UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to________

Commission file number: 001-35418

EPAM SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


Delaware		22-3536104
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
41 University Drive	Suite 202	18940
Newtown	Pennsylvania
(Address of principal executive offices)		(Zip code)

267-759-9000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered
Common Stock, par value $0.001 per share	EPAM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Title of Each Class						Outstanding as of ~~October 31, 2023~~April 30, 2024
Common Stock, par value $0.001 per share						~~57,700,476~~57,974,371 shares

EPAM SYSTEMS, INC.

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION			3
Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets as of ~~September~~ ~~30, 2023~~March 31, 2024 and December 31, ~~2022~~2023			3
Condensed Consolidated Statements of Income for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2024 and 2023 ~~and 2022~~			4
Condensed Consolidated Statements of Comprehensive Income for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2024 and 2023 ~~and 2022~~			5
Condensed Consolidated Statements of Changes in Equity for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2024 and 2023 ~~and 2022~~			6
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September~~ ~~30,~~March 31, 2024 and 2023 ~~and 2022~~			87
Notes to Condensed Consolidated Financial Statements			109
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3027
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4237
Item 4. Controls and Procedures			4438
PART II. OTHER INFORMATION			4539
Item 1. Legal Proceedings			4539
Item 1A. Risk Factors			4539
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4539
Item 3. Defaults Upon Senior Securities			4539
Item 4. Mine Safety Disclosures			4539
Item 5. Other Information			4539
Item 6. Exhibits			4640
SIGNATURES			4741

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)


		As of September 30, 2023		As of December 31, 2022			As of March 31, 2024	As of December 31, 2023
Assets	Assets
Current assets	Current assets
Current assets
Current assets
Cash and cash equivalents	Cash and cash equivalents	$	1,872,977	$	1,681,344
Trade receivables and contract assets, net of allowance of $10,884 and $15,310, respectively		913,029		932,626
Cash and cash equivalents
Cash and cash equivalents
Trade receivables and contract assets, net of allowance of $8,403 and $11,864, respectively
Short-term investments	Short-term investments	60,431		60,336
Prepaid and other current assets	Prepaid and other current assets	78,851		85,319
Total current assets	Total current assets	2,925,288		2,759,625
Property and equipment, net	Property and equipment, net	239,654		273,348
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	136,311		148,780
Intangible assets, net	Intangible assets, net	69,730		77,652
Goodwill	Goodwill	548,177		529,072
Deferred tax assets	Deferred tax assets	187,524		172,797
Other noncurrent assets	Other noncurrent assets	55,588		47,877
Total assets	Total assets	$	4,162,272	$	4,009,151

Liabilities
Liabilities
Liabilities	Liabilities
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	25,415	$	30,852
Accrued compensation and benefits expenses	Accrued compensation and benefits expenses	392,417		475,871
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	127,898		154,339
Income taxes payable, current	Income taxes payable, current	29,554		46,069
Operating lease liabilities, current	Operating lease liabilities, current	38,294		40,352
Total current liabilities	Total current liabilities	613,578		747,483
Long-term debt	Long-term debt	27,500		27,693
Operating lease liabilities, noncurrent	Operating lease liabilities, noncurrent	108,332		122,317
Other noncurrent liabilities	Other noncurrent liabilities	112,844		108,648
Total liabilities	Total liabilities	862,254		1,006,141
Commitments and contingencies (Note 14)	Commitments and contingencies (Note 14)					Commitments and contingencies (Note 14)
Equity	Equity
Stockholders’ equity	Stockholders’ equity
Common stock, $0.001 par value; 160,000 shares authorized; 57,706 and 57,668 shares issued, 57,693 and 57,655 shares outstanding at September 30, 2023 and December 31, 2022, respectively		58		58
Stockholders’ equity
Stockholders’ equity
Common stock, $0.001 par value; 160,000 shares authorized; 57,933 shares issued and outstanding at March 31, 2024, and 57,787 shares issued and outstanding at December 31, 2023
Additional paid-in capital	Additional paid-in capital	951,086		847,965
Retained earnings	Retained earnings	2,440,043		2,248,948
Treasury stock		(118)		(118)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(91,630)		(95,321)
Total EPAM Systems, Inc. stockholders’ equity	Total EPAM Systems, Inc. stockholders’ equity	3,299,439		3,001,532
Noncontrolling interest in consolidated subsidiaries	Noncontrolling interest in consolidated subsidiaries	579		1,478
Total equity	Total equity	3,300,018		3,003,010
Total liabilities and equity	Total liabilities and equity	$	4,162,272	$	4,009,151

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Table of Contents

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Revenues	Revenues	$	1,152,136	$	1,226,920	$	3,533,283	$	3,593,395
Revenues
Revenues
Operating expenses:
Operating expenses:
Operating expenses:	Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)	Cost of revenues (exclusive of depreciation and amortization)	794,265		826,796		2,458,881		2,453,955
Cost of revenues (exclusive of depreciation and amortization)
Cost of revenues (exclusive of depreciation and amortization)
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses	Selling, general and administrative expenses	194,829		198,021		601,093		667,825
Depreciation and amortization expense	Depreciation and amortization expense	23,092		21,876		68,642		69,126
Loss on sale of business		25,922		—		25,922		—
Depreciation and amortization expense
Depreciation and amortization expense

Income from operations

Income from operations

Income from operations	Income from operations	114,028		180,227		378,745		402,489
Interest and other income, net	Interest and other income, net	13,931		4,228		37,162		5,642
Foreign exchange gain/(loss)		3,893		6,691		(6,725)		(102,035)
Interest and other income, net
Interest and other income, net
Foreign exchange loss
Foreign exchange loss
Foreign exchange loss
Income before provision for income taxes
Income before provision for income taxes
Income before provision for income taxes	Income before provision for income taxes	131,852		191,146		409,182		306,096
Provision for income taxes	Provision for income taxes	34,648		35,092		89,653		41,719
Provision for income taxes
Provision for income taxes
Net income
Net income
Net income	Net income	$	97,204	$	156,054	$	319,529	$	264,377

Net income per share:	Net income per share:

Net income per share:

Net income per share:
Basic
Basic
Basic	Basic	$	1.68	$	2.72	$	5.52	$	4.62
Diluted	Diluted	$	1.65	$	2.63	$	5.40	$	4.47
Diluted
Diluted
Shares used in calculation of net income per share:
Shares used in calculation of net income per share:
Shares used in calculation of net income per share:	Shares used in calculation of net income per share:
Basic	Basic	57,853		57,420		57,850		57,194
Basic
Basic
Diluted	Diluted	58,948		59,357		59,143		59,108
Diluted
Diluted

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Table of Contents

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Net income	Net income	$	97,204	$	156,054	$	319,529	$	264,377
Net income
Net income
Other comprehensive (loss)/income:
Other comprehensive (loss)/income:
Other comprehensive (loss)/income:	Other comprehensive (loss)/income:
Change in foreign currency translation adjustments, net of tax	Change in foreign currency translation adjustments, net of tax	(5,801)		(56,923)		14,821		(72,645)
Change in unrealized loss on hedging instruments, net of tax		(13,744)		(5,352)		(11,130)		(11,780)

Change in foreign currency translation adjustments, net of tax
Change in foreign currency translation adjustments, net of tax
Change in unrealized (loss)/gain on hedging instruments, net of tax
Change in unrealized (loss)/gain on hedging instruments, net of tax
Change in unrealized (loss)/gain on hedging instruments, net of tax
Defined benefit pension plans - actuarial gain, net of tax
Defined benefit pension plans - actuarial gain, net of tax
Defined benefit pension plans - actuarial gain, net of tax
Other comprehensive (loss)/income
Other comprehensive (loss)/income
Other comprehensive (loss)/income	Other comprehensive (loss)/income	(19,545)		(62,275)		3,691		(84,425)
Comprehensive income	Comprehensive income	$	77,659	$	93,779	$	323,220	$	179,952
Comprehensive income
Comprehensive income

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Table of Contents

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In thousands)


		Common Stock			Additional Paid-in Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss)/Income		Non-controlling interest in consolidated subsidiaries		Total Equity		Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Non-controlling interest in consolidated subsidiaries	Total Equity
		Shares	Amount						Shares	Amount
Balance, January 1, 2023		57,655	$	58	$	847,965	$	2,248,948	14	$	(118)	$	(95,321)	$	1,478	$	3,003,010
	Shares
Balance, January 1, 2024
Balance, January 1, 2024
Balance, January 1, 2024
Restricted stock units vested	Restricted stock units vested	224	—		—		—		—	—		—		—		—
Equity withheld for employee taxes	Equity withheld for employee taxes	(72)	—		(20,501)		—		—	—		—		—		(20,501)
Stock-based compensation expense	Stock-based compensation expense	—	—		34,265		—		—	—		—		—		34,265
Exercise of stock options	Exercise of stock options	71	—		2,525		—		—	—		—		—		2,525
Repurchase of common stock	Repurchase of common stock	(30)	—		—		(8,510)		—	—		—		—		(8,510)
Other comprehensive income		—	—		—		—		—	—		17,361		—		17,361
Other comprehensive loss
Net income	Net income	—	—		—		102,292		—	—		—		—		102,292
Balance, March 31, 2023		57,848	$	58	$	864,254	$	2,342,730	14	$	(118)	$	(77,960)	$	1,478	$	3,130,442
Restricted stock units vested		76	—		—		—		—	—		—		—		—
Equity withheld for employee taxes		(21)	—		(6,142)		—		—	—		—		—		(6,142)
Stock-based compensation expense		—	—		32,449		—		—	—		—		—		32,449
Exercise of stock options		170	—		4,601		—		—	—		—		—		4,601
Issuance of common stock from employee stock purchase plan		77	—		18,466		—		—	—		—		—		18,466
Repurchase of common stock		(195)	—		—		(41,437)		—	—		—		—		(41,437)
Purchase of subsidiary shares from noncontrolling interest		—	—		(48)		—		—	—		—		(1,405)		(1,453)
Contributions to consolidated subsidiary from noncontrolling interest		—	—		—		—		—	—		—		506		506
Other comprehensive income		—	—		—		—		—	—		5,875		—		5,875
Net income		—	—		—		120,033		—	—		—		—		120,033
Balance, June 30, 2023		57,955	$	58	$	913,580	$	2,421,326	14	$	(118)	$	(72,085)	$	579	$	3,263,340
Restricted stock units vested		7	—		—		—		—	—		—		—		—
Equity withheld for employee taxes		(2)	—		(426)		—		—	—		—		—		(426)
Stock-based compensation expense		—	—		34,949		—		—	—		—		—		34,949
Exercise of stock options		51	—		2,983		—		—	—		—		—		2,983

Repurchase of common stock		(318)	—		—		(78,487)		—	—		—		—		(78,487)
Balance, March 31, 2024

Other comprehensive loss		—	—		—		—		—	—		(19,545)		—		(19,545)
Net income		—	—		—		97,204		—	—		—		—		97,204
Balance, September 30, 2023		57,693	$	58	$	951,086	$	2,440,043	14	$	(118)	$	(91,630)	$	579	$	3,300,018

~~Table of Contents~~


		Common Stock			Additional Paid-in Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss)/Income		Non-controlling interest in consolidated subsidiaries		Total Equity		Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive (Loss)/Income	Non-controlling interest in consolidated subsidiaries	Total Equity
		Shares	Amount						Shares	Amount
Balance, January 1, 2022		56,849	$	57	$	711,912	$	1,829,532	20	$	(177)	$	(54,207)	$	8,720	$	2,495,837
	Shares
Balance, January 1, 2023
Balance, January 1, 2023
Balance, January 1, 2023
Restricted stock units vested	Restricted stock units vested	193	—		—		—		—	—		—		—		—
Equity withheld for employee taxes	Equity withheld for employee taxes	(67)	—		(18,376)		—		—	—		—		—		(18,376)
Stock-based compensation expense	Stock-based compensation expense	—	—		22,702		—		—	—		—		—		22,702
Exercise of stock options	Exercise of stock options	158	—		2,884		—		—	—		—		—		2,884
Purchase of subsidiary shares from noncontrolling interest		—	—		—		—		—	—		—		(7,067)		(7,067)
Other comprehensive loss		—	—		—		—		—	—		(31,943)		—		(31,943)
Net income		—	—		—		89,719		—	—		—		—		89,719
Balance, March 31, 2022		57,133	$	57	$	719,122	$	1,919,251	20	$	(177)	$	(86,150)	$	1,653	$	2,553,756
Restricted stock units vested		24	—		—		—		—	—		—		—		—
Equity withheld for employee taxes		(6)	—		(1,843)		—		—	—		—		—		(1,843)
Stock-based compensation expense		—	—		24,902		—		—	—		—		—		24,902
Exercise of stock options		147	—		6,410		—		—	—		—		—		6,410
Issuance of common stock from employee stock purchase plan		55	—		12,384		—		—	—		—		—		12,384
Repurchase of common stock
Other comprehensive income	Other comprehensive income	—	—		—		—		—	—		9,793		—		9,793
Net income	Net income	—	—		—		18,604		—	—		—		—		18,604
Balance, June 30, 2022		57,353	$	57	$	760,975	$	1,937,855	20	$	(177)	$	(76,357)	$	1,653	$	2,624,006
Restricted stock units vested		8	—		—		—		—	—		—		—		—
Equity withheld for employee taxes		(2)	—		(837)		—		—	—		—		—		(837)
Stock issued in connection with Other 2021 acquisitions		6	—		1,941		—		(6)	59		—		—		2,000
Stock-based compensation expense		—	—		30,597		—		—	—		—		—		30,597
Exercise of stock options		137	—		9,223		—		—	—		—		—		9,223
Purchase of subsidiary shares from noncontrolling interest		—	—		51		—		—	—		—		(248)		(197)
Contributions from noncontrolling interest		—	—		—		—		—	—		—		73		73
Other comprehensive loss		—	—		—		—		—	—		(62,275)		—		(62,275)
Net income		—	—		—		156,054		—	—		—		—		156,054
Balance, September 30, 2022		57,502	$	57	$	801,950	$	2,093,909	14	$	(118)	$	(138,632)	$	1,478	$	2,758,644
Balance, March 31, 2023

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Table of Contents

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


��		Nine Months Ended September 30,
							Three Months Ended March 31,
		2023		2022			2024	2023
Cash flows from operating activities:	Cash flows from operating activities:
Net income	Net income	$	319,529	$	264,377
Net income
Net income
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	68,642		69,126
Depreciation and amortization expense
Depreciation and amortization expense
Operating lease right-of-use assets amortization expense	Operating lease right-of-use assets amortization expense	30,842		37,336
Bad debt expense		2,739		12,888
Bad debt (recovery)/expense
Deferred taxes	Deferred taxes	(11,760)		(54,851)
Stock-based compensation expense	Stock-based compensation expense	109,536		68,292
Unrealized (gain)/loss on derivative instruments		(7,904)		20,469
Unrealized gain on derivative instruments
Impairment charges	Impairment charges	688		21,212
Loss on sale of business		25,922		—
Other	Other	1,106		63,914
Changes in assets and liabilities:	Changes in assets and liabilities:
Trade receivables and contract assets
Trade receivables and contract assets
Trade receivables and contract assets	Trade receivables and contract assets	6,145		(196,675)
Prepaid and other assets	Prepaid and other assets	13,208		(7,787)
Accounts payable	Accounts payable	837		8,769
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(95,570)		(7,100)
Operating lease liabilities	Operating lease liabilities	(34,310)		(41,395)
Income taxes payable	Income taxes payable	(38,385)		19,460
Net cash provided by operating activities	Net cash provided by operating activities	391,265		278,035
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(18,420)		(60,134)
Purchases of short-term investments	Purchases of short-term investments	(10,865)		(60,000)

Proceeds from short-term investments	Proceeds from short-term investments	10,865		—
Acquisition of business, net of cash acquired (Note 3)	Acquisition of business, net of cash acquired (Note 3)	(13,997)		(10,530)
Cash sold as part of sale of business, net of proceeds		(2,169)		—
Purchases of non-marketable securities	Purchases of non-marketable securities	(3,281)		(1,625)
Other investing activities, net	Other investing activities, net	(8,204)		(19,499)
Net cash used in investing activities	Net cash used in investing activities	(46,071)		(151,788)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of stock under the employee incentive programs	Proceeds from issuance of stock under the employee incentive programs	28,612		31,368
Payments of withholding taxes related to net share settlements of restricted stock units	Payments of withholding taxes related to net share settlements of restricted stock units	(28,202)		(22,101)
Proceeds from debt	Proceeds from debt	764		4,114
Repayment of debt	Repayment of debt	(2,607)		(11,542)
Repurchase of common stock	Repurchase of common stock	(128,433)		—
Payment of contingent consideration for previously acquired business	Payment of contingent consideration for previously acquired business	(8,684)		(6,626)
Purchase of subsidiary shares from noncontrolling interest		(1,972)		(2,254)
Other financing activities, net	Other financing activities, net	(2,895)		(3,025)
Net cash used in financing activities	Net cash used in financing activities	(143,417)		(10,066)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,632)		(75,876)
Net increase in cash, cash equivalents and restricted cash		196,145		40,305
Net (decrease)/increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	1,683,636		1,449,347
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	1,879,781	$	1,489,652

Table of Contents

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

(Continued)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:


		As of September 30, 2023		As of December 31, 2022		As of March 31, 2024	As of December 31, 2023
Balance sheet classification	Balance sheet classification
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	1,872,977	$	1,681,344
Restricted cash in Prepaid and other current assets	Restricted cash in Prepaid and other current assets	5,441		430
Restricted cash in Other noncurrent assets	Restricted cash in Other noncurrent assets	1,363		1,862
Total restricted cash	Total restricted cash	$	6,804	$	2,292
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	1,879,781	$	1,683,636

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except per share data and as otherwise disclosed)

1.~~BUSINESS~~ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

EPAM Systems, Inc. (the “Company” or “EPAM”) is a leading digital transformation services and product engineering company, providing digital platform engineering and software development services to ~~customers located around~~clients across six continents. In a business landscape that is constantly challenged by the ~~world, primarily~~pressures of digitization, EPAM focuses on building long-term partnerships with clients in ~~North America, Europe,~~various industries through delivery of innovative and ~~Asia. The Company’s industry expertise includes financial services, travel~~scalable software solutions, integrated strategy, experience and ~~consumer, software~~technology consulting, and ~~hi-tech, business information and media, life sciences and healthcare, as well as several other industries.~~a continually evolving mix of advanced capabilities. The Company is incorporated in Delaware with headquarters in Newtown, Pennsylvania.

