EPAM - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the EPAM Systems' Second Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, David Straube, Head of Investor Relations. you. Thank sir. ahead, go Please

David Straube

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

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

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

references website. and are non-GAAP are With will now that all Investors call materials measures GAAP our reported in the to earnings said, to quarterly I reconciled Additionally, results the Ark. available located turn to our have over of that in been section

Arkadiy Dobkin

today. I Thank that for healthy the you, time hope and safe all of us morning, and you and good are staying at David, thank everyone. you joining

second would Before EPAM into highlights, environment the context like the on I overall the to business. of reflect in go quarter I

event. by understand to dynamic importantly, are steady us continues crisis, anymore it's far be we conversation in all, immediate, news changes the portfolio, the that during our were very very unrest time, our not end localized with we to and QX customers line health seeing is do social of At environment as what influenced last the more anxieties. disruptions anybody, our environment in stabilized shared end still permanent our of First the one our each serious beginning of call, economic and while client many we the we the daily the same responding from for some are and has every global definitely A impact for cases, since customers. And and, May, across and markets. the of a in much in earnings

where end with the the current are are engaging dealing many our can clients business, that state examples doing their way changing markets. situation and also We there is customers their

bringing required to our programs to accelerate ourselves our adaptive models digital a this higher to much operations the productive more projects, areas information COVID when agility of the to environment. connect the further of of of downside that us one way has become in closer to faster investment change the processes As cases, the result, increased future manage quicker also well or continue we will them our new challenge and by to EPAM as decisions. making engagement. we in working be insight, risk, to program seamlessly collaborating helping business way to much talent drive us. level, This us proven and to focus and drive EPAM believe responding We improve have of some to to clients' information taken platforms, working market mention and optimize the to leadership more new partners needs, our closeness own is fast-paced frame. field access Today, time from money field engagement to locations gain this teams comes more taken widely accepted model serve has our empower to with important supported clients, and our levels. to but demand productivity in across take in at our making define results. pivotal of collaboration and enabling options very view much of remote and knowledge to These has more to business enabling global better quickly working business acquisition demand has of supply also to faster efficiencies be much it the management, to when responsive are able the In as The closely clients' well real-time the as new us relentlessly advantage and we enhanced be result, share as clients' next retention. most expanded respond opportunities are And teams condensed needs for by been and the serve our to and and

a Moving results. of second year-over-year a quarter our revenue EPS million, We representing of increase. in growth, non-GAAP constant to delivered XX.X% $XXX currency rounded $X.XX, XX%

across demand, reflect results levels execution focusing of levels efficiency of QX Our driving while lower and performance on higher the on an company.

there bring insight highlights few that were we mentioning in worth to a better terms. are quarter, the to Within stated general what already

industries and in customers some of move end forward is they asked are a are we usual which many specific to service as and growth helping transformational our that to not significantly pandemic, streamlining of this, business of activity. by To we change workers. by consolidate are showing don't in global level being In there with efforts. they allowed return the of has benefiting do remain providers of balance there there stacking business which to with level the and know even the in are our know number our their environment. impacted customers customers, such programs. will the critical some previously, We as shared across current when efforts cases which more markets, I or reduce fewer stability As resume cases, number focusing many of are key and on A

services platform, Epic Combined digital advanced developer and the as engine store. access open the tool. Engine, measured games every example, any and a power gaming most world's that other that XD Games Fortnite for company store as real-time healthy with and Epic library Unreal infrastructure of gaming across through in well ecosystem the a before, achieved to scale Games needed For provides to no has

still of also million EPAM with and of to working Fortnite. enhancement players for a to one we AWS today. with help areas several needed been large are their several from efforts to have proud the in the XX across big while reliability has of began Epic XXX of and been and one or has scalability XXXX there expertise, to XX Games flexibility, in days business. a the add creation relationship, months. and have growing the engaged transformation part who development provide to since early boundaries help data, to new two before million to Games We continue believe gaming of customers we of them EPAM our key customers And the XX, push top to is potential it's undertaken In collaborated QX, online over application story Fortnite Epic software engineers organization. next multiyear list the With

developing assessment service recent COVID which quarterly two providers, are to protect one as children, at our lastly, highlighting with XX information and share how best result and competitive COVID-XX looking as types. designed dispelling let a Central proud also are XXXX. just sector of partnership are companies, with legislative communities fiscal me half and With recent And in probably by the outlook app, provided EPAM everything of positioned HealthBuddy of to myth We IT Gartner share rumors across services after multi-featured shared, COVID-XX. Europe families that, the we circulated a we webinar, and for resulted across UNICEF, into only our Asia COVID for second

