EPAM - Earnings call transcript Q3 2019

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Operator

Greetings, and welcome to the EPAM Systems Third Quarter 2019 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. David Straube, Head of Investor Relations for EPAM Systems.

begin. may You

David Straube

and received Operator, the By you now, third Thank copy welcome, of have your XXXX for the should quarter you, results. everyone. earnings company's release

not, epam.com have If available copy section. Investors at you in a the is

Dobkin, today's Peterson, and Officer. Arkadiy Financial and President; With me are CEO on call Jason Chief

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

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

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

Arkadiy Dobkin

everyone. net We morning, an joining Thank in million, or reflecting and Thanks revenue XX% $XXX currency you, delivered year-over-year growth constant approximate XX% good us. of for terms. David,

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

in doesn't constantly well-built record capabilities empowering problems have turn themselves companies visible the be delivering different and we challenges insights, experiences, and everything engagements together, enterprises the As the must changing consumers properly completely of platforms a clients diverse including digital invested designed environment solve ecosystems. ecosystem think a and sophistication brings people, adaptive by a use And Instead and system currently organizations designing, and is in flexible many in technology The ahead complex systems. continue it with of digital very technologies where coming future scalable suppliers, of have a and digital into our while facing and these landscape into steps multidimensional. businesses level discussed of building to in past, and to dynamic success. across ensure

and think critical. and opportunities our do the that how changes must both constant to well means marketplace technology the as which as clients a continues of high and challenges adapt very degree in to be organizational addressed to agility, their so meet with how about This to

the areas seen of a consistent years As lines opportunities present expand and engineering us technology-led into result, continues business- several product with QX, adjacent experience-driven the forced during to to and comparison but traditional a businesses last advance not from of in demand that present our customer earlier to environment we have we turn, in and engagement much to ago. us cycles in has did consulting needs. those That, our capabilities to only several bring years just what offerings

to in of number also organically our properly is including consulting of years, of carefully business evolution targeted have which the together, been acquisitions. This last challenging few advancing orchestrate to about how and through during both all think capabilities aspects experience us technology, all we a

and scale requirements high-quality the demand and platforms this clients Adding our to strengths and experiences complex to our of gives in serve top on horizontal build ability our and landscape the extend allow both with with to solutions, speed EPAM and more ability traditional domains. vertical farther across us

the address help more we that innovation client in complex right market core the our in business new time business. along organizations practitioners brings product can of to respond EPAM points to multiple Continuum, So in together adaptive today, enterprises needs of engineering across our with why challenges to clients' the organization, the them of which way integrated senior dispute in and our plays and brand of we reflects that capabilities our at position team and the part is capabilities, EPAM agility. to consulting, September, diversity consulting, the a Continuum ourselves EPAM experience is integrated is That and technology links feel firmly launched consulting.

the and launch our our relevant change market. Similar of higher EPAM quality clients of excellence evolving our Continuum partner through stay to another EPAM levels marketplace and driving and education to of engineering models, is and the to roadmap on emphasis our our and talent example development never-ending ecosystem

As change. transition I be just mentioned, our such sources efforts the continue one to of of

announced cloud and San into acquisition data capabilities migration of we our a acquisition in geographic also EPAM NAYA Israel based and On Technologies, consultancy This complements market. and expands the Jose, Tuesday, talent new existing footprint California.

Before call. highlight has EPAM last Jason, of I the I to our hand many one call like over earnings since recognitions would to received just the

for of featured EPAM last X on world's August, the was that Fortune the the information also XXXX list. performers list XXXX, returns. in was In It's companies ranking best interesting years revenues, technology of over XXX included note the to and EPAM only stock in fastest-growing the company profits services

capabilities. for summarize, grow in our the to market reserved despite uncertainties, which reflect execute been quarter with broad-based are high-quality we underscore to multiple earnings have level pleased some that and continues our So expertise and ever-changing of third consistent demand results, quarters, ability high-end macro to which the that

details hand to annual our third results more to to and over Jason as QX on well our now the will Jason? share call give I as guidance. quarter

Jason Peterson

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

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

approximately X.X% quarter. the contributed to revenue Revenues growth in acquisitions from

across this We were verticals. for quarters. relatively a growth Our broad-based saw patterns consistent with those demand most previous strong industry quarter of

