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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to________

Commission file number: 001-35418

EPAM SYSTEMS, INC.

(Exact name of registrant as specified in its charter)



Delaware		22-3536104
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

41 University Drive	Suite 202	18940
Newtown	Pennsylvania	18940
(Address of principal executive offices)		(Zip code)

267-759-9000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered
Common Stock, par value $0.001 per share	EPAM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Title of Each Class		Outstanding as of April 30, 2020
Common Stock, par value $0.001 per share		55,639,436 shares

EPAM SYSTEMS, INC.

TABLE OF CONTENTS



	Page
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements (Unaudited)	3
Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	3
Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2020 and 2019	4
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019	5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019	6
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	36
PART II. OTHER INFORMATION	37
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3. Defaults Upon Senior Securities	37
Item 4. Mine Safety Disclosures	37
Item 5. Other Information	37
Item 6. Exhibits	38
SIGNATURES	39

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)



	As of March 31, 2020			As of December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	916,253		$	936,552
Trade receivables and contract assets, net of allowance of $5,356 and $2,920, respectively	542,698			497,716
Prepaid and other current assets	48,786			39,943
Total current assets	1,507,737			1,474,211
Property and equipment, net	164,671			165,259
Operating lease right-of-use assets	243,671			238,991
Intangible assets, net	58,676			56,258
Goodwill	198,534			195,043
Deferred tax assets	79,044			75,013
Other noncurrent assets	59,548			39,433
Total assets	$	2,311,881		$	2,244,208

Liabilities
Current liabilities
Accounts payable	$	5,232		$	7,831
Accrued compensation and benefits expenses	250,560			230,035
Accrued expenses and other current liabilities	66,434			82,476
Income taxes payable, current	6,987			9,064
Operating lease liabilities, current	60,108			57,542
Total current liabilities	389,321			386,948
Long-term debt	25,046			25,074
Income taxes payable, noncurrent	45,847			45,878
Operating lease liabilities, noncurrent	189,312			180,848
Other noncurrent liabilities	14,873			9,315
Total liabilities	664,399			648,063
Commitments and contingencies (Note 12)
Stockholders’ equity
Common stock, $0.001 par value; 160,000,000 authorized; 55,608,835 and 55,207,446 shares issued, 55,589,100 and 55,187,711 shares outstanding at March 31, 2020 and December 31, 2019, respectively	56			55
Additional paid-in capital	610,579			607,051
Retained earnings	1,106,285			1,020,590
Treasury stock	(177		)	(177		)
Accumulated other comprehensive loss	(69,261		)	(31,374		)
Total stockholders’ equity	1,647,482			1,596,145
Total liabilities and stockholders’ equity	$	2,311,881		$	2,244,208

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except share and per share data)



	Three Months Ended March 31,
	2020			2019
Revenues	$	651,359		$	521,333
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)	423,802			344,689
Selling, general and administrative expenses	125,108			101,786
Depreciation and amortization expense	14,940			10,200
Income from operations	87,509			64,658
Interest and other income, net	2,386			3,076
Foreign exchange gain/(loss)	6,524			(3,484		)
Income before provision for income taxes	96,419			64,250
Provision for income taxes	10,854			3,496
Net income	$	85,565		$	60,754
Foreign currency translation adjustments, net of tax	(28,519		)	2,943
Unrealized (loss)/gain on cash-flow hedging instruments, net of tax	(9,368		)	3,100
Comprehensive income	$	47,678		$	66,797

Net income per share:
Basic	$	1.55		$	1.12
Diluted	$	1.47		$	1.06
Shares used in calculation of net income per share:
Basic	55,286,747			54,245,133
Diluted	58,142,570			57,236,427

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)



	Common Stock				Additional Paid-in Capital			Retained Earnings		Treasury Stock				Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares		Amount							Shares	Amount
Balance, January 1, 2020	55,187,711		$	55	$	607,051		$	1,020,590	19,735	$	(177	)	$	(31,374	)	$	1,596,145
Restricted stock units vested	273,904		—		—			—		—	—			—			—
Restricted stock units withheld for employee taxes	(89,990	)	—		(15,822		)	—		—	—			—			(15,822		)
Stock-based compensation expense	—		—		12,210			—		—	—			—			12,210
Proceeds from stock option exercises	217,475		1		7,140			—		—	—			—			7,141
Foreign currency translation adjustments, net of tax	—		—		—			—		—	—			(28,519		)	(28,519		)
Change in unrealized gains and losses on cash flow hedges, net of tax	—		—		—			—		—	—			(9,368		)	(9,368		)
Cumulative effect of adoption of ASU 2016-13	—		—		—			130		—	—			—			130
Net income	—		—		—			85,565		—	—			—			85,565
Balance, March 31, 2020	55,589,100		$	56	$	610,579		$	1,106,285	19,735	$	(177	)	$	(69,261	)	$	1,647,482



