SEGMENTS INFORMATION

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

SEGMENT 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 these expenses are either directly attributable to any specific segment or controllable at the segment level. Such “unallocated” expenses are deducted against the Company’s total income from operations and are not allocated to individual segments in internal management reports used by the CODM.

Revenues from external customers and operating profit/(loss), before unallocated expenses, for the North America, Europe, Russia and Other reportable segments for the three and nine months ended September 30, 2016 and 2015, were as follows:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Segment revenues:
North America	$	161,655	$	121,746	$	466,255	$	330,228
Europe	126,265		103,514		349,834		292,826
Russia	10,434		9,707		31,056		27,432
Other	—		1,207		—		3,951
Total segment revenues	$	298,354	$	236,174	$	847,145	$	654,437
Segment operating profit/(loss):
North America	$	34,699	$	28,906	$	103,693	$	78,720
Europe	19,548		17,021		49,793		49,031
Russia	1,208		1,626		5,244		3,095
Other	—		168		—		(12		)
Total segment operating profit	$	55,455	$	47,721	$	158,730	$	130,834

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 nine months ended September 30, 2016, revenues from one customer, UBS AG, were $35,142 and $107,381, respectively, and accounted for more than 10% of total revenues. During the three and nine months ended September 30, 2015, revenues from one customer, UBS AG, were $32,960 and $95,826, 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 September 30, 2016, billed and unbilled trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 10.3% and 10.7% of our total billed and unbilled trade receivables, respectively.

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

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Total segment revenues	$	298,354		$	236,174		$	847,145		$	654,437
Less: Other income	(61		)	(125		)	(538		)	(562		)
Revenues	$	298,293		$	236,049		$	846,607		$	653,875
Total segment operating profit:	$	55,455		$	47,721		$	158,730		$	130,834
Unallocated amounts:
Other income	(61		)	(125		)	(538		)	(562		)
Stock-based compensation expense	(13,826		)	(11,963		)	(37,520		)	(33,350		)
Non-corporate taxes	(1,588		)	(1,120		)	(4,105		)	(2,858		)
Professional fees	(1,470		)	(1,572		)	(5,656		)	(5,423		)
Depreciation and amortization	(2,027		)	(1,312		)	(6,294		)	(3,919		)
Bank charges	(370		)	(340		)	(1,097		)	(1,021		)
One-time charges	(7		)	—			(314		)	—
Other corporate expenses	(2,204		)	(3,513		)	(6,893		)	(9,499		)
Income from operations	33,902			27,776			96,313			74,202
Interest and other income, net	1,067			865			3,416			3,322
Foreign exchange (loss)/gain	(1,728		)	32			(5,313		)	(6,187		)
Income before provision for income taxes	$	33,241		$	28,673		$	94,416		$	71,337

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    September 30,   2016		As of    December 31,   2015
Belarus	$	44,942	$	44,879
Ukraine	5,735		4,487
Russia	4,851		2,084
Hungary	3,945		2,485
United States	2,685		1,969
Poland	2,135		1,088
China	1,715		514
India	1,594		1,099
Other	2,682		1,894
Total	$	70,284	$	60,499

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

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
United States	$	153,818	$	110,191	$	435,258	$	299,606
United Kingdom	43,535		41,324		131,541		121,312
Switzerland	31,550		28,370		94,771		81,654
Canada	14,526		14,695		45,400		40,394
Germany	12,325		10,378		30,694		26,216
Russia	9,833		9,469		29,269		26,526
Sweden	6,256		3,020		16,204		7,479
Hong Kong	4,839		5,758		15,684		17,030
Netherlands	4,302		2,630		10,014		6,984
Belgium	2,676		2,154		7,329		5,307
China	2,050		276		2,757		411
Spain	1,821		334		2,635		513
Ireland	1,315		1,554		3,795		4,374
Italy	1,103		602		2,732		1,695
Other locations	5,185		2,417		9,793		7,398
Reimbursable expenses and other revenues	3,159		2,877		8,731		6,976
Revenues	$	298,293	$	236,049	$	846,607	$	653,875