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What changed in EPAM Systems's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of EPAM Systems's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+387 added−386 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-24)

Top changes in EPAM Systems's 2023 10-K

387 paragraphs added · 386 removed · 288 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOn April 7, 2022, EPAM announced the beginning of a phased exit of our operations in Russia in close collaboration with our employees, contractors, and customers. We have discontinued services to certain customers located in Russia and on September 7, 2022, we executed an agreement to sell substantially all of our remaining holdings in Russia to a third-party.
Biggest changeOn March 4, 2022, we announced our decision to discontinue our services to customers located in Russia and on July 26, 2023, we completed the sale of our remaining holdings in Russia to a third-party. As of December 31, 2023 we no longer have employees or operations in Russia.
In addition to effective client management, our sales model also utilizes an integrated sales and marketing approach that leverages a dedicated sales team to identify and acquire new accounts. We maintain a marketing team, which coordinates corporate-level branding efforts such as participation in and hosting of industry conferences and events as well as sponsorship of programming competitions.
In addition to effective client management, our sales model also utilizes an integrated sales and marketing approach that leverages a dedicated sales team to identify and acquire new accounts. We maintain a marketing team, which coordinates corporate-level branding efforts such as participation in and the hosting of industry conferences and events as well as sponsorship of programming competitions.
For these customers we develop tools such as plant management platforms, energy saving applications, inventory management mechanisms, connected vehicle platforms and undertake various industry specific aspects of intelligent automation and operational efficiency. These customers are included in our Emerging Verticals, which are further discussed in “Item 7.
For these customers we develop tools such as plant management platforms, energy saving applications, inventory management mechanisms, and connected vehicle platforms. Additionally, we undertake various industry-specific aspects of intelligent automation and operational efficiency. These customers are included in our Emerging Verticals, which are further discussed in “Item 7.
Our engineering expertise allows us to build enterprise technologies that improve business processes, offer smarter analytics and result in greater operational excellence through requirements analysis and platform selection, deep and complex customization, cross-platform migration, implementation and integration.
Our engineering expertise allows us to build enterprise technologies that improve business processes, offer smarter analytics and result in greater operational excellence through requirements analysis and platform selection, complex customization, cross-platform migration, implementation and integration.
Increasing diversity in executive and key operational leadership roles is an organizational priority that starts at the top of our organization. Women currently represent approximately 29% of the independent directors on our Board and we have developed programs to identify, retain, mentor, and supply a pipeline of qualified, diverse candidates at all levels of our company.
Increasing diversity in executive and key operational leadership roles is an organizational priority that starts at the top of our organization. Women currently represent approximately 44% of the independent directors on our Board and we have developed programs to identify, retain, mentor, and supply a pipeline of qualified, diverse candidates at all levels of our Company.
We deliver training and development opportunities and content through our unique learning ecosystem that promotes learning in the daily workflow to improve retention and productivity, and through dedicated events, including our week-long global learning event, which delivered approximately 130 online sessions. We deliver learning and development content through proprietary platforms that are available to all of our employees.
We deliver training and development opportunities and content through our unique learning ecosystem that promotes learning in the daily workflow to improve retention and productivity, and through dedicated events, including our week-long global learning event, which delivered approximately 129 online sessions. We deliver learning and development content through proprietary platforms that are available to all of our employees.
Developing a digital experience or product from end-to-end requires input and expertise from a variety of professionals with a broad range of skills. Our multi-disciplinary teams and global delivery framework come together to deliver well-rounded technology solutions that bring a competitive advantage to our customers.
Developing a digital experience or product from end-to-end requires input and expertise from a variety of professionals with a broad range of skills. Our multi-disciplinary teams and global delivery framework come together to deliver well-rounded technology solutions that we believe bring a competitive advantage to our customers.
See Note 17 “Segment Information” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding long-lived assets and customer revenues by geographic location as well as financial information related to our reportable segments.
See Note 18 “Segment Information” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding long-lived assets and customer revenues by geographic location as well as financial information related to our reportable segments.
We deliver a wide range of services to these customers from complex system modernization, brand strategy and space design, digital marketing, payments and loyalty programs to inventory and order management, leading edge innovations in multi-channel sales and distribution. We have transformed organizations to use technology to expand and revolutionize their business models.
We deliver a wide range of services to these customers from complex system modernization, brand strategy and space design, digital marketing, payments and loyalty programs to inventory and order management, leading edge innovations in multi-channel sales and distribution. We have transformed organizations by enabling them to use technology to expand and revolutionize their business models.
Global Delivery Model Our global delivery model and centralized support functions, combined with the benefits of scale from the shared use of fixed-cost resources, 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.
Global Delivery Model Our global delivery model and centralized support functions, combined with the benefits of scale from the shared use of fixed-cost resources, have created a delivery base whereby our applications, tools, methodologies and infrastructure allow us to seamlessly deliver services and solutions from our global delivery centers to global customers across the world.
Compliance with these laws requires significant resources and non-compliance may result in civil or criminal penalties and other remedial measures. 8 Table of Contents Corporate Information EPAM Systems, Inc. was incorporated in the State of Delaware on December 18, 2002. Our predecessor entity was founded in 1993.
Compliance with these laws requires significant resources and non-compliance may result in civil or criminal penalties and other remedial measures. Corporate Information EPAM Systems, Inc. was incorporated in the State of Delaware on December 18, 2002. Our predecessor entity was founded in 1993.
We have deep expertise and the ability to offer a comprehensive set of software product development services including product research, customer experience design and prototyping, program management, component design and integration, full lifecycle software testing, product deployment and end-user customization, performance tuning, product support and maintenance, managed services, as well as porting and cross-platform migration.
We have deep expertise and the ability to offer a comprehensive set of software product and platform development services including product research, customer experience design and prototyping, program management, component design and integration, full lifecycle software testing, product deployment and end-user customization, performance tuning, product support and maintenance, managed services, as well as cross-platform migration and modernizing legacy platforms.
Our services span the complete software development lifecycle for software product development using our comprehensive development methodologies, testing, performance tuning, deployment, maintenance and support. Business Information and Media .
Our services span the complete software development lifecycle for software product development, including our comprehensive development methodologies, testing, performance tuning, deployment, maintenance and support. Business Information and Media .
These tools promote collaboration and effective oversight, reduce work time and costs, and increase quality for our IT management and our customers. 7 Table of Contents We maintain, monitor, and improve processes and infrastructure to protect our, our customers’ and their customers’ confidential and sensitive information and allocate internal and external resources to assess and ensure information security, cybersecurity and data privacy.
These tools promote collaboration and effective oversight, reduce work time and costs, and increase quality for our IT management and our customers. We maintain, monitor, and improve processes and infrastructure to protect our, our customers’ and their customers’ confidential and sensitive information and allocate internal and external resources to assess and ensure information security, cybersecurity and data privacy.
Through our extensive experience with many industry leaders in Hi-Tech research and development, software engineering and integration, we have developed proprietary internal processes, methodologies and information technology infrastructure, which give us an edge when it comes to serving customers in the Hi-Tech and Software product markets.
Through our extensive experience with many industry leaders in Hi-Tech research and development, software engineering and integration, we have established proprietary internal processes, methodologies as well as information technology infrastructure, which give us an edge when it comes to serving customers in the Hi-Tech and Software product markets.
Our largest learning and development investment has been directed towards developing our engineering talent, including targeted training programs, innovation labs, and significant internal production projects. Our employees consumed over 2.6 million learning hours in 2022.
Our largest learning and development investment has been directed towards developing our engineering talent, including targeted training programs, innovation labs, and significant internal production projects. Our employees consumed 2.6 million learning hours in 2023.
Our professionals deliver an end-to-end experience that includes strategy, architecture, development and managed services to customers ranging from the traditional healthcare providers to innovative startups. 3 Table of Contents Emerging Verticals. We also serve the diverse technology needs of customers in the energy, telecommunications, real estate, automotive and various manufacturing industries, as well as government customers.
Our professionals deliver an end-to-end experience that includes strategy, architecture, development and managed services to customers ranging from the traditional healthcare providers to innovative startups. Emerging Verticals. We also serve the diverse technology needs of customers in the energy, telecommunications, educational, real estate, automotive and various manufacturing industries, as well as government entities.
Our Life Sciences solutions enable customers to speed research and accelerate time-to-market while improving collaboration, knowledge management and operational excellence. We help our customers in the Healthcare industry respond to changing regulatory environments and improve the quality of care while managing the cost of care through integrated health solutions for patients and providers and human-centered design.
Our Life Sciences solutions enable customers to speed research and accelerate time-to-market while enhancing collaboration, knowledge management and operational excellence. We help our customers in the Healthcare industry to adapt to changing regulatory environments and improve the quality of care, all while managing the cost of care through integrated health solutions for patients and providers and human-centered design.
We also make such filings available free of charge through the Investor Relations section of our website, https://investors.epam.com , as soon as reasonably practicable after they are filed with the SEC.
We also make such filings available free of charge through the Investor Relations section of our website, https://investors.epam.com , as soon as reasonably practicable after they are filed with the SEC. 9 Table of Conten t s
Our financial services domain experts have been recognized with industry awards for engineering and deploying unique applications and business solutions that facilitate growth, competitiveness, regulatory compliance and customer interaction while driving cost efficiency and digital transformation. Travel and Consumer .
Our financial services domain experts have been recognized with industry awards for engineering and deploying unique applications and business solutions that facilitate growth, competitiveness, regulatory compliance and customer interaction while driving cost efficiency and digital transformation. 3 Table of Conten t s Travel and Consumer .
Our historical core competency, software development and product engineering services, combined with our work with global leaders in enterprise software platforms and emerging technology companies, created our foundation for the evolution of our other offerings, which include advanced technology software solutions, intelligent enterprise services and digital engagement.
Our historical core competencies, which include software development and product engineering services, combined with our work alongside global leaders in enterprise software platforms and emerging technology companies, laid the foundation for the evolution of our other offerings. These include advanced technology software solutions, intelligent enterprise services, and digital engagement.
Industry Expertise Strong industry-specific knowledge, backed by extensive experience merging technology with the business processes of our customers, allows us to deliver tailored solutions to various industry verticals. Our customers operate in five main industry verticals as well as a number of other emerging verticals in which we are increasing our presence. Financial Services.
Industry Expertise Strong industry-specific knowledge, backed by extensive experience merging technology with our customers' business processes, enables us to deliver tailored solutions to various industry verticals. Our customers operate in five main industry verticals as well as a number of emerging verticals where we are increasing our presence. Financial Services.
We help our business information and media customers build products and solutions for all modern platforms including web media streaming, mobile information delivery, print to digital transformations and information discovery and search. Our solutions help customers develop new revenue sources, accelerate content management, delivery and monetization and reach broader audiences.
We help our business information and media customers build products and solutions for all modern platforms including web media streaming, mobile information delivery, print to digital transformations and information discovery and search. Our solutions help our customers in developing new revenue sources, accelerating content management, delivery and monetization, and reaching broader audiences.
We also created the EPAM E-KIDS program where our employees volunteer their time to teach elementary school age children of any gender, race, or ethnic identity STEM concepts and introductory software coding skills. As of the end of 2022, we offered the EPAM E-KIDS program in 25 countries.
We also created the EPAM E-KIDS program where our employees volunteer their time to teach elementary school age children of any gender, race, or ethnic identity STEM concepts and introductory software coding skills.
For the years ended December 31, 2022, 2021 and 2020, the utilization rates of our delivery professionals were approximately 75.8%, 78.7%, and 79.8%, respectively. 5 Table of Contents EPAM invests significant resources in training and developing our employees through our learning and development programs.
For the years ended December 31, 2023, 2022 and 2021, the utilization rates of our delivery professionals were approximately 74.3%, 75.8%, and 78.7%, respectively. EPAM invests significant resources in training and developing our employees through our learning and development programs.
We serve varied customers in this vertical including entertainment media, news and sports broadcasting companies, financial data and legal information providers, content distributors, educational materials publishers, game developers and advertising networks. Life Sciences and Healthcare .
We serve a diverse set of customers in this vertical including entertainment media, news and sports broadcasting companies, financial data and legal information providers, content distributors, educational materials publishers and advertising networks. Life Sciences and Healthcare .
We require our employees, vendors and independent contractors to enter into written agreements upon the commencement of their relationships with us, which assign to us all deliverable intellectual property and work product made, developed or conceived by them in connection with their employment or provision of services and to keep any disclosed information confidential.
We require our employees, vendors and independent contractors to enter into written agreements upon the commencement of their relationships with us, which assign to us all deliverable intellectual property and work product made, developed or conceived by them in connection with their employment or provision of services and to keep any disclosed information confidential. 8 Table of Conten t s We also enter into confidentiality agreements with our customers and suppliers to protect information and maintain information security.
Our health and safety programs are designed to comply with the regulations in the multiple cities and countries where we operate, but also provide working conditions that are compatible with the necessities of our delivery and administrative operations.
Our health and safety programs are designed to comply with the regulations in the multiple cities and countries where we operate, but also provide working conditions that are compatible with the necessities of our delivery and administrative operations, whether our employees choose to work remotely or in EPAM’s or our customers’ offices.
In 2022, the employee experience we create was recognized with awards from a number of different organizations in North America, Europe, and Asia, and we were named on Newsweek’s list of Top 100 Most Loved Workplaces for the second consecutive year.
In 2023, the employee experience we create was recognized with awards from a number of different organizations in North America, Europe, and Asia, and we were named on Newsweek’s list of Top 100 Most Loved Workplaces for the third consecutive year and recognized by Glassdoor as a Best Workplace in 2023 and 2024.
We face competition from various technology services providers such as Accenture, Atos, Capgemini, Cognizant Technology Solutions, Deloitte Digital, DXC Technology, Endava, Genpact, GlobalLogic, Globant, Grid Dynamics, HCL Technologies, Infosys, Tata Consultancy Services, and Wipro, among others. Additionally, we compete with numerous smaller local companies in the various geographic markets in which we operate.
We face competition from various technology services providers such as Accenture, Atos, Capgemini, Cognizant Technology Solutions, Deloitte Digital, DXC Technology, Endava, Genpact, GlobalLogic, Globant, Grid Dynamics, HCL Technologies, Infosys, Tata Consultancy Services, and Wipro, among others.
We also enter into confidentiality agreements with our customers and suppliers to protect information and maintain information security. Our agreements with our customers cover our use of their software systems and platforms as our customers usually own the intellectual property in the software, products, and solutions we develop for them.
Our agreements with our customers cover our use of their software systems and platforms as our customers usually own the intellectual property in the software, products, and solutions we develop for them.
We support our customers while enabling them to reimagine their businesses through a digital lens. We focus on building long-term partnerships with our customers in a market that is constantly challenged by the pressures of digitization through our innovative strategy and scalable software solutions, integrated advisory, business consulting and experience design, and a continually evolving mix of advanced capabilities.
In a business landscape that is constantly challenged by the pressures of digitization, we focus on building long-term partnerships with our customers through innovative and scalable software solutions, integrated strategy, experience and technology consulting, and a continually evolving mix of advanced capabilities.
In the Life Sciences category, we partner with global pharmaceutical, medical and scientific technology, biotechnology companies and retail pharmacies to deliver sophisticated scientific informatics and innovative enterprise technology solutions. Our personnel in Life Sciences leverage their vast technology expertise to offer deep scientific and mathematical knowledge to broad-based initiatives.
