As a reminder, this conference is being recorded. I would now turn the conference over to Ms. Lilia Chernova, Investor Relations. Thank you, Ms. Chernova. You may now begin.
Thank you. Good morning, everyone. By now, you should have received your copy of the earnings release for the company's third quarter 2015 results. If you have not, a copy is available in the investor section on our website at epam.com. The speakers for today's call are Arkadiy Dobkin, CEO and President, and Anthony Conte, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your question may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Arkadiy?
Thank you, Lilia. Good morning, everyone, and thank you for joining us today to share with you our third quarter results. With a large portion of EPAM revenue generated outside of the United States and with corresponding significant currency headwinds all around the globe, it was not an easy quarter for us to navigate. At the same time, during this period, we continue to outperform the market by posting significant and consistent growth. While our Q3 revenue of $236 million represents 22% year-over-year and 8.4% sequential growth, our growth in constant currency was 31% year-over-year and 11% sequentially.
Overall, despite the recent acceleration of currency headwinds, which has had a $2.7 million investment impact on our Q3 revenue just since our last earnings call and will have an estimated $3 million impact on Q4, we are confident that our 2015 performance will still be in line with our original guidance. Anthony will provide a more detailed update on our financial performance in the quarter as well as full 2015 guidance. From a strategy perspective, we continue to follow the plans that we laid out in previous quarters, focusing largely on expanding EPAM hybrid capabilities in our effort to help clients in their transition into becoming digital businesses. As we incorporate a much more consultative approach into our mix of services, we expect that our top accounts will continue to grow significantly on base as well as drive new engagements further up with the value chain.
From a vertical perspective, we are pleased with the growth in our newer focus areas as well as continuing strengths from our established business and financial services, business information and media, and travel and consumer industries. Our largest vertical, banking and financial services, grew over 20% in constant currency, and we expand our digital business there, particularly in wealth management, where we anticipate additional opportunities that will diversify our traditional offerings in that segment over the next several quarters. Accelerating growth in our travel and consumer and business information and media is also being driven by increasingly digital platform work. We are expecting it to continue, especially as the benefits of the new skills we developed organically and via recent acquisitions will be merging with our current capabilities and be realized by our clients.
We see significant potential upticks as a result of that in both existing accounts as well as the acceleration of new logo acquisitions. We also continue to see growth from our independent software vendor segment at 20% in constant currency. However, there is a very interesting challenge now in how to draw the line between traditional ISV segment and many of our strong technology-driven clients with focus on generating revenue based on their business services and solutions versus selling software licenses or subscriptions directly. We will continue to evaluate how we categorize customers across our verticals to address this blurring line. One of the most interesting industry stories is the significant growth we are seeing within our life science and healthcare business with our organic growth rate of over 46% year-over-year.
The work we are doing in this vertical is addressing key shifts toward consumerism, where EPAM is building integrated experience and transactional platforms by bringing together critically important expertise we accumulated in working with more traditionally consumer-oriented industries and our strong subject matter knowledge in health. Today, for example, we are involved in truly groundbreaking innovation work with companies that sit at the forefront of healthcare. We help them to translate the latest insights and innovations in genomics and digital information and virtual reality technologies into new business models for delivering healthcare and precision medicine targets to patients' unique genetic and phenotypic profile. From a horizontal practice view, we continue our integration efforts of the recent acquisitions, and we're increasing our investments into our key capabilities in digital strategy and user experience as well as data analytics and service design methodologies.
We see a significant increase in customer traction of what we call our end-to-end engagement portfolio. So, continued investment in bringing together a very cohesive offering between our traditional software engineering services and those new emerging capabilities is one of our primary focuses. In this past quarter, we have added 10 significant new accounts, of which seven represent these new digital and analytics engagement models, as well as started a number of new digital initiatives across our existing clients. We believe that this trend will accelerate into the next quarters. From a delivery operations standpoint, our investment in key locations and into key operational platforms that allow us to better identify and understand our talent pool are allowing us to do a better job in staffing new hybrid teams of consultants, designers, architects, and engineers. In Q3, our global headcount increased to 14,000 employees.
We continue to expand our footprint practically across all our main delivery geographies, including North America, Western Europe, as well as Central and Eastern Europe, and also in Asia and now in Latin America. While competition for technology talent is very strong globally and represents a significant challenge to all players, our ability to identify and track qualitative as well as quantitative metrics through sophisticated internal platforms gives us an advantage in being able to hire, train, and retain the best talent in our key global locations. Therefore, with all those efforts, we continue to build on our reputation as a leader in product and platform development services. With that, I will turn to Anthony to share more details on our performance and guidance.
