EPAM Systems Inc

Previous wording

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 collaboration frameworks, engineering excellence tools, hybrid teams and our award-winning proprietary global delivery platform.

Current wording

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 client collaboration frameworks, engineering excellence tools, hybrid teams and our award-winning proprietary global delivery platform.

Previous wording

Our customers depend on us to solve their complex technical challenges and rely on our expertise in core engineering, advanced 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 customers. We focus on building long-term partnerships with our customers 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.

Current wording

Our clients depend on us to solve their complex technical challenges and rely on our expertise in core engineering, advanced 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 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.

Previous wording

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 our customers across the world. Our teams of consultants, designers, architects, engineers and trainers have the capabilities and skill sets to deliver business results.

Current wording

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 our clients across the world. Our teams of consultants, designers, architects, engineers and trainers have the capabilities and skill sets to deliver business results.

Previous wording

On February 24, 2022, Russian forces attacked Ukraine and its people and EPAM has repeatedly called for an immediate end to this unlawful and unconscionable attack. EPAM’s highest priority is the safety and security of its employees and their families in Ukraine as well as the broader region, and we have continued to support relocating our employees to lower risk locations, both in Ukraine and to other countries where we operate. The vast majority of our Ukraine employees are in safe locations and operating at levels of productivity consistent with those achieved prior to the attack. As of December 31, 2023, Ukraine remains our largest delivery location with the most delivery professionals. Furthermore, we have maintained our $100 million humanitarian aid commitment to our people in Ukraine in addition to our other donations and volunteer efforts.

Current wording

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 within 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 December 31, 2024, Ukraine continues to be a significant delivery location with a large number of 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.

Previous wording

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 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 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 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 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.

Current wording

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. 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 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 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 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.

Previous wording

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

Current wording

We continue to monitor and respond to the difficult conditions in Ukraine while maintaining a focus on our clients and long-term growth. We execute on our business continuity plans and adapt to developments as they occur to protect the safety of our people and address impacts on our delivery infrastructure, including reallocating work to other geographies within our global footprint. We engage with both our personnel and our clients when navigating delivery challenges and we continue to operate productively in a multitude of locations and provide consistent high-quality delivery to our clients. Our global delivery centers have sufficient resources, including infrastructure and capital, to support ongoing operations while maintaining the safety and security of our employees and their families in Ukraine as well as in the broader region.

Previous wording

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 these expenses continued to be incurred in 2023. 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 year and we expect some of these expenses will continue to occur in subsequent quarters for some time in the future.

Previous wording

Revenues — We recognize revenues when control of goods or services is passed to a customer in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Such control may be transferred over time or at a point in time depending on satisfaction of obligations stipulated by the contract. Consideration expected to be received may consist of both fixed and variable components and is allocated to each separately identifiable performance obligation based on the performance obligation’s relative standalone selling price. Variable consideration usually takes the form of volume-based discounts, service level credits, price concessions or incentives. Determining the estimated amount of such variable consideration involves assumptions and judgment that can have an impact on the amount of revenues reported.

Current wording

Revenues — We recognize revenues when control of goods or services is passed to a client in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Such control may be transferred over time or at a point in time depending on satisfaction of obligations stipulated by the contract. Consideration expected to be received may consist of both fixed and variable components and is allocated to each separately identifiable performance obligation based on the performance obligation’s relative standalone selling price. Variable consideration usually takes the form of volume-based discounts, service level credits, price concessions or incentives. Determining the estimated amount of such variable consideration involves assumptions and judgment that can have an impact on the amount of revenues reported.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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 consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

Current wording

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

Previous wording

(1) Includes $68,797, $47,470 and $51,580 of stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021, respectively.

Current wording

(1) Includes $80,944, $68,797 and $47,470 of stock-based compensation expense for the years ended December 31, 2024, 2023 and 2022, respectively.

Previous wording

(2) Includes $78,933, $52,439 and $60,075 of stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021, respectively.

Current wording

(2) Includes $86,353, $78,933 and $52,439 of stock-based compensation expense for the years ended December 31, 2024, 2023 and 2022, respectively.