XX.X% growth industry driven across our payment QX year-over-year management, offerings at by with Looking delivered verticals, growth, and in asset substantially demand Services Financial revenue processing insurance.

for timing primarily Russia, during our impacted previously clients, discussed we of positively which was in first the quarter call. quarter services the in recognition revenue financial growth a few Additionally, by

product in grew increasing engineering in ramp and quarter, down the the Hi-Tech replatforming and of offset grew by for clients. reflecting services. e-commerce, and driven continued Software demand few by XX.X% for demand and data QX, XX.X% engineering a Travel retail, Consumer the consumer

Business for and by services. analytics in very growth Information our out and which in driven vertical growth Rounding XX.X% strong Media, data demand saw posted performance, QX, we

Sciences solutions and services growth Healthcare addition XX.X%, reflecting grew R&D strong industries, applications. in to in with and across IT, demand both Life for customer-facing

revenues, represents telecommunications growth, region, constant by primarily XX.X% XX.X% in constant revenue. X.X% XX.X% and From grew XX.X% XX.X% North in and representing grew XX.X% X.X% year-over-year geographic clients perspective, driven our APAC delivered or QX currency. revenues, grew year-over-year our XX.X% a currency. And constant grew X.X% of in of in Europe, representing revenues, representing finally, or our of currency, verticals Emerging our or or constant QX of now in X.X% QX largest our America, XX.X% CIS, XX% energy. currency.

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

revenue, XX% third our top last quarter, compared quarter clients the in the same our which approximately was to grew In top clients growth XX our XX%. represent outside year. XX% of And XX,

down the statement. Moving income

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

Our plans. longer-term SG&A to support remain growth building and our priorities capacity focused capabilities on

was operations XX.X% or or year. QX XX.X% Non-GAAP $XX.X of XX.X% million operations of year. quarter $XX.X the in revenue of million the million revenue of from GAAP last income $XX.X or QX million in revenue from income $XX.X quarter in compared of to or in revenue to XX% was last compared of

of includes XX.X%, the tax rate came for GAAP to which stock restricted related benefit tax at exercises quarter Our investing a option in units. million excess effective $X.X stock

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

with in XXXX benefit per rate exchange tax shares increase an XXXX. share basis and a was benefit quarter return diluted in million reflects In a were the EPS the connection was impact million there $X.XX, Non-GAAP reflects $X.XX, Our our over approximately on earnings XX.X% filing. lower-than-expected non-GAAP $X.X XX.X the outstanding. fiscal foreign tax quarter. of which excess GAAP discrete in same QX, a tax Diluted

last quarter was last this and to in to flow from million to Cash was and balance $XX.X at was in in days QX XX million sheet. flow quarter end of days of million Now flow was lower-than-average the million And the result cash The our DSO $XXX.X turning same year. XX QX year. ongoing operations compared compared DSO to compared quarter this year. the XX operational area. days the QX same in $XX.X our in cash of $XXX last focus free

a moving few metrics. operational to on Now

Our at includes approximately which more total delivery year-over-year. XX.X% for ended than the a XX,XXX increase XX,XXX employees, professionals, headcount quarter

quarter locations. compared last in Utilization than X,XXX delivery professionals to there in joined and the XX.X% same quarter, global more in the our XX.X% EPAM, XX.X% was delivery QX. During were year primarily who

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

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

for XX%, our XX%. rate. updated tax the per full which GAAP Non-GAAP rate non-GAAP impact for be year, of $X.XX and benefit diluted expect approximately now level year. assumption least EPS will of expect least at effective to the profitability full now expected reflecting rate now an Earnings be share, a We tax a tax the now in to includes excess to be higher modest approximately improvement EPS GAAP-diluted a effective tax reflects effective lower at be for $X.XX, GAAP the which we

average million expect outstanding. XX.X weighted count We diluted to continue shares share of fully

and the in FY $XXX of For be currency quarter, least both for rate growth at terms. producing revenues will 'XX, fourth QX a of reported XX% million constant

