Financial Data and Key Metrics Changes - In Q4, the company generated revenues of $1.23 billion, reflecting an 11.2% year-over-year increase on a reported basis and 14.4% in constant currency terms [41] - GAAP income from operations was $573 million, an increase of 5.7% year-over-year, representing 11.9% of revenue [3] - Non-GAAP income from operations was $818 million, a 20.6% increase over the prior year, representing 17% of revenue [3] - Diluted earnings per share on a GAAP basis was $2.61, while non-GAAP diluted EPS was $2.93, reflecting a 6.2% growth over the same quarter in 2021 [65] Business Line Data and Key Metrics Changes - Financial services grew 2.4%, with strong growth from asset management and insurance; excluding Russian customer revenues, growth would have been 17.8% [2] - Software and Hi-Tech grew 10.3% in the quarter, reflecting a reduction in revenue from a previously top 20 customer [2] - Travel and consumer grew 16%, driven by strong growth in travel and hospitality, while life sciences and healthcare grew 11.5% [42][43] Market Data and Key Metrics Changes - The Americas, representing 59% of Q4 revenues, grew 14.7% year-over-year; EMEA, representing 37%, grew 18% year-over-year [1] - CEE contracted 71.8% year-over-year due to the exit from the Russian market, while APAC was flat year-over-year but grew 3.8% in constant currency [1] - Revenues from top 20 clients grew 8% year-over-year, while revenues from clients outside the top 20 grew 13% [1] Company Strategy and Development Direction - The company expects a lower level of revenue in Q1, indicating a slower start to the 2023 fiscal year, but anticipates stronger demand in the second half of 2023 [4] - The company plans to focus on stabilizing global operations and investing in new talent and capabilities while maintaining a strong engineering DNA [35] - The guidance for 2023 includes at least 9% revenue growth on both a reported and constant currency basis, with a return to double-digit growth in the second half of the year [14][15] Management's Comments on Operating Environment and Future Outlook - Management noted signs of moderation in demand, including delays in decision-making and increased scrutiny on budgets, particularly in the retail and consumer goods sectors [12] - The company believes the current slowdown in demand will be temporary, with expectations of a return to growth as new players enter the market with technology-led solutions [34] - Management expressed confidence in returning to a 20% plus organic growth rate in the next several quarters and achieving a $10 billion revenue target in the coming years [38] Other Important Information - The company has committed approximately $100 million for humanitarian efforts to support Ukrainian employees, with $45 million spent through December 31, 2022 [20] - A share repurchase program has been approved, allowing the company to buy back up to $500 million of its common stock over the next 24 months [45] Q&A Session Summary Question: What is the status of clients moving workloads off EPAM? - Management indicated that some clients preemptively decided to explore alternative vendors due to uncertainty about EPAM's ability to navigate disruptions, but they have not lost significant clients [24][26] Question: How does the company plan to revive the business pipeline? - The company is focusing on stabilizing delivery and investing in customer relationships, with expectations of increased demand in the second half of 2023 [31][37] Question: What are the expectations for revenue growth in 2023? - Management expects first half revenue growth to be in the single digits, returning to double-digit growth in the second half, with Q4 potentially seeing high teens growth [15][30] Question: How will margins be affected in 2023? - Margins are expected to be lower in the first half due to reduced demand, with improvements anticipated in the second half as revenue grows [76][88]

GAAP Diluted EPS of $2.61, 8.7% YoY Non-GAAP Diluted EPS of $2.93, 6.2% YoY Mobile devices The Company launches EPAM Continuum, the company's vision for integrated Consulting and Engineering services. Within EPAM's top 100 clients, 20% are in the Fortune 500 and more than 50% are in the Forbes Global 2000. Investor February 2023 These materials contain forward-looking statements. You should not place undue reliance on these statements because they are subject to numerous uncertainties and factors relating ...

Financial Data and Key Metrics Changes - In Q3 2022, EPAM delivered revenues of $1.23 billion, representing a 24% year-over-year growth, and a non-GAAP diluted EPS of $3.10, a 30% increase over Q3 2021 [23][32][44] - The company generated $234 million of free cash flow and ended the quarter with approximately $1.5 billion in cash [24][45] - The GAAP gross margin for the quarter was 32.6%, compared to 33.9% in Q3 of the previous year, while non-GAAP gross margin was 34.4%, down from 35.1% [39][40] Business Line Data and Key Metrics Changes - Travel and Consumer grew 41.9%, driven by strong organic growth from retail customers [35] - Life Sciences and Healthcare grew 35%, with significant contributions from the healthcare sector [35] - Financial Services grew 10.4%, while excluding Russian customers, growth would have been 25.4% [35] - Emerging verticals delivered 26.6% growth, driven by clients in energy, manufacturing, and automotive [36] Market Data and Key Metrics Changes - The Americas represented 61% of Q3 revenues, growing 26.3% year-over-year [37] - EMEA, accounting for 36% of revenues, grew 35.3% year-over-year [37] - CEE contracted 77.2% year-over-year due to the exit from Russia [38] - APAC grew 10.5% year-over-year, now representing 2% of revenues [38] Company Strategy and Development Direction - The company is focused on global diversification and expanding its delivery capabilities, with a goal to become one of the most geographically balanced service companies [12][15] - EPAM is working to reposition its service portfolio and maintain high service quality amid geopolitical challenges [16][17] - The company aims to maintain its engineering and technology advantage while investing in educational platforms for talent development [21][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing geopolitical challenges, particularly the war in Ukraine, and its impact on operations [7][27] - There is a cautious outlook on demand, with clients focusing on cost savings and operational efficiencies [25][81] - The company expects Q4 revenues to be in the range of $1.220 billion to $1.230 billion, reflecting a year-over-year growth rate of approximately 11% [52] Other Important Information - EPAM has spent over $39 million as part of its $100 million humanitarian commitment to Ukrainian employees and their families [51] - The company is adjusting its operations to mitigate the impact of the war and is confident in its ability to adapt and grow [28][29] Q&A Session Summary Question: Insights on Q4 growth forecast - Management indicated that Q4 growth is impacted by fewer billable days and the exit from Russia, which will reduce revenue by approximately 2% [60] Question: Delivery footprint and workforce ramp-up - Management confirmed that they are on track with their delivery capacity plans and expect to reduce reliance on impacted regions [62] Question: Headcount and margin dynamics - Management noted that pricing realignment for relocated employees had a less negative impact on profitability than expected [66] Question: Demand environment and client spending - Management observed a shift towards cost-saving measures among clients, balancing digital transformation priorities [81] Question: Pricing environment amidst inflation - Management highlighted successful rate realignment efforts and ongoing pricing improvements due to relocations [94] Question: M&A activity in the current macro environment - Management stated that M&A activities are not adjusted based on economic conditions, and they continue to seek strategic additions [96]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to________ Commission file number: 001-35418 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 ...

1 Investor Presentation November 2022 Safe Harbor Statement These materials contain forward-looking statements. You should not place undue reliance on these statements because they are subject to numerous uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking statements include information concerning the Company's possible or assumed future results of operations, inclu ...

