EPAM Systems Inc

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 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 September 30, 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.

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 March 31, 2025, 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, and as of March 31, 2025, we have $20.3 million remaining to be expensed under this humanitarian commitment.

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. 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.

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 and its committees continue their 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 clients to meet their needs while mitigating delivery challenges. EPAM continues to operate productively in more than 55 countries and provides consistent high-quality delivery to our 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 our clients 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 while operating productively in a multitude of locations and providing consistent high-quality delivery to our clients. Our global delivery centers have sufficient resources, including infrastructure and capital, to support ongoing operations while continuing to focus on the safety and security of our employees and their families in Ukraine as well as in the broader region.

Previous wording

During the three and nine months ended September 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.

Current wording

During the three months ended March 31, 2025, 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, 2024.

Previous wording

(1)Includes $19,576 and $18,142 of stock-based compensation expense for the three months ended September 30, 2024 and 2023. respectively, and $58,870 and $49,569 of stock-based compensation expense for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

(1)Includes $23,923 and $22,357 of stock-based compensation expense for the three months ended March 31, 2025 and 2024. respectively.

Previous wording

(2)Includes $22,548 and $19,705 of stock-based compensation expense for the three months ended September 30, 2024 and 2023, respectively, and $63,729 and $59,967 of stock-based compensation expense for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

(2)Includes $24,533 and $22,434 of stock-based compensation expense for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

During the three months ended September 30, 2024, our total revenues increased by 1.3% to $1.168 billion compared to the corresponding period in 2023. During the three months ended September 30, 2024 as compared to the same period last year, revenues have been positively impacted by stabilizing demand for our services and fluctuations in foreign currency exchange rates which increased our revenue growth by 0.4%, partially offset by the sale of our remaining holdings in Russia in the third quarter of 2023.

Current wording

During the three months ended March 31, 2025, our total revenues increased by 11.7% to $1.302 billion compared to the corresponding period in 2024. During the three months ended March 31, 2025 as compared to the same period last year, revenues have been positively impacted by improving demand for our services and acquisitions completed in 2024 and negatively impacted by the fluctuations in foreign currency exchange rates which decreased our revenue growth by 1.7%.

Previous wording

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

Current wording

Revenues by client location for the three months ended March 31, 2025 and 2024 were as follows:

Previous wording

(2)EMEA includes revenues from clients in Western Europe and the Middle East. Beginning in 2024, EMEA also includes revenues from Central and Eastern Europe.

Current wording

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

Previous wording

During the three and nine months ended September 30, 2024, the United States continued to be our largest client location. During the three months ended September 30, 2024, revenues in the United States increased 2.2% to $666.9 million from $652.8 million in the third quarter of 2023, largely due to increased spending at certain large accounts in the region. During the nine months ended September 30, 2024, revenues in the United States increased to $1.997 billion as compared to $1.982 billion in the same period of the prior year.

Current wording

During the three months ended March 31, 2025, the United States continued to be our largest client location. During the three months ended March 31, 2025, revenues in the United States increased 3.2% to $688.5 million from $667.1 million in the first quarter of 2024, largely due to increased spending at certain large accounts in the region as well as revenues from our 2024 acquisitions.

Previous wording

The top three revenue contributing countries by client location in EMEA were the United Kingdom, Switzerland and Germany, generating $126.0 million, $104.3 million and $53.6 million in revenues, respectively, during the three months ended September 30, 2024. Revenues from clients in these three countries were $140.7 million, $91.5 million, and $44.8 million, respectively, in the corresponding period last year. During the nine months ended September 30, 2024, the United Kingdom, Switzerland and Germany performed as EMEA’s top revenue generating locations and contributed $389.7 million, $304.0 million, and $153.6 million, respectively, compared to $448.5 million, $270.9 million, and $132.6 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 nine months ended September 30, 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 $144.6 million, $104.9 million and $51.7 million in revenues, respectively, during the three months ended March 31, 2025. Revenues from clients in these three countries were $135.9 million, $98.4 million, and $50.5 million, respectively, in the corresponding period last year. Revenues in the first quarter of 2025 in the EMEA region were positively impacted by acquisitions completed in 2024 and increased spending at certain large accounts, partially offset by changes in foreign currency exchange rates.

