OPERATING SEGMENTS

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

OPERATING SEGMENTS

OPERATING SEGMENTS

The Company determines its operating segments and reports segment information in accordance with the management approach, which designates internal reporting used by management to make operating decisions and assess performance as the source of the Company’s reportable segments.

The Company manages its business primarily based on the geographic managerial responsibility for its client base. As managerial responsibility for a particular client relationship generally correlates with the client’s geographic location, there is a high degree of similarity between client locations and the geographic boundaries of the Company’s reportable segments. In some cases, managerial responsibility for a particular client is assigned to a management team in another region and is usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In such cases, the client’s activity would be reported through the management team’s reportable segment.

The Company’s reportable segments are North America, Europe, Russia and Other. The revenues in the Other segment represented less than 1% of total segment revenues in 2014 and 2015 due to the ending of certain customer relationships and contractual changes with other clients. As no substantial clients remained in the segment, during the first quarter of 2016, the Company shifted managerial responsibility for the remaining clients to the Russia segment. This change does not represent a change in the Company's existing segments but rather a movement in responsibility for several clients that represent less than 1% of total segment revenue.

The Company’s Chief Operating Decision Maker (“CODM”) evaluates performance and allocates resources based on the segment's revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment have similar characteristics and are subject to similar factors, pressures and challenges. 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 expenses are not allocated to specific segments, as management does not believe it is practical because these expenses are either not directly attributable to any specific segment or controllable at the segment level and consequently are not allocated to individual segments in internal management reports used by the CODM. Such expenses are separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations.

Revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments for the three months ended March 31, 2016 and 2015, were as follows:

	Three Months Ended   March 31,
	2016		2015
Total segment revenues:
North America	$	147,490	$	100,269
Europe	107,843		91,152
Russia	9,481		7,513
Other	—		1,260
Total segment revenues	$	264,814	$	200,194
Segment operating profit:
North America	$	30,655	$	24,068
Europe	16,832		15,340
Russia	1,160		(271		)
Other	—		(457		)
Total segment operating profit	$	48,647	$	38,680

Intersegment transactions were excluded from the above on the basis that they are neither included into the measure of a segment’s profit and loss by the CODM, nor provided to the CODM on a regular basis.

During the three months ended March 31, 2016 and 2015, revenues from one customer, UBS AG, were $35,669 and $30,933, respectively, and accounted for more than 10% of total revenues. Revenues from this customer included reimbursable expenses and were included in the Company’s Europe segment in the periods indicated.

Trade accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. As of March 31, 2016, billed and unbilled trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 15.2% and 17.2% of our total billed and unbilled trade receivables, respectively.

Reconciliation of segment revenues and operating profit to consolidated income before provision for income taxes is presented below:

	Three Months Ended   March 31,
	2016			2015
Total segment revenues	$	264,814		$	200,194
Other income	(332		)	(149		)
Revenues	$	264,482		$	200,045
Total segment operating profit:	$	48,647		$	38,680
Unallocated amounts:
Other income	(332		)	(149		)
Stock-based compensation expense	(10,964		)	(9,134		)
Non-corporate taxes	(1,080		)	(825		)
Professional fees	(1,726		)	(1,822		)
Depreciation and amortization	(1,691		)	(1,329		)
Bank charges	(341		)	(367		)
Other corporate expenses	(2,182		)	(2,234		)
Income from operations	30,331			22,820
Interest and other income, net	1,211			1,158
Foreign exchange gain/(loss)	(1,290		)	(5,754		)
Income before provision for income taxes	$	30,252		$	18,224

Geographic Area Information

Long-lived assets 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. Geographical information about the Company’s long-lived assets based on physical location of the assets was as follows:

	As of    March 31,   2016		As of    December 31,   2015
Belarus	$	44,724	$	44,879
Ukraine	5,091		4,487
Hungary	3,369		2,485
Russia	3,099		2,084
United States	2,314		1,969
India	1,333		1,099
Poland	1,464		1,088
Other	2,900		2,408
Total	$	64,294	$	60,499

Information about the Company’s revenues by client location is as follows:

	Three Months Ended   March 31,
	2016		2015
United States	$	135,558	$	92,182
United Kingdom	42,990		38,565
Switzerland	30,765		26,351
Canada	15,701		12,485
Russia	8,952		7,259
Germany	8,706		6,498
Hong Kong	5,754		5,210
Netherlands	2,547		2,046
Sweden	4,060		2,013
Belgium	2,124		1,525
Kazakhstan	742		1,259
Ireland	1,184		1,187
Other locations	2,953		1,608
Reimbursable expenses and other revenues	2,446		1,857
Revenues	$	264,482	$	200,045