Previous wording

We continue to diversify our presence across multiple geographies and verticals, both organically and through strategic acquisitions. During the year ended December 31, 2023, our total revenues decreased 2.8% from the previous year to $4.691 billion. Revenues have been negatively impacted by reduced demand for our services as our customers took action to reduce spending, in light of the uncertain economic environment and to reduce their geographic exposure to the region impacted by the war in Ukraine, and our decision to exit Russia and discontinue services to customers there, which contributed 1.0% to the year-over-year decline. Revenues have been positively impacted by fluctuations in foreign currency exchange rates which partially offset our revenue decline by 0.6% during the year ended December 31, 2023 as compared to the previous year. During the year ended December 31, 2023 we experienced similar customer concentration in our top customer groups as a percentage of total revenues as compared to the previous year.

Current wording

We continue to diversify our presence across multiple geographies and verticals, both organically and through strategic acquisitions. During the year ended December 31, 2024, our total revenues increased 0.8% from the previous year to $4.728 billion. Revenues have been positively impacted by stabilizing demand for our services and fluctuations in foreign currency exchange rates which increased our revenue growth by 0.1% during the year ended December 31, 2024 as compared to the previous year, partially offset by the sale of our remaining holdings in Russia in the third quarter of 2023. Revenues have also been positively impacted by our acquisitions of NEORIS and First Derivative, which in aggregate contributed $65.9 million to our revenues in 2024. During the year ended December 31, 2024, we experienced a decrease in client concentration in our top client groups as a percentage of total revenues as compared to the previous year.

Previous wording

We discuss below the breakdown of our revenues by vertical, customer location, service arrangement type, and customer concentration.

Current wording

We discuss below the breakdown of our revenues by vertical, client location, service arrangement type, and client concentration.

Previous wording

We assign our customers into one of our five main vertical markets or a group of various industries where we are increasing our presence, which we label as “Emerging Verticals.” Emerging Verticals include customers in multiple industries such as energy, utilities, manufacturing, automotive, telecommunications and several others.

Current wording

We assign our clients into one of our five main vertical markets or a group of various industries where we are increasing our presence, which we label as “Emerging Verticals.” Emerging Verticals include clients in multiple industries such as energy, utilities, manufacturing, industrial materials, automotive, telecommunications and several others.

Previous wording

Travel & Consumer remained our largest vertical during 2023, comprising 22.9% of total revenues. Except for Emerging Verticals, which grew at a rate of 8.8% in 2023 over the prior year, all of our verticals experienced revenue declines in 2023 from the prior year.

Current wording

Financial Services became our largest vertical during 2024, comprising 21.6% of total revenues. Financial Services, Life Sciences & Healthcare, and Emerging Verticals experienced revenue growth in 2024 over the prior year, while Consumer Goods, Retail & Travel, Business Information & Media, and Software & Hi-Tech verticals experienced revenue declines in 2024 from the prior year.

Previous wording

Our revenues are sourced from multiple countries, which we assign into four geographic markets identified as Americas, EMEA, APAC, and CEE. We present and discuss our revenues by customer location based on the location of the specific customer site that we serve, irrespective of the location of the headquarters of the customer or the location of the delivery center where the work is performed. Revenues by customer location differ from revenues by reportable segment in our consolidated financial statements included elsewhere in this annual report. Segments are not based on the geographic location of the customers, but rather they are based on the location of the Company’s management responsible for a particular customer.

Current wording

Our revenues are sourced from multiple countries, which we assign into four geographic markets identified as Americas, EMEA, APAC, and CEE. 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 became no longer material. Starting in 2024, revenues from the CEE region are included in the EMEA region. We present and discuss our revenues by client location based on the location of the specific client site that we serve, irrespective of the location of the headquarters of the client or the location of the delivery center where the work is performed. Revenues by client location differ from revenues by reportable segment in our consolidated financial statements included elsewhere in this annual report. Segments are not based on the geographic location of the clients, but rather they are based on the location of the Company’s management responsible for a particular client.

Previous wording

The following table sets forth revenues by customer location by amount and as a percentage of our revenues for the periods indicated:

Current wording

The following table sets forth revenues by client location by amount and as a percentage of our revenues for the periods indicated:

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(4)CEE includes revenues from customers in Belarus, Georgia, Kazakhstan, Russia, Ukraine and Uzbekistan. On July 26, 2023, the Company completed the sale of its remaining holdings in Russia to a third-party.

Current 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.

Previous wording

During the year ended December 31, 2023, revenues in the Americas, our largest geography, were $2.743 billion, decreasing $144.5 million, or 5.0%, from $2.887 billion reported for the year ended December 31, 2022, 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 in the geography. Revenues from this geography accounted for 58.4% of total revenues in 2023, a decrease from 59.9% in the prior year. The United States continued to be our largest customer location contributing revenues of $2.634 billion in 2023 compared to $2.761 billion in 2022.