We partner with global pharmaceutical, medical and scientific technology, biotechnology companies and retail pharmacies to deliver sophisticated scientific informatics and innovative enterprise technology solutions. Our Life Sciences experts utilize their extensive technology skill set to provide deep scientific and mathematical knowledge to broad-based initiatives.
Over the years we have developed a robust global delivery model that serves as a key competitive advantage, enabling us to better meet our customers’ diverse needs and to provide a compelling value proposition.
Over the years we have developed a robust global delivery model that serves as a key competitive advantage, enabling us to better meet our customers’ diverse needs and to provide a compelling value proposition. We continuously evolve our delivery platform to support our business needs and strategy by engaging personnel with diversified skills in existing and new locations.
We believe that our focus on complex and innovative software product development solutions, our technical employee base, and our development and continuous improvement in process methodologies, applications and tools position us well to compete effectively in the future.
Additionally, we compete with numerous smaller local companies in the various geographic markets in which we operate. 7 Table of Conten t s We believe that our focus on complex and innovative software product development solutions, our technical employee base, and our development and continuous improvement in process methodologies, applications and tools position us well to compete effectively in the future.
Employee Engagement and Retention: As a participant in the United Nations Global Compact, we are committed to respecting our employees' fundamental human rights at work.
As of the end of 2023, we offered the EPAM E-KIDS program in 27 countries. 6 Table of Conten t s Employee Engagement and Retention: As a participant in the United Nations Global Compact, we are committed to respecting our employees' fundamental human rights at work.
Our career development programs also give our employees opportunities to earn accreditation and relevant expertise in various technology fields, including software and project management certifications and recognition and credentialing from the industry’s primary software and cloud services providers. 6 Table of Contents We focus on retaining and engaging top talent by hiring people with the skill sets our customers need and who also share our values so we can build long-term employee satisfaction, which is supported by our voluntary attrition rate of 13.8%, 13.3%, and 10.8% in 2022, 2021 and 2020, respectively.
We focus on retaining and engaging top talent by hiring people with the skill sets our customers need and who also share our values so we can build long-term employee satisfaction, which is supported by our voluntary attrition rate of 8.6%, 13.8%, and 13.3% in 2023, 2022 and 2021, respectively.
Additionally, in response to the war in Ukraine, we continue to execute our business continuity plans and have sustained our hiring efforts across multiple locations in Central and Eastern Europe, Central and Western Asia, India, and Latin America. Our global delivery centers have sufficient resources, including infrastructure and capital, to support ongoing operations.
In response to the war in Ukraine, we continue to execute our business continuity plans and have sustained our hiring efforts across multiple locations in Central and Eastern Europe, Central and Western Asia, India, and Latin America. As of December 31, 2023, we employ delivery professionals in more than 50 countries.
We serve our customers through on-site, off-site and offshore locations across the world and use strategically located delivery centers to offer a strong, diversified and cost-effective delivery platform.
As of December 31, 2023, we had approximately 47,350 delivery personnel consisting mainly of our core information technology professionals as well as consultants, designers, architects, engineers and trainers. We serve our customers through on-site, off-site and offshore locations across the world and use strategically located delivery centers to offer a strong, diversified and cost-effective delivery platform.
We deliver business and technology transformation from start to finish, leveraging agile methodologies, proven customer collaboration frameworks, engineering excellence tools, hybrid teams and our award-winning proprietary global delivery platform. We leverage our software engineering heritage with strategic business and innovation consulting, design thinking, and physical-digital capabilities to deliver real business value to our customers.
We deliver business and technology transformation from start to finish, leveraging agile methodologies, proven customer collaboration frameworks, engineering excellence tools, multidisciplinary teams and our award-winning proprietary global delivery platform. We support our customers while enabling them to reimagine their businesses through a digital lens.
Outside of Ukraine and Belarus, our largest delivery locations are India and Poland with approximately 5,900 and 5,650 delivery professionals, respectively, as of December 31, 2022. Human Capital Our employees are a key factor in our ability to grow our revenues and serve our customers.
As of December 31, 2023, we employ approximately 3,500 delivery professionals in Belarus and we expect to continue operating in Belarus. Human Capital Our employees are a key factor in our ability to grow our revenues and serve our customers.
Our focus on delivering quality service is reflected in established relationships with many of our customers, with 54.7% and 26.4% of our revenues in 2022 coming from customers that had used our services for at least five and ten years, respectively. Our sustained growth and increased capabilities are furthered by both organic growth and strategic acquisitions.
Our focus on delivering quality service is reflected in established relationships with many of our customers, with 65.6% and 28.2% of our revenues in 2023 coming from customers that had used our services for at least five and ten years, respectively. We aim to grow our customer portfolios organically and through strategic acquisitions.
Health, Safety, and Wellness: We invest in programs designed to improve the physical, mental, and social well-being of our employees so we can offer a safe, welcoming, and productive workplace that supports and enhances the work-life balance and wellness of our employees.
As of December 31, 2023, 2022 and 2021, we had approximately 53,150, 59,300, and 58,800 employees, respectively, of which approximately 47,350, 52,850, and 52,600 were delivery professionals, respectively. 5 Table of Conten t s Health, Safety, and Wellness: We invest in programs designed to improve the physical, mental, and social well-being of our employees so we can offer a safe, welcoming, and productive workplace that supports and enhances the work-life balance and wellness of our employees.
Business Strategy Our service offerings continuously evolve to provide more customized and integrated solutions to our customers where we combine best-in-class software engineering with customer experience design, business consulting and technology innovation services.
Our service offerings continuously evolve to provide more customized and integrated solutions to our clients. We combine software engineering with customer experience design, business consulting, strategy, and technology innovation services in areas such as cloud platforms, cybersecurity and artificial intelligence. Engineering Our engineering foundation underpins how we architect, build and scale next-generation software solutions and agile delivery teams.
Our strategic acquisitions have expanded our geographic reach and service capabilities to include digital strategy and design, consulting and test automation and we expect our strategic acquisitions will continue to enable us to offer a broader range of services to our customers from a wide variety of locations.
Our strategic acquisitions have expanded our geographic reach and service capabilities and will continue to enable us to offer a broader range of services to our customers from a multitude of locations. Services We turn our customers’ operations into intelligent enterprise hubs with our proprietary platforms, integrated engineering practices and smart automation.
The following table shows revenues from the top five and ten customers in the respective year as a percentage of revenues for that year: % of Revenues for Year Ended December 31, 2022 2021 2020 Top five customers 16.4 % 18.2 % 22.0 % Top ten customers 23.8 % 25.7 % 30.9 % As we remain committed to diversifying our client base and adding more customers to our client mix, we expect revenue concentration from our top customers to continue to decrease over the long-term.
The following table shows revenues from the top five and ten customers in the respective year as a percentage of revenues for that year: % of Revenues for Year Ended December 31, 2023 2022 2021 Top five customers 16.6 % 16.4 % 18.2 % Top ten customers 23.6 % 23.8 % 25.7 % 4 Table of Conten t s During the year ended December 31, 2023 the customer concentration remained similar to the levels in the previous year.
Our services directly impact strategy, breakthrough products and compelling brand and employee experiences that help retailers outpace competitors. Software and Hi-Tech. We provide complex software product development services to meet software and technology companies’ constant need for innovation and agility.
Our services and high-quality tools directly impact the creation of breakthrough products and compelling brand and employee experiences, helping companies become more adaptive and address market challenges. Software and Hi-Tech. We offer complex software product development services to address the constant need for innovation and agility among software and technology companies.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this Annual Report on Form 10-K for additional information related to revenues.
As we remain committed to diversifying our client base and adding more customers to our client mix, we expect revenue concentration from our top customers to decrease over the long-term. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this Annual Report on Form 10-K for additional information related to revenues.
In the normal course of business, we may relocate or assist in relocating our employees as business needs arise, new office geographies are added or customer engagements require teams to be available in particular locations. 4 Table of Contents Historically, our largest delivery locations, measured by the number of delivery professionals, have been Ukraine, Belarus and Russia; however, the attack on Ukraine and its people by Russian forces beginning on February 24, 2022 shifted the way we operate in those locations.
In the normal course of business, we may relocate or assist in relocating our employees as business needs arise, new office geographies are added or customer engagements require teams to be available in particular locations.
Our capabilities span a range of platforms, applications and solutions that businesses in travel and hospitality use to enhance their customers’ experience, control operating expenses and efficiently manage their business. Some of the world’s leading airlines, global hotel brands and online travel agencies rely on our expertise in creating high-quality tools for becoming more adaptive and addressing market challenges.
In this vertical, our capabilities span a range of platforms, applications and solutions that consumer goods manufacturers, global, regional and local retailers, online retail brands and marketplaces, distributors and supply chain organizations as well as leading airlines, travel agencies and global hotel brands use to enhance their customers’ experience and efficiently manage their operations.
As a recognized leader, EPAM is listed among the top 15 companies in Information Technology Services on the Fortune 1000 and ranked four times as the top IT services company on Fortune’s 100 Fastest Growing Companies list.
We are proud to be among the top 15 companies in Information Technology Services in the Fortune 1000 and to be recognized as a leader in the IDC MarketScapes for Worldwide Experience Build Services, Worldwide Experience Design Services and Worldwide Software Engineering Services.
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Item 1. Business Company Background EPAM is a leading digital 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.
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Item 1. Business Overview EPAM has used its software engineering expertise to become a leading global provider of digital engineering, cloud and artificial intelligence-enabled transformation services, as well as a leading business and experience consulting partner for global enterprises and ambitious start-ups.
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We are continually expanding our service capabilities, moving beyond our traditional services into business consulting, design and physical product development and areas such as artificial intelligence, robotics and virtual reality. 1 Table of Contents EPAM’s key service offerings and solutions include the following practice areas: Engineering Our engineering foundation underpins how we architect, build and scale next-generation software solutions and agile delivery teams.
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We address our clients’ transformation challenges by fusing EPAM Continuum’s integrated strategy, experience and technology consulting with our 30+ years of engineering execution to speed our clients’ time to market and drive greater value from their digital investments.
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We use our experience, custom tools and specialized knowledge to integrate our customers’ chosen application platforms with their internal systems and processes and to create custom solutions filling the gaps in their platforms’ functionality in order to address the needs of the customers’ users and customers.
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We use our experience, custom tools and specialized knowledge to integrate our customers’ chosen strategy and create custom solutions in order to architect the right solutions with built-in quality and security gates and accomplish the best outcome from the digital modernization efforts. 2 Table of Conten t s Cloud Cloud technology has become the default platform for nearly every digital use.
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We address our customers’ increased need for tighter enterprise integration between software development, testing and maintenance with private, public and mobile infrastructures through our infrastructure management services. These solutions cover the full lifecycle of infrastructure management including application, database, network, server, storage and systems operations management, as well as monitoring, incident notification and resolution.
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We assist our clients in creating a roadmap to set and refine their IT and business goals while identifying new and emerging cloud opportunities. Cloud technology endows adaptive enterprises with agility and flexibility, paving the way for new business models, cutting-edge products, and the acceleration of dynamic experiences for a faster time-to-market.
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We deliver maintenance and support services through our proprietary distributed project management processes and tools, which reduce the time and costs related to maintenance, enhancement and support activities.
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Our experts have a solid understanding of infrastructure and are skilled at advancing the pace of change. Additionally, we assist our clients with developing and executing optimal cloud technology migration strategies and provide customized cloud solutions.
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We focus on software products covering a wide range of business applications as well as product development for multiple mobile platforms and embedded software product services. Operations We turn our customers’ operations into intelligent enterprise hubs with our proprietary platforms, integrated engineering practices and smart automation.
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Data, Analytics and Artificial Intelligence With deep expertise in data and analytics, business intelligence and cloud platform development, we navigate the complexities of building and scaling new data capabilities necessary for the evolving environment.
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Optimization We turn process optimization into real transformation by using process automation and cognitive techniques to transform legacy processes and deliver streamlined operations that increase revenues and reduce costs for our customers. We rely on our teams, methodologies and tools to optimize every stage of software delivery for improved quality and better features with each release.
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From migrating data platforms to the cloud to implementing data governance practices across the enterprise, we help our customers unlock data-reliant outcomes for their business, ushering them into the future. Our integrated teams of business and technology experts assess our customers’ data ecosystems, build roadmaps and deliver data solutions to the market.
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We maintain a dedicated group of testing and quality assurance professionals with experience across a wide range of technology platforms and industry verticals, who perform software application testing, test management, automation and consulting services focused on helping customers improve their existing software testing and quality assurance practices.
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We drive artificial intelligence (“AI”) and generative AI strategy, delivery and enablement from a business perspective to ensure meaningful, sustained outcomes. Our hybrid, networked teams of consultants, designers, architects, engineers and trainers have developed numerous proprietary data accelerators, repeatable AI frameworks and methodologies that can be implemented quickly and at scale.
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We employ industry-recognized and proprietary defect tracking tools and frameworks to deliver a comprehensive range of testing services that identify threats and close loopholes to protect our customers’ business systems from information loss.
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With our end-to-end AI capabilities, we uncover opportunities for AI, advise and then build solutions that unlock new business models, enhance productivity, automate operations, and deliver deeper customer and supply chain insights. Customer Experience We enable our customers to better leverage technology more effectively, addressing the simultaneous pressures of driving value for their consumers and offering more engaging experiences.
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Consulting Over the years, as a complement to our core engineering skills, we have added capabilities in business consulting to give us an agile, hybrid approach to the market. Our consulting services drive deeper relationships as we help our customers with larger and more complex challenges.
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We apply innovative design ideas for customers looking to improve user experiences and drive greater customer engagement. We assist them in digitally transforming into adaptive, product-centric organizations that reinvent experiences in real time. Additionally, we specialize in physical experience where we conceive, develop physical products and design spaces for a digital world.
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Our integrated consulting teams – across Business, Experience, Technology and Data – apply a systems thinking mindset to get to the core of our clients’ challenges.
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Within our customers’ organizations, we reshape processes for the workforce through engaging, enabling and empowering experiences. Moreover, we help set up marketing teams and brands to remain relevant in the future. Cybersecurity We guide our clients through the process of achieving operational resilience against evolving cybersecurity threats.
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The functional business expertise of our professionals is supplemented by a thorough understanding of technology platforms and their interactions as well as application of data science and machine learning to deliver our best insights into our customers’ business.
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This requires pervasive security that matches the rapid pace of agile development, ensures regulatory compliance and training, and aligns with business objectives. We help our clients achieve their security objectives through adding security controls into systems and processes and deploying our agile security platform and AI-driven tools that allow for rapid threat responses and attack simulations.
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Our technical advisory services help customers stay ahead of current technology changes and innovate, where innovation beyond technology is also delivered through collaborative workshops, challenges and new organizational models. 2 Table of Contents Design We apply design thinking to digital and service strategy, user experience and the product lifecycle with a focus on innovative design ideas and product development.
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We approach enterprise security holistically, extending our services across proactive defense and actionable intelligence to engineer an effective security model. Our specialties within the cybersecurity domain include managed detection and response, digital risk management, cybersecurity advisory, cloud and data security, ransomware protection, zero trust design and implementation, and cyber intelligence and managed incident response services.
