10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2017

OR

¨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	223536104
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
41 University Drive, Suite 202 Newtown, Pennsylvania	18940
(Address of principal executive offices)	(Zip code)

267-759-9000

(Registrant’s telephone number, including area code)

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  x No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x 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. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	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   x

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 28, 2017
Common Stock, par value $0.001 per share	51,839,547 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, 2017 and December 31, 2016	3
Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2017 and 2016	4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	32
PART II. OTHER INFORMATION	32
Item 1. Legal Proceedings	32
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3. Defaults Upon Senior Securities	32
Item 4. Mine Safety Disclosures	32
Item 5. Other Information	32
Item 6. Exhibits	33
SIGNATURES	34

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(US Dollars in thousands, except share and per share data)

	As of    March 31,   2017			As of    December 31,   2016
Assets
Current assets
Cash and cash equivalents	$	398,419		$	362,025
Restricted cash	268			2,400
Time deposits	403			403
Accounts receivable, net of allowance of $1,241 and $1,434, respectively	176,686			199,982
Unbilled revenues	102,838			63,325
Prepaid and other current assets, net of allowance of $406 and $644, respectively	26,702			15,690
Employee loans, net of allowance of $0 and $0, respectively	2,694			2,726
Total current assets	708,010			646,551
Property and equipment, net	75,962			73,616
Restricted cash	245			239
Employee loans, net of allowance of $0 and $0, respectively	2,975			3,252
Intangible assets, net	49,668			51,260
Goodwill	110,291			109,289
Deferred tax assets	29,211			31,005
Other long-term assets, net of allowance of $138 and $132, respectively	10,625			10,599
Total assets	$	986,987		$	925,811
Liabilities
Current liabilities
Accounts payable	$	3,256		$	3,213
Accrued expenses and other liabilities	32,451			49,895
Due to employees	44,951			32,203
Deferred compensation due to employees	6,838			5,900
Taxes payable	35,395			25,008
Total current liabilities	122,891			116,219
Long-term debt	25,040			25,048
Other long-term liabilities	3,954			3,132
Total liabilities	151,885			144,399
Commitments and contingencies (Note 8)
Stockholders’ equity
Common stock, $0.001 par value; 160,000,000 authorized; 51,683,500 and 51,117,422 shares issued, 51,663,765 and 51,097,687 shares outstanding at March 31, 2017 and December 31, 2016, respectively	51			50
Additional paid-in capital	396,829			374,907
Retained earnings	469,701			444,320
Treasury stock	(177		)	(177		)
Accumulated other comprehensive loss	(31,302		)	(37,688		)
Total stockholders’ equity	835,102			781,412
Total liabilities and stockholders’ equity	$	986,987		$	925,811

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

3

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

(US Dollars inthousands, except share and per share data)

	Three Months Ended   March 31,
	2017			2016
Revenues	$	324,651		$	264,482
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)	207,730			167,381
Selling, general and administrative expenses	78,453			61,494
Depreciation and amortization expense	6,672			5,102
Other operating expenses, net	830			174
Income from operations	30,966			30,331
Interest and other income, net	584			1,211
Foreign exchange loss	(2,955		)	(1,290		)
Income before provision for income taxes	28,595			30,252
Provision for income taxes	4,954			6,353
Net income	$	23,641		$	23,899
Foreign currency translation adjustments	6,386			4,699
Comprehensive income	$	30,027		$	28,598
Net income per share:
Basic	$	0.46		$	0.48
Diluted	$	0.44		$	0.45
Shares used in calculation of net income per share:
Basic	50,958			49,714
Diluted	53,889			52,883

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

4

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(US Dollars in thousands)

	Three Months Ended   March 31,
	2017			2016
Cash flows from operating activities:
Net income	$	23,641		$	23,899
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,672			5,102
Bad debt (recovery)/expense	(517		)	552
Deferred taxes	2,595			(482		)
Stock-based compensation expense	15,776			10,964
Excess tax benefit on stock-based compensation plans	—			(2,040		)
Other	651			50
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets:
Accounts receivable	24,635			16,993
Unbilled revenues	(39,485		)	(18,559		)
Prepaid expenses and other assets	(79		)	(1,383		)
Increase/(decrease) in operating liabilities:
Accounts payable	77			671
Accrued expenses and other liabilities	(18,484		)	(34,153		)
Due to employees	8,611			12,420
Taxes payable	7,135			(3,173		)
Net cash provided by operating activities	31,228			10,861
Cash flows from investing activities:
Purchases of property and equipment	(5,725		)	(6,185		)
Employee housing loans issued	(370		)	—
Proceeds from repayments of employee housing loans	689			470
Decrease in restricted cash and time deposits, net	38			30,000
Increase in other long-term assets, net	(313		)	(774		)
Other investing activities, net	37			(91		)
Net cash (used in)/provided by investing activities	(5,644		)	23,420
Cash flows from financing activities:
Proceeds from stock option exercises	10,606			3,108
Excess tax benefit on stock-based compensation plans	—			2,040
Payments of withholding taxes related to net share settlements of restricted stock units	(2,694		)	—
Proceeds from debt (Note 4)	—			20,000
Repayment of debt (Note 4)	(30		)	(15,031		)
Proceeds from government grants	—			135
Acquisition of business, deferred consideration	—			(463		)
Net cash provided by financing activities	7,882			9,789
Effect of exchange rate changes on cash and cash equivalents	2,928			1,358
Net increase in cash and cash equivalents	36,394			45,428
Cash and cash equivalents, beginning of period	362,025			199,449
Cash and cash equivalents, end of period	$	398,419		$	244,877

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

5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(US Dollars inthousands, except share and per share data)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

EPAM Systems, Inc. (the “Company” or “EPAM”) is a leading global provider of software product development and digital platform engineering services to clients located around the world, primarily in North America, Europe, Asia and Australia. The Company has expertise in various industries, including software and hi-tech, financial services, media and entertainment, travel and hospitality, retail and distribution and life sciences and healthcare. The Company is incorporated in Delaware and headquartered in Newtown, PA.

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”) and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The 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, 2016 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 our 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.

Change in Presentation of Certain Financial Information — During the first quarter of 2017, the Company changed the presentation of geographic area information about its consolidated revenues. Historically, information about geographic mix of revenues excluded reimbursable expenses and other revenues, which primarily included travel and entertainment costs that are chargeable to clients. Effective January 1, 2017, the Company reports geographic area information about reimbursable expenses and other revenues based on location of clients to which these costs are chargeable. Accordingly, the Company has changed the presentation of revenues by client location for the three months ended March 31, 2016 to conform to the current period presentation. These changes did not result in any adjustments to the Company’s previously issued financial statements and were applied retrospectively beginning on January 1, 2015. Comparative information for the three months ended March 31, 2016 follows:

6

	Three Months Ended March 31, 2016
	As reported				After Reclassification
	(in thousands except percentages)
United States	$	135,558	51.3	%	$	136,639	51.7	%
United Kingdom	42,990		16.3	%	43,560		16.5	%
Switzerland	30,765		11.6	%	30,852		11.7	%
Canada	15,701		5.9	%	15,846		6.0	%
Russia	8,952		3.4	%	8,965		3.4	%
Germany	8,706		3.3	%	8,739		3.3	%
Hong Kong	5,754		2.2	%	5,944		2.2	%
Sweden	4,060		1.5	%	4,128		1.5	%
Netherlands	2,547		1.0	%	2,647		1.0	%
Ireland	1,184		0.4	%	1,186		0.4	%
Italy	636		0.2	%	668		0.3	%
Denmark	405		0.2	%	410		0.2	%
China	294		0.1	%	294		0.1	%
Other locations	4,484		1.7	%	4,604		1.7	%
Reimbursable expenses and other revenues	2,446		0.9	%	—		—	%
Total	$	264,482	100.0	%	$	264,482	100.0	%

Revenue Recognition — The Company recognizes revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue reported.

The Company derives its revenues from a variety of service offerings, which represent specific competencies of its IT professionals. Contracts for these services have different terms and conditions based on the scope, deliverables, and complexity of the engagement, which require management to make judgments and estimates in determining the appropriate revenue recognition. Fees for these contracts may be in the form of time-and-materials or fixed-price arrangements. If there is an uncertainty about the project completion or receipt of payment for the services, revenue is deferred until the uncertainty is sufficiently resolved. At the time revenue is recognized, the Company provides for any contractual deductions and reduces the revenue accordingly. The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the condensed consolidated statements of income and comprehensive income.

The Company defers amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. Unbilled revenue is recorded when services have been provided but billed subsequent to the period end in accordance with the contract terms.

Fair Value of Financial Instruments — The Company makes assumptions about fair values of its financial assets and liabilities in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurement”, and utilizes the following fair value hierarchy in determining inputs used for valuation:

Level 1 — Quoted prices for identical assets or liabilities in active markets.

Level 2 — Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities, and observable inputs other than quoted prices such as interest rates or yield curves.

Level 3 — Unobservable inputs reflecting our view about the assumptions that market participants would use in pricing the asset or liability.

Where the fair values of financial assets and liabilities recorded in the condensed consolidated balance sheets cannot be derived from an active market, they are determined using a variety of valuation techniques. These valuation techniques include a net present value technique, comparison to similar instruments with market observable inputs, option pricing models and other relevant valuation models. To the extent possible, observable market data is used as inputs into these models but when it is not feasible, a degree of judgment is required to establish fair values.

7

Changes in fair value could cause a material impact to, and volatility in the Company’s operating results. See Note 3 for disclosures related to fair value.

Business Combinations — The Company accounts for its business combinations using the acquisition accounting method, which requires it to determine the fair value of net assets acquired and the related goodwill and other intangible assets in accordance with the FASB ASC Topic 805, “Business Combinations.” The Company identifies and attributes fair values and estimated lives to the intangible assets acquired and allocates the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. There are different valuation models for each component, the selection of which requires considerable judgment. These determinations will affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes are reasonable, but recognizes that the assumptions are inherently uncertain.

All acquisition-related costs, other than the costs to issue debt or equity securities, are accounted for as expenses in the period in which they are incurred. Changes in fair value of contingent consideration arrangements that are not measurement period adjustments are recognized in earnings. Payments to settle contingent consideration, if any, are reflected in cash flows from financing activities and the changes in fair value are reflected in cash flows from operating activities in the Company’s condensed consolidated statements of cash flows.

The acquired assets typically consist of customer relationships, trade names, non-competition agreements, and workforce and as a result, a substantial portion of the purchase price is usually allocated to goodwill and other intangible assets.

Goodwill and Other Intangible Assets — Goodwill and intangible assets that have indefinite useful lives are accounted for in accordance with FASB ASC 350, “Intangibles - Goodwill and Other.” The Company conducts its evaluation of goodwill impairment at the reporting unit level on an annual basis during its fourth quarter, and more frequently if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value. A reporting unit is an operating segment or one level below. The Company does not have intangible assets that have indefinite useful lives.

Intangible assets that have finite useful lives are amortized over their estimated useful lives on a straight-line basis. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset’s carrying value, using estimates of future cash flows over the remaining asset life. The estimates of future cash flows attributable to intangible assets require significant judgment based on the Company’s historical and anticipated results. Any impairment loss is measured by the excess of carrying value over fair value.

Stock-Based Compensation — The Company recognizes the cost of its stock-based incentive awards based on the fair value of the award at the date of grant, net of estimated forfeitures. The cost is expensed evenly over the service period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Over time, the forfeiture assumption is adjusted to the actual forfeiture rate and such change may affect the timing of the total amount of expense recognized over the vesting period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that do not meet the criteria for equity classification are recorded as liabilities and adjusted to fair value at the end of each reporting period.

Off-Balance Sheet Financial Instruments — The Company uses FASB ASC Topic 825, “Financial Instruments” to identify and disclose off-balance sheet financial instruments, which include credit instruments, such as commitments to make employee loans and related guarantees, standby letters of credit and certain guarantees issued under customer contracts. The face amount for these items represents the exposure to loss, before considering available collateral or the borrower’s ability to repay. Loss contingencies arising from off-balance sheet financial instruments are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe such matters exist that will have a material effect on the condensed consolidated financial statements.

8

2. GOODWILL

Goodwill by reportable segment was as follows:

	North America			Europe		Total
Balance as of January 1, 2017	$	76,812		$	32,477	$	109,289
Other acquisitions purchase accounting adjustment	(352		)	352		—
Effect of net foreign currency exchange rate changes	144			858		1,002
Balance as of March 31, 2017	$	76,604		$	33,687	$	110,291

There were no accumulated impairment losses in the North America or Europe reportable segments as of March 31, 2017 or December 31, 2016.

3. FAIR VALUE MEASUREMENTS

The Company carries contingent liabilities and certain equity-based awards at fair value on a recurring basis on its consolidated balance sheets. Changes in the fair values of these financial liabilities are recorded in cost of revenues and selling, general and administrative expenses on the Company’s consolidated statements of income and comprehensive income.

The following tables show the fair values of the Company’s financial liabilities measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016:

	As of March 31, 2017
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	6,754	$	6,754	$	—	$	—
Cash-settled restricted stock units	84		84		—		—
Total liabilities measured at fair value on a recurring basis	$	6,838	$	6,838	$	—	$	—

	As of December 31, 2016
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	3,789	$	3,789	$	—	$	—
Cash-settled restricted stock units	2,111		2,111		—		—
Total liabilities measured at fair value on a recurring basis	$	5,900	$	5,900	$	—	$	—

Performance-based equity awards carried at fair value on a recurring basis represent contractual liabilities related to certain business combination transactions completed in 2014. During the determination period, the Company classified the performance-based equity awards within Level 3. The Company estimated the fair value of these liabilities based on transaction-specific inputs by discounting the expected cash flows to a present value, after taking into account estimated probabilities of reaching specified performance targets, as appropriate. During the year ended December 31, 2016, the company reclassified these liabilities from Level 3 to Level 1.

The fair value of the cash-settled restricted stock units is measured using prices for which observable market information is available.

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 Company uses the following methods to estimate the fair values of its financial instruments:

• for financial instruments that have quoted market prices, those quoted prices are used to estimate fair value;

• for financial instruments for which no quoted market prices are available, fair value is estimated using information obtained from independent third parties, or by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.

• for financial instruments for which no quoted market prices are available and that have no defined maturity, have a remaining maturity of 360 days or less, or reprice frequently to a market rate, the Company assumes that the fair value of these instruments approximates their reported value, after taking into consideration any applicable credit risk;

9

The generally short duration of certain of the Company’s assets and liabilities results in a significant number of assets and liabilities for which fair value equals or closely approximates the amount recorded on the Company’s consolidated balance sheets. These types of assets and liabilities which are reported on the Company’s consolidated balance sheets include:

• cash and cash equivalents;

• time deposits and restricted cash;

• employee loans and notes receivable;

• borrowings under the 2014 Credit Facility (Note 4)

In addition, due to the relatively short duration of certain loans, the Company considers fair value for these loans to approximate their carrying amounts. The fair value of other types of loans, such as employee loans issued under the Housing Program, is estimated using information on the rates of return that market participants in Belarus would require when investing in unsecured U.S. dollar-denominated government bonds with similar maturities (a “risk-free rate”), after taking into consideration any applicable credit and liquidity risk.

The following tables present the reported amounts and estimated fair values of the financial assets and liabilities for which disclosure of fair value is required, as they would be categorized within the fair-value hierarchy, as of the dates indicated:

					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
March 31, 2017
Financial Assets:
Cash and cash equivalents	$	398,419	$	398,419	$	398,419	$	—	$	—
Time deposits and restricted cash	916		916		—		916		—
Employee loans	5,669		5,669		—		—		5,669
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	25,022	$	25,022	$	—	$	25,022	$	—

					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2016
Financial Assets:
Cash and cash equivalents	$	362,025	$	362,025	$	362,025	$	—	$	—
Time deposits and restricted cash	$	3,042	$	3,042	$	—	$	3,042	$	—
Employee loans	$	5,978	$	5,978	$	—	$	—	$	5,978
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	25,019	$	25,019	$	—	$	25,019	$	—

4. DEBT

Revolving Line of Credit — On September 12, 2014, the Company entered into a credit facility (the “2014 Credit Facility”) with PNC Bank, National Association; Santander Bank, N.A; and Silicon Valley Bank (collectively the “Lenders”) to replace its former revolving loan agreement. The 2014 Credit Facility provides for a borrowing capacity of $100,000, with potential to increase the credit facility up to $200,000 if certain conditions are met. The 2014 Credit Facility matures on September 12, 2019.

Borrowings under the 2014 Credit Facility may be denominated in U.S. dollars or, up to a maximum of $50,000 equivalent in British pounds sterling, Canadian dollars, euros or Swiss francs (or other currencies as may be approved by the Lenders). Borrowings under the 2014 Credit Facility bear interest at either a base rate or Euro-rate plus a margin based on the Company’s leverage ratio. Base rate is equal to the highest of (a) the Federal Funds Open Rate, plus 0.5%, (b) the Prime Rate, and (c) the Daily LIBOR Rate, plus 1.0%.

10

The 2014 Credit Facility is collateralized with: (a) all tangible and intangible assets of the Company, and its U.S.-based subsidiaries including all accounts, general intangibles, intellectual property rights and equipment; and (b) all of the outstanding shares of capital stock and other equity interests in U.S.-based subsidiaries of the Company, and 65.0% of the outstanding shares of capital stock and other equity interests in certain of the Company’s foreign subsidiaries. The 2014 Credit Facility includes customary business and financial covenants and restricts the Company’s ability to make or pay dividends (other than certain intercompany dividends) unless no potential or actual event of default has occurred or would be triggered. As of March 31, 2017, the Company was in compliance with all covenants contained in the 2014 Credit Facility.

As of March 31, 2017 and December 31, 2016, the outstanding debt of the Company under the 2014 Credit Facility was $25,000, and is subject to a LIBOR-based interest rate, which resets regularly at issuance, based on lending terms. In addition, the Company has a $942 unused irrevocable standby letter of credit associated with its insurance program that was issued under the 2014 Credit Facility.

As of March 31, 2017 and December 31, 2016, the borrowing capacity of the Company under the 2014 Credit Facility was $74,058.

5. INCOME TAXES

In determining its quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. The Company’s worldwide effective tax rate for the three months ended March 31, 2017 and 2016 was 17.3% and 21.0%, respectively. The decrease in the three months ended March 31, 2017 as compared to the same period last year was primarily due to the recognition of excess tax benefits of $1,695 following the adoption of ASU No. 2016-09 in the first quarter of fiscal year 2017. Refer to Note 10, “Recent Accounting Pronouncements,” for further information.

Our Belarus subsidiary is eligible for certain income tax holiday benefits granted by the local government for its export activities conducted within the Hi-Tech Park. Income tax holidays are effective for 15 years starting from 2006. Other subsidiaries of the Company are primarily taxed at the jurisdictions’ statutory rate most of which are lower than U.S. federal statutory rates.

6. STOCK-BASED COMPENSATION

The following costs related to the Company’s stock compensation plans were included in the condensed consolidated statements of income and comprehensive income:

	Three Months Ended   March 31,
	2017		2016
Cost of revenues	$	5,350	$	3,644
Selling, general and administrative expenses - Acquisition related	4,574		3,010
Selling, general and administrative expenses - All other	5,852		4,310
Total	$	15,776	$	10,964

11

Equity Plans

2012 Non-Employee Directors Compensation Plan — On January 11, 2012, the Company approved the 2012 Non-Employee Directors Compensation Plan (“2012 Directors Plan”) to be used to issue equity awards to its non-employee directors. The Company authorized 600,000 shares of common stock to be reserved for issuance under the plan. The 2012 Directors Plan will expire after 10 years and is administered by the Company’s Board of Directors. As of March 31, 2017, 547,560 shares remained available for issuance under the 2012 Directors Plan.

2015 Long-Term Incentive Plan— On June 11, 2015, the Company's stockholders approved the 2015 Long Term Incentive Plan (“2015 Plan”) to be used to issue equity awards to company personnel. As of March 31, 2017, 5,681,902 shares remained available for issuance under the 2015 Plan. All of the stock option awards issued pursuant to the 2015 Plan expire 10 years from the date of grant.

2012 Long-Term Incentive Plan — On January 11, 2012, the Company approved the 2012 Long-Term Incentive Plan (“2012 Plan”) to be used to issue equity grants to company personnel. In June 2015, the 2012 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2012 Plan and any shares that are subject to an award that was previously granted under the 2012 Plan and that expire or terminate for any reason prior to exercise will become available for issuance under the 2015 Plan. All of the stock option awards issued pursuant to the 2012 Plan expire 10 years from the date of grant.

2006 Stock Option Plan — Effective May 31, 2006, the Board of Directors of the Company adopted the 2006 Stock Option Plan (the “2006 Plan”) to grant stock options to directors, employees, and certain independent contractors. In January 2012, the 2006 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2006 Plan and any shares that are subject to an option award that was previously granted under the 2006 Plan and that expire or terminate for any reason prior to exercise will become available for issuance under the 2015 Plan. All of the awards issued pursuant to the 2006 Plan expire 10 years from the date of grant.

Stock Options

Stock option activity under the Company’s plans is set forth below:

	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2017	6,637,239		$	37.20	$	179,936
Options granted	234,990		73.27		529
Options exercised	(486,524	)	27.92		(23,159		)
Options forfeited/cancelled	(75,456	)	57.87		(1,332		)
Options outstanding at March 31, 2017	6,310,249		$	39.06	$	230,072
Options vested and exercisable at March 31, 2017	4,302,714		$	30.84	$	192,245
Options expected to vest	1,891,705		$	56.33	$	36,302

As of March 31, 2017, total remaining unrecognized compensation expense related to unvested stock options, net of forfeitures was approximately $42,801. The expense is expected to be recognized over a weighted-average period of 1.6 years.

As of March 31, 2017, the weighted average remaining contractual term was 6.2 years for fully vested and exercisable outstanding options and 8.1 years for outstanding options expected to vest.

As of March 31, 2017, a total of 176,758 shares underlying options exercised through March 31, 2017, were in transfer with the Company’s transfer agent.