Financial Data and Key Metrics Changes - In Q2 2022, EPAM generated revenues of $1.19 billion, a year-over-year increase of 35.6% on a reported basis and 40.1% in constant currency terms, reflecting a negative foreign exchange impact of 450 basis points [27] - GAAP gross margin for the quarter was 29.2% compared to 33.8% in Q2 of last year, while non-GAAP gross margin was 31.5% compared to 35% for the same quarter last year [32] - GAAP income from operations was $93 million or 7.8% of revenue, down from $125 million or 14.2% of revenue in Q2 of last year, primarily due to costs associated with the exit of Russian operations and humanitarian expenditures [33] Business Line Data and Key Metrics Changes - Travel & consumer grew 61.1%, driven by strong organic growth from retail customers and recent acquisitions [29] - Life sciences and healthcare grew 40.1%, with significant contributions from the healthcare industry [29] - Financial services grew 29.4%, with growth from asset management, payments, and banking [29] - Emerging verticals delivered 36.1% growth, driven by clients in telecommunications, energy, manufacturing, and automotive [30] Market Data and Key Metrics Changes - The Americas, representing 60% of Q2 revenues, grew 36.8% year-over-year [31] - EMEA, representing 35% of Q2 revenues, grew 45.2% year-over-year [31] - CEE, representing 2% of Q2 revenues, contracted 46.7% year-over-year due to the ramp down of services to Russian customers [31] - APAC grew 20.8% year-over-year, now representing 3% of revenues [31] Company Strategy and Development Direction - The company is focusing on geographical diversification of its delivery platform and has established digital delivery locations in India, Latin America, and Central Asia [9][10] - EPAM is committed to exiting operations in Russia, reducing its local footprint from over 9,000 people to just under 1,000 [11][12] - The company aims to return to profit levels approaching historical ranges during the first half of 2023 [16] Management's Comments on Operating Environment and Future Outlook - Management noted a stable demand environment and expects continued sequential revenue growth throughout the second half of 2022 [40] - The company is optimistic about returning to profitability levels similar to pre-war conditions in 2023 [65][66] - Management acknowledged mixed economic indicators but believes medium-term demand trends will support strong organic growth [19][20] Other Important Information - EPAM has spent over $34 million as part of its $100 million humanitarian commitment to Ukrainian employees and their families [44] - The company ended Q2 with approximately $1.3 billion in cash and cash equivalents [36] Q&A Session Summary Question: Growth composition between new and existing clients in Q2 - Management indicated solid growth in existing customers with a slight slowdown in new customers during Q2, but expects new logo-driven demand to increase in the second half [51][52] Question: Sequential billable headcount excluding Russia - Management confirmed that attrition rates outside of Russia remained consistent, and they are comfortable returning to pre-war headcount levels [53][54] Question: Performance of new delivery locations - Management reported an increase of 1,200 to 1,300 people in Q2, primarily outside of Ukraine, Belarus, and Russia, and expressed confidence in the ability to grow in new regions [56][57] Question: Adjusting rate cards to new delivery locations - Management noted that there is a lag in rate increases as resources transition to new geographies, but they are optimistic about completing most rate adjustments by early 2023 [63][64] Question: Cash flow expectations - Management expressed satisfaction with cash flow performance and expects cash flow conversion to exceed 100% in Q3 [67] Question: Gross margins and delivery profile changes - Management anticipates some temporary impacts on gross margins due to shifting to higher-cost geographies but expects improvements as they transition [91][92] Question: Client project priorities and sales cycles - Management has not observed significant changes in client priorities or project types, maintaining focus on application modernization and cloud migration [95]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's discussion and analysis, and disclosures on market risks and controls [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, statements of changes in stockholders' equity, and cash flow statements, along with detailed notes explaining significant accounting policies, the impact of the Ukraine invasion, acquisitions, and other financial disclosures [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates **Condensed Consolidated Balance Sheet Highlights (in thousands):** | Metric | June 30, 2022 | December 31, 2021 | | :----------------------- | :------------ | :---------------- | | Total Assets | $3,563,964 | $3,523,227 | | Total Liabilities | $939,958 | $1,027,390 | | Total Stockholders' Equity | $2,624,006 | $2,495,837 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the company's revenues, expenses, and net income over specific periods, highlighting profitability trends **Condensed Consolidated Statements of Income Highlights (in thousands, except per share data):** | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $1,194,861 | $881,366 | $2,366,475 | $1,662,141 | | Income from operations | $93,020 | $125,274 | $222,262 | $232,525 | | Net income | $18,604 | $114,671 | $108,323 | $223,717 | | Basic EPS | $0.33 | $2.03 | $1.90 | $3.97 | | Diluted EPS | $0.32 | $1.94 | $1.84 | $3.80 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the company's net income and other comprehensive income or loss components, reflecting total changes in equity from non-owner sources **Condensed Consolidated Statements of Comprehensive Income Highlights (in thousands):** | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $18,604 | $114,671 | $108,323 | $223,717 | | Other comprehensive income/(loss) | $9,793 | $11,677 | $(22,150) | $(3,561) | | Comprehensive income | $28,397 | $126,348 | $86,173 | $220,156 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines the changes in the company's equity accounts, including common stock, retained earnings, and accumulated other comprehensive loss **Changes in Stockholders' Equity (in thousands):** | Metric | Balance, January 1, 2022 | Balance, June 30, 2022 | | :----------------------------------- | :----------------------- | :--------------------- | | Common Stock | $57 | $57 | | Additional Paid-in Capital | $711,912 | $760,975 | | Retained Earnings | $1,829,532 | $1,937,855 | | Treasury Stock | $(177) | $(177) | | Accumulated Other Comprehensive Loss | $(54,207) | $(76,357) | | Noncontrolling interest | $8,720 | $1,653 | | Total Stockholders' Equity | $2,495,837 | $2,624,006 | - Net income for the six months ended June 30, 2022, contributed **$108,323 thousand** to retained earnings[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section categorizes cash inflows and outflows from operating, investing, and financing activities, illustrating liquidity and solvency **Condensed Consolidated Statements of Cash Flows Highlights (in thousands):** | Activity | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :-------------------------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $25,667 | $81,663 | | Net cash used in investing activities | $(123,088) | $(97,390) | | Net cash used in financing activities | $(10,634) | $(18,996) | | Effect of exchange rate changes on cash | $(45,661) | $(3,761) | | Net decrease in cash, cash equivalents and restricted cash | $(153,716) | $(38,484) | | Cash, cash equivalents and restricted cash, end of period | $1,295,631 | $1,285,049 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the financial statements, covering accounting policies, significant events, and specific financial items [1. Business and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20BUSINESS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business operations, industry focus, and key accounting principles applied in preparing the financial statements - EPAM Systems, Inc. is a leading digital transformation services and product engineering company, providing digital platform engineering and software development services globally, primarily in North America, Europe, and Asia[26](index=26&type=chunk) - The company's industry expertise spans financial services, travel and consumer, software and hi-tech, business information and media, and life sciences and healthcare[26](index=26&type=chunk) - As of June 30, 2022, the company held **$40.4 million** in Belarus, **$40.2 million** in Ukraine, and **$17.2 million** in Russia in cash and cash equivalents, which are subject to banking sector instability and are not insured[31](index=31&type=chunk) [2. Impact of the Invasion of Ukraine](index=11&type=section&id=2.%20IMPACT%20OF%20THE%20INVASION%20OF%20UKRAINE) This note details the financial and operational impacts of the Ukraine invasion, including humanitarian commitments, repositioning efforts, and asset impairments - EPAM announced a **$100.0 million** humanitarian commitment to support its employees and their families in and displaced from Ukraine[39](index=39&type=chunk) **Expenses Related to Ukraine Invasion (in thousands):** | Category | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Humanitarian Commitment | $8,400 | $34,000 | | Geographic Repositioning Efforts | $14,400 | $33,100 | | Standby Resources | $9,300 | $11,800 | | Employee Separation Costs (Russia) | $16,200 | $16,200 | | Impairment Charges (Russia) | N/A | $19,600 | | Bad Debt Expense (Russia) | N/A | $8,200 | - The company announced a phased exit of its operations in Russia, leading to impairments of Property and equipment (**$15.1 million**), Operating lease right-of-use assets (**$3.8 million**), and Goodwill (**$0.7 million**) in Q1 2022[42](index=42&type=chunk)[43](index=43&type=chunk) [3. Acquisitions](index=13&type=section&id=3.