SEGMENTS INFORMATION

3 Months Ended

Mar. 31, 2020

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 intangible assets acquired through business combinations, 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 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.

During the fourth quarter of 2019, the Company changed its management reporting of segment revenue to exclude other income. Prior year amounts presented below have been changed to conform to the new presentation.

Revenues from external customers and operating profit, before unallocated expenses, by reportable segments for the three months ended March 31, 2020 and 2019, were as follows:



	Three Months Ended March 31,
	2020		2019
Segment revenues:
North America	$	391,102	$	310,689
Europe	236,333		194,065
Russia	23,924		16,579
Total segment revenues	$	651,359	$	521,333
Segment operating profit:
North America	$	78,927	$	64,457
Europe	31,779		31,785
Russia	519		589
Total segment operating profit	$	111,225	$	96,831

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, 2020 and 2019.

Reconciliation of segment operating profit to consolidated income before provision for income taxes is presented below:



	Three Months Ended March 31,
	2020			2019
Total segment operating profit:	$	111,225		$	96,831
Unallocated amounts:
Stock-based compensation expense	(11,881		)	(21,856		)
Amortization of intangibles assets	(3,135		)	(2,138		)
Other acquisition-related expenses	(468		)	(511		)
Other unallocated costs	(8,232		)	(7,668		)
Income from operations	87,509			64,658
Interest and other income, net	2,386			3,076
Foreign exchange gain/(loss)	6,524			(3,484		)
Income before provision for income taxes	$	96,419		$	64,250

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, 2020		As of December 31, 2019
Belarus	$	74,766	$	75,984
Ukraine	27,384		24,652
United States	17,845		15,637
Russia	13,414		17,980
India	6,874		7,443
Poland	4,988		5,029
Hungary	4,887		5,201
China	2,806		3,036
Other	11,707		10,297
Total	$	164,671	$	165,259

The table below presents information about the Company’s revenues by customer location for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
	2020		2019
United States	$	370,089	$	299,680
United Kingdom	92,132		65,739
Switzerland	47,222		36,233
Netherlands	25,909		20,616
Russia	21,961		15,892
Germany	20,193		19,154
Canada	17,920		16,972
Other locations	55,933		47,047
Total	$	651,359	$	521,333