There were no material changes with respect to the assumptions used in the Black-Scholes option valuation model during the three months ended March 31, 2017, as compared with the assumptions disclosed in Note 14 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Restricted Stock and Restricted Stock Units

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Under the Company’s 2012 Directors Plan, the Company grants awards of restricted stock to non-employee directors until April 2017, and thereafter, restricted stock units (“RSUs”). Under the Company’s 2015 Plan (and prior to its approval, under the 2012 Plan), the Company grants awards of RSUs to Company personnel. In addition, the Company has issued in the past, and may issue in the future its equity securities to compensate employees of acquired businesses for future services. Equity-based awards granted in connection with acquisitions of businesses are generally issued in the form of service-based awards (dependent on continuing employment only) and performance-based awards, which are granted and vest only if certain specified performance conditions are met. The awards issued in connection with acquisitions of businesses are subject to the terms and conditions contained in the applicable award agreement and acquisition documents with a typical vesting period of three years, with 33.3% of the awards granted vesting in equal installments on the first, second and third anniversaries of the grant.

Service-Based Awards

The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the three months ended March 31, 2017.

	Equity-Classified  Restricted Stock				Equity-Classified Equity-Settled Restricted Stock Units				Liability-Classified Cash-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2017	154,125		$	40.89	485,188		$	67.69	204,501		$	70.53
Awards granted	—		—		380,577		73.27		138,584		73.27
Awards modified	—		—		(2,570	)	48.49		2,570		73.27
Awards vested	(1,437	)	20.64		(116,183	)	65.32		(51,928	)	70.56
Awards forfeited/cancelled	—		—		(19,036	)	67.45		(616	)	70.52
Unvested service-based awards outstanding at March 31, 2017	152,688		$	41.08	727,976		$	71.06	293,111		$	71.84

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding service-based restricted stock was $1,783. This expense is expected to be recognized over the next 1.1 years using the weighted average method.

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding service-based equity-classified RSUs was $45,693. This expense is expected to be recognized over the next 2.2 years using the weighted average method.

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding service-based liability-classified RSUs was $19,842. This expense is expected to be recognized over the next 2.2 years using the weighted average method.

Performance -Based Awards

Summarized activity related to the Company’s performance-based awards for the three months ended March 31, 2017, was as follows:

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	Equity-Classified  Restricted Stock				Liability-Classified Restricted Stock			Equity-Classified Equity-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2017	5,573		$	33.47	105,602	$	38.86	4,667	$	70.22
Awards granted	—		—		—	—		—	—
Awards vested	(2,552	)	36.57		—	—		—	—
Awards forfeited/cancelled	—		—		—	—		—	—
Unvested performance-based awards outstanding at March 31, 2017	3,021		$	30.85	105,602	$	38.86	4,667	$	70.22

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding performance-based equity-classified restricted stock was $89. This expense is expected to be recognized over the next 1.0 year using the weighted average method.

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding performance-based liability-classified restricted stock was $1,221. This expense is expected to be recognized over the next 1.0 year using the weighted average method.

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding performance-based equity-classified RSUs was $389. This expense is expected to be recognized over the next 1.2 years using the weighted average method.

Modifications

During the three months ended March 31, 2017, the Company modified certain awards held by a named executive officer of the Company in connection with the execution of a separation agreement on February 28, 2017. Fair value of the modified awards immediately before and after modification was $0 and $563, respectively. The Company also reclassified certain awards from equity to liability when it became probable that it would settle the awards in cash. As a result of these modifications, the Company recorded incremental share-based compensation expense for the three months ended March 31, 2017 of $167.

7. EARNINGS PER SHARE

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, unvested restricted stock and unvested equity-settled RSUs. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:

	Three Months Ended   March 31,
	2017		2016
Numerator for basic and diluted earnings per share:
Net income	$	23,641	$	23,899
Numerator for basic and diluted earnings per share	$	23,641	$	23,899
Denominator:
Weighted average common shares for basic earnings per share	50,958		49,714
Net effect of dilutive stock options, restricted stock units and restricted stock awards	2,931		3,169
Weighted average common shares for diluted earnings per share	53,889		52,883
Net income per share:
Basic	$	0.46	$	0.48
Diluted	$	0.44	$	0.45

The number of shares underlying equity-based awards excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive, was 2,272 and 2,218 during the three months ended March 31, 2017 and 2016, respectively.

8. COMMITMENTS AND CONTINGENCIES

Indemnification Obligations—In the normal course of business, the Company is a party to a variety of agreements under which it may be obligated to indemnify the other party for certain matters. These obligations typically arise in contracts where the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations or covenants for certain matters such as title to assets and intellectual property rights associated with certain arrangements. The duration of these indemnifications varies, and in certain cases, is indefinite.

The Company is unable to reasonably estimate the maximum potential amount of future payments under these or similar agreements due to the unique facts and circumstances of each agreement and the fact that certain indemnifications provide for no limitation to the maximum potential future payments under the indemnification. Management is not aware of any such matters that would have a material effect on the condensed consolidated financial statements of the Company.

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Litigation — From time to time, the Company is involved in litigation, claims or other contingencies arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, it does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, if decided adversely, is not expected to have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

9. SEGMENT INFORMATION

The Company determines its business 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 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 did not represent a change in the Company’s segments but rather a movement in responsibility for several clients that represented 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 that are not controllable at the segment level are not allocated to specific segments. 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, and Russia reportable segments for the three months ended March 31, 2017 and 2016, were as follows:

	Three Months Ended   March 31,
	2017		2016
Segment revenues:
North America	$	178,303	$	147,490
Europe	132,707		107,843
Russia	13,693		9,481
Total segment revenues	$	324,703	$	264,814
Segment operating profit:
North America	$	37,092	$	30,655
Europe	19,811		16,832
Russia	3,549		1,160
Total segment operating profit	$	60,452	$	48,647

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, revenues from one customer, UBS AG, were $35,669 and accounted for more than 10% of total revenues. Revenues from this customer were included in the Company’s Europe segment in the periods indicated. There were no customers that accounted for more than 10% of total revenues during the three months ended March 31, 2017.

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Accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. As of March 31, 2017, accounts receivable from one customer, UBS AG, individually exceeded 10% and accounted for 11.9% of our total accounts receivable. As of March 31, 2017, unbilled revenues from one customer, Expedia, individually exceeded 10% and accounted for 10.3% of our unbilled revenues.

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   March 31,
	2017			2016
Total segment revenues	$	324,703		$	264,814
Other revenues	(52		)	(332		)
Revenues	$	324,651		$	264,482
Total segment operating profit:	$	60,452		$	48,647
Unallocated amounts:
Other revenues	(52		)	(332		)
Stock-based compensation expense	(15,776		)	(10,964		)
Non-corporate taxes	(3,451		)	(1,080		)
Professional fees	(2,344		)	(1,726		)
Depreciation and amortization	(1,975		)	(1,691		)
Bank charges	(397		)	(341		)
One-time charges	(568		)	—
Other corporate expenses	(4,923		)	(2,182		)
Income from operations	30,966			30,331
Interest and other income, net	584			1,211
Foreign exchange loss	(2,955		)	(1,290		)
Income before provision for income taxes	$	28,595		$	30,252

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,   2017		As of    December 31,   2016
Belarus	$	47,124	$	46,011
Russia	7,853		7,203
Ukraine	5,847		5,610
Hungary	3,384		3,485
United States	3,013		2,618
Poland	2,498		2,213
China	1,785		1,887
India	1,530		1,650
Other	2,928		2,939
Total	$	75,962	$	73,616

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Information about the Company’s revenues by client location, including reimbursable expenses of $3,925 and $2,446 for the three months ended March 31, 2017 and 2016, respectively, is as follows:

	Three Months Ended   March 31,
	2017		2016
United States	$	176,830	$	136,639
United Kingdom	46,594		43,560
Switzerland	29,096		30,852
Russia	13,209		8,965
Canada	12,494		15,846
Germany	12,094		8,739
Netherlands	8,671		2,647
Sweden	7,466		4,128
Hong Kong	4,777		5,944
United Arab Emirates	2,048		—
China	1,584		294
Ireland	1,389		1,186
Italy	1,280		668
Denmark	1,253		410
Other locations	5,866		4,604
Revenues	$	324,651	$	264,482

10. RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards

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

Stock-Based Compensation — Effective January 1, 2017, the Company adopted Accounting Standard Update (“ASU”) No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The provisions of the new guidance affecting the Company require excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled; remove the requirement to include hypothetical excess tax benefits in the application of the treasury stock method when computing earnings per share; and provided for a new policy election to either: (1) continue applying forfeiture rate estimates in the determination of compensation cost, or (2) account for forfeitures as a reduction of share-based compensation cost as they occur. The new guidance also requires cash flows related to excess tax benefits to be classified as an operating activity in the cash flow statement and now requires shares withheld for tax withholding purposes to be classified as a financing activity.

As a result of this adoption:

• the Company prospectively recognized discrete tax benefits of $1,695 in the provision for income taxes line item of its condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2017 related to excess tax benefits upon vesting or settlement of stock-based awards in that period;

• the Company recognized a $1,740 increase in beginning retained earnings for previously unrecognized tax benefits using the modified retrospective method of transition, as required by the standard;

• the Company elected to adopt the cash flow presentation of the excess tax benefits prospectively where these benefits are classified along with other income tax cash flows as operating cash flows. Accordingly, prior period information has not been restated;

• the Company elected to continue to estimate the number of stock-based awards expected to forfeit, rather than electing to account for forfeitures as they occur to determine the amount of compensation cost to be recognized in each period;

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• the Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of our diluted earnings per share for the three months ended March 31, 2017. The adoption of this provision did not have a material impact on the Company’s diluted earnings per share for the three months ended March 31, 2017;

• the remaining amendments to this standard, as noted above, are either not applicable, or do not change the Company's current accounting practices and thus do not impact its condensed consolidated financial statements.

Simplifying the Measurement for Goodwill — Effective January 1, 2017, the Company early adopted the new accounting guidance simplifying the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance is adopted on a prospective basis. The adoption of this amended guidance did not have an impact on the Company’s financial results.

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.

Revenue Recognition — In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP and permits the use of either the retrospective or modified retrospective transition method. The update requires significant additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09, as amended by ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, is effective for years beginning after December 15, 2017, including interim periods, with early adoption permitted for years beginning after December 15, 2016. Since the issuance of ASU 2014-09, the FASB has issued additional interpretive guidance, including new accounting standards updates, that clarify certain points of the standard and modify certain requirements.

The Company has performed a review of the requirements of the new revenue standard and is monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance. It is reviewing customer contracts and is in the process of applying the five-step model of the new standard to each contract category it has identified and will compare the results to its current accounting practices. The Company plans to adopt ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018.

The Company expects the new standard could change the amount and timing of revenue and costs under certain arrangement types. The Company is also assessing pricing provisions contained in certain of its customer contracts, which may represent variable consideration or may provide the customer with a material right, potentially resulting in a different allocation of the transaction price than under current guidance. Due to the complexity of certain of the Company’s contracts, the actual revenue recognition treatment required under the new standard for these arrangements may be dependent on contract-specific terms and may vary in some instances. The Company has not yet determined what impact the new guidance will have on its consolidated financial statements and/or related disclosures or concluded on the transition method. The Company expects to further its assessment of the financial impact of the new guidance on its consolidated financial statements in 2017.

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Leases — Effective January 1, 2019, the Company will be required to adopt the new guidance of ASC Topic 842, Leases (with early adoption permitted effective January 1, 2018.) This amendment supersedes previous accounting guidance (Topic 840) and requires all leases, with the exception of leases with a term of twelve months or less, to be recorded on the balance sheet as lease assets and lease liabilities. The standard requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The transition guidance in Topic 842 also provides specific guidance for the amounts previously recognized in accordance with the business combinations guidance for leases. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements, when it will adopt the standard, or concluded on whether it will elect to apply practical expedients.

Measurement of Credit Losses on Financial Instruments — Effective January 1, 2020, the Company will be required to adopt the amended guidance of ASC Topic 326, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, (with early adoption permitted effective January 1, 2019.) The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require 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. Entities are required to adopt the standard using a modified-retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements or concluded on when it will adopt the standard.

Tax Accounting for Intra-Entity Asset Transfers — Effective January 1, 2018, with early adoption permitted, the Company will be required to adopt the accounting guidance ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory, that will require the tax effects of intra-entity asset transfers to be recognized in the period when the transfer occurs. Under current guidance, the tax effects of intra-entity sales of assets are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance does not apply to intra-entity transfers of inventory and is required to be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements or concluded on when it will adopt the standard.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our Annual Report on Form 10-K for the year ended December 31, 2016 and the unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Forward-Looking Statements” in this item and “Part II. Item 1A. Risk Factors.” We assume no obligation to update any of these forward-looking statements.

In this quarterly report, “EPAM,” “EPAM Systems, Inc.,” the “Company,” “we,” “us” and “our” refer to EPAM Systems, Inc. and its consolidated subsidiaries.

Executive Summary

We are a leading global provider of product development and software engineering solutions offering specialized technological services to many of the world’s leading organizations. Our clients depend on us to solve their complex technical challenges and rely on our expertise in core engineering, advanced technology, digital engagement and intelligent enterprise development. We are continuously venturing into new industries to expand our core industry client base in software and technology, financial services, media and entertainment, travel and hospitality, retail and distribution, and life sciences and healthcare. Our teams of developers, architects, strategists, engineers, designers, and product experts have the capabilities and skill sets to deliver business results.

Our global delivery model and centralized support functions, combined with the benefits of scale from the shared use of fixed-cost resources, enhance our productivity levels and enable us to better manage the efficiency of our global operations. As a result, we have created a delivery base whereby our applications, tools, methodologies and infrastructure allow us to seamlessly deliver services and solutions from our delivery centers to global clients across all geographies, further strengthening our relationships with them.

Through increased specialization in focused verticals and a continued emphasis on strategic partnerships, we are leveraging our roots in software engineering to grow as a recognized brand in software development and end-to-end digital transformation services for our clients.

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Year-to-Date 2017 Developments and Trends

During the first three months of 2017, our revenues were $324.7 million, an increase of approximately 22.7% over $264.5 million reported for the same period a year ago. Our performance remained strong across our key verticals, led by the Media and Entertainment vertical which grew in excess of 50% during the first quarter of fiscal 2017 as compared to the first quarter of fiscal 2016.

We have built a diversified portfolio across numerous verticals, geographies and service offerings. Our account management teams work to expand the scope and size of our engagements with existing customers, while at the same time we grow our customer base through our business development efforts and our strategic acquisitions.

Utilization for the first quarter of fiscal 2017 showed improvement compared to the same period last year. This was achieved by a focused hiring process and attrition throughout the period consistent with the strategic outlook for 2017 and beyond.

Summary of Results of Operations

The following table presents a summary of our results of operations for the three months ended March 31, 2017 and 2016:

	Three Months Ended   March 31,
	2017					2016
	(in thousands, percentages and except per share data)
Revenues	$	324,651		100.0	%	$	264,482		100.0	%
Income from operations	30,966			9.5	%	30,331			11.5	%
Net income	23,641			7.3	%	23,899			9.0	%
Effective tax rate	17.3		%			21.0		%
Diluted earnings per share	$	0.44				$	0.45

The key highlights of our consolidated results for the three months ended March 31, 2017, as compared to the corresponding period of 2016, were as follows:

• Revenues for the first quarter were $324.7 million, or a 22.7% increase from $264.5 million reported last year, despite 1.2%, or $3.1 million, of currency headwinds.

• Income from operations grew 2.1% during the three months ended March 31, 2017. Expressed as a percentage of revenues, income from operations was 9.5% compared to 11.5% last year. The decrease of 2.0% was mainly driven by an increase in selling, general and administrative expenses relative to the growth in revenues.

• Our effective tax rate was 17.3% in the first quarter of fiscal 2017, compared to 21.0% in the first quarter of last year. The income tax provision for the first quarter of 2017 included $1.7 million of credits associated with excess tax benefits upon vesting or exercise of equity awards in the first quarter of fiscal 2017 bringing the effective tax rate down by 6.0%.

• Net income decreased 1.1% to $23.6 million compared to $23.9 million reported in the corresponding period last year. Expressed as a percentage of revenues, net income was 7.3%, a decrease of 1.7% compared to 9.0% reported in the corresponding periods of 2016. The decrease in net income as a percentage of revenues was primarily driven by a decrease in income from operations as a percentage of revenues.

• Diluted earnings per share decreased by $0.01 to $0.44 in the first quarter of 2017.

• Cash provided by operations increased $20.4 million, or 187.5%, to $31.2 million during the first quarter of 2017.

The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

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Critical Accounting Policies

The discussion and analysis of our financial position and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition and related allowances, impairments of long-lived assets including intangible assets, impairments of goodwill, income taxes including the valuation allowance for deferred tax assets, and stock-based compensation. Actual results may differ materially from these estimates under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.

Other than as discussed below, there have been no material changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies in the three months ended March 31, 2017. For further information, refer to our summary of significant accounting policies and estimates in our Annual Report on Form 10-K filed for the year ended December 31, 2016.

Goodwill and Other Intangible Assets — The acquired assets typically include customer relationships, trade names, non-competition agreements, and workforce. As a result, a substantial portion of the purchase price is allocated to goodwill and other intangible assets.

We assess goodwill for impairment as of October 31 of each fiscal year, or more frequently if events or changes in circumstances indicate that the fair value of our reporting unit has been reduced below its carrying value. Effective January 1, 2017, we early-adopted ASU 2017-04 which simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. As a result, when conducting our annual goodwill impairment assessment, we use a two-step process. The first step is to perform an optional qualitative evaluation as to whether it is more likely than not that the fair value of our reporting unit is less than its carrying value, using an assessment of relevant events and circumstances. In performing this assessment, we are required to make assumptions and judgments including but not limited to an evaluation of macroeconomic conditions as they relate to our business, industry and market trends, as well as the overall future financial performance of our reporting unit and future opportunities in the markets in which it operates. If we determine that it is not more likely than not that the fair value of our reporting unit is less than its carrying value, we are not required to perform any additional tests in assessing goodwill for impairment. However, if we conclude otherwise or elect not to perform the qualitative assessment, we perform a second step for our reporting unit, consisting of a quantitative assessment of goodwill impairment. This quantitative assessment requires us to estimate impairment by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Historically, a significant portion of the purchase consideration was allocated to customer relationships. In valuing customer relationships, we typically utilize the multi-period excess earnings method, a form of the income approach. The principle behind this method is that the value of the intangible asset is equal to the present value of the after-tax cash flows attributable to the intangible asset only. We amortize our intangible assets that have finite lives using either the straight-line method or, if reliably determinable, the pattern in which the economic benefit of the asset is expected to be consumed utilizing expected discounted future cash flows. Amortization is recorded over the estimated useful lives that are predominantly ranging, on average, from five to ten years. We do not have any intangible assets with indefinite useful lives.

We review our intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If the carrying value of an asset exceeds its undiscounted cash flows, we will write down the carrying value of the intangible asset to its fair value in the period identified. In assessing fair value, we must make assumptions regarding estimated future cash flows and discount rates. If these estimates or related assumptions change in the future, we may be required to record impairment charges. If the estimate of an intangible asset’s remaining useful life is changed, we will amortize the remaining carrying value of the intangible asset prospectively over the revised remaining useful life.

Stock-Based Compensation — Equity-based compensation cost relating to the issuance of share-based awards to employees is based on the fair value of the award at the date of grant, which is expensed over the requisite service period, net of estimated forfeitures. Equity-based awards that do not require future service are expensed immediately. If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past.

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Significant judgment is required in determining the adjustment to stock-based compensation expense for estimated forfeitures. Stock-based compensation expense in a period could be impacted, favorably or unfavorably, by differences between forfeiture estimates and actual forfeitures. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unvested stock-based compensation expense.

Equity-based awards that do not meet the criteria for equity classification are recorded as liabilities and adjusted to fair value based on the closing price of our stock at the end of each reporting period. Future stock-based compensation expense related to our liability-classified awards may increase or decrease as a result of changes in the market price for our stock, adding to the volatility in our operating results.

Adoption of ASU 2016-09 effective January 1, 2017 increased income tax expense volatility. Our future operating results will depend on fluctuations in the stock price at the awards’ vest or exercise dates and the magnitude of transactions occurring in each reporting period, among other factors.

Change in Presentation of Certain Financial Information

As part of our discussion and analysis, we analyze revenues by client location and by vertical. Prior to the first quarter of 2017, management did not include reimbursable expenses and other revenues in its discussion of revenue performance across locations and verticals. Effective in the first quarter of 2017, we have allocated reimbursable expenses and other revenues (which primarily include travel and entertainment costs chargeable to clients) to corresponding geographies and verticals. We believe this change allows us to more effectively analyze our verticals and geographies by streamlining the presentation of revenues, both internally and externally, using a standardized approach. These changes did not result in any adjustments to our previously issued financial statements and were applied retrospectively beginning on January 1, 2015. Comparative information for the three months ended March 31, 2016 is presented in the following tables.

	Three Months Ended March 31, 2016
	As reported				After Reclassification
Client Location	(in thousands except percentages)
North America	$	151,259	57.2	%	$	152,485	57.7	%
Europe	94,564		35.8	%	95,580		36.1	%
CIS	10,147		3.8	%	10,162		3.8	%
APAC	6,066		2.3	%	6,255		2.4	%
Reimbursable expenses and other revenues	2,446		0.9	%	—		—	%
Revenues	$	264,482	100.0	%	$	264,482	100.0	%

	Three Months Ended March 31, 2016
	As reported				After Reclassification
Vertical	(in thousands except percentages)
Financial Services	$	70,890	26.9	%	$	71,509	27.0	%
Travel & Consumer	59,604		22.5	%	60,402		22.8	%
Software & Hi-Tech	55,911		21.1	%	56,268		21.3	%
Media & Entertainment	37,733		14.3	%	38,144		14.4	%
Life Sciences & Healthcare	20,875		7.9	%	21,026		7.9	%
Emerging Verticals	17,023		6.4	%	17,133		6.6	%
Reimbursable expenses and other revenues	2,446		0.9	%	—		—	%
Revenues	$	264,482	100.0	%	$	264,482	100.0	%

Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this quarterly report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

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	Three Months Ended   March 31,
	2017					2016
	(in thousands, except percentages and per share data)
Revenues	$	324,651		100.0	%	$	264,482		100.0	%
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)(1)	207,730			64.0	%	167,381			63.3	%
Selling, general and administrative expenses(2)	78,453			24.2	%	61,494			23.3	%
Depreciation and amortization expense	6,672			2.1	%	5,102			1.9	%
Other operating expenses, net	830			0.2	%	174			—	%
Income from operations	30,966			9.5	%	30,331			11.5	%
Interest and other income, net	584			0.2	%	1,211			0.4	%
Foreign exchange loss	(2,955		)	(0.9	)%	(1,290		)	(0.5	)%
Income before provision for income taxes	28,595			8.8	%	30,252			11.4	%
Provision for income taxes	4,954			1.5	%	6,353			2.4	%
Net income	$	23,641		7.3	%	$	23,899		9.0	%
Effective tax rate	17.3		%			21.0		%
Diluted earnings per share	$	0.44				$	0.45

(1) Includes $5,350 and $3,644 of stock-based compensation expense for the three months ended March 31, 2017 and 2016, respectively.