%20ACQUISITIONS) This note provides information on recent acquisitions, including purchase prices, acquired intangible assets, and their financial impact **Major Acquisitions in 2021 (Purchase Price in millions):** | Acquisition | Date Acquired | Purchase Price | | :---------- | :------------ | :------------- | | PolSource | April 2, 2021 | $148.2 | | CORE | July 23, 2021 | $50.2 | | Emakina | Nov 3, 2021 | $143.4 | - During the six months ended June 30, 2022, the Company completed two acquisitions with a total purchase price of **$13.6 million**, adding **$3.4 million** of intangible assets, primarily customer relationships[56](index=56&type=chunk) **Intangible Assets Acquired (Fair Values as of June 30, 2022, in thousands):** | Intangible Asset | PolSource | CORE | Emakina | | :--------------- | :-------- | :------ | :------ | | Customer relationships | $14,790 | $7,779 | $27,822 | | Trade names | $1,000 | $589 | $2,666 | | Total | $15,790 | $8,368 | $30,488 | [4. Goodwill](index=15&type=section&id=4.%20GOODWILL) This note details the company's goodwill balances by segment, including impairment charges and the impact of foreign currency exchange rate changes **Goodwill by Reportable Segment (in thousands):** | Segment | Balance as of January 1, 2022 | Balance as of June 30, 2022 | | :------------ | :---------------------------- | :-------------------------- | | North America | $217,594 | $216,475 | | Europe | $312,413 | $304,792 | | Russia | $716 | $0 | | Total | $530,723 | $521,267 | - Goodwill impairment of **$686 thousand** was recorded in the Russia segment during the three months ended March 31, 2022, due to the impact of the invasion of Ukraine[58](index=58&type=chunk) - Net foreign currency exchange rate changes resulted in a negative impact of **$18,940 thousand** on goodwill[58](index=58&type=chunk) [5. Fair Value Measurements](index=15&type=section&id=5.%20FAIR%20VALUE%20MEASUREMENTS) This note outlines the fair value measurements of financial assets and liabilities, categorized by valuation input levels **Fair Values of Financial Assets and Liabilities (in thousands, as of June 30, 2022):** | Item | Balance | Level 1 | Level 2 | Level 3 | | :--------------------------------------------------- | :------ | :------ | :------ | :------ | | Foreign exchange derivative assets | $25 | $0 | $25 | $0 | | Rights to acquire noncontrolling interest | $952 | $0 | $0 | $952 | | Foreign exchange derivative liabilities | $44,774 | $0 | $44,774 | $0 | | Contingent consideration | $30,556 | $0 | $0 | $30,556 | - Contingent consideration liabilities increased from **$23,114 thousand** as of January 1, 2022, to **$30,556 thousand** as of June 30, 2022, primarily due to new acquisitions and changes in fair value[67](index=67&type=chunk) - The carrying amount of non-marketable securities without readily determinable fair values was **$27.5 million** as of June 30, 2022, and December 31, 2021[71](index=71&type=chunk) [6. Derivative Financial Instruments](index=17&type=section&id=6.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) This note describes the company's use of derivative financial instruments, primarily foreign exchange forward contracts, for hedging purposes and their financial impact - The company uses foreign exchange forward contracts with durations of twelve months or less, designated as cash flow hedges for forecasted Polish zloty, Hungarian forint, and Indian rupee transactions[72](index=72&type=chunk) - In Q1 2022, Russian ruble foreign exchange forward contracts were de-designated as hedges, and an accumulated loss of **$43.9 million** was reclassified into foreign exchange loss due to the unlikelihood of underlying transactions[74](index=74&type=chunk) **Derivative Financial Instruments (in thousands, as of June 30, 2022):** | Type | Balance Sheet Classification | Asset Derivatives | Liability Derivatives | | :--------------------------------------------------- | :----------------------------------- | :---------------- | :-------------------- | | Foreign exchange forward contracts - Designated as hedging instruments | Prepaid expenses and other current assets | $25 | N/A | | Foreign exchange forward contracts - Designated as hedging instruments | Accrued expenses and other current liabilities | N/A | $12,761 | | Foreign exchange forward contracts - Not designated as hedging instruments | Accrued expenses and other current liabilities | N/A | $32,013 | [7. Leases](index=18&type=section&id=7.%20LEASES) This note provides details on the company's lease costs, cash flows from operating leases, and the maturity schedule of operating lease liabilities **Total Lease Cost (in thousands):** | Period | 2022 | 2021 | | :--------------------------- | :----- | :----- | | Three Months Ended June 30 | $15,983 | $19,237 | | Six Months Ended June 30 | $36,093 | $38,931 | **Operating Cash Flows Used for Operating Leases (in thousands):** | Period | 2022 | 2021 | | :--------------------------- | :----- | :----- | | Six Months Ended June 30 | $30,466 | $35,419 | **Operating Lease Liabilities Maturity (in thousands, as of June 30, 2022):** | Year Ending December 31 | Lease Payments | | :---------------------- | :------------- | | 2022 (remaining) | $23,589 | | 2023 | $39,699 | | 2024 | $33,070 | | 2025 | $25,625 | | 2026 | $20,470 | | Thereafter | $40,068 | | Total Lease Payments | $182,521 | | Less: Imputed Interest | $(10,505) | | Total | $172,016 | [8. Debt](index=19&type=section&id=8.%20DEBT) This note details the company's debt obligations, including its revolving credit facility, outstanding balances, interest rates, and borrowing capacity - The company has a **$700.0 million** revolving credit facility (2021 Credit Agreement) maturing on October 21, 2026, with a potential to increase to **$1,000.0 million**[81](index=81&type=chunk) **Outstanding Debt and Borrowing Capacity (in thousands):** | Metric | As of June 30, 2022 | As of December 31, 2021 | | :--------------------------- | :------------------ | :---------------------- | | Outstanding debt (2021 Credit Agreement) | $25,000 | $25,000 | | Interest rate (2021 Credit Agreement) | 2.5% | 1.0% | | Available borrowing capacity | $675,000 | $675,000 | | Maximum borrowing capacity | $700,000 | $700,000 | - As of June 30, 2022, other debt included **$6.7 million** in short-term bank loans (**1.6%** weighted-average interest rate) and **$5.2 million** in long-term bank loans (**1.4%** weighted-average interest rate), primarily assumed from the Emakina acquisition[85](index=85&type=chunk) [9. Revenues](index=20&type=section&id=9.%20REVENUES) This note disaggregates the company's revenues by customer location, industry vertical, and contract type, providing insights into revenue streams **Consolidated Revenues by Customer Location (in thousands):** | Customer Location | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :---------------- | :--------------------------- | :--------------------------- | | Americas | $721,612 | $1,408,405 | | EMEA | $422,986 | $844,936 | | APAC | $30,176 | $59,758 | | CEE | $20,087 | $53,376 | | Total Revenues | $1,194,861 | $2,366,475 | **Consolidated Revenues by Industry Vertical (in thousands):** | Industry Vertical | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :------------------------- | :--------------------------- | :--------------------------- | | Travel & Consumer | $276,318 | $541,637 | | Financial Services | $250,983 | $511,046 | | Business Information & Media | $197,870 | $392,173 | | Software & Hi-Tech | $195,323 | $384,806 | | Life Sciences & Healthcare | $128,492 | $252,295 | | Emerging Verticals | $145,875 | $284,518 | | Total Revenues | $1,194,861 | $2,366,475 | **Consolidated Revenues by Contract Type (in thousands):** | Contract Type | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :---------------- | :--------------------------- | :--------------------------- | | Time-and-material | $1,059,571 | $2,082,724 | | Fixed-price | $131,180 | $274,743 | | Licensing | $3,024 | $6,856 | | Other revenues | $1,086 | $2,152 | | Total Revenues | $1,194,861 | $2,366,475 | [10. Stock-Based Compensation](index=25&type=section&id=10.%20STOCK-BASED%20COMPENSATION) This note details the company's stock-based compensation expense, outstanding awards, and unrecognized compensation costs for various equity plans **Stock-Based Compensation Expense (in thousands):** | Period | 2022 | 2021 | | :--------------------------- | :----- | :----- | | Three Months Ended June 30 | $27,893 | $23,898 | | Six Months Ended June 30 | $35,005 | $48,451 | - As of June 30, 2022, **2,134 thousand** stock options were outstanding with a weighted-average exercise price of **$95.65**, and **$28.8 million** of unrecognized compensation cost is expected to be recognized over **3.0 years**[102](index=102&type=chunk)[103](index=103&type=chunk) - Unrecognized stock-based compensation cost for equity-classified restricted stock units (RSUs) was **$223.7 million** (over **3.1 years**) and for cash-settled RSUs was **$26.3 million** (over **2.7 years**) as of June 30, 2022[105](index=105&type=chunk)[106](index=106&type=chunk) - Under the 2021 Employee Stock Purchase Plan (ESPP), **55 thousand** shares of common stock were purchased during the six months ended June 30, 2022, with **$6.5 million** of unrecognized compensation cost remaining[111](index=111&type=chunk)[112](index=112&type=chunk) [11. Income Taxes](index=27&type=section&id=11.