EPAM - Earnings call transcript Q2 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to EPAM Systems' Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note this conference is being recorded.

At this time, I will turn the conference over to David Straube, Head of Investor Relations.

begin. may You

David Straube

And have Operator. for everyone. now, By company's Thank your good copy should results. received quarter release of you second you, XXXX morning, the the earnings

available you at With If on are and and call Dobkin, today's a Financial Jason not, copy Peterson, me epam.com, the Chief investors have in section. CEO President; Arkadiy is Officer.

These to today's to of the Before and some call contain described we company's that may begin, in subject remind earnings SEC I you statements forward-looking uncertainties as release statements. would risks filings. made on are like the comments and

Additionally, all are have available results section located are and been quarterly our non-GAAP investors earnings materials references measures to reported in in GAAP website. reconciled our to the that of

will Ark. now over I call the said, to turn that With

Arkadiy Dobkin

David. of growth XX% a highlights few would everyone. joining Thanks Thank good terms. quarter. million, financial revenues approximate in $XXX morning, reflecting with for year-over-year We like start you, or us. And XX% delivered constant to currency second from our I an

non-GAAP delivered QX from which $X.XX, approximately represents we share of earnings growth Additionally, XXXX. XX% of per strong

different occurring our challenge offer to as and complex And we adapt market feel all to our are positioned as do increasingly by Our led extremely serve, own to technologies markets digitally pace. every offerings to and transform which well to to levels landscape, by and in reflects will business the another. speed at to half organization at EPAM. from clients the from new driven able native very across solutions impacts is side; we that these for we believe We continue position of and we that to our competitive long in one continue Disruption industry, their needs. first growth our companies changes challenges, the trends ourselves during the fast serve create solve XXXX new have separating dynamic are opportunities continue

drive the our push talent That to market journey change nonstop operate our as in EPAM of all increase is in bringing involves the new operations, and product, clients. and and ways our by offerings geographies our is we expansions own So and relevancy to across which engineering, Everything challenge the aspects done and our we consulting to acquisition our capabilities. serve value digital next including core additions to strategy, services level. in engagement to

of Our of recent which our acquisition is we in illustration a announced Competentum, July, good direction.

part education it in employee revenue capabilities learning small as portfolios is digital proposition and Competentum across our both and company of terms of and extend the base, internal a our EPAM While allows needs. our clients'

development is believe professional in digital important reach becoming as just the the transformation space strategy We as guides.

organization powers require who platforms in each digital mindset enterprise-wide to efforts enterprise, of while skills hunger teams and for digital-first parts upgrades. clients a of evolve the help evolve This the life transformative product highly capabilities EPAM too. how our across that constant step As and cross-functional new their should to continues is the become adaptive will for to another nature and organizations successful example cycle master critical itself approach of different an real and have

happening the what types to call received of like changes illustrations of to Jason, has hand would good to first few are recognitions I highlight a us. which EPAM over Before I XXXX, in of the are half

insight top was agency FH able to by past, this XXXX market Agencies over directions. the in U.K. other a combine We callers XX relevantly custom differentiated of truckloads recognized in and commerce Forrester, demonstrate focus critical largest reference our content, we've and port, business a them across for differentiate the Or of build [indiscernible], EPAM transformation. report, there expose, context historically of years engineering EPAM employees high-volume portionings. and analyze, agencies among delivery the and wellness. and hooks position way, to in your digital from the XXXth Forrester digital is; while on largest among these to and still and customer of ago. growing up to are infuse itself customer all believe the in us, transactional their strong market experience design, do be our just has agencies several demonstrated skilled area and also Plus, and parts able for in and based the context. brand still short, to to the have manage integrate among it should software experience presence sometime. digital that in product/service keep architectures States, elevate and creative different definition to and times As have into many to that capabilities placed In shared XX,XXX EPAM XX already create, of top top practices. breaking systems data United with execution be all In annual thought and experience the we it's

large EPAM our Forrester out of migration application side as because in-demand are providers and services cloud-native those of capable higher set important the service the of also of of the by and another those spectrum, we was modernization it's the the to addressing much of architectures. needs and on of listed, proportion legacy usually recognized both significant We point one in And diverse companies that, smallest offerings. player most fastest-growing think all

key growth like during would X remind support points for about remain about also calls we I previous talked which everyone our important to very to story. us

also And industry only to offering is a enable smarter that but grow us digital and consulting global real deliver capabilities attract to to to clients. talent continuous talents platforms our services investing new as to have, effort. adaptive, make experience continue bring well in and we allowing internal our smartly. apply and and operations not also turn better agile it value the to we truly to to build retain to our And our to blend engineering our technology and together in continue We

Despite us time, here to demand to with quarter execute for to it we like results, macro-level delivered high-quality and some undefined another the continues in So summarize. uncertainties, stay seems and grow underscores ability they about market ever-changing that of which expertise high-end the our to an and talked of which before consistent, are we capabilities.

