OPERATING SEGMENTS

6 Months Ended

Jun. 30, 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 are not allocated to specific segments, as management does not believe it is practical because these expenses are either not directly attributable to any specific segment or controllable at the segment level 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 and six months ended June 30, 2015 and 2014, were as follows:

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2015		2014			2015			2014
Total segment revenues:
North America	$	108,213	$	88,275		$	208,482		$	168,473
Europe	98,160		71,514			189,312			139,173
Russia	10,212		13,371			17,725			24,119
Other	1,484		1,523			2,744			2,915
Total segment revenues	$	218,069	$	174,683		$	418,263		$	334,680
Segment operating profit:
North America	$	25,746	$	21,529		$	49,814		$	39,726
Europe	16,670		9,714			32,010			23,849
Russia	1,740		2,199			1,469			1,064
Other	277		(900		)	(180		)	(2,218		)
Total segment operating profit	$	44,433	$	32,542		$	83,113		$	62,421

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 and six months ended June 30, 2015, revenues from one customer, UBS AG, were $31,933 and $62,867, respectively, and accounted for more than 10% of total revenues. During the three and six months ended June 30, 2014, revenues from one customer, UBS AG, were $23,224 and $43,247, 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 June 30, 2015, billed and unbilled trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 12.7% and 14.0% of our total billed and unbilled trade receivables, respectively.

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

	Three Months Ended   June 30,						Six Months Ended   June 30, 2015
	2015			2014			2015			2014
Total segment revenues	$	218,069		$	174,683		$	418,263		$	334,680
Unallocated revenues/ (discounts)	(288		)	12			(437		)	399
Revenues	$	217,781		$	174,695		$	417,826		$	335,079
Total segment operating profit:	$	44,433		$	32,542		$	83,113		$	62,421
Unallocated amounts:
Other unallocated revenues/ (discounts)	(288		)	12			(437		)	399
Stock-based compensation expense	(12,253		)	(5,891		)	(21,387		)	(9,099		)
Non-corporate taxes	(913		)	(609		)	(1,738		)	(1,155		)
Professional fees	(2,029		)	(1,227		)	(3,851		)	(2,541		)
Depreciation and amortization	(1,278		)	(2,226		)	(2,607		)	(2,881		)
Bank charges	(314		)	(256		)	(681		)	(503		)
One-time charges	—			(2,000		)	—			(2,000		)
Other corporate expenses	(3,752		)	(1,869		)	(5,986		)	(4,308		)
Income from operations	23,606			18,476			46,426			40,333
Interest and other income, net	1,299			1,164			2,457			2,140
Foreign exchange loss	(465		)	(1,239		)	(6,219		)	(2,480		)
Income before provision for income taxes	$	24,440		$	18,401		$	42,664		$	39,993

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:

	June 30, 2015		December 31, 2014
Belarus	$	44,966	$	41,652
Ukraine	4,291		4,392
Hungary	2,367		2,773
Russia	2,311		2,196
United States	1,863		2,001
Other	2,648		2,120
Total	$	58,446	$	55,134

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

	Three Months Ended   June 30,				Six Months Ended   June 30, 2015
	2015		2014		2015		2014
United States	$	97,233	$	75,092	$	189,415	$	144,228
United Kingdom	41,423		33,176		79,988		67,420
Switzerland	26,933		20,833		53,284		41,365
Canada	13,214		11,474		25,699		21,455
Russia	9,798		12,772		17,057		23,162
Germany	9,340		6,360		15,838		12,492
Hong Kong	6,062		3,210		11,272		3,210
Netherlands	2,308		2,344		4,354		4,462
Sweden	2,446		2,167		4,459		4,479
Belgium	1,628		899		3,153		1,540
Kazakhstan	1,484		1,374		2,743		2,616
Ireland	1,633		982		2,820		982
Other locations	2,037		2,340		3,645		4,029
Reimbursable expenses and other revenues	2,242		1,672		4,099		3,639
Revenues	$	217,781	$	174,695	$	417,826	$	335,079

Service Offering Information

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

	Three Months Ended   June 30,				Six Months Ended   June 30, 2015
	2015		2014		2015		2014
Software development	$	151,743	$	119,852	$	291,778	$	230,539
Application testing services	42,310		34,196		79,340		65,966
Application maintenance and support	17,970		14,513		35,102		25,891
Infrastructure services	2,747		3,484		5,920		7,238
Licensing	769		978		1,587		1,806
Reimbursable expenses and other revenues	2,242		1,672		4,099		3,639
Revenues	$	217,781	$	174,695	$	417,826	$	335,079