Previous wording

During the three and nine months ended September 30, 2024, revenues from clients in the APAC region increased by $0.4 million or 1.8% mainly due to growth in the Life Sciences & Healthcare vertical and decreased by $3.2 million or 4.2% mainly due to a decline in the Financial Services vertical, compared to the corresponding periods of 2023.

Current wording

During the three months ended March 31, 2025, revenues from clients in the APAC region increased by $1.0 million or 4.3% mainly due to growth in the Life Sciences & Healthcare vertical compared to the corresponding period of 2024.

Previous wording

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 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 are continuously exploring new geographies, markets, and sources to locate talented personnel and present them with competitive compensation programs and educational opportunities.

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

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.

Current wording

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 include costs of relocating our employees and various one-time and unusual expenses such as impairment charges.

Previous wording

During the three months ended September 30, 2024, selling, general and administrative expenses were $206.8 million representing a 6.2% increase as compared to $194.8 million in the corresponding period of 2023. The increase in selling, general and administrative expenses was mainly driven by a $6.1 million increase in professional fee expenses related to our business acquisition efforts, an increase in compensation costs impacted by salary increases and promotions for existing professionals, a $2.8 million increase in stock-based compensation expense and a $1.9 million increase in employee separation costs resulting from the Cost Optimization Programs initiated in the second quarter of 2024 and the third quarter of 2023, compared to the corresponding period of the prior year. See Note 9 “Cost Optimization Programs” for more information regarding the Company’s restructuring programs. The increase in the selling, general and administrative expenses during the quarter was partially offset by a $1.4 million decrease in bad debt expense as compared to the corresponding period of the prior year. Expressed as a percentage of revenues, selling, general and administrative expenses increased by 0.8% to 17.7% for the three months ended September 30, 2024 as compared to the same period from the prior year, primarily driven by the increase in professional fee expenses related to our business acquisition efforts and personnel-related costs as a percentage of revenues.

Current wording

During the three months ended March 31, 2025, selling, general and administrative expenses were $218.9 million representing a 10.3% increase as compared to $198.5 million in the corresponding period of 2024. The increase in selling, general and administrative expenses was mainly driven by the acquisitions of NEORIS and First Derivative completed in the fourth quarter of 2024. Expressed as a percentage of revenues, selling, general and administrative expenses decreased by 0.2% to 16.8% for the three months ended March 31, 2025 as compared to the same period from the prior year, primarily driven by the decrease in personnel-related costs as a percentage of revenues.

Previous wording

During the three and nine months ended September 30, 2024, depreciation and amortization expense was $19.7 million and $63.0 million, respectively, as compared to $23.1 million and $68.6 million, respectively, in the corresponding period last year. The decrease in depreciation and amortization expense during the three and nine months ended September 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 decreased to 1.7% and 1.8% during the three and nine months ended September 30, 2024, respectively, as compared to 2.0% in both corresponding periods of 2023.

Current wording

During the three months ended March 31, 2025, depreciation and amortization expense was $31.4 million as compared to $22.1 million in the corresponding period last year. The increase in depreciation and amortization expense during the three months ended March 31, 2025 was primarily the result of increased amortization of acquired finite-lived intangible assets largely resulting from the acquisitions of First Derivative and NEORIS in 2024, partially offset by lower depreciation on furniture, fixtures, other equipment and computer hardware. Expressed as a percentage of revenues, depreciation and amortization expense increased to 2.5% during the three months ended March 31, 2025 as compared to 1.9% in the corresponding period of 2024.