With I quarter give over that said, will our the Jason? on hand to to second Jason call now details more results.

Jason Peterson

and In several Thank quarter, you, delivering good results everyone. produced we across second And morning, revenues key while both operational in Ark. metrics. strong profitability the

growth the reflecting exchange a $XXX.X XX.X% and of X.X%. impact a are constant negative from at quarter. Here Revenue a highlights on in year-over-year of currency, at foreign million, growth reported came basis XX.X% in few -- came a

patterns verticals, We demand with in those this by growth of broad-based most specific Our industry previous quarter few a quarters. industries. strong, growth slower across balanced were consistent relatively saw

Looking year-over-year at XX.X% QX growth. across vertical, revenue delivered verticals: our industry services, our Financial largest

increasing and for asset management in processing. We demand continue offerings to payment see

America. In with at our reflected addition, accounts financial X% lower North portfolio. in projects for share in modest represents services of reported clients a revenues, the consumer currently few and growing Growth [Technical of growth X.X% grew part continued insurance, which along Difficulty] constant a of in Europe, in QX consumer ramp-down terms. a rapidly currency

in high broad-based posted and health our growth tech information we life and in client which primarily and reflecting XX.X% Rounding across XX.X% out which grew as as QX. emerging the and programs; in in new strong growth both by and media growth performance, delivered and energy. well XX.X%, both driven sciences clients existing care, verticals, industries grew saw Software quarter, and XX.X% growth vertical business in very telecommunications

XX.X% constant or geographic And a QX or, grew finally, year-over-year, and our or XX.X% North year-over-year, APAC representing in or perspective, From of largest grew constant our XX.X% our America, representing region QX now Europe, in XX.X% revenues. represents our constant X.X% constant currency. XX.X% currency. XX.X% QX representing of grew our in of currency. grew CIS, in of X.X% currency; revenues, XX.X% revenues, revenues, XX.X%, XX.X% XX.X%

In the the in outside XX% to top clients second was clients XX.X%, last our year. quarter, approximately growth compared quarter XX same top our and was XX growth

across by we Our revenue quarter the underpinned serve. results of clients from of portfolio growth are a set drivers diverse the

Moving income the down statement.

Our was XX.X% same XX.X% quarter quarter for compared year. gross margin for the QX the compared non-GAAP of in year. XX.X% quarter of GAAP last last to in was in the same the in XX.X% last was last came year, to XX.X% XX.X% of SG&A SG&A and QX to gross compared period compared for Non-GAAP to XX.X% margin GAAP year. XX.X% revenue revenue at of

million to Our our support in of our compared the or GAAP revenue primarily intended income was SG&A $XX.X longer-term spend on focused or in or operations and XX.X% million in QX of QX of growth. last to from of facilities the last year. is compared employees $XX.X operations of XX.X% to quarter investments was in and quarter $XX.X XX.X% $XX.X million in or was revenue in revenue year. of million QX Non-GAAP income XX.X% from revenue

quarter. options the includes the in the stock lower at at which $XX quarter in Our stock exercises in XX.X%, the excess beginning million exercised to million units. GAAP investing effective number came rate tax quarter, actual than which option forecasted the a substantially The benefit was result restricted of tax stock related lower benefit the $X.X of for of was a

Our tax adjustments, the non-GAAP includes excludes and XX.X%. non-GAAP effect tax benefit effective tax which rate, of excess was the

in a quarter. basis lower-than-expected per reflects over $X.XX, the outstanding. shares Diluted in GAAP on same $X.XX, was QX, diluted quarter earnings increase which approximately were fiscal XXXX. XX.X% there XX.X In reflecting the the was benefit a share tax EPS Non-GAAP million

in inorganic support flow cash million last to $XX.X flow compared our the million compensation flow million last sheet. $XX.X compared quarter strategy. were same this to was free annual and million in our growth operations ongoing our flow Reflected QX $XX.X payments in our and Cash quarter the cash balance of from program the variable quarter to $XX in same year. And to Turning cash year. related was

end XXXX XX these days of We fiscal levels. remain at XX managing on QX the DSO last our of days to at was in QX focused days year. compared DSO XX and

a on a We net addition year-over-year of the ended hires delivery a locations Moving quarter low than quarter. delivery increase primarily production by driven to new our and attrition global XX,XXX operational over professionals, XX% professionals with the few in in X,XXX more and metrics.