So we impact. exchange anticipate foreign be an insignificant there will

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

EPS rate to effective We XX.X be share, be And share will expect lastly, non-GAAP least we and XX%, $X.XX of at least fully tax XX%. tax for expect be the we the outstanding. GAAP for quarter, per GAAP-diluted shares be and Earnings non-GAAP quarter. approximately $X.XX effective count weighted expect a approximately average rate at will will diluted EPS our million

be Amortization adjustments foreign $X.X that to Stock expected expected $X.X be approximately measurements. GAAP is expense a support loss. to to intangibles $X few key non-GAAP is expected to non-GAAP impact our QX assumptions million million. exchange compensation million. Finally, be of to be The is Tax-effective expected million. $XX.X of is

benefit QX. million to one assumptions, that our tax of and income And non-GAAP excess expect GAAP We part to be be $X.X lastly, we is $X.X in other not to million. more interest expect assumption

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

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

David Straube

Before delay experience to we responding and Q&A, mention open that we different are want a do call locations Ark in Jason to call, slight questions. for for today's I could the in and

please you can operator, give instructions that, Q&A? for With the

Operator

[Operator Instructions].

Our with first question of Barclays. Ramsey the El-Assal from comes line

Unidentified Analyst

wanted and that any acceleration here This you is tough Damien your revenue potential conservatism year. I QX, a you your quarter for I on about up guidance? thought have expectations in raised I know to full here have this Ramsey. comp that after in the growth coming but ask would that's

And then is the is cannot segments So nicely, nice believe we you've to this maybe how year's growth into for that seen into is that maybe all of conservatism expectations? exit chugging are reason much there? to the as baseline year baked sort like this And any rate we along XXXX, set any move XXXX? seems use you what's there your is decelerate, that stopping there as reason

Jason Peterson

Yes.

So I think your ones. good points are

but a demand services, experience our to XXXX QX is strong continue in one. we the So for the compare challenging

inorganic the think strip growth currency XX% you'll you and was quarter remember a the that XX.X% on piece. I that basis if constant in out

it's the been since here. rate growth I've highest So

We actually that rate Healthcare in generated growth and also Life XX% grew QX. business Science and XX% business the in sequentially

reference a that is -- just it's tough point. So a

recognized percentage probably higher $X is year than we pattern CIS saw different In in that would what this revenue QX. a based on Usually, about our more patterns. This year, expect we in recognition. recognized we'd see we revenue of saw million a traditional in addition, QX slightly

QX QX XXXX. up probably in think, recognized million the in we in would $X that would have that I earlier XXXX, year, expected of show of So

is So again, standpoint I revenue a a from that guide. fair think guide the

in demand rate our see to for from then fiscal growth we now, from XX% And to of we rate The a growth is demand environment strong continue to a in last XXXX, excess in standpoint, continue the unchanged services. conference And a call. see XXXX. see we're that our expecting right

Unidentified Analyst

trade Yes. tougher a on or anything region. in on there. That's Asia Is follow-up is do demand the region? U.S.-China zero-in Hong great. And maybe maybe broad here slowdown on Any saw like I'll Or comps? to with APAC there my the it simply just environment It Kong? the the just Pac commentary war

Jason Peterson

had Yes. say us Europe went asked support huge our would demand and has of focus growth demand there. American of supporting North you APAC, probably as been and It and is in that, of operations we historically, North to North to for would America EPAM -- customers. been and us of out because their Western a we've area I set our because hasn't our that's specific driving note, to European America. clients Europe come our most out

we're But focus point, our large resourcing what and growth. at for And is customers think, we're time, support in will so greater it'll and growing I this America of an area North and think see Europe. you doing prioritizing rapidly I to us, over be

Operator

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

Jason Kupferberg

just just What with contribution you is for well kind And on of QX XXXX? number color I And main they of bring thinking the any couple into? want the they acquisition. NAYA revenue we geography of to employees as questions are there to on start the as really Israel helped new have? a

Arkadiy Dobkin

Yes.

