In this annual report, “EPAM,” “EPAM Systems, Inc.,” the “Company,” “we,” “us” and “our” refer to EPAM Systems, Inc. and its consolidated subsidiaries.

“EPAM” is a trademark of EPAM Systems, Inc. “ISO 9001:2015” and “ISO 27001:2013” are trademarks of the International Organization for Standardization. “ISAE” is a trademark of the International Federation of Accountants. All other trademarks, trade names and servicemarks used herein are the property of their respective owners.

Unless otherwise indicated, information contained in this annual report concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from various sources (including industry publications, surveys and forecasts and our internal research), on assumptions that we have made, which we believe are reasonable, based on such data and other similar sources and on our knowledge of the markets for our services. The projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate, are subject to a high degree of uncertainty and risk due to a variety of factors, including those described under “Item 1A. Risk Factors” and elsewhere in this annual report. These and other factors could cause results to differ materially from those expressed in the estimates included in this annual report.

The words “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “might,” “would,” “continue” or the negative of these terms or other comparable terminology and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made and, except to the extent required by law, we undertake no obligation to update, to revise or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this annual report might not occur and our future results, level of activity, performance or achievements may differ materially from those expressed in these forward-looking statements due to, including, but not limited to, the factors mentioned above, and the differences may be material and adverse. Because of these uncertainties, you should not place undue reliance on these forward-looking statements.

EPAM delivers end-to-endis a leading digital transformation services and product engineering company, providing digital platform engineering and software development services to customers located around the world, primarily in North America, Europe, and Asia. We deliver business and technology transformation from start to finish, leveraging agile methodologies, proven customer collaboration frameworks, engineering excellence tools, hybrid teams and our award-winning proprietary global delivery platform. We leverage our software engineering heritage with strategic business and innovation consulting, design thinking, and physical-digital capabilities to deliver real business value to itsour customers. We support our customers by combining its core engineering and technology capabilitieswhile enabling them to reimagine their businesses through a digital lens. We focus on building long-term partnerships with business and experience consulting. We support our customers in a market that is constantly challenged by the pressures of digitization through our innovative strategy and scalable software solutions, high qualityintegrated advisory, business consulting and experience design, and a continually evolving mix of advanced capabilities. We focus on building long-term partnerships with our customers, enabling them to reimagine their businesses through a digital lens.

Our historical core competency, software development and product engineering services, combined with our work with global leaders in enterprise software platforms and emerging technology companies, created our foundation for the evolution of our other offerings, which include advanced technology software solutions, intelligent enterprise services and digital engagement. Our strategic acquisitions have expanded our geographic reach and service capabilities to include digital strategy and design, consulting and test automation and we expect our strategic acquisitions will continue to enable us to offer a broader range of services to our customers from a wide variety of locations.

Our service offerings continuously evolve to provide more customized and integrated solutions to our customers where we combine best-in-class software engineering with customer experience design, business consulting and technology innovation services. We are continually expanding our service capabilities, moving beyond our traditional services into business consulting, design and physical product development and areas such as artificial intelligence, robotics and virtual reality.

EPAM’s key service offerings and solutions include the following practice areas:

Our engineering foundation underpins how we architect, build and scale next-generation software solutions and agile delivery teams. Our engineering expertise allows us to build enterprise technologies that improve business processes, offer smarter analytics and result in greater operational excellence through requirements analysis and platform selection, deep and complex customization, cross-platform migration, implementation and integration.

We use our experience, custom tools and specialized knowledge to integrate our customers’ chosen application platforms with their internal systems and processes and to create custom solutions filling the gaps in their platforms’ functionality in order to address the needs of the customers’ users and customers. We address our customers’ increased need for tighter enterprise integration between software development, testing and maintenance with private, public and mobile infrastructures through our infrastructure management services. These solutions cover the full lifecycle of infrastructure management including application, database, network, server, storage and systems operations management, as well as monitoring, incident notification and resolution. We deliver maintenance and support services through our proprietary distributed project management processes and tools, which reduce the time and costs related to maintenance, enhancement and support activities.

We have deep expertise and the ability to offer a comprehensive set of software product development services including product research, customer experience design and prototyping, program management, component design and integration, full lifecycle software testing, product deployment and end-user customization, performance tuning, product support and maintenance, managed services, as well as porting and cross-platform migration. We focus on software products covering a wide range of business applications as well as product development for multiple mobile platforms and embedded software product services.

We turn our customers’ operations into intelligent enterprise hubs with our proprietary platforms, integrated engineering practices and smart automation. Developing a digital experience or product from end-to-end requires input and expertise from a variety of professionals with a broad range of skills. Our multidisciplinarymulti-disciplinary teams and global delivery framework come together to deliver well-rounded technology solutions that bring a competitive advantage to our customers. In addition to utilizing our dedicated delivery centers, which allow us to deploy key delivery talent, we work closely with leading companies in various industries to enable our customers to better leverage technology and address the simultaneous pressures of driving value for their consumer and offering a more engaging experience.

We turn process optimization into real transformation by using process automation and cognitive techniques to transform legacy processes and deliver streamlined operations that increase revenues and reduce costs for our customers. We rely on our teams, methodologies and tools to optimize every stage of software delivery for improved quality and better features with each release.

We maintain a dedicated group of testing and quality assurance professionals with experience across a wide range of technology platforms and industry verticals, who perform software application testing, test management, automation and consulting services focused on helping customers improve their existing software testing and quality assurance practices. We employ industry-recognized and proprietary defect tracking tools and frameworks to deliver a comprehensive range of testing services that identify threats and close loopholes to protect our customers’ business systems from information loss.

