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 corporate expenses are not allocated to specific segments as these expenses are not controllable at the segment level. Such expenses include certain types of professional fees and recruitment and development expenses, non-corporate taxes, compensations to non-employee directors and certain other general and administrative expenses, including compensation of specific groups of non-production employees. In addition, the Company does not allocate amortization of acquisition-related intangible assets, goodwill and other assets impairment charges, stock-based compensation expenses, acquisition-related costs and certain other one-time charges. 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/(benefit from) 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.

Revenues from external customers and operating profit, before unallocated expenses, by reportable segments for the three and nine months ended September 30, 2018 and 2017, were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Segment revenues:
North America	$	280,838	$	206,389	$	769,137	$	578,717
Europe	171,482		157,446		516,320		431,472
Russia	16,208		14,455		53,374		41,825
Total segment revenues	$	468,528	$	378,290	$	1,338,831	$	1,052,014
Segment operating profit:
North America	$	60,763	$	45,529	$	155,944	$	126,243
Europe	28,871		25,984		84,329		66,453
Russia	543		1,685		8,211		7,129
Total segment operating profit	$	90,177	$	73,198	$	248,484	$	199,825

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, 2018 and 2017.

Accounts receivable and unbilled revenues are generally dispersed across the Company’s clients in proportion to their revenues. There were no customers individually exceeding 10% of total unbilled revenues as of September 30, 2018. As of December 31, 2017, unbilled revenues from one customer, individually exceeded 10% and accounted for 13.0% of total unbilled revenues. There were no customers individually exceeding 10% of total accounts receivable as of September 30, 2018 and December 31, 2017.

Reconciliation of segment revenues to consolidated revenues and segment operating profit to consolidated income before provision for/(benefit from) income taxes is presented below:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Total segment revenues	$	468,528		$	378,290		$	1,338,831		$	1,052,014
Other income included in segment revenues	(342		)	(767		)	(850		)	(863		)
Revenues	$	468,186		$	377,523		$	1,337,981		$	1,051,151

Total segment operating profit:	$	90,177		$	73,198		$	248,484		$	199,825
Unallocated amounts:
Other income included in segment revenues	(342		)	(767		)	(850		)	(863		)
Stock-based compensation expense	(15,330		)	(11,217		)	(46,736		)	(39,920		)
Non-corporate taxes	(2,063		)	(1,966		)	(7,041		)	(7,212		)
Professional fees	(1,420		)	(1,050		)	(4,736		)	(5,870		)
Depreciation and amortization expense	(2,011		)	(1,883		)	(5,754		)	(5,763		)
Bank charges	(782		)	(574		)	(1,950		)	(1,417		)
One-time charges and other acquisition-related expenses	(155		)	(289		)	(2,016		)	(1,187		)
Other operating expenses	(3,514		)	(6,204		)	(11,907		)	(16,697		)
Income from operations	64,560			49,248			167,494			120,896
Interest and other income, net	1,941			1,416			2,442			2,802
Foreign exchange (loss)/gain	(514		)	(77		)	1,069			(1,470		)
Income before provision for/(benefit from) income taxes	$	65,987		$	50,587		$	171,005		$	122,228

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, 2018		As of December 31, 2017
Belarus	$	48,728	$	49,866
United States	11,542		3,371
Russia	10,279		9,617
Ukraine	8,529		6,995
India	6,783		2,698
Hungary	3,198		3,901
China	2,830		2,608
Other locations	7,576		7,363
Total	$	99,465	$	86,419

The table below presents information about the Company’s revenues by client location for the three and nine months ended September 30, 2018 and 2017.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
United States	$	266,065	$	202,364	$	736,579	$	571,513
United Kingdom	50,482		48,471		152,315		141,177
Switzerland	35,524		33,185		105,396		90,400
Germany	20,732		16,053		60,331		42,291
Canada	18,008		15,711		51,391		41,854
Netherlands	17,031		14,118		51,934		35,345
Russia	15,609		14,079		51,930		40,614
Other locations	44,735		33,542		128,105		87,957
Total	$	468,186	$	377,523	$	1,337,981	$	1,051,151