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. 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, non-corporate taxes, compensation 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 asset 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. Additionally, management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably among the segments.

The Company manages its business primarily based on the managerial responsibility for its client base and market. As managerial responsibility for a particular customer relationship generally correlates with the customer’s geographic location, there is a high degree of similarity between customer locations and the geographic boundaries of the Company’s reportable segments. In some cases, managerial responsibility for a particular customer is assigned to a management team in another region and is usually based on the strength of the relationship between customer executives and particular members of EPAM’s senior management team. In such cases, the customer’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 months ended March 31, 2019 and 2018, were as follows:



	Three Months Ended March 31,
	2019		2018
Segment revenues:
North America	$	310,689	$	231,196
Europe	194,223		173,343
Russia	16,580		19,786
Total segment revenues	$	521,492	$	424,325
Segment operating profit:
North America	$	64,457	$	43,960
Europe	31,785		28,890
Russia	589		5,347
Total segment operating profit	$	96,831	$	78,197

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 segment revenues during the three months ended March 31, 2019 and 2018. Accounts receivable and unbilled revenues are generally dispersed across the Company’s customers in proportion to their revenues. There were no customers individually exceeding 10% of total unbilled revenues as of March 31, 2019 and December 31, 2018. There were no customers individually exceeding 10% of total accounts receivable as of March 31, 2019 and December 31, 2018.

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 March 31,
	2019			2018
Total segment revenues	$	521,492		$	424,325
Other income included in segment revenues	(159		)	(177		)
Revenues	$	521,333		$	424,148

Total segment operating profit:	$	96,831		$	78,197
Unallocated amounts:
Other income included in segment revenues	(159		)	(177		)
Stock-based compensation expense	(21,856		)	(16,596		)
Non-corporate taxes	(1,728		)	(2,560		)
Professional fees	(1,769		)	(1,916		)
Depreciation and amortization expense	(2,140		)	(1,769		)
Bank charges	(606		)	(589		)
One-time charges and other acquisition-related expenses	(546		)	(620		)
Other operating expenses	(3,369		)	(5,273		)
Income from operations	64,658			48,697
Interest and other income/(loss), net	3,076			(551		)
Foreign exchange loss	(3,484		)	(247		)
Income before provision for/(benefit from) income taxes	$	64,250		$	47,899

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. Physical locations and values of the Company’s long-lived assets are presented below:



	As of March 31, 2019		As of December 31, 2018
Belarus	$	50,065	$	50,085
United States	14,028		13,101
Russia	11,191		9,902
Ukraine	9,435		8,433
India	6,863		7,019
Hungary	3,144		3,168
Poland	2,759		2,637
China	2,479		2,651
Other	5,841		5,650
Total	$	105,805	$	102,646

The table below presents information about the Company’s revenues by customer location for the three months ended March 31, 2019 and 2018.



	Three Months Ended March 31,
	2019		2018
United States	$	299,680	$	223,683
United Kingdom	65,739		51,730
Switzerland	36,233		35,604
Netherlands	20,616		17,649
Germany	19,154		19,488
Canada	16,972		15,763
Russia	15,892		19,412
Other	47,047		40,819
Total	$	521,333	$	424,148