(2) Includes $10,426 and $7,320 of stock-based compensation expense for the three months ended March 31, 2017 and 2016, respectively.

Three Months Ended March 31, 2017 Compared to the Three Months Ended March 31, 2016

Revenues

	Three Months Ended   March 31,
	2017				2016
	(in thousands, except percentages and per share data)
North America	$	189,324	58.3	%	$	152,485	57.7	%
Europe	114,312		35.2	%	95,580		36.1	%
CIS(1)	14,541		4.5	%	10,162		3.8	%
APAC(1)	6,474		2.0	%	6,255		2.4	%
Revenues (2)	$	324,651	100.0	%	$	264,482	100.0	%

(1) CIS, which stands for the Commonwealth of Independent States, is comprised of constituents of the former U.S.S.R., including Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. APAC, which stands for Asia Pacific, includes all of Asia (including India) and Australia.

(2) Includes reimbursable expenses of $3,925 and $2,446 for the three months ended March 31, 2017 and 2016

During the three months ended March 31, 2017, our total revenues grew 22.7% over the corresponding period in 2016, to $324.7 million. This growth is mainly attributable to our ability to retain and increase the level of services we provide to our existing customers. We continue targeting new customers and expanding our presence in various verticals, both organically and through acquisitions.

During the three months ended March 31, 2017, revenues in our largest geography, North America, were $189.3 million, growing 24.2% over the corresponding period in 2016. Revenues from this geography accounted for 58.3% of total revenues in the first quarter of fiscal 2017, an increase of 0.6% from 57.7% reported in the corresponding period last year.

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Revenues from all major verticals in North America grew during the three months ended March 31, 2017 compared with the same period last year. This result is partly attributed to continuing strong performance by our existing top clients in North America’s top performing Media & Entertainment vertical. Revenues from the Media & Entertainment vertical in North America increased 45.4% for the three months ended March 31, 2017 compared with the same period last year. The Financial Services, Life Sciences & Healthcare, and Software & Hi-Tech verticals all contributed over 20% revenue growth.

Compared to last year, our European geography experienced growth in excess of 70% from each of the Media & Entertainment, Emerging Verticals, and Life Sciences & Healthcare verticals, and a 32.0% growth from the Travel & Consumer vertical in the first quarter of fiscal 2017. These significant growth rates drove a 19.6% increase in total revenues reported for the geography despite the slowdown in Financial Services and Software & Hi-Tech verticals. In the first quarter of fiscal 2017, the Financial Services vertical remained the largest vertical in the European geography.

Revenues in the CIS geography benefited from currency fluctuations and increased $4.4 million, or 43.1%, to $14.5 million in the first quarter of 2017 compared to $10.2 million reported in the first quarter of last year. The increase in the CIS geography came predominantly from customers in the Financial Services, Software & Hi-Tech, and Emerging Verticals. Ongoing economic and geo-political uncertainty in the region, as well as significant volatility of the Russian ruble limit revenue growth in this geography.

During the first quarter of 2017, revenues from the APAC region increased by $0.2 million, or 3.5%, over the corresponding period of 2016. In the APAC region, we continue to remain focused on diversifying our business outside banking and financial services, including expansion in the retail, consumer, media and entertainment markets. We have been able to capitalize on the diversification of the customer portfolio during fiscal 2016 with revenues from outside the Financial Services vertical representing 48.4% of total revenues in the APAC geography in the first quarter of 2017 compared to 18.7% last year.

Cost of Revenues (Exclusive of Depreciation and Amortization)

The principal components of our cost of revenues (exclusive of depreciation and amortization) are salaries, employee benefits, stock-based compensation expense, travel costs and subcontractor fees for IT professionals and subcontractors that are assigned to client projects. Salaries and other compensation expenses of our IT professionals are reported as cost of revenue regardless of whether the employees are actually performing client services during a given period.

We manage the utilization levels of our professionals through strategically hiring and training high-performing IT professionals and efficiently staffing projects. Our staff utilization also depends on the general economy and its effect on our clients and their business decisions regarding the use of our services. Some of our IT professionals are specifically hired and trained to work for specific clients or on specific projects, and some of our offshore development centers are dedicated to specific clients or projects.

During the three months ended March 31, 2017, cost of revenues (exclusive of depreciation and amortization) was $207.7 million representing an increase of 24.1% from $167.4 million reported in the corresponding period of 2016. The increase was primarily due to an increase in compensation costs mainly resulting from the 17.6% growth in the average number of production headcount during the three months ended March 31, 2017 as compared to the same period in 2016.

Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 64.0% and 63.3% in the first quarters of 2017 and 2016, respectively. The increase was mainly due to adverse exchange rate fluctuations in the first quarter of 2017 as compared to the same period in 2016, which accounted for 1.0% of the increase partially offset by improved utilization and balanced wage inflation.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses represent expenses associated with promoting and selling our services and general administrative functions of our business. These expenses include senior management, administrative personnel and sales and marketing personnel salaries; stock-based compensation expense, related fringe benefits, commissions and travel costs for those employees; legal and audit expenses, insurance, operating lease expenses, and the cost of advertising and other promotional activities. In addition, we pay a membership fee of 1% of revenues in Belarus to the administrative organization of the Belarus Hi-Tech Park.

Over the recent years, our selling, general and administrative expenses have been increasing as a result of our expanding operations, acquisitions, and the hiring of a number of senior managers to support our growth. We expect our selling, general and administrative expenses to continue to increase in absolute terms as our business expands but will generally remain steady or slightly decrease as a percentage of our revenues.

During the three months ended March 31, 2017, selling, general and administrative expenses were $78.5 million representing an increase of 27.6% as compared to $61.5 million reported in the corresponding period of 2016. Compared to the first quarter of fiscal 2016, the increase in selling, general and administrative expenses in the current quarter was driven by a number of factors, including a $5.3 million increase in personnel-related costs coupled with a $3.1 million higher stock-based compensation expense; a $4.7 million increase in investment in facilities and infrastructure to support the increased headcount; $2.1 million higher professional fees, as well as a $2.4 million increase in non-corporate income taxes.

Expressed as a percentage of revenue, selling, general and administrative expenses increased 0.9% to 24.2% of consolidated revenues for the three months ended March 31, 2017. The increase was primarily attributable to a combined impact of higher professional fees and investments in facilities and infrastructure, as well as other non-recurring costs and expenses incurred in the in the current quarter.

Depreciation and Amortization Expense

During the three months ended March 31, 2017, depreciation and amortization expense was $6.7 million, as compared to $5.1 million in the corresponding period last year. Expressed as a percentage of revenues, depreciation and amortization expense increased slightly by 0.2% during the three months ended March 31, 2017 as compared with the corresponding period of 2016. The increase in depreciation and amortization expense is primarily due to the increase in purchases of computer equipment to support headcount growth.

Depreciation and amortization expense includes amortization of acquired intangible assets, all of which have finite useful lives.

Interest and Other Income, Net

Net interest and other income was $0.6 million during the three months ended March 31, 2017 representing a decrease of $0.6 million compared to the corresponding periods last year. The decrease was due to lower interest earned on cash accounts in Belarus combined with lower other income of $0.2 million in the first quarter of 2017 compared to the same period last year.

Provision for Income Taxes

Determining the consolidated provision for income tax expense, deferred income tax assets and liabilities and related valuation allowance, if any, involves judgment. As a global company, we are required to calculate and provide for income taxes in each of the jurisdictions in which we operate.

In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. Our worldwide effective tax rate for the three months ended March 31, 2017 and 2016 was 17.3% and 21.0%, respectively. The change in the worldwide effective tax rate in the first quarter of fiscal 2017 was primarily due to the adoption of a new accounting standard in the first quarter of fiscal year 2017 whereby excess tax benefits of $1.7 million were recognized in the income tax provision rather than additional paid-in-capital.

As we continue to grow our onsite presence and expand the geographic footprint of our delivery centers, we expect this may result in an increase in our effective tax rate in the near and medium term (exclusive of the new effect of how excess tax benefits are recognized). However, we will also consider other factors that may contribute, favorably or unfavorably, to the overall effective tax rate in 2017 and beyond. These factors include statutory tax rate changes proposed in the countries that are part of our geographic footprint. 

Foreign Exchange Gain /Loss

For discussion of the impact of foreign exchange fluctuations see “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”

Effects of Inflation

Economies in CIS countries, particularly Belarus, Russia, Kazakhstan and Ukraine, have periodically experienced high rates of inflation. Periods of higher inflation may slow economic growth in those countries and as a result decrease demand for our services and negatively impact the business of our existing clients. Inflation is likely to increase some of our expenses, which may reduce our profitability, as we may not be able to pass these increases on to our clients. Generally, our largest expense that could be impacted by inflation is wages. We do not rely on borrowed funds for operations in those locations; therefore, increases in interest rates typical for inflationary environments do not currently pose a risk to our business.

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Ukraine has been experiencing political and economic turmoil severely impacting the Ukrainian economy. The Ukrainian currency has been weakened and the negative outlook in the Ukrainian economy continues. We have not experienced a significant impact from the inflation in Ukraine and do not have significant clients located in Ukraine.

Inflation in Russia increased in late 2014 due to weakening of the Russian ruble and decreasing oil prices. Inflation in Russia remained steady during 2015 with some decline observed during 2016. Our operations in Russia have not been significantly affected by local inflation; however, we have noted some impact from inflation on our clients in Russia.

Belarus experienced hyperinflation in the past and may experience high levels of inflation in the future. We have not seen a significant impact from the inflation in Belarus as our largest expense there, wages, is denominated in U.S. dollars in order to provide stability in our business and for our employees. We do not have significant clients located in Belarus or significant revenues denominated in Belarusian rubles. The functional currency for financial reporting purposes in Belarus is US dollars.

Other locations where we have clients or perform services are not experiencing significant inflation and our business is not materially impacted by inflation in those locations.

Results by Business Segment

Our operations consist of four reportable segments: North America, Europe, Russia and Other. There were no operations in the Other segment for the periods presented. The segments represent components of EPAM for which separate financial information is available that is used on a regular basis by our chief executive officer, who is also our chief operating decision maker (“CODM”), in determining how to allocate resources and evaluate performance. This determination is based on the unique business practices and market specifics of each region and that each region engages in business activities from which it earns revenues and incurs expenses. Our reportable segments are based on managerial responsibility for a particular client. Because 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 our reportable segments. In some specific cases, however, managerial responsibility for a particular client is assigned to a management team in another region, usually based on the strength of the relationship between client executives and particular members of our senior management team. In a case like this, the client’s activity would be reported through the management team’s reportable segment. Our CODM evaluates the Company’s performance and allocates resources based on segment 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. We use globally integrated support organizations to realize economies of scale and efficient use of resources. As a result, a majority of our expenses is shared by all segments. These shared expenses include Delivery, Recruitment and Development, Sales and Marketing, and support functions such as IT, Finance, Legal, and Human Resources. Generally, shared expenses are allocated based on measurable drivers of expense, e.g., recorded hours or headcount. Certain expenses that are not controllable at the segment level are not allocated to specific segments. 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 clients and segment operating profit, before unallocated expenses, for the North America, Europe, and Russia reportable segments for the three months ended March 31, 2017 and 2016 were as follows:

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	Three Months Ended   March 31,
	2017		2016
	(in thousands)
Segment revenues:
North America	$	178,303	$	147,490
Europe	132,707		107,843
Russia	13,693		9,481
Total segment revenues	$	324,703	$	264,814
Segment operating profit:
North America	$	37,092	$	30,655
Europe	19,811		16,832
Russia	3,549		1,160
Total segment operating profit	$	60,452	$	48,647

North America Segment

During the three months ended March 31, 2017, revenues for the North America segment increased $30.8 million, or 20.9%, compared to the same period last year. Segment operating profits increased $6.4 million, or 21.0%, compared to the same period last year. During the three months ended March 31, 2017, revenues from our North America segment were 54.9% of total segment revenues, a decrease from 55.7% reported in the corresponding period of 2016. As a percentage of North America segment revenues, the North America segment’s operating profit remained flat at 20.8% during the first quarters of fiscal 2017 and 2016.

Within the segment, growth in the Media & Entertainment vertical was the strongest. Over 78% of the overall growth in the North America segment’s revenues and operating profits was attributable to combined performance of the Media & Entertainment, Life Sciences & Healthcare, and Software & Hi-Tech verticals.

Europe Segment

Europe’s segment revenues were $132.7 million, representing an increase of $24.9 million, or 23.1%, from the same period last year. During the quarters ended March 31, 2017 and 2016, Europe’s segment revenues accounted for 40.9% and 40.7% of total segment revenues, respectively. Compared to the first quarter of 2016, the segment’s operating profits increased $3.0 million, or 17.7%, to $19.8 million operating profit.

In the first quarter of fiscal 2017, the segment’s operating results were adversely affected by revenue deceleration in Financial Services, our largest vertical in the segment, and continued pressures on operating margins from exchange rate fluctuations, and particularly, the depreciation of the British pound, which is the primary currency for the majority of the delivery centers that service our U.K. accounts, relative to the U.S. dollar. Although the Financial Services vertical remained our largest vertical throughout the quarter, most of the growth in the segment came from the Travel & Consumer, Media & Entertainment, Software & Hi-Tech, and Emerging Verticals.

Russia Segment

During the three months ended March 31, 2017, revenues from our Russia segment accounted for 4.2% of total segment revenues, representing an increase of $4.2 million, or 44.4%, as compared to the corresponding period last year. During the three months ended March 31, 2017, operating profit of the Russia segment was $3.5 million, representing an increase of $2.4 million, or 205.9%. Ongoing economic and geo-political uncertainty in the region, as well as significant volatility of the Russian ruble limited our growth in this segment.

Liquidity and Capital Resources

Capital Resources

At March 31, 2017, our principal sources of liquidity were cash and cash equivalents totaling $398.4 million and $74.1 million of available borrowings under our revolving line of credit.

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As of March 31, 2017, $333.7 million of our total cash was held outside the United States. Of this amount, $169.2 million was held in U.S. dollar denominated accounts in Belarus, which include some interest bearing deposits. As of March 31, 2017, a balance of $31.2 million U.S. dollars was kept in an unrestricted account in our Cyprus entity’s bank in the United Kingdom. Our subsidiaries in the CIS or APAC regions do not maintain significant balances denominated in currencies other than U.S. dollars.

The cash and cash equivalents held at locations outside of the United States are for future operating expenses and we have no intention of repatriating those funds. However, as a result of various factors such as any global or regional instability or changes in tax laws in place for a specific time period, we may later decide to repatriate some or all of our funds to the United States. If we decide to remit funds to the United States in the form of dividends, $333.1 million would be subject to foreign withholding taxes, of which $310.4 million would also be subject to U.S. corporate income tax. We believe that our available cash and cash equivalents held in the United States and cash flow to be generated from domestic operations will be adequate to satisfy our domestic liquidity needs in the foreseeable future. Our ability to expand and grow our business in accordance with current plans and to meet our long-term capital requirements will depend on many factors, including the rate, if any, at which our cash flows increase, our continued intent not to repatriate earnings from outside of the U.S. and the availability of public and private debt and equity financing. To the extent we pursue one or more significant strategic acquisitions; we may incur debt or sell additional equity to finance those acquisitions.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Three Months Ended   March 31,
	2017			2016 (1)
	(in thousands)
Condensed Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities	$	31,228		$	10,861
Net cash (used in)/ provided by investing activities	(5,644		)	23,420
Net cash provided by financing activities	7,882			9,789
Effect of exchange rate changes on cash and cash equivalents	2,928			1,358
Net increase in cash and cash equivalents	36,394			45,428
Cash and cash equivalents, beginning of period	362,025			199,449
Cash and cash equivalents, end of period	$	398,419		$	244,877

(1) Prior period amounts have not been adjusted for the impact of the adoption of ASU 2016-09, as permitted by the standard.

Operating Activities

Net cash provided by operating activities during the three months ended March 31, 2017 increased by $20.4 million, compared to the corresponding period of 2016. The increase in operating cash flows was primarily attributable to higher customer collections as we made substantial progress in managing our billed and unbilled trade receivables, and decreased the ratio of billed and unbilled trade receivables to revenues over the course of 2016 and during the first quarter of 2017.

Investing Activities

Net cash used in investing activities during the three months ended March 31, 2017 was $5.6 million compared to $23.4 million provided in the same period in 2016. Cash outflow in the first quarter of fiscal 2017 was primarily attributable to cash spent on capital expenditures, which decreased $0.5 million compared to the same period last year. Cash inflows for the first quarter of 2016 included a $30.0 million increase in cash upon maturity of certain time deposits.

Financing Activities

Net cash provided by financing activities was relatively flat with cash provided by financing activities of $7.9 million and $7.7 million (excluding excess tax benefits of approximately $2.0 million recorded as a financing activity) in the first quarter of fiscal 2017 and 2016, respectively. During the first quarter of fiscal 2017, net cash inflow associated with our long-term incentive plans was $7.9 million, an increase of $4.8 million over $3.1 million recorded last year. Cash flows in the first quarter of 2016 also benefited from a net $5.0 inflow from borrowings that did not recur in 2017.

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Contractual Obligations and Future Capital Requirements

Contractual Obligations

Set forth below is information concerning our significant fixed and determinable contractual obligations as of March 31, 2017.

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)
Operating lease obligations	$	102,521	$	33,348	$	41,984	$	17,009	$	10,180
Long-term debt obligation (1)	26,230		503		25,727		—		—
Long-term incentive plan payouts(2)	22,136		6,505		13,009		2,622		—
Total contractual obligations	$	150,887	$	40,356	$	80,720	$	19,631	$	10,180

(1)

We estimate our future obligations for interest on our floating rate 2014 Credit Facility by assuming the weighted average interest rates in effect on each floating rate debt obligation at March 31, 2017 remain constant into the future. This is an estimate, as actual rates will vary over time. In addition, for the 2014 Credit Facility, we assume that the balance outstanding as of March 31, 2017 remains the same for the remaining term of the agreement. The actual balance outstanding under our Revolving Credit Facility may fluctuate significantly in future periods, depending on the availability of cash flow from operations and future investing and financing considerations.

(2)

We estimate our future obligations for long-term incentive plan payouts by assuming the price per share of our common stock in effect at March 31, 2017 remains constant into the future. This is an estimate, as actual prices will vary over time.

Letter of credit

As of March 31, 2017, we had an irrevocable standby letter of credit in the amount $0.9 million under the 2014 Credit Facility, which is required to secure commitments for certain insurance policies. The letter of credit expires on April 27, 2017 with a possibility of automatic extension for an additional period of one year from the present or any future expiration date. No amounts were outstanding against this letter of credit during the three months ended March 31, 2017.

Future Capital Requirements

We believe that our existing cash and cash equivalents combined with our expected cash flow from operations will be sufficient to meet our projected operating and capital expenditure requirements for at least the next twelve months and that we possess the financial flexibility to execute our strategic objectives, including the ability to make acquisitions and strategic investments in the foreseeable future. Our ability to generate cash, however, is subject to our performance, general economic conditions, industry trends and other factors. To the extent that existing cash and cash equivalents and operating cash flow are insufficient to fund our future activities and requirements, we may need to raise additional funds through public or private equity or debt financing. If we issue equity securities in order to raise additional funds, substantial dilution to existing stockholders may occur. If we raise cash through the issuance of additional indebtedness, we may be subject to additional contractual restrictions on our business. There is no assurance that we would be able to raise additional funds on favorable terms or at all.

Off-Balance Sheet Commitments and Arrangements

We do not have any obligations under guarantee contracts or other contractual arrangements that would constitute off-balance sheet arrangements other than as disclosed in Note 8 and Note 4 of our financial statements in “Part I. Item 1. Financial Statements (Unaudited).” We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to us, or engages in leasing, hedging, or research and development services with us.

Recent Accounting Pronouncements

See Note 10 to our unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for additional information.

29

Forward-Looking Statements

This quarterly report on Form 10-Q contains estimates and forward-looking statements, principally in “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II. Item 1A. Risk Factors.” Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Important factors, in addition to the factors described in this quarterly report, may adversely affect our results as indicated in forward-looking statements. You should read this quarterly report and the documents that we have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. The words “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “might,” “would,” “continue” or the negative of these terms or other comparable terminology and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update, to revise or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this quarterly report might not occur and our future results, level of activity, performance or achievements may differ materially from those expressed in these forward-looking statements due to, including, but not limited to, the factors mentioned above, and the differences may be material and adverse. Because of these uncertainties, you should not place undue reliance on these forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks in the ordinary course of our business. These risks result primarily from changes in foreign currency exchange rates and interest rates, and concentration of credit risks. In addition, our international operations are subject to risks related to differing economic conditions, changes in political climate, differing tax structures, and other regulations and restrictions.

Concentration of Credit and Other Credit Risks

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, trade accounts receivable and unbilled revenues.