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements of EPAM have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP” or “U.S. GAAP”) and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The unaudited condensed consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries with all intercompany balances and transactions eliminated.

These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, ~~2022~~2023 included in its Annual Report on Form 10-K. The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position as of ~~September 30, 2023~~March 31, 2024 and the results of its operations and its cash flows for the periods presented.

Risks and Uncertainties — As a result of its global operations, the Company may be subject to certain inherent risks.

Concentration of Credit — Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, short-term investments and trade receivables. The Company maintains cash, cash equivalents and short-term investments with financial institutions. The Company believes its credit policies reflect normal industry terms and business risk and there is no expectation of non-performance by the counterparties.

The Company has cash in several countries, including Ukraine and Belarus, ~~which have been impacted by the invasion of Ukraine and~~ where the banking sector remains subject to periodic instability; banking and other financial systems generally do not meet the banking standards of more developed markets; and bank deposits made by corporate entities are not insured. As of ~~September 30, 2023,~~March 31, 2024, the Company had ~~$51.7~~$57.0 million of cash and cash equivalents in banks in Ukraine and ~~$37.1~~$31.0 million of cash and cash equivalents in banks in Belarus. Cash in Ukraine and Belarus is used for the operational needs of the local entities and cash balances change with the expected operating needs of these entities. The Company regularly monitors cash held in these countries and, to the extent the cash held exceeds amounts required to support its operations in these countries, the Company distributes the excess funds into markets with more developed banking sectors to the extent it is possible to do so. In April 2024, Belarus instituted new restrictions on distributing dividends from Belarus to shareholders in certain countries, including the U.S. The restrictions are initially scheduled to remain in place until the end of 2025 and may prevent EPAM from distributing excess funds, if any, out of Belarus. The Company does not expect these new restrictions to have a material impact on its ability to meet its worldwide cash obligations during this period. The Company places its cash and cash equivalents with financial institutions considered stable in the region, limits the amount of credit exposure with any one financial institution and conducts ongoing evaluations of the credit worthiness of the financial institutions with which it does business. However, a banking crisis, bankruptcy or insolvency of banks that process or hold the Company’s funds, or sanctions may result in the loss of deposits or adversely affect the Company’s ability to complete banking transactions, which could adversely affect the Company’s business and financial condition. ~~See Note 2 “Impact of the Invasion of Ukraine” for further discussion of the Company’s response to the invasion of Ukraine and sale of its operations in Russia.~~

Trade receivables are generally dispersed across many ~~customers~~clients operating in different industries; therefore, concentration of credit risk is limited. Historically, credit losses and write-offs of trade receivables have not been material to the consolidated financial statements. If ~~any of~~ the Company’s ~~customers~~clients enter bankruptcy protection or otherwise take steps to alleviate their financial distress, the Company’s credit losses and write-offs of trade receivables could increase, which would negatively impact its results of operations.

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Foreign currency risk — The Company’s global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, the Company generates revenues in various currencies, principally, euros, British pounds, Swiss francs and Canadian dollars and incurs expenditures principally in euros, Polish zlotys, Indian rupees, British pounds, Swiss francs, ~~Mexican pesos,~~ Hungarian forints, ~~Colombian~~Mexican pesos, Canadian dollars, Colombian pesos, Armenian drams and Chinese yuan renminbi. The Company’s international operations expose it to risk of adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign currency denominated assets and liabilities (both third-party and intercompany) and translation of earnings and cash flows into U.S. dollars. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee and Hungarian forint transactions. See Note 6 “Derivative Financial Instruments” for further ~~discussion regarding~~information on the Company’s ~~termination of the~~ hedging ~~program for the Russian ruble.~~program.

Interest rate risk — The Company is exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from variable rates related to cash and cash equivalent deposits, short-term investments and the Company’s borrowings, mainly under the 2021 Credit Agreement, which is subject to a variety of rates depending on the type and timing of funds borrowed (See Note 8 “Debt”). The Company does not believe it is exposed to material direct risks associated with changes in interest rates related to these deposits, investments and borrowings.

Adoption of New Accounting Standards

There were no recently adopted accounting standards which had a material impact on the Company’s consolidated financial ~~position, results of operations, changes in stockholders’ equity and cash flows.~~statements.

Pending Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standards-setting bodies that the Company will adopt according to the various timetables the FASB specifies. ~~The~~Unless otherwise discussed below, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial ~~position, results of operations and cash flows~~statements upon adoption.

During the three months ended March 31, 2024, there have been no material updates regarding pending accounting standards as reported in our Annual Report on Form 10-K for the year ended December 31, 2023.

2. IMPACT OF THE INVASION OF UKRAINE

On February 24, 2022, Russian forces attacked Ukraine and its people, and ~~EPAM~~through the issuance date of these interim financial statements, there has ~~repeatedly called for an immediate end~~been no resolution to this ~~unlawful and unconscionable~~ attack. As of ~~September 30, 2023,~~March 31, 2024, the Company had ~~$65.3~~$60.8 million of Property and equipment, net in Ukraine consisting of a building classified as construction-in-progress located in Kyiv with a net book value of ~~$51.5~~$51.7 million, laptops with a net book value of ~~$7.6~~$4.5 million, most of which are in the possession of employees, various office furniture, equipment and supplies with a net book value of ~~$4.8~~$3.8 million, and leasehold improvements located throughout Ukraine with a net book value of ~~$1.4~~$0.8 million. Additionally, as of ~~September 30, 2023,~~March 31, 2024, the Company had Operating lease right-of-use assets located throughout Ukraine with a net book value of ~~$9.6~~$5.5 million. Through the issuance date of these interim financial statements, the Company is not aware of any damage to its long-lived assets in Ukraine and the Company expects to continue to use these assets as part of its global delivery model.

On March 4, 2022, the Company announced a $100.0 million humanitarian commitment to support its employees and their families in and displaced from Ukraine. This humanitarian commitment is in addition to donations from EPAM's ~~customers~~clients and employees and the work of EPAM volunteers on the ground. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, the Company expensed ~~$3.6~~$3.3 million and ~~$13.6~~$6.1 million, respectively, related to this commitment, which included special cash payments to support impacted employees, financial and medical support for impacted families, travel, meals and lodging expenses, and donations to third-party humanitarian organizations. Of the expensed ~~amount~~amounts for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~$3.0~~$0.7 million and ~~$8.3~~$2.5 million, respectively, is classified in Cost of revenues (exclusive of depreciation and amortization), and ~~$0.6~~$2.6 million and $5.3 million, respectively, is classified in Selling, general and administrative expenses on the condensed consolidated financial statements. During the three and nine months ended September 30, 2022, the Company expensed $4.5 million and $38.5 million, respectively, related to this commitment, which included special cash payments to support impacted employees, financial and medical support for impacted families, travel, meals and lodging expenses, and donations to third-party humanitarian organizations. Of this expensed amount for the three and nine months ended September 30, 2022, $2.9 million and $25.3 million, respectively, is classified in Cost of revenues (exclusive of depreciation and amortization), and $1.6 million and $13.2$3.6 million, respectively, is classified in Selling, general and administrative expenses on the condensed consolidated financial statements. As of ~~September 30, 2023,~~March 31, 2024, the Company has ~~$41.6~~$34.5 million remaining to be expensed under this humanitarian commitment.

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~~The~~Following the invasion, the Company executed its business continuity plans ~~following the invasion~~ to assist relocating employees residing in Ukraine and the surrounding region, who were impacted by the war and geopolitical uncertainty, to other countries and to assign delivery personnel in locations outside of the region to serve in unbilled standby or backup capacities to ensure the continuity of delivery for its ~~customers~~clients who have substantial delivery exposure to Ukraine or other delivery concerns resulting from the invasion and ongoing war. In addition to costs incurred as part of EPAM’s humanitarian commitment to Ukraine, during the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024, the Company incurred ~~$0.0 million and $9.4 million of~~no expenses ~~respectively,~~ related to ~~these~~the standby resources ~~classified as Cost of revenues (exclusive of depreciation~~ and ~~amortization). Also, during the three and nine months ended September 30, 2023 the Company~~ incurred expenses of ~~$0.4~~$0.7 million ~~and $0.9 million, respectively,~~ related to its geographic repositioning efforts, classified as Selling, general and administrative expenses.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company incurred expenses of ~~$1.0~~$7.4 million ~~and $12.9 million, respectively,~~ related to the standby resources, classified as Cost of revenues (exclusive of depreciation and amortization) and ~~$4.4~~$0.2 million ~~and $37.5 million, respectively,~~ related to its geographic repositioning efforts, classified as Selling, general and administrative expenses. During the nine months ended September 30, 2022, the Company also recorded an impairment charge of $1.3 million, classified as Interest and other income, net related to a financial asset in Ukraine which the Company believed to be unrealizable due to the events in Ukraine.

In response to the attacks on Ukraine, EPAM announced on March 4, 2022, it would discontinue services to customers located in Russia. Based on this change in facts and circumstances, the long-term cash flow forecast for the Company’s operations in Russia and its Russia reporting unit were significantly reduced. The reduction in the long-term cash flow forecasts indicated that the carrying amounts of goodwill and long-lived assets associated with the Company’s Russia reporting unit and operations in Russia may not be recoverable, and the carrying value of these assets was tested for impairment. The Company relied on the income approach to estimate the fair values of the Russia reporting unit and long-lived assets and considered multiple scenarios including the continuing operation and exit of operations in Russia. Reflecting the negative long-term cash flow forecasts that each of these scenarios produced for these assets, during the three months ended March 31, 2022, the Company recorded impairments of Property and equipment, net of $15.1 million, Operating lease right-of-use assets, net of $3.8 million, and Goodwill of $0.7 million. These asset impairment charges are included in Selling, general and administrative expenses in the condensed consolidated financial statements for the nine months ended September 30, 2022.

Additionally, the Company evaluated trade receivables and contract assets for estimated future credit losses from customers located in Russia and recorded a bad debt expense of $5.7 million reflecting the deterioration of creditworthiness of its customers in Russia during the nine months ended September 30, 2022. Amounts recorded to bad debt expense during the three and nine months ended September 30, 2023 and three months ended September 30, 2022 related to customers located in Russia were not material. Also, during the three and nine months ended September 30, 2022, t~~he Company incurred employee separation costs of $0.7 million and $16.9 million, respectively, in connection with the decision to exit its operations in Russia, with~~ ~~no such costs incurred during the~~ ~~three and nine months ended September 30, 2023.~~

On July 26, 2023, the Company completed the sale of its remaining holdings in Russia to a third-party. The Company recorded a loss on sale of $25.9 million during the third quarter of 2023, including the recognition of the accumulated currency translation loss related to this foreign entity that was previously included in Accumulated other comprehensive loss in the condensed consolidated financial statements.

3.ACQUISITIONS

~~2022~~2023 Acquisitions — During the year ended December 31, ~~2022,~~2023, the Company completed two acquisitions with a total purchase price of ~~$13.6~~$42.6 million including contingent consideration with acquisition-date fair value of ~~$2.6~~$14.9 million. These acquisitions expanded EPAM’s capabilities ~~to deliver end-to-end solutions for designing~~in software design and ~~building sophisticated commerce platforms, provided opportunities for geographic expansion~~product development, as well as added ~~$3.4~~$13.9 million of intangible assets, consisting of customer relationships. Pro forma results of operations have not been presented because the effect of these acquisitions on the Company’s condensed consolidated financial statements was not ~~material individually or in the aggregate.~~material.

~~2023 Acquisition~~2024 Acquisitions - — During the three months ended ~~September 30, 2023,~~March 31, 2024, the Company completed ~~one acquisition~~two acquisitions with a total purchase price of ~~$28.9~~$53.7 million including contingent consideration with acquisition-date fair value of ~~$14.9~~$7.3 million. ~~This acquisition~~These acquisitions expanded EPAM’s ~~capabilities in software design~~geographical reach across Latin America and ~~product development,~~Europe, as well as added ~~$8.3~~$16.6 million of intangible assets, consisting mainly of customer relationships. Pro forma results of operations have not been presented because the effect of ~~this acquisition~~these acquisitions on the Company’s condensed consolidated financial statements was not material.

~~Table of Contents~~

4.GOODWILL

Goodwill by reportable segment was as follows:
North America Europe Total
Balance as of January 1, 2023 $ 216,960 $ 312,112 $ 529,072
2023 Acquisition 20,537 — 20,537
2022 Acquisitions purchase accounting adjustments — 87 87
Effect of net foreign currency exchange rate changes (24) (1,495) (1,519)
Balance as of September 30, 2023 $ 237,473 $ 310,704 $ 548,177


	North America		Europe		Total
Balance as of January 1, 2024	$	241,860	$	320,599	$	562,459
2024 Acquisitions	24,466		12,847		37,313
2023 Acquisitions purchase accounting adjustments	805		—		805
Effect of net foreign currency exchange rate changes	(181)		(5,176)		(5,357)
Balance as of March 31, 2024	$	266,950	$	328,270	$	595,220

~~The Russia segment had accumulated goodwill impairment losses of $2.9 million as of September 30, 2023 and December 31, 2022.~~ There were no accumulated impairment losses in the North America or Europe reportable segments as of ~~September 30, 2023~~March 31, 2024 or December 31, ~~2022.~~2023.

5.FAIR VALUE MEASUREMENTS

The Company carries certain assets and liabilities at fair value on a recurring basis on its condensed consolidated balance sheets. The following tables present the fair values of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022:~~2023:


			As of September 30, 2023
			Balance		Level 1		Level 2		Level 3
		As of March 31, 2024											As of March 31, 2024
		Balance									Balance	Level 1	Level 2	Level 3
Foreign exchange derivative assets	Foreign exchange derivative assets		$	2,136	$	—	$	2,136	$	—

Total assets measured at fair value on a recurring basis	Total assets measured at fair value on a recurring basis		$	2,136	$	—	$	2,136	$	—
Total assets measured at fair value on a recurring basis
Total assets measured at fair value on a recurring basis

Foreign exchange derivative liabilities	Foreign exchange derivative liabilities		$	5,789	$	—	$	5,789	$	—
Contingent consideration			28,150		—		—		28,150
Foreign exchange derivative liabilities
Foreign exchange derivative liabilities
Contingent consideration liabilities
Total liabilities measured at fair value on a recurring basis	Total liabilities measured at fair value on a recurring basis		$	33,939	$	—	$	5,789	$	28,150

As of December 31, 2022
Balance Level 1 Level 2 Level 3
Foreign exchange derivative assets $ 12,191 $ — $ 12,191 $ —
Rights to acquire noncontrolling interest in consolidated subsidiaries 334 — — 334
Total assets measured at fair value on a recurring basis $ 12,525 $ — $ 12,191 $ 334
Foreign exchange derivative liabilities $ 9,350 $ — $ 9,350 $ —
Contingent consideration 24,308 — — 24,308
Total liabilities measured at fair value on a recurring basis $ 33,658 $ — $ 9,350 $ 24,308

Table of Contents


	As of December 31, 2023
	Balance		Level 1		Level 2		Level 3
Foreign exchange derivative assets	$	10,416	$	—	$	10,416	$	—
Total assets measured at fair value on a recurring basis	$	10,416	$	—	$	10,416	$	—

Foreign exchange derivative liabilities	$	248	$	—	$	248	$	—
Contingent consideration liabilities	23,150		—		—		23,150
Total liabilities measured at fair value on a recurring basis	$	23,398	$	—	$	248	$	23,150

The foreign exchange derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange data at the measurement date. See Note 6 “Derivative Financial Instruments” in the condensed consolidated interim financial statements for additional information regarding derivative financial instruments.

~~Table of Contents~~

The fair value of the contingent consideration was determined using a probability-weighted expected return method and is based on the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. Although there is significant judgment involved, the Company believes its estimates and assumptions are reasonable. In determining fair value, the Company considered a variety of factors, including future performance of the acquired businesses using financial projections developed by the Company and market risk assumptions that were derived for revenue growth and earnings before interest and taxes. The Company estimated future payments using the earnout formula and performance targets specified in the purchase agreements and adjusted those estimates to reflect the probability of their achievement. Those weighted-average estimated future payments were then discounted to present value using a rate based on the weighted-average cost of capital of guideline companies. The discount rates used to determine the fair value of contingent consideration ~~both as~~for the 2024 Acquisitions ranged from a minimum of ~~September 30, 2023 and December 31, 2022, were at~~12% to a maximum of ~~20.0%, if a~~20%. The discount rate used to determine the fair value of contingent consideration for the 2023 Acquisitions was ~~applied.~~16.0%. Changes in financial projections, market risk assumptions, discount rates or probability assumptions related to achieving the various earnout criteria would result in a change in the fair value of the recorded contingent liabilities. Such changes, if any, are recorded within Interest and other income, net in the Company’s condensed consolidated statement of income.

