EPAM SYSTEMS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our Annual Report on Form 10-K for the year endedDecember 31, 2021 and the unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed in the sections entitled "Forward-Looking Statements" in this item and in "Part I. Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . We assume no obligation to update any of these forward-looking statements.
In this quarterly report, "EPAM," "
"EPAM" is a trademark of
Executive Summary
We are a leading global provider of digital platform engineering and software development services to many of the world's leading organizations.
Our customers depend on us to solve their complex technical challenges and rely on our expertise in core engineering, advanced technology, digital design and intelligent enterprise development. We continuously explore opportunities in new industries to expand our core industry client base in software and technology, financial services, business information and media, travel and consumer, and life sciences and healthcare. Our teams of developers, architects, consultants, strategists, engineers, designers, and product experts have the capabilities and skill sets to deliver business results. Our global delivery model and centralized support functions, combined with the benefits of scale from the shared use of fixed-cost resources, enhance our productivity levels and enable us to better manage the efficiency of our global operations. As a result, we have created a delivery base whereby our applications, tools, methodologies and infrastructure allow us to seamlessly deliver services and solutions from our delivery centers to global customers across all geographies, further strengthening our relationships with them. Through increased specialization in focused verticals and a continued emphasis on strategic partnerships, we are leveraging our roots in software engineering to grow as a recognized brand in software development and end-to-end digital transformation services for our customers. The COVID-19 global pandemic remained a source of disruption and uncertainty during the first quarter of 2022. To ensure both safety and business continuity, many of our personnel remain in productive and secure remote working arrangements so they are able to continue to respond to the rapidly changing needs and demands of our customers. We cannot accurately predict the extent to which the COVID-19 pandemic will continue to directly and indirectly impact our business, results of operations and financial condition. For additional information on the impact of the COVID-19 pandemic on our results and for further information on the various risks posed by the COVID-19 pandemic, please read "Part I. Item 1A. Risk Factors" under the sub-heading "Risks Related to COVID-19" which is included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Business Update Regarding the Attack Against Ukraine
OnFebruary 24, 2022 , Russian forces attackedUkraine and its people and EPAM has called for an immediate end to this unlawful and unconscionable attack. EPAM's highest priority is the safety and security of its employees and their families inUkraine and we have been relocating our employees to lower risk locations inUkraine and neighboring countries as well as providing aid through our$100 million humanitarian commitment to our people. The vast majority of ourUkraine employees are in safe locations and operating at levels of productivity consistent with those achieved in 2021. We are also executing our business continuity plans and accelerating hiring across multiple locations in Central andEastern Europe ,Latin America , andIndia . Our Board of Directors is responsible for oversight of our strategic risks, including geopolitical risks, cybersecurity risks, and risks related to our geographic expansion. Since the start of the invasion ofUkraine , our Board has held several special meetings, has received regular updates from management, and has provided oversight of the risks associated with the attack onUkraine and other areas of strategic importance related to the invasion. 31
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We discontinued services to certain sanctioned customers inRussia , announced that we will discontinue services to all customers located inRussia , and expect to complete the phased exit of our operations inRussia at or near the end of the second quarter of 2022. All of our discontinuance and exit activities have been or are expected to be in collaboration with our employees, contractors, and customers, including our commitment to providing transition support for customers in this market. We expect to continue operating inBelarus while executing on ourBelarus -specific business continuity plans. A significant number of our employees inRussia andBelarus have already relocated, and we expect that substantially moreRussia - andBelarus -based employees will relocate to delivery locations outside of those countries. Prior to the attack inFebruary 2022 ,Ukraine was our largest delivery location by number of personnel andBelarus andRussia were our second and third largest delivery locations by number of personnel, respectively. We own an office building and lease office space in a number of cities inUkraine that we use for delivering services to our customers and internally. The impact of the attack on our operations, personnel, and physical assets inUkraine as well as actions taken by other countries, including new and stricter sanctions byCanada , theUnited Kingdom , theEuropean Union , theU.S. and other companies and organizations against officials, individuals, regions, and industries inRussia andBelarus , and each of those country's responses to such sanctions and other actions has had and could continue to have a material adverse effect on our operations. Customers have and may continue to seek altered terms, conditions, and delivery locations for the performance of services, delay planned work or seek services from alternate providers, or suspend, terminate, fail to renew, or reduce existing contracts or services, which could have a material adverse effect on our financial condition. Some of our customers are considering or have implemented steps to block internet communications withRussia ,Ukraine , andBelarus to protect against potential cyberattacks or other information security threats, which has caused a material adverse effect on our ability to deliver our services from those locations. Such material adverse effects disrupt our delivery of services, cause us to shift all or portions of our work occurring in the region to other countries, restrict our ability to engage in certain projects in the region and serve certain customers in or from the region, and could negatively impact our personnel, operations, financial results and business outlook.