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Our digital and service design practice provides strategy, design, creative and program management services for customers looking to improve the user experience.
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Our largest delivery location, measured by the number of delivery professionals, continues to be Ukraine where we have 9,113 delivery professionals as of December 31, 2023. However, the attack on Ukraine and its people by Russian forces beginning on February 24, 2022 shifted the way we operate in this and other locations.
Removed
We are continuously looking to strengthen and grow our design and consulting practices as evidenced by our strategic acquisitions, which enhanced our consulting, physical design and product development capabilities, global product and design offerings, and our ability to deliver creative solutions, personalized experiences, and next generation digital products.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

112 edited+33 added−19 removed95 unchanged
Biggest changeTo the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this section of this Annual Report on Form 10-K for the year ended December 31, 2022, each of which could materially adversely affect our business, financial condition, results of operations and/or stock price. 10 Table of Contents Risks Related to Our Personnel and Growth We may be unable to effectively manage our rapid growth or achieve anticipated growth, which could place significant strain on our management, systems, resources, and results of operations.
Biggest changeRisks Related to Our Personnel and Growth We may be unable to effectively manage our growth or achieve anticipated growth, which could place significant strain on our management, systems, resources, and results of operations. We have experienced uneven growth and expansion of our business over the past several years.
Our global operations require us to comply with a wide variety of foreign laws and regulations, trade or foreign exchange restrictions or sanctions, inflation, unstable civil, political and military situations, labor issues, and legal systems that make it more difficult to enforce intellectual property, contractual, or corporate rights.
Our global operations require us to comply with a wide variety of foreign laws and regulations, trade and foreign exchange restrictions, sanctions, inflation, unstable civil, political and military situations, labor issues, and legal systems that make it more difficult to enforce intellectual property, contractual, or corporate rights.
If the tax policies in Belarus or other countries where we operate are changed, terminated, not extended or comparable new tax incentives are not introduced, we expect that our operating expenses and/or our effective income tax rate could increase significantly, which could materially adversely affect our financial condition and results of operations. See “Item 7.
If the tax policies in Belarus or other countries where we operate are changed, terminated, or not extended or comparable new tax incentives are not introduced, we expect that our operating expenses and/or our effective income tax rate could increase significantly, which could materially adversely affect our financial condition and results of operations. See “Item 7.
Any violations of these or other laws, regulations and procedures by our employees, independent contractors, subcontractors and agents, including third parties we associate with or companies we acquire, could expose us to administrative, civil or criminal penalties, fines or business restrictions, which could have a material adverse effect on our results of operations and financial condition and would adversely affect our reputation and the market for shares of our common stock and may require certain of our investors to disclose their investment in us under certain state laws.
Any violations of these or other laws, regulations and procedures by our employees, independent contractors, subcontractors and agents, including third parties with which we associate or companies we acquire, could expose us to administrative, civil or criminal penalties, fines or business restrictions, which could have a material adverse effect on our results of operations and financial condition and would adversely affect our reputation and the market for shares of our common stock and may require certain of our investors to disclose their investment in us under certain state laws.
We have cash in banks in countries such as Belarus, Russia, Ukraine, Kazakhstan, Georgia, Armenia and Uzbekistan, where the banking sector generally does not meet the banking standards of more developed markets, bank deposits made by corporate entities are not insured, and the banking system remains subject to instability and changes in regulations that complicate business transactions.
We have cash in banks in countries such as Belarus, Ukraine, Kazakhstan, Georgia, Armenia and Uzbekistan, where the banking sector generally does not meet the banking standards of more developed markets, bank deposits made by corporate entities are not insured, and the banking system remains subject to instability and changes in regulations that complicate business transactions.
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.
Our customers have sought 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.
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.
In order to protect against potential cyberattacks or other information security threats, some of our customers have implemented steps to block internet communications with Ukraine and Belarus, which has had a material adverse effect on our ability to deliver our services from those locations.
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 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 on 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.
Actual or perceived security vulnerabilities in our software and services, even if those vulnerabilities are the result of hardware or software developed by third parties, could harm our reputation and lead customers to use our competitors, reduce or delay future purchases of our services, or to seek compensation or damages.
Actual or perceived security vulnerabilities in our software and services, even if those vulnerabilities are the result of hardware or software developed by third parties, harm our reputation and lead customers to use our competitors, reduce or delay future purchases of our services, or seek compensation or damages.
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 continued attacks against Ukraine.
In addition to a significant number of personnel and operations in Ukraine, we also own an office building in Kyiv 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 continued attacks against Ukraine.
If a government authority changes the applicable laws or a court makes any adverse determination with respect to independent contractors in general or one or more of our independent contractors specifically, we could incur significant costs, including for prior periods, for tax withholding, social security taxes or payments, workers’ compensation and unemployment contributions, and recordkeeping, or we may be required to modify our business model, any of which could materially adversely affect our business, financial condition and results of operations and increase the difficulty in attracting and retaining personnel.
If a government authority changes the applicable laws or a court makes an adverse determination with respect to independent contractors in general or one or more of our independent contractors specifically, we could incur significant costs, including for prior periods, related to tax withholding, social security taxes or payments, workers’ compensation and unemployment contributions, and recordkeeping, or we may be required to modify our business model, any of which could materially adversely affect our business, financial condition and results of operations and increase the difficulty of attracting and retaining personnel.
Our corporate reputation is potentially susceptible to damage by actions or statements made by current or former customers and employees, competitors, vendors, adversaries in legal proceedings, government regulators, as well as members of the investment community and the media.
Our corporate reputation is susceptible to damage by actions or statements made by current or former customers and employees, competitors, vendors, adversaries in legal proceedings, government regulators, as well as members of the investment community and the media.
The stock market, as a whole, also has experienced price and volume fluctuations that have affected the market price of many technology companies in ways that may have been unrelated to these companies’ operating performance.
The stock market, as a whole, has experienced price and volume fluctuations that have affected the market price of many technology companies in ways that may have been unrelated to these companies’ operating performance.
Our common stock has at times experienced substantial price volatility as a result of variations between our actual and anticipated financial results, announcements by our competitors, third parties, or us, projections or speculation about our business or that of our competitors or industry by the media or investment analysts, geopolitical events or uncertainty about inflation or other current global economic conditions.
Our common stock has experienced substantial price volatility as a result of variations between our actual and anticipated financial results, announcements by our competitors, third parties, or us, projections or speculation about our business or that of our competitors or industry by the media or investment analysts, geopolitical events or uncertainty about inflation or other current global economic conditions.
Item 1A. Risk Factors Our operations and financial results are subject to various risks and uncertainties, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. Listed below, not necessarily in order of importance or probability of occurrence, are the most significant risk factors applicable to us.
Item 1A. Risk Factors Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. Listed below, not necessarily in order of importance or probability of occurrence, are the most significant risk factors applicable to us.
Furthermore, contracts between our acquired companies and their customers may lack terms and conditions that adequately protect us against the risks associated with the services we provide, and our acquired companies' business operations can expose us to potential liability before integration is complete.
Furthermore, contracts between our acquired companies and their customers sometimes lack terms and conditions that adequately protect us against the risks associated with the services we provide, and our acquired companies’ business operations can expose us to potential liability before integration is complete.
These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims, and our indemnification obligations are often not subject to liability limits or exclusion of consequential, indirect or punitive damages.
These claims require us to initiate or defend litigation, which may be costly and protracted, on behalf of our customers, regardless of the merits of these claims, and our indemnification obligations are often not subject to liability limits or exclusion of consequential, indirect or punitive damages.
Belarus recently authorized government seizures of property and assets or the takeover of management of commercial organizations owned by or affiliated with specified foreign states if those states or their affiliated companies or actors commit actions deemed unfriendly to Belarus.
Belarus has authorized government seizures of property and assets or the takeover of management of commercial organizations owned by or affiliated with specified foreign states if those states or their affiliated companies or actors commit actions deemed unfriendly to Belarus.
If we do enforce our trademarks and our other intellectual property rights through litigation, we may not be successful and the litigation may result in substantial costs and diversion of resources and management attention. 19 Table of Contents We may face intellectual property infringement claims that could be time-consuming and costly to defend.
If we do enforce our trademarks and our other intellectual property rights through litigation, we may not be successful and the litigation may result in substantial costs and diversion of resources and management attention. We may face intellectual property infringement claims that could be time-consuming and costly to defend.
Any significant failure to generate revenues or delays in recognizing revenues after incurring costs related to our sales or services processes could have a material adverse effect on our business. 17 Table of Contents If we are unable to adapt to rapidly changing technologies, methodologies and evolving industry standards, we may lose customers and our business could be materially adversely affected.
Any significant failure to generate revenues or delays in recognizing revenues after incurring costs related to our sales or services processes could have a material adverse effect on our business. If we are unable to adapt to rapidly changing technologies, methodologies and evolving industry standards, we may lose customers and our business could be materially adversely affected.
Such policies and laws may require disclosures and commitments that we are not able to meet, and regulations, treaties or initiatives in response to climate change could result in increased operational costs associated with environmental regulations and increased compliance and energy costs, each of which could harm our business and results of operations by increasing our expenses or requiring us to alter our operations.
Changes in policy and laws may require disclosures and commitments that we are not able to meet, and regulations, treaties or initiatives in response to climate change could result in increased operational costs associated with environmental regulations and increased compliance and energy costs, each of which could harm our business and results of operations by increasing our expenses or requiring us to alter our operations.
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.
We implemented contingency plans to relocate work and/or personnel to other geographies within our global footprint and add new locations, as appropriate.
Changes in general economic or political conditions in the United States, including a recession or a sovereign debt default, could adversely affect our business.
Changes in general economic or political conditions in the United States, including a recession, government shutdown, or a sovereign debt default, could adversely affect our business.
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 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 anticipated impacts on our delivery capabilities.
Wage inflation, whether driven by competition for talent, ordinary course pay increases, or broader market forces, may also increase our cost of providing services and reduce our profitability if we are not able to pass those costs on to our customers or adjust prices when justified by market demand.
Wage inflation, whether driven by competition for talent, ordinary course pay increases, or broader market forces, all increase our cost of providing services and reduce our profitability when we are not able to pass those costs on to our customers or adjust prices when justified by market demand.
The United States Congress periodically proposes legislation that could impose restrictions on offshore outsourcing and on our ability to deploy employees holding U.S. work visas to customer locations, both of which could adversely impact our business.
Congress periodically proposes legislation that could impose restrictions on offshore outsourcing and on our ability to deploy employees holding U.S. work visas to customer locations, both of which could adversely impact our business.
Delays in or the unavailability of visas and work permits could have a material adverse effect on our business, results of operations, financial condition and cash flows. We are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions, the FCPA, and similar anti-corruption laws.
Delays in or the unavailability of visas and work permits could have a material adverse effect on our business, results of operations, financial condition and cash flows. 15 Table of Conten t s We are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions, the FCPA, and similar anti-corruption laws.
We face competition from offshore IT services providers in other outsourcing destinations with low wage costs such as India and China, as well as competition from large, global consulting and outsourcing firms and in-house IT departments of large corporations.
We face competition from offshore IT services providers in other outsourcing destinations with low wage costs, as well as competition from large, global consulting and outsourcing firms and in-house IT departments of large corporations.
Involuntary liquidation of any of our subsidiaries could materially adversely affect our financial condition and results of operations. The focus on environmental, social and governance topics, including commitments and disclosures we have made and may need to make, may result in additional operational costs and negative reputational impacts.
Involuntary liquidation of any of our subsidiaries could materially adversely affect our financial condition and results of operations. 14 Table of Conten t s The focus on environmental, social and governance topics, including commitments and disclosures we have made and may need to make, may result in additional operational costs and negative reputational impacts.
Errors or defects may result in the loss of current customers, revenues, market share, or customer data, a failure to attract new customers or achieve market acceptance and could divert development resources and increase support or service costs.
Errors or defects in design, execution, or quality inspections may result in the loss of current customers, revenues, market share, or customer data, a failure to attract new customers or achieve market acceptance and could divert development resources and increase support or service costs.
Termination or non-renewal of a customer contract could cause us to experience a higher-than-expected number of unassigned employees and thus compress our margins until we are able to reallocate our headcount.
Termination, non-renewal, or renegotiation of a customer contract or delayed starts to projects could cause us to experience a higher-than-expected number of unassigned employees and thus compress our margins until we are able to reallocate our headcount.
The impact to Ukraine, as well as actions taken by other countries, including arms shipments and new and stricter sanctions by Canada, the United Kingdom, the European Union and its member countries, the U.S. and other countries and organizations against officials, individuals, regions, and industries in Russia, the annexed portions of Ukraine, and Belarus, and each country’s potential response to such shipments, sanctions, tensions, and military actions has and could continue to have a material adverse effect on our operations.
The impact to Ukraine, as well as actions taken by other countries, including arms shipments and new and stricter sanctions by Canada, the United Kingdom, the European Union and its member countries, the U.S. and other countries and organizations against officials, individuals, regions, and industries in the annexed portions of Ukraine and Belarus, and responses to such shipments, sanctions, tensions, and military actions has had and could continue to have a material adverse effect on our operations.
If we increase operations and hiring in more developed economies, our compensation expenses will increase because of the higher wages demanded by technology professionals in those markets.
If we increase operations and hiring in more developed economies, our compensation expenses will increase because of the higher wages demanded in those markets.
We have no way to predict the progress or outcome of the military action in Ukraine or its impacts in Russia, Belarus, or the region because the conflict and government reactions are rapidly changing and beyond our control.
We have no way to predict the progress or outcome of the war in Ukraine or its impacts in Belarus or the region because the conflict and government reactions are rapidly changing and beyond our control.
We are required to establish processes and change certain operations in relation to the processing of personal data as a result of privacy laws, which may involve substantial expense and distraction from other aspects of our business. Undetected software design defects, errors or failures may result in loss of business or in liabilities that could materially adversely affect our business.
We are required to establish processes and change certain operations in relation to the processing of personal data as a result of privacy laws, which involves substantial expense and distraction from other aspects of our business. 22 Table of Conten t s Undetected software design defects, errors or failures may result in loss of business or in liabilities that could materially adversely affect our business.
U.S. policy with respect to a variety of issues, including international trade agreements, conducting business offshore, inflation mitigation, import and export regulations, tariffs and customs duties, foreign relations, immigration laws and travel restrictions, antitrust controls and enforcement, and corporate governance laws, could have a positive or negative impact on our business. The majority of our professionals are offshore.
U.S. policy with respect to a variety of issues, including AI, international trade agreements, conducting business offshore, inflation mitigation, interest rates, import and export regulations, tariffs and customs duties, foreign relations, immigration laws and travel restrictions, antitrust controls and enforcement, and corporate governance laws, could have a positive or negative impact on our business.
Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under applicable laws, and regulatory penalties and could adversely affect our business, revenues and competitive position. Development and deployment of measures to protect our information security or that of our customers may be inadequate and could adversely affect our results of operations.
Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under applicable laws, regulatory penalties or enforcement actions, and could adversely affect our business, revenues and competitive position. 21 Table of Conten t s Development and deployment of measures to protect our information security or that of our customers may be inadequate and could adversely affect our results of operations.
Quantitative and Qualitative Disclosures About Market Risk.” The economies of certain emerging market countries where we operate have experienced periods of considerable instability and have been subject to abrupt downturns.