Over the years, as a complement to our core engineering skills, we have added capabilities in business consulting to give us an agile, hybrid approach to the market. Our consulting services drive deeper relationships as we help our customers with larger and more complex challenges. Our industry, technologyintegrated consulting teams – across Business, Experience, Technology and experience consulting services are interconnectedData – apply a systems thinking mindset to deliver maximum impact forget to the core of our customers.clients’ challenges. The functional business expertise of our professionals is supplemented by a thorough understanding of technology platforms and their interactions as well as application of data science and machine learning to deliver our best insights into our customers’ business.

Our technical advisory services help customers stay ahead of current technology changes and innovate, where innovation beyond technology is also delivered through collaborative workshops, challenges and new organizational models.

We apply design thinking to digital and service strategy, user experience and the product lifecycle with a focus on innovative design ideas and product development. Our digital and service design practice provides strategy, design, creative and program management services for customers looking to improve the user experience.

We are continuously looking to strengthen and grow our design and consulting practices as evidenced by our 2018 strategic acquisitions, of Continuum Innovation LLC, which enhancesenhanced our consulting, physical design and product development capabilities, and Think Limited, which enhances our global product and design offerings.offerings, and our ability to deliver creative solutions, personalized experiences, and next generation digital products.

We maintain a geographically diverse client base in multiple industries. Our focus on delivering quality service is reflected in established relationships with many of our customers, with 55.9%54.7% and 29.5%26.4% of our revenues in 20192022 coming from customers that had used our services for at least five and ten years, respectively. Our sustained growth and increased capabilities are furthered by both organic growth and strategic acquisitions. We continually evaluate potential acquisition targets that can expand our vertical-specific domain expertise, geographic footprint, service portfolio, client base and management expertise.

We believeOur global delivery model and centralized support functions, combined with the developmentbenefits of scale from the shared use of fixed-cost resources, have created a delivery base whereby our applications, tools, methodologies and infrastructure allow us to seamlessly deliver services and solutions from our delivery centers to global customers across all geographies. Over the years we have developed a robust global delivery model createsthat serves as a key competitive advantage, enabling us to better understand and meet our customers’ diverse needs and to provide a compelling value proposition. We continuously grow our delivery platform both organically and through strategically acquiredstrategic acquisitions, which allows us to expand in existing and new locations and engage personnel with diversified skills that support our strategy. We had 32,561 delivery personnel asAs of December 31, 2019, which2022, we had approximately 52,850 delivery personnel consisting mainly includesof our core information technology professionals as well as designers, consultants, product experts and scientists.

We serve our customers through on-site, off-site and offshore locations across the world and use strategically located delivery centers to offer a strong, diversified and cost-effective delivery platform. OurIn the normal course of business, we may relocate or assist in relocating our employees as business needs arise, new office geographies are added or customer engagements require teams to be available in particular locations.

Historically, our largest delivery locations, measured by the number of delivery professionals, have been Ukraine, Belarus and Russia; however, the attack on Ukraine and its people by Russian forces beginning on February 24, 2022 shifted the way we operate in those locations. Our highest priority is the safety and security of our employees and their families in Ukraine as well as in the broader region, and we have continued to support relocating our employees to lower risk locations, both inside Ukraine and to other countries where we operate. The vast majority of our Ukraine employees are in safe locations and operating at levels of productivity consistent with those achieved prior to the war, and Ukraine remains our largest delivery location with the most delivery professionals, 10,500 as of December 31, 2022. Additionally, in response to the war in Ukraine, we continue to execute our business continuity plans and have sustained our hiring efforts across multiple locations in Central and Eastern Europe, Central and Western Asia, India, and Latin America. Our global delivery centers arehave sufficient resources, including infrastructure and capital, to support ongoing operations.

On April 7, 2022, EPAM announced the beginning of a phased exit of our operations in Russia in close collaboration with our employees, contractors, and customers. We have discontinued services to certain customers located in Belarus, UkraineRussia and Russia.

We expect to continue operating in Belarus including educational infrastructure, availability of qualified software engineers and government support of the technology industry.while executing on our Belarus-specific business continuity plans. As of December 31, 2019, we2022, Belarus had 7,478approximately 4,500 delivery professionals. During 2022, a significant number of our employees in Russia and Belarus have relocated, thus increasing the size of our other delivery locations. Outside of Ukraine and Belarus, our largest delivery locations are India and Poland with approximately 5,900 and 5,650 delivery professionals, in Ukraine and 5,394 delivery professionals in Russia. Our delivery model has not been materially affected by the political and economic uncertainty in Ukraine and Russia to date.

We market and sell our services through our senior management, sales and business development teams, account managers, and professional staff. Our client service professionals and account managers, who maintain direct customer relationships, play an integral role in engaging with current customers to identify and pursue potential business opportunities. This strategy has been effective in promoting repeat business and growth from within our existing clientcustomer base and we believe that our reputation as a reliable provider of software engineering solutions drives additional business from inbound requests and referrals. In addition to effective client management, our sales model also utilizes an integrated sales and marketing approach that leverages a dedicated sales team to identify and acquire new accounts.