As mentioned, company. the data-related to consultancy. we a and migration It's cloud small a it's

all the over our a So X%. is contribution from bit little acquisition

And it's we point not it to that a impact But offering, mostly So talent group. improve technology giving would numbers. of our our believe in office there us benefit consulting much from have there, we which is do also of specific addition U.S. nice and on view, available to Western an kind know. and to Israel be able and Europe, source additional all in to some capabilities

Jason Peterson

clarify, the XXXX. up to NAYA of all rate X% in of growth just make would including So acquisitions, QX about

increment But a, revenue. it is of than interesting we an the more in a of think, So it's it's substantial acquisition. play and again, capability terms

Jason Kupferberg

okay. in you Understood. war rate any And in color can terms digital offers? just on seeing And I'd checking maybe comment you of as the like on provide then part quarter? Okay, on hit keep of can you're for the campus given just attrition employee to that in these talent. days that, obviously the

Arkadiy Dobkin

last quarter, in it's what line maybe even mostly several So during years. last with so we sharing were the the

overstaff it's So alignment.

year. rate is Our attrition last better than

make working, side high. and putting a So our training education and sure on activities retention, we're internal lot from of is to focus that efforts learning very

it's So we there I put impacting general, in But this quarter. in challenging, a lot think but always of any efforts specifically to our make don't it's news sure not that again, growth. is

Jason Kupferberg

the more any can was revenue I or the sneak that accelerating, fixed rate I terms at to a like you in price real seems quick? certain that's client If price if lending to more I growth types in Okay. and preferences see looked one that trend just wondering and fixed themselves reflective be broader of of model? project just

Jason Peterson

really. not Yes,

me that sort have seeing arrangements of has months. acquisitions But certainly have quarter in of you show the pricing we -- been what have of of fixed couple seeing them the we up really you're per that this projects fee is, is to of that fee a growing some arrangement it the that let explain So terms team. of fixed percentage numbers, customer what has with large rapidly, last in do in but you're change a of that our involves in kind might small these you sort see be that pricing

the And team. of of the so sets the team, based skill the component the of the team, it's on size

a fixed it's it's the work. pricing that materials kind it new per because of so build basis, kind out agile done team again, is as on turns But type like, but classified was time fee. it a and very And of development traditional

So different. it represent doesn't really anything

fee pricing the classification. the say, fixed and is Just vague in show like, a does on a variant up that let's time materials

Operator

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

Margaret Nolan

about change does your or engagements consulting-type of in earlier think more way what deals? in the into we the you're As cycle, that larger getting seeing expectation

Arkadiy Dobkin

Yes.

right not or EPAM with providing to sure can happening. do on capabilities now mature can working end is we which larger We're this, and client the is offer that, for our it line it's why any approach go-to-market also to be specific that's we announced think Continuum It the now brand in explain I but expectations. think to in happening. of that make to KPIs And kind game I the we end. from that's and in compete deals measurement

Margaret Nolan

in continuing structure is company that many that you is think introduced employee optimal How agile? horizontal And Great. EPAM if versus the into about terms understand for of bit you structure up, balanced? are model? be what would scale reporting make not to there EPAM or the needs levels is as necessary I'm the company bloat how and trying a pyramid really Okay. less a then or the little prefers whether to hierarchy to more what

Arkadiy Dobkin

that believe believe that's it's same the have. even We the dynamically hierarchy do and points based we time. the than of less, more on one need efforts do very key in needs. at our need we We not time, all we And the changing probably that

So evolving. configuration right to and find of We're we the what's optimal. kind know the trying don't

it during weeks. I maybe we our like in little couple more a think talk will Investor bit about a of Day

Operator

comes Research. Peller question the from Wolfe next Darrin line of with Our

Darrin Peller

where spend, a having as from on want if even in thinking the they're actually and standpoint kind I just right specific can? from XXXX to given first conversations vertical start to what of of you are and a about basis, on -- we maybe with demand clients more you're they a just year touch now where granularity looking more your

Arkadiy Dobkin

in this go still at this conversation to At understand will not the in but of clients the future. much time, And finish item the year, in same conversation we period we probably how so demand for boring be what to don't very to too grow. really. more deliver changes focused answer, Listen, the companies there complexity know willing year people, for in tone from last about is next any year, and year's, significant can which expect

good. demand we happen. believe happen from Anything the know all standpoint. economy's we Anything be do so can as would And that can

let's So wait.

Jason Peterson

Yes.