Quantitative and Qualitative Disclosures About Market Risk.” 13 Table of Conten t s The economies of certain emerging market countries where we operate have experienced periods of considerable instability and have been subject to abrupt downturns.
Our growth has resulted in part from managing larger and more complex projects for our customers, but consequently requires that we invest substantial amounts of cash in human capital and the infrastructure to support them, including training, administration, and facilities in existing and new geographies.
Our growth and expansion has been both organic and through strategic acquisitions and investments and has resulted in part from managing larger and more complex projects for our customers, but consequently requires that we invest substantial amounts of cash in human capital and the infrastructure to support them, including training, administration, and facilities in existing and new geographies.
Identifying, recruiting, hiring and retaining professionals with diverse skill sets across our broad geography of operations is critical to maintaining existing engagements and obtaining new business and has become more challenging in the present economic and labor climate.
Identifying, recruiting, hiring and retaining professionals with skill sets that meet our existing and anticipated demand across our broad geography of operations is critical to maintaining existing engagements and obtaining new business and has become more challenging in the changing economic and labor climate.
Our significant operations in emerging market economies in Eastern Europe, Latin and South America, India, and certain other Asian countries are vulnerable to market and economic volatility to a greater extent than more developed markets, which presents risks to our business and operations. A majority of our revenues are generated in North America and Western Europe.
We have significant operations in emerging market economies in Eastern Europe, Latin and South America, India, and certain other Asian countries, all of which are more vulnerable to market and economic volatility than larger and more developed markets and present risks to our business and operations. A majority of our revenues are generated in North America and Western Europe.
The burden of compliance with additional data protection requirements may result in significant additional costs, complexity and risk in our services and customers may seek to shift the potential risks resulting from the implementation of data privacy legislation to us.
The burden of compliance with additional data protection requirements results in significant additional costs, complexity and risk in our services and customers attempt to shift the risks resulting from the implementation of data privacy legislation to us.
GDPR, and GDPR each established complex legal obligations that organizations must follow with respect to the processing of personal data, including a prohibition on the transfer of personal information to third parties or to other countries, and the imposition of additional notification, security and other control measures.
GDPR, and GDPR each established complex legal obligations that organizations must follow with respect to the processing of personal data, including a prohibition on the transfer of personal information to third parties or to other countries, and the imposition of additional notification, security and other control measures. Recent developments in privacy regulations, including the new EU-U.S.
If not effectively managed, the disruption of our ongoing business, increases in our expenses, including significant one-time expenses and write-offs, and difficulty and complexity of effectively integrating acquired operations may adversely affect our overall growth and profitability.
If not effectively managed, the disruption of our ongoing business, increases in our expenses, including significant one-time expenses and write-offs, assumption of unknown liabilities, including tax, litigation, cybersecurity, and commercial risks, and difficulty and complexity of effectively integrating acquired operations may adversely affect our overall growth and profitability.
We typically indemnify customers who purchase our products, services and solutions against potential infringement of third-party intellectual property rights, which subjects us to the risk and cost of defending the underlying infringement claims.
If we are unable to license technologies needed for our business, we typically indemnify customers who purchase our products, services and solutions against potential infringement of third-party intellectual property rights, which subjects us to the risk and cost of defending the underlying infringement claims.
Before potential customers commit to use our services, they require us to expend substantial time and resources educating them on the value of our services and our ability to meet their requirements.
We have a long selling cycle for our services. Before potential customers commit to use our services, they require us to expend substantial time and resources educating them on the value of our services and our ability to meet their requirements.
GDPR, the privacy laws of California and other U.S. states, and the privacy laws of the countries where we operate, each of which imposes significant restrictions and requirements relating to the processing of personal data.
GDPR, the privacy laws of California and other U.S. states, and the privacy laws of the countries where we operate, each of which imposes significant restrictions and requirements relating to the processing of personal data and can include significant financial penalties for non-compliance.
However, wages in general, and in the technology industry in these countries in particular, have increased at a faster rate than in the past, which may make us less competitive unless we are able to increase the efficiency and productivity of our people.
However, wages in general, and in the technology industry in emerging markets in particular, have increased at a faster rate than in the past, which will make us less competitive if we are not able to increase the efficiency and productivity of our people.
Therefore, we must seek to obtain new engagements when our current engagements end. 15 Table of Contents There are a number of factors relating to our customers that are outside of our control, which might lead them to terminate or not renew a contract or project with us, or be unable to pay us, including: • financial difficulties; • corporate restructuring, or mergers and acquisitions activity; • our inability to complete our contractual commitments and invoice and collect our contracted revenues; • change in strategic priorities or economic conditions, resulting in elimination of the impetus for the project or a reduced level of technology related spending; • change in outsourcing strategy resulting in moving more work to the customer’s in-house technology departments or to our competitors; and • replacement of existing software with packaged software supported by licensors.
There are a number of factors relating to our customers that are outside of our control, which might lead them to terminate or not renew a contract or project with us, or be unable to pay us, including: • financial difficulties, including customer insolvency or bankruptcy or increased global inflationary pressures and interest rates; • corporate restructuring, or mergers and acquisitions activity; • our inability to complete our contractual commitments and invoice and collect our contracted revenues; • change in strategic priorities or economic conditions, resulting in elimination of the impetus for the project or a reduced level of technology related spending; • change in outsourcing strategy resulting in moving more work to the customer’s in-house technology departments or to our competitors; and • replacement of existing software with packaged software supported by licensors.
We face a number of risks when pricing our contracts and setting terms with our customers. Our pricing is highly dependent on our internal forecasts, assumptions and predictions about our projects, the marketplace, global economic conditions (including foreign exchange volatility and inflation) and the coordination of operations and personnel in multiple locations with different skill sets and competencies.
Our pricing is highly dependent on our internal forecasts, assumptions and predictions about our projects, the marketplace, global economic conditions (including foreign exchange volatility and inflation) and the coordination of operations and personnel in multiple locations with different skill sets and competencies.
Companies that outsource services to organizations operating in other countries remains a topic of political discussion in many countries, including the United States, which is our largest source of revenues.
The majority of our professionals are offshore. Companies that outsource services to organizations operating in other countries remain a topic of political discussion in many countries, including the United States, which is our largest source of revenues. The U.S.
Our effective tax rate could be materially adversely affected by several factors, including changes in the amount of income taxed by or allocated to the various jurisdictions in which we operate that have differing statutory tax rates; changing tax laws, regulations and interpretations of such tax laws in one or more jurisdictions; and the resolution of issues arising from tax audits or examinations and any related interest or penalties.
Our effective tax rate could be materially adversely affected by several factors, including changes in the amount of income taxed by or allocated to the various jurisdictions in which we operate that have differing statutory tax rates; changing tax laws, treaties, regulations and interpretations of such rules in one or more jurisdictions, including the global implementation of a 15% minimum tax under Pillar Two of the OECD Base Erosion and Profit Shifting initiative; and the resolution of issues arising from tax audits or examinations and any related interest or penalties.
Enforcement actions taken by data protection authorities, as well as audits or investigations by one or more individuals, organizations, or foreign government agencies could result in penalties and fines for non-compliance or direct claims against us in the event of any loss or damage as a result of a breach of these regulations.
Enforcement actions taken by data protection authorities, as well as audits, investigations, or lawsuits by one or more individuals, organizations, or foreign government agencies often result in penalties and fines for non-compliance or claims against us seeking damages as a result of a breach of these regulations.
Although a substantial majority of our revenues are generated from customers who also contributed to our revenues during the prior year, our engagements with our customers are typically for projects that are singular in nature.
Although a substantial majority of our revenues are generated from customers who also contributed to our revenues during the prior year, our engagements with our customers are typically for projects that are singular in nature. Therefore, we must seek to obtain new engagements when our current engagements end.
Customers tend to engage multiple IT services providers instead of using an exclusive IT services provider, which could reduce our revenues or place significant downward pressure on pricing among competing IT services providers.
Customers tend to engage multiple IT services providers instead of using an exclusive IT services provider, which reduces our revenues and places downward pressure on pricing among competing IT services providers.
The expenses associated with stock-based compensation may make issuing equity awards under our equity incentive plans less attractive to us, but if we reduce the amount or value of equity award grants, we may not be able to attract and retain key personnel.
We expect to continue granting equity-based awards under our stock incentive plans and paying other stock-based compensation. There are significant expenses associated with issuing stock-based compensation under our equity incentive plans, but if we reduce the amount or value of equity award grants, we may not be able to attract and retain key personnel.
If we are unable to recruit skilled professionals and if we do not deploy those professionals and use our physical infrastructure and fixed-cost resources productively, our profitability will be significantly impacted.
If we are unable to recruit professionals with the skills required by our business and customers and/or if we do not productively deploy those professionals and use our physical infrastructure and fixed-cost resources productively, our profitability will be significantly impacted.
We must also educate our employees, contractors, and customers about the need to effectively use security measures. Our customers, particularly those in the Financial Services and Life Sciences & Healthcare industry verticals, may have enhanced or particular security requirements which we must address in our engineering and development services.
Our customers, particularly those in the Financial Services and Life Sciences & Healthcare industry verticals, may have enhanced or particular security requirements which we must address in our engineering and development services.
Our software development solutions involve a high degree of technological complexity, have unique specifications and could contain design defects or software errors that are difficult to detect or correct.
Our software development solutions involve a high degree of technological complexity, have unique specifications and could contain design defects or software errors that are difficult to detect or correct, including as a result of the introduction of new and emerging technologies such as AI.
We have significant operations and personnel in Ukraine and Belarus, and continue to wind down our operations 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.
We have significant operations and personnel in Ukraine and Belarus. Ongoing conflict and disruption in the region following Russia’s invasion of Ukraine in February 2022 has had and could continue to have a material adverse effect on our business, customers, service delivery, and financial results.
Undetected vulnerabilities may persist in our network environment over long periods of time and could come from or spread to the networks and systems of our suppliers and customers.
Undetected vulnerabilities that persist in our network environment over long periods of time could spread within our networks or into the networks and systems of our other suppliers and customers.
We intend to continue our expansion and pursue available opportunities for the foreseeable future. We have and will continue to invest in new lines of business, such as software development education and expanded consulting services. As we introduce new services, enter into new markets, and take on increasingly large and complex projects, our business may face new risks and challenges.
We have and will continue to invest in new lines of business, such as software development education, AI, and expanded consulting services. As we introduce new services, enter into new markets and new customer relationships, and take on increasingly large and complex projects, our business will face new risks and challenges.
Any of these events could result in a reduction in our revenues, damage to our reputation, and could also result in a customer terminating our engagement and making claims for substantial damages against us.
These events have resulted and could in the future result in a reduction in our revenues, damage to our reputation, and in customers terminating our engagement and making claims for substantial damages against us.
Conversely, if we grant more or higher value equity awards to attract and retain key personnel, the equity compensation expenses could materially adversely affect our results of operations. New regulations, volatility in our stock, and dilution to our stockholders could diminish our use and the value of our equity-based awards.
Conversely, if we grant more or higher value equity awards to attract and retain key personnel, our equity compensation expenses could materially adversely affect our results of operations.
Individuals, including employees, contractors and other third parties in our information security supply chain, as well as groups and larger, sophisticated collections of hackers, such as state-sponsored organizations, all pose threats to our information security.
Our employees and contractors and our vendors, software and hardware suppliers, and other third parties in our information security supply chain, as well as sophisticated individual or collective groups of hackers, such as state-sponsored organizations, all pose threats to our information security.
If those intellectual property rights are potentially relevant to our service offerings, we may need to license those rights in order to continue to use the applicable technology, but the holders of those intellectual property rights may be unwilling to license those rights to us on commercially acceptable terms, if at all.
If those intellectual property rights are relevant to our service offerings, we may need to license those rights on commercially reasonable terms in order to continue to use the applicable technology.
The loss of any of our major customers, a significant decrease in the volume of work they outsource to us or price they are willing or able to pay us, if not replaced by new service engagements and revenues, could materially adversely affect our revenues and results of operations.
The loss of any of our major customers, a significant decrease in the volume of work they outsource to us or price they are willing or able to pay us, if not replaced by new service engagements and revenues, could materially adversely affect our revenues and results of operations. 16 Table of Conten t s Our revenues are highly dependent on a limited number of industries, and any decrease in demand for outsourced services in these industries could reduce our revenues and adversely affect our results of operations.
Travel restrictions resulting from natural or man-made disruptions and political or social conflict increase the difficulty of obtaining and retaining highly skilled and qualified professionals and could unexpectedly increase our labor costs and expenses, both of which could also adversely affect our ability to serve our customers. 22 Table of Contents Our effective tax rate could be materially adversely affected by several factors.
Travel restrictions resulting from natural or man-made disruptions, pandemics or other public health events, and political or social conflict increase the difficulty of obtaining and retaining highly skilled and qualified professionals and could unexpectedly increase our labor costs and expenses, both of which could also adversely affect our ability to serve our customers.
Our success largely depends on our ability to use and develop our technology, tools, code, methodologies, products, and services without infringing the intellectual property rights, including patents, copyrights, trade secrets and trademarks, of third parties. We may be unaware of intellectual property rights relating to our products or services that may give rise to potential infringement claims against us.
Our success largely depends on our ability to use and develop our technology, tools, code, methodologies, products, and services without infringing the intellectual property rights, including patents, copyrights, trade secrets and trademarks, of third parties.
Other parties, such as our customers’ customers, may have a private right of action to seek damages for any information security breach on an individual or collective basis.
Other parties, such as our customers’ customers, who have a private right of action, will seek damages for any information security or privacy breach on an individual or collective basis, and our customers have in the past, and may in the future, request to be indemnified against such claims.
Such a breach, misappropriation, or disruption could also disrupt our operations and the services we provide to customers, damage our reputation, and cause a loss of confidence in our products and services, as well as require us to expend significant resources to protect against further breaches and to rectify problems caused by these events.
Such a breach, misappropriation, or disruption, or the perception that we are vulnerable to a breach, could also disrupt our operations and the services we provide to customers, and any actual, alleged, or perceived breach of network or information security that we, our suppliers, our customers, or our industry suffer could damage our reputation, and cause a loss of confidence in our products and services, as well as require us to expend significant resources, which may not be covered by insurance, to protect against further breaches and to rectify problems caused by these events.
In Belarus, one local subsidiary is a member, along with other technology companies, of High-Technologies Park. Members have a full exemption from Belarus income tax and value added tax until 2049 and are taxed at reduced amounts on obligatory social contributions and a variety of other taxes.
Members have a full exemption from Belarus income tax and value added tax until 2049 and are taxed at reduced amounts on obligatory social contributions and a variety of other taxes.
If we are unable to retain professionals with specialized skills, our revenues, operating efficiency and profitability will decrease, as will our ability to meet emerging technological challenges.
Higher wage expectations driven by wage inflation could also create challenges for our recruiting efforts. If we are unable to retain professionals with specialized skills, our revenues, operating efficiency and profitability will decrease, as will our ability to meet emerging technological challenges.
Cost reductions, such as reducing headcount, or voluntary departures that result from our failure to retain the professionals we hire, could negatively affect our reputation as an employer and our ability to hire personnel to meet our business requirements.