Moving Forward
We are executing our business continuity plans and adapting to developments as they occur to protect the safety of our people and handle potential impacts to our delivery infrastructure, including reallocating work to other geographies within our global footprint. We are actively working with our personnel and with our customers to meet their needs and to mitigate delivery challenges. EPAM continues to operate productively in more than 40 countries and is committed to providing consistent high-quality delivery to our customers. Our global delivery centers have sufficient resources, including infrastructure and capital, to support ongoing operations. EPAM continues to support rapid responses to the difficult conditions inUkraine , while maintaining a focus on customers and continuing to evaluate opportunities for long term growth. Implementation and execution of our business continuity plans, relocation costs, our humanitarian commitment to our people inUkraine , and our phased exit from operations inRussia have resulted in materially increased expenses in the first quarter of 2022 and some of those expenses will continue to be elevated in subsequent quarters. We expect that we may incur significant charges in the second quarter of 2022 related to the exit from operations inRussia in addition to the impairment of long-lived assets recorded in the first quarter. We have no way to predict the progress or outcome of the attack againstUkraine because the conflict and government reactions change quickly and are beyond our control. Prolonged military activities or broad-based sanctions could have a material adverse effect on our operations and financial condition and there is significant uncertainty for our business outlook for the second quarter and remainder of 2022. The information contained in this section is accurate as of the date hereof, but may become outdated due to changing circumstances beyond our present awareness or control. For additional information on the various risks posed by the attack againstUkraine and the impact in the region, please read "Part I. Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 and "Part II. Item 1A. Risk Factors" in this quarterly report.
Year-to-Date 2022 Developments and Trends
Our business was disrupted by the invasion ofUkraine in the later part of the first quarter of 2022. For the first three months of 2022, our revenues were$1.172 billion , an increase of 50.1% over$780.8 million reported for the same period of 2021. For the three months endedMarch 31, 2022 we have experienced strong growth across all of our verticals with all of the verticals growing above 25% year over year. We have built an increasingly diversified portfolio across numerous verticals, geographies and service offerings which enables us to continue to grow revenues. Income from operations as a percentage of revenues decreased to 11.0% as compared to 13.7% largely driven by incremental expenses associated with EPAM's humanitarian efforts inUkraine , the global repositioning of our workforce and impairment of long-lived asset charges triggered by the discontinuance of services to customers located inRussia . 32 -------------------------------------------------------------------------------- Table of Contents Summary of Results of Operations
The following table presents a summary of our results of operations for the
three months ended
Three Months Ended
March 31,
2022 2021
(in thousands, except per share data and percentages)
Revenues $ 1,171,614 100.0 % $ 780,775 100.0 %
Income from operations $ 129,242 11.0 % $ 107,251 13.7 %
Net income $ 89,719 7.7 % $ 109,046 14.0 %
Effective tax rate 15.6 % 5.1 %
Diluted earnings per share $ 1.52 $ 1.86 The key highlights of our consolidated results for the three months ended
•Revenues for the first quarter of 2022 were$1.172 billion , representing a 50.1% increase from$780.8 million reported in the same period last year. Revenue growth was strong in the first quarter of 2022 as a result of robust demand for our services. The first quarter of 2022 was negatively impacted by$22.7 million or 2.9% due to changes in certain foreign currency exchange rates as compared to the corresponding period last year. Growth from acquisitions contributed$77.6 million to our revenues for the three months endedMarch 31, 2022 . •Income from operations grew 20.5% to$129.2 million during the three months endedMarch 31, 2022 as compared to the corresponding period in 2021. Expressed as a percentage of revenues, income from operations for the first quarter of 2022 decreased to 11.0% compared to 13.7% in the first quarter last year. During the three months endedMarch 31, 2022 , income from operations as a percentage of revenues was negatively impacted by incremental expenses associated with EPAM's humanitarian efforts inUkraine , the global repositioning of our workforce and impairment of long-lived asset charges triggered by the discontinuance of services to customers inRussia . •Our effective tax rate was 15.6% and 5.1% for the three months endedMarch 31, 2022 and 2021, respectively. The increase in the effective tax rate in the three months endedMarch 31, 2022 , as compared to the corresponding period in the prior year, is primarily attributable to lower excess tax benefits recorded upon vesting or exercise of stock-based awards as a percentage of pre-tax income and the impact of changes to certainU.S. tax regulations. •Net income decreased 17.7% to$89.7 million for the three months endedMarch 31, 2022 , compared to$109.0 million reported in the corresponding period last year. Expressed as a percentage of revenues, net income was 7.7% for the first quarter of 2022, a decrease of 6.3% compared to 14.0% reported in the corresponding period of 2021. Net income for the three months endedMarch 31, 2022 was impacted by the incremental expenses associated with EPAM's humanitarian efforts inUkraine , the global repositioning of our workforce and impairment of long-lived asset charges triggered by the discontinuance of services to customers inRussia as well as a foreign exchange loss primarily driven by losses from our foreign exchange forward contracts associated with the Russian ruble.
