SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

SEGMENT INFORMATION

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, certain taxes included in operating expenses, 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 and benefits. 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.

See Note 2 “Impact of the Invasion of Ukraine” for more information regarding the Company’s decisions to no longer serve customers in Russia and the subsequent decision to exit its operations in Russia.

Revenues from external customers and operating profit/(loss), before unallocated expenses, by reportable segment for the three months ended March 31, 2023 and 2022, were as follows:

	Three Months Ended March 31,
	2023		2022
Segment revenues:
North America	$	709,957	$	687,711
Europe	493,147		451,970
Russia	7,837		31,933
Total segment revenues	$	1,210,941	$	1,171,614
Segment operating profit/(loss):
North America	$	122,831	$	126,734
Europe	59,904		56,711
Russia	(3,005)		(19,484)
Total segment operating profit	$	179,730	$	163,961

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, 2023 and 2022.

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

	Three Months Ended March 31,
	2023		2022
Total segment operating profit:	$	179,730	$	163,961
Unallocated amounts:
Stock-based compensation expense	(38,579)		(7,112)
Amortization of intangibles assets	(5,537)		(5,244)
Other acquisition-related expenses	(241)		(579)
Other unallocated expenses	(15,002)		(21,784)
Income from operations	120,371		129,242
Interest and other income/(loss), net	11,521		(165)
Foreign exchange loss	(4,608)		(22,785)
Income before provision for income taxes	$	127,284	$	106,292

Geographic Area Information

Long-lived assets presented in the table below 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, 2023		As of December 31, 2022
Ukraine	$	69,290	$	70,183
United States	65,165		68,804
Belarus	55,282		57,311
Poland	14,736		14,685
Hungary	8,483		8,552
India	7,895		8,506
Other	46,216		45,307
Total	$	267,067	$	273,348

See Note 2 “Impact of the Invasion of Ukraine” for more information regarding the Company’s decisions to no longer serve customers in Russia, impairment of long-lived assets in Russia and the subsequent decision to exit its operations in Russia.

The table below presents information about the Company’s revenues by customer location for the three months ended March 31, 2023 and 2022:

	Three Months Ended March 31,
	2023		2022
United States	$	679,437	$	657,027
United Kingdom	155,327		153,197
Switzerland	89,861		81,830
Netherlands	59,100		50,179
Germany	42,735		36,389
Canada	27,832		27,029
Russia	5,873		30,692
Other locations	150,776		135,271
Total	$	1,210,941	$	1,171,614