Company Announcements

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2025

2024

2025

2024

Revenues

$    1,353,443

$    1,146,597

$ 2,655,135

$ 2,312,062

Operating expenses:

Cost of revenues (exclusive of depreciation and amortization)

964,012

810,857

1,916,020

1,645,191

Selling, general and administrative expenses

231,681

194,058

450,598

392,511

Depreciation and amortization expense

31,274

21,121

62,711

43,267

Income from operations

126,476

120,561

225,806

231,093

Interest and other income, net

3,519

12,036

9,333

27,078

Foreign exchange (loss)/gain

(6,227)

1,213

(16,954)

(706)

Income before provision for income taxes

123,768

133,810

218,185

257,465

Provision for income taxes

35,742

35,165

56,677

42,577

Net income

$         88,026

$         98,645

$     161,508

$     214,888

Net income per share:

Basic

$              1.56

$              1.71

$           2.86

$           3.72

Diluted

$              1.56

$              1.70

$           2.84

$           3.67

Shares used in calculation of net income per share:

Basic

56,319

57,594

56,548

57,716

Diluted

56,536

58,149

56,898

58,540

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)

As of

June 30,

2025

As of

December 31,

2024

Assets

Current assets

Cash and cash equivalents

$    1,041,344

$    1,286,267

Trade receivables and contract assets, net of allowance of $4,833 and $5,612, respectively

1,158,956

1,002,175

Prepaid and other current assets

170,175

137,806

Total current assets

2,370,475

2,426,248

Property and equipment, net

201,619

207,667

Operating lease right-of-use assets, net

129,332

128,244

Intangible assets, net

435,891

436,418

Goodwill

1,209,463

1,181,575

Deferred tax assets

240,852

269,799

Other noncurrent assets

123,064

100,522

Total assets

$    4,710,696

$    4,750,473

Liabilities

Current liabilities

Accounts payable

$         45,278

$         44,702

Accrued compensation and benefits expenses

458,612

484,952

Accrued expenses and other current liabilities

184,643

201,356

Income taxes payable, current

18,461

50,395

Operating lease liabilities, current

40,433

39,634

Total current liabilities

747,427

821,039

Long-term debt

25,038

25,194

Operating lease liabilities, noncurrent

97,220

98,426

Deferred tax liabilities, noncurrent

98,063

92,362

Other noncurrent liabilities

74,586

82,301

Total liabilities

1,042,334

1,119,322

Commitments and contingencies

Equity

Stockholders' equity

Common stock, $0.001 par value; 160,000 shares authorized; 55,696 shares issued
and outstanding at June 30, 2025, and 56,869 shares issued and outstanding at December 31, 2024

56

57

Additional paid-in capital

1,286,067

1,190,222

Retained earnings

2,360,343

2,555,796

Accumulated other comprehensive income/(loss)

21,314

(116,864)

Total EPAM Systems, Inc. stockholders' equity

3,667,780

3,629,211

Noncontrolling interest in consolidated subsidiaries

582

1,940

Total equity

3,668,362

3,631,151

Total liabilities and equity

$    4,710,696

$    4,750,473

EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(Unaudited)

(In thousands, except percentages and per share amounts)

Reconciliation of year-over-year revenue growth as reported on a GAAP basis to revenue growth on an organic constant currency basis is presented in the table below:

Three Months Ended

June 30, 2025

Six Months Ended

June 30, 2025

Revenue growth as reported

18.0 %

14.8 %

Inorganic revenue growth

(10.8) %

(11.0) %

Foreign exchange rates impact

(1.9) %

(0.5) %

Revenue growth on an organic constant currency basis

5.3 %

3.3 %

Reconciliation of various income statement amounts from GAAP to non-GAAP for the three and six months ended June 30, 2025 and 2024:

Three Months Ended

June 30, 2025

Six Months Ended

June 30, 2025

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Cost of revenues (exclusive of depreciation and amortization)⁽¹⁾

$ 964,012

$  (18,232)

$ 945,780

$  1,916,020

$  (42,773)