Current wording

During the year ended December 31, 2024, revenues in the Americas, our largest geography, were $2.835 billion, growing $92.0 million, or 3.4%, from $2.743 billion reported for the year ended December 31, 2023. Revenues in this geography benefited from acquisitions which contributed $95.9 million to revenue growth in 2024. Revenues from Americas accounted for 60.0% of total revenues in 2024, an increase from 58.4% in the prior year. The United States continued to be our largest client location contributing revenues of $2.680 billion in 2024 compared to $2.634 billion in 2023.

Previous wording

Revenues in our EMEA geography were $1.823 billion, an increase of $84.9 million, or 4.9%, over $1.738 billion in the previous year. Revenues in this geography accounted for 38.9% of consolidated revenues in 2023 as compared to 36.0% in the previous year. The top three revenue contributing customer location countries in EMEA were the United Kingdom, Switzerland and the Netherlands generating revenues of $585.2 million, $367.1 million and $236.3 million in 2023, respectively, compared to $619.3 million, $323.4 million and $215.4 million in 2022, respectively. Fluctuations in foreign currency exchange rates with the U.S. dollar, particularly the euro, Swiss franc and the British pound, during 2023 compared to the same period in the prior year positively impacted revenue growth in the EMEA geography by 2.0%. Revenues in the region benefited from acquisitions which contributed $1.9 million to revenue growth in 2023.

Current wording

Revenues in our EMEA geography were $1.793 billion, a decrease of $29.6 million, or 1.6%, from $1.823 billion in the previous year. Revenues in this geography benefited from acquisitions which contributed $28.3 million to revenue growth in 2024. Revenues from EMEA accounted for 37.9% of consolidated revenues in 2024 as compared to 38.9% in the previous year. The top three revenue contributing client location countries in EMEA were the United Kingdom, Switzerland and Germany generating revenues of $523.4 million, $407.8 million and $206.1 million in 2024, respectively, compared to $585.2 million, $367.1 million and $178.5 million in 2023, respectively.

Previous wording

Revenues from customers in locations in our APAC region comprised 2.2% of total revenues in 2023, a level consistent with the prior year.

Current wording

Revenues from clients in locations in our APAC region comprised 2.1% of total revenues in 2024, a decrease from 2.2% in the prior year.

Previous wording

We have long-standing relationships with many of our customers and we seek to grow revenues from our existing customers by continually expanding the scope and size of our engagements. Revenues derived from these customers may fluctuate as these accounts mature, upon beginning or completion of multi-year projects or due to external economic environment trends. We believe there is a significant potential for future growth as we expand our capabilities and offerings within existing customers. In addition, we remain committed to diversifying our client base and adding more customers to our client mix through organic growth and strategic acquisitions, and over the long-term, we expect revenue concentration from our top customers to decrease.

Current wording

We have long-standing relationships with many of our clients and we seek to grow revenues from our existing clients by continually expanding the scope and size of our engagements. Revenues derived from these clients may fluctuate as these accounts mature, upon beginning or completion of multi-year projects or due to external economic environment trends. We believe there is a significant potential for future growth as we expand our capabilities and offerings within existing clients. In addition, we remain committed to diversifying our client base and adding more clients to our client mix through organic growth and strategic acquisitions, and over the long-term, we expect revenue concentration from our top clients to decrease.

Previous wording

The following table presents revenues contributed by our customers by amount and as a percentage of our revenues for the periods indicated:

Current wording

The following table presents revenues contributed by our clients by amount and as a percentage of our revenues for the periods indicated:

Previous wording

The following table shows the number of customers grouped by revenues recognized by the Company for each year presented:

Current wording

The following table shows the number of clients grouped by revenues recognized by the Company for each year presented:

Previous wording

Our service arrangements have been evolving to provide more customized and integrated solutions to our customers where we combine software engineering with customer experience design, business consulting and technology innovation services. We are continually expanding our service capabilities, moving beyond traditional services into business consulting, design and physical product development.

Current wording

Our service arrangements have been evolving to provide more customized and integrated solutions to our clients where we combine software engineering with customer experience design, business consulting and technology innovation services in areas such as cloud platforms, cybersecurity and artificial intelligence. We are continually expanding our service capabilities, moving beyond traditional services into business consulting, design and physical product development.