at Our Utilization and count ended XX.X% total QX. more same quarter in head the year last to XX% XX,XXX employees. XX.X% was than in compared

will and now unfavorable demand, Based XX% in exchange growth at Now our business fiscal a least be factoring least continued let's currency foreign constant reported terms, turn outlook. strong XX% X% at Starting to impact. in XXXX. revenue with estimated on

be in income XX.X% the operations expect be to to to range from to to XX.X% We income continue from of range in XX%. GAAP non-GAAP continue to operations the XX% of and

which excess tax of be level our a rate We effective includes our effective lower an updated tax to XX%. will benefit. GAAP be expect tax now approximately rate continue assumption to And approximately for XX%, non-GAAP

diluted GAAP least Non-GAAP $X.XX the EPS now diluted which diluted to expect impact now $X.XX, the modest for we XX.X rate. profitability reflects will share, tax GAAP year. EPS be expected weighted the million outstanding. average per least improvement share now full expect a be earnings reflecting year, For with for full fully count in higher the at We of at shares effective

For in constant in currency least XX% QX will least third Revenues growth unfavorable impact. quarter, FY at at estimated the producing reported terms, at of factoring for X% $XXX XX% million 'XX. and a rate foreign be exchange a least

be income in expect from XX%. to range the XX.X% income be to to operations and to in GAAP We XX% non-GAAP of the XX.X% of from range operations

XX%. non-GAAP to approximately GAAP our will tax expect and rate approximately be XX%, We effective effective be rate tax

share. per Earnings

least EPS shares the quarter. million expect GAAP of we at diluted diluted for non-GAAP outstanding. average $X.XX a expect for least the weighted lastly, We XX.X fully at be count be And will quarter, EPS will share $X.XX and

to approximately in in measurements. for Finally, of a impact the to be adjustment assumptions with of non-GAAP is remaining be GAAP remaining approximately The $XX.X $XX.X is tax-effective around to the approximately in to QX. million each million QX. foreign the $X $X.X expected $X.X Amortization intangibles for quarters. second non-GAAP expected compensation expense quarters. $X.X and is million is to few approximately million key exchange million support of Stock and be $X our that expected loss expected each QX QX in The of million be in a a half, million loss

$X and expect We in in benefit tax to around QX. QX excess be $X million million

other We one part each In our summary. lastly, the of quarters. to is assumptions: more assumption remaining for income interest GAAP non-GAAP that $X.X And be and not million to expect of

for serve. demand We by second which results, are projects our offerings strong our pleased with continued quarter a and mix of underpinned the services, reflect industries across diverse we

year. second the Our fiscal positions success first EPAM for of half for well continued in XXXX the half

let's questions. up that, the open for With call

Operator

Instructions]. [Operator

line the from Maggie first from Our comes of question Nolan William Blair.

Margaret Nolan

types transformation on, you to then the talk transformation base How like internally, in considered than you about in those employee that have can of adequately digital X what's touched truly much wanted or so scope trained the talk is scopes feel asking do that I digital And you Arkadiy. years skills? way, roughly are different maybe what about you're a how would defining digital? focus in perhaps more Or now ago? been of

Arkadiy Dobkin

of is it much digital this, what category people today. training. majority could But we example, well. or we're or increase XX,XXX, work some refer activities consider at our Again, as you analytics this versus know very Forrester on of for if other platform or could our it's have sharing employees because product versus in our questions versus classifications digital focusing software list engagement different type digital, be digital XX% back sometimes in which as are yes, less. services it's like similar lot which the attributes will as reporting is probably product we because, most be even this not saying, we it's what very core RPA very where more to is just because Maggie, than is I in as think and say a difficult And of from like categories, on classification. a modernization, I we as in that -- can EPAM, to of category short, okay, we actually of Inside of it XX,XXX core difficult in reading profile, [indiscernible]. the definitely I put other which companies that already we're our digital actually our here not legacy but other least platform am engineering, on majority -- do what considered of And is which

pretty I it of not was internally but helping our our service world question. point the we're bit and education. answer, of key clients it only train be we but also same what another strong is a might people said, as it difficult And on focused go were And So We're to majority through building keen on sharing. this, for very a little fuzzy transformation. educational

Margaret Nolan

quarter more X consistent M&A about forward? for acquisition thinking support contribution you funnel And you've talked we just drive organic then of in acquisitive And then now so that? And little the the kind also the the do organic going year to And to the Jason, engine current did? Okay. about you've the market. was then does recent in with efforts last what and relevancy the growth continue been in years, a full more the acquisition start expected bit the that a

Arkadiy Dobkin

thinking X or quarter how for per is of we're constantly the consistency opportunities. like the it, and from plans improve part we're point, about acquisitions next think, of not looking fit X how looking -- to do right only I is That's for what capabilities. consistency to our acquisitions we're There So that any year. looking constantly per kind -- to no quarter but

comment it's on companies, I in think that In for small, the looking how that but might not far not well approach, here. can was which the the so some growth, focus of terms minimal it's ones Jason roll-up impacting very because we of excluding kind the our we numbers. are hit big future, as competency-led

Jason Peterson

Yes. absolutely No, is correct. Ark

of all. relatively the has we'd X% changed we to inorganic So year, modest-sized contribution. when from revenue guided an not approximately at assumption acquisitions. we the These beginning up or get are that of at included had That

growth XX.X%. question on However, So the just was the QX: rate reported to answer

currency below quarter. adjust X.X% impact, the we inorganic growth a you will And the rate the so actually constant XX.X%. for had about was contribution foreign X% be just exchange, for If

So be from a XX.X% growth at would constant for currency organic QX we rate, XXXX. of

Operator

from is Citigroup. with the The Ashwin next of Shirvaikar question line

Ashwin Shirvaikar

Very good quarter Congratulations... here.

