EPAM Systems Inc

Previous wording

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 and some of these expenses continued during this quarter and we expect some of those expenses will continue to occur in subsequent quarters for some time in the future.

Current wording

The 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. Some of these expenses continued during this quarter and we expect some of these expenses will continue to occur in subsequent quarters for some time in the future.

Previous wording

Our business continues to be disrupted by the war in Ukraine which has created and continues to create uncertainties through March 31, 2024 and beyond. In addition, our business and operating results were negatively impacted in the first three months of 2024 by uneven demand for our services as our clients took action to reduce their spending on information technology services. For the first three months of 2024, our revenues were $1.165 billion, a decrease of 3.8% from $1.211 billion reported for the same period of 2023. Income from operations as a percentage of revenues decreased to 9.5% for the three months ended March 31, 2024 as compared to 9.9% for the three months ended March 31, 2023, largely driven by an increase in compensation costs including stock-based compensation expense as a percentage of revenues, partially offset by a decrease in expenses associated with the geographic repositioning of our workforce and humanitarian efforts for Ukraine.

Current wording

Our business continues to be disrupted by the war in Ukraine which has created and continues to create uncertainties through June 30, 2024 and beyond. In addition, our business and operating results were negatively impacted in the first six months of 2024 by uneven demand for our services. For the first six months of 2024, our revenues were $2.312 billion, a decrease of 2.9% from $2.381 billion reported for the same period of 2023. Income from operations as a percentage of revenues decreased to 10.0% for the six months ended June 30, 2024 as compared to 11.1% for the six months ended June 30, 2023, largely driven by an increase in compensation costs including stock-based compensation and severance expenses as a percentage of revenues, partially offset by a decrease in expenses associated with the geographic repositioning of our workforce and humanitarian efforts for Ukraine.

Previous wording

During the three months ended 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, 2023.

Current wording

During the three and six months ended June 30, 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, 2023.

Previous wording

(1)Includes $22,357 and $16,011 of stock-based compensation expense for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1)Includes $16,937 and $15,416 of stock-based compensation expense for the three months ended June 30, 2024 and 2023. respectively, and $39,294 and $31,427 of stock-based compensation expense for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

(2)Includes $22,434 and $22,568 of stock-based compensation expense for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(2)Includes $18,747 and $17,694 of stock-based compensation expense for the three months ended June 30, 2024 and 2023, respectively, and $41,181 and $40,262 of stock-based compensation expense for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

During the three months ended March 31, 2024, our total revenues decreased by 3.8% to $1.165 billion compared to the corresponding period in 2023. Revenues have been negatively impacted by reduced demand for our services as our clients took action to reduce spending and as a result of 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 0.5% during the three months ended March 31, 2024 as compared to the same period last year.

Current wording

During the three months ended June 30, 2024, our total revenues decreased by 2.0% to $1.147 billion compared to the corresponding period in 2023. Revenues have been negatively impacted by uneven demand for our services, the sale of our remaining holdings in Russia in the third quarter of 2023, and fluctuations in foreign currency exchange rates which decreased our revenue growth by 0.3% during the three months ended June 30, 2024 as compared to the same period last year.

Previous wording

Revenues by client location for the three months ended March 31, 2024 and 2023 were as follows:

Current wording

Revenues by client location for the three and six months ended June 30, 2024 and 2023 were as follows:

Previous wording

(4)CEE includes revenues from clients in Belarus, Georgia, Kazakhstan, Russia, Ukraine and Uzbekistan. 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. Beginning in 2024, revenues from the CEE region are included in the EMEA region.

Current wording

(4)CEE includes revenues from clients in Belarus, Georgia, Kazakhstan, Russia, Ukraine and Uzbekistan. As a result of the Company’s exit from Russia and 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. Beginning in 2024, revenues from the CEE region are included in the EMEA region.

Previous wording

During the three months ended March 31, 2024, the United States continued to be our largest client location. During the three months ended March 31, 2024, revenues in the United States decreased 1.8% to $667.1 million from $679.4 million in the first quarter of 2023, largely due to reduced spending at certain large accounts and generally slower growth in revenues across a range of clients in the region.