We maintain a marketing team, which coordinates corporate-level branding efforts such as participation in and hosting of industry conferences and events as well as sponsorship of programming competitions. We have been recognized by many top global independent research agencies, such as Forrester Gartner, Zinnov and HFSGartner and by publications such as Newsweek, Forbes and Fortune.  As a recognized leader, EPAM is listed among the top 15 companies in Information Technology Services on the Fortune 1000 and ranked four times as the top IT services company on Fortune’s 100 Fastest Growing Companies list. EPAM is also listed among Ad Age’s top 25 World’s Largest Agency Companies for three consecutive years, and Consulting Magazine named EPAM Continuum a top 20 Fastest Growing Firm.

The markets in which we compete are changing rapidly and we face competition from bothmultiple market participants such as other global technology solutions providers, as well as thosespecialized consulting firms, boutique digital companies and outsourcing companies based primarily in specific geographies with lower cost labor such as Eastern Europe, India and China. We believe that the principal competitive factors in our business include technical expertise and industry knowledge, end-to-end solution offerings, a reputation for and a track record of high-quality and on-time delivery of work, effective employee recruiting, training and retention, responsiveness to customers’ business needs, ability to scale, financial stability and price.

We face competition from various technology services providers such as Accenture, Atos, Capgemini, Cognizant Technology Solutions, Deloitte Digital, DXC Technology, Exlservice,Endava, Genpact, GlobalLogic, Globant, Grid Dynamics, HCL Technologies, HP Enterprise, IBM Services, Infosys, Mindtree, Perficient, Tata Consultancy Services, Virtusa Corporation, and Wipro, among others. Additionally, we compete with numerous smaller local companies in the various geographic markets in which we operate.

We believe that our focus on complex and innovative software product development solutions, our technical employee base, and our development and continuous improvement in process methodologies, applications and tools position us well to compete effectively in the future.

We are continuously investing in systems, applications, tools and infrastructure to manage all aspects of our global delivery process in order to manage quality and information security risks, while providing control and visibility across all project lifecycle stages both internally and to our customers. We maintain processes and infrastructure to protect our clients’ and their customers’ confidential and sensitive information and allocate resources to ensure information security, cybersecurity and data privacy. We have made significant investments in the appropriate people, processes and technology to establish and manage compliance with confidentiality policies, laws and regulations governing our activities, such as the European Union data protection legal framework referred to as the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”), and others.

We are committed to integrating positive social, environmental and ethical practices into our business operations, corporate governance, and strategy. This commitment is key to our continual development as a business and drives value for our employees, customers, business partners, the community and other stakeholders. We practice the principles established in our Code of Ethical Conduct by making positive contributions to the communities in which we operate and championing corporate social responsibility efforts.

Through our focused efforts in the areas of Education, Environment, and Community, we are committed to sharing the expertise and attributes of our highly skilled global workforce to effectively support the needs of, and positively add to the world at large and the communities where we work and live. By understanding our impact on local, regional and global communities, we strive to create positive change and opportunities in areas where it is needed most. Such efforts include our global technology education initiatives, through which we provide innovative, industry-relevant technology training and mentorship programs to students globally as well as through other technology conferences, seminars, and hackathon events where we encourage social innovation and jumpstart collaboration among our local tech communities. We maintain strong relationships with the leading technical institutions in Eastern Europe and we support these universities through EPAM-branded research labs, developing training courses and curriculum, providing teaching equipment and engaging students to identify their talents in information technology.

We believe responsible stewardship of the environment is critical, and we take this responsibility seriously. We continually strive to improve our environmental performance through implementation of sustainable development and environmental practices including recycling and upcycling electronics and computers, and designing and releasing a carbon footprint calculator to our employees and the general public. In addition, as an innovation-driven business, EPAM’s success depends on hiringpublic, and building new offices according to the most talented employeesconservation standards of the Leadership in the industry. We are committed to respecting our employees' fundamental human rights at work. We similarly expect our suppliers, vendors,Energy and subcontractors and all other third-party companies that comprise EPAM’s supply chain to respect human rights and to avoid complicityEnvironmental Design rating system. EPAM was named one of Barron's 100 Most Sustainable Companies in human rights abuses. EPAM seeks to provide our customers with exceptional personnel, which includes people with varied and diverse characteristics, to drive the innovation and thought diversity for which we are known. We aim to continuously retain and supply a pipeline of qualified, diverse candidates to foster this goal.2022.

Protecting our intellectual property rights is important to our business. We have invested, and will continue to invest, in research and development to enhance our domain knowledge, and create complex, specialized solutions for our customers.customers, and continuously advance our information security. We rely on a combination of intellectual property laws, trade secrets, cybersecurity, and confidentiality procedures and contractual provisionsobligations to protect our intellectual property. We require our employees, vendors and independent contractors to enter into written agreements upon the commencement of their relationships with us, which assign to us all deliverable intellectual property and work product made, developed or conceived by them in connection with their employment or provision of services. These agreements also provide thatservices and to keep any confidential or proprietarydisclosed information disclosed or otherwise made available by us remains confidential.

We also enter into confidentiality and non-disclosure agreements with our customers. These customarycustomers and suppliers to protect information and maintain information security. Our agreements with our customers cover our use of our customers’their software systems and platforms as our customers usually own the intellectual property in the software, products, and solutions we develop for them. Furthermore, we often grant our customers a perpetual, worldwide, royalty-free, nonexclusive transferable and non-revocable license to our customers to use relevant technologies in our pre-existing intellectual property portfolio, but only to the extent necessary in order to use the software or systems we develop for them. Our suppliers are generally bound by our supplier code of conduct, which imposes an obligation to protect our and our customers’ intangible assets, including confidential information, personal information, and intellectual property, and to protect the security of those assets.

