UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20212022

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

For the transition period from ________to________

Commission file number: 001-35418
epam-20220630_g1.jpg
EPAM SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware22-3536104
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
41 University DriveSuite 20218940
NewtownPennsylvania
(Address of principal executive offices)(Zip code)
267-759-9000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on which Registered
Common Stock, par value $0.001 per shareEPAMNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Title of Each ClassOutstanding as of OctoberJuly 29, 20212022
Common Stock, par value $0.001 per share56,719,55957,367,432 shares




EPAM SYSTEMS, INC.

TABLE OF CONTENTS
 Page



Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except par value)
 As of
September 30,
2021
As of
December 31,
2020
Assets
Current assets
Cash and cash equivalents$1,266,614 $1,322,143 
Short-term investments— 60,007 
Trade receivables and contract assets, net of allowance of $6,207 and $4,886, respectively755,588 501,062 
Prepaid and other current assets69,992 29,570 
Total current assets2,092,194 1,912,782 
Restricted cash, noncurrent (Note 4)158,454 1,284 
Property and equipment, net176,881 169,533 
Operating lease right-of-use assets, net192,628 228,672 
Intangible assets, net74,576 51,975 
Goodwill386,508 211,956 
Deferred tax assets104,057 92,454 
Other noncurrent assets56,935 52,676 
Total assets$3,242,233 $2,721,332 
Liabilities  
Current liabilities  
Accounts payable$8,086 $10,189 
Accrued compensation and benefits expenses412,061 294,709 
Accrued expenses and other current liabilities140,298 79,690 
Income taxes payable, current20,928 20,603 
Operating lease liabilities, current51,174 60,759 
Total current liabilities632,547 465,950 
Long-term debt25,024 25,038 
Income taxes payable, noncurrent42,193 43,448 
Operating lease liabilities, noncurrent149,556 180,604 
Other noncurrent liabilities53,794 23,274 
Total liabilities903,114 738,314 
Commitments and contingencies (Note 12)00
Stockholders’ equity  
Common stock, $0.001 par value; 160,000 shares authorized; 56,728 and 56,128 shares issued, 56,708 and 56,108 shares outstanding at September 30, 2021 and December 31, 2020, respectively57 56 
Additional paid-in capital693,887 660,771 
Retained earnings1,687,253 1,347,880 
Treasury stock(177)(177)
Accumulated other comprehensive loss(41,901)(25,512)
Total stockholders’ equity2,339,119 1,983,018 
Total liabilities and stockholders’ equity$3,242,233 $2,721,332 

 As of
June 30,
2022
As of
December 31,
2021
Assets
Current assets
Cash and cash equivalents$1,293,518 $1,446,625 
Trade receivables and contract assets, net of allowance of $18,554 and $5,521, respectively929,217 768,928 
Short-term investments60,098 — 
Prepaid and other current assets76,845 53,927 
Total current assets2,359,678 2,269,480 
Property and equipment, net211,119 236,214 
Operating lease right-of-use assets, net159,726 184,841 
Intangible assets, net89,032 101,143 
Goodwill521,267 530,723 
Deferred tax assets172,807 143,928 
Other noncurrent assets50,335 56,898 
Total assets$3,563,964 $3,523,227 
Liabilities  
Current liabilities  
Accounts payable$22,488 $24,847 
Accrued compensation and benefits expenses414,674 502,997 
Accrued expenses and other current liabilities181,525 142,014 
Short-term debt6,701 16,018 
Income taxes payable, current18,190 27,440 
Operating lease liabilities, current41,125 50,104 
Total current liabilities684,703 763,420 
Long-term debt30,221 30,234 
Income taxes payable, noncurrent45,441 42,454 
Operating lease liabilities, noncurrent130,891 142,802 
Other noncurrent liabilities48,702 48,480 
Total liabilities939,958 1,027,390 
Commitments and contingencies (Note 13)00
Stockholders’ equity  
Common stock, $0.001 par value; 160,000 shares authorized; 57,373 and 56,868 shares issued, 57,353 and 56,849 shares outstanding at June 30, 2022 and December 31, 2021, respectively57 57 
Additional paid-in capital760,975 711,912 
Retained earnings1,937,855 1,829,532 
Treasury stock(177)(177)
Accumulated other comprehensive loss(76,357)(54,207)
Total EPAM Systems Inc. stockholders’ equity2,622,353 2,487,117 
Noncontrolling interest in consolidated subsidiaries1,653 8,720 
Total stockholders’ equity2,624,006 2,495,837 
Total liabilities and stockholders’ equity$3,563,964 $3,523,227 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3

Table of Contents
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020 2022202120222021
RevenuesRevenues$988,539 $652,243 $2,650,680 $1,935,985 Revenues$1,194,861 $881,366 $2,366,475 $1,662,141 
Operating expenses:Operating expenses:Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)Cost of revenues (exclusive of depreciation and amortization)653,374 423,388 1,756,430 1,266,730 Cost of revenues (exclusive of depreciation and amortization)846,323 583,728 1,627,159 1,103,056 
Selling, general and administrative expensesSelling, general and administrative expenses169,498 116,530 457,797 355,829 Selling, general and administrative expenses232,527 151,910 469,804 288,299 
Depreciation and amortization expenseDepreciation and amortization expense21,543 15,929 59,804 46,095 Depreciation and amortization expense22,991 20,454 47,250 38,261 
Income from operationsIncome from operations144,124 96,396 376,649 267,331 Income from operations93,020 125,274 222,262 232,525 
Interest and other (loss)/income, net(5,325)1,672 2,629 5,875 
Foreign exchange (loss)/gain(3,441)5,896 (5,835)3,253 
Interest and other income, netInterest and other income, net1,579 2,580 1,414 7,954 
Foreign exchange lossForeign exchange loss(85,941)(4,693)(108,726)(2,394)
Income before provision for income taxesIncome before provision for income taxes135,358 103,964 373,443 276,459 Income before provision for income taxes8,658 123,161 114,950 238,085 
Provision for income taxes19,702 14,532 34,070 34,838 
(Benefit from)/ provision for income taxes(Benefit from)/ provision for income taxes(9,946)8,490 6,627 14,368 
Net incomeNet income$115,656 $89,432 $339,373 $241,621 Net income$18,604 $114,671 $108,323 $223,717 
Net income per share:Net income per share:Net income per share:
BasicBasic$2.04 $1.60 $6.01 $4.34 Basic$0.33 $2.03 $1.90 $3.97 
DilutedDiluted$1.95 $1.53 $5.75 $4.14 Diluted$0.32 $1.94 $1.84 $3.80 
Shares used in calculation of net income per share:Shares used in calculation of net income per share:Shares used in calculation of net income per share:
BasicBasic56,649 55,884 56,429 55,625 Basic57,240 56,463 57,078 56,317 
DilutedDiluted59,203 58,616 58,999 58,341 Diluted59,020 59,011 58,981 58,896 

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

4

Table of Contents
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020 2022202120222021
Net incomeNet income$115,656 $89,432 $339,373 $241,621 Net income$18,604 $114,671 $108,323 $223,717 
Other comprehensive loss:
Other comprehensive income/(loss):Other comprehensive income/(loss):
Change in foreign currency translation adjustments, net of taxChange in foreign currency translation adjustments, net of tax(10,761)199 (11,655)(15,878)Change in foreign currency translation adjustments, net of tax14,830 9,637 (15,722)(894)
Change in unrealized loss on hedging instruments, net of tax(2,067)(498)(4,108)(3,420)
Change in unrealized (loss)/gain on hedging instruments, net of taxChange in unrealized (loss)/gain on hedging instruments, net of tax(5,037)2,040 (6,428)(2,041)
Defined benefit pension plans - actuarial loss, net of taxDefined benefit pension plans - actuarial loss, net of tax— — (626)— Defined benefit pension plans - actuarial loss, net of tax— — — (626)
Other comprehensive loss(12,828)(299)(16,389)(19,298)
Other comprehensive income/(loss)Other comprehensive income/(loss)9,793 11,677 (22,150)(3,561)
Comprehensive incomeComprehensive income$102,828 $89,133 $322,984 $222,323 Comprehensive income$28,397 $126,348 $86,173 $220,156 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5

Table of Contents
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands) 
 Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive (Loss)/IncomeTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, January 1, 202156,108 $56 $660,771 $1,347,880 20 $(177)$(25,512)$1,983,018 
Restricted stock units vested248 — — — — — — — 
Restricted stock units withheld for employee taxes(84)— (31,935)— — — — (31,935)
Stock-based compensation expense — 14,624 — — — — 14,624 
Proceeds from stock option exercises109 — 4,424 — — — — 4,424 
Other comprehensive loss— — — — — — (15,238)(15,238)
Net income— — — 109,046 — — — 109,046 
Balance, March 31, 202156,381 $56 $647,884 $1,456,926 20 $(177)$(40,750)$2,063,939 
Restricted stock units vested19 — — — — — — — 
Restricted stock units withheld for employee taxes(6)— (2,631)— — — — (2,631)
Stock-based compensation expense— — 13,792 — — — — 13,792 
Proceeds from stock option exercises219 11,219 — — — — 11,220 
Other comprehensive income— — — — — — 11,677 11,677 
Net income— — — 114,671 — — — 114,671 
Balance, June 30, 202156,613 $57 $670,264 $1,571,597 20 $(177)$(29,073)$2,212,668 
Restricted stock units vested— — — — — — — 
Restricted stock units withheld for employee taxes(2)— (1,368)— — — — (1,368)
Stock-based compensation expense — 20,541 — — — — 20,541 
Proceeds from stock option exercises91 — 4,450 — — — — 4,450 
Other comprehensive loss— — — — — — (12,828)(12,828)
Net income— — — 115,656 — — — 115,656 
Balance, September 30, 202156,708 $57 $693,887 $1,687,253 20 $(177)$(41,901)$2,339,119 







 Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive LossNon-controlling interest in consolidated subsidiariesTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, January 1, 202256,849 $57 $711,912 $1,829,532 20 $(177)$(54,207)$8,720 $2,495,837 
Restricted stock units vested193 — — — — — — — — 
Equity withheld for employee taxes(67)— (18,376)— — — — — (18,376)
Stock-based compensation expense— — 22,702 — — — — — 22,702 
Exercise of stock options158 — 2,884 — — — — — 2,884 
Other comprehensive loss— — — — — — (31,943)— (31,943)
Purchase of noncontrolling interest— — — — — — — (7,067)(7,067)
Net income— — — 89,719 — — — — 89,719 
Balance, March 31, 202257,133 $57 $719,122 $1,919,251 20 $(177)$(86,150)$1,653 $2,553,756 
Restricted stock units vested24 — — — — — — — — 
Equity withheld for employee taxes(6)— (1,843)— — — — — (1,843)
Stock-based compensation expense— — 24,902 — — — — — 24,902 
Exercise of stock options147 — 6,410 — — — — — 6,410 
Issuance of common stock from employee stock purchase plan55 — 12,384 — — — — — 12,384 
Other comprehensive income— — — — — 9,793 — 9,793 
Net income— — — 18,604 — — — — 18,604 
Balance, June 30, 202257,353 $57 $760,975 $1,937,855 20 $(177)$(76,357)$1,653 $2,624,006 

6

Table of Contents
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands)
(Continued)
 Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive (Loss) / IncomeTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, January 1, 202055,188 $55 $607,051 $1,020,590 20 $(177)$(31,374)$1,596,145 
Cumulative effect of adoption of ASU 2016-13— — — 130 — — — 130 
Adjusted Balance, January 1, 202055,188 $55 $607,051 $1,020,720 20 $(177)$(31,374)$1,596,275 
Restricted stock units vested274 — — — — — — — 
Restricted stock units withheld for employee taxes(90)— (15,822)— — — — (15,822)
Stock-based compensation expense— — 12,210 — — — — 12,210 
Proceeds from stock option exercises217 7,140 — — — — 7,141 
Other comprehensive loss— — — — — — (37,887)(37,887)
Net income— — — 85,565 — — — 85,565 
Balance, March 31, 202055,589 $56 $610,579 $1,106,285 20 $(177)$(69,261)$1,647,482 
Restricted stock units vested19 — — — — — — — 
Restricted stock units withheld for employee taxes(6)— (1,169)— — — — (1,169)
Stock-based compensation expense— — 11,153 — — — — 11,153 
Proceeds from stock option exercises224 — 10,116 — — — — 10,116 
Other comprehensive income— — — — — — 18,888 18,888 
Net income— — — 66,624 — — — 66,624 
Balance, June 30, 202055,826 $56 $630,679 $1,172,909 20 $(177)$(50,373)$1,753,094 
Restricted stock units vested— — — — — — — 
Restricted stock units withheld for employee taxes(1)— (294)— — — — (294)
Stock-based compensation expense— — 12,566 — — — — 12,566 
Proceeds from stock option exercises152 — 5,735 — — — — 5,735 
Other comprehensive loss— — — — — — (299)(299)
Net income— — — 89,432 — — — 89,432 
Balance, September 30, 202055,982 $56 $648,686 $1,262,341 20 $(177)$(50,672)$1,860,234 

 Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive LossNon-controlling interest in consolidated subsidiariesTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, January 1, 202156,108 $56 $660,771 $1,347,880 20 $(177)$(25,512)$ $1,983,018 
Restricted stock units vested248 — — — — — — — — 
Equity withheld for employee taxes(84)— (31,935)— — — — — (31,935)
Stock-based compensation expense— — 14,624 — — — — — 14,624 
Exercise of stock options109 — 4,424 — — — — — 4,424 
Other comprehensive loss— — — — — — (15,238)— (15,238)
Net income— — — 109,046 — — — — 109,046 
Balance, March 31, 202156,381 $56 $647,884 $1,456,926 20 $(177)$(40,750)$ $2,063,939 
Restricted stock units vested19 — — — — — — — — 
Equity withheld for employee taxes(6)— (2,631)— — — — — (2,631)
Stock-based compensation expense— — 13,792 — — — — — 13,792 
Exercise of stock options219 11,219 — — — — — 11,220 
Other comprehensive income— — — — — — 11,677 — 11,677 
Net income— — — 114,671 — — — — 114,671 
Balance, June 30, 202156,613 $57 $670,264 $1,571,597 20 $(177)$(29,073)$ $2,212,668 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7

Table of Contents
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended September 30, Six Months Ended June 30,
20212020 20222021
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net incomeNet income$339,373 $241,621 Net income$108,323 $223,717 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expenseDepreciation and amortization expense59,804 46,095 Depreciation and amortization expense47,250 38,261 
Operating lease right-of-use assets amortization expenseOperating lease right-of-use assets amortization expense46,693 50,467 Operating lease right-of-use assets amortization expense26,037 31,496 
Bad debt expenseBad debt expense2,573 2,794 Bad debt expense11,748 2,828 
Deferred taxesDeferred taxes(6,948)(4,546)Deferred taxes(29,405)1,176 
Stock-based compensation expenseStock-based compensation expense77,638 54,794 Stock-based compensation expense35,005 48,451 
Unrealized loss on derivativeUnrealized loss on derivative32,013 — 
Impairment chargesImpairment charges21,002 — 
OtherOther4,312 3,225 Other75,433 (5,190)
Changes in assets and liabilities:Changes in assets and liabilities:  Changes in assets and liabilities:  
Trade receivables and contract assetsTrade receivables and contract assets(232,710)3,477 Trade receivables and contract assets(183,143)(168,038)
Prepaid and other assetsPrepaid and other assets(8,768)4,261 Prepaid and other assets(3,350)(7,795)
Accounts payableAccounts payable(6,468)1,836 Accounts payable725 (3,948)
Accrued expenses and other liabilitiesAccrued expenses and other liabilities86,822 30,787 Accrued expenses and other liabilities(62,153)(6,772)
Operating lease liabilitiesOperating lease liabilities(48,158)(47,023)Operating lease liabilities(29,015)(32,276)
Income taxes payableIncome taxes payable(26,450)(2,813)Income taxes payable(24,803)(40,247)
Net cash provided by operating activitiesNet cash provided by operating activities287,713 384,975 Net cash provided by operating activities25,667 81,663 
Cash flows from investing activities:Cash flows from investing activities:  Cash flows from investing activities:  
Purchases of property and equipmentPurchases of property and equipment(54,884)(50,311)Purchases of property and equipment(41,426)(33,773)
Purchases of short-term investmentsPurchases of short-term investments— (60,000)Purchases of short-term investments(60,000)— 
Proceeds from short-term investmentsProceeds from short-term investments60,000 — Proceeds from short-term investments— 60,000 
Acquisition of business, net of cash acquired (Note 2)(160,964)(18,888)
Acquisition of business, net of cash acquired (Note 3)Acquisition of business, net of cash acquired (Note 3)(10,621)(121,252)
Purchases of non-marketable securitiesPurchases of non-marketable securities(2,544)(20,500)Purchases of non-marketable securities— (2,544)
Other investing activities, netOther investing activities, net(100)452 Other investing activities, net(11,041)179 
Net cash used in investing activitiesNet cash used in investing activities(158,492)(149,247)Net cash used in investing activities(123,088)(97,390)
Cash flows from financing activities:Cash flows from financing activities:  Cash flows from financing activities:  
Proceeds from stock option exercises20,176 23,027 
Proceeds from issuance of stock under the employee incentive programsProceeds from issuance of stock under the employee incentive programs22,165 15,610 
Payments of withholding taxes related to net share settlements of restricted stock unitsPayments of withholding taxes related to net share settlements of restricted stock units(34,108)(16,213)Payments of withholding taxes related to net share settlements of restricted stock units(20,796)(33,696)
Proceeds from debtProceeds from debt3,227 — 
Repayment of debtRepayment of debt(10,756)— 
Payment of contingent consideration for previously acquired businessPayment of contingent consideration for previously acquired business(797)(7,869)Payment of contingent consideration for previously acquired business(207)(1,047)
Purchase of noncontrolling interestPurchase of noncontrolling interest(2,146)— 
Other financing activities, netOther financing activities, net231 (28)Other financing activities, net(2,121)137 
Net cash used in financing activitiesNet cash used in financing activities(14,498)(1,083)Net cash used in financing activities(10,634)(18,996)
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash(12,691)(10,110)Effect of exchange rate changes on cash, cash equivalents and restricted cash(45,661)(3,761)
Net increase in cash, cash equivalents and restricted cash102,032 224,535 
Net decrease in cash, cash equivalents and restricted cashNet decrease in cash, cash equivalents and restricted cash(153,716)(38,484)
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period1,323,533 937,688 Cash, cash equivalents and restricted cash, beginning of period1,449,347 1,323,533 
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period$1,425,565 $1,162,223 Cash, cash equivalents and restricted cash, end of period$1,295,631 $1,285,049 


8

Table of Contents
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
(Continued)
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:
As of
September 30,
2021
As of
December 31,
2020
As of
June 30,
2022
As of
December 31,
2021
Balance sheet classificationBalance sheet classificationBalance sheet classification
Cash and cash equivalents Cash and cash equivalents$1,266,614 $1,322,143  Cash and cash equivalents$1,293,518 $1,446,625 
Restricted cash in Prepaid and other current assetsRestricted cash in Prepaid and other current assets497 106 Restricted cash in Prepaid and other current assets202 495 
Restricted cash, noncurrent158,454 1,284 
Restricted cash in Other noncurrent assets Restricted cash in Other noncurrent assets1,911 2,227 
Total restricted cash Total restricted cash158,951 1,390  Total restricted cash2,113 2,722 
Total cash, cash equivalents and restricted cash Total cash, cash equivalents and restricted cash$1,425,565 $1,323,533  Total cash, cash equivalents and restricted cash$1,295,631 $1,449,347 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
9

Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share data and as otherwise disclosed) 
 
1.BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    
EPAM Systems, Inc. (the “Company” or “EPAM”) is a leading global provider ofdigital transformation services and product engineering company, providing digital platform engineering and software development services to customers located around the world, primarily in North America, Europe, and Asia. The Company’s industry expertise includes financial services, travel and consumer, software and hi-tech, business information and media, life sciences and healthcare, as well as several other emerging industries. The Company is incorporated in Delaware with headquarters in Newtown, Pennsylvania.
Basis of Presentation — The accompanying unaudited condensed consolidated financial statements of EPAM have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP” or “U.S. GAAP”) and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The unaudited condensed consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries with all intercompany balances and transactions eliminated.
These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 20202021 included in its Annual Report on Form 10-K. The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of the accompanying unaudited condensedCompany’s financial position as of June 30, 2022 and the results of its operations and its cash flows for the periods presented.
Risks and Uncertainties — As a result of its global operations, the Company may be subject to certain inherent risks.

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

The Company has cash in several countries, including Belarus, Ukraine and Russia, which have been impacted by the invasion of Ukraine (see Note 2, “Impact of the Invasion of Ukraine”) and where the banking sector remains subject to periodic instability, banking and other financial systems generally do not meet the banking standards of more developed markets, and bank deposits made by corporate entities are not insured. As of June 30, 2022, the Company had $40.4 million of cash and cash equivalents in banks in Belarus, $40.2 million of cash and cash equivalents in banks in Ukraine and $17.2 million of cash and cash equivalents in banks in Russia. The Company places its cash and cash equivalents with financial institutions considered stable in the region, limits the amount of credit exposure with any one financial institution and conducts ongoing evaluations of the credit worthiness of the financial institutions with which it does business. A banking crisis, bankruptcy or insolvency of banks that process or hold the Company’s funds, or sanctions may result in the loss of deposits or adversely affect the Company’s ability to complete banking transactions, which could adversely affect the Company’s business and financial condition. Cash in these countries is used for the operational needs of the local entities and cash balances change with the expected operating needs of these entities. The Company regularly monitors cash held in these countries and, to the extent the cash held exceeds amounts required to support its operations in these countries, the Company distributes the excess funds into markets with more developed banking sectors to the extent it is possible to do so.