$  1,873,247

Selling, general and administrative expenses⁽²⁾

$ 231,681

$  (40,349)

$ 191,332

$ 450,598

$  (74,572)

$ 376,026

Income from operations⁽³⁾

$ 126,476

$    76,417

$ 202,893

$ 225,806

$ 152,837

$ 378,643

Operating margin

9.3 %

5.7 %

15.0 %

8.5 %

5.8 %

14.3 %

Net income⁽⁴⁾

$    88,026

$    68,765

$ 156,791

$ 161,508

$ 133,298

$ 294,806

Diluted earnings per share

$        1.56

$       2.77

$        2.84

$        5.18

Three Months Ended

June 30, 2024

Six Months Ended

June 30, 2024

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Cost of revenues (exclusive of depreciation and amortization)⁽¹⁾

$ 810,857

$  (17,504)

$ 793,353

$  1,645,191

$  (40,520)

$  1,604,671

Selling, general and administrative expenses⁽²⁾

$ 194,058

$  (30,620)

$ 163,438

$ 392,511

$  (64,713)

$ 327,798

Income from operations⁽³⁾

$ 120,561

$    53,945

$ 174,506

$ 231,093

$ 117,003

$ 348,096

Operating margin

10.5 %

4.7 %

15.2 %

10.0 %

5.1 %

15.1 %

Net income⁽⁴⁾

$    98,645

$    43,621

$ 142,266

$ 214,888

$    72,624

$ 287,512

Diluted earnings per share

$        1.70

$       2.45

$        3.67

$        4.91

Items (1) through (4) above are detailed in the table below with the specific cross-reference noted in the appropriate item.

Three Months Ended

June 30,

Six Months Ended

June 30,

2025

2024

2025

2024

Stock-based compensation expenses

$         18,161

$         16,937

$     42,084

$     39,294

Poland R&D incentives^(a)

(505)

—

(505)

—

Humanitarian support in Ukraine^(b)

576

567

1,194

1,226

Total adjustments to GAAP cost of revenues⁽¹⁾

18,232

17,504

42,773

40,520

Stock-based compensation expenses

20,397

18,747

44,930

41,181

Cost Optimization charges^(c)

16,275

9,513

21,586

16,530

Other acquisition-related expenses

292

456

862

1,679

Humanitarian support in Ukraine^(b)

3,282

2,119

7,014

4,739

Geographic repositioning^(d)

—

104

—

825

One-time charges/(benefits)

103

(319)

180

(241)

Total adjustments to GAAP selling, general and administrative expenses⁽²⁾

40,349

30,620

74,572

64,713

Amortization of acquired intangible assets

17,836

5,821

35,492

11,770

Total adjustments to GAAP income from operations⁽³⁾

76,417

53,945

152,837

117,003

Foreign exchange loss/(gain)

6,227

(1,213)

16,954

706

Gain on financial instrument

—

—

(350)

—

Change in fair value of contingent consideration included in Interest and other income, net

(232)

1,485

(1,969)

2,535

Provision for income taxes:

Tax effect on non-GAAP adjustments

(18,291)

(10,632)

(38,201)

(25,027)

Tax shortfall/(excess tax benefits) related to stock-based compensation

1,106

103

563

(20,763)

Net discrete charge/(benefit) from tax planning^(e)

3,538

(67)

3,464

(1,830)

Total adjustments to GAAP net income⁽⁴⁾

$         68,765

$         43,621

$   133,298

$     72,624

(a) We have excluded from non-GAAP results the portion of the benefit from Poland R&D incentives related to qualifying activities performed in 2023 as it represents a nonrecurring one-time benefit.

(b) Humanitarian support in Ukraine includes expenses related to EPAM's $100 million humanitarian commitment in response to Russia's invasion of Ukraine to support EPAM professionals and their families in and displaced from Ukraine. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.