We've a seeing to last demand, believe demand of So and done looked prelim, a of for change XX% from overall in sort XXXX with the have grow early do said above -- numbers any only rate really we're and very I environment, not this we quarter. just an at consistent we'll continue change from any what callout from at terms our fiscal is year. this throughout and the

with is But clients We've in their investment down some see some some retail this modest of make and clients con are some EPAM. Other got So in continue having to kind and clients to investments slow actually and continue decline. we levels, grow not to beginning are pro commentary. continue Europe. new who a -- who to those

mix the of about then the QX I so got I is XXXX. other area year less particularly U.K. fiscal in banking what in And some in and demand And in kind and just of from you've unchanged retail talked even And this about we've -- certain time. talked Europe, European at throughout the think this that's that we call the of this -- is

Darrin Peller

have fair? side timing. American in speaks bit been segment than it very nonetheless, the perhaps, year. that do like a accelerate. of I that continues North But in the little could doing maybe financial mean, fact, to earlier slow with it financial I better Europe your to mean know I guess, I well, Is some being looks

Jason Peterson

different Yes. than some clients. think of ways, many portfolio our I our be In might

a different in we've in asset management, growth so of There's FinTech. strong got insurance, in And -- whole in processing. payment series very

portfolio. I think little why these why exposure seeing portfolio, you so as there's that's our Services. banks bit revenue seeing And high And Financial the Russian about large of recognition, in our other growth to less high seeing as in out growth levels a of largely you're Services that probably the to which pointed us plus, and is areas you're growth -- you're and Financial

Darrin Peller

to That's great hear.

Just one nicely hand one last cash really and gone on just up sheet looks good. is on your quick has balance

thinking done we're of I priorities So a now, tuck-ins. just you've smaller mean, when about number

going in on than... anything your from -- either it's keeping to the rather larger hand or Just just M&A used cash now that's pipeline be -- I for in or right in size discussions assume all

Jason Peterson

Yes.

So you've us I this year. think seen acquisitions more do

been you out, As point small acquisitions. they've tuck-in sort of

to or acquisitions continue place larger, other one out more our cash that And number think see using cash. a to coming of at continue you'll I acquisitions it's the build could and delivery that in we're think physical And likely are would them be fair centers. consumptive be infrastructure year. the least where do the I somewhat us is to of then our and of

And year. places see are you'll the probably so cash used coming in two those where the

Operator

Our the from Company. & question line with comes Needham next of Mayank Tandon

Kyle Peterson

This Peterson Mayank. on is actually Kyle for

has top to continue. kind on good implies of XX% XQ the the the range, guide and XX% towards profitability looked of margins, that start want to that kind to several Just of the last obviously end very quarters

of So see right the they that? to how end the XX% on moving we band outlook. I to should upper about at? more XX% forward? profitability on want the Or your should just still look margins of kind to be Is think thoughts

Jason Peterson

Yes.

in half to we to the the appropriate And you at as in the the we all So is time, on in of XX% believe same the out, that quarters range XX% run operating pointed range continue business. XXXX. top for though,

wouldn't So what fiscal have about we've I guide talked than probably a year. throughout this different

Kyle Peterson

softer little to just one Software on Is verticals, quick And which Hi-Tech the Great. that. on want relative the to? the more a That's any at kind under of we on to Just should other particular and there to be a hood? strong. vertical, follow-up basis, helpful. happening least quite get seasonality sequential that seemed all attention pay then anything color there were Or a little

Arkadiy Dobkin

spike. some quarters, of you're a number any getting have bit -- accounts, It's I and comment new the than getting on this. flatter don't we last little a it's think specific

analyze I you you there. So there nothing any specific to find think trends don't is will But start backward. if highlight to

Operator

line of Foresi Our question with Joseph comes from Fitzgerald. Cantor next the

Joseph Foresi

My first is to around question governors growth. just the

you But weakness. margins? human And growth? how model in today, obviously, a at capital space in governor is potentially X, could that's look Ukraine. on is how the you a ago? As Is other of impact the obviously couple There's public of there's to it the the how different -- really most? shake years business element pockets governor resources focused growth one company worry And the does that human the about to the that versus X out today players

Arkadiy Dobkin

one components training, specifically major which -- number topic definitely education, the that's just we're our talking touch practically of effort. is selection, in of It not the quality of but And of quarter, a we people, this each we the about in growth, and of retention. kind investments clearly

a it's topic, which very impossible big So is to almost address here.