%20INCOME%20TAXES) This note provides information on the company's worldwide effective tax rates and the factors influencing tax provisions and benefits **Worldwide Effective Tax Rates:** | Period | 2022 | 2021 | | :--------------------------- | :------- | :----- | | Three Months Ended June 30 | (114.9)% | 6.9% | | Six Months Ended June 30 | 5.8% | 6.0% | - The effective tax rates benefited from excess tax benefits of **$7.4 million** (3 months) and **$20.5 million** (6 months) from stock-based awards in 2022[116](index=116&type=chunk) - A one-time benefit of **$7.2 million** was recognized in Q2 2022 due to changing the tax status of certain foreign subsidiaries for U.S. income tax purposes[116](index=116&type=chunk) [12. Earnings Per Share](index=28&type=section&id=12.%20EARNINGS%20PER%20SHARE) This note presents the basic and diluted earnings per share calculations, including the impact of equity-based awards **Earnings Per Share (EPS):** | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.33 | $2.03 | $1.90 | $3.97 | | Diluted EPS | $0.32 | $1.94 | $1.84 | $3.80 | - The number of shares underlying equity-based awards excluded from diluted EPS calculation due to anti-dilutive effect was **461 thousand** (3 months) and **299 thousand** (6 months) in 2022[119](index=119&type=chunk) [13. Commitments and Contingencies](index=28&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's material commitments and potential contingencies, including humanitarian aid and legal matters - The company has a **$100.0 million** humanitarian commitment to support its employees in Ukraine and their families[125](index=125&type=chunk) - Management is not aware of any material litigation or claims that would have a material effect on the company's financial statements[124](index=124&type=chunk) [14. Segment Information](index=29&type=section&id=14.%20SEGMENT%20INFORMATION) This note provides financial data disaggregated by reportable segments, including revenues, operating profit, and long-lived assets by geographic area **Segment Revenues (in thousands):** | Segment | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------ | :--------------------------- | :--------------------------- | | North America | $1,411,368 | $1,006,875 | | Europe | $903,914 | $588,653 | | Russia | $51,193 | $66,613 | | Total | $2,366,475 | $1,662,141 | **Segment Operating Profit/(Loss) (in thousands):** | Segment | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------ | :--------------------------- | :--------------------------- | | North America | $254,154 | $205,363 | | Europe | $92,107 | $101,525 | | Russia | $(17,822) | $7,008 | | Total | $328,439 | $313,896 | **Long-Lived Assets by Geographic Area (in thousands, as of June 30, 2022):** | Location | Amount | | :------------ | :----- | | Ukraine | $70,901 | | Belarus | $64,401 | | United States | $17,186 | | Russia | $0 | [15. Accumulated Other Comprehensive Loss](index=31&type=section&id=15.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This note details the components of accumulated other comprehensive loss, including foreign currency translation adjustments and cash flow hedging instruments **Accumulated Other Comprehensive Loss (in thousands):** | Component | Balance, January 1, 2022 | 6 Months Ended June 30, 2022 Change | Balance, June 30, 2022 | | :--------------------------------------------------- | :----------------------- | :---------------------------------- | :--------------------- | | Foreign currency translation | $(52,747) | $(15,722) | $(68,469) | | Cash flow hedging instruments | $(3,417) | $(6,428) | $(9,845) | | Defined benefit plans | $1,957 | $0 | $1,957 |\ | Total Accumulated Other Comprehensive Loss | $(54,207) | $(22,150) | $(76,357) | [16. Subsequent Events](index=31&type=section&id=16.%20SUBSEQUENT%20EVENTS) This note discloses significant events occurring after the balance sheet date, such as the company's exit from Russian operations - The company's decision to exit operations in Russia is discussed in Note 2, with no new material subsequent events reported[136](index=136&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an executive summary, business updates regarding the war in Ukraine, year-to-date developments, detailed analysis of consolidated and segment results, liquidity, and capital resources, along with forward-looking statements [Executive Summary](index=32&type=section&id=Executive%20Summary) This section provides a high-level overview of the company's business, strategic focus, and operational model - EPAM Systems, Inc. is a leading global provider of digital platform engineering and software development services, focusing on core engineering, advanced technology, digital design, and intelligent enterprise development[140](index=140&type=chunk)[141](index=141&type=chunk) - The company leverages a global delivery model and centralized support functions to enhance productivity and manage operational efficiency[142](index=142&type=chunk) [Business Update Regarding the War in Ukraine](index=32&type=section&id=Business%20Update%20Regarding%20the%20War%20in%20Ukraine) This section details the ongoing impacts of the Ukraine conflict on the company's operations, personnel, and strategic decisions, including the Russia exit - EPAM has a **$100 million** humanitarian aid commitment to support its employees and their families in and displaced from Ukraine, with ongoing relocation efforts to lower-risk locations[145](index=145&type=chunk) - The company announced a phased exit of its operations in Russia on April 7, 2022, discontinuing services to customers located there, and continues to explore strategic alternatives[147](index=147&type=chunk) - The conflict has had and could continue to have a material adverse effect on operations, personnel, and physical assets in Ukraine, as well as on operations in Russia and Belarus due to sanctions and cyberattack concerns[149](index=149&type=chunk) [Moving Forward](index=33&type=section&id=Moving%20Forward) This section outlines the company's business continuity plans, expected future expenses, and the inherent uncertainties in the business outlook due to geopolitical events - EPAM continues to execute business continuity plans, reallocating work to other geographies and maintaining high-quality delivery across more than **50 countries**[150](index=150&type=chunk) - Implementation of business continuity plans, relocation costs, humanitarian commitments, and the Russia exit have resulted in materially increased expenses in the first six months of 2022, with elevated expenses expected in subsequent quarters[151](index=151&type=chunk) - There is significant uncertainty for the business outlook for Q3 2022 and the remainder of the year due to the unpredictable nature of the conflict and government reactions[151](index=151&type=chunk) [Year-to-Date 2022 Developments and Trends](index=34&type=section&id=Year-to-Date%202022%20Developments%20and%20Trends) This section summarizes key financial developments and trends for the first half of 2022, including revenue growth and changes in operating income - For the first six months of 2022, revenues were **$2.366 billion**, an increase of **42.4%** year-over-year, with strong growth (above **25%**) across all industry verticals[153](index=153&type=chunk) - Income from operations as a percentage of revenues decreased to **9.4%** for the six months ended June 30, 2022, from **14.0%** in the prior year, primarily due to incremental expenses related to humanitarian efforts, workforce repositioning, Russia exit costs, and asset impairments[153](index=153&type=chunk) [Summary of Results of Operations](index=34&type=section&id=Summary%20of%20Results%20of%20Operations) This section provides a concise overview of the company's consolidated financial performance, highlighting key metrics and their year-over-year changes **Consolidated Financial Highlights (YoY Change):** | Metric | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :----------------------------- | :--------------------------- | :--------------------------- | | Revenues Growth | 35.6% | 42.4% | | Income from operations Change | -25.7% | -4.4% | | Net income Change | -83.8% | -51.6% | | Diluted EPS Change | -$1.62 | -$1.96 | | Cash from Operating Activities Change | N/A | -$56.0M | - Revenue growth was positively impacted by acquisitions (**6.2%** for Q2, **8.0%** for H1) but negatively impacted by foreign currency exchange rates (**4.5%** for Q2, **3.8%** for H1)[155](index=155&type=chunk) - Decreases in operating income and net income were primarily driven by incremental expenses related to humanitarian efforts, workforce repositioning, Russia exit costs, asset impairments, and foreign exchange losses[156](index=156&type=chunk)[159](index=159&type=chunk) [Critical Accounting Policies](index=35&type=section&id=Critical%20Accounting%20Policies) This section confirms that there have been no material changes to the company's critical accounting policies since the last annual report - There have been no material changes to the company's critical accounting policies as reported in its Annual Report on Form 10-K for the year ended December 31, 2021[164](index=164&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's consolidated financial results, including revenues, expenses, and profitability metrics [Consolidated Results Review](index=36&type=section&id=Consolidated%20Results%20Review) This section presents a comprehensive review of the company's consolidated financial performance, detailing revenue, cost of revenues, and