•Diluted earnings per share was
•Cash used in operating activities was$51.8 million during the three months endedMarch 31, 2022 as compared to cash provided by operating activities of$12.8 million in the corresponding period last year. This decrease was largely driven by a higher level of variable compensation payments based on 2021 performance, accelerated payment of variable compensation during the first quarter of 2022 compared to the first quarter of the prior year, and cash outflows related to EPAM's humanitarian support efforts inUkraine and geographic repositioning.
The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
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Critical Accounting Policies
The discussion and analysis of our financial position and results of operations is based on our unaudited condensed consolidated financial statements which have been prepared in accordance withU.S. GAAP. The preparation of these condensed consolidated financial statements in accordance withU.S. GAAP requires us to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a recurring basis, we evaluate our estimates and judgments, including those related to revenue recognition and related allowances, impairments of long-lived assets including intangible assets, goodwill and right-of-use assets, income taxes including the valuation allowance for deferred tax assets, and stock-based compensation. Actual results may differ materially from these estimates under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.
During the three months ended
Results of Operations
The following table sets forth a summary of our consolidated results of
operations for the periods indicated. This information should be read together
with our unaudited condensed consolidated financial statements and related notes
included elsewhere in this quarterly report. The operating results in any period
are not necessarily indicative of the results that may be expected for any
future period.
Three Months Ended
March 31,
2022 2021
(in thousands, except percentages and per share data) Revenues
$ 1,171,614 100.0 %$ 780,775 100.0 %
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)(1) 780,836 66.6 % 519,328 66.5 % Selling, general and administrative expenses(2) 237,277 20.3 % 136,389 17.5 % Depreciation and amortization expense 24,259 2.1 % 17,807 2.3 % Income from operations 129,242 11.0 % 107,251 13.7 % Interest and other (loss)/income, net (165) - % 5,374 0.7 % Foreign exchange (loss)/gain (22,785) (1.9) % 2,299 0.3 % Income before provision for income taxes 106,292 9.1 % 114,924 14.7 % Provision for income taxes 16,573 1.4 % 5,878 0.7 % Net income$ 89,719 7.7 %$ 109,046 14.0 % Effective tax rate 15.6 % 5.1 % Diluted earnings per share$ 1.52 $ 1.86
(1)Includes
(2)Includes
Consolidated Results Review
Revenues
During the three months endedMarch 31, 2022 , our total revenues grew to$1.172 billion or 50.1% compared to the corresponding period in 2021. Revenues have been positively impacted by growth from acquisitions, which contributed 9.9% to our revenue growth, and negatively impacted by fluctuations in foreign currency exchange rates which decreased our revenue growth by 2.9% during the three months endedMarch 31, 2022 as compared to the same period last year. 34
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Revenues by customer location for the three months endedMarch 31, 2022 and 2021 were as follows: Three Months Ended March 31, 2022 2021 (in thousands, except percentages) Americas(1) $ 686,793 58.7 %$ 470,321 60.2 % EMEA(2) 421,950 36.0 % 259,372 33.2 % CEE(3) 33,289 2.8 % 30,134 3.9 % APAC(4) 29,582 2.5 % 20,948 2.7 % Revenues$ 1,171,614 100.0 %$ 780,775 100.0 %
(1)
(2)EMEA includes revenues from customers in
(3)CEE includes revenues from customers in
(4)APAC, or
During the three months endedMarch 31, 2022 ,the United States continued to be our largest customer location, with revenues increasing 46.7% to$657.0 million during the first quarter of 2022 from$448.0 million in the first quarter of 2021. The top three revenue contributing customer location countries in EMEA were theUnited Kingdom ,Switzerland andNetherlands , generating$153.2 million ,$81.8 million and$50.2 million in revenues, respectively, during the three months endedMarch 31, 2022 . Revenues from customers in these three countries were$93.5 million ,$67.6 million , and$33.0 million , respectively, in the corresponding period last year. Revenues in the EMEA region were negatively impacted by the weakening of the euro and the British pound relative to theU.S. dollar during the three months endedMarch 31, 2022 compared to the same period in the previous year. During the three months endedMarch 31, 2022 , revenues in the CEE geography included$30.7 million from customers inRussia , an increase of$3.0 million as compared to the corresponding period of 2021. The increase in revenues was primarily attributable to growth in the Financial Services and Travel & Consumer verticals during the three months endedMarch 31, 2022 compared to the same period in the previous year. OnMarch 4, 2022 , the Company announced that it will discontinue its services to customers located inRussia . EPAM is committed to providing transition support for customers in this market. The Company is also actively evaluating its other operations in the region. As a result of this announcement, the revenues from this geography are expected to materially decline in the future. During the three months endedMarch 31, 2022 , revenues from customers in the APAC region increased by$8.6 million , or 41.2% over the corresponding periods of 2021, mainly due to growth in the Financial Services vertical.
Cost of Revenues (Exclusive of Depreciation and Amortization)
The principal components of our cost of revenues (exclusive of depreciation and amortization) are salaries, bonuses, fringe benefits, stock-based compensation, project-related travel costs and fees for subcontractors who are assigned to customer projects. Salaries and other compensation expenses of our delivery professionals are reported as cost of revenues regardless of whether the employees are actually performing customer services during a given period. Our employees are a critical resource, necessary for our continued success and therefore we expect to continue hiring talented employees and providing them with competitive compensation programs. During the three months endedMarch 31, 2022 , cost of revenues (exclusive of depreciation and amortization) was$780.8 million representing an increase of 50.4% from$519.3 million in the corresponding period of 2021. The increase was primarily due to an increase in compensation costs largely driven by the 42.5% growth in the average number of production professionals during the three months endedMarch 31, 2022 as compared to the same period in 2021 as well as$19.2 million incremental costs associated with our humanitarian efforts inUkraine and$2.6 million of unbilled business continuity resources, partially offset by the reversal of$21.4 million of previously accrued discretionary compensation expenses and$11.5 million lower stock-based compensation expenses. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 66.6% and 66.5% in the first quarter of 2022 and 2021, respectively. The year-over-year increase is primarily due to increased costs associated with our humanitarian efforts inUkraine and unbilled business continuity resources partially offset by the reversal of previously accrued discretionary compensation expenses and by a lower level of stock-based compensation expense due to mark-to-market benefit from our cash-settled RSUs in the first quarter of 2022. 35
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Selling, General and Administrative Expenses
Selling, general and administrative expenses represent expenditures associated with promoting and selling our services and general and administrative functions of our business. These expenses include the costs of salaries, bonuses, fringe benefits, stock-based compensation, severance, bad debt, travel, legal and accounting services, insurance, facilities including operating leases, advertising and other promotional activities. During the three months endedMarch 31, 2022 , selling, general and administrative expenses were$237.3 million representing a 74.0% increase as compared to$136.4 million in the corresponding period of 2021. The increase in selling, general and administrative expenses was driven by a$45.7 million increase in personnel-related costs including stock-based compensation expense largely driven by the 40.7% growth in the average number of non-production professionals during the three months endedMarch 31, 2022 compared to the same period in 2021,$19.6 million of impairment charges related to our long-lived assets inRussia ,$18.7 million of expenses associated with our geographic repositioning of our workforce,$8.4 million of bad debt expense attributable to customers located inRussia , and$6.5 million of expenses associated with our humanitarian efforts inUkraine . Expressed as a percentage of revenues, selling, general and administrative expenses increased 2.8% to 20.3% for the three months endedMarch 31, 2022 as compared to the same period from the prior year, primarily driven by higher personnel-related costs, impairment charges related to our long-lived assets inRussia , increased costs associated with geographic repositioning of our workforce and our humanitarian efforts inUkraine , and higher bad debt expenses attributable to customers located inRussia .