A reconciliation of the beginning and ending balances of Level 3 contingent consideration liabilities using significant unobservable inputs for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 is as follows:


	Amount
Contingent consideration liabilities as of January 1, ~~2023~~2024	$	~~24,308~~23,150
~~2023~~ Acquisition date fair value of contingent consideration — 2024 Acquisitions	~~14,850~~7,256
Changes in fair value of contingent consideration included in Interest and other income, net	~~1,814~~1,050
Payment of contingent consideration for previously acquired businesses	~~(12,844)~~(2,500)
Effect of foreign currency exchange rate changes, net	22 (74)
Contingent consideration liabilities as of ~~September 30, 2023~~March 31, 2024	$	~~28,150~~28,882

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Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis

Estimates of fair value of financial instruments not carried at fair value on a recurring basis on the Company’s condensed consolidated balance sheets are generally subjective in nature and are determined as of a specific point in time based on the characteristics of the financial instruments and relevant market information. The generally short maturities of certain assets and liabilities result in a number of assets and liabilities for which fair value equals or closely approximates the amount recorded on the Company’s condensed consolidated balance sheets. The following tables present the estimated fair values of the Company’s financial assets and liabilities not measured at fair value on a recurring basis as of the dates indicated:


								Fair Value Hierarchy
			Balance		Estimated Fair Value			Level 1		Level 2		Level 3
September 30, 2023
							Fair Value Hierarchy												Fair Value Hierarchy
		Balance												Balance	Estimated Fair Value	Level 1	Level 2	Level 3
March 31, 2024
Financial Assets:
Financial Assets:
Financial Assets:	Financial Assets:
Cash equivalents:	Cash equivalents:
Cash equivalents:
Cash equivalents:
Money market funds
Money market funds
Money market funds	Money market funds		$	154,147	$	154,147		$	154,147	$	—	$	—
Time deposits	Time deposits		199,678		199,678			—		199,678		—
Total cash equivalents	Total cash equivalents		$	353,825	$	353,825		$	154,147	$	199,678	$	—
Restricted cash			$	6,804	$	6,804		$	6,804	$	—	$	—
Time deposits included in Short-term investments	Time deposits included in Short-term investments		$	60,431	$	60,431		$	—	$	60,431	$	—
Financial Liabilities:	Financial Liabilities:
Borrowings under the 2021 Credit Agreement	Borrowings under the 2021 Credit Agreement		$	25,000	$	25,000		$	—	$	25,000	$	—
Borrowings under the 2021 Credit Agreement
Borrowings under the 2021 Credit Agreement
Deferred consideration for asset acquisition	Deferred consideration for asset acquisition		$	55,501	$	55,501		$	—	$	55,501	$	—

~~Table of Contents~~

Fair Value Hierarchy
Balance Estimated Fair Value Level 1 Level 2 Level 3
December 31, 2022
Financial Assets:
Cash equivalents:
Money market funds $ 312,321 $ 312,321 $ 312,321 $ — $ —
Total cash equivalents $ 312,321 $ 312,321 $ 312,321 $ — $ —
Restricted cash $ 2,292 $ 2,292 $ 2,292 $ — $ —
Time deposits included in Short-term investments $ 60,336 $ 60,336 $ — $ 60,336 $ —
Financial Liabilities:
Borrowings under the 2021 Credit Agreement $ 25,000 $ 25,000 $ — $ 25,000 $ —
Deferred consideration for asset acquisition $ 53,636 $ 53,636 $ — $ 53,636 $ —

During the year ended December 31, 2022, the Company completed an asset acquisition of software licenses for use in the regular course of business for a purchase price of $66.1 million, which included an upfront payment of $13.3 million and fixed deferred consideration, payable in annual installments, with an acquisition-date fair value of $52.8 million. To estimate fair value, the future payments were discounted to present value using a discount rate based on the estimated borrowing rate of the Company. The weighted average discount rate used to determine the acquisition-date fair value was 5.2%. See Note 14 “Commitments and Contingencies” for more information regarding the deferred consideration.


					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2023
Financial Assets:
Cash equivalents:
Money market funds	$	168,120	$	168,120	$	168,120	$	—	$	—
Time deposits	105,210		105,210		—		105,210		—
Total cash equivalents	$	273,330	$	273,330	$	168,120	$	105,210	$	—
Time deposits included in Short-term investments	$	60,739	$	60,739	$	—	$	60,739	$	—
Financial Liabilities:
Borrowings under the 2021 Credit Agreement	$	25,000	$	25,000	$	—	$	25,000	$	—
Deferred consideration for asset acquisition	$	46,954	$	46,954	$	—	$	46,954	$	—

Non-Marketable Securities Without Readily Determinable Fair Values

The Company holds investments in equity securities that do not have readily determinable fair values. These investments are recorded at cost and are remeasured to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was ~~$31.7~~$31.9 million and ~~$28.4~~$31.7 million as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, and is classified as Other noncurrent assets in the Company’s condensed consolidated balance sheets.

6.DERIVATIVE FINANCIAL INSTRUMENTS

In the normal course of business, the Company uses derivative financial instruments to manage the risk of fluctuations in foreign currency exchange rates. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee and Hungarian forint transactions.

~~During the three months ended~~As of March 31, 2022, in response to the invasion of Ukraine, the Company de-designated its Russian ruble foreign exchange forward contracts as hedges and entered into offsetting foreign exchange forward contracts with the same counterparty. The Company determined it was probable the underlying forecasted foreign currency transactions which were hedged would not occur and reclassified the accumulated loss of $43.9 million on the underlying hedges into income which is classified as foreign exchange loss in the condensed consolidated statement of income. As of September 30, 2023, all of the Company’s Russian ruble foreign exchange forwards contracts had settled.

~~As of September 30, 2023,~~2024, all of the Company’s foreign exchange forward contracts were designated as hedges and there is no financial collateral (including cash collateral) required to be posted by the Company related to the foreign exchange forward contracts.

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The fair value of derivative instruments on the Company’s condensed consolidated balance sheets as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 were as follows:

As of September 30, 2023

As of December 31, 2022

Balance Sheet Classification

Asset Derivatives

Liability Derivatives

Asset Derivatives

Liability Derivatives

As of March 31, 2024

As of December 31, 2023

Balance Sheet Classification

Asset Derivatives

Liability Derivatives

Asset Derivatives

Liability Derivatives

Foreign exchange forward contracts -
Designated as hedging instruments

Prepaid expenses and other current assets

2,136

12,191

Accrued expenses and other current liabilities

5,789

1,445

Foreign exchange forward contracts -
Not designated as hedging instruments

Accrued expenses and other current liabilities

—

7,905

Accrued expenses and other current liabilities

7.LEASES

The Company leases office space, corporate apartments, office equipment, and vehicles. Many of the Company’s leases contain variable payments including changes in base rent and charges for common area maintenance or other miscellaneous expenses. Due to this variability, the cash flows associated with these variable payments are not included in the minimum lease payments used in determining the right-of-use assets and associated lease liabilities and are recognized in the period in which the obligation for such payments is incurred. The Company’s leases have remaining lease terms ranging from 0.1 to ~~8.3~~7.8 years. Certain lease agreements, mainly for office space, include options to extend or terminate the lease before the expiration date. The Company considers such options when determining the lease term when it is reasonably certain that the Company will exercise that option. The Company leases and subleases a portion of its office space to third parties. Lease income and sublease income were ~~immaterial~~not material for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022. See Note 2 “Impact of the Invasion of Ukraine” for discussion of impairment of right-of-use assets in Russia.~~

2023.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the components of lease ~~expense~~cost were as follows:


			Three Months Ended September 30,				Nine Months Ended September 30,
		Income Statement Classification	2023		2022		2023		2022

		Income Statement Classification
		Income Statement Classification
		Income Statement Classification
Operating lease cost
Operating lease cost
Operating lease cost	Operating lease cost	Selling, general and administrative expenses	$	11,592	$	12,204	$	34,725	$	40,303
Variable lease cost	Variable lease cost	Selling, general and administrative expenses	2,905		2,263		9,941		7,791
Variable lease cost
Variable lease cost
Short-term lease cost
Short-term lease cost
Short-term lease cost	Short-term lease cost	Selling, general and administrative expenses	998		916		4,609		3,382
Total lease cost	Total lease cost		$	15,495	$	15,383	$	49,275	$	51,476
Total lease cost
Total lease cost

Supplemental cash flow information related to leases for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ was as follows:
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases $ 12,383 $ 13,024 $ 37,628 $ 43,490
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 3,815 $ 6,111 $ 10,843 $ 30,843
Non-cash net increase/(decrease) due to lease modifications:
Operating lease right-of-use assets $ 1,312 $ 3,260 $ 7,203 $ (2,587)
Operating lease liabilities $ 1,276 $ 3,163 $ 7,416 $ (3,946)

~~Table of Contents~~


	Three Months Ended March 31,
		2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases		$	11,703	$	11,719
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	7,653	$	3,349
Non-cash net increase due to lease modifications:
Operating lease right-of-use assets		$	5,299	$	1,383
Operating lease liabilities		$	5,190	$	1,114

Weighted average remaining lease term and discount rate as of ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ were as follows:


		As of September 30, 2023		As of September 30, 2022		As of March 31, 2024		As of March 31, 2023
Weighted average remaining lease term, in years:	Weighted average remaining lease term, in years:
Operating leases	Operating leases	5.0		5.5
Operating leases
Operating leases						4.9		5.3
Weighted average discount rate:	Weighted average discount rate:
Operating leases	Operating leases	3.9	%	2.4	%
Operating leases
Operating leases						4.3	%	3.3	%

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As of ~~September 30, 2023,~~March 31, 2024, operating lease liabilities will mature as follows:


Year ending December 31,	Year ending December 31,	Lease Payments		Year ending December 31,	Lease Payments
2023 (excluding nine months ended September 30, 2023)		$	11,491
2024		41,039
2024 (excluding three months ended March 31, 2024)
2025	2025	32,609
2026	2026	26,005
2027	2027	16,942
2028
Thereafter	Thereafter	32,083
Total lease payments	Total lease payments	160,169
Less: imputed interest	Less: imputed interest	(13,543)
Total	Total	$	146,626

The Company had committed to payments of ~~$12.3~~$4.7 million related to operating lease agreements that had not yet commenced as of ~~September 30, 2023.~~March 31, 2024. These operating leases will commence on various dates during ~~2023 and~~ 2024 with lease terms ranging from ~~0.2~~0.8 to ~~7.3~~5.0 years. The Company did not have any material finance lease agreements that had not yet commenced.

8.DEBT

Revolving Credit Facility — On October 21, 2021, the Company replaced its 2017 credit facility with a new unsecured credit agreement (the “2021 Credit Agreement”) with PNC Bank, National Association; PNC Capital Markets LLC; Citibank N.A.; Wells Fargo Bank, National Association; Santander Bank, N.A.; and Raiffeisen Bank International AG (collectively the “Lenders”). The 2021 Credit Agreement provides for a revolving credit facility (the “2021 Revolving Facility”) with a borrowing capacity of $700.0 million, with the potential to increase the borrowing capacity up to $1.000 billion if certain conditions are met. The 2021 Credit Agreement matures on October 21, 2026.

Borrowings under the 2021 Revolving Facility may be denominated in U.S. dollars or up to a maximum of $150.0 million equivalent in British pounds sterling, Canadian dollars, euros or Swiss francs and other currencies as may be approved by the administrative agent and the Lenders. Borrowings under the 2021 Revolving Facility bear interest at either a base rate or Euro-rate plus a margin based on the Company’s leverage ratio. The base rate is equal to the highest of (a) the Overnight Bank Funding Rate, plus 0.5%, (b) the Prime Rate, or (c) the Daily Simple SOFR Rate, plus 1.0%, so long as the Daily Simple SOFR Rate is offered, ascertainable and not unlawful. As of March 31, 2024, the Company’s outstanding borrowings are subject to a SOFR-based interest rate, which resets regularly at issuance, based on lending terms.

The 2021 Credit Agreement includes customary business and financial covenants that may restrict the Company’s ability to make or pay dividends (other than certain intercompany dividends) if a potential or an actual event of default has occurred or would be triggered. As of ~~September 30, 2023,~~March 31, 2024, the Company was in compliance with all covenants contained in the 2021 Credit Agreement.

~~Table of Contents~~

The following table presents the outstanding debt and borrowing capacity of the Company under the 2021 Credit Agreement:


		As of September 30, 2023			As of December 31, 2022				As of March 31, 2024		As of December 31, 2023
Outstanding debt	Outstanding debt	$	25,000		$	25,000
Interest rate	Interest rate	6.3		%	5.2		%	Interest rate	6.3	%	6.3	%
Available borrowing capacity	Available borrowing capacity	$	675,000		$	675,000
Maximum borrowing capacity	Maximum borrowing capacity	$	700,000		$	700,000

9.COST OPTIMIZATION PROGRAM

During the ~~third~~ quarter ended September 30, 2023, the Company initiated a Cost Optimization Program to streamline operations and optimize corporate functions. This program is expected to include workforce reduction and closure of underutilized facilities.

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The ~~Company recorded $7.1 million of expenses during~~total costs related to the ~~three and nine months ended September 30, 2023 which~~Cost Optimization Program are classified in Selling, general and administrative expenses in the condensed consolidated statements of income. The Company did not allocate these charges to individual segments as they are not considered by the chief operating decision maker during the review of segment results. Accordingly, such expenses are ~~separately disclosed~~presented in our segment reporting as part of “Other unallocated expenses” (See Note 15 “Segment Information”).

Activity in the Company’s restructuring reserves was as follows:


		Balance at December 31, 2022		Charges		Payments Made		Balance at September 30. 2023
		Balance at December 31, 2023
		Balance at December 31, 2023
		Balance at December 31, 2023								Charges	Payments Made	Balance at March 31, 2024
2023 Cost Optimization Program	2023 Cost Optimization Program
Employee separation costs	Employee separation costs	$	—	$	7,116	$	(3,379)	$	3,737
Employee separation costs
Employee separation costs
Total	Total	$	—	$	7,116	$	(3,379)	$	3,737

The Company expects to complete all restructuring actions commenced during the ~~three months~~year ended ~~September 30,~~December 31, 2023 by the end of the first ~~quarter~~half of 2024 and to incur additional charges of approximately ~~$15.0~~$3.0 million related primarily to employee ~~severance and facility exit costs.~~severance. The actual amount and timing of severance and other costs are dependent in part upon local country consultation processes and regulations and may differ from our current expectations and estimates.

10.REVENUES

Disaggregation of Revenues

The following tables present the disaggregation of the Company’s revenues by ~~customer~~client location, including a reconciliation of the disaggregated revenues with the reportable segments (Note 15 “Segment Information”) for the periods indicated:


		Three Months Ended September 30, 2023
		Reportable Segments
		North America		Europe		Russia		Consolidated Revenues
Customer Locations
		Three Months Ended March 31, 2024
		Three Months Ended March 31, 2024
		Three Months Ended March 31, 2024
	Reportable Segments
		North America
		North America
		North America								Europe	Consolidated Revenues
Client Locations
Americas
Americas
Americas	Americas	$	654,717	$	22,693	$	—	$	677,410
EMEA	EMEA	29,251		416,986		—		446,237
APAC	APAC	786		24,265		—		25,051
CEE		24		1,869		1,545		3,438
CEE(1)
Revenues	Revenues	$	684,778	$	465,813	$	1,545	$	1,152,136

(1)As a result of the sale of the Company’s remaining holdings in Russia to a third-party on July 26, 2023, revenues from the CEE region are no longer material. Starting in 2024, revenues from the CEE region are included in the EMEA region.


	Three Months Ended March 31, 2023
	Reportable Segments
	North America		Europe		Russia		Consolidated Revenues
Client Locations
Americas	$	683,553	$	25,954	$	295	$	709,802
EMEA	25,372		438,565		—		463,937
APAC	726		26,084		—		26,810
CEE	306		2,544		7,542		10,392
Revenues	$	709,957	$	493,147	$	7,837	$	1,210,941

1816

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Nine Months Ended September 30, 2023
Reportable Segments
North America Europe Russia Consolidated Revenues
Customer Locations
Americas $ 1,991,871 $ 73,797 $ 631 $ 2,066,299
EMEA 80,252 1,289,007 — 1,369,259
APAC 2,161 73,919 — 76,080
CEE 522 5,679 15,444 21,645
Revenues $ 2,074,806 $ 1,442,402 $ 16,075 $ 3,533,283

Three Months Ended September 30, 2022
Reportable Segments
North America Europe Russia Consolidated Revenues
Customer Locations
Americas $ 723,015 $ 23,575 $ 501 $ 747,091
EMEA 22,621 415,595 — 438,216
APAC 1,237 30,139 — 31,376
CEE 1,510 700 8,027 10,237
Revenues $ 748,383 $ 470,009 $ 8,528 $ 1,226,920

Nine Months Ended September 30, 2022
Reportable Segments
North America Europe Russia Consolidated Revenues
Customer Locations
Americas $ 2,080,752 $ 72,351 $ 2,393 $ 2,155,496
EMEA 70,909 1,212,144 99 1,283,152
APAC 2,813 88,321 — 91,134
CEE 5,277 1,107 57,229 63,613
Revenues $ 2,159,751 $ 1,373,923 $ 59,721 $ 3,593,395

The following tables present the disaggregation of the Company’s revenues by industry vertical, including a reconciliation of the disaggregated revenues with the reportable segments (Note 15 “Segment Information”) for the periods indicated:


		Three Months Ended September 30, 2023
		Reportable Segments
		North America		Europe		Russia		Consolidated Revenues
		Three Months Ended March 31, 2024
		Three Months Ended March 31, 2024
		Three Months Ended March 31, 2024
	Reportable Segments
		North America
		North America
		North America								Europe	Consolidated Revenues
Industry Verticals	Industry Verticals
Travel & Consumer		$	115,778	$	146,837	$	342	$	262,957
Consumer Goods, Retail & Travel(1)
Consumer Goods, Retail & Travel(1)
Consumer Goods, Retail & Travel(1)
Financial Services	Financial Services	131,499		114,122		814		246,435
Software & Hi-Tech
Business Information & Media	Business Information & Media	104,863		78,983		15		183,861
Software & Hi-Tech		136,520		37,545		281		174,346
Life Sciences & Healthcare	Life Sciences & Healthcare	109,137		15,143		(36)		124,244
Emerging Verticals	Emerging Verticals	86,981		73,183		129		160,293
Revenues	Revenues	$	684,778	$	465,813	$	1,545	$	1,152,136

~~Table of Contents~~


		Nine Months Ended September 30, 2023
		Reportable Segments
		North America		Europe		Russia		Consolidated Revenues
	Three Months Ended March 31, 2023											Three Months Ended March 31, 2023
	Reportable Segments
		North America
		North America
		North America								Europe	Russia		Consolidated Revenues
Industry Verticals	Industry Verticals
Travel & Consumer		$	359,475	$	451,531	$	3,770	$	814,776
Consumer Goods, Retail & Travel(1)
Consumer Goods, Retail & Travel(1)
Consumer Goods, Retail & Travel(1)
Financial Services	Financial Services	410,527		358,091		7,450		776,068
Software & Hi-Tech
Business Information & Media	Business Information & Media	327,378		248,351		196		575,925
Software & Hi-Tech		422,073		115,137		1,545		538,755
Life Sciences & Healthcare	Life Sciences & Healthcare	305,700		44,123		120		349,943
Emerging Verticals	Emerging Verticals	249,653		225,169		2,994		477,816
Revenues	Revenues	$	2,074,806	$	1,442,402	$	16,075	$	3,533,283

(1)

Three Months Ended September 30, 2022
Reportable Segments
North America Europe Russia Consolidated Revenues
Industry Verticals
Travel & Consumer $ 131,181 $ 147,271 $ 1,950 $ 280,402
Financial Services 134,673 115,372 4,741 254,786
Business Information & Media 121,703 87,028 167 208,898
Software & Hi-Tech 170,818 34,513 59 205,390
Life Sciences & Healthcare 116,878 12,569 228 129,675
Emerging Verticals 73,130 73,256 1,383 147,769
Revenues $ 748,383 $ 470,009 $ 8,528 $ 1,226,920

Nine Months Ended September 30, 2022
Reportable Segments
North America Europe Russia Consolidated Revenues
Industry Verticals
Travel & Consumer $ 384,360 $ 424,140 $ 13,539 $ 822,039
Financial Services 381,887 345,468 38,477 765,832
Business Information & Media 346,675 253,610 786 601,071
Software & Hi-Tech 488,134 100,814 1,248 590,196
Life Sciences & Healthcare 344,148 37,378 444 381,970
Emerging Verticals 214,547 212,513 5,227 432,287
Revenues $ 2,159,751 $ 1,373,923 $ 59,721 $ 3,593,395
The Company renamed the Travel & Consumer vertical to Consumer Goods, Retail & Travel to better reflect the mix of clients included in this vertical. This constitutes a naming change only and no changes were made to amounts reported.

