Our employees isare a key factor in our ability to grow our revenues and meetserve our clients’ needs.customers. We have dedicated full-time employees thatwho oversee all aspects of our human capital management process. Weprocess including a professional talent acquisition team whose objective is to locate and attract qualified and experienced IT professionals within various EPAM locations. It is critical that we effectively plan our short-term and long-term recruitment needs and deploy the necessary personnel and processes to optimize utilization and to quickly satisfy the demands of our clients.customers. As our business grows, we also focus on hiring and retaining individuals with appropriate skills to fill our executive, finance, legal, HR and other key management positions.

At December 31, 2015, 20142018, 2017 and 2013,2016, we had a total of 18,354, 14,10930,156, 25,962 and 11,05622,383 employees, respectively. Of these employees, as of December 31, 2015, 20142018, 2017 and 2013,2016, respectively, 16,078, 11,82426,760, 22,998 and 9,34019,670 were revenue generating IT professionals.

In our competitive industry, the ability to hire and retain highly-skilled information technology professionals is critical to our success. We believe the quality of our employees serves as a key point of differentiation in how we deliver a superior value proposition to our clients.customers. To attract, retain and motivate our IT professionals, we offer a challenging work environment, ongoing skills development initiatives, attractive career advancement, and promotion opportunities thus providing an environment and culture that rewards entrepreneurial initiative and performance.

QualityHistorically, we developed our base of IT professionals by hiring highly-qualified, experienced professionals from Eastern Europe and Process Management

Our proprietary ISO 9001:2008 and CMMI-certified Quality Management System has been documented, implemented and maintained to ensure the timely delivery of software development services to our clients. We have also developed sophisticated project management techniques facilitated through our Project Management Center, a web-based collaborative environment for software development, which we consider critical to meeting or exceeding the service levels required by our clients.

Due to the industry and geographic diversity of our operations and services, our operations are subject to a variety of rules and regulations. Several foreign and U.S. federal and state agencies regulate various aspects of our business. See “Item 1A. Risk Factors — Risks Relating to Our Business — We are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions and the Foreign Corrupt Practices Act, or FCPA, and similar anti-corruption laws. If we are not in compliance with applicable legal requirements, we may be subject to civil or criminal penalties and other remedial measures.”measures”.

We have experienced rapid growth and significantly expanded our business over the past several years, both organically and through strategic acquisitions. We have also grown our support function headcount, including finance, legal and other areas. Our rapid growth has placed, and will continue to place, significant demands on our management and our administrative, operational and financial infrastructure. Continued expansion increases the challenges we face in:

Moreover, we intend to continue our expansion for the foreseeable future toand pursue existing and potential marketavailable opportunities. As we introduce new services or enter into new markets, we may face new market, technological, operational, compliance and administrative risks and challenges, and we may not be able to mitigate these risks and challenges to successfully grow those services or markets.challenges. As a result of these problemsand other challenges associated with expansion, we may not be able to achieve our anticipated growth and our business, prospects, financial condition and results of operations could be materially adversely affected.

The ability to hire and retain highly-skilledhighly skilled information technology professionals, including project managers, IT engineers and other technical personnel, is critical to our success. To maintain and renew existing engagements and obtain new business, we must attract, hire, train and retain skilled IT professionals,personnel with diverse skill sets and competencies, including experiencedthose with management IT professionals.experience, across the geographically diverse locations in which we operate. Competition for IThighly skilled professionals can beis intense in the markets where we operate, and accordingly, we may not be ableexperience significant employee turnover rates due to such competition. If we are unable to attract, hire, train or retain all of the IT professionals necessaryhighly skilled personnel, our ability to meet ourand develop ongoing and future business needs. Consequently, we may have to forgo projects due to lackcould be jeopardized and our business, financial condition and results of resources or inability to staff projects optimally.operations could be adversely affected.

A significant increase in the attrition rate among IT professionals with specialized skills could decrease our operating efficiency and productivity and could lead to a decline in demand for our services. In addition, any reductions in headcount for economic or business reasons, however temporary, could negatively affect our reputation as an employer, and our ability to hire IT professionalspersonnel to meet our business requirements.requirements may suffer.