Arkadiy Dobkin

Thank you.

Ashwin Shirvaikar

business a than question obviously much and is verticals. lot in effort creating better-diversified investments to spent of have The you be I across a used here time it many and

go model into more creep you to it As past and just next have expect or operating financial continuing phase leverage X? the to we should year some becomes that scale built, the in about what we

Jason Peterson

Yes, talk focused And maybe more have I We're business. that next around we'll think -- I business discussion would then some us what's grow the about on here's continuing how maybe I'll excess very to so about XX% happening this year. we the year. annually. vague And to investments make think allow of in

We in you've if probably we're at operate half to to it'd been investments, in range the continue to clearly will we've about to And in to looking that XX% going going so going upper the focus XX%. that some your in is on half think, I range learning we're you make of continue XXXX. operate XX%. that that model, to looked to And firmly and And what of a very we're of Ark show second in professional we're at What development. think XX% going to range. the is the see investments platforms talked

I And XX% about the the so XX% range. probably business to continue in you more think think to again should

Ashwin Shirvaikar

the And clients can remind of you another Understood. European downs any XQ ups travel remind unrelated and have of then billing wind-down days. numbers end? Can us the when vertical. you relates is and as XQ the if it And sort question us to

Jason Peterson

Yes.

didn't part hear the the I So question. first of

Ashwin Shirvaikar

The the the regards travel first part with vertical. of question was

of remind clients. ends? You're some that when you phasing Can wind-down the European

Jason Peterson

with yes. a degree the of Yes, of, that some I'm and I say, sort wind-down. we've let's I consumer not softness with our understand European sure know seen that --

accounts growing to levels accounts. quarter you a sure producing which So high you but I'm -- we've lower And holidays specific kind the demand it's more that complicated, what sort to declining. bit a of And is growth sort see because of think rate growth know of days portfolio. little performance as summer as also a this, From will. a in billed we've you've where But I that diversified are either bit the more some given of any have we in area wind-down seen a if of that but that's follow if vacation, in some lower we than of drive got it's much past, and able that more QX/QX, a flat QX. it's got don't you were in we mixed have is generally the I that

is days a QX profitability bit in I half. in little half, you quite here improvement is generally margin And for do And so What maybe gross second high of profitability -- uptick the in first margin expect we've then don't in in level time that QX. what gross strong usually so see, but of see quarter at gross us, would what in of additional because a been the operating period. in a billed a big normally though, the the you or positives some margin I is

Arkadiy Dobkin

volatility So there to yes, even line attribute starts basically, regular volatility usual for in with specifically and but again we expression. more can Ashwin, starts different softness retailers, short, us And past. are and all for some verticals in the that this in U.K. on more

Ashwin Shirvaikar

ups downs. The Okay. regular and

understood. Okay. Got it,

Operator

Kupferberg line question comes next Bank Our Jason of from of America. the with

Jason Kupferberg

some how I on follow and got I in the just obviously And make I wanted re-acceleration we commentary comps your second Had verticals: incremental half? stabilization? Are actually for there's framework any X% move just while or so there, half? the quarter. currency wanted get up in there. should just think macro Is Any up assume lingering headwinds, to sustainable about back expecting easier, to a clarify the on Do think maybe rebound we've from the constant topic services? on the mean the on nice you travel half re-acceleration then just that and financial to of in second you're we of Ashwin's kind right question sure maybe to consumer. I but the

Jason Peterson

Yes.

last of terms longer-term think diversified it's and customers, I in the that kind a So EPAM It's verticals; comment. Ark in of I'd and got has industry business both both what echo broadly said the new terms in of -- customers.

and ago, you're you in care here quarter, so single-digit been we're year drive quarter, in might were A see any and talking point health to quarter, standpoint. and financial back rate. single And digit, given than about one in life high-teens couple in another. in this going was this the vertical we sciences, a growth XX% more years a from services you've growth over firmly out, rate Last as growth growth

very And I think If little second demand so see travel we've growth yes, of management. services demand consumer, to but a mixed about think little bit From increase for the could growing potentially strong a overall. talk is the asset portfolio. cards -- quite are and but insurance processing, to small in rapidly. we I and bit continue we that I strong we're financial And were seeing result payment still in us, in a standpoint, again in seeing it's half,

demand And feel about in so financial the I market. I'm good And hopeful around the -- overall services. we

Jason Kupferberg

their does strong. Because over list How client say, today let's top to months obviously continues very expect work And in XX XX the XX be to composition of list, XX clients some months to that ago? scale non-top newer in the the XX EPAM? versus, with next changes you would continue say, the Okay. material XX as to look your growth