Trade receivables are generally dispersed across many customers operating in different industries; therefore, concentration of credit risk is limited. Historically, credit losses and write-offs of trade receivables have not been material to the consolidated financial statements have been included,statements. If any of our customers enter bankruptcy protection or otherwise take steps to alleviate their financial distress, the Company’s credit losses and all adjustments arewrite-offs of a normaltrade receivables could increase, which would negatively impact its results of operations. See Note 2 “Impact of the Invasion of Ukraine”for further discussion regarding trade receivables and recurring nature.contract assets from customers located in Russia.
Reclassifications
10

Table of Contents
Foreign currency riskRestrictedThe Company’s global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, the Company generates revenues in various currencies, principally, euros, British pounds, Russian rubles, Swiss francs, and Canadian dollars and incurs expenditures principally in Russian rubles, Polish zlotys, euros, Swiss francs, Hungarian forints, British pounds, Indian rupees, Chinese yuan renminbi and Mexican pesos. The Company’s international operations expose it to risk of adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign currency denominated assets and liabilities (both third-party and intercompany) and translation of earnings and cash noncurrent presentedflows into U.S. dollars. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee and Hungarian forint transactions. See Note 6, “Derivative Financial Instruments for further discussion regarding the Company’s termination of the hedging program for the Russian ruble.
Interest rate risk — The Company’s exposure to interest rate risk is influenced by the changes in interest rates received on cash and cash equivalent deposits and short-term investments and paid on any outstanding balance on the condensed consolidated balance sheet has been reclassified from Other noncurrent assets asCompany’s borrowings, mainly under the 2021 Credit Agreement, which is subject to a variety of December 31, 2020rates depending on the type and timing of funds borrowed (See Note 8 “Debt”). The Company does not believe it is exposed to conformmaterial direct risks associated with changes in interest rates related to the current-period financial statement presentation.these deposits and borrowings.
Adoption of New Accounting Standards
The adoption of newThere were no recently adopted accounting standards did not havewhich had a material impact on the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows.
Pending Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standards-setting bodies that the Company will adopt according to the various timetables the FASB specifies. The Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position, results of operations and cash flows upon adoption.
2.     IMPACT OF THE INVASION OF UKRAINE
On February 24, 2022, Russian forces attacked Ukraine and its people and EPAM has called for an immediate end to this unlawful and unconscionable attack. As of June 30, 2022, the Company had $70.9 million of Property and equipment, net in Ukraine consisting of a building classified as construction-in-progress located in Kyiv with a net book value of $50.7 million, laptops with a net book value of $12.5 million, most of which are in the possession of employees, various office furniture, equipment and supplies with a net book value of $7.2 million, and leasehold improvements located throughout Ukraine with a net book value of $0.5 million. Additionally, the Company had Operating lease right-of-use assets located throughout Ukraine with a net book value of $14.4 million as of June 30, 2022. Through the issuance date of these interim financial statements, the Company is not aware of any damage to its long-lived assets in Ukraine and the Company expects to continue to use these assets as part of its global delivery model.
On March 4, 2022, in addition to the Company’s donations, and the work of EPAM volunteers on the ground, the Company announced a $100.0 million humanitarian commitment to support its employees and their families in and displaced from Ukraine. During the three and six months ended June 30, 2022, the Company expensed $8.4 million and $34.0 million, respectively, related to this commitment including special cash payments to support impacted employees, financial and medical support for impacted families, travel, meals and lodging expenses, and donations to third-party humanitarian organizations. Of the expensed amount for the three months ended June 30, 2022, $3.3 million is classified in Cost of revenues (exclusive of depreciation and amortization) and $5.1 million is classified in Selling, general and administrative expense on the condensed consolidated financial statements. Of the expensed amount for the six months ended June 30, 2022, $22.4 million is classified in Cost of revenues (exclusive of depreciation and amortization) and $11.6 million is classified in Selling, general and administrative expense on the condensed consolidated financial statements.
2.
11

Table of Contents
The Company continues to execute its business continuity plans to relocate employees residing in Ukraine, Belarus and Russia to other countries and continues to assign delivery personnel in locations outside of the region to serve in unbilled standby or backup capacity to ensure the continuity of delivery for its customers who have substantial delivery exposure to Ukraine or other delivery concerns resulting from the invasion. In addition to costs incurred as part of EPAM’s humanitarian commitment to Ukraine, during the three months ended June 30, 2022, the Company incurred expenses of $14.4 million related to its geographic repositioning efforts, classified as Selling, general and administrative expenses and $9.3 million related to these standby resources, classified as Cost of revenues (exclusive of depreciation and amortization). During the six months ended June 30, 2022, the Company incurred expenses of $33.1 million related to its geographic repositioning efforts, classified as Selling, general and administrative expenses and $11.8 million related to these standby resources, classified as Cost of revenues (exclusive of depreciation and amortization). During the six months ended June 30, 2022, the Company also recorded an impairment charge of $1.3 million classified as Other income/(expense) related to a financial asset in Ukraine which the Company believes to be unrealizable due to the events in Ukraine.
In response to the attacks on Ukraine, EPAM announced on March 4, 2022, it would discontinue services to customers located in Russia. Based on this change in facts and circumstances, the long-term cash flow forecast for the Company’s operations in Russia and its Russia reporting unit were significantly reduced. The reduction in the long-term cash flow forecasts indicated that the carrying amounts of goodwill and long-lived assets associated with the Company’s Russia reporting unit and operations in Russia may not be recoverable, and the carrying value of these assets was tested for impairment. The Company relied on the income approach to estimate the fair values of the Russia reporting unit and long-lived assets and considered multiple scenarios including the continuing operation and exit of operations in Russia. Reflecting the negative long-term cash flow forecasts that each of these scenarios produced for these assets, during the three months ended March 31, 2022, the Company recorded impairments of Property and equipment, net of $15.1 million, Operating lease right-of-use assets, net of $3.8 million, and Goodwill of $0.7 million. These asset impairment charges are included in Selling, general and administrative expenses in the interim condensed consolidated financial statements for the six months ended June 30, 2022. Additionally, the Company evaluated trade receivables and contract assets for estimated future credit losses from customers located in Russia and recorded bad debt expense of $8.2 million during the six months ended June 30, 2022, reflecting the deterioration of creditworthiness of its customers in Russia. This expense is included in Selling, general and administrative expenses in the condensed consolidated financial statements.
On April 7, 2022, the Company announced that it would begin the process of a phased exit of its operations in Russia, to be completed in the months following the announcement and in close collaboration with the Company’s employees, contractors, and customers. Through the date of issuance of these condensed consolidated financial statements, the Company continues to explore strategic alternatives for its operations in Russia, including the potential sale or liquidation of its holdings while executing its phased exit. In connection with the exit of its operations in Russia, the Company incurred employee separation costs of $16.2 million during the three and six months ended June 30, 2022, of which $7.4 million is included in Accrued compensation expenses in the condensed consolidated balance sheet as of June 30, 2022. The Company could incur additional significant charges in the future related to the exit of its operations in Russia including, but not limited to, additional restructuring costs and loss on sale, which could be impacted by amounts transferred to settle intercompany receivables and payables and the recognition of the Accumulated currency translation adjustment currently included in Accumulated other comprehensive income/(loss). The timing of completing the exit is subject to completion of regulatory requirements in the country and the Company expects to complete its exit as soon as feasible.
As of June 30, 2022, the Company had the following assets and liabilities in Russia:
Cash and cash equivalents$17,160 
Trade receivables and contract assets, net of allowance of $10.2 million18,757 
Prepaid and other current assets5,381 
Total assets in Russia$41,298
Accounts payable$1,201 
Accrued compensation and benefits expenses32,896 
Accrued expenses and other liabilities7,278 
Operating lease liabilities1,309 
Other noncurrent liabilities876 
Total liabilities in Russia$43,560
12

Table of Contents
3.ACQUISITIONS
PolSource — On April 2, 2021, the Company acquired 100% of PolSource S.A. and its subsidiaries (“PolSource”), a Salesforce Platinum Consulting Partner with more than 350 experienced Salesforce specialists for a purchase price of $148.2 million including contingent consideration with an acquisition-date fair value of $35.4 million. TheAt the time of the acquisition, the Company could paycommitted to paying up to $45.0 million in contingent consideration, and the actual future payout is subject to attainment of certain revenue, earnings and operational targets.
10

Table of Contents
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition for PolSource and updated for any changes as of September 30, 2021:
PolSource
Cash and cash equivalents$2,565 
Trade receivables and contract assets13,016 
Prepaid and other current assets789 
Goodwill125,359 
Intangible assets15,790 
Property and equipment and other noncurrent assets461 
Total assets acquired$157,980
Accounts payable, accrued expenses and other current liabilities$5,607 
Other noncurrent liabilities4,201 
Total liabilities assumed$9,808
Net assets acquired$148,172
During the three months ended September 30, 2021, the Company updated the valuation of the acquired assets and liabilities resulting in a corresponding increase in the value of acquired goodwill of $11.8 million, primarily attributable to a $10.4 million increase in the fair value of contingent consideration. The effect of adjustments recorded during the three months ended September 30, 2021 that would have been recognized in a prior period if the adjustment to the preliminary amounts had been recognized as of the acquisition date of PolSource was not material. For the acquisition of PolSource, the estimated fair values of the assets acquired and liabilities assumed are provisional and based on the information that was available as of the acquisition date. The Company expects to complete the purchase price allocations as soon as practicable but no later than one year from the acquisition date.             
As of September 30, 2021, the following table presents the estimated fair values and useful lives of intangible assets acquired from PolSource:
PolSource
Weighted Average Useful Life (in years)Amount
Customer relationships6$14,790 
Trade names31,000 
Total$15,790 
The goodwill recognized as a result of the PolSource acquisition is attributable to synergies expected to be achieved by combining the businesses of EPAM and PolSource, expected future contracts, the assembled workforce acquired and other factors. This goodwill is not expected to be deductible for income tax purposes.
The Company recognized acquisition-related costs associated with the PolSource acquisition during the nine months ended September 30, 2021 totaling $1.4 million. These costs are included in Selling, general and administrative expenses in the accompanying condensed consolidated statements of income.
Revenues generated by PolSource included in the Company’s condensed consolidated statements of income totaled $19.9 million and $36.5 million during the three and nine months ended September 30, 2021, respectively. Pro forma results of operations have not been presented because the effect of the acquisition of PolSource and its subsidiaries on the Company’s condensed consolidated financial statements was not material.
CORE — On July 23, 2021, the Company acquired 100% of CORE SE and its subsidiaries (CORE)(“CORE”), a professional service provider specializing in IT strategy and technology-driven transformations with office locations in Europe and the Middle East for a purchase price of $48.0$50.2 million including contingent consideration with an acquisition-date fair value of $4.0 million and deferred consideration of $7.8 million. The Company could pay up to $8.1 million in contingent consideration and the actual future payout is subject to attainment of certain revenue, earnings and operational targets.

Emakina
11

Table — On November 3, 2021, the Company completed the acquisition of Contents98.69% of Emakina Group SA and its subsidiaries (“Emakina”), a group of independent digital agencies, for a purchase price of $143.4 million in cash. On November 30, 2021, the Company completed the acquisition of the remaining 1.31% of Emakina Group SA’s outstanding shares for a purchase price of $1.7 million in cash.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of each respective acquisition and updated for CORE:any changes as of June 30, 2022:
CORE
Cash and cash equivalents$11,272 
Trade receivables and contract assets10,063 
Prepaid and other current assets5,561 
Goodwill20,215 
Intangible assets8,368 
Property and equipment and other noncurrent assets4,618 
Total assets acquired$60,097
Accounts payable, accrued expenses and other current liabilities$7,430 
Operating lease liabilities, noncurrent2,106 
Other noncurrent liabilities2,525 
Total liabilities assumed$12,061
Net assets acquired$48,036
PolSourceCOREEmakina
Cash and cash equivalents$2,565 $11,283 $5,142 
Trade receivables and contract assets12,734 10,266 34,389 
Prepaid and other current assets814 5,490 3,109 
Goodwill125,265 23,237 137,037 
Intangible assets15,790 8,368 30,488 
Property and equipment and other noncurrent assets461 4,585 17,547 
Total assets acquired$157,629 $63,229 $227,712 
Accounts payable, accrued expenses and other current liabilities$5,337 $8,439 $36,411 
Short-term debt— — 13,657 
Long-term debt— — 8,874 
Operating lease liabilities, noncurrent157 2,056 5,527 
Other noncurrent liabilities3,963 2,525 8,756 
Total liabilities assumed$9,457 $13,020 $73,225 
Noncontrolling interest in consolidated subsidiaries— — 10,469 
Net assets acquired$148,172 $50,209 $144,018 
As of June 30, 2022 the Company has completed the purchase price allocation for the acquisition of PolSource and the estimated fair values of the assets acquired and liabilities assumed have been finalized. The effect of adjustments recorded during the three and six months ended June 30, 2022 that would have been recognized in a prior period if the adjustment to the preliminary amounts had been recognized as of the acquisition date of PolSource was not material.
The effect of adjustments recorded during the three and six months ended June 30, 2022 that would have been recognized in a prior period if the adjustment to the preliminary amounts had been recognized as of the acquisition date of CORE was not material. For the acquisition of CORE, the estimated fair values of the assets acquired and liabilities assumed are provisional and based on the information that was available as of the acquisition date. The Company expects to complete the purchase price allocations as soon as practicable but no later than one year from the acquisition date.

13

Table of Contents
The effect of adjustments recorded during the three and six months ended June 30, 2022 that would have been recognized in a prior period if the adjustment to the preliminary amounts had been recognized as of the acquisition date of Emakina was not material. For the acquisition of Emakina, the estimated fair values of the assets acquired, liabilities assumed and noncontrolling interest are provisional and based on the information that was available as of the acquisition date. The Company expects to complete the purchase price allocations as soon as practicable but no later than one year from the acquisition date. The effect of adjustments recorded during the three and six months ended June 30, 2022 that would have been recognized in a prior period if the adjustment to the preliminary amounts had been recognized as of the acquisition date of Emakina was not material.        
Pro forma results of operations have not been presented because the effect of these acquisitions on the Company’s consolidated financial statements was not material individually or in the aggregate.    
As of SeptemberJune 30, 2021,2022, the following table presents the estimated fair values and useful lives of intangible assets acquired from CORE:PolSource, CORE and Emakina:
COREPolSourceCOREEmakina
Weighted Average Useful Life (in years)AmountWeighted Average Useful Life (in years)AmountWeighted Average Useful Life (in years)AmountWeighted Average Useful Life (in years)Amount
Customer relationshipsCustomer relationships6$7,779 Customer relationships6$14,790 6$7,779 7$27,822 
Trade namesTrade names5589 Trade names31,000 5589 32,666 
TotalTotal$8,368 Total$15,790 $8,368 $30,488 
The goodwill recognized as a result of the PolSource acquisition is attributable to synergies expected to be achieved by combining the businesses of EPAM and PolSource, expected future contracts, the assembled workforce acquired and other factors. The goodwill recognized as a result of the CORE acquisition is attributable to synergies expected to be achieved by expanding the Company’s ability to support customers as a strategic consultant in Europe and the Middle East, expected future contracts, the assembled workforce acquired and other factors. ThisThe goodwill recognized as a result of the Emakina acquisition is attributable to synergies expected to be achieved by enhancing EPAM’s digital experience practice as well as augmenting offerings in digital design and engineering capabilities, expected future contracts, the assembled workforce and other factors.
The goodwill acquired as a result of the PolSource, CORE and Emakina acquisitions is not expected to be deductible for income tax purposes.
Revenues generated by CORE included in the Company’s condensed consolidated statements of income totaled $5.5 million during the three and nine months ended September 30, 2021. Pro forma results of operations have not been presented because the effect of the acquisition of CORE on the Company’s condensed consolidated financial statements was not material.
The Company recognized acquisition-related costs associated with the CORE acquisition during the three and nine months ended September 30, 2021 totaling $0.2 million and $1.1 million, respectively. These costs are included in Selling, general and administrative expenses in the accompanying condensed consolidated statements of income.purposes.
Other 2021 Acquisitions — During the nine monthsyear ended September 30,December 31, 2021, the Company completed 34 additional acquisitions with an aggregate purchase price of $49.8$65.2 million including contingent consideration with an acquisition-date fair value of $15.3$17.6 million. The Company could pay up to $26.7$30.2 million in contingent consideration and the actual future payouts are subject to attainment of specified performance targets during the periods ranging from 1412 months to 48 months after the respective acquisition dates. These acquisitions increased EPAM’s e-platform offerings and expanded the Company’s geographical reach as well as added $10.9$14.1 million in intangible assets, consisting mainly of customer relationships. Revenues generated by these Other 2021 Acquisitions totaled $6.7 million and $8.6 million during the three and nine months ended September 30, 2021, respectively. Pro forma results of operations have not been presented because the effect of these acquisitions on the Company’s condensed consolidated financial statements was not material individually or in the aggregate.

12

Table of Contents
20202022 Acquisitions — During the yearsix months ended December 31, 2020,June 30, 2022, the Company completed 2 acquisitions with an aggregatea total purchase price of $22.5$13.6 million including contingent consideration with antotal acquisition-date fair value of $5.3$2.6 million. The Company committed to making contingent consideration payments with a maximum amount payable of $18.6 million subject to attainment of specified performance targets in the first and second calendar years after the respective acquisition dates. These acquisitions increased EPAM’s software and service capabilities and expanded EPAM’s offerings in financial servicescapabilities to deliver end-to-end solutions for designing and building sophisticated commerce platforms, provided opportunities for geographic expansion as well as added $7.3$3.4 million of intangible assets, consisting mainly of customer relationships. Pro forma results of operations have not been presented because the effect of these acquisitions on the Company’s condensed consolidated financial statements was not material individually or in the aggregate.
14

Table of Contents
3.4.GOODWILL
Goodwill by reportable segment was as follows:
North AmericaEuropeRussiaTotal
Balance as of January 1, 2021$121,132 $90,106 $718 $211,956 
PolSource acquisition75,215 50,144 — 125,359 
CORE acquisition— 20,215 — 20,215 
Other 2021 acquisitions21,431 10,181 — 31,612 
2020 acquisitions purchase accounting adjustments— (24)— (24)
Effect of net foreign currency exchange rate changes(423)(2,191)(2,610)
Balance as of September 30, 2021$217,355 $168,431 $722 $386,508 
North AmericaEuropeRussiaTotal
Balance as of January 1, 2022$217,594 $312,413 $716 $530,723 
Emakina acquisition purchase accounting adjustment— 423 — 423 
PolSource acquisition purchase accounting adjustment(44)(30)— (74)
CORE acquisition purchase accounting adjustment— — 
Other 2021 acquisitions purchase accounting adjustment(519)15 — (504)
2022 acquisitions— 10,322 — 10,322 
Goodwill impairment— — (686)(686)
Effect of net foreign currency exchange rate changes(556)(18,354)(30)(18,940)
Balance as of June 30, 2022$216,475 $304,792 $ $521,267 
See Note 2 “Impact of the Invasion of Ukraine” for more information regarding the goodwill impairment recorded in the Russia segment during the three months ended March 31, 2022.
The Russia segment had accumulated goodwill impairment losses of $2.9 million and $2.2 million as of June 30, 2022 and December 31, 2021, respectively. There were no accumulated impairment losses in the North America or Europe reportable segments as of SeptemberJune 30, 20212022 or December 31, 2020. The Russia segment had accumulated goodwill impairment losses of $2.2 million as of September 30, 2021 and December 31, 2020.2021.

4.5.FAIR VALUE MEASUREMENTS
The Company carries certain assets and liabilities at fair value on a recurring basis on its condensed consolidated balance sheets. The following tables present the fair values of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of SeptemberJune 30, 20212022 and December 31, 2020:2021:
As of September 30, 2021As of June 30, 2022
BalanceLevel 1Level 2Level 3BalanceLevel 1Level 2Level 3
Foreign exchange derivative assetsForeign exchange derivative assets$2,359 $— $2,359 $— Foreign exchange derivative assets$25 $— $25 $— 
Rights to acquire noncontrolling interest in consolidated subsidiariesRights to acquire noncontrolling interest in consolidated subsidiaries952 — — 952 
Total assets measured at fair value on a recurring basisTotal assets measured at fair value on a recurring basis$2,359 $ $2,359 $ Total assets measured at fair value on a recurring basis$977 $ $25 $952 
Foreign exchange derivative liabilitiesForeign exchange derivative liabilities$2,963 $— $2,963 $— Foreign exchange derivative liabilities$44,774 $— $44,774 $— 
Contingent considerationContingent consideration61,761 — — 61,761 Contingent consideration30,556 — — 30,556 
Total liabilities measured at fair value on a recurring basisTotal liabilities measured at fair value on a recurring basis$64,724 $ $2,963 $61,761 Total liabilities measured at fair value on a recurring basis$75,330 $ $44,774 $30,556 
As of December 31, 2020As of December 31, 2021
BalanceLevel 1Level 2Level 3BalanceLevel 1Level 2Level 3
Foreign exchange derivative assetsForeign exchange derivative assets$4,955 $— $4,955 $— Foreign exchange derivative assets$1,429 $— $1,429 $— 
Rights to acquire noncontrolling interest in consolidated subsidiariesRights to acquire noncontrolling interest in consolidated subsidiaries6,093 — — 6,093 
Total assets measured at fair value on a recurring basisTotal assets measured at fair value on a recurring basis$4,955 $ $4,955 $ Total assets measured at fair value on a recurring basis$7,522 $ $1,429 $6,093 
Foreign exchange derivative liabilitiesForeign exchange derivative liabilities$243 $— $243 $— Foreign exchange derivative liabilities$5,849 $— $5,849 $— 
Contingent considerationContingent consideration7,470  — 7,470 Contingent consideration23,114  — 23,114 
Total liabilities measured at fair value on a recurring basisTotal liabilities measured at fair value on a recurring basis$7,713 $ $243 $7,470 Total liabilities measured at fair value on a recurring basis$28,963 $ $5,849 $23,114 
1315

Table of Contents
The foreign exchange derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange data at the measurement date. See Note 56 “Derivative Financial Instruments” in the condensed consolidated interim financial statements for additional information regarding derivative financial instruments.
As part of the acquisition of Emakina, the Company acquired rights to purchase certain noncontrolling interests in consolidated subsidiaries of Emakina in exchange for future cash payments determined by the future profitability of certain subsidiaries. The Company determines the fair value of these rights by (i) estimating the fair value of the noncontrolling interests in consolidated subsidiaries by applying an EBITDA multiple adjusted for a lack of control and marketability, less (ii) the fair value of expected future payments to settle the related contractual obligations. The Company purchased the majority of the noncontrolling interest in consolidated subsidiaries during the three months ended March 31, 2022.
The Company determines the fair value of the contingent consideration liabilities 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, net in the Company’s condensed consolidated statements of income.
The fair value of the contingent consideration for the PolSource acquisition attributable to future revenues and earnings was measured utilizing a Monte Carlo simulation, based on future revenue and earnings projections of the business, revenue volatility and asset volatility of comparable companies, and a discount rate. The discount ratesrate used to determine the fair value of this contingent consideration was 0.4% as of the acquisition date and 0.3% as of September 30, 2021.
date. The fair value of the contingent consideration for the PolSource acquisition attributable to future operating metrics was measured using a probability-weighted expected return method, based on the expected future payments using the earnout formula and performance targets specified in the purchase agreement and adjusting those estimates to reflect the probability of their achievement. The weighted-average estimated future payments were then discounted to present value using a rate based on EPAM’s cost of debt. The discount rate used to determine the fair value of this contingent consideration was 0.4% as of the acquisition date and 0.3% as of September 30, 2021.date.
The fair value of the contingent consideration for all other acquisitions was determined using a probability-weighted expected return method and is based on the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. Although there is significant judgment involved, the Company believes its estimates and assumptions are reasonable. In determining fair value, the Company considered a variety of factors, including future performance of the acquired businesses using financial projections developed by the Company and market risk assumptions that were derived for revenue growth and earnings before interest and taxes. The Company estimated future payments using the earnout formula and performance targets specified in the purchase agreements and adjusted those estimates to reflect the probability of their achievement. Those weighted-average estimated future payments were then discounted to present value using a rate based on the weighted-average cost of capital of guideline companies. The discount rate used to determine the fair value of contingent consideration for the 2022 Acquisitions ranged from a minimum of 13.0% to a maximum of 15.0%. The discount rate used to determine the fair value of contingent consideration for the CORE acquisition was 13.0%. The discount rates used to determine the fair value of contingent consideration for the Other 2021 Acquisitions ranged from a minimum of 20.0%15.0% to a maximum of 22.0%. TheChanges in financial projections, market risk assumptions, discount rates usedor probability assumptions related to determineachieving the various earnout criteria would result in a change in the fair value of the recorded contingent consideration forliabilities. Such changes, if any, are recorded within Interest and other income, net in the 2020 Acquisitions ranged from a minimumCompany’s condensed consolidated statement of 15.5% to a maximum of 17.5%.income.
A reconciliation of the beginning and ending balances of Level 3 acquisition-related contingent consideration using significant unobservable inputs for the ninesix months ended SeptemberJune 30, 20212022 is as follows:
Amount
Contingent consideration liabilities as of January 1, 20212022$7,47023,114 
PaymentAcquisition date fair value of contractual contingent consideration for previously acquired businessesliabilities - 2022 Acquisitions(1,000)
PolSource acquisition35,400 
CORE acquisition4,007 
Other 2021 acquisitions14,6842,645 
Changes in fair value of contingent consideration included in Interest and other income, net1,362 6,106 
Payment of contingent consideration for previously acquired businesses(207)
Effect of net foreign currency exchange rate changes(162)(1,102)
Contingent consideration liabilities as of SeptemberJune 30, 20212022$61,76130,556 
See Note 2, “Impact of the Invasion of Ukraine” for discussion of the nonrecurring level 3 fair value assessment used in the impairment tests of long-lived assets in Russia.