Previous wording

The principal components of our cost of revenues (exclusive of depreciation and amortization) are salaries, bonuses, fringe benefits, stock-based compensation, project-related travel costs and fees for subcontractors who are assigned to customer projects. Salaries and other compensation expenses of our delivery professionals are reported as cost of revenues regardless of whether the employees are actually performing services for customers during a given period. Our employees are a critical asset, necessary for our continued success and therefore we expect to continue hiring talented employees and providing them with competitive compensation programs.

Current wording

The principal components of our cost of revenues (exclusive of depreciation and amortization) are salaries, bonuses, fringe benefits, stock-based compensation, project-related travel costs and fees for subcontractors who are assigned to 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 services for clients during a given period. Our employees are a critical asset, necessary for our continued success and therefore we expect to continue hiring talented employees and providing them with competitive compensation programs. Additionally, government incentives and assistance related to services performed by delivery professionals and contractors assigned to client projects are reported in cost of revenues.

Previous wording

We manage the utilization levels of our delivery professionals through strategic hiring practices, dynamic management of staff, and efficient staffing of projects. Some of these professionals are hired and trained to work for specific customers or on specific projects and some of our offshore development centers are dedicated to specific customers or projects. Our staff utilization also depends on the general economy and its effect on our customers and their business decisions regarding the use of our services.

Current wording

We manage the utilization levels of our delivery professionals through strategic hiring practices, dynamic management of staff, and efficient staffing of projects. Our staff utilization also depends on the general economy and its effect on our clients and their business decisions regarding the use of our services.

Previous wording

During the year ended December 31, 2023, cost of revenues (exclusive of depreciation and amortization) was $3.257 billion, representing a decrease of 0.9% from $3.287 billion reported last year. The decrease during the year ended December 31, 2023 compared to 2022, was primarily due to a decrease in compensation costs, other than stock-based compensation expense, resulting from a reduction in variable compensation expense attributable to a lower level of financial performance for the year, a 5.0% decline in the average number of production professionals and the impact from the Cost Optimization Program initiated in the third quarter of 2023. See Note 12 “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 $17.7 million and our unbilled business continuity resources of $5.3 million. The decreases were partially offset by higher expenses due to the impact of salary increases and promotions for existing delivery professionals, the relocation of employees to higher cost geographies, a $21.3 million increase in stock-based compensation expense, and a 1.2% unfavorable impact from changes in foreign currency exchange rates.

Current wording

During the year ended December 31, 2024, cost of revenues (exclusive of depreciation and amortization) was $3.277 billion, representing an increase of 0.6% from $3.257 billion reported last year. The increase during the year ended December 31, 2024 compared to 2023, was primarily due to an increase in compensation costs, including a $12.1 million increase in stock-based compensation expense, as well as $19.4 million in reduced benefits from our hedging program and a 0.2% unfavorable impact from changes in foreign currency exchange rates. Compensation costs also increased due to impacts from salary increases and promotions for existing professionals, an increase in variable compensation expense, the relocation of employees to higher cost geographies as well as a 2.2% growth in the average number of production professionals contributed in part by our acquisition of businesses during 2024. The increases were significantly offset by benefits totaling $68.8 million recognized in the second half of 2024 for government incentives related to conducting R&D activities in Poland and a decline in costs associated with our humanitarian efforts for Ukraine of $8.9 million and our unbilled business continuity resources of $9.4 million year-over-year.

Previous wording

During the year ended December 31, 2023, selling, general and administrative expenses were $815.1 million, representing a decrease of 6.6% as compared to $872.8 million reported last year. The decrease in selling, general and administrative expenses during 2023 compared to 2022 was primarily due to a $34.7 million decrease in personnel-related costs, other than stock-based compensation and severance expenses, resulting from a reduction in variable compensation expense attributable to a lower level of financial performance for the year and decreases in headcount, partially offset by the impacts from salary increases and promotions for existing professionals and relocation of employees to higher cost geographies. Other drivers that contributed to the year over year decrease were a $36.9 million decrease of expenses associated with our geographic repositioning of our workforce, and a $9.7 million decrease of expenses associated with our humanitarian efforts for Ukraine. The decreases were partially offset by a $26.5 million increase in stock-based compensation expense and a $29.0 million of employee separation costs incurred as part of the Cost Optimization Program initiated during the year ended December 31, 2023, See Note 12 “Cost Optimization Program” for more information regarding the Company’s restructuring program. Additionally, selling, general and administrative expenses for the year 2022 were impacted by the recognition of $19.6 million of impairment charges related to our long-lived assets in Russia, $17.1 million of charges related to employee separation costs in Russia, and $5.1 million of bad debt expense attributable to customers located in Russia.