Cost reductions, such as reducing headcount or voluntary departures that result from our failure to retain the professionals we hire, negatively affect our reputation as an employer and our ability to hire personnel to meet our business requirements. Price increases resulting from increasing compensation to retain personnel may be a contributing factor in a decline in demand for our services.
Reverse engineering, unauthorized copying or other misappropriation of our and our customers’ proprietary technologies, tools and applications could enable unauthorized parties to benefit from our or our customers’ technologies, tools and applications without payment and may make us liable to our customers for damages and compensation, which could harm our business and competitive position.
Reverse engineering, unauthorized copying or other misappropriation of our and our customers’ proprietary technologies, tools and applications could enable unauthorized parties to benefit from our or our customers’ technologies, tools and applications without payment and may make us liable to our customers for damages and compensation, which could harm our business and competitive position. 19 Table of Conten t s We rely on our trademarks, trade names, service marks and brand names to distinguish our services and solutions from the services of our competitors.
These individual, group, and organized actors have a variety of methods at their disposal, including deploying malicious software, exploiting vulnerabilities in hardware, software, or infrastructure, using social engineering or deceptive techniques, and executing coordinated attacks to compromise our services, disrupt our operations or gain access to our networks and data centers. 20 Table of Contents Threats to information security evolve constantly and are increasingly sophisticated and complex, which makes detecting and successfully defending against them more difficult.
These individual, group, and organized actors have a variety of methods at their disposal, including deploying malicious software, exploiting vulnerabilities in hardware, software, or infrastructure, using social engineering or deceptive techniques to obtain information or gain access to our or our customers’ data, exploiting remote working connectivity and security susceptibilities, and executing coordinated attacks to compromise our services, disrupt our operations or gain access to our communications, networks and data centers.
If we are unable to attract, hire, train, and retain highly skilled personnel and productively deploy them on customer projects, we will jeopardize our ability to meet our customers’ expectations and develop ongoing and future business, which could adversely affect our financial condition and results of operations.
If we are unable to attract, hire, train, and retain highly skilled personnel and productively deploy them on customer projects, we will jeopardize our ability to meet our customers’ expectations and develop ongoing and future business, which could adversely affect our financial condition and results of operations. 11 Table of Conten t s Competition for highly skilled professionals has intensified in the markets where we operate, and we may experience significant employee turnover rates due to such competition.
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. 9 Table of Contents We discontinued services to certain customers located in Russia and we hope to complete the sale of substantially all of our holdings in Russia as soon as feasible, subject to customary closing conditions including regulatory approval.
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.
Our rapid growth places significant demands on our management and our administrative, operational and financial infrastructure, and creates challenges, including: • recruiting, training and retaining sufficiently skilled professionals and management personnel; • planning resource utilization rates on a consistent basis and efficiently using on-site, off-site and offshore staffing; • maintaining close and effective relationships with a larger number of customers in a greater number of industries and locations; • controlling costs and minimizing cost overruns and project delays in delivery center and infrastructure expansion; • effectively maintaining productivity levels and implementing process improvements across geographies and business units; and • evolving our information security and our internal administrative, operational and financial infrastructure.
Rapid growth followed by decreased demand places significant strain on our management and our administrative, operational and financial infrastructure, and creates challenges, including: • recruiting, training and retaining sufficiently skilled professionals and management personnel and balancing headcount with customer requirements; • balancing an increase in the number of experienced personnel that have correspondingly higher billing rates due to promotions with hiring, training, and deploying less experienced personnel at the lower rates sought by customers; • planning and maintaining resource utilization rates consistently and efficiently using on-site, off-site and offshore staffing; • developing and maintaining close and effective relationships with potential and existing customers in a greater number of industries and locations; • controlling costs and minimizing cost overruns and project delays in our delivery operations and infrastructure; • effectively maintaining productivity levels and implementing process improvements across geographies and business units during periods of uneven customer demand; and • evolving our information security and our internal administrative, operational and financial infrastructure.
Some of our present and potential competitors may have substantially greater financial, marketing or technical resources; therefore, we may be unable to retain our customers or successfully attract new customers.
Some of our present and potential competitors have substantially greater financial, marketing or technical resources; therefore, we may be unable to retain our customers or successfully attract new customers. Increased competition, our inability to compete successfully, pricing pressures or loss of market share could have a material adverse effect on our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur facilities are used interchangeably among our segments. See Note 17 “Segment Information” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding the geographical locations and values of our long-lived assets.
Biggest changeOur facilities are used interchangeably among our segments. 25 Table of Conten t s See Note 18 “Segment Information” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding the geographical locations and values of our long-lived assets.
See Note 2 “Impact of the Invasion of Ukraine” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for more information regarding the assets in Ukraine and Russia.
See Note 2 “Impact of the Invasion of Ukraine” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for more information regarding our assets in Ukraine.
Added
We actively monitor the spaces we occupy and adjust the leased capacity and geographical locations of offices as our operational needs change. During 2023, we continued to operate under a hybrid work model and we believe our existing facilities, both owned and leased, are in good operating condition and suitable for the conduct of our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures None. 23 Table of Contents PART II
Biggest changeMine Safety Disclosures None. 26 Table of Conten t s PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+10 added−2 removed7 unchanged
Biggest changeCOMPARISON OF CUMULATIVE TOTAL RETURN (1)(2) Among EPAM, a Peer Group (3) and the S&P 500 Index Company/Index Base period 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 EPAM Systems, Inc. $ 100.00 $ 107.99 $ 197.49 $ 333.57 $ 622.22 $ 305.07 Peer Group Index $ 100.00 $ 71.71 $ 70.23 $ 103.74 $ 133.18 $ 76.06 S&P 500 Index $ 100.00 $ 95.62 $ 125.73 $ 148.86 $ 191.59 $ 156.89 (1) Graph assumes $100 invested on December 31, 2017 in our common stock, a Peer Group and the S&P 500 Index.
Biggest changeCOMPARISON OF CUMULATIVE TOTAL RETURN (1)(2) Among EPAM, a Peer Group (3) , S&P 500 IT Index (4) and the S&P 500 Index Company/Index Base period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 EPAM Systems, Inc. $ 100.00 $ 182.88 $ 308.90 $ 576.20 $ 282.51 $ 256.31 Peer Group (3) $ 100.00 $ 97.94 $ 144.66 $ 185.71 $ 106.06 $ 143.67 S&P 500 IT Index (4) $ 100.00 $ 150.29 $ 216.25 $ 290.92 $ 208.90 $ 329.73 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 (1) Graph assumes $100 invested on December 31, 2018 in our common stock, a Peer Group, the S&P 500 IT Index and the S&P 500 Index.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in Part III of this Annual Report on Form 10-K for our equity compensation plan information. 24 Table of Contents Performance Graph The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return on a Peer Group Index (capitalization weighted) and the S&P 500 Index for the period beginning December 31, 2017 and ending December 31, 2022.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in Part III of this Annual Report on Form 10-K for our equity compensation plan information. 27 Table of Conten t s Performance Graph The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return on a Peer Group (capitalization weighted), the S&P 500 Information Technology Index and the S&P 500 Index for the period beginning December 31, 2018, and ending December 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “EPAM.” As of February 10, 2023, we had approximately 17 stockholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “EPAM.” Number of Holders As of February 9, 2024, we had approximately 15 stockholders of record of our common stock.
The number of shares of stock to be withheld is calculated based on the closing price of the Company’s common stock on the vesting date.
Under our equity-based compensation plans, the Company withholds a number of shares of vested stock as payment to satisfy tax withholding obligations arising on the date of vesting of stock-based compensation awards. The number of shares of stock to be withheld is calculated based on the closing price of the Company’s common stock on the vesting date.
Removed
Unregistered Sales of Equity Securities There were no unregistered sales of equity securities by the Company during the year ended December 31, 2022. 25 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Under our equity-based compensation plans, the Company withholds a number of shares of vested stock as payment to satisfy tax withholding obligations arising on the date of vesting of stock-based compensation awards.
Added
Securities Authorized for Issuance under Equity Compensation Plans See “Item 12.
Removed
The following table provides information about shares withheld by the Company during the year ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Program January 1, 2022 to January 31, 2022 1,023 $ 624.01 — — February 1, 2022 to February 28, 2022 1,267 $ 470.95 — — March 1, 2022 to March 31, 2022 63,954 $ 268.02 — — April 1, 2022 to April 30, 2022 5,560 $ 276.79 — — May 1, 2022 to May 31, 2022 453 $ 340.35 — — June 1, 2022 to June 30, 2022 477 $ 313.19 — — July 1, 2022 to July 31, 2022 871 $ 317.75 — — August 1, 2022 to August 31, 2022 415 $ 396.68 — — September 1, 2022 to September 30, 2022 1,092 $ 362.43 — — October 1, 2022 to October 31, 2022 252 $ 348.91 — — November 1, 2022 to November 30, 2022 1,448 $ 348.44 — — December 1, 2022 to December 31, 2022 6,134 $ 326.37 — — Total 82,946 $ 285.13 — — Item 6.
Added
(4) Beginning in 2023, we have elected to replace the Peer Group with the S&P Information Technology Index because we believe the new index represents a more diversified group of companies across the technology industry in which we operate and is more aligned with a comparable peer group.
Added
This index will replace our Peer Group in future filings, however, in this transition year both measures are included in the performance graph. 28 Table of Conten t s Unregistered Sales of Equity Securities On October 25, 2023, in connection with the Company’s acquisition of all of the outstanding equity of S4N Holding, Inc.
Added
(“S4N”), a Panamanian corporation reported as one of the Other 2021 Acquisitions (see Note 3 “Acquisitions”), the Company issued 14 thousand shares of common stock to the S4N sellers under the terms of the purchase agreement and following achievement of certain performance metrics set forth under the purchase agreement.
Added
All of the shares of common stock issued in connection with this issuance are restricted securities (as defined in Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”)). No underwriter was involved in this issuance and no underwriting commissions were paid.
Added
The transaction was exempt from the registration requirements of Section 4(a)(2) of the Securities Act, since the transaction did not involve any public offering. Purchases of Equity Securities by the Issuer and Affiliated Purchasers On February 13, 2023, the Board of Directors authorized a repurchase program for up to $500.0 million of our outstanding common stock.
Added
EPAM may repurchase shares of its common stock on a discretionary basis from time to time through open market purchases, privately negotiated transactions or other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
Added
The share repurchase program has a term of 24 months, may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock.
Added
Share repurchase activity during the three months ended December 31, 2023 was as follows: Period Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands, except per share amounts) October 1, 2023 to October 31, 2023 — $ — — $ 371,566 November 1, 2023 to November 30, 2023 80 $ 241.94 80 $ 352,240 December 1, 2023 to December 31, 2023 63 $ 273.81 63 $ 335,076 Total 143 143 (1) Average price paid per share in the period includes commission.
Added
During the three months ended December 31, 2023, the Company purchased 8 thousand shares. During 2023, the Company purchased an aggregate of 103 thousand shares. These shares were not acquired pursuant to our securities repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

100 edited+29 added−42 removed47 unchanged
Biggest changeRevenues by Vertical We assign our customers into one of our five main vertical markets or a group of various industries where we are increasing our presence, which we label as “Emerging Verticals.” Emerging Verticals include customers in multiple industries such as energy, utilities, manufacturing, automotive, telecommunications and several others. 31 Table of Contents The following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands, except percentages) Travel & Consumer $ 1,092,224 22.7 % $ 741,128 19.7 % $ 458,789 17.2 % Financial Services 1,026,686 21.3 848,370 22.6 555,235 20.9 Business Information & Media 809,952 16.8 666,941 17.7 560,680 21.1 Software & Hi-Tech 793,261 16.4 664,597 17.7 496,813 18.7 Life Sciences & Healthcare 507,367 10.5 391,309 10.4 296,313 11.1 Emerging Verticals 595,208 12.3 445,799 11.9 291,648 11.0 Revenues $ 4,824,698 100.0 % $ 3,758,144 100.0 % $ 2,659,478 100.0 % Travel & Consumer became our largest vertical during 2022, growing 47.4% as compared to 2021.
Biggest changeThe following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands, except percentages) Travel & Consumer $ 1,072,950 22.9 % $ 1,092,224 22.7 % $ 741,128 19.7 % Financial Services 1,018,433 21.7 1,026,686 21.3 848,370 22.6 Business Information & Media 753,981 16.1 809,952 16.8 666,941 17.7 Software & Hi-Tech 707,720 15.1 793,261 16.4 664,597 17.7 Life Sciences & Healthcare 489,914 10.4 507,367 10.5 391,309 10.4 Emerging Verticals 647,542 13.8 595,208 12.3 445,799 11.9 Revenues $ 4,690,540 100.0 % $ 4,824,698 100.0 % $ 3,758,144 100.0 % Travel & Consumer remained our largest vertical during 2023, comprising 22.9% of total revenues.
(2) EMEA includes revenues from customers in Western Europe and 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.
(2) EMEA includes revenues from customers in Western Europe and 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 Belarus, Georgia, Kazakhstan, Russia, Ukraine and Uzbekistan.
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.
Some of our customers have implemented steps to block internet communications with Ukraine and Belarus to protect against potential cyberattacks or other information security threats, which has caused a material adverse effect on our ability to deliver our services to these customers from those locations.
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.
If we raise cash through the issuance of additional indebtedness, we may be subject to additional contractual restrictions on our business and there is no assurance that we would be able to raise additional funds on favorable terms or at all.
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 asset, necessary for our continued success and therefore we expect to continue hiring talented employees and providing them with competitive compensation programs.
Salaries and other compensation expenses of our delivery professionals are reported as cost of revenues regardless of whether the employees are actually performing services for customers during a given period. Our employees are a critical asset, necessary for our continued success and therefore we expect to continue hiring talented employees and providing them with competitive compensation programs.
Discussion of cost of revenues (exclusive of depreciation and amortization) from 2021 as compared to 2020 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.
Discussion of cost of revenues (exclusive of depreciation and amortization) from 2022 as compared to 2021 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021. Effects of Inflation Economies in many countries where we operate have periodically experienced high rates of inflation, including during 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022. Effects of Inflation Economies in many countries where we operate have periodically experienced high rates of inflation, including during 2023.
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 16 “Commitments and Contingencies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
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 17 “Commitments and Contingencies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
Discussion of selling, general and administrative expenses from 2021 as compared to 2020 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.
Discussion of selling, general and administrative expenses from 2022 as compared to 2021 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
Interest and Other Income/(Loss), Net Interest and other income/(loss), net includes interest earned on cash and cash equivalents, short-term investments and employee loans, gains and losses from certain financial instruments, interest expense related to our borrowings, government grant income, and changes in the fair value of contingent consideration.
Interest and Other Income/(Loss), Net Interest and other income/(loss), net includes interest earned on cash and cash equivalents, short-term investments, gains and losses from certain financial instruments, interest expense related to our borrowings, government grant income, and changes in the fair value of contingent consideration.
Determining the estimated amount of such variable consideration involves assumptions and judgment that can have an impact on the amount of revenues reported. 29 Table of Contents We derive revenues from a variety of service arrangements, which have been evolving to provide more customized and integrated solutions to customers by combining software engineering with customer experience design, business consulting and technology innovation services.