Jason Peterson

I little top seen One I last the customers split and X companies of of of We've call, X X that's quarters a in talked movement and about customers. maybe think as thing the position. noteworthy, changed couple this here bit is our slightly into last maybe

to what top in XX be is our so XX effectively really customers used X. And

at concentration time, again say look changes some so bit of as movement I but reasonably a our a little over but would bit And consistent. that those comparisons probably you of little

Operator

of from question Bryan comes Bergin The line with next Cowen. the

Bryan Bergin

software And savings Competentum; broadly, an you more strategy ask how should does more any what of to is it platforms there a of it move wanted on does as a as for the talking then toward of just Is we -- about this function offering? acquisition or And goes. go I internal signal the internally, as quantifying? we benefits that and forward? and as far think worth

Arkadiy Dobkin

Yes, capabilities this internally some but we constantly. investing are any area educational making well, as impact in

company be SG&A And especially So we would specific small. is any pretty, don't pretty, savings. think pretty it the

we ourself, to So it's would but -- pretty build be have which again small. would it's aiding some capabilities,

So from generally and from them we platforms, extension because more software integration, buildup. we'd -- accelerators business believe our do the coming considering in as right in differentiation customer the

not So license be considering really strong or it it revenue very that will we're separate subscription line with of business revenue.

We how a have of think quickly. of many but faster to technology very instead software it's the modest of be become large small. very, portfolio which this at do that's because these accelerators pretty And it's today it good accelerators we us standard being start then, implementations. very a how fast to right would that our of as and jump with a to well some time, goal: percentage but start legacy very the And changing, upgrade in build will giving work, more same stuck

Bryan Bergin

obviously are in of -- on share Okay, that strong. you you're in then to work And is you And that's I is taking very then vertical ask Can currently? wanted care. believe The that health vertical comment on that the the helpful. market? mix

Arkadiy Dobkin

life science. Initially mostly planning this time. we're around was So it R&D some for

Now I component. to component health expanded we science life think to as And we care, commercial expanded well. insurance

it's least was of for point one it ago kind practically now X, X. concentration right So basically, X at if growth, years

Jason Peterson

in seeing the health care business space we're more also consulting as And Yes. well.

Arkadiy Dobkin

science. overlap good more both side part integral complementing And and between sets. it's where becoming care bioinformatics think them and also I payers of there providers life from much specific R&D is with health providers, from becoming are realtime all because and a And commercial understanding of general there lot of so data

it's very So important.

to it's So I healthy think grow. enough

Operator

next line Cantor is of from with Fitzgerald. Foresi Joseph question the The

Joseph Foresi

Your services fairly I your -- across growth balanced. mean verticals. And well within think I be seems all IT to well balanced historically

I that's rare. IT think, historically, services fairly in

the above describe strategy of verticals some seen you what from why is, newer first areas So and acceleration in companies? has us verticals just other historically maybe of your in we've my your can you question been sort in think and other those for

Arkadiy Dobkin

to that our many this repeated it's think as -- goes times. history I and well, we

we out what strategy, of And deliver this today, through engineering technology we product our a this, our with advise people to major -- last of and on from services this X, and with very that's ability to So a it our to but the were to we industries, understand be approach, And we into closely we pointed software new is to a also digital strong to production now consultative call years little And engineering just today built they companies, on building clients to integrating clearly consultative to of a would what how then but performance heritage, with quality. view, beginning also our advice we're pretty put ago, X extension the consistent build not right Like more and well, than -- products. with -- verticals started as again we've someone during top think years, But extended and probably us point with were XX the I we're kind source of understand right and digital platforms components. engineering blending scalability which clients. initially, we else. started a revenue. and the it lot with components; bit help specifically helping a be to we're And quickly transformation to good adopting need when very come companies new today, skills. was in

Joseph Foresi

Got it.

Okay. And then just as a follow-up.

that some the opportunity over talk up maybe On be that run? about this and year, about long you term the can of margin margins your them outlook, place obviously thoughts could gave guidance drive down. or but in margin How have should we the you over for about any the you thinking levers long

Jason Peterson

proven of -- that can that we say, anywhere XX% kind we've I range. run, think XX% I would we're in to

near a the I And that of just bottom you to closer end see of range. us here we ago, top quarters over think, So were years running range. in sort couple the sometimes that or these

a that's is think billed income we greater us investments has drive looking quarter XX% is making continue the on the think adjusted the And the utilization of to and to in from to about to just to to be as to really to we're it us dates revenue but some in in continue run continue and part XX% been comfortably XX% based and growth. think because of to to going probably sort operations talking I what volatility XX% that think by range. drive are able part annual probably of Arkadiy that, I about than -- XX% will