our lower industries a in disruption growth end few serve. result we markets, in continued some expect which We will in

to in priorities quarter, cover Similarly, beyond our shared call, which the it's some our the talk unchanged. after. has business during about with of as right next reduced, our variability client we Jason will behavior you previous While our key outlook challenging earnings we still believe remain

continue our believe investment well We will in we as That to engineering position very to strongly financial a protect key core confident challenging digital expertise, capabilities prepared come our and be environment in position with comeback. to our services, XX% as our people continue more is in make leading growing pandemic as plus value post for We of of to time, with product and why be continuous our and maturing are integrated provider and is and platform out company our platform rate. consulting combined eventual result-driven even this our differentiator. ability and

let call Jason. Now hand to the me over

Jason Peterson

Thank you, good everyone. Ark, morning, and

on efficiently impact of we multiple delivery and a and metrics. EPAM came exchange million, and negative XX.X% demand X%. guided for at of therefore, range a approximately an better-than-expected of effort and, quarter, better-than-expected $XXX.X operating year-over-year greater quarter, utilization. organization reported our quarter across XX.X% second across organization basis in In increase delivered increase our result quarter the our foreign availability supporting a reflecting financial was constant revenue The customers' somewhat higher due the this focused operational demand, a in was terms, uncertain second on the our with Revenue where previously currency needs results combined billable in During to environment. than higher

of quarter be impact growth both to their Business variability media, very year-over-year In XX.X% QX, our level customers verticals. Moving which the and Life industry comparison. reflecting to to growth industries. continues certain of the we largest grew results, our and pandemic portfolio across and vertical a end Care tougher greater the lower The Sciences impacted due posted saw strong Health and on markets. information delivered industry for a XX.X%, by was in the vertical.

response COVID-XX our to larger are constant in in constant top quarter, contribution of declined growth we XX.X% and clients increased XX% year-over-year clients year. Emerging clients in greater constant driven environment a anticipate in a to our QX make in more clients grew in our We ramp down was had as decline revenues. in XX% XX.X% finally, customers currency. and saw our represents was impact investments vertical branded QX to now the top and in year-over-year year-over-year grew X.X% growth same grew have in XX services the XX.X% the an grew business or appear as a XX% terms compared impacted resilient growth on growth, XX Europe, of outside And of increase. top our the X.X% this CIS, XX.X% during was lesser appears X% clients the grew QX and geographic midsized. in vertical by slowdown retail, the impacted in XX.X% by Travel America, QX. region, by Consumer XX.X% expected by Software & banking or quarter. Financial And offset Growth travel a of largest sector. in extent, flat representing From consumer European XX.X% our goods our primarily to across a representing constant and, part the the North and X.X% concentration business quarter quarter customers. environment. second these delivered revenue the XX.X% be X.X% or to last to the in XX.X% quarter. in Hi-Tech currency. year-over-year of changing quarter in revenues, perspective, our continue representing by improves, XX clients In And was revenues, clients. the energy currency our who Growth telecommunications, among offset APAC to currency. our some from was revenues,

down the moving Now statement. income

provided last QX of of year. concessions SG&A non-GAAP the margin the a QX Gross year. temporary XX.X% limited XX.X% in GAAP margin quarter to gross the came in were GAAP compared revenue was customer last last to XX.X% that the in on COVID-XX-related XX% period in compared quarter for the year. quarter to margin SG&A was XX.X% impacted was same for year Our of was compared Non-GAAP last revenue XX.X% and and for at compared to basis. by in quarter gross XX.X% same of XX.X%

million to travel, activity SG&A QX in XX.X% were last was QX in compared or related operations the Our the from of revenue from income of of marketing million $XX.X level quarter of in of events. $XX.X year. year. revenue and by compared substantially last GAAP revenue in $XX.X revenue to $XXX.X million was a relocations, or quarter XX.X% or million levels XX.X% of or XX.X% quarter reduced of to Non-GAAP income in the hiring, driven operations lower

Our GAAP which came tax related the in to for rate excess at level quarter includes tax stock-based XX.X%, benefits greater-than-expected of a effective compensation.