14
16

Table of Contents
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
Estimates of fair value of financial instruments not carried at fair value on a recurring basis on the Company’s condensed consolidated balance sheets are generally subjective in nature and are determined as of a specific point in time based on the characteristics of the financial instruments and relevant market information. The generally short maturities of certain assets and liabilities result in a number of assets and liabilities for which fair value equals or closely approximates the amount recorded on the Company’s condensed consolidated balance sheets. The following tables present the estimated fair values of the Company’s financial assets and liabilities not measured at fair value on a recurring basis as of the dates indicated:
Fair Value HierarchyFair Value Hierarchy
BalanceEstimated Fair ValueLevel 1Level 2Level 3BalanceEstimated Fair ValueLevel 1Level 2Level 3
September 30, 2021
June 30, 2022June 30, 2022
Financial Assets:Financial Assets:Financial Assets:
Cash equivalents:Cash equivalents:Cash equivalents:
Money market fundsMoney market funds$97,798 $97,798 $97,798 $— $— Money market funds$330,737 $330,737 $330,737 $— $— 
Total cash equivalentsTotal cash equivalents$97,798 $97,798 $97,798 $— $— Total cash equivalents$330,737 $330,737 $330,737 $— $— 
Restricted cashRestricted cash$158,950 $158,950 $158,950 $— $— Restricted cash$2,113 $2,113 $2,113 $— $— 
Time deposits included in Short-term investmentsTime deposits included in Short-term investments$60,098 $60,098 $— $60,098 $— 
Employee loansEmployee loans$640 $640 $— $— $640 Employee loans$2,383 $2,383 $— $— $2,383 
Financial Liabilities:Financial Liabilities:Financial Liabilities:
Borrowings under the 2017 Credit Facility$25,007 $25,007 $— $25,007 $— 
Short-term debtShort-term debt$6,701 $6,701 $— $6,701 $— 
Borrowings under the 2021 Credit AgreementBorrowings under the 2021 Credit Agreement$25,000 $25,000 $— $25,000 $— 
Other long-term debtOther long-term debt$5,221 $5,221 $— $5,221 $— 
Fair Value Hierarchy
BalanceEstimated Fair ValueLevel 1Level 2Level 3
December 31, 2020
Financial Assets:
Cash equivalents:
Money market funds$153,783 $153,783 $153,783 $— $— 
Total cash equivalents$153,783 $153,783 $153,783 $— $— 
Restricted cash$1,390 $1,390 $1,390 $— $— 
Time deposits included in Short-term investments$60,007 $60,007 $— $60,007 $— 
Employee loans$794 $794 $— $— $794 
Financial Liabilities:
Borrowings under the 2017 Credit Facility$25,007 $25,007 $— $25,007 $— 
As of September 30, 2021, the Company held $157.2 million of cash which was available for the exclusive purpose of guaranteeing the payment of the price for the acquisition of the shares of Emakina Group SA. This amount is classified as Restricted cash, noncurrent in the Company’s condensed consolidated balance sheet. See Note 15 “Subsequent events” for more information regarding the acquisition of Emakina Group SA and its subsidiaries.
Fair Value Hierarchy
BalanceEstimated Fair ValueLevel 1Level 2Level 3
December 31, 2021
Financial Assets:
Cash equivalents:
Money market funds$78,302 $78,302 $78,302 $— $— 
Total cash equivalents$78,302 $78,302 $78,302 $— $— 
Restricted cash$2,722 $2,722 $2,722 $— $— 
Employee loans$818 $818 $— $— $818 
Financial Liabilities:
Short-term debt$16,018 $16,018 $— $16,018 $— 
Borrowings under the 2021 Credit Agreement$25,000 $25,000 $— $25,000 $— 
Other long-term debt$5,234 $5,234 $— $5,234 $— 
Non-Marketable Securities Without Readily Determinable Fair Values
The Company holds investments in equity securities that do not have readily determinable fair values. These investments are recorded at cost and are remeasured to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $27.5 million and $25.0$27.5 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively, and is classified as Other noncurrent assets in the Company’s condensed consolidated balance sheets.

15

Table of Contents

5.6.DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company uses derivative financial instruments to manage the risk of fluctuations in foreign currency exchange rates. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted, Russian ruble, Polish zloty, Hungarian forint and Indian rupee transactions.
17

Table of Contents
During the three months ended March 31, 2022, in response to the invasion of Ukraine, the Company de-designated its Russian ruble foreign exchange forward contracts as hedges and entered into offsetting foreign exchange forward contracts with the same counterparty. The Company determined it was probable the underlying forecasted foreign currency transactions which were hedged would not occur and reclassified the accumulated loss of $43.9 million on the underlying hedges into income which is classified as foreign exchange loss in the condensed consolidated statement of income.
As of SeptemberJune 30, 2021,2022, all of the Company’s foreign exchange forward contracts, except the Russian ruble foreign exchange forward contracts, were designated as hedges and there is no financial collateral (including cash collateral) required to be posted by the Company related to the foreign exchange forward contracts.
The fair value of derivative instruments on the Company’s condensed consolidated balance sheets as of SeptemberJune 30, 20212022 and December 31, 20202021 were as follows:
As of September 30, 2021As of December 31, 2020
Balance Sheet ClassificationAsset DerivativesLiability DerivativesAsset DerivativesLiability Derivatives
Foreign exchange forward contracts -
Designated as hedging instruments
Prepaid expenses and other current assets$2,359 $4,955 
Accrued expenses and other current liabilities$2,963 $243 
As of June 30, 2022As of December 31, 2021
Balance Sheet ClassificationAsset DerivativesLiability DerivativesAsset DerivativesLiability Derivatives
Foreign exchange forward contracts -
Designated as hedging instruments
Prepaid expenses and other current assets$25 $1,429 
Accrued expenses and other current liabilities$12,761 $5,849 
Foreign exchange forward contracts -
Not designated as hedging instruments
Accrued expenses and other current liabilities$32,013 $— 
6.
7.LEASES
The Company leases office space, corporate apartments, office equipment, and vehicles. Many of the Company’s leases contain variable payments including changes in base rent and charges for common area maintenance or other miscellaneous expenses. Due to this variability, the cash flows associated with these variable payments are not included in the minimum lease payments used in determining the right-of-use assets and associated lease liabilities and are recognized in the period in which the obligation for such payments is incurred. The Company’s leases have remaining lease terms ranging from 0.1 to 9.6 years. Certain lease agreements, mainly for office space, include options to extend or terminate the lease before the expiration date. The Company considers such options when determining the lease term when it is reasonably certain that the Company will exercise that option. The Company leases and subleases a portion of its office space to third parties. Lease income and sublease income were immaterial for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021. See Note 2 “Impact of the Invasion of Ukraine” for discussion of impairment of right-of-use assets in Russia.
During the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the components of lease expense were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
Income Statement Classification2021202020212020Income Statement Classification2022202120222021
Operating lease costOperating lease costSelling, general and administrative expenses$16,431 $18,437 $50,932 $56,151 Operating lease costSelling, general and administrative expenses$12,215 $17,245 $28,099 $34,501 
Variable lease costVariable lease costSelling, general and administrative expenses2,247 1,442 6,163 4,656 Variable lease costSelling, general and administrative expenses2,341 1,656 5,528 3,916 
Short-term lease costShort-term lease costSelling, general and administrative expenses653 180 1,167 989 Short-term lease costSelling, general and administrative expenses1,427 336 2,466 514 
Total lease costTotal lease cost$19,331 $20,059 $58,262 $61,796 Total lease cost$15,983 $19,237 $36,093 $38,931 

1618

Table of Contents
Supplemental cash flow information related to leases for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 was as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases$16,865 $17,952 $52,284 $51,324 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$6,981 $2,277 $8,658 $45,205 
Non-cash net increase due to lease modifications:
Operating lease right-of-use assets$8,184 $11,726 $6,305 $7,744 
Operating lease liabilities$8,184 $11,708 $6,305 $7,719 
Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases$15,663 $17,774 $30,466 $35,419 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$5,248 $1,639 $24,732 $1,677 
Non-cash net increase/(decrease) due to lease modifications:
Operating lease right-of-use assets$1,581 $(813)$(5,847)$(1,879)
Operating lease liabilities$325 $(813)$(7,109)$(1,879)

Weighted average remaining lease term and discount rate as of SeptemberJune 30, 20212022 and 20202021 were as follows:
 As of September 30, 2021As of September 30, 2020
Weighted average remaining lease term, in years:
Operating leases5.65.9
Weighted average discount rate:
Operating leases2.6 %3.1 %
 As of June 30, 2022As of June 30, 2021
Weighted average remaining lease term, in years:
Operating leases5.75.8
Weighted average discount rate:
Operating leases2.2 %2.6 %
As of SeptemberJune 30, 2021,2022, operating lease liabilities will mature as follows:
Year ending December 31,Year ending December 31,Lease PaymentsYear ending December 31,Lease Payments
2021 (excluding nine months ended September 30, 2021)$15,890 
202250,537 
2022 (excluding six months ended June 30, 2022)2022 (excluding six months ended June 30, 2022)$23,589 
2023202339,323 202339,699 
2024202432,968 202433,070 
2025202523,688 202525,625 
2026202620,470 
ThereafterThereafter52,227 Thereafter40,068 
Total lease paymentsTotal lease payments214,633 Total lease payments182,521 
Less: imputed interestLess: imputed interest(13,903)Less: imputed interest(10,505)
TotalTotal$200,730 Total$172,016 
The Company had committed to payments of $8.1$10.5 million related to operating lease agreements that had not yet commenced as of SeptemberJune 30, 2021.2022. These operating leases will commence on various dates during 20212022 with lease terms ranging from 0.30.7 to 5.89.3 years. The Company did not have any material finance lease agreements that had not yet commenced.

7.8.DEBT
Revolving Credit Facility — On May 24, 2017, the Company entered into an unsecured credit facility (the “2017 Credit Facility”), as may be amended from time to time, with PNC Bank, National Association; PNC Capital Markets LLC; Citibank N.A.; Wells Fargo Bank, National Association; Fifth Third Bank and Santander Bank, N.A. (collectively the “Lenders”). The 2017 Credit Facility provided for a borrowing capacity of $300.0 million, with potential to increase the borrowing capacity up to $400.0 million if certain conditions are met. The 2017 Credit Facility was scheduled to mature on May 24, 2022.
17

Table of Contents
Borrowings under the 2017 Credit Facility could have been denominated in U.S. dollars or up to a maximum of $100.0 million equivalent in British pounds sterling, Canadian dollars, euros or Swiss francs and other currencies as may be approved by the administrative agent and the Lenders. Borrowings under the 2017 Credit Facility bore interest at either a base rate or Euro-rate plus a margin based on the Company’s leverage ratio. The base rate was equal to the highest of (a) the Overnight Bank Funding Rate, plus 0.5%, (b) the Prime Rate, and (c) the Daily LIBOR Rate, plus 1.0%. As of September 30, 2021, the Company’s outstanding borrowings were subject to a LIBOR-based interest rate which resets regularly at issuance, based on lending terms.
The 2017 Credit Facility included customary business and financial covenants that may have restricted the Company’s ability to make or pay dividends (other than certain intercompany dividends) if a potential or an actual event of default had occurred or would have been triggered. As of September 30, 2021, the Company was in compliance with all covenants contained in the 2017 Credit Facility.
The following table presents the outstanding debt and borrowing capacity of the Company under the 2017 Credit Facility:
 As of
September 30,
2021
As of
December 31,
2020
Outstanding debt$25,000 $25,000 
Interest rate1.1 %1.2 %
Available borrowing capacity$275,000 $275,000 
Maximum borrowing capacity$300,000 $300,000 
On October 21, 2021, the Company replaced theits 2017 Credit Facilitycredit facility with a new unsecured credit agreement (the “2021 Credit Agreement”) with PNC Bank, National Association; PNC Capital Markets LLC; Citibank N.A.; Wells Fargo Bank, National Association; Santander Bank, N.A.; and Raiffeisen Bank International AG (collectively the “Lenders”). The 2021 Credit Agreement provides for a revolving credit facility (the “2021 Revolving Facility”) with a borrowing capacity of $700.0 million, with the potential to increase the borrowing capacity up to $1,000.0 million if certain conditions are met. The 2021 Credit Agreement matures on October 21, 2026.
19

Table of Contents
Borrowings under the 2021 Revolving Facility may be denominated in U.S. dollars or up to a maximum of $150.0 million equivalent in British pounds sterling, Canadian dollars, euros or Swiss francs and other currencies as may be approved by the administrative agent and the Lenders. Borrowings under the 2021 Revolving Facility bear interest at either a base rate or Euro-rate plus a margin based on the Company’s leverage ratio. The base rate is equal to the highest of (a) the Overnight Bank Funding Rate, plus 0.5%, (b) the Prime Rate, or (c) the Daily LIBOR Rate, plus 1.0%, so long as the Daily LIBOR Rate is offered, ascertainable and not unlawful.
The 2021 Credit Agreement includes customary business and financial covenants that may restrict the Company’s ability to make or pay dividends (other than certain intercompany dividends) if a potential or an actual event of default has occurred or would be triggered. As of the date of this report,June 30, 2022, the Company was in compliance with all covenants contained in the 2021 Credit Agreement.
The following table presents the outstanding debt and borrowing capacity of the Company under the 2021 Credit Agreement:
 As of
June 30,
2022
As of
December 31,
2021
Outstanding debt$25,000 $25,000 
Interest rate2.5 %1.0 %
Available borrowing capacity$675,000 $675,000 
Maximum borrowing capacity$700,000 $700,000 

Other Debt -
On November 3, 2021, in connection with the acquisition of Emakina, the Company assumed the debt obligations of the acquired companies. As of June 30, 2022, debt that matures within one year is classified as Short-term debt on the condensed consolidated balance sheets and consists of multiple bank loans and credit lines totaling $6.7 million that bear a weighted-average interest rate of 1.6%. As of June 30, 2022, debt that matures in more than one year and through 2027 is classified as Long-term debt on the condensed consolidated balance sheets and consists of multiple bank loans and credit lines totaling $5.2 million that bear interest at a weighted-average interest rate of 1.4%. Some of this debt is secured by assets of Emakina. Some of the debt agreements contain covenants and as of June 30, 2022, the Company was in compliance with all those covenants.
18

Table of Contents

8.9.REVENUES
Disaggregation of Revenues
The following tables present the disaggregation of the Company’s revenues by customer location, including a reconciliation of the disaggregated revenues with the reportable segments (Note 1314 “Segment Information”) for the periods indicated:
Three Months Ended September 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Customer Locations
North America$569,331 $20,959 $1,078 $591,368 
Europe21,968 301,736 103 323,807 
CIS1,562 — 43,416 44,978 
APAC1,001 27,385 — 28,386 
        Revenues$593,862 $350,080 $44,597 $988,539 
Nine Months Ended September 30, 2021Three Months Ended June 30, 2022
Reportable SegmentsReportable Segments
North AmericaEuropeRussiaConsolidated RevenuesNorth AmericaEuropeRussiaConsolidated Revenues
Customer LocationsCustomer LocationsCustomer Locations
North America$1,532,428 $53,658 $3,001 $1,589,087 
Europe61,338 812,886 236 874,460 
CIS4,828 14 107,973 112,815 
AmericasAmericas$697,961 $22,816 $835 $721,612 
EMEAEMEA23,190 399,796 — 422,986 
APACAPAC2,143 72,175 — 74,318 APAC793 29,383 — 30,176 
CEECEE1,713 (51)18,425 20,087 
Revenues Revenues$1,600,737 $938,733 $111,210 $2,650,680  Revenues$723,657 $451,944 $19,260 $1,194,861 

Three Months Ended September 30, 2020
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Customer Locations
North America$378,493 $10,853 $630 $389,976 
Europe11,278 203,255 — 214,533 
CIS1,433 16 28,590 30,039 
APAC401 17,294 — 17,695 
        Revenues$391,605 $231,418 $29,220 $652,243 

Nine Months Ended September 30, 2020
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Customer Locations
North America$1,126,970 $32,107 $2,665 $1,161,742 
Europe32,805 615,843 648,654 
CIS6,223 32 70,722 76,977 
APAC1,538 47,074 — 48,612 
        Revenues$1,167,536 $695,056 $73,393 $1,935,985 
1920

Table of Contents
Six Months Ended June 30, 2022
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Customer Locations
Americas$1,357,737 $48,776 $1,892 $1,408,405 
EMEA48,288 796,549 99 844,936 
APAC1,576 58,182 — 59,758 
CEE3,767 407 49,202 53,376 
        Revenues$1,411,368 $903,914 $51,193 $2,366,475 

Three Months Ended June 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Customer Locations
Americas$508,330 $18,036 $1,032 $527,398 
EMEA21,615 269,596 70 291,281 
APAC667 24,317 — 24,984 
CEE1,410 — 36,293 37,703 
        Revenues$532,022 $311,949 $37,395 $881,366 
Six Months Ended June 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Customer Locations
Americas$963,097 $32,699 $1,923 $997,719 
EMEA39,370 511,150 133 550,653 
APAC1,142 44,790 — 45,932 
CEE3,266 14 64,557 67,837 
        Revenues$1,006,875 $588,653 $66,613 $1,662,141 
The following tables present the disaggregation of the Company’s revenues by industry vertical, including a reconciliation of the disaggregated revenues with the reportable segments (Note 1314 “Segment Information”) for the periods indicated:
Three Months Ended September 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Industry Verticals
Financial Services$100,631 $98,711 $31,542 $230,884 
Travel & Consumer98,494 91,197 7,875 197,566 
Software & Hi-Tech146,532 27,103 662 174,297 
Business Information & Media100,536 71,953 500 172,989 
Life Sciences & Healthcare85,534 10,374 155 96,063 
Emerging Verticals62,135 50,742 3,863 116,740 
        Revenues$593,862 $350,080 $44,597 $988,539 
Nine Months Ended September 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Industry Verticals
Financial Services$253,713 $262,716 $77,251 $593,680 
Travel & Consumer252,998 235,552 19,572 508,122 
Software & Hi-Tech406,756 72,010 1,757 480,523 
Business Information & Media280,120 197,142 1,323 478,585 
Life Sciences & Healthcare241,835 36,505 534 278,874 
Emerging Verticals165,315 134,808 10,773 310,896 
        Revenues$1,600,737 $938,733 $111,210 $2,650,680 

Three Months Ended September 30, 2020Three Months Ended June 30, 2022
Reportable SegmentsReportable Segments
North AmericaEuropeRussiaConsolidated RevenuesNorth AmericaEuropeRussiaConsolidated Revenues
Industry VerticalsIndustry VerticalsIndustry Verticals
Travel & ConsumerTravel & Consumer$130,932 $140,081 $5,305 $276,318 
Financial ServicesFinancial Services$48,415 $68,419 $19,881 $136,715 Financial Services126,879 112,766 11,338 250,983 
Travel & Consumer54,590 51,449 4,135 110,174 
Business Information & MediaBusiness Information & Media114,026 83,681 163 197,870 
Software & Hi-TechSoftware & Hi-Tech100,847 17,492 515 118,854 Software & Hi-Tech161,034 33,847 442 195,323 
Business Information & Media84,384 55,228 402 140,014 
Life Sciences & HealthcareLife Sciences & Healthcare66,071 7,963 169 74,203 Life Sciences & Healthcare115,899 12,527 66 128,492 
Emerging VerticalsEmerging Verticals37,298 30,867 4,118 72,283 Emerging Verticals74,887 69,042 1,946 145,875 
Revenues Revenues$391,605 $231,418 $29,220 $652,243  Revenues$723,657 $451,944 $19,260 $1,194,861 