Current wording

During the three and six months ended June 30, 2024, the United States continued to be our largest client location. During the three months ended June 30, 2024, revenues in the United States increased 2.0% to $662.6 million from $649.6 million in the second quarter of 2023, largely due to increased spending at certain large accounts in the region. During the six months ended June 30, 2024, revenues in the United States remained consistent at $1.330 billion as compared to $1.329 billion in the same period of the prior year.

Previous wording

The top three revenue contributing client location countries in EMEA were the United Kingdom, Switzerland and the Netherlands, generating $135.9 million, $98.4 million and $51.7 million in revenues, respectively, during the three months ended March 31, 2024. Revenues from clients in these three countries were $155.3 million, $89.9 million, and $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 March 31, 2024 as compared to the same period in the previous year.

Current wording

The top three revenue contributing countries by client location in EMEA were the United Kingdom, Switzerland and Germany, generating $127.8 million, $101.3 million and $49.6 million in revenues, respectively, during the three months ended June 30, 2024. Revenues from clients in these three countries were $152.5 million, $89.5 million, and $45.0 million, respectively, in the corresponding period last year. During the six months ended June 30, 2024, the United Kingdom, Switzerland and Germany performed as EMEA’s top revenue generating locations and contributed $263.7 million, $199.8 million, and $100.0 million, respectively, compared to $307.8 million, $179.4 million, and $87.8 million, respectively, in the corresponding period last year. Revenues in the EMEA region were negatively impacted by reduced spending at certain large accounts during the three and six months ended June 30, 2024 as compared to the same period in the previous year.

Previous wording

Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 71.6% and 70.7% in the first quarter of 2024 and 2023, respectively. The year-over-year increase in the first quarter of 2024 as compared to the corresponding period of the prior year is primarily due to a $6.3 million increase in stock-based compensation expense and the negative impact from the appreciation of foreign currencies in certain of our delivery locations.

Current wording

During the three months ended June 30, 2024, cost of revenues (exclusive of depreciation and amortization) was $810.9 million representing an increase of 0.3% from $808.7 million in the corresponding period of 2023. The increase was primarily due to negative impact from the appreciation of foreign currencies in certain of our delivery locations, reduced benefits from our hedging program, and a $1.5 million increase in stock-based compensation expense. These increases were partially offset by a decrease in costs associated with our humanitarian efforts for Ukraine of $2.3 million, our unbilled business continuity resources of $2.0 million and compensation costs, other than stock-based compensation expense, largely attributable to the 6.4% decrease in the average number of production professionals which reflects the impact from the Cost Optimization Programs initiated in the second quarter of 2024 and the third quarter of 2023, partially offset by the impacts from salary increases and promotions for existing professionals. See Note 9 “Cost Optimization Programs” for more information regarding the Company’s restructuring programs. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 70.7% and 69.1% in the second quarter of 2024 and 2023, respectively. The year-over-year increase in the second quarter of 2024 as compared to the corresponding period of the prior year is primarily due to an increase in personnel related costs as a percentage of revenues.

Previous wording

During the three months ended March 31, 2024, cost of revenues (exclusive of depreciation and amortization) was $834.3 million representing a decrease of 2.5% from $855.9 million in the corresponding period of 2023. The decrease was primarily due to a decrease in compensation costs other than stock-based compensation expense largely attributable to the 9.2% decrease in the average number of production professionals 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 year-over-year decrease were a decline in costs associated with our humanitarian efforts for Ukraine of $1.8 million and 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 the negative impact from the appreciation of foreign currencies in certain of our delivery locations.

Current wording

During the six months ended June 30, 2024, cost of revenues (exclusive of depreciation and amortization) was $1.645 billion representing a decrease of 1.2% from $1.665 billion in the corresponding period of 2023. The decrease was primarily due to a decrease in compensation costs other than stock-based compensation expense largely attributable to the 7.7% decrease in the average number of production professionals which reflects the impact from the Cost Optimization Programs initiated in the second quarter of 2024 and the third quarter of 2023, partially offset by the impacts from salary increases and promotions for existing professionals. See Note 9 “Cost Optimization Programs” for more information regarding the Company’s restructuring programs. Other drivers that contributed to the year-over-year decrease were a decline in costs associated with our humanitarian efforts for Ukraine of $4.1 million and our unbilled business continuity resources of $9.4 million. The decreases were partially offset by higher expenses due to a $7.9 million increase in stock-based compensation expense, the negative impact from the appreciation of foreign currencies in certain of our delivery locations and reduced benefits from our hedging program. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 71.2% and 69.9% for the six months ended June 30, 2024 and 2023, respectively. The year-over-year increase is primarily due to a $7.9 million increase in stock-based compensation expense and the negative impact from the appreciation of foreign currencies in certain of our delivery locations.