XX.X% increase XX.X%. were on benefits, quarter basis EPS Our a was there $X.XX. non-GAAP reflecting share which was excess approximately tax shares over earnings QX, outstanding. XX.X GAAP In the excludes was per same diluted Diluted rate, fiscal XXXX. a in $X.XX, tax million effective Non-GAAP

revolver. adjusted $XXX.X was to compared the XXX% the $XXX.X turning EPAM QX cash and ended same DSO cash of flow million $XXX days to for days was with and more QX available our compared in of balance quarter $XX.X million XXXX and and made to XX year. in our flow in sheet. of the in XXXX. in the $XX investments $X.X last million Free year, flow XX million available cash income. borrowing on was of Now quarter Cash than last billion quarter quarter resulting and million for capacity, cash same $XXX.X same million up short-term million compared the in equivalents, to conversion XX in from operations cash $XX days end at net

a ended a on moving sequential the designers metrics. with few X.X% quarter consultants, a Now approximately and engineers, year-over-year to QX. operational and decline We from XX,XXX increase

headcount given total XX.X% in XX,XXX was the the same QX greater travel QX of compared QX on in level and was the XXXX. capacity Our for limitations to year Utilization restrictions and the across last XX.X% stay-at-home employees. of The was the quarter. result XX.X% delivery organization, the quarter utilization in high during

of levels XXXX. in to return utilization fiscal high expect to second We the the half during XXs

turn to let's guidance. Now

holding we providing a while off will With the uncertainty quarterly view. year in outlook due continued on pandemic, market the full current business a continue the to

we've last in days as are adjusting level our mentioned, customers Ark a of over end seen markets. XX to changes stable activity in As our the portfolio their

Looking continued demand forward, in with environment. QX we some in expect improvement stability the

at Our typical capacity add to while will in generate revenue meet headcount operating utilization demand more improvements to ability be levels. again to on dependent in our QX

rate For be of million $XXX revenues growth range. QX of in range of 'XX, to $XXX a producing midpoint fiscal the year the million, the X.X% will at of year-over-year

to income third XX.X% XX% from from and be the of income For operations XX.X%. quarter, in range to non-GAAP be the of to GAAP the range operations to expect we in XX%

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

expect the quarter. share, earnings for the EPS the we to GAAP EPS range $X.XX For $X.XX to to be the of to quarter range and diluted be non-GAAP $X.XX diluted $X.XX in of for per in

count a XX.X diluted of weighted share We shares expect million average outstanding.

to loss key approximately approximately quarter. a $X is is be around measurements $X be a is Amortization of for The assets expected to GAAP compensation Finally, million. $XX Tax of few intangible million. be non-GAAP for adjustments to effect that expected QX. of expected million approximately foreign impact assumptions be support Stock non-GAAP acquired to expense million. exchange to is expected the $X.X our

would tax to a EPAM's open dedication a we success. excess navigating all, thank call their business $X.X Operator, across good to expect like All quarter, questions. around benefits be delivered the successfully in million. I We let's up to the our hard globe challenging for environment. and employees work for

Operator

El-Assal Our first [Operator with Instructions] question comes Ramsey Barclays. from

open. line Your is

Ramsey El-Assal

I guys thanks of clients comment pandemic. you was environment among wondering on this for tailwind for you and consolidation be Hi, of could mentioned if the guys. could mean, a question. my and vendors taking competitive kind context of in that potentially you the I

particularly you change If vendor us market? of consolidation. a you color strong could on bit How in that is little give that on do competitive that, terms force environment? in more a think just that could of process How the the

Arkadiy Dobkin

But reaction clearly, was clients. definitely, of the seen to easy all. at And on is it change specifically situation stable answer mentioned, of consolidation. would the one this we've be large like, clients wish because this the across I as not we question the

new, practically. So quantify know during I accelerated it's definitely it. a happening clients. not but something how it the exactly And quarters, at really to don't number last what large of – was two It's

Ramsey El-Assal

phenomenon – a a there quarter? should impact this again? an Okay. of around just and of mentioned I ask limited I'm about that quarter. how is had in curious the about much Is just expectations and concessions. sort have next kind Or that that wanted of to quarter really temporary of past expect into we sort the And headwind you'd that – continuing then one-and-done might

Jason Peterson

Yes.

it's we'd margin up hard as revenue, particularly, doing employees have cut. that and greater did the asking a look, impact QX And think sort of quarter the – to a When a – if that I'll or you and they airline on clear, going be have to expected then it revenue that midsized gross hey, in but to of and something our XX% support to you. a clients, to they do well, is with their two QX, in we're days show modest in had client, a XX% have do instance, very for talk you So about to about work not number. type take say, discussion had pay of week

definitely those intended series And revenue had of of through of definitely minority bridge to challenged a so The who again, a sort those sort types temporary, customers, had our we are conversations, very discounts of models. COVID period. for a of of kind

to again, temporary supportive certain challenged expect QX of We decline a more and partner be QX. a between will clients. it's in that QX our then, just impact again, And and of the

Ramsey El-Assal

terrific. right, Thanks it. I so All appreciate much.