Previous wording

The decrease in Interest and other income, net during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was largely driven by a $1.0 million decrease in interest income from our cash, cash equivalents and short-term investments and a $1.2 million increase in loss due to the change in fair value of contingent consideration. The increase in Interest and other income, net during the nine months September 30, 2024 as compared to the nine months ended September 30, 2023 was largely driven by an $8.6 million increase in interest income from our cash, cash equivalents and short-term investments, partially offset by a $3.7 million decrease in government grant income and a $2.2 million increase in loss due to the change in fair value of contingent consideration.

Current wording

Interest and other income, net include 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 was $5.8 million during the three months ended March 31, 2025 compared to $15.0 million during the three months ended March 31, 2024. The decrease in Interest and other income, net during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was largely driven by a $12.1 million decrease in interest income from our cash, cash equivalents and short-term investments, partially offset by a $2.8 million gain from the change in fair value of contingent consideration.

Previous wording

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

Current wording

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

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 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.

Current wording

Segment results are based on the segment’s revenues and operating profit, where segment operating profit is defined as segment 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. Intersegment transactions are excluded from the segment’s revenues and operating profit 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. 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, we do 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.

Previous wording

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

Current wording

The following table summarizes revenues from external clients and operating profit, before unallocated expenses, for the Americas segment for the three months ended March 31, 2025, and 2024:

Previous wording

During the three months ended September 30, 2024, revenues for the North America segment increased $19.8 million, or 2.9%, compared to the same period last year and segment operating profit increased $23.1 million, or 17.5%, compared to the same period last year. During the three months ended September 30, 2024, revenues from our North America segment were 60.4% of total segment revenues, an increase from 59.4% reported in the corresponding period of 2023. As a percentage of North America segment revenues, the North America segment’s operating profit increased to 22.1% during the third quarter of 2024 from 19.3% in the third quarter of 2023. This increase is primarily attributable to higher utilization and government incentives received related to conducting R&D activities in Poland, partially offset by an increase in variable compensation expense as a percentage of segment revenues during the third quarter of 2024 compared to the third quarter of 2023.

Current wording

During the three months ended March 31, 2025, revenues for the Americas segment increased $72.4 million, or 10.3%, compared to the same period last year and segment operating profit decreased $4.9 million, or 4.1%, compared to the same period last year. Acquisitions contributed $80.0 million to Americas segment revenues during the three months ended March 31, 2025. During the three months ended March 31, 2025, revenues from our Americas segment were 59.7% of total segment revenues, a decrease from 60.5% reported in the corresponding period of 2024. As a percentage of Americas segment revenues, the Americas segment’s operating profit decreased to 14.8% during the first quarter of 2025 from 17.0% in the first quarter of 2024. This decrease is primarily attributable to the 2024 compensation increases which we were not able to fully offset through pricing increases as well as the impact of lower profitability from acquisitions completed in 2024, partially offset by the recognition of government incentives related to conducting R&D activities in Poland and improved utilization.

Previous wording

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

Current wording

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

Previous wording

During the three and nine months ended September 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 1.6% and 8.2% during the three and nine months ended September 30, 2024, respectively, largely impacted by decline in demand from a group of wealth management and insurance clients. Life Sciences & Healthcare grew 10.6% and 18.7% during the three and nine months ended September 30, 2024, respectively, primarily due to increased demand from pharmaceutical and medical device companies. Consumer Goods, Retail & Travel declined 6.8% and 5.5% during the three and nine months ended September 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 9.8% and 1.6% during the three and nine months ended September 30, 2024, respectively, primarily due to improvement in demand from clients in the information services and entertainment sectors. Emerging Verticals grew 15.5% and 21.5% during the three and nine months ended September 30, 2024, respectively, due to growth from various clients in industries such as energy, professional services, industrial materials and educational platforms.

