SEGMENT INFORMATION

The Company determines its business segments and reports segment information in accordance with how the Company’s chief operating decision maker (“CODM”) organizes the segments to evaluate performance, allocate resources and make business decisions. Segment results are based on the segment’s revenues and operating profit, where segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each reportable segment have similar characteristics and are subject to similar factors, pressures and challenges. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain expenses are not allocated to specific segments as these expenses are not directly attributable to or controllable at the segment level. Further, stock based compensation expense is not allocated to individual segments in internal management reports used by the CODM. These unallocated amounts are combined with total segment operating profit to arrive at consolidated income from operations as reported below in the reconciliation of segment operating profit to consolidated income before provision for income taxes.

The Company manages its business primarily based on the 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.

Revenues from external customers and operating profit, before unallocated expenses, for the North America, Europe, and Russia reportable segments for the three and nine months ended September 30, 2017 and 2016, were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Segment revenues:
North America	$	206,389	$	161,655	$	578,717	$	466,255
Europe	157,446		126,265		431,472		349,834
Russia	14,455		10,434		41,825		31,056
Total segment revenues	$	378,290	$	298,354	$	1,052,014	$	847,145
Segment operating profit:
North America	$	45,529	$	34,699	$	126,243	$	103,693
Europe	25,984		19,548		66,453		49,793
Russia	1,685		1,208		7,129		5,244
Total segment operating profit	$	73,198	$	55,455	$	199,825	$	158,730

Intersegment transactions were excluded from the above on the basis that they are neither included in the measure of a segment’s profit and loss results, nor considered by the CODM during the review of segment results.

There were no customers that accounted for more than 10% of total revenues during the three and nine months ended September 30, 2017. During the three and nine months ended September 30, 2016, revenues from one customer, UBS AG, were $35,142 and $107,381, respectively, and accounted for more than 10% of total revenues. Revenues from this customer were included in the Company’s Europe segment in the periods indicated.

Accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. As of September 30, 2017, accounts receivable from one customer, UBS AG, individually exceeded 10% and accounted for 10.5% of our total accounts receivable. As of September 30, 2017, unbilled revenues from one customer, Expedia, individually exceeded 10% and accounted for 10.9% of our total 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 September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Total segment revenues	$	378,290		$	298,354		$	1,052,014		$	847,145
Other revenues	(767		)	(61		)	(863		)	(538		)
Revenues	$	377,523		$	298,293		$	1,051,151		$	846,607

Total segment operating profit:	$	73,198		$	55,455		$	199,825		$	158,730
Unallocated amounts:
Other revenues	(767		)	(61		)	(863		)	(538		)
Stock-based compensation expense	(11,217		)	(13,826		)	(39,920		)	(37,520		)
Taxes other than income taxes	(1,966		)	(1,588		)	(7,212		)	(4,105		)
Professional fees	(1,050		)	(1,470		)	(5,870		)	(5,656		)
Depreciation and amortization	(1,883		)	(2,027		)	(5,763		)	(6,294		)
Bank charges	(574		)	(370		)	(1,417		)	(1,097		)
One-time charges and other acquisition-related expenses	(289		)	(7		)	(1,187		)	(314		)
Other corporate expenses	(6,204		)	(2,204		)	(16,697		)	(6,893		)
Income from operations	49,248			33,902			120,896			96,313
Interest and other income, net	1,416			1,067			2,802			3,416
Foreign exchange loss	(77		)	(1,728		)	(1,470		)	(5,313		)
Income before provision for income taxes	$	50,587		$	33,241		$	122,228		$	94,416

Geographic Area Information

Long-lived assets include property and equipment, net of accumulated depreciation and amortization. Geographical information about the Company’s long-lived assets based on physical location of the assets is presented below:



	As of September 30, 2017		As of December 31, 2016
Belarus	$	46,671	$	46,011
Russia	8,215		7,203
Ukraine	5,724		5,610
Hungary	3,972		3,485
United States	3,479		2,618
Poland	2,657		2,213
China	1,750		1,887
India	1,176		1,650
Bulgaria	931		722
Other	3,360		2,217
Total	$	77,935	$	73,616

The table below presents information about the Company’s revenues by client location, including reimbursable expenses and other revenues of $4,134 and $3,159 for the three months ended September 30, 2017 and 2016, respectively, and $12,226 and $8,731 for the nine months ended September 30, 2017 and 2016, respectively. See Note 1 for discussion on reclassifications to conform to the current presentation.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
United States	$	202,364	$	155,241	$	571,513	$	439,244
United Kingdom	48,471		44,179		141,177		133,391
Switzerland	33,185		31,638		90,400		95,086
Germany	16,053		12,451		42,291		30,926
Canada	15,711		14,589		41,854		45,762
Russia	14,079		9,861		40,614		29,331
Netherlands	14,118		4,539		35,345		10,512
Sweden	8,491		6,506		24,134		16,667
Hong Kong	5,185		4,991		14,453		16,218
United Arab Emirates	3,282		1,788		8,531		1,788
Ireland	2,620		1,318		5,609		3,808
China	1,939		2,071		5,432		2,778
Belgium	2,785		2,699		5,427		7,422
Italy	1,654		1,125		4,451		2,799
Other locations	7,586		5,297		19,920		10,875
Total	$	377,523	$	298,293	$	1,051,151	$	846,607