Jason Peterson

Sure.

Operator

Thank you.

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

Your line is open.

Jason Kupferberg

guys. growth second know you're just morning, wanted ask we X.X% good looking revenue I guide. versus the the I just to XX.X% quarter. a QX at question the for about midpoint, in saw Hey, currency constant the

that understandably, So QX I'm driven? you environment. to How of in the be there's But growth? wondering some conservative much year-over-year line continue if think be would want is do will drive specific top you call-outs to And this slowdown? that trough the supply for it

Jason Peterson

Yes.

think, had quarter. when and saw visit also clearly new better clients. we seen nice existing feel peers the And wins we QX, pandemic kind come consistent really couldn't of with meet during some And our of they of couldn't environment. growth stabilization logo with I some even have with the clients sort centers. said delivery actually, then demand What some what interesting middle in opportunities, we've our is we the both us much we've of So the about in in

really the QX that and headcount. At time, add improving. is any we Actually, you'll QX. headcount clearly, between So demand same the didn't declined environment note

the a had We've of on, add recruiting turned but back kind back didn't the we've quarter headcount. so And recruiting engine we've where we turned engine.

that relatively time clearly so at impact support demand rate is hiring going this growth a we an We're as is see aggressively percentage a to to improvement the And rate. the in environment. have solid on back growth what

Jason Kupferberg

okay. Yes. Okay. No,

get think it. I I

maybe... So

Jason Peterson

would we to right. I those X,XXX-plus you the that got now, and usually have aren't mean, right employees fact don't think about here know, I hired, employees,

impact to an So going is on. that have

place. very improving. is a back certainly feels supply-driven. again, So it's or so in now, putting much more about in it we're much time demand supply where all now Right And –

Jason Kupferberg

Right. Right.

worse on you've guess a So felt now talent it recruiting any part I'd obviously, the right keep months and up, finding in willing ramped back say. engine right things few the ago, the to less you that, and of as were I geographies? issues

Jason Peterson

Issues finding the right talent geographies. the in right

Arkadiy Dobkin

I'm even in repeating situation, because what can years. for repeat this several like last the I smiling

So very you for it's similar the you global only environment situation, on different the growing. very kind a see, it's – competition But level heard with in as talent like talent as the general. because for of

because impact kind even revenue And very, while future gave time. of and it visible will right specifically very It some now. and feel these like of it's relief be all seems all the in – So these competitive. and happen, for uncertainties of budgets period

Jason Peterson

Yes.

comfortable with the be ability continues our somewhat But to feel to market said, we So as hire the Ark to support demand. challenging.

Jason Kupferberg

Right.

the creep follow-up second those in the margins. of likely half the leverage, guess, year? I a improved that coming down higher, growth more top on or driven SG&A or recognizing line stabilize extent be by Just would that utilization even that to

Jason Peterson

correct. Yes,

in very QX. had we So utilization high

the time, are factors. that you're number to in I expect same discounts will margin that's QX. the see QX of temporary. that, solid QX. and between driven and said, One, I improvement and And decline expect going as a utilization time-based We At a gross by level QX between

to some QX, not discount we revenue will experience again, QX recognize – institutions. workdays of Then available don't we're in in start of have there's We'll QX. related but a And of level impact where occasionally signed it's usually financial impact we is the decline QX impact contract the able between we that Russian had work, largely and have more revenue. that recognition something and so in QX. to usual we less So We QX.

