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