We maintain our cash and cash equivalents and short-term investments with financial institutions. We believe that our credit policies reflect normal industry terms and business risk. We do not anticipate non-performance by the counterparties. We hold a significant balance of cash in banks in the CIS countries where banking and other financial systems generally do not meet the banking standards of more developed markets and bank deposits made by corporate entities in the CIS region are not insured. As of March 31, 2017, $206.9 million of total cash was held in CIS countries, with $169.3 million of that in Belarus. The CIS banking sector remains subject to periodic instability and the transparency of the banking sector lags behind international standards. Particularly in Belarus, a banking crisis, bankruptcy or insolvency of banks that process or hold our funds, may result in the loss of our deposits or adversely affect our ability to complete banking transactions in the CIS region, which could materially adversely affect our business and financial condition. Cash in other CIS locations is used for short-term operational needs and cash balances in those banks move with the needs of the entities.

Trade accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. As of March 31, 2017, billed trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 11.9% of our total billed trade receivables. As of March 31, 2017, unbilled trade receivables from one customer, Expedia, individually exceeded 10% and accounted for 10.3% of our unbilled trade receivables.

During the three months ended March 31, 2017, no customers accounted for more than 10% of total revenues. During the three months ended March 31, 2016, revenues from one customer, UBS AG, were $35.4 million, and accounted for more than 10% of total revenues. Indicated revenues include reimbursable expenses.

Historically, credit losses and write-offs of trade accounts receivable balances have not been material to our condensed consolidated financial statements.

30

Interest Rate Risk

Our exposure to market risk is mainly influenced by the changes in interest rates received on our cash and cash equivalent deposits and paid on any outstanding balance on our revolving line of credit, which is subject to a variety of rates depending on the type and timing of funds borrowed.

As of March 31, 2017, the outstanding borrowings under our 2014 Credit Facility were $25.0 million. The interest rate for this debt is based on LIBOR, which resets regularly at issuance, based on lending terms. We do not believe we are exposed to material direct risks associated with changes in interest rates related to this borrowing.

We have not been exposed to material risks due to changes in market interest rates and we do not use derivative financial instruments to hedge our risk of interest rate volatility. However, our future interest expense may increase and interest income may fall due to changes in market interest rates.

Foreign Exchange Risk

Our global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, we generate a significant portion of our revenues in various currencies, principally, euros, British pounds, Canadian dollars, Swiss francs and Russian rubles and incur expenditures principally in Hungarian forints, Russian rubles, Polish zlotys, Swiss francs, British pounds, Indian rupees and China yuan renminbi (“CNY”) associated with our delivery centers.

Our international operations expose us to foreign currency exchange rate changes that could impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. We are exposed to fluctuations in foreign currency exchange rates primarily on accounts receivable and unbilled revenues from sales in foreign currencies and cash outflows for expenditures in foreign currencies. Our results of operations, primarily revenues and expenses denominated in foreign currencies, can be affected if any of the currencies, which we use materially in our business, appreciate or depreciate against the U.S. dollar. Additionally, to the extent that we need to convert U.S. dollars into foreign currencies for our operations, appreciation of such foreign currencies against the U.S. dollar would adversely affect the amount of such foreign currencies we receive from the conversion.

Foreign exchange losses increased $1.7 million to $3.0 million reported in the quarter ended March 31, 2017 as compared to a loss of $1.3 million reported in the corresponding period last year. The increase in the reported loss in the first quarter of fiscal 2017 was primarily driven by unfavorable movements in exchange rates relative to local currencies in our foreign operations, particularly in Russia, Poland, Canada, and Denmark.

Management supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in our business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating its performance. When important to management’s analysis, operating results are compared on the basis of “constant currency”, which is a non-GAAP financial measure. This measure excludes the effect of foreign currency exchange rate fluctuations by translating the current period revenues and expenses into U.S. dollars at the weighted average exchange rates of the prior period of comparison.

During the first quarter of 2017, we reported revenue growth of 22.7%. Had our consolidated revenues been expressed in constant currency terms using the exchange rates in effect during the first quarter of fiscal 2016, we would have reported revenue growth of 23.9%. The decrease in revenues expressed in constant currency terms was primarily related to the depreciation of the British pound and, to a lesser extent, the euro relative to the U.S. dollar, partially offset by the appreciation of the Russian ruble.

During the quarter ended March 31, 2017, approximately 34.9% of consolidated revenues and 43.1% of operating expenses were denominated in currencies other than the U.S. dollar. We are monitoring the developments relating to Brexit as we have a significant operating presence in the U.K. and collect revenues and incur expenses in currencies that may be affected.

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Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on management’s evaluation, with the participation of our Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Chief Accounting Officer (CAO), as of the end of the period covered by this report, these officers have concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer, principal financial officer and principal accounting officer as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in litigation and claims arising out of our operations in the normal course of business. We are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us, or contemplated to be brought against us.

Item 1A. Risk Factors

There have been no material changes with respect to the risk factors disclosed in “Part I. Item 1A.Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Description
10.1	Amended Non-Employee Director Compensation Policy
10.2	Non-Employee Directors Deferral Plan
10.3	Form of Non-Employee Director RSU Agreement
10.4	Form of Director Deferral Election Form
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.3	Certification of the Chief Accounting Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3	Certification of the Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 8, 2017

EPAM SYSTEMS, INC.
By:	/s/ Arkadiy Dobkin
	Name: Arkadiy Dobkin
	Title: Chairman, Chief Executive Officer and President (principal executive officer)
By:	/s/ Gary Abrahams
	Name: Gary Abrahams
	Title: Vice President, Corporate Controller, Chief Accounting Officer (principal accounting officer)

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EX-10.1

2

EXHIBIT 10.1

EPAM SYSTEMS, INC.

Amended Non-Employee Director Compensation Policy

(Adopted January 22, 2012; Amended December 16, 2013; February 24, 2015 (effective January 1, 2015); April 16, 2015; September 14, 2016; December 14, 2016 (effective January 1, 2017); April 11, 2017)

Unless and until the Board resolves otherwise or as otherwise agreed between the Company and the Board, each member of the Board of Directors (the “Board”) of EPAM Systems, Inc. (the “Company”) that is not an employee of the Company or any of its subsidiaries (each, a “Non-Employee Director”) shall be entitled to receive the compensation set forth below during the term of his or her service on the Board. Capitalized terms used but not defined in this policy shall have the meanings set forth in the Company’s 2012 Non-Employee Directors Compensation Plan (as amended from time to time, the “Plan”) or in the Company’s 2017 Non-Employee Directors Deferral Plan (the “Deferral Plan”), as the case may be.

Annual Cash Retainers

Frequency and Pro-Ration of Payments: Each of the retainer payments described below shall be payable in cash in arrears in equal quarterly installments on March 31, June 30, September 30 and December 31 (or, if any such date is not a business day, the business day immediately preceding such date) (each such payment date, a “Quarterly Payment Date”) in respect of the calendar quarter that includes such Quarterly Payment Date, or, at the Non-Employee Director’s election given by written notice to the Company no later than March 15 of any calendar year, in one cash payment in arrears on December 31 (or if such date is not a business day, the business day immediately preceding such date) (such payment date, an “Annual Payment Date”) in respect of the calendar year that includes such Annual Payment Date. Any Non-Employee Director who becomes eligible for any of the following retainer payments on a date that is not the first day of a calendar quarter (or year) shall receive a pro-rated Retainer for his or her service in the applicable role on the Board for such quarter (or year) based on the number of days of such service during such quarter (or year).

Service as Non-Employee Director: Each Non-Employee Director shall receive an annual retainer (a “Retainer”) in the amount of $55,000 payable in cash in arrears.

Service as Lead Independent Director: The Non-Employee Director who serves as Lead Independent Director of the Board shall receive an additional annual retainer in the amount of $25,000 payable in cash in arrears.

Service as a Committee Member: Each Non-Employee Director who serves as a member (but not as a Chairperson) of one or more of the Audit, Compensation or Nominating and Corporate Governance Committees (each, a “Committee”) of the Board shall receive an additional annual retainer in the amount

of $10,000, $7,500 and/or $6,000 for his or her service on each such Committee, respectively, payable in cash in arrears.

Service as Chairperson of a Committee of the Board: Any Non-Employee Director who serves as a Chairperson of one or more of the Committees shall receive an additional annual retainer in the amount of $20,000, $15,000 and/or $10,000 for his or her service as the Chairperson of one or more of the Audit, Compensation or Nominating and Corporate Governance Committees, respectively, payable in cash in arrears.

Additional Non-Employee Director Compensation

Any Non-Employee Director who attends more than ten (10) meetings of the Board, or more than ten (10) meetings of the same Committee on which such Non-Employee Director serves, in any calendar year shall receive an additional cash payment of $2,000 for each such additional meeting thereof that such Non-Employee Director attends in person and $1,000 for each such additional meeting that such Non-Employee Director attends telephonically.

Election to Receive Stock

A Non-Employee Director may elect to receive all or a portion of his or her Retainer in shares of Common Stock by executing and submitting to the Company’s Corporate Secretary (the “Secretary”) an election form, pursuant to a form provided by the Company, which indicates the percentage of such Retainer that such director elects to receive in shares. A Non-Employee Director who wishes to revoke or amend a previously submitted election form may do so by executing and submitting to the Secretary a subsequent election form, pursuant to a form provided by the Company. An election form, whether initial or subsequent, shall be effective only with respect to Quarterly Payment Dates (or if applicable, the Annual Payment Date) that occur after the date on which the Secretary receives such form.

As of each Quarterly Payment Date (or if so elected, the Annual Payment Date), a Non-Employee Director who has validly elected to receive all or a portion of his or her Retainer in shares of Common Stock will receive a number of shares of Common Stock determined by dividing the amount of the Retainer that otherwise would have been payable to such director in cash on such date by the closing price of a share of Common Stock on the day prior to such Quarterly Payment Date (or if so elected, the Annual Payment Date); provided that any fractional share shall be paid in cash.

Equity Grants

Initial Restricted Stock Unit Grants to Directors: On the date that a Non-Employee Director commences service on the Board, such director shall receive under the Plan an initial grant (the “Initial Grant”) of restricted stock units (each, an “RSU”), which each represent a right to receive shares of EPAM common stock. The number of RSUs in the Initial Grant shall be determined by dividing $100,000 by the closing price of a share of Common Stock on the day prior to the grant date. The Initial Grant will vest 25% on each of the first four anniversaries of the grant date, and unless a Non-Employee Director elects otherwise, shares will be delivered promptly following vesting.

Annual Restricted Stock Unit Grants to Directors: On the date of the Company’s annual public stockholder meeting, each Non-Employee Director who at such meeting is elected to serve on the Board or whose term is scheduled to continue at least through the date of the next such meeting shall receive under the Plan an annual grant (each, an “Annual Grant”) of RSUs. The number of RSUs awarded in the Annual Grant shall be determined by dividing $110,000 by the closing price of a share of Common Stock

on the day prior to the grant date. Any Non-Employee Director who commences service on the Board on a date other than the date of the Company’s annual public stockholder meeting shall receive on such start date a pro-rated Annual Grant, with the number of RSUs awarded in such grant determined by dividing (i) the product of $110,000 and a fraction, the numerator of which is 365 minus the number of days that have elapsed between the date of such meeting and such start date, and the denominator of which is 365, by (ii) the closing price of a share of Common Stock on the day prior to such start date. Each Annual Grant will vest 100% on the first anniversary of the grant date, and unless a Non-Employee Director elects otherwise, shares will be delivered promptly following vesting.

Deferral Program: Each Non-Employee Director will be provided the opportunity to defer the receipt of shares underlying RSUs pursuant to the terms of the Deferral Plan.

EX-10.2

EXHIBIT 10.2

EPAM SYSTEMS, INC. 2017 NON-EMPLOYEE DIRECTORS DEFERRAL PLAN

Section 1.Purpose. The purpose of the EPAM Systems, Inc. Non-Employee Directors Deferral Plan (the “Plan”) is to retain the services of experienced non-employee directors for EPAM Systems, Inc. (the “Company”) by providing them with opportunities to defer income taxes on their equity grants with respect to shares of the Company’s common stock (“Stock”). This Plan is established in connection with the EPAM Systems, Inc. 2012 Non-Employee Directors Compensation Plan (the “Incentive Plan”).

Section 2.Definitions. Unless otherwise defined in the Plan, capitalized terms used in the Plan shall have the meanings assigned to them in the Incentive Plan.

Section 3.Eligibility. Each director of the Company who is eligible to receive compensation as a non-employee director shall be eligible to participate in the Plan. Each such eligible non-employee director who makes a deferral under the Plan is referred to herein as a “Participant”.

Section 4.Administration. The Plan shall be administered by the Board of Directors of the Company (the “Board”). Subject to the terms of the Plan and applicable law, the Board shall have full power and authority to: (i) designate Participants; (ii) determine the terms and conditions of any deferral made under the Plan; (iii) interpret and administer the Plan and any instrument or agreement relating to, or deferral made under, the Plan; (iv) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (v) make any other determination and take any other action that the Board deems necessary or desirable for the administration of the Plan. To the extent legally permitted, the Board may, in its discretion, delegate to the General Counsel of the Company or the Secretary of the Company, or to the delegatee of the General Counsel of the Company or the Secretary of the Company any or all authority and responsibility to act with respect to administrative matters with respect to the Plan. The determination of the Board on all matters within its authority relating to the Plan shall be final, conclusive and binding upon all parties, including the Company, its shareholders and the Participants.

Section 5.Deferrals.

(a)Deferral Elections. Each Participant may elect to defer receipt of all or any shares of Stock issuable upon settlement of any restricted stock units (a “RSU”) granted to such Participant pursuant to Section 7 of the Incentive Plan (a “Deferred Stock Unit” or “DSU”). The date on which any such shares of Stock were scheduled to be issued to such Participant, had such Participant not deferred receipt of such shares of Stock, is referred to herein as the “Scheduled Payment Date”.

(b)Election Forms. A Participant’s deferral election shall be made in the form of a document (an “Election Form”) established for such purpose by the Board that is executed by such Participant and filed with the General Counsel of the Company or his or her delegatee. The Election Form will require such Participant to specify:

(i)the portion of any shares of Stock issuable upon conversion of any RSU that will be deferred;

and

(ii)the time at which the deferred shares of Stock will be distributed to such Participant , which may be (x) the July 15th following such Participant’s separation from service as a director of the Company or (z) in substantially equal annual installments over a period of up to five years commencing with the July 15th following my having a “separation from service” as a director of the Company (within the meaning given in Treasury Regulation §1.409A-1(h) or successor guidance thereto).

Each Election Form will remain in effect until superseded or revoked pursuant to this ‎Section 5.

(c)Timing of Elections.

(i)Subject to ‎Section 5(c)(ii) and Section 5(c)(iii), an Election Form executed by a Participant shall apply to any RSU that is granted to such Participant at any time following the end of the calendar year in which such Election Form is executed and prior to its revocation.

(ii)An Election Form filed by a Participant within 30 days after such Participant becomes eligible to participate in the Plan shall apply to any RSU that is granted to such Participant or relates to services performed following the date on which such Participant executes such Election Form, including, without limitation, any RSU paid in connection with such Participant’s initial election as a non-employee director of the Company.

(iii)A person who is eligible to receive compensation as a non-employee director on the Effective Date (as defined in Section 11 hereof) and who files an Election Form within 30 days of the Effective Date may elect to defer any RSU that is granted to such Participant or relates to services performed following the date on which such Participant executes such Election Form.

(d)Subsequent Election Forms. A Participant who has an Election Form on file with the Company may execute and file with the Company a subsequent Election Form at any time. Such subsequent Election Form shall apply to any RSU that is granted to such Participant following the end of the year in which such subsequent Election Form is executed.

(e)Revoking Election Forms. A Participant may revoke an Election Form at any time by providing written notice to the Board. Such revocation shall apply to any RSU that is granted to such Participant following the year in which such notice is provided.

(f)Vesting. Each Deferred Stock Unit shall be fully vested and non-forfeitable at all times from the applicable Scheduled Payment Date.

Section 6.Timing and Form of Distribution.

(a)Subject to this ‎Section 6, distribution with respect to a Participant’s Deferred Stock Unit shall be made to such Participant, as specified on the applicable Election Form, either in (i) a single lump sum or (ii) substantially equal annual installments over a period of up to five years.

(b)The Board, in its sole discretion, may accelerate the distribution of a Participant’s Deferred Stock Unit or if such Participant experiences an unforeseeable emergency or hardship, provided that such distribution complies with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

(c)All of a Participant’s Deferred Stock Units shall be distributed to such Participant upon the termination of such Participant’s service in connection with a Change in Control (as defined in the Incentive Plan), no later than the 15^th day of the third calendar month following the termination following the Change in Control occurs.

(d)If the Board considers a Participant to be one of the Company’s “specified employees” under Section 409A of the Code at the time of such Participant’s termination of service from the Board, any distribution that otherwise would be made to such Participant as a result of such termination from service shall not be made until the date that is six months after such termination of service, except to the extent that earlier distribution would not result in such Participant’s incurring interest or additional tax under Section 409A of the Code.

(e)Each Deferred Stock Unit shall be distributed in shares of Stock.

Section 7.Amount of Distribution.

(a)Each Deferred Stock Unit that is scheduled to be distributed in shares of Stock shall be allocated to a separate bookkeeping account (a “Share Account”) established and maintained by the Administrator, or the Administrator’s designee, to record the number of shares of Stock to which such Deferred Stock Unit relates. In the case of a Deferred Stock Unit, the Share Account shall reflect the number of shares of Stock deferred.

(b)Until the distribution date applicable to a Participant’s Deferred Stock Unit that is scheduled to be distributed in shares of Stock, if the Company pays a regular or ordinary cash dividend on its Stock, the Share Account shall be credited with a number of shares of Stock determined by dividing the amount of the cash dividend by the fair market value of a share of Stock on the dividend payment date, with the value of any fractional shares paid to the Participant in cash as soon as practicable following the dividend payment date.

(c)In the event of any merger, reorganization, recapitalization, consolidation, sale or other distribution of substantially all of the assets of the Company, any stock dividend, split, spin-off, split-up, split-off, distribution of cash, securities or other property by the Company, or other change in the Company’s corporate structure affecting the Stock, each Share Account shall be automatically adjusted to prevent dilution or enlargement of the benefits or potential benefits intended to be awarded under this Plan.

(d)On the distribution date applicable to a Participant’s Deferred Stock Unit, such Participant shall receive that number of shares of Stock equal to the number of shares credited to the applicable Share Account as of such distribution date.

Section 8.General Provisions Applicable to Deferrals.

(a)Except as may be permitted by the Board, (i) no deferral and no right under such deferral shall be assignable, alienable, saleable or transferable by a Participant otherwise than by will or pursuant to ‎Section 8(b), and (i) during a Participant’s lifetime, each deferral, and each right under such deferral, shall be exercisable only by such Participant or, if permissible under applicable law, by such Participant’s guardian or legal representative. The provisions of this ‎Section 8(a) shall not apply to any deferral that has been distributed to a Participant.

(b)A Participant may make a written designation of beneficiary or beneficiaries to receive all or part of the distributions under this Plan in the event of death at such times prescribed by the Board by using forms and following procedures approved or accepted by the Board for that purpose. Any shares of Stock that become payable upon a Participant’s death, and as to which a designation of beneficiary is not in effect, will be distributed to such Participant’s estate.

(c)Following distribution of shares of Stock, a Participant will be the beneficial owner of the shares of Stock issued to such Participant, and will be entitled to all rights of ownership, including voting rights and the right to receive cash or stock dividends or other distributions paid on the Stock. The Company may, if it determines it is appropriate, affix any legend to the stock certificates representing shares of Stock issued in accordance with the Plan (and any stock certificates that may subsequently be issued in substitution for the original certificates). The Company may advise the transfer agent to place a stop order against such shares of Stock if it determines that such an order is necessary or advisable.

Section 9.Amendments and Termination.

(a)The Board, in its sole discretion, may amend, suspend or discontinue the Plan or any deferral at any time; provided that no such amendment, suspension or discontinuance shall reduce the accrued benefit of any Participant except to the extent necessary to comply with applicable law. The Board further has the right, without a Participant’s consent, to amend or modify the terms of the Plan and such Participant’s deferral to the extent that the Board deems it necessary to avoid adverse or unintended tax consequences to such Participant under federal, state or local income tax laws.

(b)The Board, in its sole discretion, may terminate the Plan at any time, as long as such termination complies with then applicable tax and other requirements.

(c)Such other changes to deferrals shall be permitted and honored under the Plan to the extent authorized by the Board and consistent with Code Section 409A.

Section 10.Miscellaneous.

(a)No Participant or other person shall have any claim to be entitled to make a deferral under the Plan, and there is no obligation for uniformity of treatment of Participants or beneficiaries under the Plan. The terms and conditions of deferrals under the Plan need not be the same with respect to each Participant.

(b)The opportunity to make a deferral under the Plan shall not be construed as giving a Participant the right to be retained in the service of the Board or the Company. A Participant’s deferral under the Plan is not intended to confer any rights on such Participant except as set forth in the Plan and the applicable Election Form.

(c)Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.

(d)To the extent applicable, the Company shall be authorized to withhold from any distribution under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, shares of Stock, other property, net settlement, or any combination thereof) of applicable withholding taxes due in respect of such distribution and to take such other action (including providing for elective payment of such amounts in cash or shares of Stock by such Participant) as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes.

(e)If any provision of the Plan or any Election Form is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or deferral, or would disqualify the Plan or any deferral under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or such Election Form, such provision shall be stricken as to such jurisdiction, person or deferral, and the remainder of the Plan and such Election Form shall remain in full force and effect.

Section 11.Effective Date of the Plan. The Plan shall be effective as of the date on which the Plan is adopted by the Board (the “Effective Date”).

Section 12.Unfunded Status of the Plan. The Plan is unfunded. The Plan, together with the applicable Election Form, shall represent at all times an unfunded and unsecured contractual obligation of the Company. Each Participant and beneficiary will be an unsecured creditor of the Company with respect to all obligations owed to them under the Plan. Amounts payable under the Plan will be satisfied solely out of the general assets of the Company subject to the claims of its creditors. No Participant or beneficiary will have any interest in any fund or in any specific asset of the Company of any kind, nor shall such Participant or beneficiary or any other person have any right to receive any payment or distribution under the Plan except as, and to the extent, expressly provided in the Plan and the applicable Election Form. Any reserve or other asset that the Company may establish or acquire to assure itself of the funds to provide payments required under the Plan shall not serve in any way as security to any Participant or beneficiary for the Company’s performance under the Plan.