Thank you, Arkadiy. Good morning, everyone. I'll spend a few minutes taking you through the third quarter results, then I'll talk more about our outlook for the full year. As usual, you can find the full details of our results in our press release and on the quarterly fact sheet located in the investor section of our website. Q3 was another solid quarter of revenue, closing at $236 million, 22.5% over last year and 8.4% over prior quarter. As Arkadiy mentioned, currency remains a big piece of our story as headwinds have continued, compressing our Q3 revenue by about 8%, meaning, in Constant Currency terms, we would have grown 30.8% over Q3 2014 and 10.8% sequentially. North America remains our largest geography, representing 52.9% of our Q3 revenues, up 27.7% year-over-year and 31.3% in constant currency.
The continued weakening of the Canadian dollar is the primary driver to the almost 4% currency headwind. Europe was up 26.3% year-over-year, representing 38.7% of Q3 revenue. In constant currency terms, EU would have been up 34.3% year-over-year, reflecting the impact of both the euro and sterling volatility over the past year. For APAC, this is the first full quarter of 2015 that is comparable to prior year, given the Q2 2014 acquisition of Jointech. With that, we saw 19.7% growth year-over-year and 23.1% in constant currency. We continue to see acceptance of our APAC offering as more non-banking and financial services customers move into that region. CIS continues to struggle and is down 27.7% year-over-year and down to only 4.6% of revenue in Q3.
In constant currency terms, the region would have seen 15.1% growth, clearly highlighting the dramatic drop in the ruble over the past year. Clearly, even the 15% constant currency growth rate is well below our other regions, further reflecting the pressure on the business from the macroeconomic situation in CIS. In terms of our industry verticals, growth in banking and financial services this quarter remained consistent, with Q2 at 10.2% year-over-year growth and 4.6% sequentially. The significant slowdown in the Russian banking industry, compounded by the drop in the ruble, is still offsetting the healthy growth in key banking and financial services accounts in other regions. In constant currency, banking and financial services grew 20% year-over-year, and if you exclude CIS, it would have grown 23%. Travel and consumer turned in another strong quarter, growing 36.9% year-over-year and 13.7% sequentially.
In constant currency terms, we saw 51.6% year-over-year, with about 3% of this coming from NavigationArts, who brought some strong logos into this vertical when we acquired it. Life sciences and healthcare grew 46.6% year-over-year, with Q3 being the first fully comparable quarter since we acquired GGA in June of 2014. Sequentially, it grew 27.1% and now represents 8.4% of Q3 revenue. Currency has some minor impact here, shifting the year-over-year growth rate to 49%. Business, information, and media has a solid quarter with 34.2% year-over-year growth and 9.9% sequentially. Currency on this vertical is immaterial, as most customers are U.S. dollar denominated. The ISV vertical saw a drop in year-over-year growth rate, ending the quarter at 15.9% growth and about 3% sequentially. Currency headwinds would add about 4% year-over-year.
A key factor impacting this vertical, however, is the work at TriZetto ended in Q2 of 2015 due to the acquisition by Cognizant. Excluding this account from all periods, year-over-year growth for the balance of the vertical would have been 24.4%. Our other vertical, which is a collection of customers from various industries, grew 4% year-over-year and is down 3% sequentially. In our customer concentration numbers, we're seeing some positive trends. Our top 20 accounts, which grew 19.2% year-over-year and 22.7% in constant currency, now represents 53.9% of our Q3 revenue, which is down about 2% from last quarter. All other clients outside of our top 20 grew 26.8% year-over-year and 40.3% in constant currency.
Turning to our expenses, we completed the quarter with over 14,000 IT professionals, an increase of about 22% compared to Q3 of 2014, an 18% increase year-to-date. Currency generated some benefits to the cost of revenue in the quarter when compared to prior year. There was about 6% constant currency benefit versus Q3 2014, and the allocation of our currencies across our expense base remains fairly consistent. Utilization for the quarter was at 75%, slightly down from Q2 due to the heavy July and August vacation season. GAAP income from operations increased 27.2% year-over-year to represent 11.8% of revenue in the quarter. GAAP IFO includes stock-based compensation expense and certain acquisition-related costs that we exclude from our non-GAAP measures. Stock-based compensation expense for the third quarter increased 61% over prior year. This is mainly driven by the over 80% increase in our average closing stock price.