Wage costs for ITindustry professionals in CIS, CEE and APAC, and certain other geographiesthe emerging markets in which we operatehave significant operations and delivery centers are lower than comparable wage costs in more developed countries. However, wage costs in the service industry in these countries may increase at a faster rate than in the past, which ultimately may make us less competitive unless we are able to increase the efficiency and productivity of our IT professionals as well as the prices we can charge forpeople. Wage inflation may also increase our services. Increases in wage costs maycost of providing services and reduce our profitability.

Additionally, we have granted certain equity-based awards under our stock incentive plans and entered into certain other stock-based compensation arrangements in the past, and expect to continue this practice. The expenses associated with stock-based compensation may reduce the attractiveness to us of issuing equity awards under our equity incentive plan. However, if we do not grant equity awards, or if we reduce the value of equity awards we grant, we may not be able to attract and retain key personnel. If we grant more equity awards to attract and retain key personnel, the expenses associated with such additional equity awards could materially adversely affect our results of operations. Furthermore, any new regulations, volatility in the stock market and other factors could diminish our use and the value of our equity-based awards. This could put us at a competitive disadvantage or cause us to consider changes to our pay structure. The issuance of equity-based compensation would also resultresults in additional dilution to our stockholders.

Our future success heavily depends upon the continued services of our senior executives and other key employees. If one or more of our senior executives or key employees are unable or unwilling to continue in their present positions, it could disrupt our business operations, and we may not be able to replace them easily or at all. In addition, competition for senior executives and key personnel in our industry is intense, and we may be unable to retain our senior executives and key personnel or attract and retain new senior executives and key personnel in the future, in which case our business may be severely disrupted.

Our profitability is significantly impacted by our utilization and productivity levels of fixed-cost resources, such as our professionals as well as other resources such as computers and office space. Our ability to manage our utilization levels depends significantly on our ability to hire and train high-performing professionals, to plan effectively for future needs, to staff members to them. Additionally, there could be unauthorized disclosure orprojects appropriately, and on the general economy and its effect on our customers and their business decisions regarding the use of our technical knowledge, practicesservices. If we experience a slowdown or procedures by such personnel. Ifstoppage of work for any dispute arises between our senior executivescustomer or key personnel and us,on any non-competition, non-solicitation and non-disclosure agreementsproject for which we have withdedicated personnel or facilities, we may not be able to reallocate these assets to other customers and projects to keep their utilization and productivity levels high. If we are not able to maintain optimal resource utilization levels without corresponding cost reductions or price increases, our senior executives or key personnel might not provide effective protection to us, especially in CIS and CEE countries where some of our senior executives and key employees reside, in light of uncertainties with legal systems in CIS and CEE countries.profitability will suffer.

We are a global company with substantial international operations. Our revenues from clients outside North America represented 45.9%, 48.5% and 47.8% of our revenues excluding reimbursable expenses for 2015, 2014 and 2013. The majority of our employees, along with our development and delivery centers, are located in the CIS and CEE. The global nature of our business creates operational and economic risks.

Risks inherent in conducting international operations include:

We earnOur global operations are conducted predominantly in U.S. dollars, however we generate a significant portion of our revenues and incur expenditures in various currencies other than U.S. dollars. The majority of our expensescustomers are in multiple currencies, which exposesNorth America and Western Europe, while most of our personnel and delivery centers are located in lower cost locations. These factors expose us to foreign exchange risks relating to revenues, receivables, compensation, purchases, capital expenditures, receivables and capital expenditures.other balance-sheet items. As we continue to leverage our global delivery model, a larger portion of our revenues and incurred expenses may be in currency other than U.S. dollars. In some countries, we may be subject to regulatory or practical restrictions on the movement of cash and the exchange of foreign currencies, which would limit our ability to use cash across our global operations and increase our exposure to currency fluctuations. This risk could increase as we continue expanding our global operations, which may include entering emerging markets that may be more likely to impose these types of restrictions. Currency exchange volatility caused by political or economic instability or other factors, could also materially impact our results. See “Item 7A. Quantitative and Qualitative Disclosures aboutAbout Market Risk.” The IT services

