OPERATING SEGMENTS

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

OPERATING SEGMENTS

OPERATING SEGMENTS

The Company determines its operating segments and reports segment information in accordance with the management approach, which designates internal reporting used by management to make operating decisions and assess performance as the source of the Company’s reportable segments.

The Company manages its business primarily based on the geographic 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 a case, 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 Company’s Chief Operating Decision Maker (“CODM”) evaluates performance and allocates resources based on the segment's revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating 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, such as stock-based compensation are not allocated to specific segments, as management does not believe it is practical as these expenses are not directly attributable to any specific segment and consequently are not allocated to individual segments in internal management reports used by the CODM. Such expenses are separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations.

Revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments for the three months ended March 31, 2015 and 2014, were as follows:

	Three Months Ended   March 31,
	2015			2014
Total segment revenues:
North America	$	100,269		$	80,198
Europe	91,152			67,659
Russia	7,513			10,748
Other	1,260			1,392
Total segment revenues	$	200,194		$	159,997
Segment operating profit:
North America	$	24,068		$	18,197
Europe	15,340			14,135
Russia	(271		)	(1,135		)
Other	(457		)	(1,318		)
Total segment operating profit	$	38,680		$	29,879

Intersegment transactions were excluded from the above on the basis that they are neither included into the measure of a segment’s profit and loss by the CODM, nor provided to the CODM on a regular basis.

During the three months ended March 31, 2015 and 2014, revenues from one customer, UBS AG, were $30,933 and $20,024, respectively, and accounted for more than 10% of total revenues. Revenues from this customer included reimbursable expenses and were included in the Company’s Europe segment in the periods indicated.

Trade accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. As of March 31, 2015, billed trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 15.6% of our total billed trade receivables. As of March 31, 2015, unbilled trade receivables from two customers, UBS AG and Barclays, individually exceeded 10% and together accounted for 27.1% of our total unbilled trade receivables.

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

	Three Months Ended   March 31,
	2015			2014
Total segment revenues	$	200,194		$	159,997
Unallocated (loss)/revenue	(149		)	387
Revenues	$	200,045		$	160,384
Total segment operating profit:	$	38,680		$	29,879
Unallocated amounts:
Other revenues	(149		)	387
Stock-based compensation expense	(9,134		)	(3,208		)
Non-corporate taxes	(825		)	(546		)
Professional fees	(1,822		)	(1,314		)
Depreciation and amortization	(1,329		)	(655		)
Bank charges	(367		)	(247		)
Other corporate expenses	(2,234		)	(2,439		)
Income from operations	22,820			21,857
Interest and other income, net	1,158			976
Foreign exchange loss	(5,754		)	(1,241		)
Income before provision for income taxes	$	18,224		$	21,592

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. Geographical information about the Company’s long-lived assets based on physical location of the assets was as follows:

	March 31, 2015		December 31, 2014
Belarus	$	42,060	$	41,652
Ukraine	4,377		4,392
Hungary	2,523		2,773
Russia	2,121		2,196
United States	1,779		2,001
Other	2,255		2,120
Total	$	55,115	$	55,134

Information about the Company’s revenues by client location is as follows:

	Three Months Ended   March 31,
	2015		2014
United States	$	92,182	$	69,136
United Kingdom	38,565		34,244
Switzerland	26,351		20,532
Canada	12,485		9,981
Russia	7,259		10,390
Germany	6,498		6,132
Hong Kong	5,210		—
Netherlands	2,046		2,118
Sweden	2,013		2,312
Belgium	1,525		641
Kazakhstan	1,259		1,242
Ireland	1,187		—
Other locations	1,608		1,689
Reimbursable expenses and other revenues	1,857		1,967
Revenues	$	200,045	$	160,384

Service Offering Information

Information about the Company’s revenues by service offering is as follows:

	Three Months Ended   March 31,
	2015		2014
Software development	$	140,035	$	110,687
Application testing services	37,030		31,770
Application maintenance and support	17,132		11,378
Infrastructure services	3,173		3,754
Licensing	818		828
Reimbursable expenses and other revenues	1,857		1,967
Revenues	$	200,045	$	160,384