The following tables present the disaggregation of the Company’s revenues by contract type including a reconciliation of the disaggregated revenues with the Company’s reportable segments (Note 15 “Segment Information”) for the periods indicated:


		Three Months Ended September 30, 2023
		Reportable Segments
		North America		Europe		Russia		Consolidated Revenues
		Three Months Ended March 31, 2024
		Three Months Ended March 31, 2024
		Three Months Ended March 31, 2024
	Reportable Segments
		North America
		North America
		North America								Europe	Consolidated Revenues
Contract Types	Contract Types
Time-and-material
Time-and-material
Time-and-material	Time-and-material	$	602,765	$	391,479	$	1,355	$	995,599
Fixed-price	Fixed-price	73,640		73,226		190		147,056
Licensing and other revenues	Licensing and other revenues	8,373		1,108		—		9,481
Revenues	Revenues	$	684,778	$	465,813	$	1,545	$	1,152,136

2017

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Nine Months Ended September 30, 2023
Reportable Segments
North America Europe Russia Consolidated Revenues
Contract Types
Time-and-material $ 1,854,159 $ 1,233,271 $ 11,168 $ 3,098,598
Fixed-price 202,144 205,897 4,873 412,914
Licensing and other revenues 18,503 3,234 34 21,771
Revenues $ 2,074,806 $ 1,442,402 $ 16,075 $ 3,533,283

Three Months Ended September 30, 2022
Reportable Segments
North America Europe Russia Consolidated Revenues
Contract Types
Time-and-material $ 673,927 $ 405,030 $ 5,887 $ 1,084,844
Fixed-price 69,565 64,426 2,424 136,415
Licensing and other revenues 4,891 553 217 5,661
Revenues $ 748,383 $ 470,009 $ 8,528 $ 1,226,920

Nine Months Ended September 30, 2022
Reportable Segments
North America Europe Russia Consolidated Revenues
Contract Types
Time-and-material $ 1,955,361 $ 1,172,981 $ 39,226 $ 3,167,568
Fixed-price 192,322 198,641 20,195 411,158
Licensing and other revenues 12,068 2,301 300 14,669
Revenues $ 2,159,751 $ 1,373,923 $ 59,721 $ 3,593,395


	Three Months Ended March 31, 2023
	Reportable Segments
	North America		Europe		Russia		Consolidated Revenues
Contract Types
Time-and-material	$	644,628	$	425,598	$	4,753	$	1,074,979
Fixed-price	61,231		66,203		3,071		130,505
Licensing and other revenues	4,098		1,346		13		5,457
Revenues	$	709,957	$	493,147	$	7,837	$	1,210,941

Timing of Revenue Recognition

The following tables present the timing of revenue recognition reconciled with the Company’s reportable segments (Note 15 “Segment Information”) for the periods indicated:


		Three Months Ended September 30, 2023
		Reportable Segments
		North America		Europe		Russia		Consolidated Revenues
		Three Months Ended March 31, 2024
		Three Months Ended March 31, 2024
		Three Months Ended March 31, 2024
	Reportable Segments
		North America
		North America
		North America								Europe	Consolidated Revenues
Timing of Revenue Recognition	Timing of Revenue Recognition
Transferred over time
Transferred over time
Transferred over time	Transferred over time	$	682,410	$	465,286	$	1,545	$	1,149,241
Transferred at a point of time	Transferred at a point of time	2,368		527		—		2,895
Revenues	Revenues	$	684,778	$	465,813	$	1,545	$	1,152,136

Nine Months Ended September 30, 2023
Reportable Segments
North America Europe Russia Consolidated Revenues
Timing of Revenue Recognition
Transferred over time $ 2,066,081 $ 1,440,682 $ 16,042 $ 3,522,805
Transferred at a point of time 8,725 1,720 33 10,478
Revenues $ 2,074,806 $ 1,442,402 $ 16,075 $ 3,533,283

~~Table of Contents~~

Three Months Ended September 30, 2022
Reportable Segments
North America Europe Russia Consolidated Revenues
Timing of Revenue Recognition
Transferred over time $ 746,352 $ 468,118 $ 8,316 $ 1,222,786
Transferred at a point of time 2,031 1,891 212 4,134
Revenues $ 748,383 $ 470,009 $ 8,528 $ 1,226,920


		Nine Months Ended September 30, 2022
		Reportable Segments
		North America		Europe		Russia		Consolidated Revenues
	Three Months Ended March 31, 2023											Three Months Ended March 31, 2023
	Reportable Segments
		North America
		North America
		North America								Europe	Russia		Consolidated Revenues
Timing of Revenue Recognition	Timing of Revenue Recognition
Transferred over time
Transferred over time
Transferred over time	Transferred over time	$	2,153,772	$	1,371,390	$	59,447	$	3,584,609
Transferred at a point of time	Transferred at a point of time	5,979		2,533		274		8,786
Revenues	Revenues	$	2,159,751	$	1,373,923	$	59,721	$	3,593,395

During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, the Company recognized ~~$9.2~~$13.1 million ~~and $7.1 million, respectively,~~ of revenues from performance obligations satisfied in previous periods compared to ~~$12.3 million and~~ $7.2 million during the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

The following table includes the estimated revenues expected to be recognized in the future related to performance obligations that are partially or fully unsatisfied as of ~~September 30, 2023.~~March 31, 2024. The Company applies a practical expedient and does not disclose the value of unsatisfied performance obligations for contracts (i) that have an original expected duration of one year or less and (ii) for which it recognizes revenues at the amount to which it has the right to invoice for services provided.

Less than 1 year

1 Year

2 Years

3 Years

Total

Less than 1 year

1 Year

2 Years

3 Years

Total

Contract Type

Fixed-price

12,016

2,930

931

—

15,877

Fixed-price

The Company applies a practical expedient and does not disclose the amount of the transaction price allocated to the remaining performance obligations nor provide an explanation of when the Company expects to recognize that amount as revenue for certain variable consideration.

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Contract Balances

The following table provides information on the classification of contract assets and liabilities in the condensed consolidated balance sheets:


		As of September 30, 2023		As of December 31, 2022		As of March 31, 2024	As of December 31, 2023
Contract assets included in Trade receivables and contract assets, net	Contract assets included in Trade receivables and contract assets, net	$	29,331	$	11,490
Contract liabilities included in Accrued expenses and other current liabilities	Contract liabilities included in Accrued expenses and other current liabilities	$	26,904	$	36,036
Contract liabilities included in Other noncurrent liabilities	Contract liabilities included in Other noncurrent liabilities	$	630	$	42

Contract assets comprise amounts where the Company’s right to bill is contingent on something other than the passage of time such as achievement of contractual milestones. Contract assets have increased from December 31, ~~2022~~2023 primarily due to contracts where the Company’s right to bill is contingent upon achievement of contractual milestones. Contract liabilities comprise amounts collected from the Company’s ~~customers~~clients for revenues not yet earned and such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. Contract liabilities have ~~decreased~~increased from December 31, ~~2022~~2023 primarily due to ~~completion~~higher levels of ~~services performed for customers during the first nine months of 2023.~~advance collections.

During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, the Company recognized ~~$3.1~~$12.1 million ~~and $27.4 million, respectively,~~ of revenues that were included in Accrued expenses and other current liabilities at December 31, ~~2022.~~2023. During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company recognized ~~$2.0~~$19.2 million ~~and $34.0 million, respectively,~~ of revenues that were included in Accrued expenses and other current liabilities at December 31, ~~2021.~~2022.

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11.STOCKHOLDERS’ EQUITY

Stock-Based Compensation

The following table summarizes the components of stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the periods indicated:


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Cost of revenues (exclusive of depreciation and amortization)
Cost of revenues (exclusive of depreciation and amortization)
Cost of revenues (exclusive of depreciation and amortization)	Cost of revenues (exclusive of depreciation and amortization)	$	18,142	$	17,474	$	49,569	$	31,782
Selling, general and administrative expenses	Selling, general and administrative expenses	19,705		15,813		59,967		36,510
Selling, general and administrative expenses
Selling, general and administrative expenses
Total	Total	$	37,847	$	33,287	$	109,536	$	68,292
Total
Total

Stock Options

Stock option activity under the Company’s plans is set forth below:


		Number of Options	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)		Number of Options	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Options outstanding at January 1, 2023		1,923	$	98.92
Options outstanding at January 1, 2024
Options granted
Options granted
Options granted	Options granted	114	$	295.73
Options exercised	Options exercised	(292)	$	34.59
Options exercised
Options exercised
Options forfeited
Options forfeited
Options forfeited	Options forfeited	(3)	$	304.41
Options expired	Options expired	(4)	$	332.74
Options outstanding at September 30, 2023		1,738	$	121.77	$	253,440	3.5
Options expired
Options expired
Options outstanding at March 31, 2024
Options outstanding at March 31, 2024
Options outstanding at March 31, 2024									1,335	$	159.00	$	172,730	4.3

Options vested and exercisable as of September 30, 2023		1,452	$	88.07	$	250,628	2.5
Options expected to vest as of September 30, 2023		270	$	292.64	$	2,739	8.5
Options vested and exercisable as of March 31, 2024
Options vested and exercisable as of March 31, 2024
Options vested and exercisable as of March 31, 2024									1,080	$	124.97	$	171,999	3.2
Options expected to vest as of March 31, 2024								Options expected to vest as of March 31, 2024	239	$	303.14	$	689	8.7

As of ~~September 30, 2023, $26.5~~March 31, 2024, $29.8 million of total remaining unrecognized stock-based compensation cost related to unvested stock options, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of ~~2.3~~2.4 years.

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Restricted Stock and Restricted Stock Units

Service-Based Awards

The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:
Equity-Classified
Equity-Settled
Restricted Stock Units
Liability-Classified
Cash-Settled
Restricted Stock Units

Number of
Shares
Weighted Average Grant Date
Fair Value Per Share
Number of
Shares
Weighted Average Grant Date
Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2023 916 $ 291.19 99 $ 257.74
Awards granted 502 $ 296.40 36 $ 299.00
Awards modified (15) $ 278.52 15 $ 305.59
Awards vested (305) $ 270.64 (44) $ 239.75
Awards forfeited/cancelled (67) $ 306.98 (4) $ 244.87
Unvested service-based awards outstanding at September 30, 2023 1,031 $ 298.95 102 $ 287.41

~~Table of Contents~~


	Equity-Classified Equity-Settled Restricted Stock Units			Liability-Classified Cash-Settled Restricted Stock Units
	Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2024	1,074	$	292.45	98	$	287.36
Awards granted	488	$	298.16	34	$	298.89
Awards modified	1	$	366.27	(1)	$	114.30
Awards vested	(259)	$	281.75	(36)	$	270.45
Awards forfeited/cancelled	(17)	$	303.84	(1)	$	284.41
Unvested service-based awards outstanding at March 31, 2024	1,287	$	296.66	94	$	299.53

As of ~~September 30, 2023, $225.8~~March 31, 2024, $306.6 million of total remaining unrecognized stock-based compensation cost related to service-based equity-classified restricted stock units (“RSUs”), net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of ~~2.7~~3.0 years.

As of ~~September 30, 2023, $19.3~~March 31, 2024, $22.2 million of total remaining unrecognized stock-based compensation cost related to service-based liability-classified cash-settled RSUs, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of ~~2.5~~2.9 years.

The liability associated with the service-based liability-classified RSUs as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, was ~~$4.4~~$4.3 million and ~~$10.2~~$8.7 million, respectively, and was classified as Accrued compensation and benefits expenses in the condensed consolidated balance sheets.

Performance-Based Awards

The table below summarizes activity related to the Company’s equity-classified performance-based restricted stock unit awards (“PSUs”) for the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:
Equity-Classified
Equity-Settled
Restricted Stock
Equity-Classified
Equity-Settled
Restricted Stock Units

Number of
Shares
Weighted Average Grant Date
Fair Value Per Share
Number of
Shares
Weighted Average Grant Date
Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2023 9 $ 165.87 15 $ 412.60
Awards vested (9) $ 165.87 (1) $ 438.26
Awards forfeited/cancelled — — (1) $ 363.93
Unvested performance-based awards outstanding at September 30, 2023 — $ — 13 $ 413.14


	Equity-Classified Equity-Settled Restricted Stock Units
		Number of Shares	Weighted Average Grant Date Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2024		13	$	441.87
Awards granted		32	$	336.55
Awards vested		(2)	$	593.58

Unvested performance-based awards outstanding at March 31, 2024		43	$	355.02

As of ~~September 30, 2023, $2.4~~March 31, 2024, $9.9 million of total remaining unrecognized stock-based compensation cost related to ~~performance-based equity-classified RSUs~~PSUs is expected to be recognized over the weighted-average remaining requisite service period of ~~2.2~~1.2 years.

During the three months ended March 31, 2024, the Company granted to its named executive officers and certain other members of senior management PSUs that vest after 3 years, contingent on meeting certain financial performance targets, market conditions and continued service. The financial performance targets will be set by the Compensation Committee of the Board of Directors at the beginning of each year. For the portion of the awards subject to market conditions, fair value was determined using a Monte Carlo valuation model. The portion of the awards associated with financial performance in future years where the financial performance targets have not yet been determined are not considered granted for accounting purposes and there were 32 thousand of such awards as of March 31, 2024.

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2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan ("ESPP") enables eligible employees to purchase shares of EPAM’s common stock at a discount at the end of each designated offering period, which occurs every six months inending April 30th and ~~November.~~October 31st. The purchase price is equal to 85% of the fair market value of a share of EPAM’s common stock on the first date of an offering or the date of purchase, whichever is lower. During the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~the ESPP participants purchased 77 thousand shares~~no purchases of common stock ~~under the ESPP. During the nine months ended September 30, 2022, the ESPP participants purchased 55 thousand shares of common stock~~have been made under the ESPP.

The Company recognizes compensation expense related to share issuances pursuant to the ESPP on a straight-line basis over the six-month offering period. For the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, the Company recognized ~~$3.1~~$2.7 million ~~and $9.7 million, respectively,~~ of stock-based compensation expense related to the ESPP. For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company recognized ~~$4.7~~$3.2 million ~~and $10.0 million, respectively,~~ of stock-based compensation expense related to the ESPP. As of ~~September 30, 2023,~~March 31, 2024, total unrecognized stock-based compensation cost related to the ESPP was ~~$1.1~~$0.9 million, which is expected to be recognized over a period of 0.1 years.

Commitments for Future Equity Awards

In connection with the Company’s acquisitions of businesses as discussed in Note 3 ~~“Acquisitions”,~~“Acquisitions,” EPAM enters into agreements that contractually commit it to granting equity awards at future dates. The agreements are unique to each acquisition and terms vary, ~~to specify~~including specifying either the number of future awards to be issued or a monetary value that will be settled with equity awards valued at future stock prices.

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As of ~~September 30, 2023,~~March 31, 2024, the Company has commitments to grant up to ~~$25.4~~$15.1 million of equity awards with the number of awards to be determined based on future stock prices. ~~These~~Additionally, these awards contain performance criteria that will determine the number of future awards to be issued and there is a service-based vesting requirement after the grant date associated with these awards. As these awards are considered granted for accounting purposes, in determining the expense, the Company adjusts the expected settlement based on the probability of achievement of the performance criteria. Related to these awards, the amount of stock-based compensation expense recorded in the condensed consolidated statements of income for the three months ended ~~September 30, 2023~~March 31, 2024 was not material.

Share Repurchases

On February 13, 2023, the Board of Directors authorized a share repurchase program for up to $500.0 million of the Company's outstanding common stock. EPAM may repurchase shares of its common stock on a discretionary basis from time to time through open market purchases, privately negotiated transactions or other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program has a term of 24 months, may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock.

~~During~~Share repurchase activity during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~the Company repurchased 318 thousand and 543 thousand shares of its common stock for $78.5 million and $128.4 million, respectively, in cash. All of the repurchased shares have been retired.~~ was as follows:


	Three Months Ended March 31,
	2024		2023
Number of shares of common stock repurchased	396		30
Total cost of repurchases	$	120,593	$	8,510

As of ~~September 30, 2023,~~March 31, 2024, a remaining balance of ~~$371.6~~$214.5 million was available for purchases of the Company’s common stock under the share repurchase program authorized by the Company’s Board of Directors.

12.INCOME TAXES

In determining its interim provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

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The Company’s worldwide effective tax rate for the three months ended ~~September 30,~~March 31, 2024 and 2023 was 6.0% and ~~2022 was 26.3% and 18.4%~~19.6%, ~~respectively, and 21.9% and 13.6% during the nine months ended September 30, 2023 and 2022,~~ respectively. The Company’s effective tax rate benefited from excess tax benefits recorded upon vesting or exercise of stock-based awards of ~~$1.7~~$20.9 million and ~~$10.9~~$6.0 million during the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $15.1 million and $31.4 million during the nine months ended September 30, 2023 and 2022,~~ respectively. Additionally, during the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2024, the Company’s effective tax rate benefited from the recognition of one-time benefits of ~~$1.3~~$2.3 million, ~~and $8.5 million, respectively,~~ resulting from the Company’s decision to change the tax status and to classify certain of its foreign subsidiaries as disregarded entities for U.S. income tax ~~purposes. During~~purposes, and $1.7 million resulting from the ~~three and nine months ended September 30, 2023, the Company’s effective~~reversal of a reserve for an uncertain tax ~~rate increased due to a $3.6 million charge in the third quarter associated with the completion of EPAM’s exit from Russia.~~position.