income metrics **Consolidated Results of Operations (in thousands, except percentages and per share data):** | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :-------------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $1,194,861 (100.0%) | $881,366 (100.0%) | $2,366,475 (100.0%) | $1,662,141 (100.0%) | | Cost of revenues (exclusive of depreciation and amortization) | $846,323 (70.8%) | $583,728 (66.2%) | $1,627,159 (68.8%) | $1,103,056 (66.4%) | | Selling, general and administrative expenses | $232,527 (19.5%) | $151,910 (17.2%) | $469,804 (19.9%) | $288,299 (17.3%) | | Depreciation and amortization expense | $22,991 (1.9%) | $20,454 (2.4%) | $47,250 (1.9%) | $38,261 (2.3%) | | Income from operations | $93,020 (7.8%) | $125,274 (14.2%) | $222,262 (9.4%) | $232,525 (14.0%) | | Interest and other income, net | $1,579 (0.1%) | $2,580 (0.3%) | $1,414 (0.1%) | $7,954 (0.4%) | | Foreign exchange loss | $(85,941) (-7.2%) | $(4,693) (-0.5%) | $(108,726) (-4.6%) | $(2,394) (-0.1%) | | Income before provision for income taxes | $8,658 (0.7%) | $123,161 (14.0%) | $114,950 (4.9%) | $238,085 (14.3%) | | (Benefit from)/ provision for income taxes | $(9,946) (-0.9%) | $8,490 (1.0%) | $6,627 (0.3%) | $14,368 (0.8%) | | Net income | $18,604 (1.6%) | $114,671 (13.0%) | $108,323 (4.6%) | $223,717 (13.5%) | | Effective tax rate | (114.9)% | 6.9% | 5.8% | 6.0% | | Diluted earnings per share | $0.32 | $1.94 | $1.84 | $3.80 | [Revenues](index=36&type=section&id=Revenues_MD%26A) This section analyzes the company's revenue growth drivers, including acquisitions and foreign currency impacts, and disaggregates revenues by customer location - Total revenues grew **35.6%** to **$1.195 billion** in Q2 2022 and **42.4%** to **$2.366 billion** in H1 2022, driven by strong demand and acquisitions[168](index=168&type=chunk)[169](index=169&type=chunk) - Acquisitions contributed **6.2%** to revenue growth in Q2 2022 and **8.0%** in H1 2022, while foreign currency fluctuations negatively impacted growth by **4.5%** and **3.8%** respectively[168](index=168&type=chunk)[169](index=169&type=chunk) **Revenues by Customer Location (in thousands):** | Customer Location | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------- | :--------------------------- | :--------------------------- | | Americas | $1,408,405 (59.5%) | $997,719 (60.0%) | | EMEA | $844,936 (35.7%) | $550,653 (33.1%) | | APAC | $59,758 (2.5%) | $45,932 (2.8%) | | CEE | $53,376 (2.3%) | $67,837 (4.1%) | [Cost of Revenues (Exclusive of Depreciation and Amortization)](index=37&type=section&id=Cost%20of%20Revenues%20(Exclusive%20of%20Depreciation%20and%20Amortization)_MD%26A) This section explains the changes in cost of revenues, attributing them to personnel growth, humanitarian efforts, and unbilled resources - Cost of revenues increased **45.0%** to **$846.3 million** in Q2 2022 (**70.8%** of revenues) and **47.5%** to **$1,627.2 million** in H1 2022 (**68.8%** of revenues), compared to **66.2%** and **66.4%** in the prior year periods, respectively[179](index=179&type=chunk)[180](index=180&type=chunk) - The increase was primarily due to a **34.6%** (Q2) and **35.1%** (H1) growth in the average number of production professionals, **$3.3 million** (Q2) and **$22.4 million** (H1) in humanitarian efforts, and **$9.3 million** (Q2) and **$11.8 million** (H1) for unbilled business continuity resources[179](index=179&type=chunk)[180](index=180&type=chunk) - H1 2022 costs were also impacted by a **4.1%** unfavorable foreign currency exchange rate impact, partially offset by **$8.1 million** lower stock-based compensation and a **$21.4 million** reversal of previously accrued discretionary compensation expenses[180](index=180&type=chunk) [Selling, General and Administrative Expenses](index=38&type=section&id=Selling,%20General%20and%20Administrative%20Expenses_MD%26A) This section details the increase in SG&A expenses, driven by personnel costs, geographic repositioning, Russia exit costs, and asset impairments - Selling, general and administrative (SG&A) expenses increased **53.1%** to **$232.5 million** in Q2 2022 (**19.5%** of revenues) and **63.0%** to **$469.8 million** in H1 2022 (**19.9%** of revenues), compared to **17.2%** and **17.3%** in the prior year periods, respectively[182](index=182&type=chunk)[183](index=183&type=chunk) - Key drivers for the increase in Q2 2022 included a **$39.8 million** rise in personnel-related costs, **$14.4 million** for geographic repositioning, **$16.2 million** for Russia employee separation, and **$5.1 million** for Ukraine humanitarian efforts[182](index=182&type=chunk) - H1 2022 increases also included **$19.6 million** in impairment charges related to long-lived assets in Russia and **$8.2 million** in bad debt expense attributable to Russian customers[183](index=183&type=chunk) [Depreciation and Amortization Expense](index=39&type=section&id=Depreciation%20and%20Amortization%20Expense_MD%26A) This section explains the changes in depreciation and amortization expenses, primarily due to investments in equipment and acquired intangible assets - Depreciation and amortization expense increased to **$23.0 million** in Q2 2022 and **$47.3 million** in H1 2022, up from **$20.5 million** and **$38.3 million** in the corresponding prior year periods, respectively[185](index=185&type=chunk) - The increase is primarily due to increased investment in computer equipment and amortization of acquired finite-lived intangible assets[185](index=185&type=chunk) [Interest and Other Income, Net](index=39&type=section&id=Interest%20and%20Other%20Income,%20Net_MD%26A) This section analyzes the changes in interest and other income, net, including the impact of contingent consideration and financial asset impairments - Interest and other income, net, decreased from **$2.6 million** (Q2 2021) and **$8.0 million** (H1 2021) to **$1.6 million** (Q2 2022) and **$1.4 million** (H1 2022)[186](index=186&type=chunk) - The decrease in H1 2022 was mainly impacted by a **$6.1 million** loss from changes in the fair value of contingent consideration (compared to a **$5.6 million** gain in H1 2021) and a **$1.3 million** impairment charge on a financial asset in Ukraine[186](index=186&type=chunk) [Foreign Exchange Loss](index=39&type=section&id=Foreign%20Exchange%20Loss_MD%26A) This section details the significant foreign exchange loss, primarily attributed to the Russian ruble's appreciation on intercompany payables and U.S. dollar assets - A foreign exchange loss of **$85.9 million** was reported in Q2 2022, significantly higher than the **$4.7 million** loss in Q2 2021[236](index=236&type=chunk) - This loss was largely driven by the appreciation of the Russian ruble on the company's intercompany payables denominated in Rubles and U.S. dollar denominated assets held by subsidiaries in Russia[236](index=236&type=chunk) [(Benefit from)/ provision for Income Taxes](index=39&type=section&id=(Benefit%20from)%2F%20provision%20for%20Income%20Taxes_MD%26A) This section explains the effective tax rate fluctuations, influenced by stock-based awards and changes in foreign subsidiary tax status - The effective tax rate was **(114.9)%** for Q2 2022 and **5.8%** for H1 2022, compared to **6.9%** and **6.0%** in the corresponding prior year periods[189](index=189&type=chunk) - The decrease in the effective tax rate was primarily due to higher excess tax benefits from stock-based awards (**$7.4 million** in Q2 2022, **$20.5 million** in H1 2022) and the impact of reclassifying certain foreign subsidiaries for U.S. tax purposes[189](index=189&type=chunk) [Results by Business Segment](index=40&type=section&id=Results%20by%20Business%20Segment) This section provides a detailed breakdown of financial performance across the company's key business segments, including revenues and operating profit [North America Segment](index=41&type=section&id=North%20America%20Segment) This section analyzes the North America segment's revenue growth and operating profit margin, noting impacts from personnel costs and acquisitions **North America Segment Performance (in thousands):** | Metric | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | | Revenues | $723,657 (36.0% YoY growth) | $1,411,368 (40.2% YoY growth) | | Operating Profit | $127,420 (14.5% YoY growth) | $254,154 (23.8% YoY growth) | | Operating Profit Margin | 17.6% (vs 20.9% in Q2 2021) | 18.0% (vs 20.4% in H1 2021) | - The decrease in operating profit margin was attributed to increased personnel-related costs, supplementing delivery resources with standby resources, lower utilization, and lower profit margins from recent acquisitions[195](index=195&type=chunk)[196](index=196&type=chunk) - Software & Hi-Tech remained the largest industry vertical, while Travel & Consumer (**63.9%** growth) and Financial Services (**61.5%** growth) showed the strongest revenue increases in H1 2022[198](index=198&type=chunk) [Europe Segment](index=42&type=section&id=Europe%20Segment) This section details the Europe segment's revenue growth and operating profit changes, influenced by acquisitions and operational costs **Europe Segment Performance (in thousands):** | Metric | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | | Revenues | $451,944 (44.9% YoY growth) | $903,914 (53.6% YoY growth) | | Operating Profit | $35,396 (-29.8% YoY change) | $92,107 (-9.3% YoY change) | | Operating Profit Margin | 7.8% (vs 16.2% in Q2 2021) | 10.2% (vs 17.2% in H1 2021) | - Acquisitions contributed **$50.7 million** (Q2) and **$109.3 million** (H1) to revenue growth[200](index=200&type=chunk)[201](index=201&type=chunk) - In constant currency, Q2 revenue growth was **57.8%**[200](index=200&type=chunk) - Operating