	Common Stock				Additional Paid-in Capital			Retained Earnings		Treasury Stock				Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares		Amount							Shares	Amount
Balance, January 1, 2019	54,080,192		$	54	$	544,700		$	759,533	19,735	$	(177	)	$	(41,514	)	$	1,262,596
Restricted stock units vested	242,414		—		—			—		—	—			—			—
Restricted stock units withheld for employee taxes	(81,562	)	—		(13,483		)	—		—	—			—			(13,483		)
Stock-based compensation expense	—		—		10,425			—		—	—			—			10,425
Proceeds from stock option exercises	323,464		—		11,890			—		—	—			—			11,890
Foreign currency translation adjustments, net of tax	—		—		—			—		—	—			2,943			2,943
Change in unrealized gains and losses on cash flow hedges, net of tax	—		—		—			—		—	—			3,100			3,100
Net income	—		—		—			60,754		—	—			—			60,754
Balance, March 31, 2019	54,564,508		$	54	$	553,532		$	820,287	19,735	$	(177	)	$	(35,471	)	$	1,338,225

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net income	$	85,565		$	60,754
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	14,940			10,200
Operating lease right-of-use assets amortization expense	16,816			12,187
Bad debt expense	2,719			(133		)
Deferred taxes	8,288			846
Stock-based compensation expense	11,881			21,856
Other	5,893			520
Changes in assets and liabilities:
Trade receivables and contract assets	(51,423		)	(48,343		)
Prepaid and other assets	(9,746		)	401
Accounts payable	(2,407		)	(2,488		)
Accrued expenses and other liabilities	5,437			(22,360		)
Operating lease liabilities	(15,646		)	(13,175		)
Income taxes payable	(9,062		)	(20,467		)
Net cash provided by/(used in) operating activities	63,255			(202		)
Cash flows from investing activities:
Purchases of property and equipment	(29,075		)	(13,424		)
Acquisition of business, net of cash acquired (Note 2)	(10,339		)	—
Payments for cost method investments	(20,000		)	(5,000		)
Other investing activities, net	(71		)	(136		)
Net cash used in investing activities	(59,485		)	(18,560		)
Cash flows from financing activities:
Proceeds from stock option exercises	6,850			11,402
Payments of withholding taxes related to net share settlements of restricted stock units	(1,018		)	(1,208		)
Payment of contingent consideration for previously acquired business	(7,869		)	—
Other financing activities, net	(9		)	(13		)
Net cash (used in)/provided by financing activities	(2,046		)	10,181
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(22,009		)	548
Net decrease in cash, cash equivalents and restricted cash	(20,285		)	(8,033		)
Cash, cash equivalents and restricted cash, beginning of period	937,688			771,711
Cash, cash equivalents and restricted cash, end of period	$	917,403		$	763,678

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EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

(Continued)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:



	As of March 31, 2020		As of December 31, 2019
Balance sheet classification
Cash and cash equivalents	$	916,253	$	936,552
Restricted cash in Other noncurrent assets	1,150		1,136
Total restricted cash	1,150		1,136
Total cash, cash equivalents and restricted cash	$	917,403	$	937,688

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share data)


1.	BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

EPAM Systems, Inc. (the “Company” or “EPAM”) is a leading global provider of digital platform engineering and software development services to customers located around the world, primarily in North America, Europe, Asia and Australia. 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 other emerging 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, 2019 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 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, all adjustments considered necessary for a fair presentation of the accompanying unaudited condensed consolidated financial statements have been included, and all adjustments are of a normal and recurring nature.

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, certain amounts recorded in the prior-period consolidated statement of cash flows presented have been reclassified to conform to the current-period financial statement presentation. These reclassifications had no effect on previously reported results of operations.

Adoption of New Accounting Standards

Unless otherwise discussed below, the adoption of new accounting standards did not have a material impact on the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows.

Measurement of Credit Losses on Financial Instruments — In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

The amendments in this update changed how companies measure and recognize credit impairment for many financial assets. The new credit loss model requires companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The Company adopted Topic 326, effective January 1, 2020, using a modified-retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. As a result of the adoption of Topic 326, the Company recorded an immaterial reduction to its allowance for doubtful accounts for trade receivables and contract assets.