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

Our business may be negatively affected by instability, disruption or destruction in a geographic region in which we operate, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or manmade disasters, including famine, flood, fire, earthquake, storm or disease. Such events may cause clientscustomers to delay their decisions on spending for ITthe services we provide and give rise to sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to our people and to physical facilities and operations around the world, whether the facilities are ours or those of our clients,customers, which could materially adversely affect our financial results. By disrupting communications and travel, giving rise to travel restrictions, and increasing the difficulty of obtaining and retaining highly-skilled and qualified IT professionals, these events could make it difficult or impossible for us to deliver services to some or all of our clients.customers. Travel restrictions could cause us to incur additional unexpected labor costs and expenses or could restrain our ability to retain the skilled IT professionalspersonnel we need for our operations. In addition, any extended disruptions of electricity, other public utilities or network services at our facilities, as well as system failures at, or security breaches in, our facilities or systems, could also adversely affect our ability to serve our clients.customers.

We have significant operations in CIS and CEE countries,certain emerging market economies in Eastern Europe, India and other Asian countries, which are generally considered to be emerging markets. Investors in emerging markets should be aware that thesecountries. Emerging markets are vulnerable to market downturns and economic slowdowns elsewhere in the world and are subject to greater risks than more developed markets, including those that may result from foreign laws and regulations, and the potential imposition of trade or foreign exchange restrictions or sanctions, tax increases, fluctuations in exchange rates, inflation, and unstable political and military situations, labor issues, and labor issues.less established legal systems. The economies of certain countries where we operate have experienced periods of considerable instability and have been subject to abrupt downturns. Moreover, emerging markets have less established legal systems, which can be characterized by gaps in regulatory structures, selective enforcement of laws, and limited judicial and administrative guidance on legislation, among other limitations. Financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investment in these markets and materially adversely affect their economies. Such economic instability and any future deterioration in the international economic situation could materially adversely affecthave a material adverse effect on our business, financial condition and results of operations.

Continuing military activities in Ukraine have combined with Ukraine’s weak economic conditions to fuel ongoing economic uncertainty in Ukraine, Russia and other markets. In response to the actions in Ukraine, the EU,The European Union, United States Canada, Japan, Switzerland and other nations have imposed, and may continue imposing, further economic sanctions, including specific sanctions on certain Russian entities (specifically in the energy, defense and financial sectors). Restored stability of Ukraine’sProlonged political and economic conditions may not occur for some time and there could be increased violence or economic distressinstability in Ukraine, or other areas in the region.

Changes in general economic or political conditions in the progressUnited States or outcomeother regions could adversely affect our business. For example, the administration under President Donald Trump has put forth and may continue to propose significant changes with respect to a variety of the situation, as the politicalissues, including international trade agreements, import and civil unrestexport regulations, tariffs and reported military activities are fluidcustoms duties, foreign relations, immigration laws, and beyond our control.  Prolonged political instability in Ukraine, sanctions against Russia and Russia’s potential response to such sanctionscorporate governance laws, that could have a material adverse effectpositive or negative impact on our operations.business.

Our ability to maintain closecontinuing relationships with our major clientscustomers is essential to the growth and profitability of our business. However, the volume of work performed for any specific clientcustomer is likely to vary from year to year, especially since we generally are not our clients’customers’ exclusive IT services provider and we generally do not have long-term commitments from any clientscustomers to purchase our services. The ability of our clientscustomers to terminate master services agreements and work ordersengagements with or without cause makes our future revenues uncertain, as our clients are generally not obligated for any long-term commitments to us.uncertain. Although a substantial majority of our revenues are generated from clientscustomers who also contributed to our revenues during the prior year, our engagements with our clientscustomers are typically for projects that are singular in nature. Therefore, we must seek to obtain new engagements when our current engagements end. Our failure to perform or observe any contractual obligations could also result in termination or non-renewal of a contract, as could a change of control of our company.

There are a number of factors relating to our clientscustomers that are outside of our control, which might lead them to terminate a contract or project with us, including a client’s:including:

Termination or non-renewal of a customer contract could cause us to experience a higher than expected number of unassigned employees and an increase inthus compress our cost of revenues as a percentage of revenues,margins until we are able to reduce or reallocate our headcount. The loss of any of our major clients,customers, or a significant decrease in the volume of work they outsource to us or the price at which we sell our services to them, if not replaced by new clientservice engagements, could materially adversely affect our revenues and thus our results of operations.