2021

Table of Contents
Nine Months Ended September 30, 2020Six Months Ended June 30, 2022
Reportable SegmentsReportable Segments
North AmericaEuropeRussiaConsolidated RevenuesNorth AmericaEuropeRussiaConsolidated Revenues
Industry VerticalsIndustry VerticalsIndustry Verticals
Travel & ConsumerTravel & Consumer$253,179 $276,869 $11,589 $541,637 
Financial ServicesFinancial Services$143,970 $202,668 $49,695 $396,333 Financial Services247,214 230,096 33,736 511,046 
Travel & Consumer161,507 163,769 11,698 336,974 
Business Information & MediaBusiness Information & Media224,972 166,582 619 392,173 
Software & Hi-TechSoftware & Hi-Tech303,385 53,803 3,000 360,188 Software & Hi-Tech317,316 66,301 1,189 384,806 
Business Information & Media246,085 171,712 1,201 418,998 
Life Sciences & HealthcareLife Sciences & Healthcare189,458 22,651 217 212,326 Life Sciences & Healthcare227,270 24,809 216 252,295 
Emerging VerticalsEmerging Verticals123,131 80,453 7,582 211,166 Emerging Verticals141,417 139,257 3,844 284,518 
Revenues Revenues$1,167,536 $695,056 $73,393 $1,935,985  Revenues$1,411,368 $903,914 $51,193 $2,366,475 

Three Months Ended June 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Industry Verticals
Travel & Consumer$85,075 $79,731 $6,739 $171,545 
Financial Services83,342 85,965 24,631 193,938 
Business Information & Media92,379 65,032 436 157,847 
Software & Hi-Tech134,638 23,934 590 159,162 
Life Sciences & Healthcare80,712 10,780 204 91,696 
Emerging Verticals55,876 46,507 4,795 107,178 
        Revenues$532,022 $311,949 $37,395 $881,366 

Six Months Ended June 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Industry Verticals
Travel & Consumer$154,504 $144,355 $11,697 $310,556 
Financial Services153,082 164,005 45,709 362,796 
Business Information & Media179,584 125,189 823 305,596 
Software & Hi-Tech260,224 44,907 1,095 306,226 
Life Sciences & Healthcare156,301 26,131 379 182,811 
Emerging Verticals103,180 84,066 6,910 194,156 
        Revenues$1,006,875 $588,653 $66,613 $1,662,141 
22

Table of Contents
The following tables present the disaggregation of the Company’s revenues by contract type including a reconciliation of the disaggregated revenues with the Company’s reportable segments (Note 1314 “Segment Information”) for the periods indicated:
Three Months Ended September 30, 2021Three Months Ended June 30, 2022
Reportable SegmentsReportable Segments
North AmericaEuropeRussiaConsolidated RevenuesNorth AmericaEuropeRussiaConsolidated Revenues
Contract TypesContract TypesContract Types
Time-and-materialTime-and-material$525,372 $303,521 $22,717 $851,610 Time-and-material$654,627 $390,296 $14,648 $1,059,571 
Fixed-priceFixed-price64,510 46,070 21,835 132,415 Fixed-price65,992 60,607 4,581 131,180 
LicensingLicensing3,507 106 36 3,649 Licensing2,463 530 31 3,024 
Other revenuesOther revenues473 383 865 Other revenues575 511 — 1,086 
Revenues Revenues$593,862 $350,080 $44,597 $988,539  Revenues$723,657 $451,944 $19,260 $1,194,861 

Nine Months Ended September 30, 2021Six Months Ended June 30, 2022
Reportable SegmentsReportable Segments
North AmericaEuropeRussiaConsolidated RevenuesNorth AmericaEuropeRussiaConsolidated Revenues
Contract TypesContract TypesContract Types
Time-and-materialTime-and-material$1,409,463 $803,282 $56,383 $2,269,128 Time-and-material$1,281,434 $767,951 $33,339 $2,082,724 
Fixed-priceFixed-price178,908 133,888 54,651 367,447 Fixed-price122,757 134,215 17,771 274,743 
LicensingLicensing11,118 420 148 11,686 Licensing6,098 675 83 6,856 
Other revenuesOther revenues1,248 1,143 28 2,419 Other revenues1,079 1,073 — 2,152 
Revenues Revenues$1,600,737 $938,733 $111,210 $2,650,680  Revenues$1,411,368 $903,914 $51,193 $2,366,475 

Three Months Ended September 30, 2020Three Months Ended June 30, 2021
Reportable SegmentsReportable Segments
North AmericaEuropeRussiaConsolidated RevenuesNorth AmericaEuropeRussiaConsolidated Revenues
Contract TypesContract TypesContract Types
Time-and-materialTime-and-material$348,570 $196,719 $13,844 $559,133 Time-and-material$466,204 $267,070 $19,239 $752,513 
Fixed-priceFixed-price41,050 34,057 15,314 90,421 Fixed-price61,383 44,252 18,115 123,750 
LicensingLicensing1,717 242 53 2,012 Licensing4,076 260 31 4,367 
Other revenuesOther revenues268 400 677 Other revenues359 367 10 736 
Revenues Revenues$391,605 $231,418 $29,220 $652,243  Revenues$532,022 $311,949 $37,395 $881,366 

Six Months Ended June 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Contract Types
Time-and-material$884,091 $499,761 $33,666 $1,417,518 
Fixed-price114,398 87,818 32,816 235,032 
Licensing7,611 314 112 8,037 
Other revenues775 760 19 1,554 
        Revenues$1,006,875 $588,653 $66,613 $1,662,141 

2123

Table of Contents
Nine Months Ended September 30, 2020
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Contract Types
Time-and-material$1,054,548 $579,212 $41,412 $1,675,172 
Fixed-price106,760 111,565 30,394 248,719 
Licensing5,445 949 1,520 7,914 
Other revenues783 3,330 67 4,180 
        Revenues$1,167,536 $695,056 $73,393 $1,935,985 


Timing of Revenue Recognition
The following tables present the timing of revenue recognition reconciled with the Company’s reportable segments (Note 1314 “Segment Information”) for the periods indicated:
Three Months Ended September 30, 2021Three Months Ended June 30, 2022
Reportable SegmentsReportable Segments
North AmericaEuropeRussiaConsolidated RevenuesNorth AmericaEuropeRussiaConsolidated Revenues
Timing of Revenue RecognitionTiming of Revenue RecognitionTiming of Revenue Recognition
Transferred over timeTransferred over time$591,477 $349,984 $44,567 $986,028 Transferred over time$722,311 $451,847 $19,240 $1,193,398 
Transferred at a point of timeTransferred at a point of time2,385 96 30 2,511 Transferred at a point of time1,346 97 20 1,463 
Revenues Revenues$593,862 $350,080 $44,597 $988,539  Revenues$723,657 $451,944 $19,260 $1,194,861 

Nine Months Ended September 30, 2021Six Months Ended June 30, 2022
Reportable SegmentsReportable Segments
North AmericaEuropeRussiaConsolidated RevenuesNorth AmericaEuropeRussiaConsolidated Revenues
Timing of Revenue RecognitionTiming of Revenue RecognitionTiming of Revenue Recognition
Transferred over timeTransferred over time$1,593,081 $938,555 $111,127 $2,642,763 Transferred over time$1,407,420 $903,695 $51,131 $2,362,246 
Transferred at a point of timeTransferred at a point of time7,656 178 83 7,917 Transferred at a point of time3,948 219 62 4,229 
Revenues Revenues$1,600,737 $938,733 $111,210 $2,650,680  Revenues$1,411,368 $903,914 $51,193 $2,366,475 

Three Months Ended June 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Timing of Revenue Recognition
Transferred over time$529,230 $311,840 $37,370 $878,440 
Transferred at a point of time2,792 109 25 2,926 
        Revenues$532,022 $311,949 $37,395 $881,366 
Three Months Ended September 30, 2020
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Timing of Revenue Recognition
Transferred over time$390,295 $231,281 $29,174 $650,750 
Transferred at a point of time1,310 137 46 1,493 
        Revenues$391,605 $231,418 $29,220 $652,243 

Nine Months Ended September 30, 2020
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Timing of Revenue Recognition
Transferred over time$1,163,678 $694,525 $71,882 $1,930,085 
Transferred at a point of time3,858 531 1,511 5,900 
        Revenues$1,167,536 $695,056 $73,393 $1,935,985 
22

Table of Contents
Six Months Ended June 30, 2021
Reportable Segments
North AmericaEuropeRussiaConsolidated Revenues
Timing of Revenue Recognition
Transferred over time$1,001,604 $588,571 $66,560 $1,656,735 
Transferred at a point of time5,271 82 53 5,406 
        Revenues$1,006,875 $588,653 $66,613 $1,662,141 
During the three and ninesix months ended SeptemberJune 30, 2021,2022, the Company recognized $13.3$12.5 million and $18.0$6.6 million, respectively, of revenues from performance obligations satisfied in previous periods compared to $9.1$11.6 million and $4.7$16.5 million during the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively.
The following table includes the estimated revenues expected to be recognized in the future related to performance obligations that are partially or fully unsatisfied as of SeptemberJune 30, 2021.2022. The Company applies a practical expedient and does not disclose the value of unsatisfied performance obligations for contracts (i) that have an original expected duration of one year or less and (ii) for which it recognizes revenues at the amount to which it has the right to invoice for services provided.
Less than 1 year1 Year2 Years3 YearsTotalLess than 1 year1 Year2 Years3 YearsTotal
Contract TypeContract TypeContract Type
Fixed-priceFixed-price$14,689 $678 $71 $— $15,438 Fixed-price$9,731 $2,722 $1,930 $965 $15,348 
24

Table of Contents
The Company applies a practical expedient and does not disclose the amount of the transaction price allocated to the remaining performance obligations nor provide an explanation of when the Company expects to recognize that amount as revenue for certain variable consideration.
Contract Balances
The following table provides information on the classification of contract assets and liabilities in the condensed consolidated balance sheets:
As of
September 30,
2021
As of
December 31,
2020
As of
June 30,
2022
As of
December 31,
2021
Contract assets included in Trade receivables and contract assets$31,217 $7,700 
Contract assets included in Trade receivables and contract assets, netContract assets included in Trade receivables and contract assets, net$13,426 $13,798 
Contract liabilities included in Accrued expenses and other current liabilitiesContract liabilities included in Accrued expenses and other current liabilities$20,185 $17,383 Contract liabilities included in Accrued expenses and other current liabilities$33,157 $39,810 
Contract liabilities included in Other noncurrent liabilitiesContract liabilities included in Other noncurrent liabilities$156 $94 Contract liabilities included in Other noncurrent liabilities$326 $84 
Contract assets have increased since December 31, 2020 primarily due to contractscomprise amounts where the Company’s right to bill is contingent uponon something other than the passage of time such as achievement of contractual milestones. Contract assets have not changed materially since December 31, 2021. Contract liabilities comprise amounts collected from the Company’s customers for revenues not yet earned and such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. Contract liabilities have increaseddecreased since December 31, 20202021, due to an increase in advance payments fromservices performed for customers for professional services and licenses during the first ninesix months of 2021.2022.
During the three and ninesix months ended SeptemberJune 30, 2021,2022, the Company recognized $1.0$5.6 million and $15.3$32.0 million, respectively, of revenues that were included in Accrued expenses and other current liabilities at December 31, 2020.2021. During the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company recognized $0.4$3.3 million and $8.3$14.3 million, respectively, of revenues that were included in Accrued expenses and other current liabilities at December 31, 2019.2020.

9.10.STOCK-BASED COMPENSATION
The following table summarizes the components of stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the periods indicated:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Cost of revenues (exclusive of depreciation and amortization)$12,174 $10,854 $34,552 $23,796 
Selling, general and administrative expenses17,013 12,620 43,086 30,998 
Total$29,187 $23,474 $77,638 $54,794 


23

Table of Contents
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Cost of revenues (exclusive of depreciation and amortization)$14,732 $11,261 $14,308 $22,378 
Selling, general and administrative expenses13,161 12,637 20,697 26,073 
Total$27,893 $23,898 $35,005 $48,451 
Stock Options
Stock option activity under the Company’s plans is set forth below:
 Number of
Options 
Weighted Average
Exercise Price 
Aggregate
Intrinsic Value 
Weighted Average
Remaining Contractual Term (in years)
Options outstanding at January 1, 20212,772 $61.71 
Options granted91 $401.02 
Options exercised(418)$48.05 
Options forfeited/cancelled(12)$244.02 
Options outstanding at September 30, 20212,433 $75.85 $1,203,190 3.8
Options vested and exercisable as of September 30, 20212,132 $52.97 $1,103,549 3.2
Options expected to vest as of September 30, 2021280 $236.20 $93,728 8.4
 Number of
Options 
Weighted Average
Exercise Price 
Aggregate
Intrinsic Value 
Weighted Average
Remaining Contractual Term (in years)
Options outstanding at January 1, 20222,318 $77.79 
Options granted132 $277.45 
Options exercised(308)$32.70 
Options forfeited(8)$341.30 
Options outstanding at June 30, 20222,134 $95.65 $436,209 3.8
Options vested and exercisable as of June 30, 20221,832 $66.17 $420,985 3.0
Options expected to vest as of June 30, 2022279 $272.93 $14,299 8.7
As of SeptemberJune 30, 2021, $20.02022, $28.8 million of total remaining unrecognized stock-based compensation cost related to unvested stock options, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.83.0 years.
25

Table of Contents
Restricted Stock and Restricted Stock Units
Service-Based Awards
The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the ninesix months ended SeptemberJune 30, 2021:2022:
Equity-Classified
 Restricted Stock
Equity-Classified
Equity-Settled
Restricted Stock Units
Liability-Classified
Cash-Settled
Restricted Stock Units
Equity-Classified
 Restricted Stock
Equity-Classified
Equity-Settled
Restricted Stock Units
Liability-Classified
Cash-Settled
Restricted Stock Units
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Unvested service-based awards outstanding at January 1, 20219 $167.18 686 $162.15 175 $141.16 
Unvested service-based awards outstanding at January 1, 2022Unvested service-based awards outstanding at January 1, 20229 $167.18 576 $277.38 112 $217.28 
Awards grantedAwards granted— $— 221 $411.89 27 $392.93 Awards granted— $— 621 $283.11 51 $269.60 
Awards modifiedAwards modified $— (3)$387.74 $220.00 
Awards vestedAwards vested— $— (274)$132.67 (86)$117.80 Awards vested— $— (216)$217.49 (52)$181.19 
Awards forfeited/cancelledAwards forfeited/cancelled— $— (33)$255.14 (3)$207.46 Awards forfeited/cancelled— $— (30)$331.24 (3)$258.23 
Unvested service-based awards outstanding at September 30, 20219 $167.18 600 $262.54 113 $216.32 
Unvested service-based awards outstanding at June 30, 2022Unvested service-based awards outstanding at June 30, 20229 $167.18 948 $292.73 111 $257.12 
As of SeptemberJune 30, 2021, $0.52022, $0.1 million of total remaining unrecognized stock-based compensation cost related to service-based equity-classified restricted stock is expected to be recognized over the weighted-average remaining requisite service period of 0.90.2 years.
As of SeptemberJune 30, 2021, $116.12022, $223.7 million of total remaining unrecognized stock-based compensation cost related to service-based equity-classified restricted stock units (“RSUs”), net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.83.1 years.
During the nine months ended September 30, 2021, the Company granted 29 thousand service-based equity-classified RSUs in connection with the PolSource acquisition, 3 thousand service-based equity-classified RSUs in connection with the CORE acquisition and 14 thousand service-based equity-classified RSUs in connection with the Other 2021 Acquisitions. See Note 2 “Acquisitions” in the condensed consolidated interim financial statements for additional information regarding business acquisitions.
As of SeptemberJune 30, 2021, $39.12022, $26.3 million of total remaining unrecognized stock-based compensation cost related to service-based liability-classified cash-settled RSUs, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.42.7 years.
24

Table of Contents
The liability associated with the service-based liability-classified RSUs as of SeptemberJune 30, 20212022 and December 31, 2020,2021, was $20.4$3.6 million and $26.8$31.5 million, respectively, and was classified as Accrued compensation and benefits expenses in the condensed consolidated balance sheets.
Performance-Based Awards
The table below summarizes activity related to the Company’s equity-classified performance-based awards for the ninesix months ended SeptemberJune 30, 2021:2022:
Equity-Classified
Equity-Settled
Restricted Stock
Equity-Classified
Equity-Settled
Restricted Stock Units
 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Unvested performance-based awards outstanding at January 1, 20219 $165.87 21 $227.16 
Awards granted— $— $399.99 
Unvested performance-based awards outstanding at September 30, 20219 $165.87 22 $233.43 
Equity-Classified
Equity-Settled
Restricted Stock
Equity-Classified
Equity-Settled
Restricted Stock Units
 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Number of
Shares 
Weighted Average Grant Date
Fair Value Per Share 
Unvested performance-based awards outstanding at January 1, 20229 $165.87 23 $339.69 
Awards granted— $— $418.26 
Awards vested— — (1)$399.99 
Awards forfeited/cancelled— — (3)$399.99 
Unvested performance-based awards outstanding at June 30, 20229 $165.87 25 $349.34 
As of SeptemberJune 30, 2021, $0.72022, $0.5 million of total remaining unrecognized stock-based compensation cost related to performance-based equity-classified restricted stock is expected to be recognized over the weighted-average remaining requisite service period of 1.91.2 years.
26

Table of Contents
As of SeptemberJune 30, 2021, $1.82022, $5.0 million of total remaining unrecognized stock-based compensation cost related to performance-based equity-classified RSUs is expected to be recognized over the weighted-average remaining requisite service period of 2.02.6 years.
2021 Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan ("ESPP") enables eligible employees to purchase shares of EPAM’s common stock at a discount at the end of each designated offering period, which occurs every six months in April and November. The purchase price is equal to 85% of the fair market value of a share of EPAM’s common stock on the first date of an offering or the date of purchase, whichever is lower. During the ninethree and six months ended SeptemberJune 30, 2021, in2022, the ESPP participants purchased 55 thousand shares of common stock under the ESPP.
The Company recognizes compensation expense related to share issuances pursuant to the ESPP on a straight-line basis over the six-month offering period. For the three and six months ended June 30, 2022, the Company recognized $3.7 million and $5.4 million, respectively, of stock-based compensation expense related to the ESPP. As of June 30, 2022, total unrecognized stock-based compensation cost related to the ESPP was $6.5 million, which is expected to be recognized over a period of 0.3 years.
Commitments for Future Equity Awards
In connection with the PolSourceCompany’s acquisitions of businesses as discussed in Note 3 “Acquisitions,” EPAM enters into agreements that contractually commit it to granting equity awards at future dates. The agreements are unique to each acquisition and terms vary to specify the Company granted 1 thousand performance-based equity-settled RSUs. Vestingnumber of these performance-based equity-settled RSUs is dependent on continued service and achievementfuture awards to be issued or a monetary value that will be settled with equity awards valued at future stock prices.
As of certain revenue, earnings and operational targets.
Also, in connection with the CORE acquisition,June 30, 2022, the Company has committedcommitments to issuing $34.9grant up to $34.0 million of equity-settledequity awards with performance conditionsthe number of awards to be granted atdetermined based on future stock prices overprices. There is a service-based vesting requirement after the next 3.4 years.grant date associated with these awards and certain of these awards contain performance criteria that will determine the amount of future awards to be issued. These awards have a two year vesting period post issuance.
Additionally, duringare considered granted for accounting purposes. In determining the nine months ended September 30, 2021,expense, the Company issued certain performance-based equity-settled RSUs with undetermined conditions for future vesting, which are not deemed granted and outstanding for accounting purposes, and therefore they have been excluded fromadjusts the awards granted disclosure and recognized expense forexpected settlement based on the period presented. The Company issued 5 thousandprobability of achievement of such performance-based equity-settled RSUs in connection withperformance criteria. Related to these awards, the PolSource acquisition and 2 thousand of such performance-based equity-settled RSUs in connection with the Other 2021 Acquisitions. See Note 2 “Acquisitions”Company recorded stock-based compensation expense in the condensed consolidated interim financial statements of income of $0.5 million and $0.2 million for additional information regarding business acquisitions.the three months ended June 30, 2022 and 2021, respectively, and $0.7 million and $1.3 million for the six months ended June 30, 2022 and 2021, respectively.
As of SeptemberJune 30, 2021,2022, the Company has committed to issuing 6issued 2 thousand performance-based equity-classified RSUs to employees of PolSource and future RSU awards valued at $3.8 million to employees of Other 2021 Acquisitions at various dates over the next 12 months. As of September 30, 2021, these awards werewhich are not considered granted for accounting purposes.purposes as the future vesting conditions have not yet been determined.

10.11.INCOME TAXES
In determining its interim provision for income taxes, the Company useshistorically has used an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. During the first quarter of 2022, the Company recorded its interim tax provision using the discrete method rather than using an estimated annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. During the second quarter of 2022, the Company used an estimated annual effective tax rate. The change did not have a material impact on the condensed consolidated interim financial statements. In subsequent quarters, the Company expects to continue to utilize the annual effective tax rate method.
The Company’s worldwide effective tax rates for the three months ended SeptemberJune 30, 2022 and 2021 were (114.9)% and 2020 were 14.6% and 14.0%6.9%, respectively, and 9.1%5.8% and 12.6%6.0% during the ninesix months ended SeptemberJune 30, 2022 and 2021, and 2020, respectively.
25

Table of Contents
The Company’s effective tax rates benefited from excess tax benefits recorded upon vesting or exercise of stock-based awards of $10.4$7.4 million and $9.2$21.0 million during the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $52.8$20.5 million and $29.0$42.5 million during the ninesix months ended SeptemberJune 30, 2022 and 2021, respectively. Additionally, during the three months ended June 30, 2022, the Company’s effective tax rate benefited from the recognition of one-time benefits of $7.2 million resulting from the Company’s decision to change the tax status and 2020, respectively.to classify certain of its foreign subsidiaries as disregarded entities for U.S. income tax purposes.
27

Table of Contents
11.12.EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. For purposes of computing basic earnings per share, any nonvested shares of restricted stock that have been issued by the Company and are contingently returnable to the Company are excluded from the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, unvested restricted stock, and unvested equity-settled RSUs.RSUs and the stock to be issued under the Company’s ESPP. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.
The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020 2022202120222021
Numerator for basic and diluted earnings per share:Numerator for basic and diluted earnings per share:Numerator for basic and diluted earnings per share:
Net incomeNet income$115,656 $89,432 $339,373 $241,621 Net income$18,604 $114,671 $108,323 $223,717 
Numerator for basic and diluted earnings per shareNumerator for basic and diluted earnings per share$115,656 $89,432 $339,373 $241,621 Numerator for basic and diluted earnings per share$18,604 $114,671 $108,323 $223,717 
Denominator:Denominator:  Denominator:  
Weighted average common shares for basic earnings per shareWeighted average common shares for basic earnings per share56,649 55,884 56,429 55,625 Weighted average common shares for basic earnings per share57,240 56,463 57,078 56,317 
Net effect of dilutive stock options, restricted stock units and restricted stock awards2,554 2,732 2,570 2,716 
Net effect of dilutive stock options, restricted stock units, restricted stock awards and stock issuable under the ESPPNet effect of dilutive stock options, restricted stock units, restricted stock awards and stock issuable under the ESPP1,780 2,548 1,903 2,579 
Weighted average common shares for diluted earnings per shareWeighted average common shares for diluted earnings per share59,203 58,616 58,999 58,341 Weighted average common shares for diluted earnings per share59,020 59,011 58,981 58,896 
Net income per share:Net income per share:  Net income per share:  
BasicBasic$2.04 $1.60 $6.01 $4.34 Basic$0.33 $2.03 $1.90 $3.97 
DilutedDiluted$1.95 $1.53 $5.75 $4.14 Diluted$0.32 $1.94 $1.84 $3.80 
The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was 8461 thousand and 35299 thousand during the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively.
The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was 3 thousand83 and 4049 thousand during the three and ninesix months ended SeptemberJune 30, 2020, respectively.2021.

