 30.3 | $ 28.4 |
LEASES (Narrative) (Details) $ in Millions |
Mar. 31, 2023
USD ($)
|
---|---|
Lessee, Lease, Description [Line Items] | |
Commitments related to operating lease agreements that have not yet commenced | $ 14.2 |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease term | 1 month 6 days |
Lease term of lease agreements that have not yet commenced | 2 months 12 days |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease term | 8 years 9 months 18 days |
Lease term of lease agreements that have not yet commenced | 7 years 3 months 18 days |
LEASES (Components of Lease Expenses) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Lessee, Lease, Description [Line Items] | ||
Total lease cost | $ 17,487 | $ 20,110 |
Selling, general and administrative expenses | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease cost | 11,183 | 15,884 |
Variable lease cost | 3,648 | 3,187 |
Short-term lease cost | $ 2,656 | $ 1,039 |
LEASES (Supplemental Cash Flow Information) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows used for operating leases | $ 11,719 | $ 14,803 |
Right-of-use assets obtained in exchange for lease obligations: | ||
Operating leases | 3,349 | 19,484 |
Non-cash net increase/(decrease) due to lease modifications: | ||
Operating lease right-of-use assets | 1,383 | (7,428) |
Operating lease liabilities | $ 1,114 | $ (7,434) |
LEASES (Weighted Average Lease Terms and Discount Rates) (Details) |
Mar. 31, 2023 |
Mar. 31, 2022 |
---|---|---|
Weighted average remaining lease term, in years: | ||
Operating leases | 5 years 3 months 18 days | 5 years 8 months 12 days |
Weighted average discount rate: | ||
Operating leases | 3.30% | 2.40% |
LEASES (Maturity of Operating Lease Liabilities) (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
|
---|---|
Leases [Abstract] | |
2023 (excluding three months ended March 31, 2023) | $ 34,923 |
2024 | 38,223 |
2025 | 30,128 |
2026 | 23,774 |
2027 | 14,968 |
Thereafter | 29,400 |
Total lease payments | 171,416 |
Less: imputed interest | (12,571) |
Total | $ 158,845 |
DEBT (Details) - Revolving Credit Facility - Line of Credit |
Oct. 21, 2021
USD ($)
|
Mar. 31, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
Oct. 21, 2021
GBP (£)
|
---|---|---|---|---|
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | $ 700,000,000 | $ 700,000,000 | $ 700,000,000 | £ 150,000,000 |
Additional potential borrowing capacity | $ 1,000,000,000 | |||
Fed Funds Effective Rate Overnight Index Swap Rate | ||||
Debt Instrument [Line Items] | ||||
Variable interest rate spread | 0.50% | |||
Daily LIBOR Rate | ||||
Debt Instrument [Line Items] | ||||
Variable interest rate spread | 1.00% |
DEBT (Schedule of Outstanding Debt And Borrowing Capacity) (Details) - Revolving Credit Facility - Line of Credit |
Mar. 31, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
Oct. 21, 2021
USD ($)
|
Oct. 21, 2021
GBP (£)
|
---|---|---|---|---|
Debt Instrument [Line Items] | ||||
Outstanding debt | $ 25,000,000 | $ 25,000,000 | ||
Interest rate | 5.60% | 5.20% | ||
Available borrowing capacity | $ 675,000,000 | $ 675,000,000 | ||
Maximum borrowing capacity | $ 700,000,000 | $ 700,000,000 | $ 700,000,000 | £ 150,000,000 |
REVENUES (Contract Balances) (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Change in Contract with Customer, Liability [Abstract] | |||
Revenue recognized | $ 19,200 | $ 26,300 | |
Trade receivables and contract assets, net | |||
Change in Contract with Customer, Liability [Abstract] | |||
Contract assets | 22,524 | $ 11,490 | |
Accrued expenses and other current liabilities | |||
Change in Contract with Customer, Liability [Abstract] | |||
Contract liabilities | 35,598 | 36,036 | |
Other noncurrent liabilities | |||
Change in Contract with Customer, Liability [Abstract] | |||
Contract liabilities | $ 319 | $ 42 |
STOCKHOLDERS’ EQUITY (Components of Stock-Based Compensation Expenses) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | $ 38,579 | $ 7,112 |
Cost of revenues (exclusive of depreciation and amortization) | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | 16,011 | (424) |
Selling, general and administrative expenses | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | $ 22,568 | $ 7,536 |
STOCKHOLDERS’ EQUITY (Stock Option Additional Information) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Remaining unrecognized stock-based compensation cost | $ 33.8 |
Employee Stock Option | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted-average remaining requisite service period | 2 years 7 months 6 days |
INCOME TAXES (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 19.60% | 15.60% |
Excess tax benefit | $ 6.0 | $ 13.1 |
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Numerator for basic and diluted earnings per share: | ||
Net income | $ 102,292 | $ 89,719 |
Numerator for basic earnings per share | 102,292 | 89,719 |
Numerator for diluted earnings per share | $ 102,292 | $ 89,719 |
Denominator: | ||
Weighted average common shares for basic earnings per share (in shares) | 57,702 | 56,915 |
Net effect of dilutive stock options, restricted stock units, restricted stock awards and stock issuable under the ESPP (in shares) | 1,596 | 2,026 |
Weighted average common shares for diluted earnings per share (in shares) | 59,298 | 58,941 |
Net income per share: | ||
Basic (in usd per share) | $ 1.77 | $ 1.58 |
Diluted (in usd per share) | $ 1.73 | $ 1.52 |
Anti-dilutive options not included in the calculation (in shares) | 260 | 137 |
COMMITMENTS AND CONTINGENCIES (Building Acquisition Commitments) (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 04, 2022 |
|
Other Commitments [Line Items] | ||
Commitment | $ 14,200,000 | |
Deferred consideration | 60,000,000 | |
Deferred consideration in remainder of 2023 | 14,200,000 | |
Deferred consideration in 2024 | 14,000,000 | |
Deferred consideration in 2025 | 15,100,000 | |
Deferred consideration in 2026 | $ 16,700,000 | |
Cloud Services | ||
Other Commitments [Line Items] | ||
Contractual term | 5 years | |
Total commitment amount | $ 75,000,000 | |
Contractual commitment (in percentage) | 20.00% | |
Humanitarian Commitment | ||
Other Commitments [Line Items] | ||
Commitment | $ 49,100,000 | |
Ukraine | Humanitarian Commitment | ||
Other Commitments [Line Items] | ||
Commitment | $ 100,000,000 |
SEGMENT INFORMATION (Physical Location and Values of Long-Lived Assets) (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | $ 267,067 | $ 273,348 |
Ukraine | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 69,290 | 70,183 |
United States | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 65,165 | 68,804 |
Belarus | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 55,282 | 57,311 |
Poland | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 14,736 | 14,685 |
Hungary | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 8,483 | 8,552 |
India | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | 7,895 | 8,506 |
Other | ||
Long-Lived Assets by Geographical Areas [Line Items] | ||
Long-lived assets | $ 46,216 | $ 45,307 |
SEGMENT INFORMATION (Revenues by Customer Location) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | $ 1,210,941 | $ 1,171,614 |
United States | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 679,437 | 657,027 |
United Kingdom | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 155,327 | 153,197 |
Switzerland | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 89,861 | 81,830 |
Netherlands | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 59,100 | 50,179 |
Germany | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 42,735 | 36,389 |
Canada | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 27,832 | 27,029 |
Russia | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | 5,873 | 30,692 |
Other locations | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||
Revenues | $ 150,776 | $ 135,271 |
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