Operator

comes from the Research. Andrew of The question Bauch line with next Wolfe

Andrew Bauch

touch growth guys to you year. calling an clients some in and again. uncertainty the the showed out in wanted once you're your the seeing there you Just some expectations past guys around on update maybe the Brexit Europe in what solid so quarter such, and give despite the in market segments on for the could of rest pretty just

Arkadiy Dobkin

we're level we here working the line with also is very So even across before, volatility what in as well different -- and that there because I is much of shared global certain this accounts. geographies and think probably with some verticals

like the to -- versus we are region one predict in so accounts give while in the specific general, And guidance faster sometimes, region, global really us these numbers. on in total like for it's extremely growing difficult other volatility segment, in in

companies but still example, in services in it's type kind to last we're we some What react. quarter. very numbers. of unclear knows There enough the what which and will for getting will provide for Brexit, of clearly share deliver results here the So We be which how of what, nobody be more that [indiscernible] QX, we comfortable better how balance -- demand of we softness markets. to have the and is that in for able about subset our will thinking we're is aggregated than some

Andrew Bauch

strategy to numbers. called Got guess, have capabilities, the that here. they you expect nearshoring gross maybe gross to for implement which it. perspective update the and nearshoring but seem weigh And weigh more margin consistent digging my you I strategy And margin, guys kind how you us pretty into could the then could out our from be follow-up, guys to of on your on eventually And margin on towards side. just before

Arkadiy Dobkin

So you there. say nearshoring, going the is improve to strategy when mean... you We're -- still our

Andrew Bauch

maybe North -- In the America north a in-market... more like

Arkadiy Dobkin

Yes.

we're So view from of will -- then yes. expertise and okay. which definitely there the the point bit services point Because expand of presence need in-market a delivering. complexity talking And and of engagements nearshoring consultancy presence, because of we -- with is more If little we local view. dynamics like we

this. increasing be will we So

are low margin, it's So wait how we it's need different be because see in and here. to exactly But like At it the going in profitability there series impact gross again the yes, we general And might we to as markets. And the we be increase well. this that do value. do we able clients, would balance will we able the total time, to to able improve, think be that to be believe to it... would same

Jason Peterson

margin we're focused the certainly margin and account the on -- profitability area. we're of at maintaining And gross very in level sort

the in pricing focused past, about opportunity. And and improving we've profitability given so maintaining on that of talked we clearly as account the sort or are

Operator

Wedbush. is Moshe next the with from Katri line Our question of

Moshe Katri

and they're follow-up various inflation we a kind then pricing guess some quarter. trends. kind out coming I maybe about questions, Two we about trends talk of ordinary and focus new in Maybe regions in general onboard. focusing to the that you're Eastern on all of for Europe. talk bit of there deals the are the on? related Anything that wage margin trends Good also can should that of And

Jason Peterson

our count a a seen I in a traditional decline regions. From we've would the in growth, seen growth Actually growth standpoint, From we've operations. standpoint, -- also inflation past. year-over-year. it's Yes. from say that utilization in our We've attrition head little wage changed further in India seen obviously,

good So I you about we Do quite and new deals about feel that. to don't Ark. or... know, talk pricing want

Arkadiy Dobkin

-- were I it's again line it's I anything -- think think much call with in seeing or what before. new don't something can very extraordinary very Moshe, I we happening. it's that's

And of our as making would and mentioned all and refocusing before, size I and it's And our of we're repeat geos softness about but across do through We consistent, one that focus our mitigate and our be believe scary at focusing, stories which of the this. level, [indiscernible] there, can again. all subset at it's it yes, the the to think I here pretty we still company okay? these last able we some So market Brexit different segments.

Moshe Katri

just Great. follow-up. And a Okay.

strategic this vendors pretty competitively? made you to looking kind that -- obviously of advantage? different guys Or the some still of competitive Some and it do companies big the handful of legacy of work are able there at the space. is kind that And some get of into moves to Ark, gives that a anything a is

Arkadiy Dobkin

pretty competitive general, Well, and tough. market in is

we're is the the which market. at time, subset focusing global markets big So the of much faster growing and than same it IT

change our smaller might more in progressing, demand and how for there. example, this, focusing more is fast to but guys we're don't on I big very again this. So market see Clearly, think excited standpoint is guys from growing

these and So of the build about pretty how answer kind capabilities our when like pretty you seem expect upgrade why, margin? future likely trivial. how to questions, our you Can dynamically. self this?" are challenge, to size all That's the from right -- to gross "What benefit do

will reinvest we to our of self. kind So constantly upgrade have to

Operator

question line Capital. the next Vladimir of from VTB is with Bespalov The

Vladimir Bespalov

your on guidance. results. have specific Congratulations pretty one a I on good

your hiring And effect, and could your our the the color. developing you're the the I you -- R&D growth quarter the behind still for year-on-year also guidance Now at year-on-year first your EPS slowdown XX% accelerated. we this, also in when color year that example, look, growth significant has a can is to implied reinvestments business. base pretty some by guidance, question. operating the quarter. in Maybe provide decompose on into a non-GAAP is us non-GAAP into question margins. slowdown people And quarters. is see full some and I affects also more There this and XX% so could clear have, And This the provide third high maybe hiring I fourth margins, you see I what second somewhere maybe

up talk to now? your What right profile growth year, As you concerns are that your are shaping clients the right next for from for what key see you now clients and the the risks? the key probably