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

26

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

28

Table of Contents
Litigation — From time to time, the Company is involved in litigation, claims or other contingencies arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, if decided adversely, is not expected to have a material effect on the Company’s business, financial condition, results of operations or cash flows.
Building Acquisition CommitmentsUkraine Humanitarian Commitment During the year ended December 31, 2019, the Company entered into an agreementOn March 4, 2022, EPAM announced that it has established a $100.0 million humanitarian commitment to purchase office spacesupport its employees in Ukraine intended to support the global delivery center in that country. The agreement is subject to completion of construction and other ordinary closing conditions. As of September 30, 2021, the Company has committed to making future payments totaling approximately $34.9 million including VAT to the sellers upon transfertheir families. See Note 2 “Impact of the building. The Company anticipates gaining controlInvasion of the building and making the future payments during the fourth quarter of 2021.Ukraine” for more information regarding commitments to humanitarian aid for Ukraine.

13.14.SEGMENT INFORMATION
The Company determines its business segments and reports segment information in accordance with how the Company’s chief operating decision maker (“CODM”) organizes the segments to evaluate performance, allocate resources and make business decisions. Segment results are based on the segment’s revenues and operating profit, where segment operating profit is defined as income from operations before unallocated costs. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain corporate expenses are not allocated to specific segments as these expenses are not controllable at the segment level. Such expenses include certain types of professional fees, non-corporate taxes, compensation to non-employee directors and certain other general and administrative expenses, including compensation of specific groups of non-production employees. In addition, the Company does not allocate amortization of intangible assets acquired through business combinations, goodwill and other asset impairment charges, stock-based compensation expenses, acquisition-related costs and certain other one-time charges. These unallocated amounts are combined with total segment operating profit to arrive at consolidated income from operations as reported below in the reconciliation of segment operating profit to consolidated income before provision for income taxes. Additionally, management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably among the segments.
The Company manages its business primarily based on the managerial responsibility for its client base and market. As managerial responsibility for a particular customer relationship generally correlates with the customer’s geographic location, there is a high degree of similarity between customer locations and the geographic boundaries of the Company’s reportable segments. In some cases, managerial responsibility for a particular customer is assigned to a management team in another region and is usually based on the strength of the relationship between customer executives and particular members of EPAM’s senior management team. In such cases, the customer’s activity would be reported through the management team’s reportable segment.


27

TableSee Note 2 “Impact of Contents
the Invasion of Ukraine” for more information regarding the Company’s decisions to no longer serve customers in Russia and the subsequent decision to exit its operations in Russia.
Revenues from external customers and operating profit/(loss), before unallocated expenses, by reportable segment for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020 2022202120222021
Segment revenues:Segment revenues:Segment revenues:
North AmericaNorth America$593,862 $391,605 $1,600,737 $1,167,536 North America$723,657 $532,022 $1,411,368 $1,006,875 
EuropeEurope350,080 231,418 938,733 695,056 Europe451,944 311,949 903,914 588,653 
RussiaRussia44,597 29,220 111,210 73,393 Russia19,260 37,395 51,193 66,613 
Total segment revenuesTotal segment revenues$988,539 $652,243 $2,650,680 $1,935,985 Total segment revenues$1,194,861 $881,366 $2,366,475 $1,662,141 
Segment operating profit/(loss):Segment operating profit/(loss):  Segment operating profit/(loss):  
North AmericaNorth America$122,232 $87,272 $327,595 $248,951 North America$127,420 $111,260 $254,154 $205,363 
EuropeEurope60,952 43,018 162,477 109,223 Europe35,396 50,452 92,107 101,525 
RussiaRussia10,541 2,958 17,549 (2,168)Russia1,662 6,029 (17,822)7,008 
Total segment operating profitTotal segment operating profit$193,725 $133,248 $507,621 $356,006 Total segment operating profit$164,478 $167,741 $328,439 $313,896 
29

Table of Contents
Intersegment transactions were excluded from the above on the basis that they are neither included in the measure of a segment’s profit and loss results, nor considered by the CODM during the review of segment results.
There were no customers that accounted for more than 10% of total segment revenues during the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.
Reconciliation of segment operating profit to consolidated income before provision for income taxes is presented below:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Total segment operating profit:$193,725 $133,248 $507,621 $356,006 
Unallocated amounts:
Stock-based compensation expense(29,187)(23,474)(77,638)(54,794)
Amortization of intangibles assets(4,684)(3,086)(11,785)(9,215)
Other acquisition-related expenses(1,553)(243)(5,585)(859)
Other unallocated expenses(14,177)(10,049)(35,964)(23,807)
Income from operations144,124 96,396 376,649 267,331 
Interest and other (loss)/income, net(5,325)1,672 2,629 5,875 
Foreign exchange (loss)/gain(3,441)5,896 (5,835)3,253 
Income before provision for income taxes$135,358 $103,964 $373,443 $276,459 


28

Table of Contents
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Total segment operating profit:$164,478 $167,741 $328,439 $313,896 
Unallocated amounts:
Stock-based compensation expense(27,893)(23,898)(35,005)(48,451)
Amortization of intangibles assets(5,756)(3,961)(11,000)(7,101)
Other acquisition-related expenses(90)(2,099)(669)(4,032)
Other unallocated expenses(37,719)(12,509)(59,503)(21,787)
Income from operations93,020 125,274 222,262 232,525 
Interest and other income, net1,579 2,580 1,414 7,954 
Foreign exchange loss(85,941)(4,693)(108,726)(2,394)
Income before provision for income taxes$8,658 $123,161 $114,950 $238,085 
Geographic Area Information
Long-lived assets presented in the table below include property and equipment, net of accumulated depreciation and amortization, and management has determined that it is not practical to allocate these assets by segment since such assets are used interchangeably among the segments. Physical locations and values of the Company’s long-lived assets are presented below:
As of
June 30,
2022
As of
December 31,
2021
Ukraine$70,901 $78,289 
Belarus64,401 75,422 
United States17,186 14,843 
India9,994 9,459 
Poland7,865 8,240 
Hungary4,819 5,339 
Russia— 16,611 
Other35,953 28,011 
Total$211,119 $236,214 
As of
September 30,
2021
As of
December 31,
2020
Belarus$78,468 $73,988 
Ukraine25,816 30,980 
Russia15,982 15,036 
United States15,362 15,718 
India7,430 7,079 
Poland6,576 5,434 
Hungary5,662 5,365 
Spain2,810 2,799 
Mexico2,734 2,419 
China2,126 2,722 
Germany2,007 346 
Other11,908 7,647 
Total$176,881 $169,533 
See Note 2 “Impact of the Invasion of Ukraine” for more information regarding the Company’s decisions to no longer serve customers in Russia, impairment of long-lived assets in Russia and the subsequent decision to exit its operations in Russia.

30

Table of Contents
The table below presents information about the Company’s revenues by customer location for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
United States$564,116 $371,366 $1,514,636 $1,106,459 
United Kingdom126,282 77,519 332,485 251,928 
Switzerland66,659 50,399 198,021 144,158 
Netherlands39,607 28,827 109,339 81,973 
Russia42,656 27,963 106,079 69,372 
Germany31,292 22,172 79,053 62,163 
Canada25,843 18,219 72,133 52,724 
Other locations92,084 55,778 238,934 167,208 
Total$988,539 $652,243 $2,650,680 $1,935,985 

29

Table of Contents

Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
United States$686,952 $502,499 $1,343,979 $950,520 
United Kingdom149,730 112,739 302,927 206,203 
Switzerland79,226 63,794 161,056 131,362 
Netherlands50,879 36,700 101,058 69,732 
Germany39,874 25,736 76,263 47,761 
Canada31,811 24,455 58,840 46,290 
Russia17,987 35,767 48,679 63,423 
Other locations138,402 79,676 273,673 146,850 
Total$1,194,861 $881,366 $2,366,475 $1,662,141 
14.15.ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
20212020202120202022202120222021
Foreign currency translationForeign currency translationForeign currency translation
Beginning balanceBeginning balance$(29,062)$(48,743)$(28,168)$(32,666)Beginning balance$(83,299)$(38,699)$(52,747)$(28,168)
Foreign currency translationForeign currency translation(12,531)(907)(14,024)(20,307)Foreign currency translation22,977 12,088 (13,138)(1,493)
Income tax benefit1,770 1,106 2,369 4,429 
Income tax (expense)/ benefitIncome tax (expense)/ benefit(8,147)(2,451)(2,584)599 
Foreign currency translation, net of taxForeign currency translation, net of tax(10,761)199 (11,655)(15,878)Foreign currency translation, net of tax14,830 9,637 (15,722)(894)
Ending balanceEnding balance$(39,823)$(48,544)$(39,823)$(48,544)Ending balance$(68,469)$(29,062)$(68,469)$(29,062)
Cash flow hedging instrumentsCash flow hedging instrumentsCash flow hedging instruments
Beginning balanceBeginning balance$1,601 $(1,630)$3,642 $1,292 Beginning balance$(4,808)$(439)$(3,417)$3,642 
Unrealized (loss)/gain in fair value(3,995)445 (10,070)(815)
Net gain/(loss) reclassified into Cost of revenues (exclusive of depreciation and amortization)1,318 (1,094)4,755 (3,605)
Income tax benefit610 151 1,207 1,000 
Unrealized (loss)/ gain in fair valueUnrealized (loss)/ gain in fair value(11,048)1,271 (57,605)(6,075)
Net loss reclassified into Cost of revenues (exclusive of depreciation and amortization)Net loss reclassified into Cost of revenues (exclusive of depreciation and amortization)4,557 1,371 5,461 3,437 
Net (gain)/ loss reclassified into Foreign exchange lossNet (gain)/ loss reclassified into Foreign exchange loss(26)— 43,828 — 
Income tax benefit/ (expense)Income tax benefit/ (expense)1,480 (602)1,888 597 
Cash flow hedging instruments, net of taxCash flow hedging instruments, net of tax(2,067)(498)(4,108)(3,420)Cash flow hedging instruments, net of tax(5,037)2,040 (6,428)(2,041)
Ending balance(1)
Ending balance(1)
$(466)$(2,128)$(466)$(2,128)
Ending balance(1)
$(9,845)$1,601 $(9,845)$1,601 
Defined benefit plansDefined benefit plansDefined benefit plans
Beginning balanceBeginning balance$(1,612)$ $(986)$ Beginning balance$1,957 $(1,612)$1,957 $(986)
Actuarial lossesActuarial losses— — (811)— Actuarial losses— — — (811)
Income tax benefitIncome tax benefit— — 185 — Income tax benefit— — — 185 
Defined benefit plans, net of taxDefined benefit plans, net of tax  (626) Defined benefit plans, net of tax   (626)
Ending balanceEnding balance$(1,612)$ $(1,612)$ Ending balance$1,957 $(1,612)$1,957 $(1,612)
Accumulated other comprehensive lossAccumulated other comprehensive loss$(41,901)$(50,672)$(41,901)$(50,672)Accumulated other comprehensive loss$(76,357)$(29,073)$(76,357)$(29,073)
(1) As of SeptemberJune 30, 2021,2022, the ending balance of net unrealized losses related to derivatives designated as cash flow hedges is expected to be reclassified into Cost of revenues (exclusive of depreciation and amortization) in the next twelve months.


15.16.SUBSEQUENT EVENTS
Acquisition — On November 3, 2021, the Company completed the acquisition of 98.69% of Emakina Group SA and its subsidiaries. In aggregate, the Company paid approximately $143.3 million in cash at closing. In addition, the Company expects to grant service-based RSUs and stock options valued at up to $19.7 million to employeesSee Note 2 “Impact of the acquired companies.
Due to the timingInvasion of Ukraine” for discussion of the acquisition, the initial accounting for the acquisition is incomplete. As such, the Company is not ableCompany’s decision to disclose certain information relating to the acquisition, including the preliminary fair value of assets acquired and liabilities assumed. The Company expects to complete the initial accounting for these acquisitions during the fourth quarter of 2021.
Revolving Line of Credit — On October 21, 2021, the Company entered into the 2021 Credit Agreement. See Note 7 “Debt” for more information.



exit operations in Russia.
3031

Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our Annual Report on Form 10-K for the year ended December 31, 20202021 and the unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Forward-Looking Statements” in this item and in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021. We assume no obligation to update any of these forward-looking statements.
In this quarterly report, “EPAM,” “EPAM Systems, Inc.,” the “Company,” “we,” “us” and “our” refer to EPAM Systems, Inc. and its consolidated subsidiaries.
“EPAM” is a trademark of EPAM Systems, Inc. All other trademarks and service marks used herein are the property of their respective owners.

Executive Summary
We are a leading global provider of digital platform engineering and software development services to many of the world’s leading organizations.
Our customers depend on us to solve their complex technical challenges and rely on our expertise in core engineering, advanced technology, digital design and intelligent enterprise development. We continuously explore opportunities in new industries to expand our core industry client base in software and technology, financial services, business information and media, travel and consumer, and life sciences and healthcare. Our teams of developers, architects, consultants, strategists, engineers, designers, and product experts have the capabilities and skill sets to deliver business results.
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 delivery centers to global customers across all geographies, further strengthening our relationships with them.
Through increased specialization in focused verticals and a continued emphasis on strategic partnerships, we are leveraging our roots in software engineering to grow as a recognized brand in software development and end-to-end digital transformation services for our customers.
The COVID-19 global pandemic remained a significant source of disruption and uncertainty duringDuring the thirdsecond quarter of 2021. To2022, to ensure both safety and business continuity in the vast majoritypresence of the COVID-19 global pandemic, many of our personnel remain in productive andcontinue to work productively through secure remote working arrangements so they are able to continue tocan respond to the rapidly changing needs and demands of our customers. During the third quarter of 2021, we continued to experience increased demand in our geographies, segments, and service offerings, as detailed below under the heading “Year-to-Date 2021 Developments and Trends,” but weWe cannot accurately predict the extent to which the COVID-19 pandemic will continue to directly and indirectly impact our business, results of operations and financial condition.
For additional information on the impact of the COVID-19 pandemic on our results for the first nine months of 2021, please see “Year-to-Date 2021 Developments and Trends” and “Liquidity and Capital Resources” below. Forfor further information on the various risks posed by the COVID-19 pandemic, please read “Part I. Item 1A. Risk Factors” under the sub-heading “Risks Related to COVID-19” which is included in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Business Update Regarding the War in Ukraine
On February 24, 2022, Russian forces attacked Ukraine and its people and EPAM has 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 and we have continued to relocate our employees to lower risk locations, both in Ukraine and to other countries where we operate, and we have maintained our $100 million humanitarian aid commitment to our people. The vast majority of our Ukraine employees are in safe locations and operating at levels of productivity consistent with those achieved in 2021. We also continue to execute our business continuity plans and have sustained our accelerated hiring across multiple locations in Central and Eastern Europe, Latin America, and India. 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 the war in Ukraine and other strategic areas of importance related to the invasion.
32

Table of Contents
On April 7, 2022, the Company announced that we would begin the process of a phased exit of our operations in Russia in close collaboration with the Company’s employees, contractors, and customers. We have discontinued services to certain customers located in Russia and expect to complete the phased exit of our operations in Russia as soon as feasible and subject to regulatory approvals. Through the date of issuance of these condensed consolidated financial statements, we continue to explore strategic alternatives for our operations in Russia, including the potential sale or liquidation of our holdings while executing our phased exit. We could incur additional significant charges in the future related to the exit of our operations in Russia.
We expect to continue operating in Belarus while executing on our Belarus-specific business continuity plans. A significant number of our employees in Russia and Belarus have already relocated, and we expect that more Belarus-based employees will relocate to delivery locations in other countries, but at a reduced rate as compared to the second quarter of 2022.
Prior to the attack in February 2022, Ukraine was our largest delivery location by number of personnel and Belarus and Russia were our second and third largest delivery locations by number of personnel, respectively. We own an office building and lease office space in a number of cities in Ukraine that we use for delivering services to our customers and internally. The impact of the attack on our operations, personnel, and physical assets in Ukraine as well as 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 Russia and Belarus, and each of those country’s responses to such sanctions and other actions has 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 Russia, 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.
Moving Forward
We continue to execute our business continuity plans and adapt to developments as they occur to protect the safety of our people and address impacts to 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. EPAM continues to rapidly respond to the difficult conditions in Ukraine while maintaining a focus on customers and long-term growth.
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 have resulted in materially increased expenses in the first six months of 2022. We expect some of those expenses will continue to be elevated in subsequent quarters. We expect that we may incur significant charges in the third quarter of 2022 related to the exit from operations in Russia in addition to the charges recorded during the six months ended June 30, 2022. We have no way to predict the progress or outcome of the attack against Ukraine because the conflict and government reactions change quickly and are beyond our control. Prolonged military activities, broad-based sanctions and counter-sanctions could have a material adverse effect on our operations and financial condition and there is significant uncertainty for our business outlook for the third quarter and the remainder of 2022. The information contained in this section is accurate as of the date hereof but may become outdated due to changing circumstances beyond our present awareness or control. For additional information on the various risks posed by the attack against Ukraine and the impact in the region, please read “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and “Part II. Item 1A. Risk Factors” in this quarterly report.

33

Table of Contents
Year-to-Date 20212022 Developments and Trends
Our business was disrupted by the war in Ukraine that began in the later part of the first quarter of 2022 and continued to create uncertainties through the second quarter ended June 30, 2022. For the first ninesix months of 2021,2022, our revenues were $2,650.7 million,$2.366 billion, an increase of 36.9%42.4% over $1,936.0 million$1.662 billion reported for the same period of 2020.2021. For the six months ended June 30, 2022, we experienced strong growth across all of our verticals with revenues growing above 25% year over year in each vertical. We have built an increasingly diversified portfolio across numerous industry verticals, geographies and service offerings which allowedenables us to continue to grow revenues. Income from operations as a percentage of revenues despite challenges poseddecreased to 9.4% for the six months ended June 30, 2022 as compared to 14.0% for the six months ended June 30, 2021, largely driven by incremental expenses associated with EPAM’s humanitarian efforts in Ukraine, the global repositioning of our workforce, the costs associated with our phased exit from operations in Russia and impairment of long-lived asset charges triggered by the worldwide COVID-19 pandemic. Certain clients and certain industry verticals were adversely impacted by the worldwide COVID-19 pandemicdiscontinuance of services to customers located in 2020. However, in 2021 we are experiencing strong growth across all of our verticals with all of the verticals growing above 30% year over year, with the exception of the Business Information & Media vertical which grew 14.2% year over year.Russia.


31

Table of Contents
Summary of Results of Operations
The following table presents a summary of our results of operations for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020 2022202120222021
(in thousands, except per share data and percentages) (in thousands, except per share data and percentages)
RevenuesRevenues$988,539100.0 %$652,243100.0 %$2,650,680100.0 %$1,935,985100.0 %Revenues$1,194,861100.0 %$881,366100.0 %$2,366,475100.0 %$1,662,141100.0 %
Income from operationsIncome from operations$144,12414.6 %$96,39614.8 %$376,64914.2 %$267,33113.8 %Income from operations$93,0207.8 %$125,27414.2 %$222,2629.4 %$232,52514.0 %
Net incomeNet income$115,65611.7 %$89,43213.7 %$339,37312.8 %$241,62112.5 %Net income$18,6041.6 %$114,67113.0 %$108,3234.6 %$223,71713.5 %
Effective tax rateEffective tax rate14.6 %14.0 %9.1 %12.6 %Effective tax rate(114.9)%6.9 %5.8 %6.0 %
Diluted earnings per shareDiluted earnings per share$1.95 $1.53 $5.75 $4.14 Diluted earnings per share$0.32 $1.94 $1.84 $3.80 
The key highlights of our consolidated results for the three and ninesix months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period of 2020,2021, were as follows:
Revenues for the thirdsecond quarter of 20212022 were $988.5 million,$1.195 billion, representing a 51.6%35.6% increase from $652.2$881.4 million reported in the same period last year. Revenue growth was strong in the thirdsecond quarter of 20212022 as a result of robust demand for our services as well as a favorable comparison to the thirdservices. The second quarter of 2020 which2022 was adverselynegatively impacted by the COVID-19 pandemic. The third quarter of 2021 was positively impacted by $5.8$39.9 million or 0.9%4.5% due to changes in certain foreign currency exchange rates as compared to the corresponding period last year. Revenues for the first nine monthshalf of 20212022 were $2,650.7 million,$2.366 billion, or a 36.9%42.4% increase from $1,936.0 million$1.662 billion reported in the corresponding period last year. Revenue growth in the first nine monthshalf of 20212022 was positivelynegatively impacted by $48.2$63.1 million or 2.5%3.8% due to changes in certain foreign currency exchange rates as compared to the corresponding period last year. Revenue growth also benefited from a favorable comparison to the first nine months of 2020 which was adversely impacted by the COVID-19 pandemic. GrowthRevenues from acquisitions contributed $32.6$54.6 million and $54.5$132.2 million to our revenues for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively.
Income from operations grew 49.5%decreased 25.7% and 40.9%4.4% to $144.1$93.0 million and $376.6$222.3 million during the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, as compared to the corresponding periodsperiod in 2020.2021. Expressed as a percentage of revenues, income from operations for the thirdsecond quarter of 20212022 decreased to 14.6%7.8% compared to 14.8%14.2% in the thirdsecond quarter of last year and increaseddecreased to 14.2%9.4% for the first ninesix months of 20212022 as compared to 13.8%14.0% for the corresponding period in 2020.2021. During the three and nine monthsquarter ended SeptemberJune 30, 2021,2022, income from operations as a percentage of revenues was positively impacted by reduced facility-related expenses as a percentage of revenues and negatively impacted by higher levelsincremental expenses associated with EPAM’s humanitarian efforts in Ukraine, the continuing global repositioning of accrued variable compensation. Incomeour workforce, and the costs associated with our phased exit from operations in Russia. During the six months ended June 30, 2022, income from operations as a percentage of revenues for the first nine months of 2020 was negatively impacted by an increaseincremental expenses associated with EPAM’s humanitarian efforts in CostUkraine, the global repositioning of revenues as a percentageour workforce, the costs associated with our phased exit from operations in Russia, and impairment of revenues attributablelong-lived asset charges during the first quarter of 2022 triggered by the decision to temporary discounts provideddiscontinue services to certain customers experiencing challenging economic conditions due to the impactin Russia.