Section 13.Section 409A of the Code. With respect to deferrals that are subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code, and the provisions of the Plan and any Election Form shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code, and the Plan shall be operated accordingly. If any provision of the Plan or any term or condition of any Election Form would otherwise frustrate or conflict with this intent, the provision, term or condition will be interpreted and deemed amended so as to avoid this conflict.

Section 14.Governing Law. The Plan and the Election Forms shall be governed by the laws of the State of Delaware without reference to principles of conflicts of laws.

1

EX-10.3

EXHIBIT 10.3

EPAM SYSTEMS, INC.

2012 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

1.Grant of RSUs. EPAM Systems, Inc., a Delaware corporation (the Company”), hereby grants to _____________ (the “Participant”), on ______ (the “Grant Date”), ________ restricted stock units (the “RSUs”), subject to the terms, definitions and provisions of the EPAM Systems, Inc. 2012 Non-Employee Director Compensation Plan (the “Plan”) adopted by the Company, which is incorporated in this Agreement by reference, and the terms and conditions of this Agreement. Each RSU shall represent the right to receive one Share upon the vesting of such RSU in accordance with this Agreement. Unless otherwise defined in this Agreement, the terms used in this Agreement shall have the meanings defined in the Plan.

2.Vesting Schedule and Distribution. Subject to Section 5, the RSUs shall vest and become non-forfeitable 100% on the first anniversary of the Grant Date. Subject to the provisions of this Agreement, upon the vesting of any of the RSUs, including the RSUs that vest pursuant to Section 5, the Company shall distribute to the Participant, on or within 30 days after the date of such vesting or on the dated elected pursuant to the EPAM Systems, Inc. 2017 Non-Employee Directors Deferral Plan, one Share for each such RSU.

3.Voting Rights. The Participant shall have no voting rights with respect to the RSUs unless and until the Participant becomes the record owner of the Shares underlying the RSUs.

4.Dividend Equivalents. If a dividend is declared on Shares during the period commencing on the Grant Date (including such date) and ending on the date on which the Shares underlying RSUs are distributed to the Participant pursuant to Section 2, the Participant shall be credited with dividend equivalents equal to the dividend that the Participant would have received had the Shares underlying the RSUs been distributed to the Participant as of the time at which such dividend declared. Dividend equivalents will be subject to the same vesting and forfeiture restrictions as the RSUs to which they are attributable and will be paid on the same date that the RSUs to which they are attributable are settled in accordance with Section 2. The Participant will not be entitled to any dividend or dividend equivalents with respect to any canceled or forfeited RSUs.

5.Termination of Service or a Change in Control.

(a) Upon the Participant’s termination of service from the Board at any time, a portion of the RSUs shall vest as of the date of such termination, with such portion determined by multiplying (i) the number of RSUs that would have vested on the next scheduled vesting date had the Participant’s service on the Board continued through such date by (ii) a fraction, the numerator of which is the number of days that the Participant served on the Board from the Grant Date (or, if such termination occurs after the first anniversary of the Grant Date, the most recent anniversary of the Grant Date) through the date of such termination, and the denominator of which is 365. Any RSUs that do not vest upon such termination in accordance with the preceding sentence shall be forfeited without any payment to the Participant.

(b) Upon a Change in Control, the RSUs shall fully vest and become non-forfeitable as of the date of such Change in Control.

1

6.Non-Transferability Until Vesting. Unless and until the RSUs become vested in accordance with this Agreement, the RSUs shall not be assigned, sold, transferred or otherwise be subject to alienation by the Participant. Upon the vesting of any of the RSUs, the forfeiture restrictions with respect to such Shares shall lapse, and, subject to the provisions of this Agreement and any applicable lock-up agreement, such Shares shall be fully assignable, saleable and transferable by the Participant.

7.Miscellaneous Provisions.

(a)Notices. All notices, requests and other communications under this Agreement shall be in writing and shall be delivered in person (by courier or otherwise), mailed by certified or registered mail, return receipt requested, or sent by facsimile transmission, as follows:

if to the Company, to:

EPAM Systems, Inc.

41 University Drive

Newtown, Pennsylvania 18940

Attention: General Counsel

Facsimile: 212-759-8989

if to the Participant, to the address that the Participant most recently provided to the Company,or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.

(b)Effect of Agreement. The Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the terms of the RSUs), and hereby accepts the RSUs and agrees to be bound by their contractual terms as set forth herein and in the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Board regarding any questions relating to the RSUs. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of this Agreement, the Plan terms and provisions shall prevail. This Agreement, including the Plan, constitutes the entire agreement between the Participant and the Company on the subject matter hereof and supersedes all proposals, written or oral, and all other communications between the parties relating to such subject matter.

(c)Amendment; Waiver.  No amendment or modification of any provision of this Agreement shall be effective unless signed in writing by or on behalf of the Company and the Participant, except that the Company may amend or modify this Agreement without the Participant’s consent in accordance with the provisions of the Plan or as otherwise set forth in this Agreement. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature. Any amendment or modification of or to any provision of this Agreement, or any waiver of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.

2

(d)Successors and Assigns; No Third Party Beneficiaries.  This Agreement shall inure to the benefit of and be binding upon the Company and the Participant and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the Company and the Participant, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

(e)Severability. If any provision of this Agreement shall be declared by any court or arbitrator of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable.

(f)Dispute Resolution.  If any dispute arising out of or relating to this Agreement or the Plan, or the breach thereof, cannot be settled through negotiation, the parties agree first to try in good faith to settle such dispute by mediation. If the parties fail to settle such dispute within 30 days after the commencement of such mediation, such dispute shall be settled by arbitration conducted in the state of Pennsylvania and judgment on the arbitral award rendered may be entered in any court having jurisdiction thereof.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.

	EPAM SYSTEMS, INC.
	By:
		Name:
		Title:
Rn

3

EX-10.4

EXHIBIT 10.4

EPAM SYSTEMS, INC.NON-EMPLOYEE DIRECTORS DEFERRAL PLAN

Form of Election to Defer RSUs

On settlement of any RSUs that are granted to you under the Incentive Plan, shares of Stock will be distributed to you in accordance with the terms of the Incentive Plan and the award agreements governing such RSUs. Complete this Election Form if you wish to defer receipt of all or any portion of such shares of Stock. Indicate the percentage of such shares of Stock that you wish to defer and the time at which you wish to receive such shares of Stock.

I hereby elect to defer receipt of any shares of Stock that are distributed to me on settlement of any RSUs that are granted to me in the calendar year after the date hereof (or in the case of my initial deferral election occurring within 30 days of the adoption of the Plan or my becoming eligible to participate in the plan, after the date hereof), until such time that I revoke this Election Form in accordance with the requirements of the Incentive Plan and this Election Form. Please distribute to me such shares of Stock at the time indicated below [check only one of the two options]:

□ Option #1 – Lump Sum Distribution: On the July 15th following my having a “separation from service” as a director of the Company (within the meaning given in Treasury Regulation §1.409A-1(h) or successor guidance thereto).

□ Option #2 – Distribution in Annual Installments: As indicated below, in substantially equal annual installments, each on July 15th, over a period of up to five years commencing with the July 15th following my having a “separation from service” as a director of the Company (within the meaning given in Treasury Regulation §1.409A-1(h) or successor guidance thereto). Please select one of the following:

□ 2 Installments: On the July 15th following my “separation from service” and the following July 15th.

□ 3 Installments: On the July 15th following my “separation from service” and on the July 15th of each of the following two years.

□ 4 Installments: On the July 15th following my “separation from service” and on the July 15th of each of the following three years.

□ 5 Installments: On the July 15th following my “separation from service” and on the July 15th of each of the following four years.

I understand that any such shares of Stock that I have not elected to defer under this Election Form will be distributed to me in accordance with the terms of the Incentive Plan and the applicable award agreements.

I acknowledge that I have received copies of the Incentive Plan and the Deferral Plan. I understand that this Election Form will remain in effect until I modify this Election Form by executing and returning to the Administrator a new Election Form or I revoke this Election Form by providing written notice to the Administrator, in each case in accordance with the terms of the Deferral Plan, and I further acknowledge that in order to modify this Election Form’s application to a particular grant of RSUs, I must modify or revoke this election form prior to the end of the calendar year prior to a grant of RSUs for which I elect for deferral.

Signature:     Date:

Director’s Name: ____________________________

1

EX-31.1

EXHIBIT 31.1

Certification by Chief Executive Officer

Pursuant to Securities Exchange Act Rule 13a-14(a)

I, Arkadiy Dobkin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of EPAM Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2017

/s/ Arkadiy Dobkin

Arkadiy Dobkin

Chairman, Chief Executive Officer and President

(principal executive officer)

EX-31.2

EXHIBIT 31.2

Certification by Chief Financial Officer

Pursuant to Securities Exchange Act Rule 13a-14(a)

I, Anthony J. Conte, certify that:

1. I have reviewed this quarterly report on Form 10-Q of EPAM Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2017

/s/ Anthony J. Conte

Anthony J. Conte

Senior Vice President, Chief Financial Officer and Treasurer

(principal financial officer)

EX-31.3

EXHIBIT 31.3

Certification by Chief Accounting Officer

Pursuant to Securities Exchange Act Rule 13a-14(a)

I, Gary Abrahams, certify that:

1. I have reviewed this quarterly report on Form 10-Q of EPAM Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2017

/s/ Gary Abrahams

Name: Gary Abrahams

Title: Vice President, Corporate Controller, Chief Accounting Officer

(principal accounting officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of EPAM Systems, Inc. (the "Company") for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Arkadiy Dobkin, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(i)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 8, 2017

/s/ Arkadiy Dobkin

Arkadiy Dobkin

Chairman, Chief Executive Officer and President

(principal executive officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of EPAM Systems, Inc. (the "Company") for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Anthony J. Conte, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(i)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 8, 2017

/s/ Anthony J. Conte

Anthony J. Conte

Senior Vice President, Chief Financial Officer and Treasurer

(principal financial officer)

EX-32.3

EXHIBIT 32.3

CERTIFICATION OF CHIEF ACCOUNTING OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of EPAM Systems, Inc. (the “Company”) for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Gary Abrahams, as Chief Accounting Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(i)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 8, 2017

/s/ Gary Abrahams

Name: Gary Abrahams

Title: Vice President, Corporate Controller, Chief Accounting Officer

(principal accounting officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 28, 2017
Document Documentand Entity Information [Abstract]
Entity Registrant Name	EPAM Systems, Inc.
Entity Central Index Key	0001352010
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		51,839,547
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Document Period End Date	Mar. 31, 2017
Document Type	10-Q
Amendment Flag	false
Trading Symbol	EPAM

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 398,419	$ 362,025
Restricted cash	268	2,400
Time deposits	403	403
Accounts receivable, net of allowance of $1,241 and $1,434, respectively	176,686	199,982
Unbilled revenues	102,838	63,325
Prepaid and other current assets, net of allowance of $406 and $644, respectively	26,702	15,690
Employee loans, net of allowance of $0 and $0, respectively	2,694	2,726
Total current assets	708,010	646,551
Property and equipment, net	75,962	73,616
Restricted cash	245	239
Employee loans, net of allowance of $0 and $0, respectively	2,975	3,252
Intangible assets, net	49,668	51,260
Goodwill	110,291	109,289
Deferred tax assets	29,211	31,005
Other long-term assets, net of allowance of $138 and $132, respectively	10,625	10,599
Total assets	986,987	925,811
Current liabilities
Accounts payable	3,256	3,213
Accrued expenses and other liabilities	32,451	49,895
Due to employees	44,951	32,203
Deferred compensation due to employees	6,838	5,900
Taxes payable	35,395	25,008
Total current liabilities	122,891	116,219
Long-term debt	25,040	25,048
Other long-term liabilities	3,954	3,132
Total liabilities	151,885	144,399
Commitments and contingencies (Note 8)
Stockholders’ equity
Common stock, $0.001 par value; 160,000,000 authorized; 51,683,500 and 51,117,422 shares issued, 51,663,765 and 51,097,687 shares outstanding at March 31, 2017 and December 31, 2016, respectively	51	50
Additional paid-in capital	396,829	374,907
Retained earnings	469,701	444,320
Treasury stock	(177)	(177)
Accumulated other comprehensive loss	(31,302)	(37,688)
Total stockholders’ equity	835,102	781,412
Total liabilities and stockholders’ equity	$ 986,987	$ 925,811

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets
Accounts receivable allowance	$ 1,241	$ 1,434
Employee loans current allowance	406	644
Employee loans current allowance	0	0
Assets, Noncurrent [Abstract]
Employee loans long-term allowance	0	0
Other long-term assets allowance	$ 138	$ 132
Stockholders' equity
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	160,000,000	160,000,000
Common stock, shares issued (in shares )	51,683,500	51,117,422
Common stock, shares outstanding (in shares)	51,663,765	51,097,687

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Statement [Abstract]
Revenues	$ 324,651	$ 264,482
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)	207,730	167,381
Selling, general and administrative expenses	78,453	61,494
Depreciation and amortization expense	6,672	5,102
Other operating expenses, net	830	174
Income from operations	30,966	30,331
Interest and other income, net	584	1,211
Foreign exchange loss	(2,955)	(1,290)
Income before provision for income taxes	28,595	30,252
Provision for income taxes	4,954	6,353
Net income	23,641	23,899
Foreign currency translation adjustments	6,386	4,699
Comprehensive income	$ 30,027	$ 28,598
Net income per share:
Basic (in dollars per share)	$ 0.46	$ 0.48
Diluted (in dollars per share)	$ 0.44	$ 0.45
Shares used in calculation of net income per share:
Basic (in shares)	50,958	49,714
Diluted (in shares)	53,889	52,883

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 23,641	$ 23,899
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,672	5,102
Bad debt (recovery)/expense	(517)	552
Deferred taxes	2,595	(482)
Stock-based compensation expense	15,776	10,964
Excess tax benefit on stock-based compensation plans	0	(2,040)
Other	651	50
(Increase)/decrease in operating assets:
Accounts receivable	24,635	16,993
Unbilled revenues	(39,485)	(18,559)
Prepaid expenses and other assets	(79)	(1,383)
Increase/(decrease) in operating liabilities:
Accounts payable	77	671
Accrued expenses and other liabilities	(18,484)	(34,153)
Due to employees	8,611	12,420
Taxes payable	7,135	(3,173)
Net cash provided by operating activities	31,228	10,861
Cash flows from investing activities:
Purchases of property and equipment	(5,725)	(6,185)
Employee housing loans issued	370	0
Proceeds from repayments of employee housing loans	689	470
Decrease in restricted cash and time deposits, net	38	30,000
Increase in other long-term assets, net	(313)	(774)
Other investing activities, net	37	(91)
Net cash (used in)/provided by investing activities	(5,644)	23,420
Cash flows from financing activities:
Proceeds from stock option exercises	10,606	3,108
Excess tax benefit on stock-based compensation plans	0	2,040
Payments of withholding taxes related to net share settlements of restricted stock units	(2,694)	0
Proceeds from debt (Note 4)	0	20,000
Repayment of debt (Note 4)	(30)	(15,031)
Proceeds from government grants	0	135
Acquisition of business, deferred consideration	0	(463)
Net cash provided by financing activities	7,882	9,789
Effect of exchange rate changes on cash and cash equivalents	2,928	1,358
Net increase in cash and cash equivalents	36,394	45,428
Cash and cash equivalents, beginning of period	362,025	199,449
Cash and cash equivalents, end of period	$ 398,419	$ 244,877

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

EPAM Systems, Inc. (the “Company” or “EPAM”) is a leading global provider of software product development and digital platform engineering services to clients located around the world, primarily in North America, Europe, Asia and Australia. The Company has expertise in various industries, including software and hi-tech, financial services, media and entertainment, travel and hospitality, retail and distribution and life sciences and healthcare. The Company is incorporated in Delaware and headquartered in Newtown, PA.

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”) and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The 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, 2016 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 our 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.

Change in Presentation of Certain Financial Information — During the first quarter of 2017, the Company changed the presentation of geographic area information about its consolidated revenues. Historically, information about geographic mix of revenues excluded reimbursable expenses and other revenues, which primarily included travel and entertainment costs that are chargeable to clients. Effective January 1, 2017, the Company reports geographic area information about reimbursable expenses and other revenues based on location of clients to which these costs are chargeable. Accordingly, the Company has changed the presentation of revenues by client location for the three months ended March 31, 2016 to conform to the current period presentation. These changes did not result in any adjustments to the Company’s previously issued financial statements and were applied retrospectively beginning on January 1, 2015. Comparative information for the three months ended March 31, 2016 follows:

	Three Months Ended March 31, 2016
	As reported				After Reclassification
	(in thousands except percentages)
United States	$	135,558	51.3	%	$	136,639	51.7	%
United Kingdom	42,990		16.3	%	43,560		16.5	%
Switzerland	30,765		11.6	%	30,852		11.7	%
Canada	15,701		5.9	%	15,846		6.0	%
Russia	8,952		3.4	%	8,965		3.4	%
Germany	8,706		3.3	%	8,739		3.3	%
Hong Kong	5,754		2.2	%	5,944		2.2	%
Sweden	4,060		1.5	%	4,128		1.5	%
Netherlands	2,547		1.0	%	2,647		1.0	%
Ireland	1,184		0.4	%	1,186		0.4	%
Italy	636		0.2	%	668		0.3	%
Denmark	405		0.2	%	410		0.2	%
China	294		0.1	%	294		0.1	%
Other locations	4,484		1.7	%	4,604		1.7	%
Reimbursable expenses and other revenues	2,446		0.9	%	—		—	%
Total	$	264,482	100.0	%	$	264,482	100.0	%

Revenue Recognition — The Company recognizes revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue reported.

The Company derives its revenues from a variety of service offerings, which represent specific competencies of its IT professionals. Contracts for these services have different terms and conditions based on the scope, deliverables, and complexity of the engagement, which require management to make judgments and estimates in determining the appropriate revenue recognition. Fees for these contracts may be in the form of time-and-materials or fixed-price arrangements. If there is an uncertainty about the project completion or receipt of payment for the services, revenue is deferred until the uncertainty is sufficiently resolved. At the time revenue is recognized, the Company provides for any contractual deductions and reduces the revenue accordingly. The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the condensed consolidated statements of income and comprehensive income.

The Company defers amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. Unbilled revenue is recorded when services have been provided but billed subsequent to the period end in accordance with the contract terms.

Fair Value of Financial Instruments — The Company makes assumptions about fair values of its financial assets and liabilities in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurement”, and utilizes the following fair value hierarchy in determining inputs used for valuation:

Level 1 — Quoted prices for identical assets or liabilities in active markets.

Level 2 — Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities, and observable inputs other than quoted prices such as interest rates or yield curves.

Level 3 — Unobservable inputs reflecting our view about the assumptions that market participants would use in pricing the asset or liability.

Where the fair values of financial assets and liabilities recorded in the condensed consolidated balance sheets cannot be derived from an active market, they are determined using a variety of valuation techniques. These valuation techniques include a net present value technique, comparison to similar instruments with market observable inputs, option pricing models and other relevant valuation models. To the extent possible, observable market data is used as inputs into these models but when it is not feasible, a degree of judgment is required to establish fair values.

Changes in fair value could cause a material impact to, and volatility in the Company’s operating results. See Note 3 for disclosures related to fair value.

Business Combinations — The Company accounts for its business combinations using the acquisition accounting method, which requires it to determine the fair value of net assets acquired and the related goodwill and other intangible assets in accordance with the FASB ASC Topic 805, “Business Combinations.” The Company identifies and attributes fair values and estimated lives to the intangible assets acquired and allocates the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. There are different valuation models for each component, the selection of which requires considerable judgment. These determinations will affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes are reasonable, but recognizes that the assumptions are inherently uncertain.

All acquisition-related costs, other than the costs to issue debt or equity securities, are accounted for as expenses in the period in which they are incurred. Changes in fair value of contingent consideration arrangements that are not measurement period adjustments are recognized in earnings. Payments to settle contingent consideration, if any, are reflected in cash flows from financing activities and the changes in fair value are reflected in cash flows from operating activities in the Company’s condensed consolidated statements of cash flows.

The acquired assets typically consist of customer relationships, trade names, non-competition agreements, and workforce and as a result, a substantial portion of the purchase price is usually allocated to goodwill and other intangible assets.

Goodwill and Other Intangible Assets — Goodwill and intangible assets that have indefinite useful lives are accounted for in accordance with FASB ASC 350, “Intangibles - Goodwill and Other.” The Company conducts its evaluation of goodwill impairment at the reporting unit level on an annual basis during its fourth quarter, and more frequently if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value. A reporting unit is an operating segment or one level below. The Company does not have intangible assets that have indefinite useful lives.

Intangible assets that have finite useful lives are amortized over their estimated useful lives on a straight-line basis. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset’s carrying value, using estimates of future cash flows over the remaining asset life. The estimates of future cash flows attributable to intangible assets require significant judgment based on the Company’s historical and anticipated results. Any impairment loss is measured by the excess of carrying value over fair value.

Stock-Based Compensation — The Company recognizes the cost of its stock-based incentive awards based on the fair value of the award at the date of grant, net of estimated forfeitures. The cost is expensed evenly over the service period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Over time, the forfeiture assumption is adjusted to the actual forfeiture rate and such change may affect the timing of the total amount of expense recognized over the vesting period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that do not meet the criteria for equity classification are recorded as liabilities and adjusted to fair value at the end of each reporting period.

Off-Balance Sheet Financial Instruments — The Company uses FASB ASC Topic 825, “Financial Instruments” to identify and disclose off-balance sheet financial instruments, which include credit instruments, such as commitments to make employee loans and related guarantees, standby letters of credit and certain guarantees issued under customer contracts. The face amount for these items represents the exposure to loss, before considering available collateral or the borrower’s ability to repay. Loss contingencies arising from off-balance sheet financial instruments are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe such matters exist that will have a material effect on the condensed consolidated financial statements.