Jason Peterson

I'll half take questions. second profitability the So

the of operate doing expecting half. for half and half And models, seen change in first began better overall those the a XX% no what providing second we from profitability of you XX% the to levels you, our since really we of the thinking guidance probably of little in range. to in about We've been we're -- So terms it's profitability. clearly we've all bit of top

XX.X% we over at some remember, was a IFO was demand so If actually that you'll outsized ran IFO. XXXX, or -- when we it adjusted non-GAAP adjusted it of the QX XX% a were popped in from quarter. standpoint, time That actually utilization

adjusted so to QX. be we do IFO expect in not And XX.X% at running

-- year, range of good and year quite feel demand and XX% next about see or we profitability half. our we second you for expect say, rate what that's growth the to in, continue to or... And the probably XX% the of of end that in change full see So let's But again the you about risk high we'll run when EPS. again, in the

Arkadiy Dobkin

Yes, client so on concerns.

are right change concern. we in teams industry skills but scalability right scalable the just they right much need an capabilities It's And to with put not to and capabilities find profiles very I is think one ones. ability and in so concerns, together. line

shared just what are points: again, lot thought the leadership scalability and And for the to here, equation -- very right this to it's components main engineering trivial, we The so vendors, to a should think deliver us build looking important, one. asking to for including of of services. too clients And us actually historically; actually these clients three actually repeatable find second capabilities is bring this at more solutions. concern actually to them build how between the and concern us kind and again right just and value And I bring solutions or and to help have one; EPAM.

Operator

question Ramnani line with KeyBanc. next from the is The of Arvind

Arvind Ramnani

to I your seems of Competentum. wanted talent based recent it it really of you extract the acquisition. you a strategic expect much acquisition versus own internally to to on certainly It's using ask about clients? good value like for do How your selling

Arkadiy Dobkin

publishing the and educational main So in is focus segments. our capabilities improve

we able to very are more which this competencies some have hoping penetrate we're guys complementing what have, much to these we and will than before. market So be aggressively that

the referred which I really for content in a for the a internal internal/external we employees And offering. that as internal this this will capabilities sense offering in kind well. again -- bring externally potential think company area, of can potentially development company but has really development product we and our would train sync our platform -- candidates and capabilities, -- help. to which Plus, internal of good to here you I've enhance learning

-- as well, that this that's primary to market. goal but go So again still the should impart was

Arvind Ramnani

content? sold Great. it kind sell And how does content? something actually that And it you all to as it -- or be or with a to -- are how with authors develop offering, the else? will they developed, looking part Is internally how will question kind is are does the the external using firm distinct generate second of of be of its it packaged

Arkadiy Dobkin

who our we like have the, educational about again quicker build that's extended this to some solution you field build competency -- now in going it think because publishing offer we're in expert think if it's the With And competencies now go would what this to about in we because have a in -- is capabilities content, clients. more will, and added external improving I So sense. space. as space to platform there the and

through Now special we utilize metrics. a number able you external people orchestrate to internal but can build well as of content, who the have will be capabilities effort, some when you

scalable better, and to So we be just more would environments. it able orchestrate

Arvind Ramnani

vendors? really at also looked some question is on competitors such Pluralsight last Skillsoft. some other of evaluate just was mostly or And kind or some Great. Or you just the external haven't folks did you this of this as

Arkadiy Dobkin

all, with in different which compete of services, focus when specifically engineering about and companies talking the external around you guys these provide education first general, companies not So focus, These I'm areas. external mentioned.

of of market you internal our already we're specifically one offerings classes example, offerings engineering you're talent content When at often companies additional talking have For with of to people utilizing you're sometimes compliance. then we we for And kind about ourself. around have the -- the risk comparable create is thousands utilizing which these when now well, them, them which pretty a external so about which software because mentioned, and well to we we train on. source as looking and talking and

Operator

[Operator Instructions].

David next is line Our from coming Grossman of question the with Stifel.

David Grossman

a here. Just quick follow-ups of couple very

of Just year. rate, last were I on in half back the know running you the utilization hot

you down looking couple Or where bps. hundred it bring about back to You're a you're are comfortable? of further? this Is even down

Jason Peterson

Yes, as vary to going it's on extent. certain know to I quarter based utilization, with a think you

to kind is got up, you've vacations, may more shown which that think around coming when with we've we be can XX% run then XX% so of quarter pretty I There we're a And quarters above that. comfortably.

a XX% some is to As probably a quarter demand. about hot you'll number expecting think get and that not in decline, the would think you good at utilization XX% XX% this probably business. way pretty that unexpected where generally QX to I'm is a remember, I the probably and range again takes

David Grossman

All right. Great. And on adds. head just count the

resources. Russia Just more -- if out call just don't on the last there. the I know adding looks to there's anything of XX client is like, months, available just the there's this natural and and in percentage ebb a Ukraine Or flow it just demand over and just basis where

Jason Peterson

Yes.

good a it's So question.