profit margin decreased due to increased personnel costs, standby resources, lower utilization, and lower profit margins from recent acquisitions[200](index=200&type=chunk)[201](index=201&type=chunk) [Russia Segment](index=43&type=section&id=Russia%20Segment) This section highlights the significant decline in the Russia segment's revenues and shift to an operating loss due to the exit from Russian operations **Russia Segment Performance (in thousands):** | Metric | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | | Revenues | $19,260 (-48.5% YoY change) | $51,193 (-23.1% YoY change) | | Operating Profit/(Loss) | $1,662 (-$4.4M YoY change) | $(17,822) (vs $7.0M profit in H1 2021) | - The significant decrease in revenues and shift to an operating loss were primarily due to the discontinuance of services to customers in Russia and the phased exit from Russian operations[205](index=205&type=chunk)[206](index=206&type=chunk) - Operating loss was also driven by increased bad debt expense and uncollectible revenue from services provided to Russian customers[206](index=206&type=chunk) [Effects of Inflation](index=43&type=section&id=Effects%20of%20Inflation) This section assesses the impact of inflation on the company's operations, concluding that the effects are not currently significant - While inflation may increase expenses such as wages, the company believes the effects of inflation on its results of operations and financial condition are not significant[209](index=209&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources of liquidity, cash flow activities, and future capital requirements, considering geopolitical uncertainties [Capital Resources](index=44&type=section&id=Capital%20Resources) This section identifies the company's principal sources of liquidity, including cash, short-term investments, and available credit facilities **Principal Sources of Liquidity (in thousands, as of June 30, 2022):** | Resource | Amount | | :------------------------------------------ | :------- | | Cash and cash equivalents | $1,294,000 | | Short-term investments | $60,100 | | Available borrowings under revolving credit facility | $675,000 | [Cash Flows](index=44&type=section&id=Cash%20Flows) This section summarizes the company's cash flow activities from operations, investing, and financing for the reported periods **Summary of Cash Flows (in thousands, for Six Months Ended June 30):** | Activity | 2022 | 2021 | | :-------------------------------------------------- | :------- | :------- | | Net cash provided by operating activities | $25,667 | $81,663 | | Net cash used in investing activities | $(123,088) | $(97,390) | | Net cash used in financing activities | $(10,634) | $(18,996) | | Effect of exchange rate changes on cash | $(45,661) | $(3,761) | | Net decrease in cash, cash equivalents and restricted cash | $(153,716) | $(38,484) | [Operating Activities](index=44&type=section&id=Operating%20Activities) This section analyzes the changes in net cash provided by operating activities, attributing them to compensation payments and humanitarian support - Net cash provided by operating activities decreased by **$56.0 million** to **$25.7 million** in H1 2022, compared to **$81.7 million** in H1 2021[213](index=213&type=chunk) - This decrease was largely driven by higher variable compensation payments based on 2021 performance and cash outflows related to Ukraine humanitarian support and geographic repositioning[213](index=213&type=chunk) [Investing Activities](index=44&type=section&id=Investing%20Activities) This section details the cash used in investing activities, including capital expenditures, time deposits, and acquisitions - Net cash used in investing activities increased to **$123.1 million** in H1 2022, from **$97.4 million** in H1 2021[214](index=214&type=chunk) - This was primarily due to **$41.4 million** in capital expenditures and a **$60.0 million** investment in time deposits[214](index=214&type=chunk) - Cash used for acquisitions, net of cash acquired, decreased significantly to **$10.6 million** in H1 2022 from **$121.3 million** in H1 2021[214](index=214&type=chunk) [Financing Activities](index=44&type=section&id=Financing%20Activities) This section explains the cash flows from financing activities, including employee incentive programs, tax withholdings, and debt repayments - Net cash used in financing activities decreased to **$10.6 million** in H1 2022, from **$19.0 million** in H1 2021[215](index=215&type=chunk) - Cash inflows of **$22.2 million** from employee incentive programs and ESPP were offset by **$20.8 million** in withholding taxes for restricted stock units and **$10.8 million** in debt repayments[215](index=215&type=chunk) [Future Capital Requirements](index=45&type=section&id=Future%20Capital%20Requirements) This section assesses the company's ability to meet future capital needs, considering existing resources and potential impacts from geopolitical events - The company believes existing cash, cash equivalents, short-term investments, and expected cash flow from operations will be sufficient to meet projected operating and capital expenditure requirements for at least the next twelve months[217](index=217&type=chunk) - The invasion of Ukraine and COVID-19 introduce uncertainties that may increase borrowing costs and adversely affect business, results of operations, financial condition, and liquidity[217](index=217&type=chunk) [Off-Balance Sheet Commitments and Arrangements](index=45&type=section&id=Off-Balance%20Sheet%20Commitments%20and%20Arrangements) This section confirms the absence of material off-balance sheet obligations beyond those already disclosed - The company does not have any material obligations under guarantee contracts or other contractual arrangements other than those disclosed in Note 13[220](index=220&type=chunk) [Recent Accounting Pronouncements](index=45&type=section&id=Recent%20Accounting%20Pronouncements_MD%26A) This section refers to Note 1 for information on recent accounting pronouncements and their expected immaterial impact - Refer to Note 1 for additional information on recent accounting pronouncements; no material impact from recently adopted or pending standards is expected[221](index=221&type=chunk) [Forward-Looking Statements](index=45&type=section&id=Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements subject to risks and uncertainties, including those related to geopolitical events - The report contains forward-looking statements based on current expectations and estimates, which are subject to risks, uncertainties, and assumptions[222](index=222&type=chunk) - Important factors, including developments related to the Ukraine invasion and COVID-19 pandemic, may materially and adversely affect actual future results[222](index=222&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, including concentration of credit risk, interest rate risk, and foreign exchange risk, and outlines strategies for managing these risks, such as hedging programs and monitoring cash balances in volatile regions [Concentration of Credit and Other Credit Risks](index=47&type=section&id=Concentration%20of%20Credit%20and%20Other%20Credit%20Risks) This section discusses the company's exposure to credit risks, particularly concerning cash holdings in geopolitically sensitive regions and bad debt expenses - The company holds cash and cash equivalents in Belarus (**$40.4 million**), Ukraine (**$40.2 million**), and Russia (**$17.2 million**) as of June 30, 2022, which are subject to banking sector instability and are not insured[228](index=228&type=chunk) - Bad debt expense of **$8.2 million** was recorded during the six months ended June 30, 2022, for trade receivables from customers located in Russia, reflecting a deterioration of creditworthiness[229](index=229&type=chunk) [Interest Rate Risk](index=47&type=section&id=Interest%20Rate%20Risk) This section describes the company's exposure to interest rate fluctuations on its cash, investments, and borrowings - The company's exposure to interest rate risk is influenced by changes in interest rates on cash, cash equivalent deposits, short-term investments, and borrowings under the 2021 Credit Agreement[230](index=230&type=chunk) - Management does not believe the company is exposed to material direct risks associated with changes in interest rates[230](index=230&type=chunk) [Foreign Exchange Risk](index=47&type=section&id=Foreign%20Exchange%20Risk) This section outlines the company's exposure to foreign currency fluctuations and its hedging strategies, including the impact of the Russian ruble - Approximately **33.5%** of consolidated revenues and **53.0%** of consolidated operating expenses were denominated in currencies other than the U.S. dollar during Q2 2022[232](index=232&type=chunk) - The company's hedging program for Russian ruble foreign exchange forward contracts was de-designated in Q1 2022, resulting in a reclassification of **$43.9 million** accumulated loss into foreign exchange loss[235](index=235&type=chunk) - A foreign exchange loss of **$85.9 million** was reported in Q2 2022, primarily due to the appreciation of the Russian ruble on intercompany payables and U.S. dollar-denominated assets held by subsidiaries in Russia[236](index=236&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2022, and states that there have been no material changes in internal control over financial reporting during the quarter [Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures](index=48&type=section&id=Conclusion%20Regarding%20the%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) This section concludes on the