34

Table of the COVID-19 pandemic which was partially offset by a reduction in travel-related expenses reported in Cost of revenues and a reduction in travel-related, recruitment, and facilities expenses reported in Selling, general and administrative expenses.Contents
Our effective tax rate was 14.6%(114.9)% and 9.1%5.8% for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, and 14.0%6.9% and 12.6%6.0% for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively. The increasedecrease in the effective tax rate in the three months ended SeptemberJune 30, 2021, as compared to the corresponding period in the prior year, is primarily attributable to lower excess tax benefits recorded upon vesting or exercise of stock-based awards as a percentage of pre-tax income, which were partially offset by a $3.4 million one-time benefit from the recognition of certain tax credits during the three months ended September 30, 2021. The decrease in the effective tax rate in the nine months ended September 30, 2021,2022, as compared to the corresponding period in the prior year, is primarily attributable to higher excess tax benefits recorded upon vesting or exercise of stock-based awards as a percentage of pre-tax income as well asand the one-time benefitimpact from the recognitiondecision to change the tax status and to classify certain foreign subsidiaries of certainthe Company as disregarded entities for U.S. income tax credits during the three months ended September 30, 2021.purposes.
32

Table of Contents
Net income increased 29.3%decreased 83.8% to $115.7$18.6 million for the three months ended SeptemberJune 30, 2021,2022, compared to $89.4$114.7 million reported in the corresponding period last year. Expressed as a percentage of revenues, net income was 11.7%1.6% for the thirdsecond quarter of 2021,2022, a decrease of 2.0%11.4% compared to 13.7%13.0% reported in the corresponding period of 2020.2021. Net income grew 40.5%decreased 51.6% during the ninesix months ended SeptemberJune 30, 20212022 as compared to the corresponding period in the prior year primarily due toyear. Net income for the improvementquarter ended June 30, 2022 was impacted by the incremental expenses associated with EPAM’s humanitarian efforts in incomeUkraine, the global repositioning of our workforce, the costs associated with our phased exit from operations in Russia, and the decreaseforeign exchange loss driven by the impact of appreciation of the Russian ruble on the Company’s intercompany payables denominated in Russian rubles and U.S. dollar denominated assets held by our effective tax rate.subsidiaries in Russia. Net income for the six months ended June 30, 2022 was impacted by the incremental expenses associated with EPAM’s ongoing humanitarian efforts in Ukraine, the global repositioning of our workforce, the costs associated with our phased exit from operations in Russia, the impairment of long-lived asset charges triggered by the discontinuance of services to customers in Russia, and a foreign exchange loss primarily driven by the impact of appreciation of the Russian ruble on the Company’s intercompany payables denominated in Rubles and U.S. dollar denominated assets held by our subsidiaries in Russia and losses from our foreign exchange forward contracts associated with the Russian ruble during the first quarter of 2022.
Diluted earnings per share was $1.95$0.32 and $5.75$1.84 for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, an increasea decrease of $0.42$1.62 and $1.61$1.96 compared to the corresponding period last year.
Cash provided by operating activities was $287.7$25.7 million during the ninesix months ended SeptemberJune 30, 20212022 as compared to cash provided by operating activities of $385.0$81.7 million in the corresponding period last year. This decrease was largely driven by an increasea higher level of variable compensation payments made in days sales outstanding and increased income tax payments during the first nine monthshalf of 2022 based on 2021 comparedperformance and cash outflows related to the same periodEPAM’s humanitarian support efforts in 2020.Ukraine and geographic repositioning.
The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

Critical Accounting Policies
The discussion and analysis of our financial position and results of operations is based on our unaudited condensed consolidated financial statements which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a recurring basis, we evaluate our estimates and judgments, including those related to revenue recognition and related allowances, impairments of long-lived assets including intangible assets, goodwill and right-of-use assets, income taxes including the valuation allowance for deferred tax assets, and stock-based compensation. Actual results may differ materially from these estimates under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.
During the three and ninesix months ended SeptemberJune 30, 2021,2022, there have been no material changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2020.


2021.
3335

Table of Contents
Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this quarterly report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020 2022202120222021
(in thousands, except percentages and per share data)(in thousands, except percentages and per share data)
RevenuesRevenues$988,539 100.0 %$652,243 100.0 %$2,650,680 100.0 %$1,935,985 100.0 %Revenues$1,194,861 100.0 %$881,366 100.0 %$2,366,475 100.0 %$1,662,141 100.0 %
Operating expenses:Operating expenses:Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)(1)
Cost of revenues (exclusive of depreciation and amortization)(1)
653,374 66.1 %423,388 64.9 %1,756,430 66.3 %1,266,730 65.4 %
Cost of revenues (exclusive of depreciation and amortization)(1)
846,323 70.8 %583,728 66.2 %1,627,159 68.8 %1,103,056 66.4 %
Selling, general and administrative expenses(2)
Selling, general and administrative expenses(2)
169,498 17.1 %116,530 17.9 %457,797 17.3 %355,829 18.4 %
Selling, general and administrative expenses(2)
232,527 19.5 %151,910 17.2 %469,804 19.9 %288,299 17.3 %
Depreciation and amortization expense Depreciation and amortization expense21,543 2.2 %15,929 2.4 %59,804 2.2 %46,095 2.4 % Depreciation and amortization expense22,991 1.9 %20,454 2.4 %47,250 1.9 %38,261 2.3 %
Income from operationsIncome from operations144,124 14.6 %96,396 14.8 %376,649 14.2 %267,331 13.8 %Income from operations93,020 7.8 %125,274 14.2 %222,262 9.4 %232,525 14.0 %
Interest and other (loss)/income, net(5,325)(0.5)%1,672 0.3 %2,629 0.1 %5,875 0.3 %
Foreign exchange (loss)/gain(3,441)(0.4)%5,896 0.8 %(5,835)(0.2)%3,253 0.2 %
Interest and other income, netInterest and other income, net1,579 0.1 %2,580 0.3 %1,414 0.1 %7,954 0.4 %
Foreign exchange lossForeign exchange loss(85,941)(7.2)%(4,693)(0.5)%(108,726)(4.6)%(2,394)(0.1)%
Income before provision for income taxesIncome before provision for income taxes135,358 13.7 %103,964 15.9 %373,443 14.1 %276,459 14.3 %Income before provision for income taxes8,658 0.7 %123,161 14.0 %114,950 4.9 %238,085 14.3 %
Provision for income taxes19,702 2.0 %14,532 2.2 %34,070 1.3 %34,838 1.8 %
(Benefit from)/ provision for income taxes(Benefit from)/ provision for income taxes(9,946)(0.9)%8,490 1.0 %6,627 0.3 %14,368 0.8 %
Net incomeNet income$115,656 11.7 %$89,432 13.7 %$339,373 12.8 %$241,621 12.5 %Net income$18,604 1.6 %$114,671 13.0 %$108,323 4.6 %$223,717 13.5 %
Effective tax rateEffective tax rate14.6 %14.0 %9.1 %12.6 %Effective tax rate(114.9)%6.9 %5.8 %6.0 %
Diluted earnings per shareDiluted earnings per share$1.95 $1.53 $5.75 $4.14 Diluted earnings per share$0.32 $1.94 $1.84 $3.80 
(1)Includes $12,174$14,732 and $10,854$11,261 of stock-based compensation expense for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $34,552$14,308 and $23,796$22,378 of stock-based compensation expense for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.
(2)Includes $17,013$13,161 and $12,620$12,637 of stock-based compensation expense for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $43,086$20,697 and $30,998$26,073 of stock-based compensation expense for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.


Consolidated Results Review
Revenues
During the three months ended SeptemberJune 30, 2021,2022, our total revenues grew to $988.5 million$1.195 billion or 51.6%35.6% compared to the corresponding period in 2020.2021. Revenues have been positively impacted by growth from acquisitions, which contributed 5.0%6.2% to our revenue growth, and negatively impacted by fluctuations in foreign currency exchange rates which increaseddecreased our revenue growth by 0.9%4.5% during the three months ended SeptemberJune 30, 20212022 as compared to the same period last year. Revenue growth slowed in the third quarter of 2020 as a result of deterioration in economic conditions for our customers related to the COVID-19 pandemic.
During the ninesix months ended SeptemberJune 30, 2021,2022, our total revenues grew 36.9%42.4% over the corresponding period in 2020.2021. The first ninesix months of 20212022 were positively impacted by growth from acquisitions, which contributed 2.8%8.0% to our revenue growth, and negatively impacted by fluctuations in foreign currency exchange rates which increaseddecreased our revenue growth by $48.2$63.1 million or 2.5%3.8% due to changes in certain foreign currency exchange rates as compared to the corresponding period last year. Revenue growth slowed in the first nine months of 2020 as a result of deterioration in economic conditions for our customers related to the COVID-19 pandemic.

3436

Table of Contents
Revenues by customer location for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 were as follows:
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
 (in thousands, except percentages)(in thousands, except percentages)
North America(1)
$591,368 59.8 %$389,976 59.8 %$1,589,087 60.0 %$1,161,742 60.0 %
Europe323,807 32.8 %214,533 32.9 %874,460 32.9 %648,654 33.5 %
CIS(2)
44,978 4.5 %30,039 4.6 %112,815 4.3 %76,977 4.0 %
APAC(3)
28,386 2.9 %17,695 2.7 %74,318 2.8 %48,612 2.5 %
Revenues$988,539 100.0 %$652,243 100.0 %$2,650,680 100.0 %$1,935,985 100.0 %
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
 (in thousands, except percentages)(in thousands, except percentages)
Americas(1)
$721,612 60.4 %$527,398 59.8 %$1,408,405 59.5 %$997,719 60.0 %
EMEA(2)
422,986 35.4 %291,281 33.0 %844,936 35.7 %550,653 33.1 %
APAC(3)
30,176 2.5 %24,984 2.8 %59,758 2.5 %45,932 2.8 %
CEE(4)
20,087 1.7 %37,703 4.4 %53,376 2.3 %67,837 4.1 %
Revenues$1,194,861 100.0 %$881,366 100.0 %$2,366,475 100.0 %$1,662,141 100.0 %
(1)North AmericaAmericas includes revenues from customers in North, Central and South America.
(2)CISEMEA includes revenues from customers in Russia, Belarus, Georgia, Kazakhstan,Western Europe and Ukraine.the Middle East.
(3)APAC, or Asia Pacific, includes revenues from customers in East Asia, Southeast Asia and Australia.
(4)CEE includes revenues from customers in Russia, Belarus, Kazakhstan, Ukraine, Uzbekistan and Georgia.
During the three and ninesix months ended SeptemberJune 30, 2021,2022, the United States continued to be our largest customer location, with revenues increasing 51.9%36.7% to $564.1$687.0 million during the thirdsecond quarter of 20212022 from $371.4$502.5 million in the thirdsecond quarter of 2020.2021. During the ninesix months ended SeptemberJune 30, 2021,2022, revenues in the United States grew 36.9%41.4% to $1,514.6 million$1.344 billion compared to $1,106.5$950.5 million in the same period of the prior year.
The top three revenue contributing customer location countries in EuropeEMEA were the United Kingdom, Switzerland and Netherlands, generating $126.3$149.7 million, $66.7$79.2 million and $39.6$50.9 million in revenues,, respectively, during the three months ended SeptemberJune 30, 2021.2022. Revenues from customers in these three countries were $77.5$112.7 million, $50.4$63.8 million,, and $28.8$36.7 million, respectively, in the corresponding period last year. During the six months ended June 30, 2022, the United Kingdom, Switzerland and Netherlands performed as EMEA’s top revenue generating locations and contributed $302.9 million, $161.1 million, and $101.1 million, respectively, compared to $206.2 million, $131.4 million, and $69.7 million, respectively, in the corresponding period last year. Revenues in the European geographyEMEA region were positivelynegatively impacted by strengtheningthe weakening of the euro and the British pound relative to the U.S. dollar during the three and six months ended SeptemberJune 30, 20212022 as compared to the same period in the previous year. During the nine months ended September 30, 2021, United Kingdom, Switzerland and Netherlands performed as Europe’s top revenue generating locations and contributed $332.5 million, $198.0 million, and $109.3 million, respectively, compared to $251.9 million, $144.2 million, and $82.0 millionRevenues in the corresponding period of the prior year, respectively.
During the three months ended September 30, 2021, revenues in the CIS geography included $42.7 million from customers in Russia, an increase of $14.7 million as compared to the corresponding period of 2020. The increase in revenues was primarily attributable to growth in the Financial Services vertical and positively impacted by the strengthening of the Russian ruble relative to the U.S. dollarregion during the three and six months ended SeptemberJune 30, 2021 compared to the same period in the previous year. During the nine months ended September 30, 2021, customers in Russia comprised $106.1 million of the revenues in the CIS geography, an increase of $36.7 million over the corresponding period of 2020. During the nine months ended September 30, 2021, revenues in the CIS geography2022 benefited from acquisitions which contributed $49.7 million and $108.3 million to revenue growth, in Financial Services, particularly commercial banking, as well as the strengthening of the Russian ruble relative to the U.S. dollar compared to the nine months ended September 30, 2020.respectively.
During the three and ninesix months ended SeptemberJune 30, 2021,2022, revenues from customers in the APAC region increased by $10.7$5.2 million, or 60.4%20.8% and $25.7$13.8 million or 52.9%, respectively,30.1% over the corresponding periods of 2020,2021, mainly due to growth in the Financial Services vertical.
During the three months ended June 30, 2022, revenues in the CEE geography included $18.0 million from customers in Russia, a decrease of $17.8 million as compared to the corresponding period of 2021. During the six months ended June 30, 2022, customers in Russia comprised $48.7 million of the revenues in the CEE geography, a decrease of $14.7 million from the corresponding period of 2021. On March 4, 2022, the Company announced that it will discontinue its services to customers located in Russia. EPAM is committed to providing transition support for customers in this market as the Company administers the transition. As a result of this announcement and our phased exit from Russia, the revenues from this geography are expected to materially decline in the future.
Cost of Revenues (Exclusive of Depreciation and Amortization)
The principal components of our cost of revenues (exclusive of depreciation and amortization) are salaries, bonuses, fringe benefits, stock-based compensation, 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 customer services during a given period. Our employees are a critical resource, necessary for our continued success and therefore we expect to continue hiring talented employees and providing them with competitive compensation programs.

3537

Table of Contents
During the three months ended SeptemberJune 30, 2021,2022, cost of revenues (exclusive of depreciation and amortization) was $653.4$846.3 million representing an increase of 54.3%45.0% from $423.4$583.7 million in the corresponding period of 2020.2021. The increase was primarily due to an increase in compensation costs largely driven by the 36.1%34.6% growth in the average number of production professionals during the three months ended SeptemberJune 30, 20212022 as compared to the same period in 2020.2021 as well as $3.3 million of incremental costs associated with our humanitarian efforts in Ukraine and $9.3 million of unbilled business continuity resources. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 66.1%70.8% and 64.9%66.2% in the thirdsecond quarter of 20212022 and 2020,2021, respectively. The year-over-year increase is primarily due to a 1.5% increase as a percentageincreased costs associated with our humanitarian efforts in Ukraine, unbilled business continuity resources and the ongoing transition of revenues in personnel-related costs including stock-based compensation expense largely driven by acustomer work to higher level of accrued variable compensation during the third quarter of 2021 as compared to the same period in 2020.cost geographies.
During the ninesix months ended SeptemberJune 30, 2021,2022, cost of revenues (exclusive of depreciation and amortization) was $1,756.4$1,627.2 million representing an increase of 38.7%47.5% from $1,266.7$1,103.1 million in the corresponding period of 2020.2021. The increase was primarily due to an increase in compensation costs other than stock-based compensation expense largely driven by the 26.4%35.1% growth in the average number of production professionals, a higher level of accrued variable compensation during the first nine months of 2021 as compared to the same period in 2020 and a 1.7%4.1% unfavorable impact from changing foreign currency exchange rates.rates, as well as $22.4 million of incremental costs associated with our humanitarian efforts in Ukraine and $11.8 million of unbilled business continuity resources, partially offset by $8.1 million of lower stock-based compensation expenses and the reversal of $21.4 million of previously accrued discretionary compensation expenses during the first quarter of 2022. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 66.3%68.8% and 65.4%66.4% for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. The year-over-year increase is primarily due to increased costs associated with our humanitarian efforts in Ukraine, unbilled business continuity resources, and the ongoing transition of customer work to higher cost geographies, partially offset by a 1.7% increase in personnel-related costs includinglower level of stock-based compensation expense as a percentageand the reversal of revenues largely driven by a higher level ofpreviously accrued variablediscretionary compensation duringexpenses in the first nine monthsquarter of 2021 as compared to the same period in 2020, partially offset by reduced travel and entertainment expenses.2022.
Selling, General and Administrative Expenses
Selling, general and administrative expenses represent expenditures associated with promoting and selling our services and general and administrative functions of our business. These expenses include the costs of salaries, bonuses, fringe benefits, stock-based compensation, severance, bad debt, travel, legal and accounting services, insurance, facilities including operating leases, advertising, and other promotional activities. In addition, we pay a membership feeAdditionally, selling, general and administrative expenses contain costs of 1% of revenues generated in Belarus to the administrative organization of the Belarus High-Technologies Park.relocating our employees and various one-time and unusual expenses such as impairment charges.
During the three months ended SeptemberJune 30, 2021,2022, selling, general and administrative expenses were $169.5$232.5 million representing a 45.5%53.1% increase as compared to $116.5$151.9 million in the corresponding period of 2020.2021. The increase in selling, general and administrative expenses was primarily driven by a $42.5$39.8 million increase in personnel-related costs including stock-based compensation expense.expense largely driven by the 34.4% growth in the average number of non-production professionals during the three months ended June 30, 2022 compared to the same period in 2021. Additionally, we incurred $14.4 million of expenses associated with our geographic repositioning of our workforce, $16.2 million of charges related to employee separation costs in Russia, and $5.1 million of expenses associated with our humanitarian efforts in Ukraine during the second quarter of 2022. Expressed as a percentage of revenues, selling, general and administrative expenses decreased 0.8%increased by 2.3% to 17.1%19.5% for the three months ended SeptemberJune 30, 20212022 as compared to the same period from the prior year, primarily driven by reduced facility-relatedhigher personnel-related costs, expenses as a percentagerelated to the phased exit from Russia, increased costs associated with geographic repositioning of revenues.our workforce and our humanitarian efforts in Ukraine.
During the ninesix months ended SeptemberJune 30, 2021,2022, selling, general and administrative expenses were $457.8$469.8 million representing an increase of 28.7%63.0% as compared to $355.8$288.3 million reported in the corresponding period of 2020.2021. The increase in selling, general and administrative expenses was primarily driven by an $87.7$85.5 million increase in personnel-related costs includingother than stock-based compensation expense, partially offsetwhich decreased $5.4 million during the six months ended June 30, 2022 as compared to the same period in the prior year. Additionally, the six months ended June 30, 2022 were impacted by a $1.9$33.1 million decreaseof expenses associated with our geographic repositioning of our workforce, $11.6 million of expenses associated with our humanitarian efforts in facilitiesUkraine, $16.2 million of charges related to employee separation costs in Russia, $19.6 million of impairment charges related to our long-lived assets in Russia and infrastructure expenses.$8.2 million of bad debt expense attributable to customers located in Russia. Expressed as a percentage of revenues, selling, general and administrative expenses decreased 1.1%increased by 2.6% to 17.3%19.9% for the ninesix months ended SeptemberJune 30, 20212022 as compared to the same period from the prior year primarily driven by reduced facility-relatedhigher personnel-related costs, impairment charges related to our long-lived assets in Russia and higher bad debt expenses attributable to customers located in Russia, increased costs associated with geographic repositioning of our workforce and employee separation costs in Russia as a percentagewell as our humanitarian efforts in Ukraine.