Determining the estimated amount of such variable consideration involves assumptions and judgment that can have an impact on the amount of revenues reported. We derive revenues from a variety of service arrangements, which have been evolving to provide more customized and integrated solutions to customers by combining software engineering with customer experience design, business consulting and technology innovation services.
See Note 9 “Leases”, Note 10 “Debt”, Note 16 “Commitments and Contingencies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding our various contractual obligations and capital expenditure requirements.
See Note 9 “Leases”, Note 10 “Debt”, Note 17 “Commitments and Contingencies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding our various contractual obligations and capital expenditure requirements.
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. 35 Table of Contents As a global company, we are required to calculate and provide for income taxes in each of the jurisdictions in which we operate.
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 global company, we are required to calculate and provide for income taxes in each of the jurisdictions in which we operate.
Additional information on our policies is in Note 1 “Business and Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
Additional information on our policies is in Note 1 “Organization and Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
Discussion of Interest and other income/(loss) from 2021 as compared to 2020 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.
Discussion of Interest and other income/(loss), net from 2022 as compared to 2021 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
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.
Liquidity and Capital Resources Capital Resources Our cash generated from operations has been our primary source of liquidity to fund operations, investments to support the growth of our business and share repurchases.
Revenues from customers in locations in our APAC region comprised 2.5% of total revenues in 2022, a level consistent with the prior year. Discussion of revenues from 2021 as compared to 2020 is included in “Part II. Item 7.
Revenues from customers in locations in our APAC region comprised 2.2% of total revenues in 2023, a level consistent with the prior year. Discussion of revenues from 2022 as compared to 2021 is included in “Part II. Item 7.
Revenue growth in Software & Hi-Tech during the year ended December 31, 2022 as compared to 2021 was attributable to the expansion of services provided to one of our top 20 customers as well as growth in customers outside of our top 100 customers.
Revenue growth in Software & Hi-Tech during the year ended December 31, 2023, as compared to 2022, was largely attributable to the expansion of services provided to one of our top 20 customers as well as growth in customers outside of our top 100 customers.
Recent Accounting Pronouncements See Note 1 “Business and Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding recent accounting pronouncements. 30 Table of Contents Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods indicated.
Recent Accounting Pronouncements See Note 1 “Organization and Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding recent accounting pronouncements. Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods indicated.
Our 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.
Our 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, as described elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We manage the utilization levels of our delivery professionals through strategic hiring and efficient staffing of projects. Some of these professionals are hired and trained to work for specific customers or on specific projects and some of our offshore development centers are dedicated to specific customers or projects.
We manage the utilization levels of our delivery professionals through strategic hiring practices, dynamic management of staff, and efficient staffing of projects. Some of these professionals are hired and trained to work for specific customers or on specific projects and some of our offshore development centers are dedicated to specific customers or projects.
During 2022, 2021 and 2020, we had $428.7 million, $404.9 million and $278.1 million, respectively, in income before provision for income taxes attributed to our foreign jurisdictions. Changes in the geographic mix or level of annual pre-tax income can also affect our overall effective income tax rate.
During 2023, 2022 and 2021, we had $325.7 million, $428.7 million and $404.9 million, respectively, in income before provision for income taxes attributed to our foreign jurisdictions. Changes in the geographic mix or level of annual pre-tax income can also affect our overall effective income tax rate.
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, including counter-sanctions and other actions, has had and could continue to have a material adverse effect on our operations.
Actions taken by other countries, including new and stricter sanctions by Canada, the United Kingdom, the European Union, the U.S. and other companies and organizations against officials, individuals, regions, and industries in Belarus, and Belarus’ responses to those sanctions, including counter-sanctions and other actions, have had and could continue to have a material adverse effect on our operations.
To the extent that the final tax outcome of these matters differs from the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes was $87.8 million in 2022 and $51.7 million in 2021.
To the extent that the final tax outcome of these matters differs from the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes was $119.5 million in 2023 and $87.8 million in 2022.
Depreciation and Amortization Expense Depreciation and amortization expense includes depreciation of physical assets used in the operation of our business such as computer equipment, software, buildings we purchased, leasehold improvements as well as various office furniture and equipment. Depreciation and amortization expense also includes amortization of acquired finite-lived intangible assets.
Depreciation and Amortization Expense Depreciation and amortization expense includes depreciation of physical assets used in the operation of our business such as computer equipment, software, buildings we purchased, leasehold improvements as well as various office furniture and equipment.
The vast majority of our Ukraine employees are in safe locations and operating at levels of productivity consistent with those achieved in 2021. As of December 31, 2022, Ukraine remains our largest delivery location with the most delivery professionals.
The vast majority of our Ukraine employees are in safe locations and operating at levels of productivity consistent with those achieved prior to the attack. As of December 31, 2023, Ukraine remains our largest delivery location with the most delivery professionals.
The following table shows revenues by service offering as an amount and as a percentage of our revenues for the years indicated: Year Ended December 31, 2022 2021 2020 (in thousands, except percentages) Professional services $ 4,800,047 99.5 % $ 3,739,143 99.5 % $ 2,643,016 99.4 % Licensing and other revenues 24,651 0.5 % 19,001 0.5 % 16,462 0.6 % Revenues $ 4,824,698 100.0 % $ 3,758,144 100.0 % $ 2,659,478 100.0 % See Note 12 “Revenues” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for more information regarding our contract types and related revenue recognition policies.
The following table shows revenues by service offering as an amount and as a percentage of our revenues for the years indicated: Year Ended December 31, 2023 2022 2021 (in thousands, except percentages) Professional services $ 4,661,733 99.4 % $ 4,800,047 99.5 % $ 3,739,143 99.5 % Licensing and other revenues 28,807 0.6 % 24,651 0.5 % 19,001 0.5 % Revenues $ 4,690,540 100.0 % $ 4,824,698 100.0 % $ 3,758,144 100.0 % See Note 13 “Revenues” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for more information regarding our contract types and related revenue recognition policies.
Expressed as a percentage of revenues, depreciation and amortization expense decreased to 1.9% during the year ended December 31, 2022 as compared to 2.2% in 2021. Discussion of depreciation and amortization expense from 2021 as compared to 2020 is included in “Part II. Item 7.
Expressed as a percentage of revenues, depreciation and amortization expense remained the same at 1.9% during the year ended December 31, 2023, as compared to 2022. Discussion of depreciation and amortization expense from 2022 as compared to 2021 is included in “Part II. Item 7.
Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 68.1% and 66.1% during the years ended December 31, 2022 and 2021, respectively.
Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 69.4% and 68.1% during the years ended December 31, 2023 and 2022, respectively.
Fluctuations in foreign currency exchange rates with the U.S. dollar, particularly the euro and the British pound, during 2022 compared to the same period in the prior year negatively impacted revenue growth in the EMEA geography by 10.0%. Revenues in the region benefited from acquisitions which contributed $160.9 million to revenue growth in 2022.
Fluctuations in foreign currency exchange rates with the U.S. dollar, particularly the euro, Swiss franc and the British pound, during 2023 compared to the same period in the prior year positively impacted revenue growth in the EMEA geography by 2.0%. Revenues in the region benefited from acquisitions which contributed $1.9 million to revenue growth in 2023.
Furthermore, we have maintained our $100 million humanitarian aid commitment to our people in Ukraine in addition to our other donations and volunteer efforts. Prior to the attack in February 2022, Belarus and Russia were our second and third largest delivery locations by the number of delivery professionals, respectively.
Furthermore, we have maintained our $100 million humanitarian aid commitment to our people in Ukraine in addition to our other donations and volunteer efforts. Prior to the attack in February 2022, Russia was our third largest delivery location as measured by the number of delivery professionals.
Expressed as a percentage of revenue, North America segment operating profit decreased to 20.3% in 2022 as compared to 20.6% in 2021.
Expressed as a percentage of revenue, North America segment operating profit decreased to 18.8% in 2023 as compared to 20.3% in 2022.
As of December 31, 2022, our principal sources of liquidity were cash and cash equivalents totaling $1.681 billion, short-term investments totaling $60.3 million as well as $675.0 million of available borrowings under our revolving credit facility.
As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents totaling $2.036 billion, short-term investments totaling $60.7 million as well as $675.0 million of available borrowings under our revolving credit facility.
Interest and other income/(loss), net increased from a loss of $1.7 million during the year ended December 31, 2021 to a gain of $10.0 million during the year ended December 31, 2022.
Interest and other income/(loss), net increased from $10.0 million during the year ended December 31, 2022 to $51.1 million during the year ended December 31, 2023.
The Europe segment benefited from 61.4% growth in Travel & Consumer during the year ended December 31, 2022 as compared to 2021 primarily due to increased demand from customers in the retail and distribution industries and revenues from acquisitions which contributed $89.4 million to revenue growth during 2022.
The Europe segment benefited from 4.4% growth in Travel & Consumer during the year ended December 31, 2023, as compared to 2022, primarily due to increased demand from customers in the retail and distribution industries.
Foreign Exchange Loss For discussion of the impact of foreign exchange fluctuations see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk — Foreign Exchange Risk.” Results by Business Segment Our operations consist of three reportable segments: North America, Europe, and Russia.
Quantitative and Qualitative Disclosures About Market Risk — Foreign Exchange Risk.” Results by Business Segment Our operations consist of three reportable segments: North America, Europe, and Russia.
The top three revenue contributing customer location countries in EMEA were the United Kingdom, Switzerland and the Netherlands generating revenues of $619.3 million, $323.4 million and $215.4 million in 2022, respectively, compared to $474.9 million, $271.2 million and $154.8 million in 2021, respectively.
The top three revenue contributing customer location countries in EMEA were the United Kingdom, Switzerland and the Netherlands generating revenues of $585.2 million, $367.1 million and $236.3 million in 2023, respectively, compared to $619.3 million, $323.4 million and $215.4 million in 2022, respectively.
Except for Software & Hi-Tech, which grew at a rate of 19.4% in 2022 over the prior year, all of our verticals grew over 20% in 2022 over the prior year. Revenues by Customer Location Our revenues are sourced from multiple countries, which we assign into four geographic markets and identify as Americas, EMEA, APAC and CEE.
Except for Emerging Verticals, which grew at a rate of 8.8% in 2023 over the prior year, all of our verticals experienced revenue declines in 2023 from the prior year. Revenues by Customer Location Our revenues are sourced from multiple countries, which we assign into four geographic markets identified as Americas, EMEA, APAC, and CEE.
Additionally, selling, general and administrative expenses for the year ended December 31, 2022 were impacted by $38.7 million of expenses associated with our geographic repositioning of our workforce, $15.8 million of expenses associated with our humanitarian efforts in Ukraine, $17.1 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 $5.1 million of bad debt expense attributable to customers located in Russia.
Additionally, selling, general and administrative expenses for the year 2022 were impacted by the recognition of $19.6 million of impairment charges related to our long-lived assets in Russia, $17.1 million of charges related to employee separation costs in Russia, and $5.1 million of bad debt expense attributable to customers located in Russia.
Year Ended December 31, 2022 2021 2020 % of revenues % of revenues % of revenues (in thousands, except percentages and per share data) Revenues $ 4,824,698 100.0% $ 3,758,144 100.0 % $ 2,659,478 100.0 % Operating expenses: Cost of revenues (exclusive of depreciation and amortization) (1) 3,286,683 68.1 2,483,697 66.1 1,732,522 65.1 Selling, general and administrative expenses (2) 872,777 18.1 648,736 17.3 484,758 18.2 Depreciation and amortization expense 92,272 1.9 83,395 2.2 62,874 2.4 Income from operations 572,966 11.9 542,316 14.4 379,324 14.3 Interest and other income/(loss), net 10,025 0.2 (1,727) — 3,822 0.1 Foreign exchange loss (75,733) (1.6) (7,197) (0.2) (4,667) (0.2) Income before provision for income taxes 507,258 10.5 533,392 14.2 378,479 14.2 Provision for income taxes 87,842 1.8 51,740 1.4 51,319 1.9 Net income $ 419,416 8.7% $ 481,652 12.8 % $ 327,160 12.3 % Effective tax rate 17.3 % 9.7 % 13.6 % Diluted earnings per share $ 7.09 $ 8.15 $ 5.60 (1) Includes $47,470, $51,580 and $32,785 of stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020, respectively.
Year Ended December 31, 2023 2022 2021 % of revenues % of revenues % of revenues (in thousands, except percentages and per share data) Revenues $4,690,540 100.0 % $4,824,698 100.0 % $3,758,144 100.0 % Operating expenses: Cost of revenues (exclusive of depreciation and amortization) (1) 3,256,514 69.4 3,286,683 68.1 2,483,697 66.1 Selling, general and administrative expenses (2) 815,065 17.4 872,777 18.1 648,736 17.3 Depreciation and amortization expense 91,800 1.9 92,272 1.9 83,395 2.2 Loss on sale of business 25,922 0.6 — — — — Income from operations 501,239 10.7 572,966 11.9 542,316 14.4 Interest and other income/(loss), net 51,124 1.0 10,025 0.2 (1,727) — Foreign exchange loss (15,778) (0.3) (75,733) (1.6) (7,197) (0.2) Income before provision for income taxes 536,585 11.4 507,258 10.5 533,392 14.2 Provision for income taxes 119,502 2.5 87,842 1.8 51,740 1.4 Net income $ 417,083 8.9 % $ 419,416 8.7 % $ 481,652 12.8 % Effective tax rate 22.3 % 17.3 % 9.7 % Diluted earnings per share $7.06 $7.09 $8.15 (1) Includes $68,797, $47,470 and $51,580 of stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021, respectively.
An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
We consider the policies discussed below to be critical to an understanding of our consolidated financial statements as their application places significant demands on the judgment of our management. 31 Table of Conten t s An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
The increase was primarily driven by a significant decrease in excess tax benefits recorded upon vesting or exercise of stock-based awards which were $35.1 million in 2022 compared to $71.6 million in 2021.
The increase was primarily driven by a significant decrease in excess tax benefits recorded upon vesting or exercise of stock-based awards which were $19.8 million in 2023 compared to $35.1 million in 2022, as well as an increase in pre-tax income and U.S. state tax.
The cash used in investing activities was primarily attributable to $81.6 million used for capital expenditures and an investment of $60.0 million in time deposits in 2022 compared to cash used for capital expenditures of $111.5 million partially offset by the maturity of $60.0 million of time deposits during 2021.
The cash used in investing activities during 2022 was primarily attributable to $81.6 million used for capital expenditures, an investment of $60.0 million in time deposits and $10.6 million used for the acquisitions of businesses, net of cash acquired.
The following table presents revenues contributed by our customers by amount and as a percentage of our revenues for the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands, except percentages) Top five customers $ 793,603 16.4 % $ 682,147 18.2 % $ 584,303 22.0 % Top ten customers $ 1,149,966 23.8 % $ 966,486 25.7 % $ 822,824 30.9 % Top twenty customers $ 1,698,916 35.2 % $ 1,394,546 37.1 % $ 1,124,552 42.3 % Customers below top twenty $ 3,125,782 64.8 % $ 2,363,598 62.9 % $ 1,534,926 57.7 % The following table shows the number of customers grouped by revenues recognized by the Company for each year presented: Year Ended December 31, 2022 2021 2020 Over $20 Million 49 40 28 $10 - $20 Million 51 38 27 $5 - $10 Million 85 63 43 $1 - $5 Million 303 271 225 $0.5 - $1 Million 185 133 107 33 Table of Contents Revenues by Service Offering Our service arrangements have been evolving to provide more customized and integrated solutions to our customers where we combine software engineering with customer experience design, business consulting and technology innovation services.