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. Unless otherwise discussed below, 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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2.	ACQUISITION

2020 Acquisition — During the three months ended March 31, 2020, the Company completed one acquisition with a purchase price of $14,663 including contingent consideration with a fair value of $4,042. The Company committed to making earnout payments with a maximum amount payable of $16,582 subject to attainment of specified performance targets in the first and second calendar years after the acquisition date. This acquisition increased EPAM’s software and service capabilities in financial services as well as added $6,300 of intangible assets, consisting mainly of customer relationships. Revenues generated by this acquisition totaled $1,043 during the three months ended March 31, 2020. Pro forma results of operations have not been presented because the effect of the acquisition on the Company’s condensed consolidated financial statements was not material.


3.	GOODWILL

Goodwill by reportable segment was as follows:



	North America			Europe			Russia			Total
Balance as of January 1, 2020	$	113,426		$	80,873		$	744		$	195,043
Other 2019 acquisitions purchase accounting adjustments	210			(42		)	20			188
2020 Acquisition	6,818			—			—			6,818
Effect of net foreign currency exchange rate changes	(373		)	(3,078		)	(64		)	(3,515		)
Balance as of March 31, 2020	$	120,081		$	77,753		$	700		$	198,534

There were no accumulated impairment losses in the North America or Europe reportable segments as of March 31, 2020 or December 31, 2019. The Russia segment had accumulated goodwill impairment losses of $2,241 as of March 31, 2020 and December 31, 2019.


4.	FAIR VALUE MEASUREMENTS

The Company carries certain assets and liabilities at fair value on a recurring basis on its 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, 2020 and December 31, 2019:



	As of March 31, 2020
	Balance		Level 1		Level 2		Level 3
Foreign exchange derivative assets	$	55	$	—	$	55	$	—
Total assets measured at fair value on a recurring basis	$	55	$	—	$	55	$	—

Foreign exchange derivative liabilities	$	10,475	$	—	$	10,475	$	—
Contingent consideration	5,705		—		—		5,705
Total liabilities measured at fair value on a recurring basis	$	16,180	$	—	$	10,475	$	5,705



	As of December 31, 2019
	Balance		Level 1		Level 2		Level 3
Foreign exchange derivative assets	$	1,910	$	—	$	1,910	$	—
Total assets measured at fair value on a recurring basis	$	1,910	$	—	$	1,910	$	—

Foreign exchange derivative liabilities	$	243	$	—	$	243	$	—
Contingent consideration	10,495		—		—		10,495
Total liabilities measured at fair value on a recurring basis	$	10,738	$	—	$	243	$	10,495

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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 5 “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 business 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 agreement 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 rate used to determine the fair value of contingent consideration for the 2020 Acquisition was 17.5%. 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, net in the Company’s consolidated statement of income and comprehensive income.

A reconciliation of the beginning and ending balances of Level 3 acquisition-related contingent consideration using significant unobservable inputs for the three months ended March 31, 2020 is as follows:



	Amount
Contingent consideration liabilities as of January 1, 2020	$	10,495
Payment of contingent consideration for previously acquired business	(7,869		)
Acquisition date fair value of contingent consideration — 2020 Acquisition (Note 2)	4,042
Changes in fair value of contingent consideration included in Interest and other income, net	(438		)
Effect of net foreign currency exchange rate changes	(525		)
Contingent consideration liabilities as of March 31, 2020	$	5,705

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 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 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:



					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
March 31, 2020
Financial Assets:
Cash equivalents:
Money market funds	$	334,194	$	334,194	$	334,194	$	—	$	—
Time deposits	2		2		—		2		—
Total cash equivalents	$	334,196	$	334,196	$	334,194	$	2	$	—
Restricted cash	$	1,150	$	1,150	$	1,150	$	—	$	—
Employee loans	$	2,159	$	2,159	$	—	$	—	$	2,159
Financial Liabilities:
Borrowings under the 2017 Credit Facility	$	25,011	$	25,011	$	—	$	25,011	$	—

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					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2019
Financial Assets:
Cash equivalents:
Money market funds	$	407,817	$	407,817	$	407,817	$	—	$	—
Time deposits	10,002		10,002		—		10,002		—
Total cash equivalents	$	417,819	$	417,819	$	407,817	$	10,002	$	—
Restricted cash	$	1,136	$	1,136	$	1,136	$	—	$	—
Employee loans	$	2,434	$	2,434	$	—	$	—	$	2,434
Financial Liabilities:
Borrowings under the 2017 Credit Facility	$	25,017	$	25,017	$	—	$	25,017	$	—


5.	DERIVATIVE FINANCIAL INSTRUMENTS

In 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 Russian ruble, Polish zloty and Indian rupee transactions. As of March 31, 2020, 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 consolidated balance sheets as of March 31, 2020 and December 31, 2019 were as follows:



		As of March 31, 2020				As of December 31, 2019
	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	$	55			$	1,910
	Accrued expenses and other current liabilities			$	10,475			$	243

The Company records changes in the fair value of its cash flow hedges in accumulated other comprehensive loss in the consolidated balance sheets until the forecasted transaction occurs. When the forecasted transaction occurs, the Company reclassifies the related gain or loss on the cash flow hedge to cost of revenues (exclusive of depreciation and amortization). In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the Company reclassifies the gain or loss on the related cash flow hedge into income. If the Company does not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded in income.