13.EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. For purposes of computing basic earnings per share, any unvested shares of restricted stock that have been issued by the Company and are contingently returnable to the Company are excluded from the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, unvested restricted stock, unvested equity-settled RSUs and the stock to be issued under the Company’s ESPP. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

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The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Numerator for basic and diluted earnings per share:	Numerator for basic and diluted earnings per share:
Numerator for basic and diluted earnings per share:
Numerator for basic and diluted earnings per share:
Net income	Net income	$	97,204	$	156,054	$	319,529	$	264,377
Net income
Net income
Numerator for basic and diluted earnings per share
Numerator for basic and diluted earnings per share
Numerator for basic and diluted earnings per share	Numerator for basic and diluted earnings per share	$	97,204	$	156,054	$	319,529	$	264,377

Denominator:	Denominator:

Denominator:

Denominator:
Weighted average common shares for basic earnings per share
Weighted average common shares for basic earnings per share
Weighted average common shares for basic earnings per share	Weighted average common shares for basic earnings per share	57,853		57,420		57,850		57,194
Net effect of dilutive stock options, restricted stock units, restricted stock awards and stock issuable under the ESPP	Net effect of dilutive stock options, restricted stock units, restricted stock awards and stock issuable under the ESPP	1,095		1,937		1,293		1,914
Net effect of dilutive stock options, restricted stock units, restricted stock awards and stock issuable under the ESPP
Net effect of dilutive stock options, restricted stock units, restricted stock awards and stock issuable under the ESPP
Weighted average common shares for diluted earnings per share
Weighted average common shares for diluted earnings per share
Weighted average common shares for diluted earnings per share	Weighted average common shares for diluted earnings per share	58,948		59,357		59,143		59,108

Net income per share:	Net income per share:

Net income per share:

Net income per share:
Basic
Basic
Basic	Basic	$	1.68	$	2.72	$	5.52	$	4.62
Diluted	Diluted	$	1.65	$	2.63	$	5.40	$	4.47
Diluted
Diluted

The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was ~~452~~363 thousand and ~~410~~260 thousand during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~respectively.~~

The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was 158 thousand and 252 thousand during the three and nine months ended September 30, 2022, respectively.

14.COMMITMENTS AND CONTINGENCIES

Indemnification Obligations — In the normal course of business, the Company is a party to a variety of agreements under which it may be obligated to indemnify the other party for certain matters. These obligations typically arise in contracts where the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations or covenants for certain matters, infringement of third-party intellectual property rights, data privacy violations, and certain tortious conduct in the course of providing services. The duration of these indemnifications varies, and in certain cases, is indefinite.

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The Company is unable to reasonably estimate the maximum potential amount of future payments under these or similar agreements due to the unique facts and circumstances of each agreement and the fact that certain indemnifications provide for no limitation to the maximum potential future payments under the indemnification. Management is not aware of any such matters that would have a material effect on the condensed consolidated financial statements of the Company.

Litigation — From time to time, the Company is involved in litigation, claims or other contingencies arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, if decided adversely, is not expected to have a material effect on the Company’s business, financial condition, results of operations or cash flows.

Ukraine Humanitarian Commitment — On March 4, 2022, EPAM announced that it has established a $100.0 million humanitarian commitment to support its employees in Ukraine and their families. See Note 2 “Impact of the Invasion of Ukraine” for more information regarding ~~commitments~~commitment to humanitarian aid for Ukraine.

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Deferred Consideration — During the year ended December 31, 2022, the Company purchased software licenses for use in the regular course of business in exchange for an upfront payment and fixed, ~~future~~subsequent annual payments due over the next 4 years. This agreement was modified during the year ended December 31, 2023. As of ~~September 30, 2023,~~March 31, 2024, the undiscounted deferred consideration amounts owed totaled approximately ~~$60.0~~$49.7 million and are expected to be paid as follows: ~~$14.2~~$16.6 million during the remainder of ~~2023, $14.0 million in~~ 2024, ~~$15.1~~$16.6 million in 2025, and ~~$16.7~~$16.5 million in 2026.

Contractual Commitment — On March 31, 2023, the Company entered into a 5-year agreement for cloud services through which it committed to spending at least $75.0 million over the term of the agreement. The Company has the ability to cancel the commitment whereby it would incur a cancellation penalty of 20% of the remaining contractual commitment.

15.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~~client relationship generally correlates with the ~~customer’s~~client’s geographic location, there is a high degree of similarity between ~~customer~~client locations and the geographic boundaries of the Company’s reportable segments. In some cases, managerial responsibility for a particular ~~customer~~client is assigned to a management team in another region and is usually based on the strength of the relationship between ~~customer~~client executives and particular members of EPAM’s senior management team. In such cases, the ~~customer’s~~client’s activity would be reported through the management team’s reportable segment.

On July 26, 2023, the Company completed the sale of its remaining holdings in Russia to a third party. As a result of this sale, the Company no longer has operations associated with this segment. ~~See Note 2 “Impact~~

Table of ~~the Invasion of Ukraine” for more information.~~Contents

Revenues from external ~~customers~~clients and operating profit/(loss), before unallocated expenses, by reportable segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ were as follows:






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Segment revenues:	Segment revenues:
Segment revenues:
Segment revenues:
North America
North America
North America	North America	$	684,778	$	748,383	$	2,074,806	$	2,159,751
Europe	Europe	465,813		470,009		1,442,402		1,373,923
Europe
Europe
Russia
Russia
Russia	Russia	1,545		8,528		16,075		59,721
Total segment revenues	Total segment revenues	$	1,152,136	$	1,226,920	$	3,533,283	$	3,593,395
Total segment revenues
Total segment revenues
Segment operating profit/(loss):
Segment operating profit/(loss):
Segment operating profit/(loss):	Segment operating profit/(loss):
North America	North America	$	132,438	$	175,845	$	386,929	$	429,999
North America
North America
Europe
Europe
Europe	Europe	64,074		64,813		188,779		156,920
Russia	Russia	(118)		1,507		(5,866)		(16,315)
Russia
Russia
Total segment operating profit	Total segment operating profit	$	196,394	$	242,165	$	569,842	$	570,604
Total segment operating profit
Total segment operating profit

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.

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There were no ~~customers~~clients that accounted for more than 10% of total segment revenues during the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

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Reconciliation of segment operating profit to consolidated income before provision for income taxes is presented below:
Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Total segment operating profit: $ 196,394 $ 242,165 $ 569,842 $ 570,604
Unallocated amounts:
Stock-based compensation expense (37,847) (33,287) (109,536) (68,292)
Amortization of intangibles assets (5,688) (5,584) (16,708) (16,584)
Other acquisition-related expenses (867) (265) (2,448) (934)
Loss on sale of business (25,922) — (25,922) —
Other unallocated expenses (12,042) (22,802) (36,483) (82,305)
Income from operations 114,028 180,227 378,745 402,489
Interest and other income, net 13,931 4,228 37,162 5,642
Foreign exchange gain/(loss) 3,893 6,691 (6,725) (102,035)
Income before provision for income taxes $ 131,852 $ 191,146 $ 409,182 $ 306,096


	Three Months Ended March 31,
	2024		2023
Total segment operating profit:	$	181,183	$	179,730
Unallocated amounts:
Stock-based compensation expense	(44,791)		(38,579)
Amortization of intangibles assets	(5,949)		(5,537)
Other acquisition-related expenses	(1,223)		(241)

Other unallocated expenses	(18,688)		(15,002)
Income from operations	110,532		120,371
Interest and other income, net	15,042		11,521
Foreign exchange loss	(1,919)		(4,608)
Income before provision for income taxes	$	123,655	$	127,284

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 September 30, 2023		As of December 31, 2022
	As of March 31, 2024					As of March 31, 2024	As of December 31, 2023
Ukraine	Ukraine	$	65,277	$	70,183
Belarus
United States	United States	56,995		68,804
Belarus		51,761		57,311
Poland	Poland	12,213		14,685
India	India	6,856		8,506
Hungary	Hungary	6,752		8,552
Other	Other	39,800		45,307
Total	Total	$	239,654	$	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 sale of its holdings in Russia.

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The table below presents information about the Company’s revenues by ~~customer~~client location for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
United States
United States
United States	United States	$	652,757	$	715,314	$	1,981,816	$	2,059,293
United Kingdom	United Kingdom	140,718		160,683		448,526		463,610
United Kingdom
United Kingdom
Switzerland
Switzerland
Switzerland	Switzerland	91,504		76,191		270,862		237,247
Netherlands	Netherlands	59,020		56,996		176,528		158,054
Netherlands
Netherlands
Germany
Germany
Germany	Germany	44,843		40,116		132,606		116,379
Canada	Canada	21,808		29,145		76,125		87,985
Canada
Canada
Russia
Russia
Russia	Russia	1,545		8,013		13,290		56,692
Other locations	Other locations	139,941		140,462		433,530		414,135
Other locations
Other locations
Total	Total	$	1,152,136	$	1,226,920	$	3,533,283	$	3,593,395
Total
Total

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16.ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss:


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Foreign currency translation
Foreign currency translation
Foreign currency translation	Foreign currency translation
Beginning balance	Beginning balance	$	(81,158)	$	(68,469)	$	(101,780)	$	(52,747)
Beginning balance
Beginning balance
Foreign currency translation	Foreign currency translation	(33,292)		(69,674)		(9,231)		(82,812)
Net loss reclassified into Loss on sale of business		23,931		—		23,931		—
Income tax benefit		3,560		12,751		121		10,167
Foreign currency translation
Foreign currency translation
Income tax benefit/ (expense)
Income tax benefit/ (expense)
Income tax benefit/ (expense)
Foreign currency translation, net of tax
Foreign currency translation, net of tax
Foreign currency translation, net of tax	Foreign currency translation, net of tax	(5,801)		(56,923)		14,821		(72,645)
Ending balance	Ending balance	$	(86,959)	$	(125,392)	$	(86,959)	$	(125,392)
Ending balance
Ending balance
Cash flow hedging instruments
Cash flow hedging instruments
Cash flow hedging instruments	Cash flow hedging instruments
Beginning balance	Beginning balance	$	10,920	$	(9,845)	$	8,306	$	(3,417)
Beginning balance
Beginning balance
Unrealized (loss)/ gain in fair value	Unrealized (loss)/ gain in fair value	(8,805)		(15,222)		7,028		(72,827)
Net (gain)/ loss reclassified into Cost of revenues (exclusive of depreciation and amortization)		(8,764)		8,186		(21,248)		13,647
Net (gain)/ loss reclassified into Foreign exchange loss		(211)		112		(178)		43,940
Income tax benefit		4,036		1,572		3,268		3,460
Unrealized (loss)/ gain in fair value
Unrealized (loss)/ gain in fair value
Net gain reclassified into Cost of revenues (exclusive of depreciation and amortization)
Net gain reclassified into Cost of revenues (exclusive of depreciation and amortization)
Net gain reclassified into Cost of revenues (exclusive of depreciation and amortization)
Net loss reclassified into Foreign exchange loss
Net loss reclassified into Foreign exchange loss
Net loss reclassified into Foreign exchange loss
Income tax benefit/ (expense)
Income tax benefit/ (expense)
Income tax benefit/ (expense)
Cash flow hedging instruments, net of tax
Cash flow hedging instruments, net of tax
Cash flow hedging instruments, net of tax	Cash flow hedging instruments, net of tax	(13,744)		(5,352)		(11,130)		(11,780)
Ending balance(1)	Ending balance(1)	$	(2,824)	$	(15,197)	$	(2,824)	$	(15,197)
Ending balance(1)
Ending balance(1)
Defined benefit plans
Defined benefit plans
Defined benefit plans	Defined benefit plans
Beginning balance	Beginning balance	$	(1,847)	$	1,957	$	(1,847)	$	1,957

Beginning balance
Beginning balance
Actuarial gains
Actuarial gains
Actuarial gains
Defined benefit plans, net of tax
Defined benefit plans, net of tax
Defined benefit plans, net of tax
Ending balance
Ending balance
Ending balance	Ending balance	$	(1,847)	$	1,957	$	(1,847)	$	1,957
Accumulated other comprehensive loss	Accumulated other comprehensive loss	$	(91,630)	$	(138,632)	$	(91,630)	$	(138,632)
Accumulated other comprehensive loss
Accumulated other comprehensive loss

(1) As of ~~September 30, 2023,~~March 31, 2024, the ending balance of net unrealized ~~loss~~gain related to derivatives designated as cash flow hedges is expected to be reclassified into Cost of revenues (exclusive of depreciation and amortization) in the next twelve months.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and the unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Forward-Looking Statements” in this item and in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. We assume no obligation to update any of these forward-looking statements.

In this quarterly 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. All other trademarks and service marks used herein are the property of their respective owners.

Executive Summary

We ~~are~~have used our software engineering expertise to become a leading global provider of digital engineering, cloud and AI-enabled transformation services, ~~and product engineering company, providing digital platform engineering and software development services to many of the world’s~~as well as a leading ~~organizations.~~

~~We deliver~~ business and experience consulting partner for global enterprises and ambitious startups. We address our clients’ transformation challenges by fusing EPAM Continuum’s integrated strategy, experience and technology consulting with our 30+ years of engineering execution to speed our clients’ time to market and drive greater value from their digital investments.

Through increased specialization in focused verticals and a continued emphasis on strategic partnerships, we are able to deliver technology transformation from start to finish, leveraging agile methodologies, proven ~~customer~~client 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 our customers.~~

Our ~~customers~~clients depend on us to solve their complex technical challenges and rely on our expertise in core engineering, advanced ~~technology,~~technologies, digital design and intelligent enterprise development. We combine our software engineering heritage with strategic business and innovation consulting, design thinking, and physical-digital capabilities to deliver end-to-end digital transformation services for our clients. We focus on building long-term partnerships with our ~~customers~~clients in a market that is constantly challenged by the pressures of digitization through our innovative strategy and scalable software solutions, integrated advisory, business consulting and experience design, and a continually evolving mix of advanced capabilities. 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 global delivery centers to ~~global customers~~our clients across ~~all geographies.~~the world. Our teams of ~~developers,~~consultants, designers, architects, ~~consultants, strategists,~~ engineers ~~designers,~~ and ~~product experts~~trainers have the capabilities and skill sets to deliver business results.

Business Update Regarding the War in Ukraine

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 in 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 prior to the attack. As of ~~September 30, 2023,~~March 31, 2024, Ukraine ~~remains the~~continues to be 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, Russia was our third largest delivery location by the number of delivery professionals. In April 2022, the Company 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 Russia and on July 26, 2023, we completed the sale of our remaining holdings in Russia to a third party.

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The impact of Russia’s invasion of Ukraine on our operations, personnel, and physical assets in Ukraine has had, and, along with any escalation of the war that includes Belarus’ territory or military, could continue to have a material adverse effect on our operations. Actions taken by other countries, including new and stricter sanctions by Canada, the United Kingdom, the European Union, the U.S. and other companies and organizations against officials, individuals, regions, and industries in Belarus, and Belarus’ responses to those sanctions, including counter-sanctions and other actions, have had and could continue to have a material adverse effect on our operations. ~~Customers~~Clients have and may continue to seek altered terms, conditions, and delivery locations for the performance of services, delay planned work or seek services from alternate providers, or suspend, terminate, fail to renew, or reduce existing contracts or services, which could have a material adverse effect on our financial condition. Some of our ~~customers~~clients have implemented steps to block internet communications with Ukraine and Belarus to protect against potential cyberattacks or other information security threats, which has caused a material adverse effect on our ability to deliver our services to these ~~customers~~clients from those locations. Such material adverse effects disrupt our delivery of services, cause us to shift all or portions of our work occurring in the region to other countries, restrict our ability to engage in certain projects in the region and serve certain ~~customers~~clients in or from the region, and could negatively impact our personnel, operations, financial results and business outlook. Our Board of Directors continues its oversight of our strategic, geopolitical, and cybersecurity risks and the risks related to our geographic expansion. Our Board has received updates from management during both regular and special meetings, while also providing oversight of the risks associated with Russia’s invasion of Ukraine and other strategic areas of importance related to the war.

Moving Forward

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 toon our delivery infrastructure, including reallocating work to other geographies within our global footprint. We have engaged both our personnel and our ~~customers~~clients to meet their needs ~~and to mitigate~~while mitigating delivery challenges. EPAM continues to operate productively in more than 5055 countries and provides consistent high-quality delivery to our ~~customers.~~clients. Our global delivery centers have sufficient resources, including infrastructure and capital, to support ongoing operations. We continue to rapidly respond to the difficult conditions in Ukraine while maintaining a focus on ~~customers~~our clients and long-term growth.

~~Implementation~~In previous years after the invasion, implementation and execution of our business continuity plans, relocation costs, our humanitarian commitment to our people in Ukraine, and the cost of our phased exit from Russia resulted in materially increased expenses ~~during 2022~~ and some of these expenses ~~continue to be incurred in the first nine months of 2023. We~~continued during this quarter and we expect some of those expenses will continue to occur in subsequent quarters for some time in the future.

We have no way to predict the progress or outcome of the war in Ukraine because the conflict and government reactions change quickly and are beyond our control. Prolonged military activities, broad-based sanctions and counter-sanctions, or escalation of the war that includes Belarus’ territory or military could have a material adverse effect on our operations and financial condition. 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. For additional information on the various risks posed by the attack against Ukraine and the impact in the region as well as other ~~disruptors~~risks to our business, please read “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and “Part II. Item 1A. Risk Factors” in this quarterly report.

Year-to-Date ~~2023~~2024 Developments and Trends

Our business ~~was~~continues to be disrupted by the war in Ukraine ~~that began in the latter part of the first quarter of 2022~~which has created and ~~has continued~~continues to create uncertainties through ~~September 30, 2023~~March 31, 2024 and beyond. In addition, our business and operating results were negatively impacted in the first ~~nine~~three months of ~~2023~~2024 by ~~reduced~~uneven demand for our services as our ~~customers~~clients took action to reduce their spending ~~in light of the anticipated global slowdown in economic activity.~~on information technology services. For the first ~~nine~~three months of ~~2023,~~2024, our revenues were ~~$3.533~~$1.165 billion, a decrease of ~~1.7%~~3.8% from ~~$3.593~~$1.211 billion reported for the same period of ~~2022.~~2023. Income from operations as a percentage of revenues decreased to ~~10.7%~~9.5% for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 as compared to ~~11.2%~~9.9% for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, largely driven by an increase in compensation ~~and benefits~~ costs including stock-based compensation expense ~~and recognition~~as a percentage of ~~a $25.9 million loss from the sale of the Russia business,~~revenues, partially offset by ~~lower variable compensation expense and~~ a decrease in expenses associated with the geographic repositioning of our workforce and humanitarian efforts for Ukraine.

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Critical Accounting Policies

The discussion and analysis of our financial position and results of operations is based on our unaudited condensed consolidated financial statements which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a recurring basis, we evaluate our estimates and judgments, including those related to revenue recognition and related allowances, impairments of long-lived assets including intangible assets, goodwill and right-of-use assets, income taxes including the valuation allowance for deferred tax assets, and stock-based compensation. Actual results may differ materially from these estimates under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.