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

A downturn in any of our targeted industries, a slowdown or reversal of the trend to outsource IT services in any of these industries or the introduction of regulations that restrict or discourage companies from outsourcing could result in a decrease in the demand for our services and materially adversely affectcould have a material adverse effect on our business, financial condition and results of operations. For example, a worsening of economic conditions in the financial services industry, or significant consolidation in any of these industries may reduce the demand for our services and negatively affect our revenues and profitability. Other developments in the industries in which we operate may also lead to a decline in the demand for our services, and we may not be able to successfully anticipate and prepare for any such changes. Decreased demand for our services, or increased pricing pressure on us from our clientscustomers in these key industries could adversely affect our results of operations.

We negotiate pricing terms with our clients utilizing a range of pricing structures and conditions. We face a number of risks when pricing our contracts.contracts and setting terms with our customers. Our pricing is highly dependent on our internal forecasts, assumptions and predictions about our projects, the marketplace, and global economic conditions (including foreign exchange volatility). Many of our projects entail and the coordination of operations and personnel in multiple locations with different skill sets and competencies. Our pricing and cost estimates for the work that we perform may include anticipated long-term cost savings from transformational and other initiatives that we expect to achieve and sustain over the life of the contract. Because of these inherent uncertainties, we may underprice our projects (particularly with fixed-price contracts), fail to accurately estimate the costs of performing the work or fail to accurately assess the risks associated with potential contracts. Any increased or unexpected costs, delays or failures to achieve anticipated cost savings, or unexpected risks we encounter in connection with the performance of this work, including those caused by factors outside our control, could make these contracts less profitable or unprofitable. Moreover, if we are not able to pass on to our clientscustomers increases in compensation costcosts (whether driven by competition for talent or ordinary-course pay increases) or charge premium prices when justified by market demand or the type of service, our profitability may suffer.

In addition, a number of our contracts contain conditions in pricing terms that condition a portion of the payment of fees by the clientare dependent on our ability to meet defined performance goals, service levels and completion schedules set forth in the contracts.schedules. Our failure to meet such performance goals, service levels or completion schedulesthese specified conditions or our failure to meet clientcustomer expectations in such contracts may result in less profitable or unprofitable engagements.

To successfully perform larger and more complex projects, we need to establish and maintain effective, close relationships with our clients,customers, continue high levels of clientcustomer satisfaction and develop a thorough understanding of our clients’customers’ operations. In addition, we may face a number of challenges managing larger and more complex projects, including:

Our ability to successfully manage large and complex projects depends significantly on the skills of our management personnel and IT professionals, some of whom do not have experience managing large-scale or complex projects.professionals. In addition, large and complex projects may involve multiple engagements or stages, and there is a risk that a clientcustomer may choose not to retain us for additional stages or may cancel or delay additional planned engagements. Such cancellations or delays may make it difficult to plan our project resource requirements. If we fail to successfully obtain engagements for large and complex projects, we may not achieve our revenue growth and other financial goals. Even if we are successful in obtaining such engagements, a failure by us to effectively manage these large and complex projects could damage our reputation, cause us to lose business, compress our margins and adversely affect our business and results of operations.

We have a long selling cycle for our IT services, which requires significant investment of human resources and time by both our clients and us.services. Before committingpotential customers commit to use our services, potential clientsthey require us to expend substantial time and resources educating them on the value of our services and our ability to meet their requirements. Therefore, our selling cycle is subject to many risks and delays over which we have little or no control, including our clients’customers’ decision to choose alternatives to our services (such as other IT services providersselect another service provider or in-house resources)resources to perform the services and the timing of our clients’customers’ budget cycles and approval processes. If our sales cycle unexpectedly lengthens for one or more large projects, it would negatively affect the timing of our revenues and hinder our revenue growth. ForIn certain clients,cases, we may begin work and incur costs prior to executing a contract. A delay in our ability to obtain a signed agreement or other persuasive evidence that the parties to the agreement have approved the contract and are committed to perform their respective obligations of an arrangement, or to complete certain contract requirements, may cause fluctuations in a particular quarter, could reduce ourrecognized revenues in that quarter.between periods.