effectiveness of the company's disclosure controls and procedures as of the reporting date - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, providing reasonable assurance for timely and accurate financial reporting[239](index=239&type=chunk) [Changes in Internal Control Over Financial Reporting](index=48&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes in the company's internal control over financial reporting during the quarter - There has been no change in internal control over financial reporting during the quarter ended June 30, 2022, that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[240](index=240&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms that the company is not currently involved in any material legal proceedings and is unaware of any pending or contemplated material legal or governmental actions - The company is not currently a party to any material legal proceeding, nor is it aware of any material legal or governmental proceedings pending or contemplated against it[242](index=242&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section highlights significant risks, particularly those stemming from the conflict in Ukraine, Belarus, and Russia, which have materially impacted the company's business, service delivery, and financial results, including operational disruptions and the effects of sanctions - The conflict in Ukraine has had and could continue to have a material adverse effect on the company's business, customers, service delivery, and financial results, particularly given significant operations and personnel in Ukraine and Belarus, and previously Russia[244](index=244&type=chunk)[246](index=246&type=chunk) - Actions by other countries, including new and stricter sanctions against Russia and Belarus, and customer-implemented blocks on internet communications, have materially affected the company's ability to deliver services from these locations[246](index=246&type=chunk) - Increased operations and hiring in existing or new geographies, especially in more developed economies, are likely to increase expenses and could reduce profitability[247](index=247&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report during the period - There were no unregistered sales of equity securities or use of proceeds to report[251](index=251&type=chunk) [Item 3. Defaults Upon Senior Securities](index=50&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities to report during the period - There were no defaults upon senior securities to report[252](index=252&type=chunk) [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that the disclosure requirements for mine safety are not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[253](index=253&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information required to be disclosed under this item - There is no other information to report under this item[254](index=254&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including certifications and XBRL documents **Key Exhibits Filed:** | Exhibit Number | Description | | :------------- | :---------- | | 31.1* | Certification of the Chief Executive Officer | | 31.2* | Certification of the Chief Financial Officer | | 32.1* | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | | 32.2* | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | | 101.INS | XBRL Instance Document | | 104 | Cover Page Interactive Data File | [SIGNATURES](index=52&type=section&id=SIGNATURES) This section contains the required signatures of the company's principal executive and financial officers, certifying the accuracy and completeness of the quarterly report - The report was signed by Arkadiy Dobkin, Chairman, Chief Executive Officer and President, and Jason Peterson, Senior Vice President, Chief Financial Officer and Treasurer, on August 4, 2022[260](index=260&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Q1 2022 and 2021, detailing the financial impact of the Ukraine invasion, recent acquisitions, and segment performance [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets were $3.51 billion, a slight decrease from year-end 2021, with cash and cash equivalents decreasing to $1.28 billion, while total liabilities decreased and stockholders' equity increased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,276,461 | $1,446,625 | | Total current assets | $2,266,753 | $2,269,480 | | Goodwill | $534,136 | $530,723 | | **Total assets** | **$3,507,570** | **$3,523,227** | | **Liabilities & Equity** | | | | Total current liabilities | $683,252 | $763,420 | | **Total liabilities** | **$953,814** | **$1,027,390** | | **Total stockholders' equity** | **$2,553,756** | **$2,495,837** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q1 2022, revenues increased by 50.1% year-over-year to $1.17 billion, but net income decreased to $89.7 million from $109.0 million, primarily due to a significant foreign exchange loss of $22.8 million and increased operating expenses Condensed Consolidated Statement of Income (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenues | $1,171,614 | $780,775 | | Income from operations | $129,242 | $107,251 | | Foreign exchange (loss)/gain | ($22,785) | $2,299 | | Net income | $89,719 | $109,046 | | Diluted EPS | $1.52 | $1.86 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities for Q1 2022 was $51.8 million, a significant shift from the $12.8 million provided in the prior year, primarily due to working capital changes, with total cash, cash equivalents, and restricted cash ending at $1.31 billion Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | ($51,848) | $12,827 | | Net cash (used in)/provided by investing activities | ($34,563) | $48,461 | | Net cash (used in)/provided by financing activities | ($9,604) | $1,329 | | Net (decrease)/increase in cash | ($141,422) | $50,761 | | Cash, cash equivalents and restricted cash, end of period | $1,307,925 | $1,374,294 | [Note 2. Impact of the Invasion of Ukraine](index=10&type=section&id=Note%202.%20IMPACT%20OF%20THE%20INVASION%20OF%20UKRAINE) The company committed $100 million for humanitarian aid in Ukraine, expensing $25.7 million in Q1 2022, and discontinued services in Russia, incurring impairment charges of $19.6 million and bad debt expense of $8.4 million, with a full exit from Russia expected by Q2 2022 - Announced a **$100.0 million** humanitarian commitment for its employees and their families in Ukraine, with **$25.7 million** expensed in Q1 2022[41](index=41&type=chunk) - Discontinued services to customers in Russia, which triggered impairment tests on the Russia reporting unit's long-lived assets and goodwill[42](index=42&type=chunk) Impairment and Related Charges in Q1 2022 (in millions) | Item | Amount | | :--- | :--- | | Property and equipment, net impairment | $15.1 | | Operating lease right-of-use assets, net impairment | $3.8 | | Goodwill impairment | $0.7 | | Bad debt expense (Russia customers) | $8.4 | - Subsequent to Q1, the company decided to fully exit its operations in Russia, with the phased exit expected to be completed near the end of Q2 2022[46](index=46&type=chunk) [Note 9. Revenues](index=20&type=section&id=Note%209.%20REVENUES) Total revenues for Q1 2022 reached $1.17 billion, up from $780.8 million in Q1 2021, with North America as the largest segment contributor and Travel & Consumer and Financial Services as top industry verticals Revenues by Reportable Segment (in thousands) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | North America | $687,711 | $474,853 | | Europe | $451,970 | $276,704 | | Russia | $31,933 | $29,218 | | **Total** | **$1,171,614** | **$780,775** | Revenues by Industry Vertical - Q1 2022 (in thousands) | Industry Vertical | Revenue | | :--- | :--- | | Travel & Consumer | $265,319 | | Financial Services | $260,063 | | Business Information & Media | $194,303 | | Software & Hi-Tech | $189,483 | | Life Sciences & Healthcare | $123,803 | | Emerging Verticals | $138,643 | [Note 14. Segment Information](index=27&type=section&id=Note%2014.%20SEGMENT%20INFORMATION) Total segment operating profit for Q1 2022 was $164.0 million, with North America contributing the most profit, while the Russia segment recorded a $19.5 million operating loss due to the decision to exit the market Segment Operating Profit/(Loss) (in thousands) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | North America | $126,734 | $94,103 | | Europe | $56,711 | $51,073 | | Russia | ($19,484) | $979 | | **Total segment operating profit** | **$163,961** | **$146,155** | - The company announced its decision to no longer serve customers in Russia and subsequently decided to exit its operations there[125](index=125&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2022 financial performance, highlighting a 50.1% revenue increase to $1.172 billion, with significant focus on the Ukraine war's impact, including a $100 million humanitarian commitment, and strong liquidity with over $1.2 billion in cash [Business Update Regarding the Attack Against Ukraine](index=31&type=section&id=Business%20Update%20Regarding%20the%20Attack%20Against%20Ukraine) EPAM prioritizes employee safety in Ukraine, committing $100 million to humanitarian aid, discontinuing services to Russian customers with a phased exit by Q2 2022, and implementing business continuity plans including accelerated hiring in other regions - The company's highest priority is the safety of its employees and their families in Ukraine, supported by a **$100 million** humanitarian commitment[145](index=145&type=chunk) - EPAM has discontinued services to customers in Russia and expects to complete a phased exit of its Russian operations by the end of Q2 