Additionally, 38% of the total Q3 charge and 43% of the increase is related to acquisitions. Our non-GAAP income from operations for the quarter, after all adjustments, increased 30.5% over prior year to $41.5 million, representing 17.6% of revenue. Our effective tax rate of the quarter came in at 20.2%. For the quarter, we generated $0.70 of non-GAAP EPS, $0.02 above our top end of our guidance, and $0.44 of GAAP EPS based on approximately 52 million shares diluted outstanding. Our balance sheet remained strong. We finished the quarter with approximately $214 million of cash plus $30 million in time deposit accounts. During the third quarter, operating activities generated approximately $55.5 million of cash. Unbilled revenues were at $105 million as of September 30th. Accounts receivable were at $126 million. DSO ended the quarter at approximately 51 days.
With that, I now turn to our guidance. Due to the strong volatility in the currency markets, which we believe will continue into 2016, we're adjusting how we provide guidance. For the full year, we expect to achieve revenue growth of at least 30% in constant currency and at least $900 million in GAAP reported revenue. Non-GAAP net income growth for 2015 is expected to be at least 25% year-over-year, with an effective tax rate of approximately 20%. Full-year non-GAAP diluted EPS is expected to be at least $2.65 per share based on the weighted average share count of approximately 52 million diluted shares outstanding. GAAP diluted EPS is expected to be at least $1.55 per share. In February, we will provide you full-year guidance for 2016 and then provide updates quarterly. With that, I would now like to turn the call back over to the operator and open up for Q&A. Operator?
Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Ashwin Shirvaikar of Citi. Please go ahead.
Thank you. Hi, Ark. Hi, Anthony. So if I understand this correctly, and I'm kind of laying out three factors here. One is currency in CIS and Canada. The second is CIS revenue weakness, which has been there for a while. And the third is TriZetto moving out, but that sort of stuff is kind of normal ebb and flow of contracts that can happen. Is that sort of the sum total of all the impact, or am I missing something with regards to the miss? And I don't necessarily want to call it a guide down because the lower end of the range seemed to move up a little bit. Is that what the impacts are?
Yeah, all of these factors clearly play a role, but I don't think it's exactly a right analysis. I think on effects, effects definitely play the major role. As we mentioned, it was $2.7 million impact. And clearly, specifically, Canadian dollars were the biggest surprise for us. It happened practically after our last announcement, and we didn't expect at this level. So Canadian dollars alone increase FX loss versus previous sequential quarter by $1.5 million. So in general, again, $2.7 million came from FX. Another $1.3 million-$1.5 million against what we were expecting with our guidance came practically from reviewing and making some decisions about how to proceed with capabilities which we required during the several last quarters. Because as we always mentioned, our acquisitions were mostly focusing on additional capabilities which would be utilized across different EPAM units.
This quarter, we had to make a couple of calls where we have to decide about the advantages of longer-term perspective versus short-term revenue and how to utilize capabilities which we got for potentially bigger deals in the future versus small, short-term billable positions. So that was actually another $1.3 million-$1.5 million. TriZetto was mostly expected. We thought maybe it would be a little bit longer, but it was finished, but we didn't count on this much. And as you mentioned, CIS also more or less was what we understand how it's what's happening there.
Okay [crosstalk]
If you take out, for example, $2.7 million, then this is $1.3 million, which is on kind of short-term revenue which we decided to give up. It's 0.5% of miss.
Right. Great. No, and that kind of gets us to where I think consensus was. As you look at that process of calling contracts and making that long-term versus short-term decision, is that process now behind us? I know that as you grow, it can come up again, but for now, is it behind us, and what is the forward-looking [crosstalk] impact?
I think it's still, yeah, I understand. So I think it still could be partially true in Q4. But after this, we should start realizing the benefits of what we're doing, and we'll see.
That's built into our guidance.
Right. That's right.
For Q4.
Okay. Great. And when you talk about the forward benefits of walking away from shorter-term revenues, is that mainly a resourcing-type issue where you move resources towards getting longer-term work? Is this [crosstalk] a resource constraint?
Yeah, that's exactly right. Yeah, this is like, again, we're not talking about yet resource constraint, but we clearly were optimizing the long-term opportunities with high-quality presales capabilities otherwise would be at short-term billable projects.