So a that positive. has

relative improvement impact the And exceed guide an will QX. the in I also utilization. margin And the lower positives of we we XX.X% reason fact and a of expect three despite booked those XX.X% the in a QX of elevated percentage gross between the SG&A to to QX. part expect revenue XX% as that's solid for So of

Jason Kupferberg

for commentary. the Got it. All right, thanks

Operator

Thank you.

comes Bergin question from next Bryan Cowen. with Our

open. line Your is

Bryan Bergin

wanted Thank bridge here morning. the good XQ to Hi, you. just then XQ view. ask outperformance, to I the

better any have can just whether a speak? of pulled I'm there industries So your some tone versus XQ is the trying that there here sense things any trough that forward? So get talk some you expectation? about the to so work the XQ of growth, you benefits and drivers shorter-term Was contributed to on pipeline that results from

Arkadiy Dobkin

QX ended environment the at volatile So just it's the how QX situation whole beginning reflects how and up. was of

the the level and of utility clients very uncertainty between at quarter. of the was different So end

because So higher understand results your right? I – much question expected, why you're were QX asking than so

Bryan Bergin

relatively, outperformance understanding given obviously, uncertainty. three It giving relative XQ, ago. view guess, you're I was, to we months a the for Yes. solid here where stood prudent And

trying So there XQ things is why forward to understand that caused I'm to just here and you were down. your outperform you're pulled that's whether

Arkadiy Dobkin

very quarter and of at no. beginning then. kind the of were it environment clients is No, the one change This where assumption just volatile making

exactly, like and think, – that's point. communicating much at environment right So now, already, And stable. as we this we mentioned feels more of were I a how reflection

That's So it's feel we business as no you But QX It's daily to changes usual, predictable. there better. know, more still predict QX. not like behavior. and client why still why comfortable to is feels changes much weekly happen in what's that's going in that we're or as not

Jason Peterson

Yes.

we fact the kind that in. didn't anything So and Ark customers about talked pull of and market

But to were grocery dog. who your we than couldn't the do – of I'll algebraic I an what said. shop impact somewhat people cases, we couldn't perverse better and Demand anything had Ark cities, to walk from go expected, vacations. simply in call, on standpoint. as you us answer I outdoors pandemic. this, We slightly think other than major was go In just of a those many

you those so vacations, instead, people And that who not booked did and would have take worked. had had vacations they

of And again that expect we is utilization, so the high return helped levels that that to the drive helped revenue and some much And business levels saw the will in utilization XXs. – which of higher overage. T&M normal, we

of so when arguably is in you're a constraint take that's vacations seeing QX, beginning vacations if take what of a supply part And people that's they didn't QX result in to clear.

Bryan Bergin

And a Yes. Okay. just here. follow-up then

growth Just that of but recover, does anything you've enable come a forward? as profitability there like will at what utilization view on are going aspects higher or more going level? have revenue down, done back helps you on Understanding in confident you structure here that is that, the cost side margins sustain the to anything a corporate to

Jason Peterson

comment I the wanted to, I first, on think negative. So

at this so that So don't in some up QX, XX% expect that will the the though, expect time, that in range XX% we to take XX% It would ran right. we that have head to I've do and range. but back do up I think, during to to in XX% learned we towards to SG&A, past. probably in the range end end guided process, we clearly I XX%

changes in – lot of to better did be respond very a job, nimble we and matching to so a supply to And and demand honest, individual clients. lot being more probably

customer match the off put that account. you for ramp-up, coming careful we and another. were a to had one to ramp-up client one down were support to Rather – try on a of to hiring staff So ramping them the very instance, and to then ramp than in

So I got think more nimble there. we

with a is that in again, that to the particularly SG&A impact I in renewed what that support future. investment XX% line now, return knows there'll not extent probably have the distant continue impact, utilization. margin you'll I the to less will in and who of our greater and XX% growth think rate consistent a some could get bench I articulate So terms travel so profitability both what in of think, on overly than XX% the that. that we to excess rate is to see positive and to expect sort think, But And of But gross be to the that we to kind certain kind intend XX% we would of margin things times. through that of on of how still probably once profitability I economic of sort in including challenging of range land growth be

Bryan Bergin

Thank you. understood. Okay,

Jason Peterson

you. Thank

Operator

Blair. Our Maggie with next William comes question Nolan from

Your line open. is

Ted Starck-King

this the Ted is question. this type the a Thanks on speaking, hiring year environment? you Maggie. in maybe Hey, and work-from-home little about to the ago, Jason, the taking that for a could environment? for Ark largely just And bit differs how talk of

Arkadiy Dobkin

would the and I be what's to talk where quarter like So like people understand think it more hiring it the proper lot. you exactly about QX happening in if quarter because like next were dynamically wasn't market, a

But an again, last So mild softer was market. will be that's exception. QX why it's than year. difficult probably different to answer the question. labor very It definitely It was

to numbers. be market, because So people exception still hiring bigger some okay. a hiring competitive stabilization an confusion But was in was and review I again, would and when a I happening. kind a next think competitive will that again question start we're is very it quarter interesting and bit kind to of understand very of market, much little that QX, wasn't saying it's happen

stabilize, So Involuntary – market market QX to So still clearly be right that's was mostly hotter usual, the well. like now, labor lower numbers Everybody understand since huge the right was starting lower. attrition, which than as versus clients higher But attrition natural getting from QX. was previous than changes. Demand now, also different all quarter. is okay?