During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, there have been no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this quarterly report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.


		Three Months Ended September 30,										Nine Months Ended September 30,
		2023					2022					2023					2022
		(in thousands, except percentages and per share data)



		(in thousands, except percentages and per share data)
		(in thousands, except percentages and per share data)
		(in thousands, except percentages and per share data)
Revenues	Revenues	$	1,152,136		100.0	%	$	1,226,920		100.0	%	$	3,533,283		100.0	%	$	3,593,395		100.0	%
Operating expenses:	Operating expenses:
Operating expenses:
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)(1)
Cost of revenues (exclusive of depreciation and amortization)(1)
Cost of revenues (exclusive of depreciation and amortization)(1)	Cost of revenues (exclusive of depreciation and amortization)(1)	794,265			68.9	%	826,796			67.4	%	2,458,881			69.6	%	2,453,955			68.3	%
Selling, general and administrative expenses(2)	Selling, general and administrative expenses(2)	194,829			16.9	%	198,021			16.1	%	601,093			17.0	%	667,825			18.6	%
Selling, general and administrative expenses(2)
Selling, general and administrative expenses(2)
Depreciation and amortization expense	Depreciation and amortization expense	23,092			2.0	%	21,876			1.8	%	68,642			2.0	%	69,126			1.9	%
Loss on sale of business		25,922			2.3	%	—			—	%	25,922			0.7	%	—			—	%
Depreciation and amortization expense
Depreciation and amortization expense

Income from operations

Income from operations

Income from operations	Income from operations	114,028			9.9	%	180,227			14.7	%	378,745			10.7	%	402,489			11.2	%
Interest and other income, net	Interest and other income, net	13,931			1.2	%	4,228			0.4	%	37,162			1.1	%	5,642			0.1	%
Foreign exchange gain/(loss)		3,893			0.3	%	6,691			0.5	%	(6,725)			(0.2)	%	(102,035)			(2.8)	%
Interest and other income, net
Interest and other income, net
Foreign exchange loss
Foreign exchange loss
Foreign exchange loss
Income before provision for income taxes
Income before provision for income taxes
Income before provision for income taxes	Income before provision for income taxes	131,852			11.4	%	191,146			15.6	%	409,182			11.6	%	306,096			8.5	%
Provision for income taxes	Provision for income taxes	34,648			3.0	%	35,092			2.9	%	89,653			2.6	%	41,719			1.1	%
Provision for income taxes
Provision for income taxes
Net income
Net income
Net income	Net income	$	97,204		8.4	%	$	156,054		12.7	%	$	319,529		9.0	%	$	264,377		7.4	%
Effective tax rate	Effective tax rate	26.3		%			18.4		%			21.9		%			13.6		%
Effective tax rate
Effective tax rate
Diluted earnings per share	Diluted earnings per share	$	1.65				$	2.63				$	5.40				$	4.47
Diluted earnings per share
Diluted earnings per share

(1)Includes ~~$18,142~~$22,357 and ~~$17,474~~$16,011 of stock-based compensation expense for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $49,569 and $31,782 of stock-based compensation expense for the nine months ended September 30, 2023 and 2022,~~ respectively.

(2)Includes ~~$19,705~~$22,434 and ~~$15,813~~$22,568 of stock-based compensation expense for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $59,967 and $36,510 of stock-based compensation expense for the nine months ended September 30, 2023 and 2022,~~ respectively.

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Consolidated Results Review

Revenues

During the three months ended ~~September 30, 2023,~~March 31, 2024, our total revenues decreased by ~~6.1%~~3.8% to ~~$1.152~~$1.165 billion compared to the corresponding period in ~~2022.~~2023. Revenues have been negatively impacted by reduced demand for our services as our ~~customers~~clients took action to reduce spending ~~in light~~and as a result of ~~the anticipated global slowdown in economic activity and~~ the sale of our remaining holdings in Russia in the third quarter of 2023, and positively impacted by fluctuations in foreign currency exchange rates which offset our revenue decline by ~~1.9%~~0.5% during the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period last year.

~~During the nine months ended September 30, 2023, our total revenues decreased 1.7% over the corresponding period in 2022. The first nine months~~

Table of 2023 were negatively impacted by reduced demand for our services as our customers took action to reduce spending in light of the anticipated global slowdown in economic activity and our decision to exit Russia and discontinue services to customers there, and positively impacted by growth during the first three months of 2023 and fluctuations in foreign currency exchange rates which offset our revenue decline by 0.4% as compared to the same period last year.Contents

Revenues by ~~customer~~client location for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ were as follows:








		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
		(in thousands, except percentages)								(in thousands, except percentages)
Americas(1)	Americas(1)	$	677,410	58.8	%	$	747,091	60.9	%	$	2,066,299	58.4	%	$	2,155,496	60.0	%
Americas(1)
Americas(1)
EMEA(2)
EMEA(2)
EMEA(2)	EMEA(2)	446,237		38.7	%	438,216		35.7	%	1,369,259		38.8	%	1,283,152		35.7	%
APAC(3)	APAC(3)	25,051		2.2	%	31,376		2.6	%	76,080		2.2	%	91,134		2.5	%
APAC(3)
APAC(3)
CEE(4)
CEE(4)
CEE(4)	CEE(4)	3,438		0.3	%	10,237		0.8	%	21,645		0.6	%	63,613		1.8	%
Revenues	Revenues	$	1,152,136	100.0	%	$	1,226,920	100.0	%	$	3,533,283	100.0	%	$	3,593,395	100.0	%
Revenues
Revenues

(1)Americas includes revenues from ~~customers~~clients in North, Central and South America.

(2)EMEA includes revenues from ~~customers~~clients in Western Europe and the Middle East.

(3)APAC includes revenues from ~~customers~~clients in East Asia, Southeast Asia and Australia.

(4)CEE includes revenues from ~~customers~~clients in Belarus, Georgia, Kazakhstan, Russia, Ukraine and Uzbekistan. ~~On July 26, 2023, the Company completed~~As a result of the sale of ~~its~~the Company’s remaining holdings in Russia to a ~~third-party.~~third-party on July 26, 2023, revenues from the CEE region are no longer material. Beginning in 2024, revenues from the CEE region are included in the EMEA region.

During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, the United States continued to be our largest ~~customer~~client location. During the three months ended ~~September 30, 2023,~~March 31, 2024, revenues in the United States decreased ~~8.7%~~1.8% to ~~$652.8~~$667.1 million from ~~$715.3~~$679.4 million in the ~~third~~first quarter of ~~2022,~~2023, largely due to ~~a ramp down initiated in the fourth quarter of 2022 of a large transformation program at a customer that was previously in our top 10 customers as well as~~ reduced spending at certain ~~other~~ large accounts and generally slower growth in revenues across a range of ~~customers~~clients in the geography. During the nine months ended September 30, 2023, revenues in the United States decreased 3.8% to $1.982 billion compared to $2.059 billion in the same period of the prior year, largely driven by a ramp down initiated in the fourth quarter of 2022 of a large transformation program at a customer that was previously in our top 10 customers as well as reduced spending at certain other large accounts and reduced demand for our services as our customers took action to reduce spending in light of the anticipated global slowdown in economic activity.region.

The top three revenue contributing ~~customer~~client location countries in EMEA were the United Kingdom, Switzerland and the Netherlands, generating ~~$140.7~~$135.9 million, ~~$91.5~~$98.4 million and ~~$59.0~~$51.7 million in revenues, respectively, during the three months ended ~~September 30, 2023.~~March 31, 2024. Revenues from ~~customers~~clients in these three countries were ~~$160.7~~$155.3 million, ~~$76.2~~$89.9 million, and ~~$57.0~~$59.1 million, respectively, in the corresponding period last year. Revenues in the EMEA region were negatively impacted by reduced spending at certain large accounts and were positively impacted by the strengthening of the euro, the British pound and Swiss franc relative to the U.S. dollar during the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period in the previous year.

During the ~~nine~~three months ended September 30, 2023, the United Kingdom, Switzerland and the Netherlands performed as EMEA’s top revenue generating locations and contributed $448.5 million, $270.9 million, and $176.5 million, respectively, compared to $463.6 million, $237.2 million, and $158.1 million, respectively,March 31, 2024, revenues from clients in the ~~corresponding period last year. Revenues in the EMEA~~APAC region ~~were positively impacted by the strengthening~~comprised 2.0% of ~~the euro, Swiss franc and the British pound relative to the U.S. dollar during the nine months ended September 30, 2023 as compared to~~total revenues, a level consistent with the same period in the previous year.

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During the three and nine months ended September 30, 2023, revenues from customers in the APAC region decreased by $6.3 million or 20.2% and $15.1 million or 16.5% compared to the corresponding periods of 2022, mainly due to decline in the Financial Services vertical.

During the three months ended September 30, 2023, revenues in the CEE geography experienced a decrease of $6.8 million as compared to the corresponding period of 2022. Revenues in the region during the three and nine months ended September 30, 2023 included $1.5 million and $13.3 million of revenues from customers in Russia, respectively. On March 4, 2022, we announced our decision to discontinue our services to customers located in Russia and on July 26, 2023, we completed the sale of our remaining holdings in Russia to a third-party. During this time, we have been providing transition support for customers in this market while pursuing the sale and as a result of this sale, the revenues from this geography are expected to dissipate in the future.

Cost of Revenues (Exclusive of Depreciation and Amortization)

The principal components of our cost of revenues (exclusive of depreciation and amortization) are salaries, bonuses, fringe benefits, stock-based compensation, and project-related travel costs for our delivery professionals and fees for subcontractors who are assigned to ~~customer~~client projects. Salaries and other compensation expenses of our delivery professionals are reported as cost of revenues regardless of whether the employees are actually performing ~~customer~~ services for clients during a given period. Our employees are a critical asset, necessary for our continued success and, therefore, we are continuously exploring new geographies, markets, and sources to locate talented personnel and present them with competitive compensation programs and educational opportunities.

During the three months ended ~~September 30, 2023,~~March 31, 2024, cost of revenues (exclusive of depreciation and amortization) was ~~$794.3~~$834.3 million representing a decrease of ~~3.9%~~2.5% from ~~$826.8~~$855.9 million in the corresponding period of ~~2022.~~2023. The decrease was primarily due to ~~lower~~a decrease in compensation ~~and benefits~~ costs other than stock-based compensation expense largely attributable to ~~a 10.0%~~the 9.2% decrease in the average number of production professionals ~~and reduced variable compensation expense attributable~~which reflects the impact from the Cost Optimization Program initiated in the third quarter of 2023. See Note 9 “Cost Optimization Program” for more information regarding the Company’s restructuring program. Other drivers that contributed to the ~~lower level~~year-over-year decrease were a decline in costs associated with our humanitarian efforts for Ukraine of ~~financial performance expected for the year,~~$1.8 million and ~~a reduction of $1.0 million for~~our unbilled business continuity resources of $7.4 million. The decreases were partially offset by higher expenses due to a $6.3 million increase in stock-based compensation expense and ~~benefits costs, attributable to salary increases and promotions for existing delivery professionals as well as higher compensation and benefits costs resulting~~the negative impact from the ~~relocation~~appreciation of ~~employees to higher cost geographies.~~ foreign currencies in certain of our delivery locations.

Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was ~~68.9%~~71.6% and ~~67.4%~~70.7% in the ~~third~~first quarter of ~~2023~~2024 and ~~2022,~~2023, respectively. The year-over-year increase in the ~~third~~first quarter of ~~2023~~2024 as compared to the corresponding period of the prior year is primarily due to ~~lower utilization attributable to uneven demand for our services and compensation and benefits costs being~~ a ~~higher percentage of our revenues due to the ongoing transition of customer work to higher cost geographies.~~

~~During the nine months ended September 30, 2023, cost of revenues (exclusive of depreciation and amortization) was $2.459 billion representing an~~$6.3 million increase ~~of 0.2% from $2.454 billion~~ in the corresponding period of 2022. The increase was primarily due to higher compensation and benefits costs, attributable to salary increases and promotions for existing delivery professionals as well as due to the relocation of employees to higher cost geographies, $17.8 million of higher stock-based compensation expenses and the reversal of $21.4 million of previously accrued discretionary compensation expenses in the first quarter of 2022. The increases were partially offset by a decrease of $17.0 million of incremental costs associated with our humanitarian efforts for Ukraine, a decrease of $3.4 million of unbilled business continuity resources and reduced variable compensation expense attributable to the lower level of financial performance expected for the year. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 69.6% and 68.3% for the nine months ended September 30, 2023 and 2022, respectively. The year-over-year increase is primarily due to lower utilization attributable to uneven demand for our services, the ongoing transition of customer work to higher cost geographies, a higher level of stock-based compensation expense ~~as well as a reversal~~and the negative impact from the appreciation of ~~previously accrued discretionary compensation expenses~~foreign currencies in ~~the first quarter~~certain of ~~2022.~~our delivery locations.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses represent expenditures associated with promoting and selling our services and general and administrative functions of our business. These expenses include the costs of salaries, bonuses, fringe benefits, stock-based compensation, severance, bad debt, travel, legal and accounting services, insurance, facilities including operating leases, advertising, and other promotional activities. Additionally, selling, general and administrative expenses contain costs of relocating our employees and various one-time and unusual expenses such as impairment charges.

~~Table of Contents~~

During the three months ended ~~September 30, 2023,~~March 31, 2024, selling, general and administrative expenses were ~~$194.8~~$198.5 million representing a ~~1.6%~~6.3% decrease as compared to ~~$198.0~~$211.9 million in the corresponding period of ~~2022.~~2023. The decrease in selling, general and administrative expenses was ~~largely~~primarily driven by a ~~$4.7~~$9.2 million decrease in personnel-related costs ~~other than stock-based compensation expense reflecting reduced variable compensation expense attributable to~~resulting from a ~~lower level~~decrease in headcount which reflects the impact from the Cost Optimization Program initiated in the third quarter of ~~financial performance expected~~2023, partially offset by the impacts from salary increases and promotions for existing professionals. See Note 9 “Cost Optimization Program” for more information regarding the ~~year,~~Company’s restructuring program. Selling, general and administrative expenses during the quarter also benefited from a ~~$4.0~~$2.4 million reduction in facilities and infrastructure expenses and a $1.6 million decrease in ~~expenses associated with~~bad debt expense as compared to the ~~geographic repositioning~~corresponding period of ~~our workforce, and a $1.0 million decrease in expenses associated with our humanitarian efforts for Ukraine. These were partially offset by a $3.9 million increase in stock-based compensation expense.~~ the prior year.

Expressed as a percentage of revenues, selling, general and administrative expenses ~~increased~~decreased by ~~0.8%~~0.5% to ~~16.9%~~17.0% for the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period from the prior year, primarily driven by higher stock-based compensation expense and higher compensation and benefits costs, attributable to salary increases and promotions for existing employees as well as higher compensation and benefits costs resulting from the ~~relocation of employees to higher cost geographies.~~

During the nine months ended September 30, 2023, selling, general and administrative expenses were $601.1 million representing a decrease of 10.0% as compared to $667.8 million reported in the corresponding period of 2022. The decrease in selling, general and administrative expenses was largely driven by a $24.2 million decrease in personnel-related costs other than stock-based compensation expense reflecting reduced variable compensation expense attributable to a lower level of financial performance expected for the year, a $36.6 million decrease in expenses associated with the geographic repositioning of our workforce, and a $7.9 million decrease in expenses associated with our humanitarian efforts for Ukraine. These were partially offset by a $23.5 million increase in stock-based compensation expense. Additionally, the nine months ended September 30, 2022 were impacted by the recognition of $19.6 million of impairment charges related to our long-lived assets in Russia and $5.7 million of bad debt expense attributable to customers located in Russia. Expressed as a percentage of revenues, selling, general and administrative expenses decreased by 1.6% to 17.0% for the nine months ended September 30, 2023 as compared to the same period from the prior year primarily driven by reductions in impairment charges, expenses associated with the geographic repositioning of our workforce, costs related to our humanitarian efforts for Ukraine, and variable compensation expense.

During the three and nine months ended September 30, 2023, selling, general and administrative expenses included $7.1 million of employee separation costs incurred as part of the Cost Optimization Program. See Note 9 “Cost Optimization Program” for more information regarding the Company’s restructuring decision.costs.

Depreciation and Amortization Expense

During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, depreciation and amortization expense was ~~$23.1~~$22.1 million ~~and $68.6 million, respectively,~~ as compared to ~~$21.9~~$22.8 million ~~and $69.1 million, respectively,~~ in the corresponding periods last year. The increase in depreciation and amortization expense during the three months ended September 30, 2023 is primarily the result of increased depreciation on software licenses as compared to the corresponding period last year. The decrease in depreciation and amortization expense during the ~~nine~~three months ended ~~September 30, 2023 is~~March 31, 2024 was primarily the result of lower depreciation on ~~leasehold improvements~~furniture, fixtures, other equipment and ~~desktop~~computer hardware, ~~driven by our phased exit from our operations in Russia,~~ partially offset by increased depreciation on software ~~licenses.~~licenses and increased amortization of acquired finite-lived intangible assets. Expressed as a percentage of revenues, depreciation and amortization expense remained consistent at ~~2.0%~~1.9% during both the three ~~and nine~~ months ended ~~September 30, 2023 as compared to 1.8%~~March 31, 2024 and ~~1.9% in the corresponding periods of 2022.~~2023.

~~Loss on Sale of Business~~

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Interest and Other Income, Net

Interest and other income, net includes interest earned on cash and cash equivalents and short-term investments, gains and losses from certain financial instruments, interest expense related to our borrowings, government grant income, and changes in the fair value of contingent consideration. Interest and other income, net increased from ~~$4.2 million and $5.6~~$11.5 million during the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 to ~~$13.9 million and $37.2~~$15.0 million during the three ~~and nine~~ months ended ~~September 30, 2023, respectively.~~March 31, 2024. This increase in Interest and other income, net during the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the three months ended ~~September 30, 2022~~March 31, 2023 was largely driven by ~~an $11.8~~a $7.1 million increase in interest income from our cash, cash equivalents and short-term investments, driven by improved interest rates, ~~and~~partially offset by a ~~$2.1~~$0.8 million ~~decrease~~increase in loss due to the change in fair value of contingent consideration ~~partially offset by~~and a $2.9 million decrease in government grant income. The increase in Interest and other income, net during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was largely driven by a $31.2 million increase in interest income from our cash, cash equivalents and short-term investments, a $6.7 million decrease in loss due to the change in fair value of contingent consideration, partially offset by a $1.2$2.8 million decrease in government grant income.