Previous wording

During the three months ended March 31, 2024, selling, general and administrative expenses were $198.5 million representing a 6.3% decrease as compared to $211.9 million in the corresponding period of 2023. The decrease in selling, general and administrative expenses was primarily driven by a $9.2 million decrease in personnel-related costs resulting from a decrease in headcount which reflects the impact from the Cost Optimization Program initiated in the third quarter of 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 Company’s restructuring program. Selling, general and administrative expenses during the quarter also benefited from a $2.4 million reduction in facilities and infrastructure expenses and a $1.6 million decrease in bad debt expense as compared to the corresponding period of the prior year.

Current wording

During the three months ended June 30, 2024, selling, general and administrative expenses were $194.1 million representing a 0.2% decrease as compared to $194.4 million in the corresponding period of 2023. Selling, general and administrative expenses during the quarter benefited primarily from a $1.2 million reduction in facilities and infrastructure expenses and a $2.8 million decrease in bad debt expense as compared to the corresponding period of the prior year. The decrease in selling, general and administrative expenses was partially offset by the $9.2 million of employee separation costs resulting from the Cost Optimization Programs initiated in the second quarter of 2024 and the third quarter of 2023, partially offset by the impacts from salary increases and promotions for existing professionals. See Note 9 “Cost Optimization Programs” for more information regarding the Company’s restructuring programs. Expressed as a percentage of revenues, selling, general and administrative expenses increased by 0.2% to 16.9% for the three months ended June 30, 2024 as compared to the same period from the prior year, primarily driven by the increase in personnel-related costs as a percentage of revenues.

Previous wording

Expressed as a percentage of revenues, selling, general and administrative expenses decreased by 0.5% to 17.0% for the three months ended March 31, 2024 as compared to the same period from the prior year, primarily driven by the decrease in personnel-related costs.

Current wording

During the six months ended June 30, 2024, selling, general and administrative expenses were $392.5 million representing a 3.4% decrease as compared to $406.3 million in the corresponding period of 2023. The decrease in selling, general and administrative expenses was primarily driven by a $3.7 million reduction in facilities and infrastructure expenses and a $4.4 million decrease in bad debt expense as compared to the corresponding period of the prior year. Additionally, during the six months ended June 30, 2024, selling, general and administrative expenses benefited from the $4.6 million decrease in personnel-related costs resulting from a decrease in headcount which reflects the impact from the Cost Optimization Programs initiated in the second quarter of 2024 and the third quarter of 2023, partially offset by the impacts from salary increases and promotions for existing professionals. See Note 9 “Cost Optimization Programs” for more information regarding the Company’s restructuring programs. Expressed as a percentage of revenues, selling, general and administrative expenses decreased by 0.2% to 16.9% for the six months ended June 30, 2024 as compared to the same period from the prior year, primarily driven by the reduction in facilities and infrastructure expenses as a percentage of revenues.

Previous wording

During the three months ended March 31, 2024, depreciation and amortization expense was $22.1 million as compared to $22.8 million in the corresponding period last year. The decrease in depreciation and amortization expense during the three months ended March 31, 2024 was primarily the result of lower depreciation on furniture, fixtures, other equipment and computer hardware, partially offset by increased depreciation on software licenses and increased amortization of acquired finite-lived intangible assets. Expressed as a percentage of revenues, depreciation and amortization expense remained consistent at 1.9% during both the three months ended March 31, 2024 and 2023.

Current wording

During the three and six months ended June 30, 2024, depreciation and amortization expense was $21.1 million and $43.3 million, respectively, as compared to $22.8 million and $45.6 million, respectively, in the corresponding period last year. The decrease in depreciation and amortization expense during the three and six months ended June 30, 2024 was primarily the result of lower depreciation on furniture, fixtures, other equipment and computer hardware, partially offset by increased amortization of acquired finite-lived intangible assets. Expressed as a percentage of revenues, depreciation and amortization expense remained consistent at 1.9% during the three and six months ended June 30, 2024, as well as in both corresponding periods of 2023.