Due to the industry and geographic diversity of our operations and services, our operations are subject to a variety of rules and regulations. Several foreign and U.S. federal and state agencies regulate various aspects of our business. See “Item 1A. Risk Factors — Risks RelatingRelated to Our Business.Regulation and Legislation and Risks Related to Information Security and Data Protection.” We are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions, the Foreign Corrupt Practices Act (“FCPA”) and similar anti-corruption laws and data privacy regulations. Compliance with these laws requires significant resources and non-compliance may result in civil or criminal penalties and other remedial measures.

Our operations and financial results are subject to various risks and uncertainties, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. Listed below, not necessarily in order of importance or probability of occurrence, are the most significant risk factors applicable to us. Additionally, forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. See “Forward-Looking Statements.”

We have grown rapidly and significantly expanded our businessbusinesses over the past several years, both organically and through strategic acquisitions.acquisitions and investments. Our growth has resulted in part from managing larger and more complex projects for our customers, but consequently requires that we invest substantial amounts of cash in human capital and the infrastructure to support them, including training, administration, and facilities in existing and new facilities and physical infrastructure.geographies. Our rapid growth places significant demands on our management and our administrative, operational and financial infrastructure, and creates challenges, including:

We intend to continue our expansion and pursue available opportunities for the foreseeable future. We have and will continue to invest in new lines of business, such as software development education and expanded consulting services. As we introduce new services, enter into new markets, and take on increasingly large and complex projects, our business may face new risks and challenges. If customers do not choose us for large and complex projects or we do not effectively manage those projects, our reputation may be damaged and our business and financial goals may not be damaged.realized. Direct-to-consumer offerings in the highly regulated education industry could result in increased liability and compliance costs. We need to generate business and revenues to support new facilitiesinvestments and infrastructure projects. If the challenges associated with expansion negatively impact our anticipated growth and margins, our business, prospects, financial condition and results of operations could be materially adversely affected.

HiringIdentifying, recruiting, hiring and retaining professionals with diverse skill sets across our broad geography of operations is critical to maintaining existing engagements and obtaining new business.business and has become more challenging in the present economic and labor climate. If we are unable to recruit skilled professionals and if we do not deploy those professionals and use computers, office space,our physical infrastructure and other fixed-cost resources productively, our profitability will be significantly impacted. We must manage the utilization levels of the professionals that we hire and train by planning for future needs effectively and staffing projects appropriately while accurately predicting the general economy and our customers’ need for our services. If we are unable to attract, hire, train, and retain highly skilled personnel and productively deploy them on customer projects, we will jeopardize our ability to meet our customers’ expectations and develop ongoing and future business, andwhich could adversely affect our financial condition and results of operations could be adversely affected.

Competition for highly skilled professionals is intensehas intensified in the markets where we operate, and we may experience significant employee turnover rates due to such competition. Higher wage expectations driven by wage inflation could also create challenges for our recruiting efforts. If we are unable to retain professionals with specialized skills, our revenues, operating efficiency and profitability will decrease.decrease, as will our ability to meet emerging technological challenges. Cost reductions, such as reducing headcount, or voluntary departures that result from our failure to retain the professionals we hire, could negatively affect our reputation as an employer and our ability to hire personnel to meet our business requirements. Price increases resulting from increasing compensation to retain personnel could lead to a decline in demand for our services.

In several countries, certain of our personnel and certain of the personnel of companies that we have acquired are retained as independent contractors. The criteria to determine whether an individual is considered an independent contractor or an employee are typically fact sensitive, vary by jurisdiction, and are subject to the interpretation of the applicable laws. If a government authority changes the applicable laws or a court makes any adverse determination with respect to independent contractors in wages, equitygeneral or one or more of our independent contractors specifically, we could incur significant costs, including for prior periods, for tax withholding, social security taxes or payments, workers’ compensation and other compensation expenses could prevent us from sustaining our competitive advantage, increase our costs,unemployment contributions, and result in dilution to our stockholders.

Our future success heavily depends upon the continued services of our senior executives and other key employees. If one or more of our senior executives or key employees are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all. If any of our senior executives or key personnel joins a competitor or forms a competing company, we may lose customers, suppliers, know-how and other key personnel to those competitors. If we are unable to attract new senior executives or key personnel due to the intense competition for talent in our industry, it could disrupt our business operations and growth.

We haveOur significant operations in certain emerging market economies in Eastern Europe, Latin and South America, India, and certain other Asian countries. Emerging marketscountries are vulnerable to market and economic volatility to a greater extent than more developed markets, which presents risks to our business and operations. A majority of our revenues are generated in North America and Western Europe. However, most of our personnel and delivery centers are located in lower cost locations, including emerging markets. This exposes us to foreign exchange risks relating to revenues, compensation, purchases, capital expenditures, receivables and other balance-sheet items. As we continue to leverage and expand our global delivery model into other emerging markets, a larger portion of our revenues and incurred expenses may be in currencies other than U.S. dollars. Currency exchange volatility caused by economic instability or other factors could materially impact our results. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.”