of a of advanced internal cover X, asking one topics, And ago, to the you're ago. still also don't pretty was we Investor during of are it I it's still tough in think different how but X that's think or with than to And years would much I I which be ecosystem, advanced pretty we compare our it's again, Day. couple think, more this. the last tough. going years couple it And ecosystem, kind it years, deal of If why infrastructure to

Joseph Foresi

it. Got

your then upwards. dominant want an us wage to And I've Okay. Then just And upward attrition and takes in think us and you puts times on couple your the know I perhaps seem margins inflation regions? long-term a continue rates the kind there? X-part push update to my give to are Maybe on last call more just go? asked about move Can where sort of margins of the view on could on kind margins. of the give you of question. can what you

Jason Peterson

Yes.

from in than low attrition for to run continues an it lower QX us. in the in of the of standpoint, QX teens was 'XX. Attrition attrition is So 'XX

we're a appropriate So of they've hasn't of career a so career feel making year. inflation sort personnel a on for that that really our certain inflation a From wage at again, home that that the we've the in lot really experience energy wage they an delivery standpoint, long-term EPAM. and providing throughout changed got do focused

no what about really So in talked past. I've the there change versus

think about then standpoint, it we're to from say, the let's the And margin on I running been at running, level at. to a that gross going continue focus margin we've

I so and to of SG&A from talked standpoint, And this we've XX% then XX% about think an -- range. sort

And the XXXX, I so the a to range about I enter to what range target different yes, see Certainly, as of is wouldn't the be the about able still that don't XXXX. I XX% for run see XX% end IFO fiscal top been -- can range at a XXXX you but we've think year. talking we we talk in adjusted

Operator

Our next Citi. question comes from the line of Ashwin Shirvaikar with

Ashwin Shirvaikar

Good quarter.

has make time. the said to demand I doing of continues, that into of opposed if it for So question kind to supply, which have acquisition more exceeds I as just what spectrum? a is, guess does guys some for capability-based been acquisitions, my But for that the guys sense question to point generally true scale-based tap you -- is, make you any sort been at generally of you've last time, September, we spoke demand in the is

Arkadiy Dobkin

expectation, It -- make this sense would is of might which to it after our shot. allow organically long and of if quality kind with line be well, very to acquisition the a would us this, in more expand as

ability grow but at acquisition least we're definitely, we'll and be resources sizable again, this come, XX% to But -- this, will high-quality looking and considering. with this. So opportunity after if for

type these cost companies and lot a of So strategy. probably have their own

Ashwin Shirvaikar

Understood. No, that makes sense.

the margins thinking of the already, all that. number with clarification just the stock-based really XQ was accruals, I'm of compensation right? regards thing other already The to and impact in a that's for

Jason Peterson

Yes. Correct.

stock-based in year. expense in with based we level that fiscal on the compensation, year. accrual recognizing the And our the comp, for variable expectations yes, the the be certainly the performance So then with for of would is that associated throughout

Ashwin Shirvaikar

As in to upward to start future? you expect be the as we percent trending would revenue, a of look that

Jason Peterson

that haven't about element I what be. thought specific would

that, guess, it about Yes, at we think that I'll that. can me so and And talk just I let later. maybe leave and about

Operator

of comes Our line Capital. Bespalov from next with Vladimir question VTB the

Vladimir Bespalov

the uncertainties stand kind could would whether expense risks about right conversation the or broad talk this is of you cut -- in IT is that now, where on and because macro to clients Congratulations in little your question like number. My spending priorities bit with a see cut this, one. first this need things on spending item last Maybe they're For kind side? like going of their the this of example, you if the clients?

couple numbers. And technical on questions of probably a the

I acceleration hiring. in see some First,

So maybe quarter. started is color is on the your there last And past the change you quarters. and could to time this provide the in client of the top in acceleration first several concentration, increase, X this for some trend clients a the also, reported

some on this well? is see or of volatility side a So maybe quarterly kind you changes this as

Jason Peterson

about to you want do Ark, demand? the talk

Arkadiy Dobkin

Can the that -- first understand softness you a then question, what reaction clients, feel be clarify there would about exactly repeat didn't Can on is then should Yes. was I you the we You bit? demand? and said our if question one-on-one. some some little