38

Table of revenues.Contents
Depreciation and Amortization Expense
During the three and ninesix months ended SeptemberJune 30, 2021,2022, depreciation and amortization expense was $21.5$23.0 million and $59.8$47.3 million, respectively, as compared to $15.9$20.5 million and $46.1$38.3 million, respectively, in the corresponding periodsperiod last year. The increase in depreciation and amortization expense is primarily the result of increased investment in computer equipment used by our employees.employees and amortization of acquired finite-lived intangible assets. Expressed as a percentage of revenues, depreciation and amortization expense decreased to 2.2%1.9% during both the three and ninesix months ended SeptemberJune 30, 2021,2022, as compared to 2.4% and 2.3% in boththe corresponding periodsperiod of 2020.2021.
Interest and Other (Loss)/Income, Net
Interest and other (loss)/income, net includes interest earned on cash and cash equivalents and employee loans, gains and losses from certain financial instruments, interest expense related to our 2017 Credit Facilityborrowings and changes in the fair value of contingent consideration. Interest and other (loss)/income, net decreased from a gain of $1.7$2.6 million and $8.0 million during the three and six months ended SeptemberJune 30, 20202021 to a loss of $5.3$1.6 million and $1.4 million during the three and six months ended SeptemberJune 30, 2021, which is primarily attributable2022. The six months of 2022 were mainly impacted by a $6.1 million loss due to a $7.0 million increase in the charge from the change in fair value of contingent consideration as compared to a $5.6 million gain in the corresponding period of 2021 reflecting improvedrevised expectations for the performance of certain acquisitions. There were no material changes in interest and other (loss)/income, netAdditionally, during the ninefirst six months ended September 30, 2021 as comparedof 2022, we recorded a $1.3 million charge related to the same periodimpairment of a financial asset in 2020.Ukraine.
36

Table of Contents
Foreign Exchange (Loss)/GainLoss
For discussion of the impact of foreign exchange fluctuations see “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”

Provision(Benefit from)/ provision for Income Taxes
In determining the interim provision for income taxes, we historically have used an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which EPAM operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. During the first quarter of 2022, we recorded the interim tax provision using the discrete method rather than using an estimated annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. During the second quarter of 2022, the Company used an estimated annual effective tax rate. The change did not have a material impact on the condensed consolidated interim financial statements. In subsequent quarters, the Company expects to continue to utilize the annual effective tax rate method.
Determining the consolidated provision for income tax expense, deferred income tax assets and liabilities and anyany potential related valuation allowances involves judgment. We consider factors that may contribute, favorably or unfavorably, to the overall annual effective tax rate in the current year as well as the future. These factors include statutory tax rates and tax law changes in the countries where we operate and excess tax benefits upon vesting or exercise of equity awards as well as consideration of any significant or unusual items.
As a company operating in many countries, we are required to calculate and provide for income taxes in each of the jurisdictions in which we operate. Our provision for income taxes benefited from excess tax benefits recorded upon vesting or exercise of stock-based awards of $10.4 million and $9.2 million during the three months ended September 30, 2021 and 2020, respectively. Our provision for income taxes benefited from excess tax benefits recorded upon vesting or exercise of stock-based awards of $52.8 million and $29.0 million during the nine months ended September 30, 2021 and 2020, respectively.
Our effective tax rate was 14.6%(114.9)% and 9.1%5.8% for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, and 14.0%6.9% and 12.6%6.0% for the three and ninesix months ended September 30, 2020, respectively. The increase in the effective tax rate in the three months ended SeptemberJune 30, 2021, as compared to the corresponding period in the prior year, is primarily attributable to lower excess tax benefits recorded upon vesting or exercise of stock-based awards as a percentage of pre-tax income, which were partially offset by a $3.4 million one-time benefit from the recognition of certain tax credits during the three months ended September 30, 2021.respectively. The decrease in the effective tax rate in the ninethree and six months ended SeptemberJune 30, 2021,2022, as compared to the corresponding period in the prior year, is primarily attributable to higher excess tax benefits recorded upon vesting or exercise of stock-based awards as a percentage of pre-tax income and the impact of the Company’s election to disregard certain foreign subsidiaries of the Company as well as a $3.4separate entities for U.S. tax purposes. Our provision for income taxes was impacted by excess tax benefits recorded upon vesting or exercise of stock-based awards of $7.4 million one-time benefit from the recognition of certain tax creditsand $20.5 million during the three and six months ended SeptemberJune 30, 2021.2022, respectively, and $21.0 million and $42.5 million during the three and six months ended June 30, 2021, respectively.

39

Table of Contents
Results by Business Segment
Our operations consist of three reportable segments: North America, Europe, and Russia. 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, including the Belarus High-Technologies Park membership fee, 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. These unallocated amounts are combined with total segment operating profit to arrive at consolidated income from operations.
We manage our business primarily based on the managerial responsibility for its client base and market. As managerial responsibility for a particular customer relationship generally correlates with the customer’s geographic location, there is a high degree of similarity between customer locations and the geographic boundaries of our reportable segments. In some cases, managerial responsibility for a particular customer is assigned to a management team in another region and is usually based on the strength of the relationship between customer executives and particular members of EPAM’s senior management team. In such cases, the customer’s activity would be reported through the management team’s reportable segment.

37

TableOn March 4, 2022, the Company announced that it will discontinue its services to customers located in Russia and is committed to providing transition support for customers in this market. On April 7, 2022, the Company announced that it would begin the process of Contentsa phased exit of its operations in Russia, to be completed in the months following the announcement and in close collaboration with the Company’s employees, contractors, and custome
rs. The timing of completing the exit is subject to completion of regulatory requirements in the country and the Company expects to complete its exit as soon as feasible.
Segment revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe and Russia reportable segments for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020 2022202120222021
(in thousands)  (in thousands) 
Segment revenues:Segment revenues:Segment revenues:
North AmericaNorth America$593,862 $391,605 $1,600,737 $1,167,536 North America$723,657 $532,022 $1,411,368 $1,006,875 
EuropeEurope350,080 231,418 938,733 695,056 Europe451,944 311,949 903,914 588,653 
RussiaRussia44,597 29,220 111,210 73,393 Russia19,260 37,395 51,193 66,613 
Total segment revenuesTotal segment revenues$988,539 $652,243 $2,650,680 $1,935,985 Total segment revenues$1,194,861 $881,366 $2,366,475 $1,662,141 
Segment operating profit/(loss):Segment operating profit/(loss):  Segment operating profit/(loss):  
North AmericaNorth America$122,232 $87,272 $327,595 $248,951 North America$127,420 $111,260 $254,154 $205,363 
EuropeEurope60,952 43,018 162,477 109,223 Europe35,396 50,452 92,107 101,525 
RussiaRussia10,541 2,958 17,549 (2,168)Russia1,662 6,029 (17,822)7,008 
Total segment operating profitTotal segment operating profit$193,725 $133,248 $507,621 $356,006 Total segment operating profit$164,478 $167,741 $328,439 $313,896 


40

Table of Contents
North America Segment
During the three months ended SeptemberJune 30, 2021,2022, revenues for the North America segment increased $202.3$191.6 million, or 51.6%36.0%, compared to the same period last year and segment operating profit increased $35.0$16.2 million, or 40.1%14.5%, compared to the same period last year. During the three months ended SeptemberJune 30, 2021,2022, revenues from our North America segment were 60.1%60.6% of total segment revenues, an increase from 60.0%60.4% reported in the corresponding period of 2020.2021. The North America segment’s operating profit margin decreased to 20.6%17.6% during the thirdsecond quarter of 20212022 from 22.3%20.9% in the thirdsecond quarter of 2020. This decrease is primarily2021. Segment operating profit was negatively impacted by increased personnel-related costs in part attributable to increases in personnel-related costs, largely drivensupplementing delivery resources on certain projects with standby resources able to support projects if delivery resources impacted by a higher levelthe invasion of accrued variable compensation.Ukraine become unable to work and lower utilization during the second quarter of 2022 compared to the second quarter of 2021.
During the ninesix months ended SeptemberJune 30, 2021,2022, revenues for the North America segment increased $433.2$404.5 million, or 37.1%40.2%, compared to the same period last year and segment operating profit increased $78.6$48.8 million, or 31.6%23.8%, compared to the same period last year. During the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, revenues from our North America segment were 60.4%59.6% and 60.3%60.6% of total segment revenues, respectively. As a percentage of North America segment revenues, the North America segment’s operating profit margin decreased to 20.5%18.0% during the ninesix months ended SeptemberJune 30, 20212022 as compared to 21.3%20.4% in the corresponding period of 2020. This decrease is primarily2021. Segment operating profit was negatively impacted by increased personnel-related costs in part attributable to increasessupplementing delivery resources on certain projects with standby resources able to support projects if delivery resources impacted by the invasion of Ukraine become unable to work, lower utilization during the second quarter of 2022 compared to the second quarter of 2021, and lower profit margins from acquisitions completed in personnel-related costs, largely driven by a higher level of accrued variable compensation.the last twelve months.
The following table presents North America segment revenues by industry vertical for the periods indicated:
Three Months Ended
September 30,
ChangeNine Months Ended
September 30,
ChangeThree Months Ended
June 30,
ChangeSix Months Ended
June 30,
Change
20212020Dollars Percentage 20212020Dollars Percentage 20222021Dollars Percentage 20222021Dollars Percentage 
Industry VerticalIndustry Vertical(in thousands, except percentages)Industry Vertical(in thousands, except percentages)
Software & Hi-TechSoftware & Hi-Tech$146,532 $100,847 $45,685 45.3 %$406,756 $303,385 $103,371 34.1 %Software & Hi-Tech$161,034 $134,638 $26,396 19.6 %$317,316 $260,224 $57,092 21.9 %
Travel & ConsumerTravel & Consumer130,932 85,075 45,857 53.9 %253,179 154,504 98,675 63.9 %
Financial ServicesFinancial Services126,879 83,342 43,537 52.2 %247,214 153,082 94,132 61.5 %
Life Sciences & HealthcareLife Sciences & Healthcare115,899 80,712 35,187 43.6 %227,270 156,301 70,969 45.4 %
Business Information & MediaBusiness Information & Media100,536 84,384 16,152 19.1 %280,120 246,085 34,035 13.8 %Business Information & Media114,026 92,379 21,647 23.4 %224,972 179,584 45,388 25.3 %
Financial Services100,631 48,415 52,216 107.9 %253,713 143,970 109,743 76.2 %
Travel & Consumer98,494 54,590 43,904 80.4 %252,998 161,507 91,491 56.6 %
Life Sciences & Healthcare85,534 66,071 19,463 29.5 %241,835 189,458 52,377 27.6 %
Emerging VerticalsEmerging Verticals62,135 37,298 24,837 66.6 %165,315 123,131 42,184 34.3 %Emerging Verticals74,887 55,876 19,011 34.0 %141,417 103,180 38,237 37.1 %
Revenues Revenues$593,862 $391,605 $202,257 51.6 %$1,600,737 $1,167,536 $433,201 37.1 % Revenues$723,657 $532,022 $191,635 36.0 %$1,411,368 $1,006,875 $404,493 40.2 %


38

Table of Contents
DuringDuring the three and ninesix months ended SeptemberJune 30, 20212022 compared to the same period in the prior year,year, revenues from each vertical in the North America segment except Business Information & Media, grew in excess of 25%.19% and Software & Hi-Tech remained the largest industry vertical in the North America segment, growing 45.3%which was a result of the continued focus on engaging with our technology customers. Travel and 34.1%Consumer grew 53.9% and 63.9% during the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, as comparedprimarily due to the corresponding periodsgrowth from the prior year.retail customers. Financial Services grew 107.9%52.2% and 76.2%61.5% during the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, largely due to growth in a group of wealth management customer that was previously one of our top 200 customers and is now one of our top 20 customers. Business Information & Media experienced slower growthgrew 23.4% and 25.3% during the three and ninesix months of 2021 compared to the prior year largelyended June 30, 2022, respectively, primarily due to slower relative growth at several clients where revenues from certain engagements have plateaued.existing customers in our top 20 customers. Life Sciences & Healthcare grew 29.5%43.6% and 27.6%45.4% during the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, in partprimarily due to growth from customers added in the addition of a significant new customer in 2021.last 24 months.

41

Table of Contents
Europe Segment
During the three months ended SeptemberJune 30, 2021,2022, Europe’s segment revenues were $350.1$451.9 million, representing an increase of $118.7$140.0 million, or 51.3%44.9%, from the same period last year. Acquisitions completed in the last 12 months contributed $50.7 million to revenues during the three months ended June 30, 2022. Revenues were positivelynegatively impacted by changes in foreign currency exchange rates during the thirdsecond quarter of 2021.2022. Had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the thirdsecond quarter of 2020,2021, we would have reported revenue growth of 49.9%57.8%. Europe’s segment revenues accounted for 35.4%37.8% and 35.5%35.4% of total segment revenues during the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. During the thirdsecond quarter of 2021,2022, the segment’s operating profit increased 41.7%decreased 29.8% to $61.0$35.4 million compared to the thirdsecond quarter of 2020.2021. Expressed as a percentage of revenues, Europe’s segment operating profit decreased to 17.4%7.8% compared to 18.6%16.2% in the same period of the prior year. Segment operating profit was negatively impacted by increased personnel relatedpersonnel-related costs largely drivenin part attributable to supplementing delivery resources on certain projects with standby resources able to support projects if delivery resources impacted by a higher levelthe invasion of accrued variable compensation.Ukraine become unable to work, lower utilization during the second quarter of 2022 compared to the second quarter of 2021, and lower profit margins from acquisitions completed in the last twelve months.
During the ninesix months ended SeptemberJune 30, 2021,2022, revenues for the Europe segment increased $243.7$315.3 million, or 35.1%53.6%, compared to the same period last year and segment operating profit increased $53.3decreased $9.4 million, or 48.8%9.3%, compared to the same period last year. During the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, revenues from our Europe segment were 35.4%38.2% and 35.9%35.4% of total segment revenues, respectively. As a percentage of Europe segment revenues, the Europe segment’s operating profit increaseddecreased to 17.3%10.2% during the ninesix months ended SeptemberJune 30, 20212022 from 15.7%17.2% in the corresponding period of 2020.2021. Acquisitions completed in the last 12 months contributed $109.3 million to revenues during the six months ended June 30, 2022. During the first ninesix months of 2022, segment operating profit was negatively impacted by increased personnel-related costs partially attributable to supplementing delivery resources on certain projects with standby resources able to support projects if delivery resources impacted by the invasion of Ukraine become unable to work, lower utilization during the first six months of 2022 compared to the first six months of 2021, and lower profit margins from acquisitions completed in the last twelve months. Additionally, during the first six months of 2021, Europe’s segment operating profit was positively impacted by changes in foreign currency exchange rates, predominantly the euro and British pound, as well as the recognition of $6.4 million in revenues from performance obligations satisfied in previous periods, partially offset by a higher level of accrued variable compensation. During the nine months ended September 30, 2020, segment operating profit was negatively impacted by temporary discounts provided to certain customers experiencing challenging economic conditions due to the impact of the COVID-19 pandemic.periods.
The following table presents Europe segment revenues by industry vertical for the periods indicated:
Three Months Ended
September 30,
ChangeNine Months Ended
September 30,
ChangeThree Months Ended
June 30,
ChangeSix Months Ended
June 30,
Change
20212020Dollars Percentage 20212020Dollars Percentage 20222021Dollars Percentage 20222021Dollars Percentage 
Industry VerticalIndustry Vertical(in thousands, except percentages)Industry Vertical(in thousands, except percentages)
Travel & ConsumerTravel & Consumer$140,081 $79,731 $60,350 75.7 %$276,869 $144,355 $132,514 91.8 %
Financial ServicesFinancial Services$98,711 $68,419 $30,292 44.3 %$262,716 $202,668 $60,048 29.6 %Financial Services112,766 85,965 26,801 31.2 %230,096 164,005 66,091 40.3 %
Travel & Consumer91,197 51,449 39,748 77.3 %235,552 163,769 71,783 43.8 %
Business Information & MediaBusiness Information & Media71,953 55,228 16,725 30.3 %197,142 171,712 25,430 14.8 %Business Information & Media83,681 65,032 18,649 28.7 %166,582 125,189 41,393 33.1 %
Software & Hi-TechSoftware & Hi-Tech27,103 17,492 9,611 54.9 %72,010 53,803 18,207 33.8 %Software & Hi-Tech33,847 23,934 9,913 41.4 %66,301 44,907 21,394 47.6 %
Life Sciences & HealthcareLife Sciences & Healthcare10,374 7,963 2,411 30.3 %36,505 22,651 13,854 61.2 %Life Sciences & Healthcare12,527 10,780 1,747 16.2 %24,809 26,131 (1,322)(5.1)%
Emerging VerticalsEmerging Verticals50,742 30,867 19,875 64.4 %134,808 80,453 54,355 67.6 %Emerging Verticals69,042 46,507 22,535 48.5 %139,257 84,066 55,191 65.7 %
Revenues Revenues$350,080 $231,418 $118,662 51.3 %$938,733 $695,056 $243,677 35.1 % Revenues$451,944 $311,949 $139,995 44.9 %$903,914 $588,653 $315,261 53.6 %

39

Table of Contents
Financial Services remained the largest industry vertical in the Europe segment during the three and nine months ended September 30, 2021. Revenues in Travel & Consumer experienced higher growthgrew 75.7% and 91.8% during the three and six months ended SeptemberJune 30, 20212022, respectively, as compared to the corresponding period in 20202021 primarily due to increased demand from customers in the retail and distribution industries.industries and revenues from acquisitions completed during the last twelve months which contributed $26.6 million and $55.9 million to revenue growth during the three and six months ended June 30, 2022, respectively. During the ninethree and six months ended SeptemberJune 30, 2021,2022, revenues in Financial Services experienced 31.2% and 40.3% growth, respectively, primarily driven by increased revenues from commercial and investment banking customers and revenues from recent acquisitions which contributed $7.0 million and $14.7 million to revenue growth during the three and six months ended June 30, 2022, respectively. During the three and six months ended June 30, 2022, the increase in revenues in Business Information & Media experienced slower relative growth at several clients where revenues from certain engagements have plateaued compared to the prior year. For the three and nine months ended September 30, 2021, the increase in revenues in the Software & Hi-Tech vertical iswas largely attributable to the expansion of services provided to one of our top 205 customers. For the ninethree and six months ended SeptemberJune 30, 2021,2022, the increase in revenues in Life Sciencesthe Software & Healthcare is largely dueHi-Tech vertical was attributable to the expansion of services provided to a single healthcare customer.one of our top 20 customers as well as growth in customers outside of our top 100 customers. Revenues in Emerging Verticals experienced higher growth primarily attributable to growth in existing customers in the telecommunications, manufacturingenergy and energyautomotive industries and revenues from acquisitions completed during the last twelve months which contributed $9.5 million and $20.8 million to revenue growth during the three and ninesix months ended SeptemberJune 30, 2021.2022, respectively.
42

Table of Contents
Russia Segment
During the three months ended SeptemberJune 30, 2021,2022, revenues from our Russia segment accounted for 4.5%1.6% of total segment revenues and increased $15.4decreased $18.1 million, or 52.6%48.5%, as compared to the corresponding period in the prior year. The increasedecrease in revenues was primarily attributable to growthdecreased operations in Russia as the Financial Services verticalCompany discontinues services to customers in Russia and positively impacted by the strengthening of the Russian ruble relative to the U.S. dollar.proceeds with its phased exit from Russia. During the three months ended SeptemberJune 30, 2021,2022, operating profit from the Russia segment was $10.5$1.7 million, representing an increasea decrease of $7.6$4.4 million, as compared to a $3.0$6.0 million operating profit in the corresponding period last year. This increase isyear largely driven by reduced revenues attributable to a net benefitthe discontinuance of services to customers in the third quarter of 2021 as compared to the corresponding period of last year from revenues from performance obligations satisfied in previous periods and a benefit from the change in the valuation of the Russian ruble relative to the U.S. dollar.Russia.
During the ninesix months ended SeptemberJune 30, 2021,2022, revenues from our Russia segment increased $37.8decreased $15.4 million, or 51.5%23.1%, as compared to the corresponding period of 20202021 and accounted for 4.2%2.2% of total segment revenues. During the ninesix months ended SeptemberJune 30, 2021,2022, operating profit ofloss from the Russia segment was $17.5$17.8 million, representing an increasea decrease of $19.7$24.8 million, as compared to a $2.2$7.0 million operating lossprofit in the corresponding period last year. This increase isyear largely driven by increased bad debt expense, expenses incurred for services provided to customers for which revenue was not recognized as collectability was not considered probable after announcing the discontinuance of services to customers in Russia, and reduced revenues attributable to a net benefitthe discontinuance of services to customers in the third quarter of 2021 as compared to the corresponding period of last year from revenues from performance obligations satisfied in previous periods and a benefit from the change in the valuation of the Russian ruble relative to the U.S. dollar.Russia.
The following table presents Russia segment revenues by industry vertical for the periods indicated:
Three Months Ended
September 30,
ChangeNine Months Ended
September 30,
ChangeThree Months Ended
June 30,
ChangeSix Months Ended
June 30,
Change
20212020Dollars Percentage 20212020Dollars Percentage 20222021Dollars Percentage 20222021Dollars Percentage 
Industry VerticalIndustry Vertical(in thousands, except percentages)Industry Vertical(in thousands, except percentages)
Financial ServicesFinancial Services$31,542 $19,881 $11,661 58.7 %$77,251 $49,695 $27,556 55.5 %Financial Services$11,338 $24,631 $(13,293)(54.0)%$33,736 $45,709 $(11,973)(26.2)%
Travel & ConsumerTravel & Consumer7,875 4,135 3,740 90.4 %19,572 11,698 7,874 67.3 %Travel & Consumer5,305 6,739 (1,434)(21.3)%11,589 11,697 (108)(0.9)%
Software & Hi-TechSoftware & Hi-Tech662 515 147 28.5 %1,757 3,000 (1,243)(41.4)%Software & Hi-Tech442 590 (148)(25.1)%1,189 1,095 94 8.6 %
Business Information & MediaBusiness Information & Media500 402 98 24.4 %1,323 1,201 122 10.2 %Business Information & Media163 436 (273)(62.6)%619 823 (204)(24.8)%
Life Sciences & HealthcareLife Sciences & Healthcare155 169 (14)(8.3)%534 217 317 146.1 %Life Sciences & Healthcare66 204 (138)(67.6)%216 379 (163)(43.0)%
Emerging VerticalsEmerging Verticals3,863 4,118 (255)(6.2)%10,773 7,582 3,191 42.1 %Emerging Verticals1,946 4,795 (2,849)(59.4)%3,844 6,910 (3,066)(44.4)%
Revenues Revenues$44,597 $29,220 $15,377 52.6 %$111,210 $73,393 $37,817 51.5 % Revenues$19,260 $37,395 $(18,135)(48.5)%$51,193 $66,613 $(15,420)(23.1)%
Revenues in the Russia segment are generally subject to fluctuations and are impacted by the timing of revenue recognition associated with the execution of contracts and the fluctuations in the foreign currency exchange rate of the Russian ruble to the U.S. dollar. RevenuesOn March 4, 2022, EPAM announced that it will discontinue services to customers located in Russia and is committed to providing transition support for customers in this market. On April 7, 2022, the Company announced that it would begin the process of a phased exit of its operations in Russia, to be completed in the Financial Services vertical primarily benefited from increasedmonths following the announcement and in close collaboration with the Company’s employees, contractors, and customers. The timing of completing the exit is subject to completion of regulatory requirements in the country and the Company expects to complete its exit as soon as feasible. As a result of t announcement, the revenues from this segment are expected to dissipate in the future. See Note 2 “Impact of the Invasion of Ukraine” for more information regarding the Company’s decisions to no longer serve customers in the banking sector during the threeRussia and nine months of 2021 compared to the same periodsexit our operations in 2020. Revenues in the Travel & Consumer vertical benefited during the three and nine months ended September 30, 2021 from increased revenues from a single retailer. There have been no significant changes in the other verticals during the three and nine months ended September 30, 2021 as compared to the same period in 2020.
Currency fluctuations of the Russian ruble frequently impact results in the Russia segment. Ongoing economic and geopolitical uncertainty in the region and the volatility of the Russian ruble can significantly impact reported revenues and profitability in this segment. We continue to monitor geopolitical forces, economic and trade sanctions, and other issues involving this region.