The economies of certain emerging market countries where we operate have experienced periods of considerable instability and have been subject to abrupt downturns. We have cash in banks in countries such as Belarus, Russia, Ukraine, Kazakhstan, Georgia, Armenia and Uzbekistan, where the banking sector generally does not meet the banking standards of more developed markets, bank deposits made by corporate entities are not insured, and the banking system remains subject to instability.instability and changes in regulations that complicate business transactions. Russia’s invasion of Ukraine and the resulting sanctions and counter-sanctions against Russia have increased the difficulty in accessing cash held in Russian banks, severely limited our ability to move funds out of Russia, and prolonged or escalating military conflict and further sanctions or counter-sanctions could contribute to a banking crisis in these countries and in Belarus. A banking crisis, or the bankruptcy or insolvency of banks that receive or hold our funds particularly in Belarus, may result in the loss of our deposits or adversely affect our liquidity and our ability to complete banking transactions in that region. In addition, some countries where we operate may impose regulatory or practical restrictions on the movement of cash and the exchange of foreign currencies within their banking systems, which would limit our ability to use cash across our global operations and increase our exposure to currency fluctuations. Emerging market vulnerability, and especially its impact on currency exchange volatility and banking systems, could have a material adverse effect on our business, financial condition and results of operations.

Our global operations require us to comply with a wide variety of foreign laws and regulations, trade or foreign exchange restrictions or sanctions, inflation, unstable civil, political and military situations, labor issues, and legal systems that make it more difficult to enforce intellectual property, contractual, or corporate rights. Certain legal provisions in Belarus and Ukraine, where our local subsidiaries operate important delivery centers and employ a significant number of billable and support professionals, may allow a court to order liquidation of a locally organized legal entity on the basis of its formal noncompliance with certain requirements during formation, reorganization or during its operations. Russia, where we are currently winding down our business operations, has similar legal provisions and additional restrictions on sales of assets and repatriation of cash. Belarus recently authorized government seizures of property and assets or the takeover of management of commercial organizations owned by or affiliated with specified foreign states if those states or their affiliated companies or actors commit actions deemed unfriendly to Belarus. If we fail to comply with certain requirements, including those relating to minimum net assets, governmental or local authorities can impose fines or seek the involuntary liquidation of our local subsidiaries in court, and creditors will have the right to accelerate their claims, demand early performance of legal obligations, and demand compensation for any damages. Involuntary liquidation of any of our subsidiaries could materially adversely affect our financial condition and results of operations.

Changes in general economic or political conditions in the United States, including a recession or a sovereign debt default, could adversely affect our business. For example, the administration under President Donald Trump has put forth and may continue to propose significant changesU.S. policy with respect to a variety of issues, including international trade agreements, and conducting business offshore, inflation mitigation, import and export regulations, tariffs and customs duties, foreign relations, immigration laws and travel restrictions, antitrust controls and enforcement, and corporate governance laws, that could have a positive or negative impact on our business.

The majority of our professionals are offshore. Companies that outsource services to organizations operating in other countries remains a topic of political discussion in many countries, including the United States, which is our largest source of revenues. ProposedThe United States Congress periodically proposes legislation in the United Statesthat could impose restrictions on offshore outsourcing and on our ability to deploy employees holding U.S. work visas to customer locations, both of which could adversely impact our business. Such legislative measures could broaden restrictions on outsourcing by federal and state government agencies and contracts and impact private industry with tax disincentives, intellectual property transfer restrictions, and restrictions on the use or availability of certain work visas.

Some of our projects require our personnel to obtain visas to travel and work at clientcustomer sites outside of our personnel’s home countries.countries and often in the United States. Our reliance on visas to staff projects with employees who are not citizens of the country where the work is to be performed makes us vulnerable to legislative and administrative changes in visathe number of visas to be issued in any particular year and other work permit laws and regulations. The process to obtain the required visas and work permits can be lengthy and difficult and variations in application and enforcement due to political forces and economic conditions in the number of permitted applications, as well as application and enforcement processes, may cause delays or rejections when trying to obtain visas. Delays in obtaining visas or other work authorizations may result in delays in the ability of our personnel to travel to meet with and provide services to our customers or to continue to provide services on a timely basis. In addition, the availability of a sufficient number of visas without significant additional costs could limit our ability to provide services to our customers on a timely and cost-effective basis or manage our sales and delivery centers as efficiently as we otherwise could. Delays in or the unavailability of visas and work permits could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We are subject to many laws and regulations that restrict our international operations, including laws that prohibit activities involving restricted countries, organizations, entities and persons that have been identified as unlawful actors or that are subject to U.S. sanctions. The U.S. Office of Foreign Assets Control, or OFAC, and other international bodies have imposed sanctions that prohibit us from engaging in trade or financial transactions with certain countries, businesses, organizations and individuals. We are also subject to the FCPA and anti-bribery and anti-corruption laws in other countries, all of which prohibit companies and their intermediaries from bribing government officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment. We operate in many parts of the world that have experienced government corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under U.S. and other anti-bribery laws.

Our ability to maintain continuing relationships with our major customers and successfully obtain payment for our services is essential to the growth and profitability of our business. However, the volume of work performed for any specific customer is likely to vary from year to year, especially since we generally are not our customers’ exclusive IT services provider and we generally do not have long-term commitments from customers to purchase our services. We may also fail to adequately or accurately assess the creditworthiness of our customers.customers adequately or accurately. Our customers’ ability to terminate engagements with or without cause and our customers’ inability or unwillingness to pay for services we performed makes our future revenues and profitability uncertain. Although a substantial majority of our revenues are generated from customers who also contributed to our revenues during the prior year, our engagements with our customers are typically for projects that are singular in nature. Therefore, we must seek to obtain new engagements when our current engagements end.