– I So and think next quarter the show differences. will

Jason Peterson

of engine recruiting kind that idle ran Yes. turned on. mode. in of And we kind We've back the

been able in X,XXX cases, I excess seen of past, we've think, the you've some think additions. I in As add, to net in

we've running, And to from of clearly to improve. with hirer to hires. that work of will brand beginning a take we're our continues fully always us but done so as time We're go a little clearly, to bit lateral idle it universities. sort doing do Again,

QX from certainly us QX. And it you'll see to on harder of it turn sort and think go so we push I as

Ted Starck-King

digital Okay. you Ark, That's has accelerated. the for helpful. And mentioned, demand as then transformation

maybe all. guidance, maybe the the just So where I that organic COVID, here of kind for I that. the necessarily growth revenue coming of you could for do your qualitatively EPAM of out trajectory thoughts looking Not more in growth terms specific like, exceeded believe, has kind guess, on that that moved guess kind at XX% growth, period and up medium-term floor of growth in just if historical, time of speaking a see Appreciate right. of

Arkadiy Dobkin

because our I at that think to very, this accomplish very which very we else today growth. confirm of because talked kind how think And we difficult we percent I see I update would and the general times. everything of the these of rather metrics like in visible to many, all provide would it's we shared past in components what which already like higher return we to growth many need quality to size, XX-plus

think, I different for than goal market think, to a So, Higher the us, normal XX% I market that, issue will return growth. to it. demand. now just support right than definitely And, the it's

Jason Peterson

Yes.

at as growth. said, And than XX% greater we've operating so generally, Ark been

of have I So I think been those types think, sort of to the growth rates to XX% more even XX% XX%. historically, in which,

Ted Starck-King

question. follow-up rate quick could I this QX? included in guidance if organic growth the And What quarter? And Okay. for what's was

Jason Peterson

Yes.

going I'm so rate, growth organic the decompose. So to

we've we've XX.X% got constant reported, got about then we've from inorganic. And XX.X%. basis X% benefit currency So on a got

XX.X% organic rate. that growth was a constant currency so And

M&A say, a get from, to let's related expect or of inorganic. We benefit less

X% going maybe QX both and think go slightly contribution or above X% QX. we to from is in QX in So that that, to

very is – the good again, think considering feel growth And rate the I So again, acquisition that little market. the about we of driven. pretty

Ted Starck-King

Thank you much. very

Operator

you. Thank

question Thind with Jefferies. Surinder next Our from comes

open. Your line is

Surinder Thind

morning. Hi, good

– of earlier was constraints, supply some bottom for suggesting growth. parse of about How your kind marks are growth? the visiting revenues should comments that? about and the Just XQ comments about If that to comments think you I revenue we the

Jason Peterson

you Yes. challenge going which doing that. I'm of avoid, – the my on the with is to algebra I I'm sort going mean help call, to without but phone the maybe

revenue we added look that in think that sort basis catch then we to have while comes adding, headcount for which much can look of how a until what and let's And negative. You and how say, we go probably many the out QX, net up. in on was that, back at number – a were quarterly XXXX back at of

think, get growth said, Ark, excess going to continuing in but catch-up we it's you of as to take we that a because we got a lot of to the hire, responding were and, have you of that so, solid place you declining Okay. I near-term XX% naturally, a do. And hard to from as you've to we're in went realize Again, rate where need very to you unclear environment to demand do appropriately QX. demand quarter have? a environment, QX Ark sort where hiring

Surinder Thind

about supply then me follow-up, comment I understood remains and constraints a headcount the you help correctly. as if challenging, quite understand still the can the that And you fact adding

Going you back to last year, were XX%, when growing mid-teens. was above obviously, headcount growing

the... reason – is this so or there you faster even that plus at at a what can't any point? grow Like mid-teens is And lot than