In addition, we remain committed to diversifying our client base and adding more customers to our client mix through organic growth and strategic acquisitions, and over the long-term, we expect revenue concentration from our top customers to decrease. 35 Table of Conten t s The following table presents revenues contributed by our customers by amount and as a percentage of our revenues for the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands, except percentages) Top five customers $ 780,606 16.6 % $ 793,603 16.4 % $ 682,147 18.2 % Top ten customers $ 1,109,033 23.6 % $ 1,149,966 23.8 % $ 966,486 25.7 % Top twenty customers $ 1,660,174 35.4 % $ 1,698,916 35.2 % $ 1,394,546 37.1 % Customers below top twenty $ 3,030,366 64.6 % $ 3,125,782 64.8 % $ 2,363,598 62.9 % The following table shows the number of customers grouped by revenues recognized by the Company for each year presented: Year Ended December 31, 2023 2022 2021 Over $20 Million 44 49 40 $10 - $20 Million 56 51 38 $5 - $10 Million 76 85 63 $1 - $5 Million 305 303 271 $0.5 - $1 Million 175 185 133 Revenues by Service Offering Our service arrangements have been evolving to provide more customized and integrated solutions to our customers where we combine software engineering with customer experience design, business consulting and technology innovation services.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” of our Annual Report on Form 10-K for the year ended December 31, 2022. 42 Table of Conten t s 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.
We determine the fair value of contingent consideration using Monte Carlo simulations (which involve a simulation of future revenues and earnings during the earn-out period using management's best estimates) or probability-weighted expected return methods.
We base our fair value estimates on assumptions we believe are reasonable but recognize that the assumptions are inherently uncertain. 32 Table of Conten t s We determine the fair value of contingent consideration using Monte Carlo simulations (which involve a simulation of future revenues and earnings during the earn-out period using management's best estimates) or probability-weighted expected return methods.
For further information on the various risks posed by the disruptions to our business structure, please read “Part I. Item 1A. Risk Factors” included in this Annual Report on Form 10-K.
For additional information on the various risks posed by the attack against Ukraine and the impact in the region as well as other disruptors to our business, please read “Part I. Item 1A. Risk Factors” included in this Annual Report on Form 10-K.
See Note 10 “Debt” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding the terms of our revolving credit facility and information about debt. 39 Table of Contents Cash Flows The following table summarizes our cash flows for the periods indicated: For the Years Ended December 31, 2022 2021 2020 (in thousands) Consolidated Statements of Cash Flow Data: Net cash provided by operating activities $ 464,104 $ 572,327 $ 544,407 Net cash used in investing activities (182,927) (368,924) (167,154) Net cash used in financing activities (2,021) (59,557) (765) Effect of exchange rate changes on cash, cash equivalents and restricted cash (44,867) (18,032) 9,357 Net increase in cash, cash equivalents and restricted cash $ 234,289 $ 125,814 $ 385,845 Cash, cash equivalents and restricted cash, beginning of period 1,449,347 1,323,533 937,688 Cash, cash equivalents and restricted cash, end of period $ 1,683,636 $ 1,449,347 $ 1,323,533 Operating Activities Net cash provided by operating activities during the year ended December 31, 2022 decreased $108.2 million, or 18.9%, to $464.1 million, as compared to 2021.
See Note 10 “Debt” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for information regarding the terms of our revolving credit facility and information about debt. 41 Table of Conten t s Cash Flows The following table summarizes our cash flows for the periods indicated: For the Years Ended December 31, 2023 2022 2021 (in thousands) Consolidated Statements of Cash Flow Data: Net cash provided by operating activities $ 562,634 $ 464,104 $ 572,327 Net cash used in investing activities (66,768) (182,927) (368,924) Net cash used in financing activities (165,773) (2,021) (59,557) Effect of exchange rate changes on cash, cash equivalents and restricted cash 29,379 (44,867) (18,032) Net increase in cash, cash equivalents and restricted cash $ 359,472 $ 234,289 $ 125,814 Cash, cash equivalents and restricted cash, beginning of period 1,683,636 1,449,347 1,323,533 Cash, cash equivalents and restricted cash, end of period $ 2,043,108 $ 1,683,636 $ 1,449,347 Operating Activities Our largest source of cash provided by operating activities is cash generated from our professional services that we provide to our customers.
The following table sets forth revenues by customer location by amount and as a percentage of our revenues for the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands, except percentages) Americas (1) $ 2,887,204 59.9 % $ 2,226,830 59.3 % $ 1,595,136 60.0 % EMEA (2) 1,737,919 36.0 1,259,717 33.4 879,842 33.1 APAC (3) 120,370 2.5 103,559 2.8 69,798 2.6 CEE (4) 79,205 1.6 168,038 4.5 114,702 4.3 Revenues $ 4,824,698 100.0 % $ 3,758,144 100.0 % $ 2,659,478 100.0 % (1) Americas includes revenues from customers in North, Central and South America.
Segments are not based on the geographic location of the customers, but rather they are based on the location of the Company’s management responsible for a particular customer. 34 Table of Conten t s The following table sets forth revenues by customer location by amount and as a percentage of our revenues for the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands, except percentages) Americas (1) $ 2,742,662 58.4 % $ 2,887,204 59.9 % $ 2,226,830 59.3 % EMEA (2) 1,822,782 38.9 1,737,919 36.0 1,259,717 33.4 APAC (3) 102,138 2.2 120,370 2.5 103,559 2.8 CEE (4) 22,958 0.5 79,205 1.6 168,038 4.5 Revenues $ 4,690,540 100.0 % $ 4,824,698 100.0 % $ 3,758,144 100.0 % (1) Americas includes revenues from customers in North, Central and South America.
Our staff utilization also depends on the general economy and its effect on our customers and their business decisions regarding the use of our services. During the year ended December 31, 2022, cost of revenues (exclusive of depreciation and amortization) was $3,286.7 million, representing an increase of 32.3% from $2,483.7 million reported last year.
Our staff utilization also depends on the general economy and its effect on our customers and their business decisions regarding the use of our services. 36 Table of Conten t s During the year ended December 31, 2023, cost of revenues (exclusive of depreciation and amortization) was $3.257 billion, representing a decrease of 0.9% from $3.287 billion reported last year.
This change was largely driven by a $6.5 million increase in government grant income and an increase in interest income from our cash and cash equivalents and short-term investments, partially offset by a $2.3 million increase in loss due to the change in fair value of contingent consideration, $0.8 million charge related to the impairment of an investment and a $1.3 million charge related to the impairment of a financial asset in Ukraine recorded during the year ended December 31, 2022.
This increase was largely driven by a $40.7 million increase in interest income from our cash and cash equivalents and short-term investments resulting from improved interest rates, and by an $8.3 million decrease in loss due to the change in fair value of contingent consideration, partially offset by a $3.2 million decrease in government grant income and a $2.6 million increase in interest expense.
(2) Includes $52,439, $60,075 and $42,453 of stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020, respectively. Revenues We continue to expand our presence across multiple geographies and verticals, both organically and through strategic acquisitions. During the year ended December 31, 2022, our total revenues grew 28.4% over the previous year to $4.825 billion.
(2) Includes $78,933, $52,439 and $60,075 of stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021, respectively. 33 Table of Conten t s Revenues We continue to diversify our presence across multiple geographies and verticals, both organically and through strategic acquisitions.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022. 38 Table of Conten t s Foreign Exchange Loss For discussion of the impact of foreign exchange fluctuations see “Item 7A.
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. 40 Table of Contents 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.
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.
The impact of the war on our operations, personnel, and physical assets in Ukraine has had, and, along with any escalation of the war that includes Belarus’ territory or military, could continue to have, a material adverse effect on our operations.
We discontinued services to certain customers located in Russia and on July 26, 2023, we completed the sale of our remaining holdings in Russia to a third party. 30 Table of Conten t s The impact of Russia’s invasion of Ukraine on our operations, personnel, and physical assets in Ukraine has had, and, along with any escalation of the war that includes Belarus’ territory or military, could continue to have a material adverse effect on our operations.
Acquisitions contributed $166.3 million to Europe segment revenues during 2022. Revenues were negatively impacted by changes in foreign currency exchange rates during 2022. Had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during 2021, we would have reported revenue growth of 47.3%.
Revenues were positively impacted by changes in foreign currency exchange rates during 2023. Had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during 2022, we would have reported revenue growth of 1.1%. Revenues from our Europe segment represent 40.7% and 38.4% of total segment revenues during 2023 and 2022, respectively.
Our Europe segment includes our business in the APAC region, which is managed by the same management team. 36 Table of Contents Segment revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe and Russia segments for the years ended December 31, 2022, 2021 and 2020 were as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Segment revenues: North America $ 2,898,554 $ 2,242,248 $ 1,601,820 Europe 1,853,056 1,350,484 947,305 Russia 73,088 165,412 110,353 Total segment revenues $ 4,824,698 $ 3,758,144 $ 2,659,478 Segment operating profit/(loss): North America $ 589,412 $ 462,798 $ 345,196 Europe 223,276 233,727 152,902 Russia (13,460) 32,547 5,811 Total segment operating profit $ 799,228 $ 729,072 $ 503,909 North America Segment During 2022, North America segment revenues increased $656.3 million, or 29.3%, over the previous year.
Revenues from external customers and operating profit/(loss), before unallocated expenses, by reportable segments for the years ended December 31, 2023, 2022 and 2021 were as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Segment revenues: North America $ 2,765,022 $ 2,898,554 $ 2,242,248 Europe 1,909,443 1,853,056 1,350,484 Russia 16,075 73,088 165,412 Total segment revenues $ 4,690,540 $ 4,824,698 $ 3,758,144 Segment operating profit/(loss): North America $ 520,945 $ 589,412 $ 462,798 Europe 250,634 223,276 233,727 Russia (5,866) (13,460) 32,547 Total segment operating profit $ 765,713 $ 799,228 $ 729,072 North America Segment During 2023, North America segment revenues decreased $133.5 million, or 4.6%, from the previous year.
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 during 2022.
Implementation and execution of our business continuity plans, relocation costs, our humanitarian commitment to our people in Ukraine, and the cost of our phased exit from Russia resulted in materially increased expenses during 2022 and these expenses continued to be incurred in 2023.
We 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 operate productively in more than 50 countries and provides consistent high-quality delivery to our customers. Our global delivery centers have sufficient resources, including infrastructure and capital, to support ongoing operations. We continue to rapidly respond to the difficult conditions in Ukraine while maintaining a focus on our customers and long-term growth.
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.
As a result, we have created a delivery base whereby our applications, tools, methodologies and infrastructure allow us to seamlessly deliver services and solutions from our global delivery centers to our customers across the world. Our teams of consultants, designers, architects, engineers and trainers have the capabilities and skill sets to deliver business results.
During the year ended December 31, 2022 we experienced a decrease in customer concentration as compared to the previous year, with revenues from our top five, top ten and top twenty customer groups decreasing as a percentage of total revenues.
During the year ended December 31, 2023 we experienced similar customer concentration in our top customer groups as a percentage of total revenues as compared to the previous year. We discuss below the breakdown of our revenues by vertical, customer location, service arrangement type, and customer concentration.
Revenues have been positively impacted by our acquisitions, which contributed 5.1% to our revenue growth, and negatively impacted by our decision to exit Russia and discontinue services to customers there by 3.7% and fluctuations in foreign currency exchange rates which decreased our revenue growth by 4.0% during the year ended December 31, 2022 as compared to the previous year.
Revenues have been positively impacted by fluctuations in foreign currency exchange rates which partially offset our revenue decline by 0.6% during the year ended December 31, 2023 as compared to the previous year.
Revenues from our North America segment represented 60.1% of total segment revenues, an increase from 59.7% reported in the corresponding period of 2021. During 2022 as compared to 2021, North America segment operating profits increased $126.6 million, or 27.4%, to $589.4 million.
Revenues from our North America segment represented 58.9% of total segment revenues, a decrease from 60.1% reported in the corresponding period of 2022. Acquisitions contributed $8.2 million to North America segment revenues during 2023. During 2023 as compared to 2022, North America segment operating profits decreased $68.5 million, or 11.6%, to $520.9 million.
On April 7, 2022, the Company announced the beginning of a phased exit of our operations in Russia in close collaboration with our employees, contractors, and customers. We have discontinued services to certain customers located in Russia and on September 7, 2022, we executed an agreement to sell substantially all of our remaining holdings in Russia to a third party.
In April 2022, the Company announced the beginning of a phased exit of our operations in Russia in close collaboration with our employees, contractors, and customers.
Emerging Verticals experienced 26.9% growth during 2022 compared to the prior year largely due to an increase in services provided to several customers in various industries in the group. 37 Table of Contents Europe Segment During 2022, Europe segment revenues were $1,853.1 million, reflecting an increase of $502.6 million, or 37.2%, from last year.
Emerging Verticals experienced 16.6% growth during 2023 compared to the prior year due to growth from various customers in industries such as energy, education, manufacturing and automotive. Europe Segment During 2023, Europe segment revenues were $1.909 billion, reflecting an increase of $56.4 million, or 3.0%, from last year. Acquisitions contributed $2.2 million to Europe segment revenues during 2023.
The following table presents Europe segment revenues by industry vertical for the periods indicated: Year Ended December 31, Change 2022 2021 Dollars Percentage Industry Vertical (in thousands, except percentages) Travel & Consumer $ 571,437 $ 354,041 $ 217,396 61.4 % Financial Services 460,858 372,394 88,464 23.8 % Business Information & Media 341,344 275,502 65,842 23.9 % Software & Hi-Tech 136,273 102,270 34,003 33.2 % Life Sciences & Healthcare 52,465 49,900 2,565 5.1 % Emerging Verticals 290,679 196,377 94,302 48.0 % Revenues $ 1,853,056 $ 1,350,484 $ 502,572 37.2 % Travel & Consumer became the largest industry vertical in the Europe segment during the year ended December 31, 2022.
The following table presents Europe segment revenues by industry vertical for the periods indicated: Year Ended December 31, Change 2023 2022 Dollars Percentage Industry Vertical (in thousands, except percentages) Travel & Consumer $ 596,830 $ 571,437 $ 25,393 4.4 % Financial Services 472,146 460,858 11,288 2.4 % Business Information & Media 323,985 341,344 (17,359) (5.1) % Software & Hi-Tech 153,683 136,273 17,410 12.8 % Life Sciences & Healthcare 60,549 52,465 8,084 15.4 % Emerging Verticals 302,250 290,679 11,571 4.0 % Revenues $ 1,909,443 $ 1,853,056 $ 56,387 3.0 % 40 Table of Conten t s Travel & Consumer remained the largest industry vertical in the Europe segment during the year ended December 31, 2023.
Our Board has received updates from management during both regular and special meetings, while also providing oversight of the risks associated with Russia’s invasion of Ukraine and other strategic areas of importance related to the war. 27 Table of Contents 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 on our delivery infrastructure, including reallocating work to other geographies within our global footprint.