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GOODWILL

3 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

GOODWILL

Goodwill by reportable segment was as follows:

	North America			Europe		Total
Balance as of January 1, 2017	$	76,812		$	32,477	$	109,289
Other acquisitions purchase accounting adjustment	(352		)	352		—
Effect of net foreign currency exchange rate changes	144			858		1,002
Balance as of March 31, 2017	$	76,604		$	33,687	$	110,291

There were no accumulated impairment losses in the North America or Europe reportable segments as of March 31, 2017 or December 31, 2016.

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FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The Company carries contingent liabilities and certain equity-based awards at fair value on a recurring basis on its consolidated balance sheets. Changes in the fair values of these financial liabilities are recorded in cost of revenues and selling, general and administrative expenses on the Company’s consolidated statements of income and comprehensive income.

The following tables show the fair values of the Company’s financial liabilities measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016:

	As of March 31, 2017
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	6,754	$	6,754	$	—	$	—
Cash-settled restricted stock units	84		84		—		—
Total liabilities measured at fair value on a recurring basis	$	6,838	$	6,838	$	—	$	—

	As of December 31, 2016
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	3,789	$	3,789	$	—	$	—
Cash-settled restricted stock units	2,111		2,111		—		—
Total liabilities measured at fair value on a recurring basis	$	5,900	$	5,900	$	—	$	—

Performance-based equity awards carried at fair value on a recurring basis represent contractual liabilities related to certain business combination transactions completed in 2014. During the determination period, the Company classified the performance-based equity awards within Level 3. The Company estimated the fair value of these liabilities based on transaction-specific inputs by discounting the expected cash flows to a present value, after taking into account estimated probabilities of reaching specified performance targets, as appropriate. During the year ended December 31, 2016, the company reclassified these liabilities from Level 3 to Level 1.

The fair value of the cash-settled restricted stock units is measured using prices for which observable market information is available.

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 Company uses the following methods to estimate the fair values of its financial instruments:

• for financial instruments that have quoted market prices, those quoted prices are used to estimate fair value;

• for financial instruments for which no quoted market prices are available, fair value is estimated using information obtained from independent third parties, or by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.

• for financial instruments for which no quoted market prices are available and that have no defined maturity, have a remaining maturity of 360 days or less, or reprice frequently to a market rate, the Company assumes that the fair value of these instruments approximates their reported value, after taking into consideration any applicable credit risk;

The generally short duration of certain of the Company’s assets and liabilities results in a significant number of assets and liabilities for which fair value equals or closely approximates the amount recorded on the Company’s consolidated balance sheets. These types of assets and liabilities which are reported on the Company’s consolidated balance sheets include:

• cash and cash equivalents;

• time deposits and restricted cash;

• employee loans and notes receivable;

• borrowings under the 2014 Credit Facility (Note 4)

In addition, due to the relatively short duration of certain loans, the Company considers fair value for these loans to approximate their carrying amounts. The fair value of other types of loans, such as employee loans issued under the Housing Program, is estimated using information on the rates of return that market participants in Belarus would require when investing in unsecured U.S. dollar-denominated government bonds with similar maturities (a “risk-free rate”), after taking into consideration any applicable credit and liquidity risk.

The following tables present the reported amounts and estimated fair values of the financial assets and liabilities for which disclosure of fair value is required, as they would be categorized within the fair-value hierarchy, as of the dates indicated:

					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
March 31, 2017
Financial Assets:
Cash and cash equivalents	$	398,419	$	398,419	$	398,419	$	—	$	—
Time deposits and restricted cash	916		916		—		916		—
Employee loans	5,669		5,669		—		—		5,669
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	25,022	$	25,022	$	—	$	25,022	$	—

					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2016
Financial Assets:
Cash and cash equivalents	$	362,025	$	362,025	$	362,025	$	—	$	—
Time deposits and restricted cash	$	3,042	$	3,042	$	—	$	3,042	$	—
Employee loans	$	5,978	$	5,978	$	—	$	—	$	5,978
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	25,019	$	25,019	$	—	$	25,019	$	—

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DEBT

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

DEBT

DEBT

Revolving Line of Credit — On September 12, 2014, the Company entered into a credit facility (the “2014 Credit Facility”) with PNC Bank, National Association; Santander Bank, N.A; and Silicon Valley Bank (collectively the “Lenders”) to replace its former revolving loan agreement. The 2014 Credit Facility provides for a borrowing capacity of $100,000, with potential to increase the credit facility up to $200,000 if certain conditions are met. The 2014 Credit Facility matures on September 12, 2019.

Borrowings under the 2014 Credit Facility may be denominated in U.S. dollars or, up to a maximum of $50,000 equivalent in British pounds sterling, Canadian dollars, euros or Swiss francs (or other currencies as may be approved by the Lenders). Borrowings under the 2014 Credit Facility bear interest at either a base rate or Euro-rate plus a margin based on the Company’s leverage ratio. Base rate is equal to the highest of (a) the Federal Funds Open Rate, plus 0.5%, (b) the Prime Rate, and (c) the Daily LIBOR Rate, plus 1.0%.

The 2014 Credit Facility is collateralized with: (a) all tangible and intangible assets of the Company, and its U.S.-based subsidiaries including all accounts, general intangibles, intellectual property rights and equipment; and (b) all of the outstanding shares of capital stock and other equity interests in U.S.-based subsidiaries of the Company, and 65.0% of the outstanding shares of capital stock and other equity interests in certain of the Company’s foreign subsidiaries. The 2014 Credit Facility includes customary business and financial covenants and restricts the Company’s ability to make or pay dividends (other than certain intercompany dividends) unless no potential or actual event of default has occurred or would be triggered. As of March 31, 2017, the Company was in compliance with all covenants contained in the 2014 Credit Facility.

As of March 31, 2017 and December 31, 2016, the outstanding debt of the Company under the 2014 Credit Facility was $25,000, and is subject to a LIBOR-based interest rate, which resets regularly at issuance, based on lending terms. In addition, the Company has a $942 unused irrevocable standby letter of credit associated with its insurance program that was issued under the 2014 Credit Facility.

As of March 31, 2017 and December 31, 2016, the borrowing capacity of the Company under the 2014 Credit Facility was $74,058.

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INCOME TAXES

3 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

In determining its quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. The Company’s worldwide effective tax rate for the three months ended March 31, 2017 and 2016 was 17.3% and 21.0%, respectively. The decrease in the three months ended March 31, 2017 as compared to the same period last year was primarily due to the recognition of excess tax benefits of $1,695 following the adoption of ASU No. 2016-09 in the first quarter of fiscal year 2017. Refer to Note 10, “Recent Accounting Pronouncements,” for further information.

Our Belarus subsidiary is eligible for certain income tax holiday benefits granted by the local government for its export activities conducted within the Hi-Tech Park. Income tax holidays are effective for 15 years starting from 2006. Other subsidiaries of the Company are primarily taxed at the jurisdictions’ statutory rate most of which are lower than U.S. federal statutory rates.

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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The following costs related to the Company’s stock compensation plans were included in the condensed consolidated statements of income and comprehensive income:

	Three Months Ended   March 31,
	2017		2016
Cost of revenues	$	5,350	$	3,644
Selling, general and administrative expenses - Acquisition related	4,574		3,010
Selling, general and administrative expenses - All other	5,852		4,310
Total	$	15,776	$	10,964

Equity Plans

2012 Non-Employee Directors Compensation Plan — On January 11, 2012, the Company approved the 2012 Non-Employee Directors Compensation Plan (“2012 Directors Plan”) to be used to issue equity awards to its non-employee directors. The Company authorized 600,000 shares of common stock to be reserved for issuance under the plan. The 2012 Directors Plan will expire after 10 years and is administered by the Company’s Board of Directors. As of March 31, 2017, 547,560 shares remained available for issuance under the 2012 Directors Plan.

2015 Long-Term Incentive Plan— On June 11, 2015, the Company's stockholders approved the 2015 Long Term Incentive Plan (“2015 Plan”) to be used to issue equity awards to company personnel. As of March 31, 2017, 5,681,902 shares remained available for issuance under the 2015 Plan. All of the stock option awards issued pursuant to the 2015 Plan expire 10 years from the date of grant.

2012 Long-Term Incentive Plan — On January 11, 2012, the Company approved the 2012 Long-Term Incentive Plan (“2012 Plan”) to be used to issue equity grants to company personnel. In June 2015, the 2012 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2012 Plan and any shares that are subject to an award that was previously granted under the 2012 Plan and that expire or terminate for any reason prior to exercise will become available for issuance under the 2015 Plan. All of the stock option awards issued pursuant to the 2012 Plan expire 10 years from the date of grant.

2006 Stock Option Plan — Effective May 31, 2006, the Board of Directors of the Company adopted the 2006 Stock Option Plan (the “2006 Plan”) to grant stock options to directors, employees, and certain independent contractors. In January 2012, the 2006 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2006 Plan and any shares that are subject to an option award that was previously granted under the 2006 Plan and that expire or terminate for any reason prior to exercise will become available for issuance under the 2015 Plan. All of the awards issued pursuant to the 2006 Plan expire 10 years from the date of grant.

Stock Options

Stock option activity under the Company’s plans is set forth below:

	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2017	6,637,239		$	37.20	$	179,936
Options granted	234,990		73.27		529
Options exercised	(486,524	)	27.92		(23,159		)
Options forfeited/cancelled	(75,456	)	57.87		(1,332		)
Options outstanding at March 31, 2017	6,310,249		$	39.06	$	230,072
Options vested and exercisable at March 31, 2017	4,302,714		$	30.84	$	192,245
Options expected to vest	1,891,705		$	56.33	$	36,302

As of March 31, 2017, total remaining unrecognized compensation expense related to unvested stock options, net of forfeitures was approximately $42,801. The expense is expected to be recognized over a weighted-average period of 1.6 years.

As of March 31, 2017, the weighted average remaining contractual term was 6.2 years for fully vested and exercisable outstanding options and 8.1 years for outstanding options expected to vest.

As of March 31, 2017, a total of 176,758 shares underlying options exercised through March 31, 2017, were in transfer with the Company’s transfer agent.

There were no material changes with respect to the assumptions used in the Black-Scholes option valuation model during the three months ended March 31, 2017, as compared with the assumptions disclosed in Note 14 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Restricted Stock and Restricted Stock Units

Under the Company’s 2012 Directors Plan, the Company grants awards of restricted stock to non-employee directors until April 2017, and thereafter, restricted stock units (“RSUs”). Under the Company’s 2015 Plan (and prior to its approval, under the 2012 Plan), the Company grants awards of RSUs to Company personnel. In addition, the Company has issued in the past, and may issue in the future its equity securities to compensate employees of acquired businesses for future services. Equity-based awards granted in connection with acquisitions of businesses are generally issued in the form of service-based awards (dependent on continuing employment only) and performance-based awards, which are granted and vest only if certain specified performance conditions are met. The awards issued in connection with acquisitions of businesses are subject to the terms and conditions contained in the applicable award agreement and acquisition documents with a typical vesting period of three years, with 33.3% of the awards granted vesting in equal installments on the first, second and third anniversaries of the grant.

Service-Based Awards

The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the three months ended March 31, 2017.

	Equity-Classified  Restricted Stock				Equity-Classified Equity-Settled Restricted Stock Units				Liability-Classified Cash-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2017	154,125		$	40.89	485,188		$	67.69	204,501		$	70.53
Awards granted	—		—		380,577		73.27		138,584		73.27
Awards modified	—		—		(2,570	)	48.49		2,570		73.27
Awards vested	(1,437	)	20.64		(116,183	)	65.32		(51,928	)	70.56
Awards forfeited/cancelled	—		—		(19,036	)	67.45		(616	)	70.52
Unvested service-based awards outstanding at March 31, 2017	152,688		$	41.08	727,976		$	71.06	293,111		$	71.84

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding service-based restricted stock was $1,783. This expense is expected to be recognized over the next 1.1 years using the weighted average method.

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding service-based equity-classified RSUs was $45,693. This expense is expected to be recognized over the next 2.2 years using the weighted average method.

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding service-based liability-classified RSUs was $19,842. This expense is expected to be recognized over the next 2.2 years using the weighted average method.

Performance -Based Awards

Summarized activity related to the Company’s performance-based awards for the three months ended March 31, 2017, was as follows:

	Equity-Classified  Restricted Stock				Liability-Classified Restricted Stock			Equity-Classified Equity-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2017	5,573		$	33.47	105,602	$	38.86	4,667	$	70.22
Awards granted	—		—		—	—		—	—
Awards vested	(2,552	)	36.57		—	—		—	—
Awards forfeited/cancelled	—		—		—	—		—	—
Unvested performance-based awards outstanding at March 31, 2017	3,021		$	30.85	105,602	$	38.86	4,667	$	70.22

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding performance-based equity-classified restricted stock was $89. This expense is expected to be recognized over the next 1.0 year using the weighted average method.

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding performance-based liability-classified restricted stock was $1,221. This expense is expected to be recognized over the next 1.0 year using the weighted average method.

As of March 31, 2017, the aggregate unrecognized compensation expense for all outstanding performance-based equity-classified RSUs was $389. This expense is expected to be recognized over the next 1.2 years using the weighted average method.

Modifications

During the three months ended March 31, 2017, the Company modified certain awards held by a named executive officer of the Company in connection with the execution of a separation agreement on February 28, 2017. Fair value of the modified awards immediately before and after modification was $0 and $563, respectively. The Company also reclassified certain awards from equity to liability when it became probable that it would settle the awards in cash. As a result of these modifications, the Company recorded incremental share-based compensation expense for the three months ended March 31, 2017 of $167.

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, unvested restricted stock and unvested equity-settled RSUs. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:

	Three Months Ended   March 31,
	2017		2016
Numerator for basic and diluted earnings per share:
Net income	$	23,641	$	23,899
Numerator for basic and diluted earnings per share	$	23,641	$	23,899
Denominator:
Weighted average common shares for basic earnings per share	50,958		49,714
Net effect of dilutive stock options, restricted stock units and restricted stock awards	2,931		3,169
Weighted average common shares for diluted earnings per share	53,889		52,883
Net income per share:
Basic	$	0.46	$	0.48
Diluted	$	0.44	$	0.45

The number of shares underlying equity-based awards excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive, was 2,272 and 2,218 during the three months ended March 31, 2017 and 2016, respectively.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Indemnification Obligations—In the normal course of business, the Company is a party to a variety of agreements under which it may be obligated to indemnify the other party for certain matters. These obligations typically arise in contracts where the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations or covenants for certain matters such as title to assets and intellectual property rights associated with certain arrangements. The duration of these indemnifications varies, and in certain cases, is indefinite.

The Company is unable to reasonably estimate the maximum potential amount of future payments under these or similar agreements due to the unique facts and circumstances of each agreement and the fact that certain indemnifications provide for no limitation to the maximum potential future payments under the indemnification. Management is not aware of any such matters that would have a material effect on the condensed consolidated financial statements of the Company.

Litigation — From time to time, the Company is involved in litigation, claims or other contingencies arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, it does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, if decided adversely, is not expected to have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

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SEGMENTS INFORMATION

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

The Company determines its business 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 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 did not represent a change in the Company’s segments but rather a movement in responsibility for several clients that represented 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 that are not controllable at the segment level are not allocated to specific segments. 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, and Russia reportable segments for the three months ended March 31, 2017 and 2016, were as follows:

	Three Months Ended   March 31,
	2017		2016
Segment revenues:
North America	$	178,303	$	147,490
Europe	132,707		107,843
Russia	13,693		9,481
Total segment revenues	$	324,703	$	264,814
Segment operating profit:
North America	$	37,092	$	30,655
Europe	19,811		16,832
Russia	3,549		1,160
Total segment operating profit	$	60,452	$	48,647

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, revenues from one customer, UBS AG, were $35,669 and accounted for more than 10% of total revenues. Revenues from this customer were included in the Company’s Europe segment in the periods indicated. There were no customers that accounted for more than 10% of total revenues during the three months ended March 31, 2017.

Accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. As of March 31, 2017, accounts receivable from one customer, UBS AG, individually exceeded 10% and accounted for 11.9% of our total accounts receivable. As of March 31, 2017, unbilled revenues from one customer, Expedia, individually exceeded 10% and accounted for 10.3% of our unbilled revenues.

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   March 31,
	2017			2016
Total segment revenues	$	324,703		$	264,814
Other revenues	(52		)	(332		)
Revenues	$	324,651		$	264,482
Total segment operating profit:	$	60,452		$	48,647
Unallocated amounts:
Other revenues	(52		)	(332		)
Stock-based compensation expense	(15,776		)	(10,964		)
Non-corporate taxes	(3,451		)	(1,080		)
Professional fees	(2,344		)	(1,726		)
Depreciation and amortization	(1,975		)	(1,691		)
Bank charges	(397		)	(341		)
One-time charges	(568		)	—
Other corporate expenses	(4,923		)	(2,182		)
Income from operations	30,966			30,331
Interest and other income, net	584			1,211
Foreign exchange loss	(2,955		)	(1,290		)
Income before provision for income taxes	$	28,595		$	30,252

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,   2017		As of    December 31,   2016
Belarus	$	47,124	$	46,011
Russia	7,853		7,203
Ukraine	5,847		5,610
Hungary	3,384		3,485
United States	3,013		2,618
Poland	2,498		2,213
China	1,785		1,887
India	1,530		1,650
Other	2,928		2,939
Total	$	75,962	$	73,616

Information about the Company’s revenues by client location, including reimbursable expenses of $3,925 and $2,446 for the three months ended March 31, 2017 and 2016, respectively, is as follows:

	Three Months Ended   March 31,
	2017		2016
United States	$	176,830	$	136,639
United Kingdom	46,594		43,560
Switzerland	29,096		30,852
Russia	13,209		8,965
Canada	12,494		15,846
Germany	12,094		8,739
Netherlands	8,671		2,647
Sweden	7,466		4,128
Hong Kong	4,777		5,944
United Arab Emirates	2,048		—
China	1,584		294
Ireland	1,389		1,186
Italy	1,280		668
Denmark	1,253		410
Other locations	5,866		4,604
Revenues	$	324,651	$	264,482

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RECENT ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2017

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards

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

Stock-Based Compensation — Effective January 1, 2017, the Company adopted Accounting Standard Update (“ASU”) No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The provisions of the new guidance affecting the Company require excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled; remove the requirement to include hypothetical excess tax benefits in the application of the treasury stock method when computing earnings per share; and provided for a new policy election to either: (1) continue applying forfeiture rate estimates in the determination of compensation cost, or (2) account for forfeitures as a reduction of share-based compensation cost as they occur. The new guidance also requires cash flows related to excess tax benefits to be classified as an operating activity in the cash flow statement and now requires shares withheld for tax withholding purposes to be classified as a financing activity.

As a result of this adoption:

• the Company prospectively recognized discrete tax benefits of $1,695 in the provision for income taxes line item of its condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2017 related to excess tax benefits upon vesting or settlement of stock-based awards in that period;

• the Company recognized a $1,740 increase in beginning retained earnings for previously unrecognized tax benefits using the modified retrospective method of transition, as required by the standard;

• the Company elected to adopt the cash flow presentation of the excess tax benefits prospectively where these benefits are classified along with other income tax cash flows as operating cash flows. Accordingly, prior period information has not been restated;

• the Company elected to continue to estimate the number of stock-based awards expected to forfeit, rather than electing to account for forfeitures as they occur to determine the amount of compensation cost to be recognized in each period;

• the Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of our diluted earnings per share for the three months ended March 31, 2017. The adoption of this provision did not have a material impact on the Company’s diluted earnings per share for the three months ended March 31, 2017;

• the remaining amendments to this standard, as noted above, are either not applicable, or do not change the Company's current accounting practices and thus do not impact its condensed consolidated financial statements.

Simplifying the Measurement for Goodwill — Effective January 1, 2017, the Company early adopted the new accounting guidance simplifying the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance is adopted on a prospective basis. The adoption of this amended guidance did not have an impact on the Company’s financial results.

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.

Revenue Recognition — In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP and permits the use of either the retrospective or modified retrospective transition method. The update requires significant additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09, as amended by ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, is effective for years beginning after December 15, 2017, including interim periods, with early adoption permitted for years beginning after December 15, 2016. Since the issuance of ASU 2014-09, the FASB has issued additional interpretive guidance, including new accounting standards updates, that clarify certain points of the standard and modify certain requirements.

The Company has performed a review of the requirements of the new revenue standard and is monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance. It is reviewing customer contracts and is in the process of applying the five-step model of the new standard to each contract category it has identified and will compare the results to its current accounting practices. The Company plans to adopt ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018.

The Company expects the new standard could change the amount and timing of revenue and costs under certain arrangement types. The Company is also assessing pricing provisions contained in certain of its customer contracts, which may represent variable consideration or may provide the customer with a material right, potentially resulting in a different allocation of the transaction price than under current guidance. Due to the complexity of certain of the Company’s contracts, the actual revenue recognition treatment required under the new standard for these arrangements may be dependent on contract-specific terms and may vary in some instances. The Company has not yet determined what impact the new guidance will have on its consolidated financial statements and/or related disclosures or concluded on the transition method. The Company expects to further its assessment of the financial impact of the new guidance on its consolidated financial statements in 2017.

Leases — Effective January 1, 2019, the Company will be required to adopt the new guidance of ASC Topic 842, Leases (with early adoption permitted effective January 1, 2018.) This amendment supersedes previous accounting guidance (Topic 840) and requires all leases, with the exception of leases with a term of twelve months or less, to be recorded on the balance sheet as lease assets and lease liabilities. The standard requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The transition guidance in Topic 842 also provides specific guidance for the amounts previously recognized in accordance with the business combinations guidance for leases. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements, when it will adopt the standard, or concluded on whether it will elect to apply practical expedients.

Measurement of Credit Losses on Financial Instruments — Effective January 1, 2020, the Company will be required to adopt the amended guidance of ASC Topic 326, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, (with early adoption permitted effective January 1, 2019.) The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require 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. Entities are required to adopt the standard using a modified-retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements or concluded on when it will adopt the standard.

