SEGMENTS INFORMATION

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

SEGMENTS INFORMATION

SEGMENT INFORMATION

The Company determines its reporting 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 reportable 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 and six months ended June 30, 2016 and 2015, were as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Segment revenues:
North America	$	157,110	$	108,213	$	304,600	$	208,482
Europe	115,726		98,160		223,569		189,312
Russia	11,141		10,212		20,622		17,725
Other	—		1,484		—		2,744
Total segment revenues	$	283,977	$	218,069	$	548,791	$	418,263
Segment operating profit/(loss):
North America	$	38,339	$	25,746	$	68,994	$	49,814
Europe	13,413		16,670		30,245		32,010
Russia	2,876		1,740		4,036		1,469
Other	—		277		—		(180		)
Total segment operating profit	$	54,628	$	44,433	$	103,275	$	83,113

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 and six months ended June 30, 2016, revenues from one customer, UBS AG, were $36,570 and $72,239, respectively, and accounted for more than 10% of total revenues. During the three and six months ended June 30, 2015, revenues from one customer, UBS AG, were $31,933 and $62,867, 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 June 30, 2016, billed trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 14.2% of our total billed trade receivables. There were no customers individually exceeding 10% of our unbilled trade receivables as of June 30, 2016.

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

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Total segment revenues	$	283,977		$	218,069		$	548,791		$	418,263
Less: Other income	(145		)	(288		)	(477		)	(437		)
Revenues	$	283,832		$	217,781		$	548,314		$	417,826
Total segment operating profit:	$	54,628		$	44,433		$	103,275		$	83,113
Unallocated amounts:
Other income	(145		)	(288		)	(477		)	(437		)
Stock-based compensation expense	(12,730		)	(12,253		)	(23,694		)	(21,387		)
Non-corporate taxes	(1,437		)	(913		)	(2,517		)	(1,738		)
Professional fees	(2,460		)	(2,029		)	(4,186		)	(3,851		)
Depreciation and amortization	(2,576		)	(1,278		)	(4,267		)	(2,607		)
Bank charges	(386		)	(314		)	(727		)	(681		)
One time charges	(307		)	—			(307		)	—
Other corporate expenses	(2,507		)	(3,752		)	(4,689		)	(5,986		)
Income from operations	32,080			23,606			62,411			46,426
Interest and other income, net	1,138			1,299			2,349			2,457
Foreign exchange loss	(2,295		)	(465		)	(3,585		)	(6,219		)
Income before provision for income taxes	$	30,923		$	24,440		$	61,175		$	42,664

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    June 30,   2016		As of    December 31,   2015
Belarus	$	44,399	$	44,879
Ukraine	5,717		4,487
Russia	3,604		2,084
Hungary	3,345		2,485
United States	2,456		1,969
Poland	1,827		1,088
India	1,540		1,099
China	1,504		514
Other	2,359		1,894
Total	$	66,751	$	60,499

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

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
United States	$	145,882	$	97,233	$	281,440	$	189,415
United Kingdom	45,016		41,423		88,006		79,988
Switzerland	32,456		26,933		63,221		53,284
Canada	15,173		13,214		30,874		25,699
Russia	10,484		9,798		19,436		17,057
Germany	9,663		9,340		18,369		15,838
Hong Kong	5,091		6,062		10,845		11,272
Sweden	5,888		2,446		9,948		4,459
Netherlands	3,165		2,308		5,712		4,354
Belgium	2,529		1,628		4,653		3,153
Ireland	1,296		1,633		2,480		2,820
Italy	993		680		1,629		1,093
Kazakhstan	650		1,484		1,392		2,743
Other locations	2,420		1,357		4,737		2,552
Reimbursable expenses and other revenues	3,126		2,242		5,572		4,099
Revenues	$	283,832	$	217,781	$	548,314	$	417,826