Current wording

During the three months ended March 31, 2025, Financial Services became the largest industry vertical in the Americas segment and increased 20.2% compared to the first quarter of 2024, benefiting from new revenues from clients gained through our 2024 acquisitions. Software & Hi-Tech grew 1.9% during the three months ended March 31, 2025, which was a result of the continued focus on engaging with our technology clients. Life Sciences & Healthcare grew 3.5% during the three months ended March 31, 2025, primarily due to increased demand from pharmaceutical and medical device companies. Consumer Goods, Retail & Travel declined 2.6% during the three months ended March 31, 2025, primarily due to declines from clients in the retail industry, partially offset by growth from our travel clients. Business Information & Media grew 6.1% during the three months ended March 31, 2025, primarily due to improvement in demand from clients in the publishing and entertainment sectors. Emerging Verticals grew 36.7% during the three months ended March 31, 2025, primarily due to revenues from clients gained through our 2024 acquisitions as well as growth from various clients in industries such as energy and telecommunications.

Previous wording

During the three months ended September 30, 2024, Europe’s segment revenues were $462.9 million, representing a decrease of $2.9 million, or 0.6%, from the same period last year. Revenues were positively impacted by changes in foreign currency exchange rates during the third quarter of 2024 and had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the third quarter of 2023, we would have reported a revenue decline of 1.6%. Europe’s segment revenues accounted for 39.6% and 40.4% of total segment revenues during the three months ended September 30, 2024 and 2023, respectively. During the third quarter of 2024, the segment’s operating profit increased 48.1% to $94.9 million compared to the third quarter of 2023. Expressed as a percentage of revenues, Europe’s segment operating profit increased to 20.5% compared to 13.8% in the same period of the prior year. Segment operating profit as a percentage of revenues was positively impacted by higher utilization and government incentives received related to conducting R&D activities in Poland, partially offset by an increase in variable compensation expense and foreign exchange rates.

Current wording

During the three months ended March 31, 2025, Europe’s segment revenues were $524.5 million, representing an increase of $63.8 million, or 13.8%, from the same period last year. Acquisitions completed in the prior 12 months contributed $50.6 million to Europe segment revenues during the three months ended March 31, 2025. Revenues were negatively impacted by changes in foreign currency exchange rates during the first quarter of 2025 and had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the first quarter of 2024, we would have reported revenue growth of 15.8%. Europe’s segment revenues accounted for 40.3% and 39.5% of total segment revenues during the three months ended March 31, 2025 and 2024, respectively. During the first quarter of 2025, the segment’s operating profit increased 19.6% to $71.3 million compared to the first quarter of 2024. Expressed as a percentage of revenues, Europe’s segment operating profit increased to 13.6% compared to 13.0% in the same period of the prior year. Segment operating profit as a percentage of revenues was positively impacted by the recognition of government incentives related to conducting R&D activities in Poland, changes in foreign exchange rates and results of Cost Optimization Programs combined with improved utilization.

Previous wording

During the three and nine months ended September 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 2.4% and 6.3%, during the three and nine months ended September 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, partially offset by growth from our travel clients. During the three and nine months ended September 30, 2024, revenues in Financial Services grew 9.8% and 1.9%, respectively, primarily due to the improvement in demand from insurance and wealth management clients as well as from commercial banking clients in the third quarter of 2024. During the three and nine months ended September 30, 2024, revenues in Business Information & Media declined 33.8% and 31.2%, respectively, primarily due to decreased demand from two clients who were historically included in our top-10 clients. During the three and nine months ended September 30, 2024, revenues in Software & Hi-Tech grew 25.0% and 10.9%, respectively, primarily due to the expansion of services provided to one of our top 10 clients. Revenues in Life Sciences & Healthcare grew 43.1% and 35.2% during the three and nine months ended September 30, 2024, respectively, primarily due to the growth experienced from clients in the pharmaceutical and healthcare sectors. Revenues in Emerging Verticals increased 0.4% and 0.2% during the three and nine months ended September 30, 2024, respectively, with growth experienced from clients in the energy industry as well as a client that was previously reported under the Russia segment.