Depreciation and Amortization Expense
During the three months endedMarch 31, 2022 , depreciation and amortization expense was$24.3 million , as compared to$17.8 million in the corresponding period last year. The increase in depreciation and amortization expense is primarily the result of increased investment in computer equipment used by our employees and amortization of acquired finite-lived intangible assets. Expressed as a percentage of revenues, depreciation and amortization expense decreased to 2.1% during the three months endedMarch 31, 2022 , as compared to 2.3% in corresponding period of 2021.
Interest and Other (Loss)/Income, Net
Interest and other (loss)/income, net includes interest earned on cash and cash equivalents and employee loans, gains and losses from certain financial instruments, interest expense related to our borrowings and changes in the fair value of contingent consideration. Interest and other (loss)/income, net decreased from a gain of$5.4 million during the three months endedMarch 31, 2021 to a loss of$0.2 million during the three months endedMarch 31, 2022 , which is primarily attributable to a$3.4 million loss in the first quarter of 2022 for the change in fair value of contingent consideration as compared to a$4.9 million gain in the corresponding period of 2021 reflecting revised expectations for the performance of certain acquisitions and a$1.3 million charge related to the impairment of a financial asset inUkraine .
Foreign Exchange (Loss)/Gain
For discussion of the impact of foreign exchange fluctuations see "Item 3. Quantitative and Qualitative Disclosures About Market Risk."
Provision for Income Taxes
In determining the interim provision for income taxes, we historically have used
an estimated annual effective tax rate, which is based on expected annual profit
before tax, statutory tax rates and tax planning opportunities available in the
various jurisdictions in which EPAM operates. Certain significant or unusual
items are separately recognized in the quarter in which they occur and can be a
source of variability in the effective tax rates from quarter to quarter. During
the first quarter of 2022, we recorded the interim tax provision using the
discrete method rather than using an estimated annual effective tax rate. The
discrete method treats the year-to-date period as if it was the annual period
and determines the income tax expense or benefit on that basis. The discrete
method is applied when the application of the estimated annual effective tax
rate is impractical because it is not possible to reliably estimate the annual
effective tax rate. In subsequent quarters, we will continue to evaluate the
practicality of utilizing the annual effective tax rate method.
Determining the consolidated provision for income tax expense, deferred income
tax assets and liabilities and any potential related valuation allowances
involves judgment. We consider factors that may contribute, favorably or
unfavorably, to the overall effective tax rate in the current year as well as
the future. These factors include statutory tax rates and tax law changes in the
countries where we operate and excess tax benefits upon vesting or exercise of
equity awards as well as consideration of any significant or unusual items.
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Our effective tax rate was 15.6% and 5.1% for the three months endedMarch 31, 2022 and 2021, respectively. The increase in the effective tax rate in the three months endedMarch 31, 2022 , as compared to the corresponding period in the prior year, is primarily attributable to lower excess tax benefits recorded upon vesting or exercise of stock-based awards as a percentage of pre-tax income and the impact of changes to certainU.S. tax regulations. Our provision for income taxes benefited from excess tax benefits recorded upon vesting or exercise of stock-based awards of$13.1 million and$21.5 million during the three months endedMarch 31, 2022 and 2021, respectively.