(c) Cost Optimization charges include severance, facilities and contract termination charges incurred in connection with the programs initiated in the third quarter of 2023, second quarter of 2024, and second quarter of 2025. Consistent with the Company's historical non-GAAP policy, costs incurred in connection with formal restructuring initiatives have been excluded from non-GAAP results as these are one-time and unusual in nature.

(d) Geographic repositioning includes expenses associated with the relocation to other countries of employees based outside of Ukraine impacted by the war and geopolitical instability in the region, and includes the cost of accommodations, travel and food. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.

(e) One-time charge or benefit related to the implementation of tax planning to disregard certain foreign subsidiaries as separate entities for U.S. income tax purposes. Consistent with the Company's historical non-GAAP policy, the charge or benefit related to the implementation of tax planning has been excluded from non-GAAP results as it is one-time and unusual in nature.

EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Guidance Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(Unaudited)

The below guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. Actual results may differ materially from the Company's expectations depending on factors discussed in the Company's filings with the Securities and Exchange Commission.

Reconciliation of expected year-over-year revenue growth on a GAAP basis to expected revenue growth on an organic constant currency basis is presented in the table below:

Third Quarter 2025

Full Year 2025

(at midpoint of range)

Revenue growth

17.6 %

13.0% to 15.0%

Foreign exchange rates impact

(1.0) %

(0.9) %

Inorganic revenue growth

(10.4) %

(9.1) %

Revenue growth on an organic constant currency basis

6.2 %

3.0% to 5.0%

Reconciliation of expected GAAP to non-GAAP income from operations as a percentage of revenues is presented in the table below:

Third Quarter 2025

Full Year 2025

GAAP income from operations as a percentage of revenues

10.0% to 11.0%

9.0% to 10.0%

Stock-based compensation expenses

3.2 %

3.2 %

Included in cost of revenues (exclusive of depreciation and amortization)

1.6 %

1.6 %

Included in selling, general and administrative expenses

1.6 %

1.6 %

Humanitarian support in Ukraine^(b)

0.3 %

0.3 %

Cost Optimization charges^(c)

0.7 %

0.7 %

One-time charges and Other acquisition-related expenses^(f)

— %

— %

Amortization of acquired intangible assets

1.3 %

1.3 %

Non-GAAP income from operations as a percentage of revenues 

15.5% to 16.5%

14.5% to 15.5%

(f) EPAM has not included the impact of potential future One-time charges including asset impairments, unusual gains and losses, and Other acquisition-related expenses because the Company is unable to predict these amounts with reasonable certainty.

Reconciliation of expected GAAP to non-GAAP effective tax rate is presented in the table below:

Third Quarter 2025

Full Year 2025

GAAP effective tax rate (approximately)

25.0 %

26.0 %

Excess tax benefits/(tax shortfall) related to stock-based compensation

0.1 %

(0.1) %

Net discrete charge from tax planning^(e)

— %

(0.7) %

Tax effect on non-GAAP adjustments

(1.1) %

(1.2) %

Non-GAAP effective tax rate (approximately)

24.0 %

24.0 %

Reconciliation of expected GAAP to non-GAAP diluted earnings per share is presented in the table below:

Third Quarter 2025

Full Year 2025

GAAP diluted earnings per share

$1.89 to $1.97

$6.48 to $6.64

Stock-based compensation expenses

0.79

3.13

Included in cost of revenues (exclusive of depreciation and amortization)

0.39

1.53

Included in selling, general and administrative expenses

0.40

1.60

Poland R&D incentives^(a)

—

(0.01)

Humanitarian support in Ukraine^(b)

0.07

0.28

Cost Optimization charges^(c)

0.16

0.68

Amortization of acquired intangible assets

0.33

1.27

Change in fair value of contingent consideration

—

(0.03)

Foreign exchange loss

0.04

0.34

Provision for income taxes:

     Tax effect on non-GAAP adjustments

(0.30)

(1.25)

     Tax shortfall related to stock-based compensation

—

0.01

Net discrete charge from tax planning^(e)

—

0.06

Non-GAAP diluted earnings per share

$2.98 to $3.06

$10.96 to $11.12