Previous wording

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 $11.5 million during the three months ended March 31, 2023 to $15.0 million during the three months ended March 31, 2024. This increase in Interest and other income, net during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was largely driven by a $7.1 million increase in interest income from our cash, cash equivalents and short-term investments, driven by improved interest rates, partially offset by a $0.8 million increase in loss due to the change in fair value of contingent consideration and a $2.8 million decrease in government grant income.

Current wording

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, and changes in the fair value of contingent consideration. Interest and other income, net increased from $11.7 million and $23.2 million during the three and six months ended June 30, 2023, respectively, to $12.0 million and $27.1 million during the three and six months ended June 30, 2024, respectively. This increase in Interest and other income, net during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 was largely driven by a $2.5 million increase in interest income from our cash, cash equivalents and short-term investments driven by improved interest rates, partially offset by a $1.4 million decrease in government grant income. The increase in Interest and other income, net during the six months June 30, 2024 as compared to the six months ended June 30, 2023 was largely driven by a $9.6 million increase in interest income from our cash, cash equivalents and short-term investments, partially offset by a $4.2 million decrease in government grant income and a $1.0 million increase in loss due to the change in fair value of contingent consideration.

Previous wording

Our effective tax rate was 6.0% for the three months ended March 31, 2024 and 19.6% for the three months ended March 31, 2023. The decrease in the effective tax rate in the three months ended March 31, 2024, as compared to the corresponding period in the prior year, is primarily attributable to higher excess tax benefits recorded upon vesting or exercise of stock-based awards in the current period. Excess tax benefits recorded upon vesting or exercise of stock-based awards were $20.9 million during the three months ended March 31, 2024 and $6.0 million during the three months ended March 31, 2023. Additionally, during the three months ended March 31, 2024 the Company’s effective tax rate benefited from the recognition of one-time benefits of $2.3 million, resulting from our decision to change the tax status and to classify certain of its foreign subsidiaries as disregarded entities for U.S. income tax purposes, and $1.7 million resulting from the reversal of a reserve for an uncertain tax position.

Current wording

We recorded a tax shortfall upon vesting or exercise of stock awards of $0.1 million during the three months ended June 30, 2024 and excess tax benefits upon vesting or exercise of stock awards of $20.8 million during the six months ended June 30, 2024, compared to excess tax benefits of $7.4 million and $13.4 million during the three and six months ended June 30, 2023, respectively. Additionally, during the three and six months ended June 30, 2024, the effective tax rate benefited from the recognition of one-time benefits of $0.1 million and $2.3 million, respectively, resulting from our decision to change the tax status and to classify certain of our foreign subsidiaries as disregarded entities for U.S. income tax purposes. During the three months ended June 30, 2024, we recorded tax expense of $1.2 million resulting from the recognition of a deferred tax liability associated with unremitted earnings of subsidiaries.

Previous wording

Our operations 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.

Current wording

Our operations 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 and 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.

Previous wording

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

Current wording

Revenues from external clients and operating profit/(loss), before unallocated expenses, by reportable segment for the three and six months ended June 30, 2024 and 2023 were as follows:

Previous wording

During the three months ended March 31, 2024, revenues for the North America segment decreased $5.2 million, or 0.7%, compared to the same period last year and segment operating profit decreased $2.2 million, or 1.8%, compared to the same period last year. During the three months ended March 31, 2024, revenues from our North America segment were 60.5% of total segment revenues, an increase from 58.6% reported in the corresponding period of 2023. As a percentage of North America segment revenues, the North America segment’s operating profit margin decreased to 17.1% during the first quarter of 2024 from 17.3% in the first quarter of 2023, mainly impacted by the changes in foreign currency exchange rates.

Current wording

During the three months ended June 30, 2024, revenues for the North America segment increased $18.6 million, or 2.7%, compared to the same period last year and segment operating profit decreased $8.8 million, or 6.7%, compared to the same period last year. During the three months ended June 30, 2024, revenues from our North America segment were 60.9% of total segment revenues, an increase from 58.1% reported in the corresponding period of 2023. As a percentage of North America segment revenues, the North America segment’s operating profit decreased to 17.6% during the second quarter of 2024 from 19.4% in the second quarter of 2023. This decrease is primarily attributable to an increase in variable compensation expense and negative impact of foreign exchange rates, partially offset by higher utilization.