Results by Business Segment
Our operations consist of three reportable segments:North America ,Europe , andRussia . The segments represent components of EPAM for which separate financial information is available and used on a regular basis by our chief executive officer, who is also our chief operating decision maker ("CODM"), to determine how to allocate resources and evaluate performance. Our CODM makes business decisions based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain corporate expenses are not allocated to specific segments as these expenses are not controllable at the segment level. Such expenses include certain types of professional fees, certain taxes included in operating expenses, compensation to non-employee directors and certain other general and administrative expenses, including compensation of specific groups of non-production employees. In addition, the Company does not allocate stock-based compensation, amortization of intangible assets acquired through business combinations, goodwill and other asset impairment charges, acquisition-related costs and certain other one-time charges. These unallocated amounts are combined with total segment operating profit to arrive at consolidated income from operations. We manage our business primarily based on the managerial responsibility for its client base and market. As managerial responsibility for a particular customer relationship generally correlates with the customer's geographic location, there is a high degree of similarity between customer locations and the geographic boundaries of our reportable segments. In some cases, managerial responsibility for a particular customer is assigned to a management team in another region and is usually based on the strength of the relationship between customer executives and particular members of EPAM's senior management team. In such cases, the customer's activity would be reported through the management team's reportable segment. OnMarch 4, 2022 , the Company announced that it will discontinue its services to customers located inRussia and is committed to providing transition support for customers in this market. Segment revenues from external customers and segment operating profit, before unallocated expenses, for theNorth America ,Europe andRussia reportable segments for the three months endedMarch 31, 2022 and 2021 were as follows: Three Months Ended March 31, 2022 2021 (in thousands) Segment revenues: North America$ 687,711 $ 474,853 Europe 451,970 276,704 Russia 31,933 29,218 Total segment revenues$ 1,171,614 $ 780,775 Segment operating profit/(loss): North America$ 126,734 $ 94,103 Europe 56,711 51,073 Russia (19,484) 979
Total segment operating profit
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North America Segment
During the three months endedMarch 31, 2022 , revenues for theNorth America segment increased$212.9 million , or 44.8%, compared to the same period last year and segment operating profit increased$32.6 million , or 34.7%, compared to the same period last year. During the three months endedMarch 31, 2022 , revenues from ourNorth America segment were 58.7% of total segment revenues, a decrease from 60.8% reported in the corresponding period of 2021. TheNorth America segment's operating profit margin decreased to 18.4% during the first quarter of 2022 from 19.8% in the first quarter of 2021. This decrease is primarily attributable to increases in personnel-related costs and lower utilization during the first quarter of 2022 compared to the same period in 2021. The following table presentsNorth America segment revenues by industry vertical for the periods indicated: Three Months Ended March 31, Change 2022 2021 Dollars Percentage Industry Vertical (in thousands, except percentages) Software & Hi-Tech$ 156,282 $ 125,586 $ 30,696 24.4 % Travel & Consumer 122,247 69,429 52,818 76.1 % Financial Services 120,335 69,740 50,595 72.5 % Life Sciences & Healthcare 111,371 75,589 35,782 47.3 % Business Information & Media 110,946 87,205 23,741 27.2 % Emerging Verticals 66,530 47,304 19,226 40.6 % Revenues$ 687,711 $ 474,853 $ 212,858 44.8 % During the three months endedMarch 31, 2022 compared to the same period in the prior year, revenues from each vertical in theNorth America segment grew in excess of 24% and Software & Hi-Tech remained the largest industry vertical in theNorth America segment, which was a result of the continued focus on working with our technology customers. Travel and Consumer grew 76.1% during the three months endedMarch 31, 2022 primarily due to growth from retail customers. Financial Services grew 72.5% during the three months endedMarch 31, 2022 due to growth in a group of wealth management customers that are in our top 20 customers. Business Information & Media grew 27.2% during the three months endedMarch 31, 2022 primarily due to growth from an existing customer in our top 10 customers. Life Sciences & Healthcare grew 47.3% during the three months endedMarch 31, 2022 primarily due to growth from customers added in the last 24 months.
Europe Segment
During the three months endedMarch 31, 2022 ,Europe's segment revenues were$452.0 million , representing an increase of$175.3 million , or 63.3%, from the same period last year. Acquisitions completed in the last 12 months contributed$58.6 million to revenues during the three months endedMarch 31, 2022 . Revenues were negatively impacted by changes in foreign currency exchange rates during the first quarter of 2022. Had ourEurope segment revenues been expressed in constant currency terms using the exchange rates in effect during the first quarter of 2021, we would have reported revenue growth of 69.0%.Europe's segment revenues accounted for 38.6% and 35.5% of total segment revenues during the three months endedMarch 31, 2022 and 2021, respectively. During the first quarter of 2022, the segment's operating profit increased 11.0% to$56.7 million compared to the first quarter of 2021. Expressed as a percentage of revenues,Europe's segment operating profit decreased to 12.5% compared to 18.5% in the same period of the prior year. Segment operating profit was negatively impacted by increased personnel-related costs in part attributable to supplementing delivery resources on certain projects with standby resources able to support projects if delivery resources impacted by the invasion ofUkraine become unable to work, lower utilization during the first quarter of 2022 compared to the first quarter of 2021, and lower profit margins from acquisitions completed in the last twelve months. 38