Implementing our services also involves a significant commitment of resources over an extended period of time from both our clientscustomers and us. Our clients may experience delays in obtaining internal approvals or delays associated with technology, thereby further delaying the implementation process. Our current and future clientscustomers may not be willing or able to invest the time and resources necessary to implement our services, and we may fail to close sales with potential clientscustomers to whom we have devoted significant time and resources. Any significant failure to generate revenues or delays in recognizing revenues after incurring costs related to our sales or services processprocesses could materially adversely affecthave a material adverse effect on our business.

Our business depends on our ability to successfully obtain payment from our clientscustomers of the amounts they owe us for work performed. We usually bill and collect on relatively short cycles. We maintain allowances against receivables. Actual losses on client balances could differ from those that we currently anticipate and, as a result, we might need to adjust our allowances. There is no guarantee that we will accurately assess the creditworthiness of our clients. Weak or volatile macroeconomic and global financial system conditions could also result incustomers. If our customers suffer financial difficulties, for our clients, and, as a result,it could cause clientsthem to delay payments to us, request modifications to their payment arrangements that could increase our receivables balance, or default on their payment obligations to us. Timely collection of clientcustomer balances also depends on our ability to complete our contractual commitments and bill and collect our contracted revenues. If we are unable to meet our contractual requirements, we might experience delays in collection of and/or be unableinability to collect our client balances,accounts receivable, and if this occurs,in such cases, our results of operations and cash flows could be materially adversely affected. Moreover, in the event of delays in payment from our governmental and quasi-governmental clients, we may have difficulty collecting on receivables owed.

The market for ITour services is highly competitive, and we expect competition to persist and intensify. We face competition from offshore IT services providers in other outsourcing destinations with low wage costs such as India and China, as well as competition from large, global consulting and outsourcing firms and in-house IT departments of large corporations. ClientsCustomers tend to engage multiple IT services providers instead of using an exclusive IT services provider, which could reduce our revenues to the extent that clientscustomers obtain services from other competing IT services providers. Clientscompanies. Customers may prefer IT services providers that have more locations or that are based in countries more cost-competitive or more stable than some of the emerging markets in which we operate.

Current or prospective clientscustomers may elect to perform certain services themselves or may be discouraged from transferring services from onshore to offshore IT servicesservice providers, to avoid negative perceptions that may be associated with using an offshore IT services provider. This shift away from offshore outsourcing wouldwhich could seriously harm our ability to compete effectively with competitors that provide services from within the countries in which our clientscustomers operate.

Some of our present and potential competitors may have substantially greater financial, marketing or technical resources than EPAM. Client buying patterns can change if clients become more price sensitive and accepting of low-cost suppliers with less emphasis on quality. Therefore,resources; therefore, we cannot assure you that we willmay be ableunable to retain our clientscustomers while competing against such competitors. Increased competition, our inability to compete successfully, pricing pressures or loss of market share could materially adversely affecthave a material adverse effect on our business.

Rapidly changing technologies, methodologies and evolving industry standards are inherent in the market for our services. Our future success will depend in part upon our ability to anticipate developments in IT services,our industry, enhance our existing services and to develop and introduce new services to keep pace with such changes and developments and to meet changing clientcustomer needs. The process of developing our clientcustomer solutions is extremely complex and is expected to become increasingly complex and expensive in the future due to the introduction of new platforms, operating systems, technologies and methodologies. Our ability to keep pace with, anticipate or respond to these changes in technology, methodology and business is subject to a number of risks, including that:

We may not be successful in anticipating or responding to these developments in a timely manner, or if we do respond, the services, technologies or methodologies we develop or implement may not be successful in the marketplace. Further, services, technologies or methodologies that are developed by our competitors may render our services non-competitive or obsolete. Our failure to enhance our existing services and to develop and introduce new services to promptly address the needs of our clientscustomers could cause us to lose clients and materially adversely affecthave a material adverse effect on our business.