There are a number of factors relating to our customers that are outside of our control, which might lead them to terminate or not renew a contract or project with us, or be unable to pay us, including:

Termination or non-renewal of a customer contract could cause us to experience a higher than expectedhigher-than-expected number of unassigned employees and thus compress our margins until we are able to reallocate our headcount. Customers that delay payment, request modifications to their payment arrangements, or fail to meet their payment obligations to us could increase our cash collection time, or cause us to incur bad debt expense.expense, or cause us to incur expenses in collections actions. The loss of any of our major customers, a significant decrease in the volume of work they outsource to us or price they are willing or able to pay us, if not replaced by new service engagements and revenue,revenues, could materially adversely affect our revenues and results of operations.

A substantial portion of our customers are concentrated in five specific industry verticals: Financial Services; Software & Hi-Tech; Business Information & Media; Travel & Consumer; and Life Sciences & Healthcare. Our business growth largely depends on continued demand for our services from customers in these five industry verticals and other industries that we target or may target in the future, and also depends on trends in these industries to outsource the type of services we provide.

A downturn in any of our targeted industries, a slowdown or reversal of the trend to outsource IT services in any of these industries or the introduction of regulations that restrict or discourage companies from outsourcing could result in a decrease in the demand for our services and could have a material adverse effect on our business, financial condition and results of operations. Our customers in the Financial Services industry vertical that depend on the steady functioning of the global capital and credit markets may be particularly susceptible to the adverse effects of a threatened or actual U.S. sovereign debt default, which could cause those customers to reduce spending on our services. Other developments in the industries in which we operate may increase the demand for lower cost or lower quality IT services and decrease the demand for our services or increase the pressure our customers put on us to reduce pricing. We may not be able to successfully anticipate and prepare for any such changes, which could adversely affect our results of operations.

Furthermore, developments in the industries we serve could shift customer demand to new services, solutions or technology. If our customers demand new services, solutions or technologies, we may be less competitive in these new areas or may need to make significant investments to meet that demand. Additionally, as we expand into serving new industry verticals, our solutions and technology may be used by, or generally affect, a broader base of customers and end users, which may expose us to new business and operational risks.

We face a number of risks when pricing our contracts and setting terms with our customers. Our pricing is highly dependent on our internal forecasts, assumptions and predictions about our projects, the marketplace, global economic conditions (including foreign exchange volatility)volatility and inflation) and the coordination of operations and personnel in multiple locations with different skill sets and competencies. Larger and more complex projects that involve multiple engagements or stages heighten those pricing risks because a customer may choose not to retain us for additional stages or delay forecasted engagements, which disrupts our planned project resource requirements. If our pricing for a project includes dedicated personnel or facilities and the customer were to slow or stop that project, we may not be able to reallocate resources to other customers. Our pricing and cost estimates for the work that we perform may include anticipated long-term cost savings that we expect to achieve and sustain over the life of the contract. Because of thesesuch inherent uncertainties, we may underprice our projects, fail to accurately estimate the costs of performing the work or fail to accurately assess the risks associated with potential contracts, such as defined performance goals, service levels, and completion schedules. The risk of underpricing our services or underestimating the costs of performing the work is heightened in fixed -pricefixed-price contracts and in contracts that require our customer to receive a productivity benefit as a deliverableresult of the services performed under the contract. If we fail to accurately estimate the resources, time or quality levels required to complete such engagements, or if the cost to us of employees, facilities, or technology unexpectedly increases, we could be exposed to cost overruns. Any increased or unexpected costs, delays or failures to achieve anticipated cost savings, or unexpected risks we encounter in connection with the performance of the services, including those caused by factors outside our control, could make these contracts less profitable or unprofitable.

Our industry is sensitive to the economic environment and the industry tends to decline during general economic downturns. Given our significant revenues from North America and Europe, if those economies weaken or slow,enter a recession, pricing for our services may be depressed and our customers may reduce or postpone their technology related spending significantly, which may in turn lower the demand for our services and negatively affect our revenues and profitability.

We have a long selling cycle for our services. Before potential customers commit to use our services, they require us to expend substantial time and resources educating them on the value of our services and our ability to meet their requirements. Therefore, our selling cycle is subject to many risks and delays over which we have little or no control, including our customers’ decision to select another service provider or in-house resources to perform the services, the timing of our customers’ budget cycles, and customer procurement and approval processes. If our sales cycle unexpectedly lengthens for one or more large projects, it could negatively affect the timing of our revenues and our revenue growth. In certain cases, we may begin work and incur costs prior to executing a contract, which may cause fluctuations in recognizing revenues between periods or jeopardize our ability to collect payment from customers.

Implementing our services also involves a significant commitment of resources over an extended period of time from both our customers and us. Our current and future customers may not be willing or able to invest the time and resources necessary to implement our services, and we may fail to close sales with potential customers despite devoting significant time and resources. Any significant failure to generate revenues or delays in recognizing revenues after incurring costs related to our sales or services processes could have a material adverse effect on our business.

In connection with the Company’s acquisitionThere were no unregistered sales of all of the outstanding equity of Axsphère SAS (“Axsphere”), on September 3, 2019,securities by the Company issued 18,787 sharesduring the year ended December 31, 2022.

We are a leading global provider of digital platform engineering and software development services offering specialized technological solutions to many of the world’s leading organizations.

We continuously explore opportunities in new industries to expand our core industry client base in software and technology, financial services, business information and media, travel and consumer, retail and distribution and life sciences and healthcare. Our teams of developers, architects, consultants, strategists, engineers, designers, and product experts have the capabilities and skill sets to deliver business results. Through increased specialization in focused verticals and a continued emphasis on strategic partnerships, we are leveraging our roots in software engineering to grow as a recognized brand in software development and end-to-end digital transformation services for our customers.