Vladimir Bespalov

yes. Yes,

very clear. it Sorry, not if was

and economy spending. macro this, some particular, clients due in cut the to my So will and we in uncertainties see like companies, basically, to global your was question recession have some if things

for to are this since So clients sustainability one? in last where for this terms be the think of feel to of probably important so it's business, in clients? you How, your IT is this? about the #X item spending, their going Or your will general, stands be cutting going which cut? that spending they Whether

Arkadiy Dobkin

Sure.

how taking many it's be into there. very how clients many could tough So situations a account and question different

-- So or to package recession big is economic predict like the account be. -- downturn taking of big clients. could impact of There how or different what how into level and also how

be For some of them, it might critical.

For invest would the digital of a probably to of clients, lot be opportunity it part continuously in business.

who a I had give had from since years who tough So experience when of continued clients grow We of to we like then. couple stopped happened. can and bunch pretty completely, a XX clients you actually our ago one

to started year, flat okay? in a time, count. Some But to I jumped think XX%, utilizing maybe then example, this. a but capability for really grow good not the don't to clear there at EPAM was opportunity expected, for is engineering what answer So for this and

Jason Peterson

And on the headcount. just

additions QX from we're what environment. demand So of suggestive the in seeing headcount are just a

also and see growth primarily beginning then demand traditional the centers, And with Ukraine to to in like strong of stand in XXX places up to Belarus. and a headcount, acquisition India rates We're few smaller so in Mexico Competentum environment. Russia. over some addition continue rapid We our you'd like came additional there. grew rapidly see geographies We a sort growth in headcount and

really most being the we're for from so standpoint. demand the substantially by is headcount driven seeing growth what a And part,

Operator

[Operator Instructions].

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

Moshe Katri

of growth of business between A couple terms in the a here. It top things the dynamics of XX that is there the difference at rates client the looking base. in seems and rest

then color maybe assume I some will of basis the So think, of at there points, or on that. dragging helpful. that of that on kind we've change hundred what we much pricing should we are Europe? And color pricing? any XX inflation, lower Maybe seeing case? be of give of the geographies are in large seen that growth X can are still some couple some number in on top you us specifically uptick of terms -- a unproportionately? wage also a That clients the in looking top in Eastern And is historically, some dynamics then

Jason Peterson

QX would concentration something is that bit that time. of of the an the So and from of a you've that the by a little in is over period a terms I I concentration, we asked -- expect -- between and prior was about not from I I a think -- QX there was longer seen guess, question caller, that also say the uptick

subtle I growth just outside same seen But have bit as good kind uptick. of time, think a in customers at of a seeing customers. the it's extremely rates growth And we top in some we're larger our of our XX well. high some

to have speaks of greater growth our growth the the -- we've that we So the growth business again, think diversification typical in a fairly I even think XX. large it's and top customers. and And our rapid also got customers it in outside I

in also from environment point similar could this predict standpoint, to inflation pricing it's consistent. been time, years. From But seen at future. a a Hard in what similar. at at look in this it's what quite to past And standpoint, we've wage like it least time, the pretty very

constrained. large with generally demand get engagements, market across of for So of rate just a then And in we continue our subset those newer that to based resourcing stronger pricing increases overall a long-standing is customers. have somewhat kind resource on the

Moshe Katri

I last one just one. And in can sneak just if

will and in some keep there kind and for budgets you we that QX. point? into of Is of obviously, at -- mind Is us should QX of how projects Looking at looking color QX anything on unusual the start this there anything terms funding terms in in seasonality? gave

Jason Peterson

year. in for We've fiscal a to color XX% And at done And the coming preliminary. to it's the rate full it It's again, excess for very speak again, QX does, on this year. me in Yes. time. hard provide prelim look growth a of

Operator

of comes question Bryan line from Bergin Company. next Our & the with Cowen

Bryan Bergin

sales I wanted proactive the you on update team? lines or provide sales of service larger so, more an sales strategy around on ask a of you particular focus? Any XXXX? And areas to any if development Can the direct color to look force. as

Arkadiy Dobkin

challenges in recognizing the big our have what exception think we solutions. definitely and go-to-market more which like development have consultative they the the about like we're business out with part is clients approach ways smarter I pretty are operate So which changes of and general, is strategy, And don't But with the opportunities and market of we consulting of approach. talking interesting.

sales today, last of businesses direct our new after. kind And growth or point lines of already think growing to I sectors -- we're headcount new we're the go years. From of over couple in view, we opening don't of

we're, in think general, I place So good in here.