The changes in the fair value of foreign currency derivative instruments in our unaudited condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2020 and 2019 were as follows:



	Three Months Ended March 31,
	2020			2019
Foreign exchange forward contracts - Designated as hedging instruments:
Net (loss)/gain in fair value recognized in accumulated other comprehensive loss	$	(12,087	)	$	3,999
Net loss reclassified from accumulated other comprehensive loss into cost of revenues (exclusive of depreciation and amortization)	$	(660	)	$	(452	)

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6.	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 years to 11.1 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, 2020 and 2019.

During the three months ended March 31, 2020 and 2019, the components of lease expense were as follows:



		Three Months Ended March 31,
	Income Statement Classification	2020		2019
Operating lease cost	Selling, general and administrative expenses	$	18,863	$	13,719
Variable lease cost	Selling, general and administrative expenses	2,635		2,097
Short-term lease cost	Selling, general and administrative expenses	540		898
Total lease cost		$	22,038	$	16,714

Supplemental cash flow information related to leases for the three months ended March 31, 2020 and 2019 was as follows:



	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	16,891	$	14,696
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	31,252	$	12,825
Non-cash net increase/(decrease) due to lease modifications:
Operating lease right-of-use assets	$	4,584	$	(5,174	)
Operating lease liabilities	$	4,573	$	(5,106	)

Weighted average remaining lease term and discount rate as of March 31, 2020 and 2019 were as follows:



	As of March 31, 2020		As of March 31, 2019
Weighted average remaining lease term, in years:
Operating leases	6.0		5.9
Weighted average discount rate:
Operating leases	3.3	%	4.0	%

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As of March 31, 2020, operating lease liabilities will mature as follows:



Year ending December 31,	Lease Payments
2020 (excluding three months ended March 31, 2020)	$	50,933
2021	59,351
2022	42,665
2023	31,190
2024	26,870
Thereafter	62,988
Total lease payments	273,997
Less: imputed interest	(24,577		)
Total	$	249,420

As of March 31, 2020, the Company had committed to payments of $13,727 related to operating lease agreements that had not yet commenced. These operating leases will commence during various dates during 2020 with lease terms ranging from 2.0 to 10.9 years. The Company did not have any material finance lease agreements that had not yet commenced.


7.	LONG-TERM DEBT

Revolving Line of Credit — On May 24, 2017, the Company entered into an unsecured credit facility (the “2017 Credit Facility”), as may be amended from time to time, with PNC Bank, National Association; PNC Capital Markets LLC; Citibank N.A.; Wells Fargo Bank, National Association; Fifth Third Bank and Santander Bank, N.A. (collectively the “Lenders”). The 2017 Credit Facility provides for a borrowing capacity of $300,000, with potential to increase the borrowing capacity up to $400,000 if certain conditions are met. The 2017 Credit Facility matures on May 24, 2022.

Borrowings under the 2017 Credit Facility may be denominated in U.S. dollars or up to a maximum of $100,000 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 2017 Credit 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, and (c) the Daily LIBOR Rate, plus 1.0%. As of March 31, 2020, the Company’s outstanding borrowings are subject to a LIBOR-based interest rate which resets regularly at issuance, based on lending terms.

The 2017 Credit Facility 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, 2020, the Company was in compliance with all covenants contained in the 2017 Credit Facility.

The following table presents the outstanding debt and borrowing capacity of the Company under the 2017 Credit Facility:



	As of March 31, 2020			As of December 31, 2019
Outstanding debt	$	25,000		$	25,000
Interest rate	1.9		%	2.8		%
Irrevocable standby letters of credit	$	298		$	303
Available borrowing capacity	$	274,702		$	274,697
Current maximum borrowing capacity	$	300,000		$	300,000

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8.	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 13 “Segment Information”) for the periods indicated:



	Three Months Ended March 31, 2020
	Reportable Segments
	North America		Europe		Russia		Consolidated Revenues
Customer Locations
North America	$	377,784	$	10,419	$	1,627	$	389,830
Europe	10,332		212,722		3		223,057
CIS	2,554		12		22,294		24,860
APAC	432		13,180		—		13,612
Revenues	$