Our global delivery model and centralized support functions, combined with the benefits of scale from the shared use of fixed-cost resources, enhance our productivity levels and enable us to better manage the efficiency of our global operations. As a result, we have created a delivery base whereby our applications, tools, methodologies and infrastructure allow us to seamlessly deliver services and solutions from our delivery centers to global customers across all geographies, further strengthening our relationships with them. To ensure safety and business continuity in the environment introduced by the COVID-19 global pandemic, many of our personnel have worked and continue to work productively through secure remote working arrangements so they can respond to the rapidly changing needs and demands of our customers. For further information on the various risks posed by the disruptions to our business structure, please read “Part I. Item 1A. Risk Factors” included in this Annual Report on Form 10-K.

On February 24, 2022, Russian forces attacked Ukraine and its people and EPAM has repeatedly called for an immediate end to this unlawful and unconscionable attack. EPAM’s highest priority is the safety and security of its employees and their families in Ukraine as well as the broader region, and we have continued to support relocating our employees to lower risk locations, both in Ukraine and to other countries where we operate. The vast majority of our Ukraine employees are in safe locations and operating at levels of productivity consistent with those achieved in 2021. As of December 31, 2022, Ukraine remains our largest delivery location with the most delivery professionals. Furthermore, we have maintained our $100 million humanitarian aid commitment to our people in Ukraine in addition to our other donations and volunteer efforts.

Prior to the attack in February 2022, Belarus and Russia were our second and third largest delivery locations by the number of delivery professionals, respectively. On April 7, 2022, the Company announced the beginning of a continued emphasisphased exit of our operations in Russia in close collaboration with our employees, contractors, and customers. We have discontinued services to certain customers located in Russia and on strategic partnerships,September 7, 2022, we executed an agreement to sell substantially all of our remaining holdings in Russia to a third party. As of December 31, 2022 and through the date of issuance of the financial statements, the long stop date of the agreement has passed and we are leveragingcurrently renegotiating the terms of that sale agreement as well as exploring other strategic alternatives. The timing and completion of a sale is uncertain and any sale would be subject to customary closing conditions, including regulatory approvals by the Russian government.

We expect to continue operating in Belarus while executing on our rootsBelarus-specific business continuity plans. A significant number of our employees in software engineeringRussia and Belarus have relocated, and we may assist in relocating employees to growdelivery locations in other countries in the future. Additionally, we continue to execute our business continuity plans and have sustained our hiring efforts across multiple locations in Eastern Europe, Central and Western Asia, India, and Latin America.

We continue to execute our business continuity plans and adapt to developments as they occur to protect the safety of our people and address impacts on our delivery infrastructure, including reallocating work to other geographies within our global footprint. We have engaged both our personnel and our customers to meet their needs and to mitigate delivery challenges. EPAM continues to operate productively in more than 50 countries and provides consistent high-quality delivery to our customers. Our global delivery centers have sufficient resources, including infrastructure and capital, to support ongoing operations. EPAM continues to rapidly respond to the difficult conditions in Ukraine while maintaining a recognized brandfocus on customers and long-term growth.

Implementation and execution of our business continuity plans, relocation costs, our humanitarian commitment to our people in software developmentUkraine, and end-to-end digital transformation servicesthe cost of our phased exit from Russia have resulted in materially increased expenses during 2022. We expect some of those expenses will continue to occur in subsequent quarters for some time in the future. In addition to the charges recorded during 2022 related to our exit from Russia, based on the information available through the date of issuance of the financial statements, we expect to record a loss upon the earlier of classification of the assets and liabilities to be sold as held for sale or closing of a sale, and such loss is not expected to be material. Fluctuations in foreign currency exchange rates could impact the gain or loss the Company could recognize in the future. If unable to complete a sale, the Company could recognize other charges including restructuring costs.

We have no way to predict the progress or outcome of the attack against Ukraine because the conflict and government reactions change quickly and are beyond our control. Prolonged military activities, broad-based sanctions and counter-sanctions could have a material adverse effect on our operations and financial condition and there is significant uncertainty for our customers.business outlook for 2023. The information contained in this section is accurate as of the date hereof but may become outdated due to changing circumstances beyond our control or present awareness.

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), which require us to make judgments, estimates and assumptions that affect: (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the end of each reporting period and (iii) the reported amounts of revenues and expenses during each reporting period. We evaluate these estimates and assumptions based on historical experience, knowledge and assessment of current business and other conditions, and expectations regarding the future based on available information and reasonable assumptions, which together form a basis for making judgments about matters not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. When reviewing our audited consolidated financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgment and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. We consider the policies discussed below to be critical to an understanding of our consolidated financial statements as their application places significant demands on the judgment of our management.

An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe that the following critical accounting policies are the most sensitive and require more significant estimates and assumptions used in the preparation of our consolidated financial statements. You should read the following descriptions of critical accounting policies, judgments and estimates in conjunction with our audited consolidated financial statements and other disclosures included elsewhere in this annual report.

We derive revenues from a variety of service arrangements, which have been evolving to provide more customized and integrated solutions to customers by combining software engineering with customer experience design, business consulting and technology innovation services. Fees for these contracts may be in the form of time-and-materials or fixed-price arrangements. We generate the majority of our revenues under time-and-material contracts, which are billed using hourly, daily or monthly rates to determine the amounts to be charged directly to the customer. We apply a practical expedient and revenues related to time-and-material contracts are recognized based on the right to invoice for services performed.