Okay. My last question, does any of this change your forward view with regards to the nature of investments you're making as you go through that process, whether on an organic or inorganic basis, either of those?
You mean longer-term projections, or what?
Yes. Well, not necessarily projections, but more investments that you're making as you think through what you because you've gone through, obviously, a process here where you're kind of looking at, "Here's where I want to be focused, not in these other areas." Does that impact your investment process with regards to how you think of acquisitions, with regards to how you think of inorganic investments?
No, we don't think that it's impacting us. So again, we shared it before, our approach to M&As, and we were talking about multiple purposes, multiple goals of this, including capabilities, specific expertise, and probably some additional delivery locations, but it's all still in place right now. So we're not changing this approach, and I don't think we're thinking that anything changed in longer-term perspectives as well.
Okay. Great. Thank you. Thank you both.
Thank you. The next question is from Jason Kupferberg of Jefferies. Please go ahead.
Thanks, guys. Good morning. If current spot rates hold through all of next year, what would be the FX headwinds on the top line in 2016?
I'm sorry. Headwinds on 2016?
If current spot rates stay in effect through all of next year, what would be the FX headwind on revenue in 2016? Yeah.
Well, I mean, we haven't really released our forecast for 2016, so I don't know that I could really compute for you what the headwinds would be. I mean, we'll factor that into our guidance when we give it, so. You're saying that as compared to this year, I guess, is what you're saying?
Yeah, yeah. Yeah, just year-over-year. In other words, if we stay at [crosstalk] these types of levels.
Honestly, I haven't done that calculation to really determine that.
I think maybe it would be helpful, a little bit different answer to, I mean, answer to a little bit different question. For example, if estimate how much revenue we lost based on the effect situation from the time when we gave guidance for the year, then this number would be $17 million right now.
Okay. Okay. That's helpful. That's helpful.
Another number which might help everybody as well, if we compare the FX effects versus last year, then this number would be $51 million.
Okay. Understood. And so just shifting gears to the competitive environment, can you give us a sense these days? I mean, how often are you competing versus the multinationals, an Accenture, a Capgemini, etc., versus the big Indian players versus some of the other regional players in the CIS area? I mean, has that mix changed at all?
Well, this is already pretty diverse competitive landscape for us. We're seeing all of those companies. We're seeing all of these companies on our competition list and maybe a little bit different between different verticals, but it is pretty much everybody you named.
Okay. And can you give us a sense today of how penetrated the Fortune 1000 is by EPAM? In other words, what percentage of the Fortune 1000, roughly, would you estimate our clients of EPAM today?
I don't have this on the top of my head, so probably we can give this answer to you separately, so.
Okay. All right. Thank you, guys.
Thank you. The next question is from Darrin Peller of Barclays. Please go ahead.
Hey, thanks, guys. Look, I just want to start off. I know it's a little early, but with regard to the outlook in terms of what you're seeing from your clients right now, Ark, any indication into 2016 in terms of trends and budgets and really how clients are feeling right now? Maybe that would be helpful, especially just given some of the sentiment we're seeing out of some of your areas in Russia and other areas around there. It would be helpful to get a better sense of how everyone else is feeling for now.
No, I probably can repeat what I'm repeating during the last quarters, quarter after quarter. So I think from our perspective, from our side, we're seeing pretty healthy demand in North America and Western Europe. So clearly, Russia or CIS is a different story. But from this perspective, we're seeing the next year in similar terms like previous year. So that's our long-term answer was we're looking forward to grow at least 20%.
Okay. What about with some of your top clients? I mean, I guess it's been a pretty big driver for you, seeing specifically UBS carrying a fair amount of growth for you guys over the past year or two. I mean, I think it was about 22% or low 20s% this quarter is what we calculate. A little bit of a deceleration, although it's obviously off a very high growth rate before, and maybe effects impacted that as well. So maybe just give us a little more color on the top few clients, and we'll leave it at that.
Well, as far as UBS growth, the one thing I do want to point out, remember that we acquired Jointech in Q2 of last year. So that brought us a significant uptick in UBS revenue since they were primarily servicing only UBS. So the growth rate in UBS has to be adjusted for the fact that this is really the first fully comparable quarter for 2015. So it was a 20%, you're right. It's about a 22, 21% growth rate for UBS this quarter. Constant Currency would be about 25% for UBS. I think the growth there remains solid and strong. The growth rate is obviously down from where it was in Q1, Q2 because of the Jointech acquisition, but it's growing pretty much in line with where we expect it to be and in line with the rest of the company.