Bryan Bergin

or build-out where with that are average? does is of company you the consulting the a pressures, consistent Does broadening profile? in Or that profitability Okay. do from it anything

Arkadiy Dobkin

consultants right we as us for we impactful now people. high. resources We results, in additional it's here but have wages be about Profitability growth, time more about profitability bring not for will on probably because in for are answer of was depends our what remember the will that and some it's to probably everybody cost also be client happening and growth the see to support on some the

balanced. I was think it So

main So here. goal it's -- revenue growth is going the forward

Jason Peterson

Yes.

So also the as kind of higher a combined value. will again, engagements, part delivery blended it's significantly of have with delivery. which an larger we And hope then, overall of organization, consulting kind

or in so in near-term coming expect And the year. a least don't material profitability, impact the at

Bryan Bergin

Okay. delivery on up to follow That sense. Jason, the just makes regions. And

setting you're centers regions Are in smaller those for EPAM? some new mentioned up. You

Jason Peterson

somewhat Yes. of, places some to years. They're in say, us, business newish regions the tangential kind that the for done let's we've of over

Operator

line Susquehanna. of comes with the Friedman Our from James next question

James Friedman

to Jamie. but It's hate your Jason, regard divergence two I ask your I'll with a upfront. the to you and tax confusing a between here, little commentary. rate, was that -- tax had regard with commentary to tax non-GAAP start just the because

I right. sure make So to I just heard want that

product that's Hi-Tech the for Ark, controversy aware aren't don't and know amount vertical. fair a development outsourcing So trends it, And I trends, in Jason. of about there you then, is Software if of the

some challenges, One exiting guys actually they're of you customers are your has verticals, present. some called they're exiting where competitors out some

from the the you to just little your on but second to on there's do the Hi-Tech. your looks profound like positive? a trying out, heard feel get and value our nothing is So here? answer and something first roadmap still going call seat, more sense deceleration, tax the one, you're So Software previous to on Or we're and a I there adding

Jason Peterson

talk about And tax so guess, first the rate. I I'll

statements And so less the made quarter. we excess of I that had the the that was somewhat tax expected inside than one think benefit I was

rate. tax with have is I what have tax return, tax we quite sort and impacted XXXX our then was discrete the the And that GAAP But GAAP would both we've and we lower talked a would the non-GAAP that's approaching was impacted a of than the expected is other had associated trying just that as that our rate. bit GAAP rate the to clarify non-GAAP that And so statement the benefit why rate. made XX% about discrete benefit

Arkadiy Dobkin

services view? if product that happening is in And engineering feel Okay. and -- of there question we kind of question special is second Hi-Tech like, your software point from sector something

James Friedman

yes, Yes, was to ask. I that's what trying

Arkadiy Dobkin

kind houses. we you pretty all is So -- I We there. platform mature that or value actually problems would Hi-Tech And small it's there. which that component of us, I are for strategic expanded refer for the strong there software is bring us. that and think We -- don't a do And what component think and we we perhaps of lot believe like And it's some to it's know to we a to software companies. specific borne companies well said do what digital whom a some whatever. stay

-- in definitely So it's and this any quarter. specific not

James Friedman

that Got overall it. good. I the I to the It's I some trajectory. mean color. the get trying context numbers appreciate was just were demand about

Operator

gentlemen, and session. turn comments. final for any Ladies to that I'll Dobkin floor concludes Mr. question-and-answer our back the

Arkadiy Dobkin

services on you, also myself XX and team to and Thank to thank to in would November Day I morning. provide And Boston. Thank help time this forward for Investor and dedication their your employees management our all everybody, like looking you. to to us grow.

you contact any David if see Bye. you Thanks. have hopefully, soon. So questions. always, pretty And please face-to-face

Operator

This you. concludes Thank today's teleconference.

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

EPAM Systems (EPAM) 7 Nov 192019 Q3 Earnings call transcript