Fixed-price contracts include maintenance and support arrangements, which may exceed one year in duration. Maintenance and support arrangements generally relate to the provision of ongoing services and revenues for such contracts are recognized ratably over the expected service period. Fixed-price contracts also include application development arrangements, where progress towards satisfaction of the performance obligation is measured using input or output methods and input methods are used only when there is a direct correlation between hours incurred and the end product delivered. Assumptions, risks and uncertainties inherent in the estimates used to measure progress could affect the amount of revenues, receivables and deferred revenues at each reporting period.

Revenues from licenses which have significant stand-alone functionality are recognized at a point in time when control of the license is transferred to the customer. Revenues from licenses which do not have stand-alone functionality are recognized over time. If there is an uncertainty about the receipt of payment for the services, revenue recognition is deferred until the uncertainty is sufficiently resolved. We apply a practical expedient and do not assess the existence of a significant financing component if the period between transfer of the service to a customer and when the customer pays for that service is one year or less.

We determine the fair value of contingent consideration using Monte Carlo simulations (which involve a simulation of future revenues and assembled workforce and asearnings during the earn-out period using management's best estimates) or probability-weighted expected return methods. Changes in financial projections, market risk assumptions, discount rates or probability assumptions related to achieving the various earn-out criteria would result in a result, a substantial portionchange in the fair value of the purchase price is allocated to goodwillcontingent consideration. Such changes, if any, are recorded within Interest and other intangible assets.income/(loss), net in the Company’s consolidated statements of income.

If the initial accounting for the business combination has not been completed by the end of the reporting period in which the business combination occurs, provisional amounts are reported to present information about facts and circumstances that existed as of the acquisition date. Once the measurement period ends, which in no case extends beyond one year from the acquisition date, revisions to the accounting for the business combination are recorded in earnings.

Our selling, general and administrative expenses have increased due to our continuously expanding operations, strategic business acquisitions, and the hiring of necessary personnel to support our growth. During the year ended December 31, 2019,2022, selling, general and administrative expenses were $457.4$872.8 million, representing an increase of 22.4%34.5% as compared to $373.6$648.7 million reported last year. The increase in selling, general and administrative expenses in 20192022 was primarily driven bydue to a $44.8$105.4 million increase in personnel-related costs, includingwhich include stock-based compensation expense, and talent acquisition and development expenses, and a $28.0 millionprimarily driven by an increase in facilitiesheadcount. Additionally, selling, general and infrastructureadministrative expenses for the year ended December 31, 2022 were impacted by $38.7 million of expenses associated with our geographic repositioning of our workforce, $15.8 million of expenses associated with our humanitarian efforts in Ukraine, $17.1 million of charges related expenses to supportemployee separation costs in Russia, $19.6 million of impairment charges related to our growth.long-lived assets in Russia and $5.1 million of bad debt expense attributable to customers located in Russia.

Expressed as a percentage of revenues, selling, general and administrative expenses decreased 0.4%increased 0.8% to 19.9%18.1% for the year ended December 31, 2019.2022. The decreaseincrease was primarily driven by the slower growthimpairment charges related to our long-lived assets in Russia, higher bad debt expenses attributable to customers located in Russia, employee separation costs in Russia, increased costs associated with geographic repositioning of 19.7%our workforce as well as our humanitarian efforts in personnel-related costs including stock-based compensation expense as compared to revenue growth of 24.5%.Ukraine, partially offset by reduced facilities-related expenses.

Discussion of selling, general and administrative expenses from 20182021 as compared to 20172020 is disclosedincluded in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2018.2021.

During the year ended December 31, 2019,2022, depreciation and amortization expense was $45.3$92.3 million, representing an increase of $8.7$8.9 million from $36.6$83.4 million reported lastin the prior year. The increase in depreciation and amortization expense was primarily due todriven by an increaseincreased investment in computer equipment to support headcount growth. Depreciationused by our employees and amortization expense includes amortization of acquired finite-lived intangible assets.assets, which contributed $4.6 million to the year over year increase in depreciation and amortization expense. Expressed as a percentage of revenues, depreciation and amortization expense remained consistent at 2.0%decreased to 1.9% during the year ended December 31, 20192022 as compared to 2018.2.2% in 2021.

Discussion of depreciation and amortization expense from 20182021 as compared to 20172020 is disclosedincluded in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2018.2021.

Interest and other income,income/(loss), net includes interest earned on cash and cash equivalents, short-term investments and employee housing loans, gains and losses from certain financial instruments, interest expense related to our revolving credit facilityborrowings, government grant income, and changes in the fair value of contingent consideration. There were no material changesInterest and other income/(loss), net increased from a loss of $1.7 million during the year ended December 31, 2021 to a gain of $10.0 million during the year ended December 31, 2022. This change was largely driven by a $6.5 million increase in government grant income and an increase in interest income from our cash and cash equivalents and short-term investments, partially offset by a $2.3 million increase in loss due to the change in fair value of contingent consideration, $0.8 million charge related to the impairment of an investment and a $1.3 million charge related to the impairment of a financial asset in Ukraine recorded during the year ended December 31, 2022.

Discussion of Interest and other income, net in 2019income/(loss) from 2021 as compared to 20182020 is included in “Part II. Item 7. Management’s Discussion and 2017.Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.

Determining the consolidated provision for income tax expense, deferred income tax assets and liabilities and any potential related valuation allowances involves judgment. We consider factors that may contribute, favorably or unfavorably, to the overall annual effective tax rate in the current year as well as the future. These factors include statutory tax rates and tax law changes in the countries where we operate and excess tax benefits upon vesting or exercise of equity awards as well as consideration of any significant or unusual items.