Russia.
40

Table of Contents

Effects of Inflation
Economies in some countries where we operate particularly Belarus, Russia, Uzbekistan, Kazakhstan, Ukraine and India have periodically experienced high rates of inflation. Periods of higher inflation may affect various economic sectors in those countries and increase our cost of doing business there. Inflation may increase some of our expenses such as wages. ItWhile inflation may impact our results of operations and financial condition and it is difficult to accurately measure the impact it has or could haveof inflation, we believe the effects of inflation on our results of operations and financial condition.condition are not significant.

43

Table of Contents
Liquidity and Capital Resources
Capital Resources
Our cash generated from operations has been our primary source of liquidity to fund operations and investments to support the growth of our business. As of SeptemberJune 30, 2021,2022, our principal sources of liquidity were cash and cash equivalents totaling $1,266.6$1.294 billion, short-term investments totaling $60.1 million as well as $275.0$675.0 million of available borrowings under our revolving credit facility.
We have cash in banks in Belarus, Russia, Ukraine, Kazakhstan, Armenia, Georgia and Uzbekistan, where the banking sector remains subject to periodic instability, banking and other financial systems generally do not meet the banking standards of more developed markets and bank deposits made by corporate entities are not insured. As of September 30, 2021, the total amount of cash held in these countries was $194.1 million and, of this amount, $65.3 million was held in Belarus. Cash in this region is used for operational needs and cash balances in those banks change with the operating needs of our entities in the region. We regularly monitor cash held in these countries and, to the extent the cash held exceeds amounts required to support our business operations, we distribute the excess funds into markets with more developed banking sectors.
As of September 30, 2021, we had outstanding borrowings of $25.0 million under the 2017 Credit Facility, and were in compliance with all covenants specified under the 2017 Credit Facility. On October 21, 2021, we replaced the 2017 Credit Facility with the 2021 Credit Agreement which provides for the 2021 Revolving Facility with a borrowing capacity of $700.0 million, with potential to increase the borrowing capacity up to $1,000.0 million if certain conditions are met. See Note 78 “Debt” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for information regarding our debt.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
 Six Months Ended
June 30,
 20222021
 (in thousands)
Condensed Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities$25,667 $81,663 
Net cash used in investing activities(123,088)(97,390)
Net cash used in financing activities(10,634)(18,996)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(45,661)(3,761)
Net decrease in cash, cash equivalents and restricted cash(153,716)(38,484)
Cash, cash equivalents and restricted cash, beginning of period1,449,347 1,323,533 
Cash, cash equivalents and restricted cash, end of period$1,295,631 $1,285,049 
Operating Activities
Net cash provided by operating activities during the six months ended June 30, 2022 was $25.7 million, a decrease of $56.0 million compared to $81.7 million provided by operating activities in the corresponding period of 2021. This decrease was largely driven by a higher level of variable compensation payments made in the first half of 2022 based on 2021 performance, and cash outflows related to EPAM’s humanitarian support efforts in Ukraine and geographic repositioning.
Investing Activities
Net cash used in investing activities during the six months ended June 30, 2022 was $123.1 million compared to $97.4 million used in investing activities during the same period in 2021. During the first six months of 2022, the cash used in investing activities was primarily attributable to $41.4 million used for capital expenditures and an investment of $60.0 million into time deposits compared to cash used for capital expenditures of $33.8 million offset by the maturity of $60.0 million of time deposits during the comparable period in 2021. During the first six months of 2022, the cash used for the acquisitions of businesses, net of cash acquired was $10.6 million compared to $121.3 million used in the first six months of 2021.
Financing Activities
Net cash used in financing activities was $10.6 million in the first six months of 2022 compared to $19.0 million net cash used in financing activities in the same period of 2021. During the first six months of 2022, we received cash from the exercises of stock options issued under our long-term incentive plans and proceeds from the first purchase of shares under our ESPP of $22.2 million, compared to $15.6 million received from the exercises of stock options in the corresponding period of 2021. These cash inflows were offset by cash used for the payments of withholding taxes related to net share settlements of restricted stock units of $20.8 million in the first six months of 2022, compared to $33.7 million paid in the corresponding period of 2021. Additionally, the first six months of 2022 included repayments of debt of $10.8 million.

44

Table of Contents
Future Capital Requirements
We believe that our existing cash, cash equivalents and short-term investments, combined with our expected cash flow from operations, will be sufficient to meet our projected operating and capital expenditure requirements for at least the next twelve months and that we possess the financial flexibility to execute our strategic objectives, including the ability to make acquisitions and strategic investments in the foreseeable future. However, the invasion of Ukraine, COVID-19 and the consequences and related measures to contain their impact have caused material disruptions in both national and global financial markets and economies. The future impact of the invasion of Ukraine and COVID-19 and responsive measures cannot be predicted with certainty and may increase our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity.
Our ability to expand and grow our business in accordance with current plans and to meet our long-term capital requirements will depend on many factors, including the rate at which our cash flows increase or decrease and the availability of public and private debt and equity financing. We may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain another credit facility.
Based on currently available information and management’s current expectations, we anticipate that we have sufficient cash on hand and sufficient access to capital to continue to fund our operations for a significant period of time. However, COVID-19 and related measures to contain its impact have caused material disruptions in both national and global financial markets and economies. The future impact of COVID-19 and the COVID-19 containment measures cannot be predicted with certainty and may increase our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity.
41

Table of Contents
Cash Flows
The following table summarizes our cash flows for the periods indicated:
 Nine Months Ended
September 30,
 20212020
 (in thousands)
Condensed Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities$287,713 $384,975 
Net cash used in investing activities(158,492)(149,247)
Net cash used in financing activities(14,498)(1,083)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(12,691)(10,110)
Net increase in cash, cash equivalents and restricted cash102,032 224,535 
Cash, cash equivalents and restricted cash, beginning of period1,323,533 937,688 
Cash, cash equivalents and restricted cash, end of period$1,425,565 $1,162,223 
Operating Activities
Net cash provided by operating activities during the nine months ended September 30, 2021 was $287.7 million, a decrease of $97.3 million compared to $385.0 million provided by operating activities in the corresponding period of 2020. This decrease was largely driven by an increase in days sales outstanding as well as increased income tax payments during the first nine months of 2021 compared to the same period in 2020.
Investing Activities
Net cash used in investing activities during the nine months ended September 30, 2021 was $158.5 million compared to $149.2 million used in the same period in 2020. During the first nine months of 2021, the cash used in investing activities was primarily attributable to $161.0 million used for the acquisitions of businesses, net of cash acquired, compared to $18.9 million used for the acquisitions of businesses, net of cash acquired, during the first nine months of 2020. Cash used for capital expenditures was $54.9 million during the first nine months of 2021 compared to cash used for capital expenditures of $50.3 million during the comparable period in 2020. Additionally, net cash used in investing activities was positively impacted by the maturity of $60.0 million of time deposits during the first nine months of 2021 and negatively impacted by the $60.0 million use of cash to purchase these time deposits during the first nine months of 2020. Furthermore, $2.5 million was used for purchases of non-marketable securities during the first nine months of 2021 compared to $20.5 million used in the same period in 2020.
Financing Activities
Net cash used in financing activities was $14.5 million in the first nine months of 2021 compared to $1.1 million net cash used in financing activities in the same period of 2020. During the first nine months of 2021, we received cash from the exercises of stock options issued under our long-term incentive plans of $20.2 million, compared to $23.0 million received in the corresponding period of 2020. These cash inflows were offset by cash used for the payments of withholding taxes related to net share settlements of restricted stock units of $34.1 million in the first nine months of 2021, compared to $16.2 million paid in the corresponding period of 2020. Additionally, the first nine months of 2021 included payment of $0.8 million for contingent consideration compared to payment of $7.9 million of contingent consideration during the first nine months of 2020.
Contractual Obligations and Future Capital Requirements
We believe that our existing cash and cash equivalents combined with our expected cash flow from operations will be sufficient to meet our projected operating and capital expenditure requirements for at least the next twelve months and that we possess the financial flexibility to execute our strategic objectives, including the ability to make acquisitions and strategic investments in the foreseeable future.

42

Table of Contents
However, ourOur ability to generate cash is subject to our performance, general economic conditions, industry trends and other factors including the impact of the invasion of Ukraine and COVID-19 pandemic, each as described elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. To the extent that existing cash, and cash equivalents, short-term investments, and operating cash flowflows are insufficient to fund our future activities and requirements, we may need to raise additional funds through public or private equity or debt financing. If we issue equity securities in order to raise additional funds, substantial dilution to existing stockholders may occur. If we raise cash through the issuance of additional indebtedness, we may be subject to additional contractual restrictions on our business. There is no assurance that we would be able to raise additional funds on favorable terms or at all.
See Note 1213 “Commitments and Contingencies” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” of this Quarterly Report and “Part II. Item 7. Contractual Obligations and Future Capital Requirements” of our Annual Report on Form 10-K for the year ended December 31, 20202021 for information regarding contractual obligations.
Off-Balance Sheet Commitments and Arrangements
We do not have any material obligations under guarantee contracts or other contractual arrangements other than as disclosed in Note 1213 “Commitments and Contingencies” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited).” We have not entered into any transactions with unconsolidated entities where we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to us, or engages in leasing, hedging, or research and development services with us.
Recent Accounting Pronouncements
See Note 1 “Business and Summary of Significant Accounting Policies” to our unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for additional information.

Forward-Looking Statements
This quarterly report on Form 10-Q contains estimates and forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, principally in “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our“Part II. Item 1A. Risk Factors.” Our Annual Report on Form 10-K for the year ended December 31, 20202021 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 anticipated impactinvasion of Ukraine, political and civil unrest or military action in the geographies where we conduct business and operate, developments relating to the on-going COVID-19 pandemic, and the effect that itthey may have on our sales,revenues, operations, access to capital, revenues, profitability and customer demand. 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 ofbased on 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 as indicated in forward-looking statements. 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.
45

Table of Contents
 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, 20202021 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.
46

43

Table of Contents
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks in the ordinary course of our business. These risks primarily result from changes in concentration of credit, foreign currency exchange rates and interest rates. In addition, our international operations are subject to risks related to differing economic conditions, civil unrest, political instability or uncertainty, military activities, broad-based sanctions, differing tax structures, and other regulations and restrictions.
Concentration of Credit and Other Credit Risks
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments and trade receivables.
We maintain our cash, cash equivalents and short-term investments with financial institutions. We believe that our credit policies reflect normal industry terms and business risk and werisk. We do not anticipate non-performance by the counterparties.
We have cash in banks inseveral countries, including Belarus, Ukraine and Russia, which could be impacted by the invasion of Ukraine Kazakhstan, Armenia, Uzbekistan and Georgia, where the banking sector remains subject to periodic instability. Bankinginstability, banking and other financial systems in these countries generally do not meet the banking standards of more developed markets, and bank deposits made by corporate entities are not insured. As of SeptemberJune 30, 2021, $194.12022, we had $40.4 million of our total cash was keptand cash equivalents in banks in these countries,Belarus, $40.2 million of cash and cash equivalents in banks in Ukraine and $17.2 million of cash and cash equivalents in banks in Russia. We place our cash and cash equivalents with financial institutions considered stable in the region, limit the amount of credit exposure with any one financial institution and conduct ongoing evaluations of the credit worthiness of the financial institutions with which $65.3 million was held in Belarus. In this region, and particularly in Belarus, awe do business. A banking crisis, bankruptcy or insolvency of banks that process or hold ourthe Company’s funds, or sanctions may result in the loss of our deposits or adversely affect ourthe Company’s ability to complete banking transactions, in the region, which could adversely affect our business and financial condition. Cash in this regionthese countries is used for the operational needs of the local entities and cash balances in those banks change with the expected operating needs of our entities in the region.these entities. We regularly monitor cash held in these countries and, to the extent the cash held exceeds amounts required to support our business operations we distributein these countries, the Company distributes the excess funds into markets with more developed banking sectors.
Trade receivables are generally dispersed across many customers operating in different industries; therefore, concentration of credit risk is limited and we do not believe significant credit risk existed at SeptemberJune 30, 2021.2022. Though our results of operations depend on our ability to successfully collect payment from our customers for work performed, historically, credit losses and write-offs of trade receivables have not been material to our condensed consolidated financial statements. If any of our customers enter bankruptcy protection or otherwise take steps to alleviate their financial distress, resulting from the COVID-19 pandemic, our credit losses and write-offs of trade receivables could increase, which would negatively impact our results of operations. On March 4, 2022, EPAM announced that we will discontinue services to customers located in Russia and at that time the Company evaluated trade receivables and contract assets for estimated future credit losses from customers located in Russia and recorded bad debt expense of $8.2 million during the six months ended June 30, 2022, which is included in Selling, general and administrative expenses, reflecting the deterioration of credit-worthiness of its customers in Russia. The Company is actively monitoring its trade receivables from the customers in Russia for any further deterioration of creditworthiness.
Interest Rate Risk
Our exposure to market risk is influenced by the changes in interest rates on our cash and cash equivalent deposits, short-term investments and paid on any outstanding balance on our borrowings, mainly under our credit facility,2021 Credit Agreement, which is subject to a variety of rates depending on the typecurrency and timing of funds borrowed. We do not believe we are exposed to material direct risks associated with changes in interest rates related to these deposits, investments and borrowings.
Foreign Exchange Risk
Our global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, we generate revenues principally in euros, British pounds, Swiss francs, Canadian dollars and Russian rubles. Other than U.S. dollars, we incur expenditures principally in Russian rubles, Hungarian forints, Polish zlotys, British pounds, Swiss francs, euros, Indian rupees, Chinese yuan renminbi and Mexican pesos. As a result, currency fluctuations, specifically the depreciation of the euro, British pound, and Canadian dollar and the appreciation of the Russian ruble, Hungarian forint, Polish zloty, Chinese yuan renminbi and Indian rupee relative to the U.S. dollar, could negatively impact our results of operations.
During the quarter ended September 30, 2021, foreign exchange loss was $3.4 million compared to a gain of $5.9 million reported in the corresponding period last year. The loss was largely driven by the strengthening of the euro during the third quarter of 2021. During the ninethree months ended SeptemberJune 30, 2021, foreign exchange loss was $5.8 million compared to a gain of $3.3 million in the corresponding period last year.
During the quarter ended September 30, 2021,2022, approximately 34.7%33.5% of consolidated revenues and 43.5%53.0% of consolidated operating expenses were denominated in currencies other than the U.S. dollar.
To
47

Table of Contents
In the normal course of business, EPAM uses derivative financial instruments to manage the risk of fluctuations in foreign currency exchange rates and hedge a portion of our forecasted foreign currency denominated operating expenses in the normal course of business, we implementedrates. We have a hedging program through whichwhereby we enter into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Russian ruble, Polish zloty, Hungarian forint and Indian rupee transactions. As of SeptemberJune 30, 2021,2022, all of EPAM’s foreign exchange forward contracts, except the net unrealized gain from theseRussian ruble foreign exchange forward contracts, were designated as hedges and there is no financial collateral (including cash collateral) required to be posted related to the foreign exchange forward contracts.
During the quarter ended March 31, 2022, in response to the invasion of Ukraine, EPAM de-designated our Russian ruble foreign exchange forward contracts as hedges and entered into offsetting foreign exchange forward contracts with the same counterparty. The Company determined it was $0.6 million.probable the underlying forecasted foreign currency transactions which were hedged would not occur and reclassified the accumulated loss of $43.9 million on the underlying hedge into income which is classified as foreign exchange loss in the condensed consolidated statement of income.
44

TableDuring the quarter ended June 30, 2022, foreign exchange loss was $85.9 million compared to a loss of Contents
$4.7 million reported in the corresponding period last year. The loss was largely driven by the impact of appreciation of the Russian ruble on the Company’s intercompany payables denominated in Rubles and U.S. dollar denominated assets held by our subsidiaries in Russia.
Management supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in our business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating its performance. When important to management’s analysis, operating results are compared on the basis of “constant currency”, which is a non-GAAP financial measure. This measure excludes the effect of foreign currency exchange rate fluctuations by translating the current period revenues and expenses into U.S. dollars at the weighted average exchange rates of the prior period of comparison.
During the thirdsecond quarter of 2021,2022, we reported revenue growth of 51.6% over35.6% compared to the thirdsecond quarter of 2020.2021. Had our consolidated revenues been expressed in constant currency terms using the exchange rates in effect during the thirdsecond quarter of 2020,2021, we would have reported revenue growth of 50.7%40.1%. Our revenues benefited from appreciationwere negatively impacted mainly by the depreciation of the euro and British pound Russian ruble and Canadian dollar relative to the U.S. dollar. During the thirdsecond quarter of 2021,2022, we reported a netdecrease in income increasefrom operations of 29.3% over25.7% compared to the thirdsecond quarter of 2020.2021. Had our consolidated results been expressed in constant currency terms using the exchange rates in effect during the thirdsecond quarter of 2020,2021, we would have reported a netdecrease in income increasefrom operations of 26.1%13.5%. Net incomeIncome from operations was most positivelynegatively impacted by the appreciation of the Russian ruble and the depreciation of the euro and British pound relative to the U.S. dollar partially offset by the negative impact from the appreciation of the Russian ruble relative to the U.S. dollar.

Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Based on management’s evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this report, these officers have concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended SeptemberJune 30, 20212022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
48


Table of Contents

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in litigation and claims arising out of our business and operations in the normal course of business. We are not currently a party to any material legal proceeding, nor are we aware of any material legal or governmental proceedings pending or contemplated to be brought against us.
Item 1A. Risk Factors
For a discussion of our potential risks and uncertainties, including the fast-changing nature of the COVID-19 pandemic and its impact on global economic conditions, and our significant operations in the emerging market economies of Eastern Europe, which may be impacted by fluctuating military activities in and near Ukraine and enhanced sanctions and responses between the U.S. and Russia as well as new or enhanced sanctions imposed by the U.S., Canada, and European countries against Belarus, see the risk factor below and the risk factors disclosed under the heading “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020. 2021.
We have significant operations and personnel in Ukraine and Belarus, and previously had significant operations and personnel in Russia. Conflict in the region has had and could continue to have a material adverse effect on our business, customers, service delivery, and financial results.
Economic, civil, military, energy supply and political uncertainty exists and may increase in many of the regions where we operate and derive our revenues. In particular, as of December 31, 2021, more than half of our global delivery, administrative and support personnel were located in Ukraine, Belarus and Russia, all of which are involved in a military action in Ukraine. We also have significant operations in countries bordering Ukraine and in those countries allied with Russia in the nearby emerging market economies of Eastern Europe and Central Asia, which currently are, and in the future may be, adversely impacted by regional instability.
On February 24, 2022, Russian military forces attacked Ukraine, and sustained conflict and disruption in the region has occurred and is likely to continue to occur. In addition to a significant number of personnel and operations in Ukraine, we also own an office building and lease office space in a number of cities in Ukraine, all or some of which may be damaged or destroyed as a result of the attack against Ukraine. The impact to Ukraine, as well as actions taken by other countries, including new and stricter sanctions by Canada, the United Kingdom, the European Union, the U.S. and other countries and organizations against officials, individuals, regions, and industries in Russia, the Donbas region of Ukraine, and Belarus, and each country’s potential response to such sanctions, tensions, and military actions has and could continue to have a material adverse effect on our operations. In order to protect against potential cyberattacks or other information security threats, some of our customers have implemented steps to block internet communications with Russia, Ukraine, and Belarus, which has had a material adverse effect on our ability to deliver our services from those locations. Our 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, all of which could have a material adverse effect on our financial condition. The material adverse effects from the conflict, enhanced sanctions activity, and counter-sanctions may continue to disrupt our delivery of services, has caused us to shift portions of our work occurring in the region to other countries, and may continue to restrict our ability to engage in certain projects or with certain customers in the region. We discontinued services to certain customers located in Russia and we expect to complete the phased exit of our remaining operations in Russia as soon as feasible, subject to regulatory approvals. We could incur additional significant charges in the future related to the exit of our operations in Russia. We expect to continue operating in Belarus. A significant number of our employees in Russia and Belarus have already relocated, and we expect that more Russia- and Belarus-based employees will relocate to delivery locations outside their countries, but at a reduced rate as compared to the second quarter of 2022.
EPAM is actively monitoring and enhancing the security of our people and the stability of our infrastructure, including communications, physical assets, and internet availability. We continue to execute our business continuity plans in response to developments as they occur and to protect the safety of our personnel and address potential impacts to our delivery infrastructure. To date we have not experienced any material interruptions in our infrastructure, utility supply or internet connectivity needed to support our customers. We have implemented additional contingency plans to relocate work and/or personnel to other geographies within our global footprint and add new locations, as appropriate. Increased operations and hiring in existing or new geographies, including in more developed economies, is likely to increase our expenses, especially compensation expenses for technology professionals in those markets, which could reduce the profitability of our business.

49

Table of Contents
Our business continuity plans are designed to address known contingency scenarios to ensure that we have adequate processes and practices in place to protect the safety of our people and to handle potential impacts to our delivery capabilities. Our crisis management procedures, business continuity plans, and disaster recovery capabilities may not be effective at preventing or mitigating the effects of prolonged or multiple crises, such as civil unrest, military conflict, energy instability and a pandemic in a concentrated geographic area or in multiple geographies. The current events in the regions where we operate and where we derive a significant amount of our business pose security risks to our people, our facilities, our operations, and infrastructure, such as utilities and network services, and the further disruption of any or all of them could materially adversely affect our operations and financial results, cause additional volatility in the price of our stock, and reduce our profitability. We have no way to predict the progress or outcome of the military action in Ukraine or its impacts in Russia and Belarus as the conflict and government reactions are rapidly changing and beyond our control. Whether in these countries or in others in which we operate, prolonged civil unrest, political instability or uncertainty, military activities, broad-based sanctions or counter-sanctions, should they continue for the long term or escalate, could require us to further rebalance our geographic concentrations and could have a material adverse effect on our personnel, operations, financial results and business outlook.
The risks and uncertainties that we face are not limited to those set forth in our Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
45

Table of Contents
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
50

Table of Contents

Item 6. Exhibits
Exhibit
Number
Description
  
31.1*
31.2*
32.1*
32.2*
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)
Indicates management contracts or compensatory plans or arrangements
*Exhibits filed herewith
4651

Table of Contents


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

Date: NovemberAugust 4, 20212022
 EPAM SYSTEMS, INC.
   
 By:/s/ Arkadiy Dobkin
  Name: Arkadiy Dobkin
  Title: Chairman, Chief Executive Officer and President
(principal executive officer)
   
 By:/s/ Jason Peterson
  Name: Jason Peterson
  Title: Senior Vice President, Chief Financial Officer and Treasurer
(principal financial officer)

4752