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 on our delivery infrastructure, including reallocating work to other geographies within our global footprint. We have engaged both our personnel and our customers to meet their needs and to mitigate delivery challenges.
Revenues in this geography accounted for 36.0% of consolidated revenues in 2022 as compared to 33.4% in the previous year.
Revenues in our EMEA geography were $1.823 billion, an increase of $84.9 million, or 4.9%, over $1.738 billion in the previous year. Revenues in this geography accounted for 38.9% of consolidated revenues in 2023 as compared to 36.0% in the previous year.
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. 26 Table of Contents 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.
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.
The following table presents North America segment revenues by industry vertical for the periods indicated: Year Ended December 31, Change 2022 2021 Dollars Percentage Industry Vertical (in thousands, except percentages) Software & Hi-Tech $ 655,122 $ 559,707 $ 95,415 17.0 % Financial Services 522,970 361,611 161,359 44.6 % Travel & Consumer 505,227 359,306 145,921 40.6 % Business Information & Media 467,664 389,613 78,051 20.0 % Life Sciences & Healthcare 454,102 340,706 113,396 33.3 % Emerging Verticals 293,469 231,305 62,164 26.9 % Revenues $ 2,898,554 $ 2,242,248 $ 656,306 29.3 % Software & Hi-Tech remained the largest industry vertical in the North America segment during the year ended December 31, 2022, growing 17.0% as compared to the prior year, which was a result of the continued focus on engaging with our technology customers.
This decrease is primarily attributable to lower utilization, partially offset by a decrease in variable compensation expense as a percentage of segment revenues during 2023 compared to 2022. 39 Table of Conten t s The following table presents North America segment revenues by industry vertical for the periods indicated: Year Ended December 31, Change 2023 2022 Dollars Percentage Industry Vertical (in thousands, except percentages) Software & Hi-Tech $ 552,492 $ 655,122 $ (102,630) (15.7) % Financial Services 538,837 522,970 15,867 3.0 % Travel & Consumer 472,350 505,227 (32,877) (6.5) % Business Information & Media 429,800 467,664 (37,864) (8.1) % Life Sciences & Healthcare 429,245 454,102 (24,857) (5.5) % Emerging Verticals 342,298 293,469 48,829 16.6 % Revenues $ 2,765,022 $ 2,898,554 $ (133,532) (4.6) % During the year ended December 31, 2023, Software & Hi-Tech remained the largest industry vertical in the North America segment which was a result of the continued focus on engaging with our technology customers.
During 2022, revenues in our CEE geography decreased $88.8 million, or 52.9%, from the previous year. The decrease in CEE revenues came primarily from customers in Russia, contributing a decrease of $90.4 million in 2022 compared to the previous year.
During 2023, revenues in our CEE geography decreased $56.2 million, or 71.0%, from the previous year. In 2023, revenues in CEE included $13.3 million of revenues from customers in Russia, compared to $64.7 million in 2022.
Discussion of the provision for income taxes from 2021 as compared to 2020 is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.
Discussion of the provision for income taxes from 2022 as compared to 2021 is included in “Part II. Item 7.
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.
Our customers depend on us to solve their complex technical challenges and rely on our expertise in core engineering, advanced technologies, digital design and intelligent enterprise development. We combine our software engineering heritage with strategic business and innovation consulting, design thinking, and physical-digital capabilities to deliver end-to-end digital transformation services for our customers.
Revenues from our Europe segment represent 38.4% and 35.9% of total segment revenues during 2022 and 2021, respectively. During 2022, this segment’s operating profits decreased $10.5 million, or 4.5% as compared to last year, to $223.3 million. Europe’s operating profit represented 12.0% of Europe segment revenues as compared to 17.3% in 2021.
During 2023, Europe segment operating profits increased $27.4 million, or 12.3% as compared to last year, to $250.6 million. Europe segment operating profit represented 13.1% of Europe segment revenues as compared to 12.0% in 2022.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” of our Annual Report on Form 10-K for the year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022. Loss on Sale of Business On July 26, 2023, the Company completed the sale of its remaining holdings in Russia to a third-party.
During the year ended December 31, 2022, depreciation and amortization expense was $92.3 million, representing an increase of $8.9 million from $83.4 million reported in the prior year.
Depreciation and amortization expense also includes amortization of acquired finite-lived intangible assets. 37 Table of Conten t s During the year ended December 31, 2023, depreciation and amortization expense was $91.8 million, representing a decrease of $0.5 million from $92.3 million reported in the prior year.
The effective tax rate increased from 9.7% in 2021 to 17.3% in 2022 primarily due to the decrease in excess tax benefits recorded upon vesting or exercise of stock-based awards and tax charges in 2022 resulting from changes to certain U.S. tax regulations, partially offset by one-time tax benefits in 2022 resulting from the Company’s decision to change the tax status and to classify certain of its foreign subsidiaries as disregarded entities for U.S. income tax purposes.
The effective tax rate increased from 17.3% in 2022 to 22.3% in 2023 primarily due to the decrease in excess tax benefits recorded upon vesting or exercise of stock-based awards, as well as an increase in U.S. state tax and losses in certain foreign jurisdictions with no corresponding tax benefit.
We expect some of those expenses will continue to occur in subsequent quarters for some time in the future.
We expect some of those expenses will continue to occur in subsequent quarters for some time in the future. We have no way to predict the progress or outcome of the war in Ukraine because the conflict and government reactions change quickly and are beyond our control.
During the year ended December 31, 2022, selling, general and administrative expenses were $872.8 million, representing an increase of 34.5% as compared to $648.7 million reported last year.
Additionally, selling, general and administrative expenses contain costs of relocating our employees and various one-time and unusual expenses such as impairment charges. During the year ended December 31, 2023, selling, general and administrative expenses were $815.1 million, representing a decrease of 6.6% as compared to $872.8 million reported last year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

18 edited+7 added−9 removed7 unchanged
Biggest changeNet income was most positively impacted by the depreciation of the Polish zloty and the Hungarian forint, partially offset by the depreciation of the euro and British pound relative to the U.S. dollar. Item 8. Financial Statements and Supplementary Data The information required is included in this Annual Report on Form 10-K beginning on page F-1. Item 9.
Biggest changeFinancial Statements and Supplementary Data The information required is included in this Annual Report on Form 10-K beginning on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Item 7A. 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 risks, interest rates and foreign currency exchange rates.
Item 7A. 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 risks, foreign currency exchange rates and interest rates.
Exposure to interest rate risk results primarily from variable rates related to the cash and cash equivalent deposits, short-term investments, and our borrowings, mainly under our 2021 Credit Agreement, which is subject to a variety of rates depending on the currency and timing of funds borrowed.
Exposure to interest rate risk results primarily from variable rates related to cash and cash equivalent deposits, short-term investments, and our borrowings, mainly under our 2021 Credit Agreement, which is subject to a variety of rates depending on the currency and timing of funds borrowed.
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 implemented a hedging program through which 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 Polish zloty, Hungarian forint, and Indian rupee transactions.
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 implemented a hedging program through which 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 Polish zloty, Indian rupee, and Hungarian forint transactions.
Foreign exchange loss was primarily 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 subsidiaries in Russia, and losses from our foreign exchange forward contracts associated with the Russian ruble during the first quarter of 2022.
Foreign exchange loss for the year 2022 was primarily 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 subsidiaries in Russia, and losses from our foreign exchange forward contracts associated with the Russian ruble during the first quarter of 2022.
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, Indian rupee and Chinese yuan renminbi relative to the U.S. dollar, could negatively impact our results of operations.
As a result, currency fluctuations, specifically the depreciation of the euro, British pound, and Canadian dollar and the appreciation of the Hungarian forint, Polish zloty, Indian rupee and Chinese yuan renminbi relative to the U.S. dollar, could negatively impact our results of operations.
We regularly monitor cash held in these countries and, to the extent the cash held exceeds amounts required to support our 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.
We regularly monitor cash held in these countries and, to the extent the cash held exceeds amounts required to support our operations in these countries, we distribute the excess funds into markets with more developed banking sectors to the extent it is possible to do so.
Other than U.S. dollars, the Company generates revenues in various currencies, principally, euros, British pounds, Swiss francs, Canadian dollars, and Russian rubles and incurs expenditures principally in euros, Polish zlotys, Russian rubles, Indian rupees, British pounds, Swiss francs, Hungarian forints, Mexican pesos, Colombian pesos, Canadian dollars, and Chinese yuan renminbi.
Other than U.S. dollars, the Company generates revenues in various currencies, principally, euros, British pounds, Swiss francs, Canadian dollars, and, prior to our exit from Russia, Russian rubles and incurs expenditures principally in euros, Polish zlotys, Indian rupees, British pounds, Swiss francs, Hungarian forints, Mexican pesos, Colombian pesos, Canadian dollars, Chinese yuan renminbi, and, prior to our exit from Russia, Russian rubles.
If any of our customers enter bankruptcy protection or otherwise take steps to alleviate their financial distress, our credit losses and write-offs of trade receivables could increase, which would negatively impact our results of operations.
If any of our customers enter bankruptcy protection or otherwise take steps to alleviate their financial distress, our credit losses and write-offs of trade receivables could increase, which would negatively impact our results of operations. Interest Rate Risk We are exposed to market risk from changes in interest rates.
We have cash in several countries, including Ukraine, Russia and Belarus, which could be impacted by the invasion of Ukraine and where the banking sector remains subject to periodic instability, 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.
We do not anticipate non-performance by the counterparties. 43 Table of Conten t s We have cash in several countries, including Ukraine and Belarus, where the banking sector remains subject to periodic instability; 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 December 31, 2022, all of our 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 related to the foreign exchange forward contracts. As of December 31, 2022, the net unrealized gain from these hedges was $2.8 million.
As of December 31, 2023, all of our 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 first quarter of 2022, in response to the invasion of Ukraine, we de-designated our Russian ruble foreign exchange forward contracts as hedges and entered into offsetting foreign exchange forward contracts with the same counterparty.
As of December 31, 2023, the net unrealized gain from these hedges was $10.2 million. 44 Table of Conten t s During the first quarter of 2022, in response to the invasion of Ukraine, we de-designated our Russian ruble foreign exchange forward contracts as hedges and entered into offsetting foreign exchange forward contracts with the same counterparty.
During the year ended December 31, 2022, we reported a decrease in net income of 12.9% as compared to the previous year. Had our consolidated results been expressed in constant currency terms using the exchange rates in effect during 2021, we would have reported a decrease in net income of 17.1%.
Had our consolidated results been expressed in constant currency terms using the exchange rates in effect during 2022, we would have reported a decrease in income from operations of 9.5%.
Cash in Ukraine and Belarus is used for the operational needs of the local entities and cash balances change with the expected operating needs of these entities.
As of December 31, 2023, we had $45.8 million of cash and cash equivalents in banks in Ukraine and $38.3 million of cash and cash equivalents in banks in Belarus. Cash in Ukraine and Belarus is used for the operational needs of the local entities and cash balances change with the expected operating needs of these entities.
During the year ended December 31, 2022, approximately 33.4% of consolidated revenues and 53.7% of operating expenses were denominated in currencies other than the U.S. dollar. During the year ended December 31, 2022, our foreign exchange loss was $75.7 million compared to a $7.2 million loss reported last year.
During the year ended December 31, 2023, approximately 34.2% of consolidated revenues and 58.6% of operating expenses were denominated in currencies other than the U.S. dollar.
However, a banking crisis, bankruptcy or insolvency of banks that process or hold the Company’s funds, or sanctions may result in the loss of our deposits or adversely affect the Company’s ability to complete banking transactions, which could adversely affect our business and financial condition. 41 Table of Contents 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 risks existed at December 31, 2022.
However, a banking crisis, bankruptcy or insolvency of banks that process or hold our funds, or sanctions may result in the loss of our deposits or adversely affect our ability to complete banking transactions, which could adversely affect our business and financial condition.
When important to management’s analysis, operating results are compared on the basis of “constant currency,” which is a non-GAAP financial measure.
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.
Had our consolidated revenues been expressed in constant currency terms using the exchange rates in effect during 2021, we would have reported revenue growth of 32.4%. During 2022, our revenues were negatively impacted mainly by the depreciation of the euro and British pound relative to the U.S. dollar.
During the year ended December 31, 2023, we reported a revenue decrease of 2.8% compared to the prior year. Had our consolidated revenues been expressed in constant currency terms using the exchange rates in effect during 2022, we would have reported revenue decline of 3.4%.
Removed
We do not anticipate non-performance by the counterparties.
Added
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 risks existed as of December 31, 2023.
Removed
As of December 31, 2022, we had $47.1 million of cash and cash equivalents in banks in Ukraine, $29.0 million of cash and cash equivalents in banks in Russia, and $28.0 million of cash and cash equivalents in banks in Belarus.
Added
Prior to March 4, 2022, when EPAM announced it would discontinue services to customers located in Russia in response to the attacks on Ukraine, the Russian ruble was one of our significant currencies in which we generated revenues and incurred expenses and it had a significant foreign exchange impact on our operations.
Removed
Due to restrictions imposed by the Russian government, our ability to distribute excess funds from Russia to other countries is limited. On September 7, 2022, we executed an agreement to sell substantially all of our remaining holdings in Russia, including cash and cash equivalents, to a third party.
Added
After the announcement, our revenues, expenses, assets, liabilities and equity denominated in Russian rubles began to decrease and on July 26, 2023, we completed the sale of our remaining holdings in Russia to a third-party.
Removed
As of December 31, 2022 and through the date of issuance of these financial statements, the long stop date of the agreement has passed and we are currently renegotiating the terms of that sale agreement as well as exploring other strategic alternatives.
Added
We recorded a loss on sale of $25.9 million during the year ended December 31, 2023, including the recognition of the accumulated currency translation loss related to this foreign entity that was previously included in Accumulated other comprehensive loss in the consolidated financial statements.
Removed
The timing and completion of a sale is uncertain and any sale would be subject to customary closing conditions, including regulatory approvals by the Russian government.
Added
During the year ended December 31, 2023, our foreign exchange loss was $15.8 million compared to a $75.7 million loss reported last year.
Removed
Reflecting the deterioration of credit-worthiness of its customers in Russia after Russia’s invasion of Ukraine, the Company evaluated its trade receivables and contract assets for estimated future credit losses from customers located in Russia and recorded net bad debt expense of $5.1 million during the year 2022, which is included in Selling, general and administrative expenses.
Added
During 2023, our revenues were positively impacted mainly by the appreciation of the euro, Swiss franc and British pound, partially offset by the depreciation of the Canadian dollar relative to the U.S. dollar. During the year ended December 31, 2023, we reported a decrease in income from operations of 12.5% as compared to the previous year.
Removed
The Company is actively monitoring its trade receivables from its customers in Russia for any further deterioration of creditworthiness. Interest Rate Risk We are exposed to market risk from changes in interest rates.
Added
Income from operations was negatively impacted by the appreciation of the Mexican peso, Polish zloty and the Armenian dram, and positively impacted by the appreciation of the euro, British pound and the Swiss franc and depreciation of the Indian rupee relative to the U.S. dollar during the year ended December 31, 2023 compared to 2022. Item 8.
Removed
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. 42 Table of Contents During the year ended December 31, 2022, we reported revenue growth of 28.4% over the prior year.
Removed
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.

Other EPAM 10-K year-over-year comparisons