Previous wording

During the three months ended March 31, 2024 compared to the same 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 clients. However, a reduction in revenues from a former top 20 client and overall declines in the technology sector in the U.S. during 2023 impacted the revenues in this vertical. Financial Services declined 13.6% during the three months ended March 31, 2024 largely impacted by fluctuations in demand from a group of wealth management and insurance clients. Consumer Goods, Retail & Travel declined 4.8% during the three months ended March 31, 2024, primarily due to declines from clients in the retail industry, partially offset by growth from our travel clients. Business Information & Media declined 8.1% during the three months ended March 31, 2024, primarily due to decline in demand from clients in the information services and credit reporting sectors. Life Sciences & Healthcare grew 26.0% during the three months ended March 31, 2024, primarily due to increased demand from pharmaceutical and medical device companies as well as an addition of a new healthcare client in the past 12 months. Emerging Verticals grew 26.6% during the three months ended March 31, 2024 due to growth from various clients in industries such as energy, education, telecommunications, industrial materials and professional services.

Current wording

During the three and six months ended June 30, 2024 compared to the same 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 clients. However, a reduction in revenues from a former top 20 client and overall declines in the technology sector in the U.S. during 2023 impacted the revenues in this vertical. Financial Services declined 8.7% and 11.2% during the three and six months ended June 30, 2024, respectively, largely impacted by decline in demand from a group of wealth management and insurance clients. Life Sciences & Healthcare grew 20.6% and 23.3% during the three and six months ended June 30, 2024, respectively, primarily due to increased demand from pharmaceutical and medical device companies. Consumer Goods, Retail & Travel declined 5.0% and 4.9% during the three and six months ended June 30, 2024, respectively, primarily due to declines from clients in the retail industry, partially offset by growth from our travel clients. Business Information & Media grew 4.2% and declined 2.3% during the three and six months ended June 30, 2024, respectively, primarily due to the fluctuations in demand from clients in the information services and credit reporting sectors. Emerging Verticals grew 22.7% and 24.6% during the three and six months ended June 30, 2024, respectively, due to growth from various clients in industries such as energy, professional services, telecommunications, industrial materials and educational platforms.

Previous wording

During the three months ended March 31, 2024, Europe’s segment revenues were $460.7 million, representing a decrease of $32.4 million, or 6.6%, from the same period last year. Revenues were positively impacted by changes in foreign currency exchange rates during the first quarter of 2024 and had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the first quarter of 2023, we would have reported a revenue decline of 8.0%. Europe’s segment revenues accounted for 39.5% and 40.7% of total segment revenues during the three months ended March 31, 2024 and 2023, respectively. During the first quarter of 2024, the segment’s operating profit increased 1.0% to $60.5 million compared to the first quarter of 2023. Expressed as a percentage of revenues, Europe’s segment operating profit 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.

Current wording

During the three months ended June 30, 2024, Europe’s segment revenues were $448.0 million, representing a decrease of $35.5 million, or 7.3%, from the same period last year. Revenues were negatively impacted by changes in foreign currency exchange rates during the second quarter of 2024 and had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the second quarter of 2023, we would have reported a revenue decline of 6.9%. Europe’s segment revenues accounted for 39.1% and 41.3% of total segment revenues during the three months ended June 30, 2024 and 2023, respectively. During the second quarter of 2024, the segment’s operating profit decreased 15.8% to $54.5 million compared to the second quarter of 2023. Expressed as a percentage of revenues, Europe’s segment operating profit decreased to 12.2% compared to 13.4% in the same period of the prior year. Segment operating profit was negatively impacted by an increase in variable compensation expense and foreign exchange rates, partially offset by higher utilization.