Okay. Anything for the other top five guys that you can just comment on, any risk or opportunities that we should be aware of given how you have some pretty large clients up there?
Let's see. Well, UBS, we spoke about.
You mean from the top 10 or 20, or from top 10?
Yeah, you can go as far as the top 10 perhaps. I mean, I was really thinking just given there's some concentration in the top five or so, but yeah, I mean, top 10's great.
I can tell you that top five, in general, grew about 20%. I think that's top 10 growing 25%. This is all in line with the general growth we have.
Yeah. Going through the list, Dan, there's no specific big stories in any of them. The story's there pretty consistent with what we've always talked about. We've just continued to gain traction and penetrate deeper into those clients.
Okay. Just last question?[crosstalk]
There's no special story.
I appreciate that, Anthony. Just last question.
Just to also color, last year, TriZetto was one of the top 10 clients for us.
All right. That's a fair point. Thanks, Ark. Just last question again on the margin side. Again, you've maintained margins in a certain band, and you've done a pretty good job with that and reinvesting in the business. I mean, just give us a little comfort level on the cushion you have to continue to reinvest in what's needed given just how competitive digital has become across your pretty much the top few names out there really have pulled ahead of the pack around digital, and you guys have done a probably standout job given how high of a percentage of your mix is digital. But again, it's always a challenge to know what to invest in, and the margin is a story for you guys that you've been able to maintain. Is that are you still comfortable with that capability going forward, whether it's the next quarter or even year given just how competitive digital is becoming?
Yes, we are comfortable, and we're clearly planning to continue to compete in this space very seriously. We do believe that we have a very interesting distinction against most of our players in this space because we're really trying to invest in integration between digital part of this and really strong engineering. We do think that it's becoming pretty obvious competitive advantage for us and differentiator. From this point of view, we're not trying to replicate some other companies which are going with kind of roll-up of digital agencies all around the globe. We're trying to bring this capability and actually really deeply integrate with our delivery skills.
Okay. Thanks, guys. Good job.
Darrin. Thank you. The next question is from Mayank Tandon of Needham & Company. Please go ahead.
Hi. This is Elizabeth Schwach for Mayank. Thank you for taking my questions. Have there been any changes in hiring or your hiring plans in your key delivery locations?
As I mentioned today, we're hiring people across all locations. Also, during the last 18 months, we expanded in Central Eastern Europe. We opened, as you know, Bulgaria. We're growing in Poland. We're opening a center in the Czech Republic. So we mentioned that we're building operations in Mexico, Guadalajara, and already brought the existing clients. So we're looking at this as very much kind of in a global perspective, how to serve clients from different locations and potentially 24/7.
Okay. Thank you. Can you give us any color on how attrition is trending and how wage inflation or deflation, what that looks like given the recent currency issues?
Attrition remains pretty low for us. For the quarter, we saw about 8.2% of voluntary production attrition. So it's much lower than our historical average, which is usually in the low teens. Again, as we've talked about in past quarters, it's kind of driven by the situation in the CIS region allowing us to kind of keep attrition down. So we don't know if that's going to be a long-term permanent effect or not at this stage, but we're taking it for this year. As far as wage inflation goes, we do a small midyear promotion cycle. So we saw about 2.5%-2.6% of wage inflation coming from that midyear cycle. Otherwise, for the year, it remains very low, close to zero because of the benefits of effects.
Okay. Thank you.
Thank you. The next question is from Peter Christiansen of UBS. Please go ahead.
Good morning. Thanks for taking my question. Ark, I look back. I think about two years ago, you had Thomson Reuters rolling off, and at that time, the company was intentionally lowering utilization, investing in the pipeline of work that you saw coming in. Now, today, you have TriZetto rolling off. You talked about some new accounts coming into the pipeline with important key digital initiatives and utilizations now in the mid-70s. Can we draw parallels between these two periods? Am I thinking about this correctly, that you are kind of saving your powder for longer-term potential here?
Thomson Reuters was the largest client versus TriZetto was one of the top 10. I don't see this as a direct parallel here. Also, we're talking about TriZetto because it's a very kind of public information when Cognizant acquired them. During the history, even during the last three years, we have a similar situation. We're saying that because of acquisitions or because of some other different reasons, one client from top 20 each year, something's happening with it. I wouldn't put this as strong parallels. At the same time, yeah, TriZetto was big enough clients, and we clearly had opportunities to repurpose the talent in different directions. No, I don't think it's a direct parallel with this. By the way, at the same time, I would mention that from these three years ago, Thomson Reuters now become, again, top of our five clients, I think [crosstalk] Probably bigger than three years ago.