Foreign Exchange ~~Gain/(Loss)~~Loss

For discussion of the impact of foreign exchange fluctuations see “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”

Provision for Income Taxes

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 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.

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Our effective tax rate was ~~26.3% and 21.9%~~6.0% for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 and ~~18.4% and 13.6%~~19.6% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023. The ~~increase~~decrease in the effective tax rate in the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, as compared to the corresponding ~~periods~~period in the prior year, is primarily attributable to ~~lower~~higher excess tax benefits recorded upon vesting or exercise of stock-based awards ~~as a percentage of pre-tax income~~ in the current period. Excess tax benefits recorded upon vesting or exercise of stock-based awards were ~~$1.7 million and $15.1~~$20.9 million during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 and ~~$10.9 million and $31.4~~$6.0 million during the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023. Additionally, during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2024 the Company’s effective tax rate benefited from the recognition of one-time benefits of ~~$1.3~~$2.3 million, ~~and $8.5 million, respectively,~~ resulting from ~~the Company’s~~our decision to change the tax status and to classify certain of its foreign subsidiaries as disregarded entities for U.S. income tax ~~purposes. During~~purposes, and $1.7 million resulting from the ~~three and nine months ended September 30, 2023, the Company’s effective~~reversal of a reserve for an uncertain tax ~~rate was also negatively impacted by a $3.6 million charge in the quarter associated with the completion of EPAM’s exit from Russia.~~position.

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Results by Business Segment

Our operations ~~consist~~have historically consisted of three reportable segments: North America, Europe, and Russia. On July 26, 2023, we completed the sale of our remaining holdings in Russia to a third party. As a result of this sale, we no longer have operations associated with the Russia segment. The segments represent components of EPAM for which separate financial information is available and used on a regular basis by our chief executive officer, who is also our chief operating decision maker (“CODM”), to determine how to allocate resources and evaluate performance. Our CODM makes business decisions based on segment revenues and operating profit. 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 stock-based compensation, amortization of intangible assets acquired through business combinations, goodwill and other asset impairment charges, 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.

We manage our business primarily based on the managerial responsibility for ~~its~~the client base and market. As managerial responsibility for a particular ~~customer~~client relationship generally correlates with the ~~customer’s~~client’s geographic location, there is a high degree of similarity between ~~customer~~client locations and the geographic boundaries of our reportable segments. In some cases, managerial responsibility for a particular ~~customer~~client is assigned to a management team in another region and is usually based on the strength of the relationship between ~~customer~~client executives and particular members of EPAM’s senior management team. In such cases, the ~~customer’s~~client’s activity would be reported through the respective management ~~team’s~~team member’s reportable segment.

~~On March 4, 2022, we announced that we will discontinue~~ Our Europe segment includes our ~~services to customers located~~business in ~~Russia while staying committed to providing transition support for customers in this market and in April 2022 began~~ the ~~process of a phased exit of our operations in Russia. On July 26, 2023, we completed~~APAC region, which is managed by the ~~sale of our remaining holdings in Russia to a third party.~~same management team.








		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		(in thousands)								(in thousands)
Segment revenues:	Segment revenues:
North America	North America	$	684,778	$	748,383	$	2,074,806	$	2,159,751
North America
North America
Europe
Europe
Europe	Europe	465,813		470,009		1,442,402		1,373,923
Russia	Russia	1,545		8,528		16,075		59,721
Russia
Russia
Total segment revenues
Total segment revenues
Total segment revenues	Total segment revenues	$	1,152,136	$	1,226,920	$	3,533,283	$	3,593,395
Segment operating profit/(loss):	Segment operating profit/(loss):
Segment operating profit/(loss):
Segment operating profit/(loss):
North America
North America
North America	North America	$	132,438	$	175,845	$	386,929	$	429,999
Europe	Europe	64,074		64,813		188,779		156,920
Europe
Europe
Russia
Russia
Russia	Russia	(118)		1,507		(5,866)		(16,315)
Total segment operating profit	Total segment operating profit	$	196,394	$	242,165	$	569,842	$	570,604
Total segment operating profit
Total segment operating profit

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North America Segment

During the three months ended ~~September 30, 2023,~~March 31, 2024, revenues for the North America segment decreased ~~$63.6~~$5.2 million, or ~~8.5%~~0.7%, compared to the same period last year and segment operating profit decreased ~~$43.4~~$2.2 million, or ~~24.7%~~1.8%, compared to the same period last year. During the three months ended ~~September 30, 2023,~~March 31, 2024, revenues from our North America segment were ~~59.4%~~60.5% of total segment revenues, ~~a decrease~~an increase from ~~61.0%~~58.6% reported in the corresponding period of ~~2022.~~2023. As a percentage of North America segment revenues, the North America segment’s operating profit margin decreased to ~~19.3%~~17.1% during the ~~third~~first quarter of 2024 from 17.3% in the first quarter of 2023, ~~from 23.5%~~mainly impacted by the changes in the third quarter of 2022. This decrease is primarily attributable to lower utilization, partially offset by a decrease in variable compensation expense as a percentage of segment revenues during the third quarter of 2023 compared to the third quarter of 2022.

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During the nine months ended September 30, 2023, revenues for the North America segment decreased $84.9 million, or 3.9%, compared to the same period last year and segment operating profit decreased $43.1 million, or 10.0%, compared to the same period last year. During the nine months ended September 30, 2023 and 2022, revenues from our North America segment were 58.7% and 60.1% of total segment revenues, respectively. As a percentage of North America segment revenues, the North America segment’s operating profit margin decreased to 18.6% during the nine months ended September 30, 2023 as compared to 19.9% in the corresponding period of 2022. This decrease is primarily attributable to lower utilization, partially offset by a decrease in variable compensation expense as a percentage of segment revenues during the first nine months of 2023 compared to the first nine months of 2022.foreign currency exchange rates.

The following table presents North America segment revenues by industry vertical for the periods indicated:

Three Months Ended
September 30, Change Nine Months Ended
September 30, Change
2023 2022 Dollars Percentage 2023 2022 Dollars Percentage
Industry Vertical (in thousands, except percentages)
Software & Hi-Tech $ 136,520 $ 170,818 $ (34,298) (20.1) % $ 422,073 $ 488,134 $ (66,061) (13.5) %
Financial Services 131,499 134,673 (3,174) (2.4) % 410,527 381,887 28,640 7.5 %
Travel & Consumer 115,778 131,181 (15,403) (11.7) % 359,475 384,360 (24,885) (6.5) %
Business Information & Media 104,863 121,703 (16,840) (13.8) % 327,378 346,675 (19,297) (5.6) %
Life Sciences & Healthcare 109,137 116,878 (7,741) (6.6) % 305,700 344,148 (38,448) (11.2) %
Emerging Verticals 86,981 73,130 13,851 18.9 % 249,653 214,547 35,106 16.4 %
Revenues $ 684,778 $ 748,383 $ (63,605) (8.5) % $ 2,074,806 $ 2,159,751 $ (84,945) (3.9) %


	Three Months Ended March 31,				Change
	2024		2023		Dollars		Percentage
Industry Vertical	(in thousands, except percentages)
Software & Hi-Tech	$	133,194	$	149,798	$	(16,604)	(11.1)	%
Financial Services	124,292		143,850		(19,558)		(13.6)	%
Life Sciences & Healthcare	121,717		96,597		25,120		26.0	%
Consumer Goods, Retail & Travel	117,691		123,659		(5,968)		(4.8)	%
Business Information & Media	106,692		116,158		(9,466)		(8.1)	%
Emerging Verticals	101,143		79,895		21,248		26.6	%
Revenues	$	704,729	$	709,957	$	(5,228)	(0.7)	%

During the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 compared to the same ~~periods~~period in the prior year, Software & Hi-Tech remained the largest industry vertical in the North America segment, which was a result of the continued focus on engaging with our technology ~~customers.~~clients. However, a reduction in revenues from a former top 20 ~~customer~~client and overall declines in the technology sector in the U.S. during ~~the first nine months of~~ 2023 impacted ~~growth~~the revenues in this vertical. Financial Services declined ~~2.4% and grew 7.5%~~13.6% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 largely impacted by ~~the~~ fluctuations in demand from a group of wealth management and insurance ~~customers.~~clients. Consumer Goods, Retail & Travel ~~and Consumer~~ declined ~~11.7% and 6.5%, respectively,~~4.8% during the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, primarily due to declines from ~~customers~~clients in the retail industry, partially offset by growth from our travel ~~customers.~~clients. Business Information & Media declined ~~13.8% and 5.6%, respectively,~~8.1% during the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, primarily due to decline in demand from ~~customers~~clients in the information ~~providing~~services and credit reporting sectors. Life Sciences & Healthcare ~~declined 6.6% and 11.2%, respectively,~~grew 26.0% during the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, primarily due to ~~a ramp down~~increased demand from pharmaceutical and medical device companies as well as an addition of a ~~large transformation program at a customer that was previously one of our top 10 customers.~~new healthcare client in the past 12 months. Emerging Verticals grew ~~18.9% and 16.4%, respectively,~~26.6% during the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 due to growth from various ~~customers~~clients in industries such as energy, education, telecommunications, ~~manufacturing~~industrial materials and ~~automotive.~~professional services.

Europe Segment

During the three months ended ~~September 30, 2023,~~March 31, 2024, Europe’s segment revenues were ~~$465.8~~$460.7 million, representing a decrease of ~~$4.2~~$32.4 million, or ~~0.9%~~6.6%, from the same period last year. Revenues were positively impacted by changes in foreign currency exchange rates during the ~~third~~first quarter of ~~2023~~2024 and had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the ~~third~~first quarter of ~~2022,~~2023, we would have reported a revenue decline of ~~6.1%~~8.0%. Europe’s segment revenues accounted for ~~40.4%~~39.5% and ~~38.3%~~40.7% of total segment revenues during the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. During the ~~third~~first quarter of ~~2023,~~2024, the segment’s operating profit ~~decreased 1.1%~~increased 1.0% to ~~$64.1~~$60.5 million compared to the ~~third~~first quarter of ~~2022.~~2023. Expressed as a percentage of revenues, Europe’s segment operating profit ~~remained at 13.8%~~increased to 13.1% compared to 12.1% in the same period of the prior year.

The increase was positively impacted by higher utilization during the first quarter of 2024 compared to the first quarter of 2023, partially offset by changes in foreign currency exchange rates.

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During the nine months ended September 30, 2023, revenues for the Europe segment increased $68.5 million, or 5.0%, compared to the same period last year and segment operating profit increased $31.9 million, or 20.3%, compared to the same period last year. During the nine months ended September 30, 2023 and 2022, revenues from our Europe segment were 40.8% and 38.2% of total segment revenues, respectively. As a percentage of Europe segment revenues, the Europe segment’s operating profit increased to 13.1% during the nine months ended September 30, 2023 from 11.4% in the corresponding period of 2022. During the first nine months of 2023, segment operating profit was positively impacted by changes in foreign currency exchange rates and a decrease in variable compensation expense, partially offset by lower utilization during the first nine months of 2023 compared to the first nine months of 2022.

The following table presents Europe segment revenues by industry vertical for the periods indicated:


		Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
		2023		2022		Dollars		Percentage		2023		2022		Dollars		Percentage
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Industry Vertical	Industry Vertical	(in thousands, except percentages)
Travel & Consumer		$	146,837	$	147,271	$	(434)	(0.3)	%	$	451,531	$	424,140	$	27,391	6.5	%
Industry Vertical
Industry Vertical																		(in thousands, except percentages)
Consumer Goods, Retail & Travel
Financial Services
Financial Services
Financial Services	Financial Services	114,122		115,372		(1,250)		(1.1)	%	358,091		345,468		12,623		3.7	%
Business Information & Media	Business Information & Media	78,983		87,028		(8,045)		(9.2)	%	248,351		253,610		(5,259)		(2.1)	%
Business Information & Media
Business Information & Media
Software & Hi-Tech
Software & Hi-Tech
Software & Hi-Tech	Software & Hi-Tech	37,545		34,513		3,032		8.8	%	115,137		100,814		14,323		14.2	%
Life Sciences & Healthcare	Life Sciences & Healthcare	15,143		12,569		2,574		20.5	%	44,123		37,378		6,745		18.0	%
Life Sciences & Healthcare
Life Sciences & Healthcare
Emerging Verticals
Emerging Verticals
Emerging Verticals	Emerging Verticals	73,183		73,256		(73)		(0.1)	%	225,169		212,513		12,656		6.0	%
Revenues	Revenues	$	465,813	$	470,009	$	(4,196)	(0.9)	%	$	1,442,402	$	1,373,923	$	68,479	5.0	%
Revenues
Revenues

~~Revenues~~During the three months ended March 31, 2024, compared to the same period in the prior year, Consumer Goods, Retail & Travel ~~& Consumer~~remained the largest industry vertical in the Europe segment. However, revenues in this vertical declined ~~0.3% and grew 6.5%~~7.6%, during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 as compared to the corresponding period in ~~2022~~2023 primarily due to ~~fluctuations in~~decreased demand from ~~customers~~clients in the retail and consumer goods ~~and retail~~ industries. During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, revenues in Financial Services decreased ~~1.1% and increased 3.7%, respectively,~~4.2% primarily driven by decreased revenues from commercial banking, investment banking and payment processing ~~customers and~~clients, partially offset by increased revenues from insurance ~~customers~~clients as well as ~~customers~~clients who provide other financial services. During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, revenues in Business Information & Media decreased ~~9.2% and 2.1%, respectively,~~26.1% primarily due to decreased demand from ~~one of~~two clients who were historically included in our top 10 ~~customers.~~clients. For the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, the 4.0% increase in revenues in the Software & Hi-Tech vertical was largely attributable to the expansion of services provided to one of our top ~~20 customers.~~10 clients. Revenues in Life Sciences & Healthcare increased 27.3% during the three months ended March 31, 2024 with growth experienced from clients in the pharmaceutical and healthcare sectors. Revenues in Emerging Verticals ~~declined 0.1% and grew 6.0%~~increased 1.7% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 with growth experienced from ~~the customers~~clients in the energy ~~and the automotive~~ industry and a client that was previously reported under the Russia segment, partially offset by declines from ~~the customers~~clients in the ~~telecommunications~~professional services industry.

Russia Segment

On March 4, 2022, EPAM announced that it will discontinue services to customers located in Russia and will provide transition support for the customers in this market. In April 2022, we began the process of a phased exit of our operations in Russia and on July 26, 2023, we completed the sale of our remaining holdings in Russia to a third party. As a result of this sale, ~~the Company~~we no longer ~~has~~have operations associated with this 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 exit our operations in Russia.~~

During the nine months ended September 30, 2023, revenues from our Russia segment decreased $43.6 million, or 73.1%, as compared to the corresponding period of 2022 and accounted for 0.5% of total segment revenues. During the nine months ended September 30, 2023, operating loss from the Russia segment was $5.9 million, representing an improvement of $10.4 million, as compared to an operating loss of $16.3 million in the corresponding period last year largely driven by higher costs incurred in the prior year period related to Russia’s invasion of Ukraine and the Company’s decision to exit Russia. As a percentage of Russia segment revenues, the Russia segment’s operating loss increased to 36.5% during the nine months ended September 30, 2023 from 27.3% in the corresponding period of 2022 as we continued to decrease our revenues in the Russia segment.

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~~The following table presents Russia segment revenues by industry vertical for the periods indicated:~~
Three Months Ended
September 30, Change Nine Months Ended
September 30, Change
2023 2022 Dollars Percentage 2023 2022 Dollars Percentage
Industry Vertical (in thousands, except percentages)
Financial Services $ 814 $ 4,741 $ (3,927) (82.8) % $ 7,450 $ 38,477 $ (31,027) (80.6) %
Travel & Consumer 342 1,950 (1,608) (82.5) % 3,770 13,539 (9,769) (72.2) %
Software & Hi-Tech 281 59 222 376.3 % 1,545 1,248 297 23.8 %
Business Information & Media 15 167 (152) (91.0) % 196 786 (590) (75.1) %
Life Sciences & Healthcare (36) 228 (264) (115.8) % 120 444 (324) (73.0) %
Emerging Verticals 129 1,383 (1,254) (90.7) % 2,994 5,227 (2,233) (42.7) %
Revenues $ 1,545 $ 8,528 $ (6,983) (81.9) % $ 16,075 $ 59,721 $ (43,646) (73.1) %

Effects of Inflation

Economies in many countries where we operate have periodically experienced high rates of inflation. Periods of higher inflation may affect various economic sectors in those countries and increase our cost of doing business there. We do not believe that inflation has had a material impact on our business, results of operations or financial condition to date. We continue to track the impact of inflation, particularly on wages, while attempting to minimize its effects through pricing and cost management strategies. A higher-than-normal rate of inflation in the future could adversely affect our operations and financial condition. For a discussion of our potential risks and uncertainties, including those related to inflation, see “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Liquidity and Capital Resources

Capital Resources

Our cash generated from operations has been our primary source of liquidity to fund operations, investments to support the growth of our business and share repurchases. As of ~~September 30, 2023,~~March 31, 2024, our principal sources of liquidity were cash and cash equivalents totaling ~~$1.873~~$1.984 billion, short-term investments totaling ~~$60.4~~$61.6 million as well as $675.0 million of available borrowings under our revolving credit facility. See Note 8 “Debt” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for information regarding our debt.

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Cash Flows

The following table summarizes our cash flows for the periods indicated:

Nine Months Ended
September 30,
2023 2022
(in thousands)
Condensed Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities $ 391,265 $ 278,035
Net cash used in investing activities (46,071) (151,788)
Net cash used in financing activities (143,417) (10,066)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (5,632) (75,876)
Net increase in cash, cash equivalents and restricted cash 196,145 40,305
Cash, cash equivalents and restricted cash, beginning of period 1,683,636 1,449,347
Cash, cash equivalents and restricted cash, end of period $ 1,879,781 $ 1,489,652

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	Three Months Ended March 31,
	2024		2023
	(in thousands)
Condensed Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities	$	129,920	$	87,334
Net cash used in investing activities	(50,990)		(17,717)
Net cash used in financing activities	(112,081)		(15,318)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(19,560)		14,070
Net (decrease)/increase in cash, cash equivalents and restricted cash	(52,711)		68,369
Cash, cash equivalents and restricted cash, beginning of period	2,043,108		1,683,636
Cash, cash equivalents and restricted cash, end of period	$	1,990,397	$	1,752,005

Operating Activities

~~Net~~Our largest source of cash provided by operating activities is cash generated from our professional services that we provide to our clients. Our primary uses of cash from operating activities include compensation to our employees and related costs, payments for leased facilities, various general corporate expenditures and income tax payments. Since the invasion of Ukraine in 2022, our operating activities included using cash on humanitarian efforts for Ukraine and geographic repositioning of our workforce.