Current wording

During the year ended December 31, 2024, selling, general and administrative expenses were $816.3 million, representing an increase of 0.2% as compared to $815.1 million reported last year. The increase in selling, general and administrative expenses during 2024 compared to 2023 was primarily driven by a $14.1 million increase in personnel-related costs, including a $7.4 million increase in stock-based compensation expense, a $10.3 million increase in professional fee expenses related to our business acquisition efforts and a $4.7 million increase in expenses associated with our humanitarian efforts for Ukraine. Personnel-related costs increased due to impacts from salary increases and promotions for existing professionals, increases in variable compensation expense and severance, which reflects the impact from the Cost Optimization Programs initiated in the second quarter of 2024 and the third quarter of 2023. See Note 12 “Cost Optimization Programs” for more information regarding the Company’s restructuring programs. These year-over-year increases were partially offset by an $8.4 million decrease in bad debt expense, a $5.6 million reduction in facility exit costs and a $3.9 million reduction in facilities and infrastructure expenses as compared to the prior year.

Previous wording

Expressed as a percentage of revenues, selling, general and administrative expenses decreased 0.7% to 17.4% for the year ended December 31, 2023 as compared to the prior year primarily driven by reductions in Russia-related impairment charges, expenses associated with the geographic repositioning of our workforce, costs related to our humanitarian efforts for Ukraine, and variable compensation expense.

Current wording

Expressed as a percentage of revenues, selling, general and administrative expenses decreased 0.1% to 17.3% for the year ended December 31, 2024, as compared to the prior year primarily driven by reductions in facility exit costs, bad debt expense and facilities and infrastructure expenses as a percentage of revenues.

Previous wording

During the year ended December 31, 2023, depreciation and amortization expense was $91.8 million, representing a decrease of $0.5 million from $92.3 million reported in the prior year. The decrease in depreciation and amortization expense 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 the same at 1.9% during the year ended December 31, 2023, as compared to 2022.

Current wording

During the year ended December 31, 2024, depreciation and amortization expense was $89.6 million, representing a decrease of $2.2 million from $91.8 million reported in the prior year. The decrease in depreciation and amortization expense was primarily the result of lower depreciation on furniture, fixtures, other equipment and computer hardware, partially offset by increased amortization of software licenses and acquired finite-lived intangible assets. Expressed as a percentage of revenues, depreciation and amortization expense remained the same at 1.9% during the year ended December 31, 2024, as compared to 2023.

Previous wording

Interest and other income/(loss), net includes interest earned on cash and cash equivalents, 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/(loss), net increased from $10.0 million during the year ended December 31, 2022 to $51.1 million during the year ended December 31, 2023. This increase was largely driven by a $40.7 million increase in interest income from our cash and cash equivalents and short-term investments resulting from improved interest rates, and by an $8.3 million decrease in loss due to the change in fair value of contingent consideration, partially offset by a $3.2 million decrease in government grant income and a $2.6 million increase in interest expense.

Current wording

Interest and other income, net includes interest earned on cash, cash equivalents and short-term investments, gains and losses from certain financial instruments, interest expense related to our borrowings, certain government grant income, and changes in the fair value of contingent consideration. Interest and other income, net decreased from $51.1 million during the year ended December 31, 2023 to $46.9 million during the year ended December 31, 2024. This decrease was largely driven by a $4.2 million decrease in government grant income and a $2.9 million increase in loss due to the change in fair value of contingent consideration, partially offset by a $1.1 million increase in other income.

Previous wording

Discussion of Interest and other income/(loss), net from 2022 as compared to 2021 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.

Current wording

Discussion of Interest and other income, net from 2023 as compared to 2022 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

As a global company, we are required to calculate and provide for income taxes in each of the jurisdictions in which we operate. During 2023, 2022 and 2021, we had $325.7 million, $428.7 million and $404.9 million, respectively, in income before provision for income taxes attributed to our foreign jurisdictions. Changes in the geographic mix or level of annual pre-tax income can also affect our overall effective income tax rate.

Current wording

As a global company, we are required to calculate and provide for income taxes in each of the jurisdictions in which we operate. During 2024, 2023 and 2022, we had $391.4 million, $325.7 million and $428.7 million, respectively, in income before provision for income taxes attributed to our foreign jurisdictions. Changes in the geographic mix or level of annual pre-tax income can also affect our overall effective income tax rate.