Tax Accounting for Intra-Entity Asset Transfers — Effective January 1, 2018, with early adoption permitted, the Company will be required to adopt the accounting guidance ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory, that will require the tax effects of intra-entity asset transfers to be recognized in the period when the transfer occurs. Under current guidance, the tax effects of intra-entity sales of assets are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance does not apply to intra-entity transfers of inventory and is required to be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements or concluded on when it will adopt the standard.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Nature of Operations

EPAM Systems, Inc. (the “Company” or “EPAM”) is a leading global provider of software product development and digital platform engineering services to clients located around the world, primarily in North America, Europe, Asia and Australia. The Company has expertise in various industries, including software and hi-tech, financial services, media and entertainment, travel and hospitality, retail and distribution and life sciences and healthcare. The Company is incorporated in Delaware and headquartered in Newtown, PA.

Basis of Presentation

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”) and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The 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, 2016 included in its Annual Report on Form 10-K.

Use of Estimates

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 our 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.

Change in Presentation of Certain Financial Information

Change in Presentation of Certain Financial Information — During the first quarter of 2017, the Company changed the presentation of geographic area information about its consolidated revenues. Historically, information about geographic mix of revenues excluded reimbursable expenses and other revenues, which primarily included travel and entertainment costs that are chargeable to clients. Effective January 1, 2017, the Company reports geographic area information about reimbursable expenses and other revenues based on location of clients to which these costs are chargeable. Accordingly, the Company has changed the presentation of revenues by client location for the three months ended March 31, 2016 to conform to the current period presentation. These changes did not result in any adjustments to the Company’s previously issued financial statements and were applied retrospectively beginning on January 1, 2015. Comparative information for the three months ended March 31, 2016 follows:

	Three Months Ended March 31, 2016
	As reported				After Reclassification
	(in thousands except percentages)
United States	$	135,558	51.3	%	$	136,639	51.7	%
United Kingdom	42,990		16.3	%	43,560		16.5	%
Switzerland	30,765		11.6	%	30,852		11.7	%
Canada	15,701		5.9	%	15,846		6.0	%
Russia	8,952		3.4	%	8,965		3.4	%
Germany	8,706		3.3	%	8,739		3.3	%
Hong Kong	5,754		2.2	%	5,944		2.2	%
Sweden	4,060		1.5	%	4,128		1.5	%
Netherlands	2,547		1.0	%	2,647		1.0	%
Ireland	1,184		0.4	%	1,186		0.4	%
Italy	636		0.2	%	668		0.3	%
Denmark	405		0.2	%	410		0.2	%
China	294		0.1	%	294		0.1	%
Other locations	4,484		1.7	%	4,604		1.7	%
Reimbursable expenses and other revenues	2,446		0.9	%	—		—	%
Total	$	264,482	100.0	%	$	264,482	100.0	%

Revenue Recognition

Revenue Recognition — The Company recognizes revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue reported.

The Company derives its revenues from a variety of service offerings, which represent specific competencies of its IT professionals. Contracts for these services have different terms and conditions based on the scope, deliverables, and complexity of the engagement, which require management to make judgments and estimates in determining the appropriate revenue recognition. Fees for these contracts may be in the form of time-and-materials or fixed-price arrangements. If there is an uncertainty about the project completion or receipt of payment for the services, revenue is deferred until the uncertainty is sufficiently resolved. At the time revenue is recognized, the Company provides for any contractual deductions and reduces the revenue accordingly. The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the condensed consolidated statements of income and comprehensive income.

The Company defers amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. Unbilled revenue is recorded when services have been provided but billed subsequent to the period end in accordance with the contract terms.

Fair Value of Financial Instruments

Fair Value of Financial Instruments — The Company makes assumptions about fair values of its financial assets and liabilities in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurement”, and utilizes the following fair value hierarchy in determining inputs used for valuation:

Level 1 — Quoted prices for identical assets or liabilities in active markets.

Level 2 — Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities, and observable inputs other than quoted prices such as interest rates or yield curves.

Level 3 — Unobservable inputs reflecting our view about the assumptions that market participants would use in pricing the asset or liability.

Where the fair values of financial assets and liabilities recorded in the condensed consolidated balance sheets cannot be derived from an active market, they are determined using a variety of valuation techniques. These valuation techniques include a net present value technique, comparison to similar instruments with market observable inputs, option pricing models and other relevant valuation models. To the extent possible, observable market data is used as inputs into these models but when it is not feasible, a degree of judgment is required to establish fair values.

Changes in fair value could cause a material impact to, and volatility in the Company’s operating results. See Note 3 for disclosures related to fair value.

Business Combinations

Business Combinations — The Company accounts for its business combinations using the acquisition accounting method, which requires it to determine the fair value of net assets acquired and the related goodwill and other intangible assets in accordance with the FASB ASC Topic 805, “Business Combinations.” The Company identifies and attributes fair values and estimated lives to the intangible assets acquired and allocates the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. There are different valuation models for each component, the selection of which requires considerable judgment. These determinations will affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes are reasonable, but recognizes that the assumptions are inherently uncertain.

All acquisition-related costs, other than the costs to issue debt or equity securities, are accounted for as expenses in the period in which they are incurred. Changes in fair value of contingent consideration arrangements that are not measurement period adjustments are recognized in earnings. Payments to settle contingent consideration, if any, are reflected in cash flows from financing activities and the changes in fair value are reflected in cash flows from operating activities in the Company’s condensed consolidated statements of cash flows.

The acquired assets typically consist of customer relationships, trade names, non-competition agreements, and workforce and as a result, a substantial portion of the purchase price is usually allocated to goodwill and other intangible assets.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets — Goodwill and intangible assets that have indefinite useful lives are accounted for in accordance with FASB ASC 350, “Intangibles - Goodwill and Other.” The Company conducts its evaluation of goodwill impairment at the reporting unit level on an annual basis during its fourth quarter, and more frequently if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value. A reporting unit is an operating segment or one level below. The Company does not have intangible assets that have indefinite useful lives.

Intangible assets that have finite useful lives are amortized over their estimated useful lives on a straight-line basis. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset’s carrying value, using estimates of future cash flows over the remaining asset life. The estimates of future cash flows attributable to intangible assets require significant judgment based on the Company’s historical and anticipated results. Any impairment loss is measured by the excess of carrying value over fair value.

Stock-based Compensation

Stock-Based Compensation — The Company recognizes the cost of its stock-based incentive awards based on the fair value of the award at the date of grant, net of estimated forfeitures. The cost is expensed evenly over the service period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Over time, the forfeiture assumption is adjusted to the actual forfeiture rate and such change may affect the timing of the total amount of expense recognized over the vesting period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that do not meet the criteria for equity classification are recorded as liabilities and adjusted to fair value at the end of each reporting period.

Off-Balance Sheet Financial Instruments

Off-Balance Sheet Financial Instruments — The Company uses FASB ASC Topic 825, “Financial Instruments” to identify and disclose off-balance sheet financial instruments, which include credit instruments, such as commitments to make employee loans and related guarantees, standby letters of credit and certain guarantees issued under customer contracts. The face amount for these items represents the exposure to loss, before considering available collateral or the borrower’s ability to repay. Loss contingencies arising from off-balance sheet financial instruments are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe such matters exist that will have a material effect on the condensed consolidated financial statements.

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RECENT ACCOUNTING PRONOUNCEMENTS RECENT ACCOINTING PRONOUNCEMENTS (Policies)

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards

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

Stock-Based Compensation — Effective January 1, 2017, the Company adopted Accounting Standard Update (“ASU”) No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The provisions of the new guidance affecting the Company require excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled; remove the requirement to include hypothetical excess tax benefits in the application of the treasury stock method when computing earnings per share; and provided for a new policy election to either: (1) continue applying forfeiture rate estimates in the determination of compensation cost, or (2) account for forfeitures as a reduction of share-based compensation cost as they occur. The new guidance also requires cash flows related to excess tax benefits to be classified as an operating activity in the cash flow statement and now requires shares withheld for tax withholding purposes to be classified as a financing activity.

As a result of this adoption:

• the Company prospectively recognized discrete tax benefits of $1,695 in the provision for income taxes line item of its condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2017 related to excess tax benefits upon vesting or settlement of stock-based awards in that period;

• the Company recognized a $1,740 increase in beginning retained earnings for previously unrecognized tax benefits using the modified retrospective method of transition, as required by the standard;

• the Company elected to adopt the cash flow presentation of the excess tax benefits prospectively where these benefits are classified along with other income tax cash flows as operating cash flows. Accordingly, prior period information has not been restated;

• the Company elected to continue to estimate the number of stock-based awards expected to forfeit, rather than electing to account for forfeitures as they occur to determine the amount of compensation cost to be recognized in each period;

• the Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of our diluted earnings per share for the three months ended March 31, 2017. The adoption of this provision did not have a material impact on the Company’s diluted earnings per share for the three months ended March 31, 2017;

• the remaining amendments to this standard, as noted above, are either not applicable, or do not change the Company's current accounting practices and thus do not impact its condensed consolidated financial statements.

Simplifying the Measurement for Goodwill — Effective January 1, 2017, the Company early adopted the new accounting guidance simplifying the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance is adopted on a prospective basis. The adoption of this amended guidance did not have an impact on the Company’s financial results.

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.

Revenue Recognition — In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP and permits the use of either the retrospective or modified retrospective transition method. The update requires significant additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09, as amended by ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, is effective for years beginning after December 15, 2017, including interim periods, with early adoption permitted for years beginning after December 15, 2016. Since the issuance of ASU 2014-09, the FASB has issued additional interpretive guidance, including new accounting standards updates, that clarify certain points of the standard and modify certain requirements.

The Company has performed a review of the requirements of the new revenue standard and is monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance. It is reviewing customer contracts and is in the process of applying the five-step model of the new standard to each contract category it has identified and will compare the results to its current accounting practices. The Company plans to adopt ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018.

The Company expects the new standard could change the amount and timing of revenue and costs under certain arrangement types. The Company is also assessing pricing provisions contained in certain of its customer contracts, which may represent variable consideration or may provide the customer with a material right, potentially resulting in a different allocation of the transaction price than under current guidance. Due to the complexity of certain of the Company’s contracts, the actual revenue recognition treatment required under the new standard for these arrangements may be dependent on contract-specific terms and may vary in some instances. The Company has not yet determined what impact the new guidance will have on its consolidated financial statements and/or related disclosures or concluded on the transition method. The Company expects to further its assessment of the financial impact of the new guidance on its consolidated financial statements in 2017.

Leases — Effective January 1, 2019, the Company will be required to adopt the new guidance of ASC Topic 842, Leases (with early adoption permitted effective January 1, 2018.) This amendment supersedes previous accounting guidance (Topic 840) and requires all leases, with the exception of leases with a term of twelve months or less, to be recorded on the balance sheet as lease assets and lease liabilities. The standard requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The transition guidance in Topic 842 also provides specific guidance for the amounts previously recognized in accordance with the business combinations guidance for leases. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements, when it will adopt the standard, or concluded on whether it will elect to apply practical expedients.

Measurement of Credit Losses on Financial Instruments — Effective January 1, 2020, the Company will be required to adopt the amended guidance of ASC Topic 326, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, (with early adoption permitted effective January 1, 2019.) The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require 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. Entities are required to adopt the standard using a modified-retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements or concluded on when it will adopt the standard.

Tax Accounting for Intra-Entity Asset Transfers — Effective January 1, 2018, with early adoption permitted, the Company will be required to adopt the accounting guidance ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory, that will require the tax effects of intra-entity asset transfers to be recognized in the period when the transfer occurs. Under current guidance, the tax effects of intra-entity sales of assets are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance does not apply to intra-entity transfers of inventory and is required to be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements or concluded on when it will adopt the standard.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Schedule of Reclassifications

Comparative information for the three months ended March 31, 2016 follows:

	Three Months Ended March 31, 2016
	As reported				After Reclassification
	(in thousands except percentages)
United States	$	135,558	51.3	%	$	136,639	51.7	%
United Kingdom	42,990		16.3	%	43,560		16.5	%
Switzerland	30,765		11.6	%	30,852		11.7	%
Canada	15,701		5.9	%	15,846		6.0	%
Russia	8,952		3.4	%	8,965		3.4	%
Germany	8,706		3.3	%	8,739		3.3	%
Hong Kong	5,754		2.2	%	5,944		2.2	%
Sweden	4,060		1.5	%	4,128		1.5	%
Netherlands	2,547		1.0	%	2,647		1.0	%
Ireland	1,184		0.4	%	1,186		0.4	%
Italy	636		0.2	%	668		0.3	%
Denmark	405		0.2	%	410		0.2	%
China	294		0.1	%	294		0.1	%
Other locations	4,484		1.7	%	4,604		1.7	%
Reimbursable expenses and other revenues	2,446		0.9	%	—		—	%
Total	$	264,482	100.0	%	$	264,482	100.0	%

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GOODWILL (Tables)

3 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill By Reportable Segment

Goodwill by reportable segment was as follows:

	North America			Europe		Total
Balance as of January 1, 2017	$	76,812		$	32,477	$	109,289
Other acquisitions purchase accounting adjustment	(352		)	352		—
Effect of net foreign currency exchange rate changes	144			858		1,002
Balance as of March 31, 2017	$	76,604		$	33,687	$	110,291

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Financial Liabilities Measured at Fair Value on Recurring Basis

The following tables show the fair values of the Company’s financial liabilities measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016:

	As of March 31, 2017
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	6,754	$	6,754	$	—	$	—
Cash-settled restricted stock units	84		84		—		—
Total liabilities measured at fair value on a recurring basis	$	6,838	$	6,838	$	—	$	—

	As of December 31, 2016
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	3,789	$	3,789	$	—	$	—
Cash-settled restricted stock units	2,111		2,111		—		—
Total liabilities measured at fair value on a recurring basis	$	5,900	$	5,900	$	—	$	—

Financial Assets and Liabilities Not Measured on Recurring Basis

The following tables present the reported amounts and estimated fair values of the financial assets and liabilities for which disclosure of fair value is required, as they would be categorized within the fair-value hierarchy, as of the dates indicated:

					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
March 31, 2017
Financial Assets:
Cash and cash equivalents	$	398,419	$	398,419	$	398,419	$	—	$	—
Time deposits and restricted cash	916		916		—		916		—
Employee loans	5,669		5,669		—		—		5,669
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	25,022	$	25,022	$	—	$	25,022	$	—

					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2016
Financial Assets:
Cash and cash equivalents	$	362,025	$	362,025	$	362,025	$	—	$	—
Time deposits and restricted cash	$	3,042	$	3,042	$	—	$	3,042	$	—
Employee loans	$	5,978	$	5,978	$	—	$	—	$	5,978
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	25,019	$	25,019	$	—	$	25,019	$	—

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Costs Related to Stock Compensation Plans

The following costs related to the Company’s stock compensation plans were included in the condensed consolidated statements of income and comprehensive income:

	Three Months Ended   March 31,
	2017		2016
Cost of revenues	$	5,350	$	3,644
Selling, general and administrative expenses - Acquisition related	4,574		3,010
Selling, general and administrative expenses - All other	5,852		4,310
Total	$	15,776	$	10,964

Stock Option Activity

Stock option activity under the Company’s plans is set forth below:

	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2017	6,637,239		$	37.20	$	179,936
Options granted	234,990		73.27		529
Options exercised	(486,524	)	27.92		(23,159		)
Options forfeited/cancelled	(75,456	)	57.87		(1,332		)
Options outstanding at March 31, 2017	6,310,249		$	39.06	$	230,072
Options vested and exercisable at March 31, 2017	4,302,714		$	30.84	$	192,245
Options expected to vest	1,891,705		$	56.33	$	36,302

Service-based Awards Activity

The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the three months ended March 31, 2017.

	Equity-Classified  Restricted Stock				Equity-Classified Equity-Settled Restricted Stock Units				Liability-Classified Cash-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2017	154,125		$	40.89	485,188		$	67.69	204,501		$	70.53
Awards granted	—		—		380,577		73.27		138,584		73.27
Awards modified	—		—		(2,570	)	48.49		2,570		73.27
Awards vested	(1,437	)	20.64		(116,183	)	65.32		(51,928	)	70.56
Awards forfeited/cancelled	—		—		(19,036	)	67.45		(616	)	70.52
Unvested service-based awards outstanding at March 31, 2017	152,688		$	41.08	727,976		$	71.06	293,111		$	71.84

Performance-based Awards Activity

Summarized activity related to the Company’s performance-based awards for the three months ended March 31, 2017, was as follows:

	Equity-Classified  Restricted Stock				Liability-Classified Restricted Stock			Equity-Classified Equity-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2017	5,573		$	33.47	105,602	$	38.86	4,667	$	70.22
Awards granted	—		—		—	—		—	—
Awards vested	(2,552	)	36.57		—	—		—	—
Awards forfeited/cancelled	—		—		—	—		—	—
Unvested performance-based awards outstanding at March 31, 2017	3,021		$	30.85	105,602	$	38.86	4,667	$	70.22

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:

	Three Months Ended   March 31,
	2017		2016
Numerator for basic and diluted earnings per share:
Net income	$	23,641	$	23,899
Numerator for basic and diluted earnings per share	$	23,641	$	23,899
Denominator:
Weighted average common shares for basic earnings per share	50,958		49,714
Net effect of dilutive stock options, restricted stock units and restricted stock awards	2,931		3,169
Weighted average common shares for diluted earnings per share	53,889		52,883
Net income per share:
Basic	$	0.46	$	0.48
Diluted	$	0.44	$	0.45

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SEGMENTS INFORMATION (Tables)

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Revenues from External Customers and Operating Profit/(Loss) Before Unallocated Expenses

Revenues from external customers and operating profit/(loss), before unallocated expenses, for the North America, Europe, and Russia reportable segments for the three months ended March 31, 2017 and 2016, were as follows:

	Three Months Ended   March 31,
	2017		2016
Segment revenues:
North America	$	178,303	$	147,490
Europe	132,707		107,843
Russia	13,693		9,481
Total segment revenues	$	324,703	$	264,814
Segment operating profit:
North America	$	37,092	$	30,655
Europe	19,811		16,832
Russia	3,549		1,160
Total segment operating profit	$	60,452	$	48,647

Reconciliation of Segment Revenues to Consolidated Revenues and Segment Operating Profit to Consolidated Income Before Provision for Income Taxes

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   March 31,
	2017			2016
Total segment revenues	$	324,703		$	264,814
Other revenues	(52		)	(332		)
Revenues	$	324,651		$	264,482
Total segment operating profit:	$	60,452		$	48,647
Unallocated amounts:
Other revenues	(52		)	(332		)
Stock-based compensation expense	(15,776		)	(10,964		)
Non-corporate taxes	(3,451		)	(1,080		)
Professional fees	(2,344		)	(1,726		)
Depreciation and amortization	(1,975		)	(1,691		)
Bank charges	(397		)	(341		)
One-time charges	(568		)	—
Other corporate expenses	(4,923		)	(2,182		)
Income from operations	30,966			30,331
Interest and other income, net	584			1,211
Foreign exchange loss	(2,955		)	(1,290		)
Income before provision for income taxes	$	28,595		$	30,252

Geographical Information of Long-Lived Assets Based on Physical Location

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

	As of    March 31,   2017		As of    December 31,   2016
Belarus	$	47,124	$	46,011
Russia	7,853		7,203
Ukraine	5,847		5,610
Hungary	3,384		3,485
United States	3,013		2,618
Poland	2,498		2,213
China	1,785		1,887
India	1,530		1,650
Other	2,928		2,939
Total	$	75,962	$	73,616

Revenues by Client Location

Information about the Company’s revenues by client location, including reimbursable expenses of $3,925 and $2,446 for the three months ended March 31, 2017 and 2016, respectively, is as follows:

	Three Months Ended   March 31,
	2017		2016
United States	$	176,830	$	136,639
United Kingdom	46,594		43,560
Switzerland	29,096		30,852
Russia	13,209		8,965
Canada	12,494		15,846
Germany	12,094		8,739
Netherlands	8,671		2,647
Sweden	7,466		4,128
Hong Kong	4,777		5,944
United Arab Emirates	2,048		—
China	1,584		294
Ireland	1,389		1,186
Italy	1,280		668
Denmark	1,253		410
Other locations	5,866		4,604
Revenues	$	324,651	$	264,482