2022[147](index=147&type=chunk) - Business continuity plans are being executed, including accelerating hiring in Central and Eastern Europe, Latin America, and India to mitigate delivery challenges[145](index=145&type=chunk)[149](index=149&type=chunk) [Summary of Results of Operations](index=33&type=section&id=Summary%20of%20Results%20of%20Operations) In Q1 2022, revenues grew 50.1% to $1.172 billion, but net income fell 17.7% to $89.7 million, impacted by war-related costs and a significant foreign exchange loss, leading to a decline in operating margin to 11.0% Q1 2022 vs Q1 2021 Performance Summary (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenues | $1,171,614 | $780,775 | | Income from operations | $129,242 | $107,251 | | Net income | $89,719 | $109,046 | | Diluted EPS | $1.52 | $1.86 | - Revenue growth was **50.1%**, with acquisitions contributing **$77.6 million** (9.9% of growth) and foreign currency changes having a negative impact of **$22.7 million** (2.9%)[154](index=154&type=chunk)[166](index=166&type=chunk) - Operating margin declined to **11.0%** from **13.7%** due to incremental expenses from humanitarian efforts in Ukraine, global workforce repositioning, and asset impairments in Russia[155](index=155&type=chunk) [Results by Business Segment](index=37&type=section&id=Results%20by%20Business%20Segment) North America's revenue grew 44.8% to $687.7 million, Europe's revenue increased 63.3% to $452.0 million with a decreased operating margin, and Russia's revenue grew 9.3% to $31.9 million but posted a $19.5 million operating loss due to market exit decisions - **North America:** Revenue grew **44.8%** to **$687.7 million**. Operating profit margin decreased to **18.4%** from **19.8%** due to higher personnel costs and lower utilization[188](index=188&type=chunk) - **Europe:** Revenue grew **63.3%** to **$452.0 million**, aided by acquisitions. Operating profit margin fell significantly to **12.5%** from **18.5%**, impacted by costs related to business continuity and lower-margin acquisitions[190](index=190&type=chunk) - **Russia:** Revenue grew **9.3%** to **$31.9 million**, but the segment recorded an operating loss of **$19.5 million**, compared to a **$1.0 million** profit in Q1 2021, due to increased bad debt and unrecognized revenue[193](index=193&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, EPAM's liquidity included $1.277 billion in cash and cash equivalents and $675.0 million available under its credit facility, despite net cash used in operating activities being $51.8 million for the quarter due to increased compensation and humanitarian support costs - Primary liquidity sources as of March 31, 2022, include **$1.277 billion** in cash and cash equivalents and **$675.0 million** available under a revolving credit facility[198](index=198&type=chunk) - Net cash used in operating activities was **$51.8 million**, a **$64.7 million** decrease from the prior year, mainly due to higher variable compensation payments and costs related to Ukraine support and employee repositioning[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from credit concentration in Russia, Ukraine, and Belarus, and foreign currency exchange rates, with a $43.9 million loss reclassified from Russian ruble hedges contributing to a total foreign exchange loss of $22.8 million in Q1 2022 - The company faces significant credit risk with cash balances held in Russia, Ukraine, and Belarus. As of March 31, 2022, cash and cash equivalents in these countries totaled **$59.5 million**, **$28.3 million**, and **$51.0 million**, respectively[215](index=215&type=chunk) - In response to the invasion of Ukraine, the company de-designated its Russian ruble foreign exchange forward contracts, reclassifying an accumulated loss of **$43.9 million** into the income statement as a foreign exchange loss[221](index=221&type=chunk) - Total foreign exchange loss for Q1 2022 was **$22.8 million**, compared to a gain of **$2.3 million** in Q1 2021, largely driven by the loss on the Russian ruble hedges[223](index=223&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[226](index=226&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the quarter ended March 31, 2022[227](index=227&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company reports it is not currently a party to any material legal proceedings, nor is it aware of any pending or contemplated material legal or governmental proceedings against it - The company is not currently involved in any material legal proceedings[229](index=229&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section highlights significant risks from the company's substantial operations and personnel in Ukraine, Belarus, and Russia, where the military conflict has had and is expected to continue to have a material adverse effect on the business, including asset damage, customer disruption, sanctions, and increased relocation expenses - As of December 31, 2021, more than half of the company's global delivery, administrative, and support personnel were located in Ukraine, Belarus, and Russia[231](index=231&type=chunk) - The conflict and related sanctions have caused disruptions, including customers altering terms, delaying work, or blocking internet communications with the region, which has had a material adverse effect on service delivery[232](index=232&type=chunk) - The company is exiting its operations in Russia and relocating a significant number of employees from Russia and Belarus, which is likely to increase expenses, particularly compensation costs[232](index=232&type%3Dchunk)[233](index=233&type%3Dchunk)

Financial Data and Key Metrics Changes - In Q1 2022, EPAM generated revenues of $1.17 billion, a year-over-year increase of 50.1% on a reported basis and 53% in constant currency terms [28] - GAAP gross margin for the quarter was 33.4%, compared to 33.5% in Q1 of last year, while non-GAAP gross margin was 33.3%, down from 34.9% [32] - GAAP income from operations was $129 million, or 11% of revenue, compared to $107 million, or 13.7% of revenue in Q1 of last year [33] - Non-GAAP diluted EPS was $2.49, reflecting a 37.6% growth over the same quarter in 2021 [35] - Cash flow from operations for Q1 was a net cash outflow of $51.8 million, compared to a net cash inflow of $13 million in the same quarter of 2021 [36] Business Line Data and Key Metrics Changes - Travel and Consumer grew 90.9%, driven by strong organic growth from retail and travel customers [28] - Financial Services grew 54%, with strong growth from asset management, insurance, and banking [28] - Life Sciences and Healthcare grew 35.9%, while Software and Hi-Tech grew 28.8% [28] - Emerging verticals delivered 59.4% growth, driven by clients in telecommunications, energy, manufacturing, and automotive [28] Market Data and Key Metrics Changes - America represented 59% of Q1 revenues, growing 46% year-over-year [30] - EMEA represented 36% of Q1 revenues, growing 62.7% year-over-year [30] - APAC grew 41.2% year-over-year, representing 3% of revenues [30] Company Strategy and Development Direction - The company is focusing on geographic diversification and has begun scaling operations in India, Latin America, and Central Asia [15][18] - EPAM has committed $100 million in assistance to support employees affected by the war in Ukraine [8] - The company plans to maintain operations in Belarus while expecting lower utilization levels [44] - Future phases of recovery include focusing on revenue growth and profitability, with expectations to return to historical profit levels by the first half of 2023 [21][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of Ukrainian employees and their ability to maintain productivity despite the ongoing conflict [9][77] - The company anticipates ongoing improvement in profitability in the second half of 2022, with a return to positive sequential revenue growth [46] - Management noted that client retention has been better than expected, with new business starting to come in [57][84] Other Important Information - The company has exited operations in Russia and is working to relocate employees to other delivery locations [14][43] - The company expects to reduce the allocation of production staff in the region to about 30% by the end of 2022 [18] Q&A Session Summary Question: Client retention and new work conversion - Management noted that while some clients paused growth, many have returned and expressed appreciation for the productivity of Ukrainian teams [56] Question: Profitability outlook and structural considerations - Management acknowledged lower utilization levels in Q2 but expects improvement in Q3, with ongoing discussions about rate increases with clients [58][61] Question: New talent development centers - Management indicated a focus on India and Latin America for talent development, with ongoing efforts to establish new delivery centers [69] Question: Pricing discussions with clients - Management reported that clients are generally receptive to price increases due to inflation and the value of EPAM's differentiated service [72] Question: Relocation of employees - Management confirmed that relocation efforts are ongoing, with many employees being moved to various countries, including Poland and Turkey [78] Question: New business development - Management stated that new business development has restarted, with positive feedback from clients about EPAM's capabilities [84]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | |------------------------------------------|---------------------------------------------------------------------------------------------------------------|-------------------------| | ...