Oh, okay. And then I think we've heard a little bit during the quarter about potentially some areas that you're looking to in blockchain. Is this a key capability that you're looking to build upon, and do you see this as a big opportunity for the company?
I don't think we were talking about blockchain on our calls. But in general, yeah, it could be interesting opportunities, and clearly, we're looking into this, which is relatively early on, but as we all know, very hot in financial markets right now.
Great. And then, Anthony, can you give us a breakdown of the difference between GAAP and non-GAAP for the full year, I guess, since you're giving that full year?
Sure. Yeah, difference[crosstalk] for the full year.
Or for the quarter, whatever's easier.
I can do either/or or both [crosstalk] Stock comp, obviously.
The quarter's great.
Yeah, stock comp's obviously the biggest component. For the quarter, it was just under $12 million. For the full year, it'll be about $45 million. M&A activity will be about $500,000 for the year. For the quarter, it's about $427,000. Amortization of purchase intangibles will be $1.3 million for the quarter. It'll be about $5 million for the year. And effects right now was about -$150,000 for the quarter. It'll be about +$6 million for the year. And I think that's it. That should get you everything.
Great. And then the stock-based comp that was tied to M&A, is that the size of that? Is that recurring, do you believe, at that level, or was that more one-time in nature?
No, it's not one-time. It'll continue through probably a little bit into next year, about halfway, as they start to fall off. So next year, we'll start to see some falloff from the, say, 2012 acquisition, some of the amortization, and then it'll kind of fall off from there as acquisitions age.
Great. Thanks for taking my question.
Sure.
Thank you. The next question is from Arvind Ramnani of Gordon Haskett. Please go ahead.
Hi, Ark. Hi, Anthony.
Arvin.
I think that it'll be very helpful to talk about some of your large $20 million accounts. Clearly, you're servicing more of these accounts. But what are some of the inflection points at a client that will help the account grow from a $4 million-$5 million account to $20 million? And what are you doing from a process perspective to enable more of the accounts to get to this $20 million+ mark?
Okay. We don't have 100 accounts at the $20 million mark yet. I think it's still a pretty individual [crosstalk] approach happening. Yeah, we have probably around six, seven accounts right now. I think that's what we're exactly trying to do, and that's what we were doing during these last three years, bringing these more strategic capabilities to the clients, being able to start more consultative engagements, people who can handle this type of conversations and advice. We're usually building a very strong reputation as a delivery partner, after which clients come into us and starting to we're coming to us and starting to ask about more strategic capabilities and kind of advice and brainstorming together. That's where we were really lacking talent three, four years ago. Again, that's what we were doing, and that's what we're trying to do. I think increasing large clients, it's actually showing that it works. That's what we continue to do, planning to continue doing.
Great. That's helpful. And just very quick on Russia. As expected, the business continues to get kind of smaller. So what's the thinking about kind of keeping the Russia business still ongoing? Because at some point, it probably gets a little too expensive to kind of maintain that business. Or is the thinking of keeping the Russia business still ongoing so that when the environment gets more conducive to growth, you're there to take advantage of the opportunities? Just trying to get a sense of your Russia strategy longer term.
Basically, if I rephrase, are you asking why we're still staying in the market and why we're not exiting the market completely?
Yes.
I think it would be for us a little bit premature to do something like this. Russia and former Soviet Union countries, it's 250 million population, which, again, yes, we know that it went down, but there are still major businesses there. There is still going on international business, which, considering the region as a market, and they need to be served there. For us, with our roots, it would be kind of a little bit silly, probably, exiting the market where we can comfortably operate and still going to operate because we have 2,000 delivery capacity in the market.
We're going to stay there no matter what from a delivery perspective. We just need to be more careful what we're doing, how we're doing, with what type of clients we serve. That's already happening during the last three years because even before the ruble crash, you probably saw that proportionally, the CIS market was going down.
Okay. Yep. That's very helpful. Thank you very much, and good luck for the rest of the year.
Thank you.
Thank you.
Thank you. The next question is from Alex Veytsman of Monness, Crespi, Hardt. Please go ahead.