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reclassification (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Item Effected [Line Items]
Revenues	$ 324,651	$ 264,482
Reimbursable expenses and other revenues
Item Effected [Line Items]
Revenues	3,925	2,446
United States
Item Effected [Line Items]
Revenues	176,830	136,639
United Kingdom
Item Effected [Line Items]
Revenues	46,594	43,560
Switzerland
Item Effected [Line Items]
Revenues	29,096	30,852
Canada
Item Effected [Line Items]
Revenues	12,494	15,846
Russia
Item Effected [Line Items]
Revenues	13,209	8,965
Germany
Item Effected [Line Items]
Revenues	12,094	8,739
Hong Kong
Item Effected [Line Items]
Revenues	4,777	5,944
Sweden
Item Effected [Line Items]
Revenues	7,466	4,128
Netherlands
Item Effected [Line Items]
Revenues	8,671	2,647
Ireland
Item Effected [Line Items]
Revenues	1,389	1,186
Italy
Item Effected [Line Items]
Revenues	1,280	668
Denmark
Item Effected [Line Items]
Revenues	1,253	410
China
Item Effected [Line Items]
Revenues	1,584	294
Other locations
Item Effected [Line Items]
Revenues	$ 5,866	4,604
Previously reported
Item Effected [Line Items]
Revenues		$ 264,482
Percent of Revenue		100.00%
Previously reported | Reimbursable expenses and other revenues
Item Effected [Line Items]
Revenues		$ 2,446
Percent of Revenue		0.90%
Previously reported | United States
Item Effected [Line Items]
Revenues		$ 135,558
Percent of Revenue		51.30%
Previously reported | United Kingdom
Item Effected [Line Items]
Revenues		$ 42,990
Percent of Revenue		16.30%
Previously reported | Switzerland
Item Effected [Line Items]
Revenues		$ 30,765
Percent of Revenue		11.60%
Previously reported | Canada
Item Effected [Line Items]
Revenues		$ 15,701
Percent of Revenue		5.90%
Previously reported | Russia
Item Effected [Line Items]
Revenues		$ 8,952
Percent of Revenue		3.40%
Previously reported | Germany
Item Effected [Line Items]
Revenues		$ 8,706
Percent of Revenue		3.30%
Previously reported | Hong Kong
Item Effected [Line Items]
Revenues		$ 5,754
Percent of Revenue		2.20%
Previously reported | Sweden
Item Effected [Line Items]
Revenues		$ 4,060
Percent of Revenue		1.50%
Previously reported | Netherlands
Item Effected [Line Items]
Revenues		$ 2,547
Percent of Revenue		1.00%
Previously reported | Ireland
Item Effected [Line Items]
Revenues		$ 1,184
Percent of Revenue		0.40%
Previously reported | Italy
Item Effected [Line Items]
Revenues		$ 636
Percent of Revenue		0.20%
Previously reported | Denmark
Item Effected [Line Items]
Revenues		$ 405
Percent of Revenue		0.20%
Previously reported | China
Item Effected [Line Items]
Revenues		$ 294
Percent of Revenue		0.10%
Previously reported | Other locations
Item Effected [Line Items]
Revenues		$ 4,484
Percent of Revenue		1.70%
After reclassification adjustment
Item Effected [Line Items]
Revenues		$ 264,482
Percent of Revenue		100.00%
After reclassification adjustment | Reimbursable expenses and other revenues
Item Effected [Line Items]
Revenues		$ 0
Percent of Revenue		0.00%
After reclassification adjustment | United States
Item Effected [Line Items]
Revenues		$ 136,639
Percent of Revenue		51.70%
After reclassification adjustment | United Kingdom
Item Effected [Line Items]
Revenues		$ 43,560
Percent of Revenue		16.50%
After reclassification adjustment | Switzerland
Item Effected [Line Items]
Revenues		$ 30,852
Percent of Revenue		11.70%
After reclassification adjustment | Canada
Item Effected [Line Items]
Revenues		$ 15,846
Percent of Revenue		6.00%
After reclassification adjustment | Russia
Item Effected [Line Items]
Revenues		$ 8,965
Percent of Revenue		3.40%
After reclassification adjustment | Germany
Item Effected [Line Items]
Revenues		$ 8,739
Percent of Revenue		3.30%
After reclassification adjustment | Hong Kong
Item Effected [Line Items]
Revenues		$ 5,944
Percent of Revenue		2.20%
After reclassification adjustment | Sweden
Item Effected [Line Items]
Revenues		$ 4,128
Percent of Revenue		1.50%
After reclassification adjustment | Netherlands
Item Effected [Line Items]
Revenues		$ 2,647
Percent of Revenue		1.00%
After reclassification adjustment | Ireland
Item Effected [Line Items]
Revenues		$ 1,186
Percent of Revenue		0.40%
After reclassification adjustment | Italy
Item Effected [Line Items]
Revenues		$ 668
Percent of Revenue		0.30%
After reclassification adjustment | Denmark
Item Effected [Line Items]
Revenues		$ 410
Percent of Revenue		0.20%
After reclassification adjustment | China
Item Effected [Line Items]
Revenues		$ 294
Percent of Revenue		0.10%
After reclassification adjustment | Other locations
Item Effected [Line Items]
Revenues		$ 4,604
Percent of Revenue		1.70%

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GOODWILL - Roll Forward (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Goodwill [Roll Forward]
Balance as of January 1, 2017	$ 109,289
Effect of net foreign currency exchange rate changes	1,002
Balance as of March 31, 2017	110,291
North America
Goodwill [Roll Forward]
Balance as of January 1, 2017	76,812
Effect of net foreign currency exchange rate changes	144
Balance as of March 31, 2017	76,604
Europe
Goodwill [Roll Forward]
Balance as of January 1, 2017	32,477
Effect of net foreign currency exchange rate changes	858
Balance as of March 31, 2017	33,687
Other Acquisitions
Goodwill [Roll Forward]
Purchase accounting adjustments	0
Other Acquisitions | North America
Goodwill [Roll Forward]
Purchase accounting adjustments	(352)
Other Acquisitions | Europe
Goodwill [Roll Forward]
Purchase accounting adjustments	$ 352

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GOODWILL - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
North America
Goodwill [Line Items]
Accumulated impairment loss	$ 0	$ 0
Europe
Goodwill [Line Items]
Accumulated impairment loss	$ 0	$ 0

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FAIR VALUE MEASUREMENTS - Financial Liabilities at Fair Value on Recurring Basis (Details) - Recurring - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Financial Liabilities:
Total liabilities measured at fair value on a recurring basis	$ 6,838	$ 5,900
Restricted Stock
Financial Liabilities:
Performance-based equity awards	6,754	3,789
Cash-Settled Award | Restricted Stock Units
Financial Liabilities:
Cash-settled restricted stock units	84	2,111
Level 1
Financial Liabilities:
Total liabilities measured at fair value on a recurring basis	6,838	5,900
Level 1 | Restricted Stock
Financial Liabilities:
Performance-based equity awards	6,754	3,789
Level 1 | Cash-Settled Award | Restricted Stock Units
Financial Liabilities:
Cash-settled restricted stock units	84	2,111
Level 2
Financial Liabilities:
Total liabilities measured at fair value on a recurring basis	0	0
Level 2 | Restricted Stock
Financial Liabilities:
Performance-based equity awards	0	0
Level 2 | Cash-Settled Award | Restricted Stock Units
Financial Liabilities:
Cash-settled restricted stock units	0	0
Level 3
Financial Liabilities:
Total liabilities measured at fair value on a recurring basis	0	0
Level 3 | Restricted Stock
Financial Liabilities:
Performance-based equity awards	0	0
Level 3 | Cash-Settled Award | Restricted Stock Units
Financial Liabilities:
Cash-settled restricted stock units	$ 0	$ 0

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FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS - Financial Assets and Liabilities Not Measured on Recurring Basis (Details) - Nonrecurring - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Balance
Financial Assets:
Cash and cash equivalents	$ 398,419	$ 362,025
Time deposits and restricted cash	916	3,042
Employee loans	5,669	5,978
Balance | Revolving Credit Facility
Financial Liabilities:
Borrowing under 2014 Credit Facility	25,022	25,019
Estimated Fair Value
Financial Assets:
Cash and cash equivalents	398,419	362,025
Time deposits and restricted cash	916	3,042
Employee loans	5,669	5,978
Estimated Fair Value | Revolving Credit Facility
Financial Liabilities:
Borrowing under 2014 Credit Facility	25,022	25,019
Estimated Fair Value | Level 1
Financial Assets:
Cash and cash equivalents	398,419	362,025
Time deposits and restricted cash	0	0
Employee loans	0	0
Estimated Fair Value | Level 1 | Revolving Credit Facility
Financial Liabilities:
Borrowing under 2014 Credit Facility	0	0
Estimated Fair Value | Level 2
Financial Assets:
Cash and cash equivalents	0	0
Time deposits and restricted cash	916	3,042
Employee loans	0	0
Financial Liabilities:
Borrowing under 2014 Credit Facility	25,022	25,019
Estimated Fair Value | Level 3
Financial Assets:
Cash and cash equivalents	0	0
Time deposits and restricted cash	0	0
Employee loans	5,669	5,978
Estimated Fair Value | Level 3 | Revolving Credit Facility
Financial Liabilities:
Borrowing under 2014 Credit Facility	$ 0	$ 0

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DEBT (Details) - Credit Facility 2014 - USD ($) $ in Thousands	Sep. 12, 2014	Mar. 31, 2017	Dec. 31, 2016
Revolving Credit Facility
Debt Instrument [Line Items]
Maturity date	Sep. 12, 2019
Percentage of foreign subsidiaries outstanding shares of capital stock serves as collateral	65.00%
Line of credit, outstanding		$ 25,000	$ 25,000
Revolving Credit Facility | Federal Funds Open Rate
Debt Instrument [Line Items]
Variable interest rate spread	0.50%
Revolving Credit Facility | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Variable interest rate spread	1.00%
Revolving Credit Facility | U.S. dollars
Debt Instrument [Line Items]
Line of credit, collateralized borrowing capacity	$ 100,000
Line of credit, maximum borrowing capacity	200,000
Line of credit, remaining borrowing capacity		74,058	$ 74,058
Revolving Credit Facility | Other currencies, excluding U.S. dollars
Debt Instrument [Line Items]
Line of credit, maximum borrowing capacity	$ 50,000
Standby Letters of Credit
Debt Instrument [Line Items]
Unused letter of credit outstanding amount		$ 942

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Effective tax rate	17.30%	21.00%
Excess tax benefit recognized	$ 1,695
Income tax holiday period	15 years

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STOCK-BASED COMPENSATION - Costs Related To Stock Compensation Plans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 15,776	$ 10,964
Cost of revenues
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	5,350	3,644
Selling, general and administrative expenses | Business acquisitions
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	4,574	3,010
Selling, general and administrative expenses | Organic growth
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 5,852	$ 4,310

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STOCK-BASED COMPENSATION - Equity Plans Additional Information (Details) - shares	Jun. 11, 2015	Jan. 11, 2012	May 31, 2006	Mar. 31, 2017
2012 Directors Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized for issuance (in shares)		600,000
Expiration period of awards issued (in years)		10 years
Number of shares available for issuance (in shares)				547,560
2015 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of awards issued (in years)	10 years
Number of shares available for issuance (in shares)				5,681,902
2012 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of awards issued (in years)		10 years
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of awards issued (in years)			10 years

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STOCK-BASED COMPENSATION - Stock Option Activity (Details) - Employee Stock Option $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) $ / shares shares
Number of Options
Options outstanding at January 1, 2017 | shares	6,637,239
Options granted | shares	234,990
Options exercised | shares	(486,524)
Options forfeited/cancelled | shares	(75,456)
Options outstanding at March 31, 2017 | shares	6,310,249
Options vested and exercisable at March 31, 2017 | shares	4,302,714
Options expected to vest | shares	1,891,705
Weighted Average Exercise Price
Options outstanding at January 1, 2017 | $ / shares	$ 37.20
Options granted | $ / shares	73.27
Options exercised | $ / shares	27.92
Options forfeited/cancelled | $ / shares	57.87
Options outstanding at March 31, 2017 | $ / shares	39.06
Options vested and exercisable at March 31, 2017 | $ / shares	30.84
Options expected to vest | $ / shares	$ 56.33
Aggregate Intrinsic Value
Options outstanding at January 1, 2017 | $	$ 179,936
Options granted | $	529
Options exercised | $	(23,159)
Options forfeited/cancelled | $	(1,332)
Options outstanding at March 31, 2017 | $	230,072
Options vested and exercisable at March 31, 2017 | $	192,245
Options expected to vest | $	$ 36,302

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STOCK-BASED COMPENSATION - Stock Option Additional Information (Details) - Employee Stock Option $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options exercised in transfer (in shares) | shares	176,758
2015 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense | $	$ 42,801
Weighted average period for recognition of unrecognized compensation expense (in years)	1 year 7 months
Weighted average remaining contractual term for fully vested and exercisable options (in years)	6 years 2 months 15 days
Weighted average contractual term for options expected to vest (in years)	8 years 21 days

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STOCK-BASED COMPENSATION - Restricted Stock and Restricted Stock units Activity (Details)	3 Months Ended
	Mar. 31, 2017 $ / shares shares
Service Period | Equity Classified Award | Equity-Settled Award | Restricted Stock
Number of Shares
Unvested awards outstanding at January 1, 2017 | shares	154,125
Awards granted | shares	0
Awards modified | shares	0
Awards vested | shares	(1,437)
Awards forfeited/cancelled | shares	0
Unvested awards outstanding at March 31, 2017 | shares	152,688
Weighted Average Grant Date Fair Value Per Share
Unvested awards outstanding at January 1, 2016 | $ / shares	$ 40.89
Awards granted | $ / shares	0.00
Awards modified | $ / shares	0.00
Awards vested | $ / shares	20.64
Awards forfeited/cancelled | $ / shares	0.00
Unvested awards outstanding at September 30, 2016 | $ / shares	$ 41.08
Service Period | Equity Classified Award | Equity-Settled Award | Restricted Stock Units
Number of Shares
Unvested awards outstanding at January 1, 2017 | shares	485,188
Awards granted | shares	380,577
Awards modified | shares	(2,570)
Awards vested | shares	(116,183)
Awards forfeited/cancelled | shares	(19,036)
Unvested awards outstanding at March 31, 2017 | shares	727,976
Weighted Average Grant Date Fair Value Per Share
Unvested awards outstanding at January 1, 2016 | $ / shares	$ 67.69
Awards granted | $ / shares	73.27
Awards modified | $ / shares	48.49
Awards vested | $ / shares	65.32
Awards forfeited/cancelled | $ / shares	67.45
Unvested awards outstanding at September 30, 2016 | $ / shares	$ 71.06
Service Period | Liability Classified Award | Cash-Settled Award | Restricted Stock Units
Number of Shares
Unvested awards outstanding at January 1, 2017 | shares	204,501
Awards granted | shares	138,584
Awards modified | shares	2,570
Awards vested | shares	(51,928)
Awards forfeited/cancelled | shares	(616)
Unvested awards outstanding at March 31, 2017 | shares	293,111
Weighted Average Grant Date Fair Value Per Share
Unvested awards outstanding at January 1, 2016 | $ / shares	$ 70.53
Awards granted | $ / shares	73.27
Awards modified | $ / shares	73.27
Awards vested | $ / shares	70.56
Awards forfeited/cancelled | $ / shares	70.52
Unvested awards outstanding at September 30, 2016 | $ / shares	$ 71.84
Performance Target | Equity Classified Award | Equity-Settled Award | Restricted Stock
Number of Shares
Unvested awards outstanding at January 1, 2017 | shares	5,573
Awards granted | shares	0
Awards vested | shares	(2,552)
Awards forfeited/cancelled | shares	0
Unvested awards outstanding at March 31, 2017 | shares	3,021
Weighted Average Grant Date Fair Value Per Share
Unvested awards outstanding at January 1, 2016 | $ / shares	$ 33.47
Awards granted | $ / shares	0.00
Awards vested | $ / shares	36.57
Awards forfeited/cancelled | $ / shares	0.00
Unvested awards outstanding at September 30, 2016 | $ / shares	$ 30.85
Performance Target | Equity Classified Award | Equity-Settled Award | Restricted Stock Units
Number of Shares
Unvested awards outstanding at January 1, 2017 | shares	4,667
Awards granted | shares	0
Awards vested | shares	0
Awards forfeited/cancelled | shares	0
Unvested awards outstanding at March 31, 2017 | shares	4,667
Weighted Average Grant Date Fair Value Per Share
Unvested awards outstanding at January 1, 2016 | $ / shares	$ 70.22
Awards granted | $ / shares	0.00
Awards vested | $ / shares	0.00
Awards forfeited/cancelled | $ / shares	0.00
Unvested awards outstanding at September 30, 2016 | $ / shares	$ 70.22
Performance Target | Liability Classified Award | Equity-Settled Award | Restricted Stock
Number of Shares
Unvested awards outstanding at January 1, 2017 | shares	105,602
Awards granted | shares	0
Awards vested | shares	0
Awards forfeited/cancelled | shares	0
Unvested awards outstanding at March 31, 2017 | shares	105,602
Weighted Average Grant Date Fair Value Per Share
Unvested awards outstanding at January 1, 2016 | $ / shares	$ 38.86
Awards granted | $ / shares	0.00
Awards vested | $ / shares	0.00
Awards forfeited/cancelled | $ / shares	0.00
Unvested awards outstanding at September 30, 2016 | $ / shares	$ 38.86

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STOCK-BASED COMPENSATION - Restricted Stock and Restricted Stock Units Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Acquisition-related Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)	3 years
Service Period | Equity Classified Award | Equity-Settled Award | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 1,783
Weighted average period for recognition of unrecognized compensation expense (in years)	1 year 21 days
Service Period | Equity Classified Award | Equity-Settled Award | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 45,693
Weighted average period for recognition of unrecognized compensation expense (in years)	2 years 2 months 14 days
Service Period | Liability Classified Award | Cash-Settled Award | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 19,842
Weighted average period for recognition of unrecognized compensation expense (in years)	2 years 2 months 17 days
Performance Target | Equity Classified Award | Equity-Settled Award | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 89
Weighted average period for recognition of unrecognized compensation expense (in years)	1 year
Performance Target | Equity Classified Award | Equity-Settled Award | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 389
Weighted average period for recognition of unrecognized compensation expense (in years)	1 year 1 month 26 days
Performance Target | Liability Classified Award | Equity-Settled Award | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 1,221
Performance Target | Liability Classified Award | Equity-Settled Award | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average period for recognition of unrecognized compensation expense (in years)	1 year
Year One | Acquisition-related Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.30%
Year Two | Acquisition-related Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.30%
Year Three | Acquisition-related Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.30%

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STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION - Modifications (Details) - USD ($)		3 Months Ended
	Feb. 28, 2017	Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Fair value of modified award before modification	$ 0
Fair value of modified award after modification	$ 563
Incremental share-based compensation expense recorded		$ 167

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Numerator for basic and diluted earnings per share:
Net income	$ 23,641	$ 23,899
Numerator for basic and diluted earnings per share	$ 23,641	$ 23,899
Denominator:
Weighted average common shares outstanding (in shares)	50,958	49,714
Effect of dilutive securities (in shares):
Stock options, RSUs and restricted stock awards (in shares)	2,931	3,169
Denominator for diluted earnings per share (in shares)	53,889	52,883
Net income per share:
Basic (in dollars per share)	$ 0.46	$ 0.48
Diluted (in dollars per share)	$ 0.44	$ 0.45
Anti-dilutive options not included in the calculation (in shares)	2,272	2,218

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SEGMENTS INFORMATION - Revenues from External Customers and Operating Profit/(Loss) Before Unallocated Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Segment Reporting Information [Line Items]
Revenues	$ 324,651	$ 264,482
Operating profit	30,966	30,331
Russia
Segment Reporting Information [Line Items]
Revenues	13,209	8,965
Operating Segments
Segment Reporting Information [Line Items]
Revenues	324,703	264,814
Operating profit	60,452	48,647
Operating Segments | North America
Segment Reporting Information [Line Items]
Revenues	178,303	147,490
Operating profit	37,092	30,655
Operating Segments | Europe
Segment Reporting Information [Line Items]
Revenues	132,707	107,843
Operating profit	19,811	16,832
Operating Segments | Russia
Segment Reporting Information [Line Items]
Revenues	13,693	9,481
Operating profit	$ 3,549	$ 1,160

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SEGMENTS INFORMATION - Major Customers (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)
Revenue, Major Customer [Line Items]
Revenues	$ 324,651	$ 264,482
Operating Segments
Revenue, Major Customer [Line Items]
Revenues	324,703	264,814
Operating Segments | Europe
Revenue, Major Customer [Line Items]
Revenues	$ 132,707	$ 107,843
Sales Revenue, Net | Customer Concentration Risk | Operating Segments
Revenue, Major Customer [Line Items]
Number of customers	0
Sales Revenue, Net | Customer Concentration Risk | Operating Segments | Europe | UBS AG
Revenue, Major Customer [Line Items]
Number of customers		1
Revenues		$ 35,669
Accounts Receivable | Customer Concentration Risk | UBS AG | Billed Revenues
Revenue, Major Customer [Line Items]
Number of customers	1
Concentration percentage	11.90%
Accounts Receivable | Customer Concentration Risk | Expedia | Unbilled Revenues
Revenue, Major Customer [Line Items]
Number of customers	1
Concentration percentage	10.30%

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SEGMENTS INFORMATION - Reconciliation of Segment Revenues to Consolidated Revenues and Segment Operating Profit to Consolidated Income Before Provision for Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	$ 324,651	$ 264,482
Segment Reporting Information [Line Items]
Income from operations	30,966	30,331
Stock-based compensation expense	(15,776)	(10,964)
Depreciation and amortization	(6,672)	(5,102)
Interest and other income, net	584	1,211
Foreign exchange loss	(2,955)	(1,290)
Income before provision for income taxes	28,595	30,252
Operating Segments
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	324,703	264,814
Segment Reporting Information [Line Items]
Income from operations	60,452	48,647
Unallocated Amounts
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	(52)	(332)
Segment Reporting Information [Line Items]
Other revenues	(52)	(332)
Stock-based compensation expense	(15,776)	(10,964)
Non-corporate taxes	(3,451)	(1,080)
Professional fees	(2,344)	(1,726)
Depreciation and amortization	(1,975)	(1,691)
Bank charges	(397)	(341)
One-time charges	(568)	0
Other corporate expenses	$ (4,923)	$ (2,182)

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SEGMENTS INFORMATION - Geographical Information of Long-Lived Assets Based on Physical Location (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	$ 75,962	$ 73,616
Belarus
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	47,124	46,011
Russia
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	7,853	7,203
Ukraine
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	5,847	5,610
Hungary
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	3,384	3,485
United States
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	3,013	2,618
Poland
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	2,498	2,213
China
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	1,785	1,887
India
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	1,530	1,650
Other
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	$ 2,928	$ 2,939

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SEGMENTS INFORMATION - Revenues by Client Location (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	$ 324,651	$ 264,482
Reimbursable expenses and other revenues
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	3,925	2,446
United States
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	176,830	136,639
United Kingdom
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	46,594	43,560
Switzerland
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	29,096	30,852
Russia
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	13,209	8,965
Canada
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	12,494	15,846
Germany
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	12,094	8,739
Netherlands
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	8,671	2,647
Sweden
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	7,466	4,128
Hong Kong
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	4,777	5,944
United Arab Emirates
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	2,048	0
China
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	1,584	294
Ireland
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	1,389	1,186
Italy
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	1,280	668
Denmark
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	1,253	410
Other locations
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	$ 5,866	$ 4,604

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RECENT ACCOUNTING PRONOUNCEMENTS RECENT ACCOUNTING PRONOUNCEMENT - ASU 2016-09 (Details)	3 Months Ended
	Mar. 31, 2017 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Discrete tax benefit recognized	$ 1,695,000
ASU 2016-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Discrete tax benefit recognized	1,695
Adjustment to retained earnings for previusly unrecognized tax benefit	$ 1,740