Cash provided by operating activities during the ~~nine~~three months ended ~~September 30,~~March 31, 2024 was primarily driven by the Company's cash collections from client contracts, which was partially offset by variable compensation payments and other operating outflows. The first three months of 2024 were positively impacted by lower payments for variable compensation as compared to the first three months of 2023 ~~was $391.3 million,~~attributable to a lower level of financial performance for the year ended December 31, 2023 and were negatively impacted by an increase ~~of $113.2 million~~in days sales outstanding compared to ~~$278.0 million~~a decrease in days sales outstanding during the first three months of 2023. Cash provided by operating activities in the corresponding period of ~~2022. The first nine months of 2022~~2023 was ~~negatively impacted~~primarily driven by ~~an increase in days sales outstanding, a higher level of~~the Company's cash collections from client contracts, which were partially offset by variable compensation payments ~~made based on 2021 performance~~ and ~~cash outflows related to~~ EPAM’s humanitarian efforts for Ukraine and geographic repositioning.

Investing Activities

~~Net~~Our primary uses of cash from investing activities consist of purchases of computer hardware, software and office equipment, as well as investments into office buildings and new businesses. We also use cash for short-term investments and time deposits, and receive cash upon maturity of these deposits. Most of our investments are typically short-term and cash equivalent in nature but we may invest in longer term deposits if the terms are favorable. The cash used in investing activities during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was ~~$46.1~~primarily attributable to $6.7 million ~~compared to $151.8~~used for capital expenditures and $44.1 million used for the acquisitions of businesses, net of cash acquired. The cash used in investing activities during the same period in ~~2022. During the first nine months of~~ 2023 ~~the cash used in investing activities~~ was primarily attributable to ~~$18.4~~$7.9 million used for capital expenditures and ~~$14.0 million~~no cash was used ~~for the acquisition of a business, net of cash acquired, compared to cash used for capital expenditures of $60.1 million, an investment of $60.0 million into time deposits and $10.5 million~~ for the acquisitions of businesses ~~net~~in the corresponding period of ~~cash acquired during the comparable period in 2022.~~2023.

Financing Activities

~~Net cash~~Cash used in financing activities ~~was $143.4 million in the first nine months~~mainly consists of ~~2023 compared to $10.1 million net cash used in financing activities in the same period of 2022. During 2023 we commenced a program to repurchase~~repurchasing shares of EPAM common stock ~~pursuant to the publicly announced~~under a share repurchase program ~~and during the first nine months of~~announced in 2023, ~~we used $128.4 million of cash to repurchase our common stock. In addition, we used cash for the~~ payments of withholding taxes related to net share settlements of restricted stock units, repayments of ~~$28.2 million in~~debt, and settlements of the acquisition-date fair value of contingent consideration related to acquisitions of businesses. Cash provided by financing activities mainly consists of the proceeds from the purchases of shares under our ESPP and exercises of stock options issued under our long-term incentive plans as well as proceeds from debt. We typically do not rely on debt to supplement our cash flows. During the first ~~nine~~three months of ~~2023,~~2024 our main use of cash from financing activities consisted of $120.6 million of payments to repurchase our common stock, compared to ~~$22.1~~$8.5 million ~~paid~~ in the corresponding period of 2022. Net cash used in financing activities during the nine months ended September 30, 2023 included repayments of debt of $2.6 million, compared to $11.5 million of repayments of debt in the corresponding period of 2022.2023. These cash outflows were partially offset by cash received from the exercises of stock options issued under our long-term incentive plans ~~and proceeds from the purchase~~ of ~~shares under our ESPP of $28.6~~$14.6 million in the first ~~nine~~three months of ~~2023,~~2024, compared to ~~$31.4~~$2.5 million received in the corresponding period of ~~2022.~~2023.

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Future Capital Requirements

We believe that our existing cash, cash equivalents and short-term investments, combined with our expected cash flow from operations, will be sufficient to meet our projected operating and capital expenditure requirements for at least the next twelve months and that we possess the financial flexibility to execute our strategic objectives, including the ability to make acquisitions and strategic investments in the foreseeable future. However, the invasion of Ukraine, other various geopolitical events, and the ~~consequences and~~ related measures to contain ~~its~~their impact have caused and may continue to cause material disruptions in ~~both national and global~~ financial markets and economies. ~~The future impact of the invasion of Ukraine and responsive measures cannot be predicted with certainty and~~These disruptions may increase our ~~borrowing costs and other~~ costs of capital, decrease returns on investment, and otherwise adversely affect our business, results of operations, financial condition and liquidity.

Our ability to expand and grow our business in accordance with current plans and to meet our long-term capital requirements will depend on many factors, including the rate at which our cash flows increase or decrease and the availability of public and private debt and equity financing. We may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. Our ability to generate cash is subject to our performance, general economic conditions, industry trends and other factors including the impact of the invasion of Ukraine, as described elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. We may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. To the extent that existing cash, cash equivalents, short-term investments, and operating cash flows are insufficient to fund our future activities and requirements, we may need to raise additional funds through public or private equity or debt financing. If we issue equity securities in order to raise additional funds, substantial dilution to existing stockholders may occur. If we raise cash through the issuance of additional indebtedness, we may be subject to additional contractual restrictions on our ~~business. There~~business and there is no assurance that we would be able to raise additional funds on favorable terms or at all. Our ability to expand and grow our business in accordance with current plans and to meet our long-term capital requirements will depend on many factors, including the rate at which our cash flows increase or decrease and the availability of public and private debt and equity financing.

See Note 14 “Commitments and Contingencies” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” of this Quarterly Report and “Part II. Item 7. Future Capital Requirements” of our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 for information regarding contractual obligations.

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Off-Balance Sheet Commitments and Arrangements

We do not have any material obligations under guarantee contracts or other contractual arrangements other than as disclosed in Note 14 “Commitments and Contingencies” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited).” We have not entered into any transactions with unconsolidated entities where we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to us, or engages in leasing, hedging, or research and development services with us.

Recent Accounting Pronouncements

See Note 1 ~~“Business~~“Organization and Summary of Significant Accounting Policies” to our unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for additional information.

Forward-Looking Statements

This quarterly report on Form 10-Q contains estimates and forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, principally in “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II. Item 1A. Risk Factors.” Our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 also contains estimates and forward-looking statements, principally in “Part I. Item 1A. Risk Factors.” Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our business and operations. Those future events and trends may relate to, among other things, developments relating to the war in Ukraine and escalation of the war in the surrounding region, political and civil unrest or military action in the geographies where we conduct business and operate, difficult conditions in global capital markets, foreign exchange markets and the broader economy, and the effect that these events may have on client demand, our revenues, operations, access to capital and profitability. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks, uncertainties and assumptions as to future events that may not prove to be accurate and are made in light of information currently available to us. Important factors, in addition to the factors described in this quarterly report and in our Annual ~~Report,~~report, may materially and adversely affect our ~~results as indicated in forward-looking statements.~~results. You should read this quarterly report, our Annual ~~Report~~report and the documents that we have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect.

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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 quarterly report and our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks in the ordinary course of our business. These risks primarily result from changes in concentration of credit risks, foreign currency exchange rates and interest rates. In addition, our ~~international~~global operations are subject to risks related to differing economic conditions, civil unrest, political instability or uncertainty, military activities, broad-based sanctions, differing tax structures, and other regulations and restrictions.

Concentration of Credit and Other Credit Risks

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments and trade receivables.

We maintain our cash, cash equivalents and short-term investments with financial institutions. We believe that our credit policies reflect normal industry terms and business risk. We do not anticipate non-performance by the counterparties.

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We have cash in several countries, including Ukraine and Belarus, ~~which could be impacted by the invasion of Ukraine and~~ where the banking sector remains subject to periodic instability; banking and other financial systems in these countries generally do not meet the banking standards of more developed markets, and bank deposits made by corporate entities are not insured. As of ~~September 30, 2023,~~March 31, 2024, we had ~~$51.7~~$57.0 million of cash and cash equivalents in banks in Ukraine and ~~$37.1~~$31.0 million of cash and cash equivalents in banks in Belarus. Cash in Ukraine and Belarus is used for the operational needs of the local entities and cash balances change with the expected operating needs of these entities. We regularly monitor cash held in these countries and, to the extent the cash held exceeds amounts required to support our operations in these countries, we distribute the excess funds into markets with more developed banking sectors to the extent it is possible to do so. In April 2024, Belarus instituted new restrictions on distributing dividends from Belarus to shareholders in certain countries, including the U.S. The restrictions are initially scheduled to remain in place until the end of 2025 and may prevent EPAM from distributing excess funds, if any, out of Belarus. The Company does not expect these new restrictions to have a material impact on our ability to meet our worldwide cash obligations during this period. We place our cash and cash equivalents with financial institutions considered stable in the region, limit the amount of credit exposure with any one financial institution and conduct ongoing evaluations of the credit worthiness of the financial institutions with which we do business. However, a banking crisis, bankruptcy or insolvency of banks that process or hold our funds, or sanctions may result in the loss of our deposits or adversely affect our ability to complete banking transactions, which could adversely affect our business and financial condition.

Trade receivables are generally dispersed across many ~~customers~~clients operating in different industries; therefore, concentration of credit risk is limited and we do not believe significant credit risk existed as of ~~September 30, 2023.~~March 31, 2024. Though our results of operations depend on our ability to successfully collect payment from our ~~customers~~clients for work performed, historically, credit losses and write-offs of trade receivables have not been material to our condensed consolidated financial statements. If ~~any of~~ our ~~customers~~clients enter bankruptcy protection or otherwise take steps to alleviate their financial distress, our credit losses and write-offs of trade receivables could increase, which would negatively impact our results of operations.

Interest Rate Risk

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from variable rates related to ~~our~~ cash and cash equivalent deposits, short-term investments, and our borrowings, mainly under our 2021 Credit Agreement, which is subject to a variety of rates depending on the currency and timing of funds borrowed. We do not believe we are exposed to material direct risks associated with changes in interest rates related to these deposits, investments and borrowings.

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Foreign Exchange Risk

Our global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, we generate revenues principally in euros, British pounds, Swiss francs and Canadian dollars and incur expenditures principally in euros, Polish zlotys, Indian rupees, British pounds, Swiss francs, ~~Mexican pesos,~~ Hungarian forints, ~~Colombian~~Mexican pesos, Canadian dollars, Colombian pesos, Armenian drams and Chinese yuan renminbi. As a result, exchange rate fluctuations in any of these currencies relative to the U.S. dollar could negatively impact our results of operations. During the three months ended ~~September 30, 2023,~~March 31, 2024, approximately ~~33.9%~~32.9% of consolidated revenues and ~~55.7%~~62.7% of consolidated operating expenses were denominated in currencies other than the U.S. dollar.

To manage the risk of fluctuations in foreign currency exchange rates and hedge a portion of our forecasted foreign currency denominated operating expenses incurred in the normal course of business, we implemented a hedging program through which we enter into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee, and Hungarian forint transactions. As of ~~September 30, 2023,~~March 31, 2024, all of EPAM’s foreign exchange forward contracts, were designated as hedges and there is no financial collateral (including cash collateral) required to be posted related to the foreign exchange forward contracts.

During the ~~quarter~~three months ended March 31, 2022, in response to the invasion of Ukraine, EPAM de-designated our Russian ruble foreign exchange forward contracts as hedges and entered into offsetting foreign exchange forward contracts with the same counterparty. The Company determined it was probable the underlying forecasted foreign currency transactions which were hedged would not occur and reclassified the accumulated loss of $43.9 million on the underlying hedge into income which is classified as2024, foreign exchange loss ~~in the condensed consolidated statement of income.~~

~~During the three months ended September 30, 2023, foreign exchange gain~~ was ~~$3.9~~$1.9 million compared to a ~~gain~~loss of ~~$6.7~~$4.6 million reported in the corresponding period last year. Foreign exchange ~~gain~~loss was primarily driven by the impact of fluctuations in foreign currencies on ~~the Company’s~~our assets and liabilities denominated in foreign currencies.

~~Table~~ Exchange rate movements can impact the reported value of ~~Contents~~

our assets and liabilities denominated in currencies other than the U.S. dollar or where the currency of such items is different than the functional currency of the entity where these items were recorded.

Management supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in our business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating its performance. When important to management’s analysis, operating results are compared on the basis of “constant currency,” which is a non-GAAP financial measure. This measure excludes the effect of foreign currency exchange rate fluctuations by translating the current period revenues and expenses into U.S. dollars at the weighted average exchange rates of the prior period of comparison.

During the ~~third~~first quarter of ~~2023,~~2024, we reported a revenue decline of ~~6.1%~~3.8% compared to the ~~third~~first quarter of ~~2022.~~2023. Had our consolidated revenues been expressed in constant currency terms using the exchange rates in effect during the ~~third~~first quarter of ~~2022,~~2023, we would have reported a revenue decline of ~~8.0%~~4.3%. Our revenues ~~were positively impacted by~~denominated in the ~~appreciation of the euro,~~Swiss franc, British pound and ~~Swiss franc, partially offset by~~euro experienced the ~~depreciation of~~most impact from the ~~Russian ruble relative to the U.S. dollar.~~movements in foreign currencies. During the ~~third~~first quarter of ~~2023,~~2024, we reported a decrease in income from operations of ~~36.7%~~8.2% compared to the ~~third~~first quarter of ~~2022.~~2023. Had our consolidated results been expressed in constant currency terms using the exchange rates in effect during the ~~third~~first quarter of ~~2022,~~2023, we would have reported ~~a decrease~~an increase in income from operations of ~~35.2%~~3.1%. Income from operations was ~~negatively~~most significantly impacted by the ~~appreciation~~movements of Polish zloty, ~~Mexican peso and~~ Colombian peso, and ~~positively impacted by the appreciation of the euro, British pound and Swiss franc and depreciation of Indian Rupee relative to the U.S. dollar~~Mexican peso exchange rates during the ~~third~~first quarter of ~~2023~~2024 compared to the same period in the prior year.

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on management’s evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this report, these officers have concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended ~~September 30, 2023~~March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in litigation and claims arising out of our business and operations in the normal course of business. We are not currently a party to any material legal proceeding, nor are we aware of any material legal or governmental proceedings pending or contemplated to be brought against us.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, including our significant operations in Belarus and Ukraine and the material adverse effect the invasion of Ukraine by Russia has had and may have on our operations, business, and financial results, see the risk factors disclosed under the heading “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

The risks and uncertainties that we face are not limited to those set forth in our Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On February 13, 2023, the Board of Directors authorized a repurchase program for up to $500.0 million of our outstanding common stock. EPAM may repurchase shares of its common stock on a discretionary basis from time to time through open market purchases, privately negotiated transactions or other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The share repurchase program has a term of 24 months, may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock.

The following table provides information about the purchases of shares of our common stock during the three months ended ~~September 30, 2023:~~March 31, 2024:

Period Total Number of
Shares Purchased
Average Price Paid
per Share (1)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Plans or
Programs
(in thousands, except per share amounts)
July 1 to July 31, 2023 — $ — — $ 450,052
August 1 to August 31, 2023 232 $ 239.84 232 $ 394,447
September 1 to September 30, 2023 86 $ 264.11 86 $ 371,566
Total 318 318


Period	Total Number of Shares Purchased	Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
	(in thousands, except per share amounts)
January 1 to January 31, 2024	—	$	—	—	$	335,076
February 1 to February 29, 2024	115	$	301.70	115	$	300,195
March 1 to March 31, 2024	281	$	305.24	281	$	214,483
Total	396			396

(1) Average price paid per share in the period includes commission.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

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Item 5. Other Information

Insider Adoption or Termination of Trading Arrangements:

~~On August 8, 2023, Jason Peterson, Senior Vice President, Treasurer, and Chief Financial Officer, adopted a trading arrangement for~~

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During the ~~sale~~quarter ended March 31, 2024, none of ~~securities~~our directors or officers informed us of the ~~Company’s common stock that is intended to satisfy the affirmative defense conditions~~adoption or termination of ~~Securities Exchange Act Rule 10b5-1(c) (a~~a “Rule 10b5-1 ~~Trading Plan”). Mr. Peterson’s Rule~~trading arrangement” or “non-Rule 10b5-1 ~~Trading Plan has a term of one year and provides for the sale of up to 4,250 shares of common stock according to the~~trading arrangement” as those terms ~~of his Rule 10b5-1 Trading Plan.~~are defined in Regulation S-K, Item 408.

On August 25, 2023, Elaina Shekhter, Senior Vice President and Chief Marketing and Strategy Officer, adopted a Rule 10b5-1 Trading Plan. Ms. Shekhter’s Rule 10b5-1 Trading Plan has a term of four months and provides for the sale of up to 8,176 shares of common stock according to the terms of her Rule 10b5-1 Trading Plan.

Item 6. Exhibits


Exhibit Number						Description

3.2						Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed July 5, 2023, SEC file No. 001-35418)
10.1*†						Form of Chief Executive Officer Non-Qualified Stock Option Agreement
10.2*†						Form of Global Non-Qualified Stock Option Agreement for Senior Managers
10.3*†						Form of Chief Executive Officer Restricted Stock Unit Award Agreement
10.4*†						Form of Global Restricted Stock Unit Award Agreement for Senior Managers
31.1*						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.2*						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
32.1*						Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

*						Exhibits filed herewith
†						Indicates management contracts or compensatory plans or arrangements

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~November 2, 2023~~May 9, 2024


			EPAM SYSTEMS, INC.

			By:			/s/ Arkadiy Dobkin
						Name: Arkadiy Dobkin
						Title: Chairman, Chief Executive Officer and President (principal executive officer)

			By:			/s/ Jason Peterson
						Name: Jason Peterson
						Title: Senior Vice President, Chief Financial Officer and Treasurer (principal financial officer)

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	Three Months Ended September 30, 2022
	Reportable Segments
	North America		Europe		Russia		Consolidated Revenues
Customer Locations
Americas	$	723,015	$	23,575	$	501	$	747,091
EMEA	22,621		415,595		—		438,216
APAC	1,237		30,139		—		31,376
CEE	1,510		700		8,027		10,237
Revenues	$	748,383	$	470,009	$	8,528	$	1,226,920