Yes. Good morning, guys. Quick question for you. In North America, it seems that sequentially, revenue grew roughly $15 million, which is arguably one of the largest deltas we've seen in that region over the last several quarters. Could you be more specific about what drove that in terms of accounts and also your verticals?
You said sequentially you saw it grow?
From Q2 to Q3. Right. From Q2 to Q3.
Right. So it's up about, in reported terms, North America's up about $14 million from Q2 to, I mean, I don't know that we can really address any specific accounts within that. North America just continues to be our strongest sector. Growth is coming really from across the spectrum of different verticals. So they're all really growing. I don't know if there's any specific story different than what I kind of spoke to at the top level. Obviously, travel and consumer was very big for us this quarter globally. That's still also true within North America. And we saw growth across many of our other verticals. So there's no specific story that I have that addresses that. And as far as going forward.
As far as going forward for the fourth quarter, should we expect the delta to be fairly similar, or do you expect it to be more in line with Q3? Because it was, I mean.
So it was[crosstalk]
It increased the.
Yeah. It was actually a couple kind of fixed-cost deliverables, which we did in North America, which probably was a little bit extra. So I think life science contributed well in this segment. So probably next quarter's maybe not for North America as strong as this one, but in general, it's going to consistently grow like it did in the past.
Got it. That's helpful. Then for life sciences, I mean, as you mentioned, yes, it was quite a significant growth. Obviously, it's still kind of a relatively smaller segment, so it grows fairly fast. What are your expectations for the next several quarters? Are you expecting it to kind of hover around the same levels, or do you expect it to expand?
Probably in the future, it would be getting more in line with the average across the company. Again, right now, it's too early to say. I think it still will be growing in Q4 pretty well, and then see.
Sounds good. Thank you. Thank you. The next question is from Ashwin Shirvaikar of Citi. Please go ahead.
Hi. I just wanted to follow back up on one question. When you move to using at least it's a good move, but there are clearly positives and negatives to providing only a lower bound instead of a range. So I just want to understand for 4Q what your assumptions are with regards to budget flush, with regards to effects, demand trend. It seems like effects would stay consistent, and the demand trend, generally speaking, is good except for the culling you mentioned. So that sort of leaves primarily budget flush. What are your assumptions generally for 4Q?
I think everybody has too good memory because this spike in Q4 was happening more in 2013, I think. So it was smaller last year, and we don't expect much this year. So it probably would be kind of regular quarterly increase as anybody else because in 2013, it was probably impacted by actually the CIS market where we had more fixed-cost deals closing in Q4. So last year, it was already different, and this year, we don't expect it.
Okay. To answer your question on effects expectations, built into the forecast is really looking at some of the forward rates for the quarter and taking that approach for what we build in from effects expectations. So it'll be dependent upon how good the forward forecasts are.
Super. That's good to know. Great. Thank you, guys.
Thank you. The next question is from Anil Doradla of William Blair. Please go ahead.
Hi. This is Maggie Nolan in for Anil Doradla. I had a question on, I know we spoke some about your top accounts, but I'm wondering if the focus in the long term is going to be more on growing kind of those existing top accounts and finding new opportunities within those accounts, or if you're looking more towards really growing the client base overall. I'm hoping you can share a little bit more color on that.
Yeah. Probably my answer would be very simple that we're trying to do both, but we have clearly and we do believe that we have a very strong opportunity in our existing base, and we will continue growing this and finding new lines of revenue there, especially taking into account that we're expanding our capabilities and can offer new things. So I think existing accounts is a big potential for us. We have a pretty large number of. I don't know exactly what percentage of Fortune 500 or 1,000, but we have a significant number of large clients which could grow and double and triple with us. But we're also paying very strong attention right now on the new logos.
Great. That helps. Thanks. Because we have heard some of your peers mention trying to kind of zone in on some of those existing accounts a little bit more. So I'm wondering, is there a cap for the number of new opportunities that you want to bring on, or do you just intend to continue to grow headcount to spur that growth?
Again, both, we do believe that we need to have a pretty diverse client base and not to have too concentrated. So I think what we have today and with our potential growth of around 20%+, we will try to maintain similar client concentration.
Okay. Great. Thanks for taking my question.
Thank you. At this time, I would like to turn the conference back over to Mr. Dobkin for any closing comments.
Again, thank you, everyone, for joining today. I hope we addressed concerns which we understand were valid. I hope we hope to see you in three months again. Thank you. Bye-bye.
Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.