Previous wording

During the three months ended March 31, 2024, compared to the same period in the prior year, Consumer Goods, Retail & Travel remained the largest industry vertical in the Europe segment. However, revenues in this vertical declined 7.6%, during the three months ended March 31, 2024 as compared to the corresponding period in 2023 primarily due to decreased demand from clients in the retail and consumer goods industries. During the three months ended March 31, 2024, revenues in Financial Services decreased 4.2% primarily driven by decreased revenues from commercial banking, investment banking and payment processing clients, partially offset by increased revenues from insurance clients as well as clients who provide other financial services. During the three months ended March 31, 2024, revenues in Business Information & Media decreased 26.1% primarily due to decreased demand from two clients who were historically included in our top 10 clients. For the three months ended 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 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 increased 1.7% during the three months ended March 31, 2024 with growth experienced from clients in the energy industry and a client that was previously reported under the Russia segment, partially offset by declines from clients in the professional services industry.

Current wording

During the three and six months ended June 30, 2024, compared to the same period in the prior year, Consumer Goods, Retail & Travel remained the largest industry vertical in the Europe segment. However, revenues in this vertical declined 8.8% and 8.2%, during the three and six months ended June 30, 2024, respectively, as compared to the corresponding periods in 2023 primarily due to decreased demand from clients in the retail and consumer goods industries. During the three and six months ended June 30, 2024, revenues in Financial Services grew 0.5% and declined 1.9%, respectively, primarily due to the fluctuations in demand from commercial banking, investment banking, payment processing and insurance clients. During the three and six months ended June 30, 2024, revenues in Business Information & Media declined 34.0% and 30.0%, respectively, primarily due to decreased demand from two clients who were historically included in our top 10 clients. During the three and six months ended June 30, 2024, revenues in Software & Hi-Tech grew 4.2% and 4.1%, respectively, primarily due to the expansion of services provided to one of our top 10 clients. Revenues in Life Sciences & Healthcare grew 34.8% and 31.0% during the three and six months ended June 30, 2024, respectively, primarily due to the growth experienced from clients in the pharmaceutical and healthcare sectors. Revenues in Emerging Verticals declined 1.6% and grew 0.1% during the three and six months ended June 30, 2024, respectively, with declines experienced from clients in the professional services and telecommunications industries, and growth experienced from clients in the energy industry as well as a client that was previously reported under the Russia segment.

Previous wording

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 March 31, 2024, our principal sources of liquidity were cash and cash equivalents totaling $1.984 billion, short-term investments totaling $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.

Current wording

Our cash generated from operations has been our primary source of liquidity to fund operations, to repurchase shares and make investments to support the growth of our business. As of June 30, 2024, our principal sources of liquidity were cash and cash equivalents totaling $1.787 billion, short-term investments totaling $61.5 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.

Previous wording

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.

Current wording

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. The first six months of 2024 were positively impacted by lower payments for variable compensation as compared to the first six months of 2023 attributable to a lower level of financial performance for the year ended December 31, 2023 and were negatively impacted by a larger increase in days sales outstanding compared to the first six months of 2023.

Previous wording

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 three months ended March 31, 2024 was primarily attributable to $6.7 million 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 2023 was primarily attributable to $7.9 million used for capital expenditures and no cash was used for the acquisitions of businesses in the corresponding period of 2023.

Current wording

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 six months ended June 30, 2024 was primarily attributable to $11.5 million used for capital expenditures and $56.7 million used for the acquisitions of businesses, net of cash acquired. The cash used in investing activities during the same period in 2023 was primarily attributable to $14.8 million used for capital expenditures and an investment of $10.9 million into time deposits.

Previous wording

Cash used in financing activities mainly consists of repurchasing shares of EPAM common stock under a share repurchase program announced in 2023, payments of withholding taxes related to net share settlements of restricted stock units, repayments of 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 three months of 2024 our main use of cash from financing activities consisted of $120.6 million of payments to repurchase our common stock, compared to $8.5 million in the corresponding period of 2023. These cash outflows were partially offset by cash received from the exercises of stock options issued under our long-term incentive plans of $14.6 million in the first three months of 2024, compared to $2.5 million received in the corresponding period of 2023.

Current wording

Cash used in financing activities mainly consists of repurchasing shares of EPAM common stock under the 2023 Repurchase Program, payments of withholding taxes related to net share settlements of restricted stock units, repayments of 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 six months of 2024, our main use of cash from financing activities consisted of $335.1 million of payments to repurchase our common stock, compared to $49.9 million in the corresponding period of 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 $32.5 million in the first six months of 2024, compared to $25.6 million received in the corresponding period of 2023.