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The following table presentsEurope segment revenues by industry vertical for the periods indicated: Three Months Ended March 31, Change 2022 2021 Dollars Percentage Industry Vertical (in thousands, except percentages) Travel & Consumer$ 136,788 $ 64,624 $ 72,164 111.7 % Financial Services 117,330 78,040 39,290 50.3 % Business Information & Media 82,901 60,157 22,744 37.8 % Software & Hi-Tech 32,454 20,973 11,481 54.7 % Life Sciences & Healthcare 12,282 15,351 (3,069) (20.0) % Emerging Verticals 70,215 37,559 32,656 86.9 % Revenues$ 451,970 $ 276,704 $ 175,266 63.3 % Revenues in Travel & Consumer grew 111.7% during the three months endedMarch 31, 2022 as compared to the corresponding period in 2021 primarily due to increased demand from customers in the retail and distribution industries and revenues from acquisitions completed during the last twelve months which contributed$29.2 million to revenue growth. During the three months endedMarch 31, 2022 , revenues in Financial Services experienced 50.3% growth, primarily driven by increased revenues from commercial and investment banking customers and revenues from acquisitions completed during the last twelve months which contributed$7.8 million to revenue growth. During the three months endedMarch 31, 2022 , the increase in revenues in Business Information & Media was largely attributable to the expansion of services provided to one of our top 5 customers. For the three months endedMarch 31, 2022 , the increase in revenues in the Software & Hi-Tech vertical was largely attributable to the expansion of services provided to one of our top 20 customers. Revenues in Emerging Verticals experienced higher growth primarily attributable to growth in existing customers in the telecommunications and automotive industries and revenues from acquisitions completed during the last twelve months which contributed$11.3 million to revenue growth during the three months endedMarch 31, 2022 .
Russia Segment
During the three months endedMarch 31, 2022 , revenues from ourRussia segment accounted for 2.7% of total segment revenues and increased$2.7 million , or 9.3%, as compared to the corresponding period in the prior year. The increase in revenues was primarily attributable to growth in Financial Services and Travel & Consumer partially offset by the weakening of the Russian ruble relative to theU.S. dollar in the first quarter of 2022. During the three months endedMarch 31, 2022 , operating loss from theRussia segment was$19.5 million , representing a decrease of$20.5 million , as compared to a$1.0 million operating profit in the corresponding period last year largely driven by increased bad debt expense and expenses incurred for services provided to customers for which revenue was not recognized as collectibility was not considered probable after announcing the discontinuance of services to customers inRussia . The following table presentsRussia segment revenues by industry vertical for the periods indicated: Three Months Ended March 31, Change 2022 2021 Dollars Percentage Industry Vertical (in thousands, except percentages) Financial Services$ 22,398 $ 21,078 $ 1,320 6.3 % Travel & Consumer 6,284 4,958 1,326 26.7 % Software & Hi-Tech 747 505 242 47.9 %
Business Information & Media 456 387 69 17.8 %
Life Sciences & Healthcare 150 175
(25) (14.3) %
Emerging Verticals 1,898 2,115 (217) (10.3) %
Revenues $ 31,933 $ 29,218 $ 2,715 9.3 %
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Revenues in theRussia segment are generally subject to fluctuations and are impacted by the timing of revenue recognition associated with the execution of contracts and the foreign currency exchange rate of the Russian ruble to theU.S. dollar. OnMarch 4, 2022 , EPAM announced that it will discontinue services to customers located inRussia and is committed to providing transition support for customers in this market. As a result of this announcement, the revenues from this segment are expected to materially decline in the future. See Note 2 "Impact of the Invasion ofUkraine " for more information regarding the Company's decisions to no longer serve customers inRussia and the resulting impairments of long-lived assets. Effects of Inflation Economies in some countries where we operate have periodically experienced high rates of inflation. Periods of higher inflation may affect various economic sectors in those countries and increase our cost of doing business there. Inflation may increase some of our expenses such as wages. While inflation may impact our results of operations and financial condition and it is difficult to accurately measure the impact of inflation, we believe the effects of inflation on our results of operations and financial condition are not significant.
Liquidity and Capital Resources
Capital Resources
Our cash generated from operations has been our primary source of liquidity to fund operations and investments to support the growth of our business. As ofMarch 31, 2022 , our principal sources of liquidity were cash and cash equivalents totaling$1,276.5 million as well as$675.0 million of available borrowings under our revolving credit facility. See Note 8 "Debt" of our condensed consolidated financial statements in "Part I. Item 1. Financial Statements (Unaudited)" for information regarding our debt.
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