Current wording

During the three months ended March 31, 2025, Financial Services became the largest industry vertical in the Europe segment and increased 39.0% compared to the first quarter of 2024, benefiting from new revenues from clients that we gained as part of our 2024 acquisitions. During the three months ended March 31, 2025, revenues in Software & Hi-Tech increased 35.2%, primarily due to the expansion of services provided to one of our top 10 clients as well as the addition of several new clients in the past 12 months. During the three months ended March 31, 2025, revenues in Business Information & Media decreased 16.2%, primarily due to decreased demand from two clients who were historically included in our top-10 clients. Revenues in Life Sciences & Healthcare increased 56.7% during the three months ended March 31, 2025, primarily due to the growth experienced from clients in the pharmaceutical, medical devices and healthcare sectors. Revenues in Emerging Verticals increased 4.9% during the three months ended March 31, 2025, due to growth from various clients in industries such as energy, professional services and industrial materials. Emerging Verticals also benefited from new revenues from clients gained through our 2024 acquisitions.

Previous 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 September 30, 2024, our principal sources of liquidity were cash and cash equivalents totaling $2.036 billion, short-term investments totaling $22.3 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 March 31, 2025, our principal sources of liquidity were cash and cash equivalents totaling $1.174 billion, short-term investments totaling $3.5 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. The first nine months of 2024 were positively impacted by lower payments for variable compensation as compared to the first nine months of 2023, attributable to a lower level of financial performance for the year ended December 31, 2023.

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 three months of 2025 were negatively impacted by a larger increase in days sales outstanding compared to the first three months of 2024 and higher payments for variable compensation as compared to the first three months of 2024, attributable to a higher level of financial performance for the year ended December 31, 2024.

Previous wording

Our primary uses of cash in 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 months ended September 30, 2024 was primarily attributable to $57.1 million used for the acquisitions of businesses, net of cash acquired, and $16.4 million used for capital expenditures compared to $14.0 million used for the acquisitions of businesses, net of cash acquired, $18.4 million used for capital expenditures and an investment of $10.9 million in time deposits during the same period in 2023. Additionally, during the nine months ended September 30, 2024 we received $41.5 million from matured investments in time deposits, compared to $10.9 million received during the same period in 2023.

Current wording

Our primary uses of cash in 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, 2025 was primarily attributable to $9.3 million used for capital expenditures compared to $6.7 million used for capital expenditures in the corresponding period of 2024. During the three months ended March 31, 2025, $3.3 million was provided by investing activities as a result of purchase price adjustments for the acquisitions of businesses compared to $44.1 million used for the acquisitions of businesses, net of cash acquired in the corresponding period of 2024.

Previous wording

Cash used in financing activities mainly consists of repurchasing shares of EPAM common stock under the 2023 Repurchase Program and 2024 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 nine months of 2024, our main use of cash in financing activities consisted of $385.0 million of payments to repurchase our common stock, compared to $128.4 million in the corresponding period of 2023. In addition, we used cash for the payments of withholding taxes related to net share settlements of restricted stock units of $32.5 million in the first nine months of 2024, compared to $28.2 million paid 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 $33.8 million in the first nine months of 2024, compared to $28.6 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 our share repurchase programs, 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 2025, our main use of cash in financing activities consisted of $160.0 million of payments to repurchase our common stock, compared to $120.6 million in the corresponding period of 2024. 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 $19.5 million in the first three months of 2025, compared to $14.6 million received in the corresponding period of 2024.

Previous wording

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, 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, may materially and adversely affect our results. You should read this quarterly report, our Annual 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.

Current wording

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, 2024 also contains estimates and forward-looking statements, principally in “Part I. Item 1A. Risk Factors.” Our estimates and forward-looking statements are based on our current expectations and estimates of future events and trends, which affect or may affect our businesses 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, global trade and the broader economy, the adoption and implementation of artificial intelligence technologies by EPAM and its customers, 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, may materially and adversely affect our results. You should read this quarterly report, our Annual 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.

Previous wording

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, 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.

Current wording

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 correct, 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, 2024 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.