So have we region. growing Ukraine in the in CIS, would been

India, we're where seeing We in also be would traction. growing good

kind need growth where quarter demands the this by sort business the to so the additions kind the show supply drive a that more pleased it can of I'm the that we to in talent. and was much because us. to of shift in-market to a of towards actually continue able a meet make were we produce of think I didn't marketplace. we was here of so for we see And quite the that And quarter It balanced does

David Grossman

add time geographies, the need terms in soon new anything of with to current global... no you're pretty So satisfied in the supply

Jason Peterson

see to don't I think radical say, geographies, And but see include about. let's I any business incremental time any evolve as that substantial continue think future. could you'll the always change or, in talks the us you'll Ark

are those we're growth good still you substantial We, growing. pretty small, consistent. got in about. delivery resources seeing Both of We've relatively are centers. of in So uptake a talked seeing Spain Mexico, those but center in that's we as

David Grossman

just I'm Ark, some your of made comments remarks. that. I sorry. you Great. And some missed I then lastly: think, prepared in consulting, about

a So is line? to running is of there integrating you're there Or business separate to where business this just natural the it that? evolution is -- as consulting into offering, the as than opposed it more

Arkadiy Dobkin

we're what but complete story. are not Well, of separate capabilities, end-to-end on not again line still a solution integrated business. before. this bring is our -- with We're always on how we but shared mostly focusing some goal clients, building There projects consistent a it's these how bring kind focusing to of to specific area, completely separate to which the is

Operator

with from Needham Our & Company. next is question Tandon Mayank

Mayank Tandon

today? but a results. the you sorry, towards about ask as you effort? the the where nature does just over the it time also then the more iterative the of to I'd site/offshore work. digital-type in going put mix work work. to model on Or given Jason, like stay And becomes the Is already shift with this, just on-site-centric a becomes ones more much on trend that look quick result here. have the T&M mentioned Is pretty couple the Really fixed that just for side. shift we the as maybe should wanted more about may the on have to -- of price I work ask Congrats

Jason Peterson

questions. good Yes, Okay.

as as continue think engagements, we I take presence. strategic have from to that larger larger, I site, the necessitates in-market responsibility programs, to towards we the more of, we shift increasingly higher So be standpoint on clients for relevant guess, as

or about so that's dramatically what won't for like. a little shift us but in-market of constant terms impacts in on probably shift, in think ongoing terms pop going so have the just We've you quarters sort to expect anything. But wouldn't very in couple of with I think overall remains gradual uptick up think in see the be in -- march. it's you're I our the of count. but looks the We of it maybe P&L. a given next see relationships that And seen talked I positive head an think sort the kind it'll any a again quarter, bit we that to to of clients And we anything

with up a a are are they're or to It done fee, short-term generally we've projects, might And on generally months Most kind T&M. the And of have that X or companies year. a months nature. multiyear X versus but fixed fixed been it's project most maybe in then fee. fee consultative very So from that more engagements acquisitions of not fixed of their be right?

us maybe these revenues so has just and a seen From and of over companies. lot X what And to a do fixed T&M that's quarters of been we adjust it's not fee, business not a time, might a layering-in some significant some TH_NK you've from last but the ask have Continuum a -- for of the from to time trend of client that to us.

by driven mostly it's So the inorganic.

Mayank Tandon

one pricing. already revenue Then type don't your Got year? building one, last commented, it. are if tailwind you you into guide on the know pricing but what of I for

Jason Peterson

change any I in there's we've about into past. don't think talked the what

sort do I job price we inflation. of of wage of, think, a sort continue to good versus So

margins. the on And XX days significant last changes haven't seen in we that, and in any so account be to focused continue we quite

certainly the leadership executive and focus the a it's So of of company entire team.

Operator

Thank you.

Dobkin turn now closing end will call of reached the I for the and remarks. have to session, question-and-answer We Arkadiy the over

Arkadiy Dobkin

and We're and fast. the time. out keep thank you. next challenge that how talk help thanks we of mentioned, Well, around will hope ourself And joining you additional us challenge is, to this. as is run people David you, pleased results, with help to -- for any to again inquiries. to we this. And And in And usual, we pretty here doing with to the globe everyone, continue today. shape all QX to Thank our XX,XXX-plus with

Operator

today's Thank conference. you. This concludes

your disconnect Thank you time. this may lines for You at your participation.

EPAM Systems (EPAM) 9 Aug 192019 Q2 Earnings call transcript