Arkadiy Dobkin

Yes.

missing working hire in we're and whole process need means people. what chain think you the I supply it how to when thousands of of like terms of point the

and to March was well. like and go starting something when in with predictions that as will April, reactions happen everything down So clients'

to So in, you anything like we bringing people and quarter you whole systematic this work in stop no about. it, of in which the one like what probably problem talking engine to we're cannot one engine, restore okay. recall, just engine another need to the There is day start not or properly. have but week, And whole that's

Jason Peterson

wasn't maybe running of little – very case bench, in at enough, QX that So I we're clear right. and the is

quarter we said going million maintain entered So guided our ran for workforce And capacity to maintain to our if we at were slacked, we we $XXX And hey, to we a demand and we million. return. million. guidance, and that, gave when the $XXX here, $XXX

good there's about demand environment. can the and an of expect need means so the employees said, while that so form we growth excess ongoing XX% – thousands up means rate. as it got revenue a of a growth. to It build But get it feel And hire that to revenue back left the back you just of in again, takes so of Ark to that in we've inventory to And inventory bench, we our you lot not again.

Surinder Thind

Understand.

So...

Arkadiy Dobkin

it's the Plus, it's of is from the still like XX%. not demand market's view, like market point there from clear support to

we normal as in are a not not well. like It's environment. Let's this forget

much still And At it's, second business even two business come it's are the business. wave. or talking it's May, pandemic stable, still. in wave don't got wave In about we like than up strong. haven't to volatility with stabilized. it going three were of incomparable as of we how started. we we and whole second We what very, more month we're still usual QX why improve that know year. And another ago And far, it's kind It's that second That's And situation not. then the understand happened us and is many talking when last time, all see. alone, actually potentially very the more will about stable months what's the same were means in like what much for by not but thinking

Surinder Thind

the in understand time second ramp be something... to cautious that but given have may the there takes sense to have I – in think a up, also that uncertainty I you it or the wave sense obviously, you be to

Arkadiy Dobkin

and then end That's absolutely of of we to we were like have again QX beginning the don't ramp want or QX. this because true up at facing situation

Surinder Thind

revenue have spend. simply seems your on maybe larger is and to clients smaller gotten helpful. customers this client are These clients top like of That's assuming the a It a more defensive. in sales your I'm environment in a the then as of function – your And five bit whereas strategy. climb. demand more continues continuing the maybe to downturn, them follow-up, little kind color concentration

clients outside evolving point are – of top perspective? versus from this existing demand of of from point clients XX growth the clients So this coming your XX.X%? at that new vast how mix a at of And the is majority the

Arkadiy Dobkin

will situation the have benefiting for unexpected was largest are we're which of for I of general with client whom in like pushing be winning think, ago. So clients even more better and us already, I opportunities what's From of demand yes, feel There XX growth this to understands expected all of seeing overview, a six because we like somebody of will point grow prepare everybody transformation ahead view, more jumping consolidation, think during from us years be than five, this everything and to we Like allow that happened okay. that XX%. trust, lot for I asking kind bring than themselves was faster strategically even I large points. think more kind months specifically trying we're digital about to my strong relationship level and if like happened digital will and

So all of this happening.

we number are put in a clients, time, actually very companies probably growth points, which clients. across are months financial like the below there XX impacted. another impact have we're ones, resources At some mentioned, on together same or some is industries of have which, certain new are XX, XX that smaller there which top not on as So specific of didn't the in or to thinking much might clients, and pretty XX. number there new clients, we large There become in a are

increase So a and – created that's little in concentration. bit this

something like reaction but the – or from portfolio. general, unusual see specific across we in So any don't

feeling good pretty the it's think throughout opportunities about I portfolio.

Surinder Thind

you. Thank

Arkadiy Dobkin

you. Thank

Operator

with question comes next Citi. Shirvaikar from Our Ashwin

Your line open. is

Ashwin Shirvaikar

and How are Ark Hey, Jason. good you? morning,

Arkadiy Dobkin

Thank good. Very you.

Ashwin Shirvaikar

of you Yes, of comments change, you will. thing the for wanted Thank good from guys. details. all understand rate to One hear to I and if a you was sort

understood. or is In the and travel verticals – guess, initial are things they getting conversations incrementally where – which Where things worse? I better? any in other verticals your incrementally worse? So words, that – getting are are kind which of the hit, there getting they like in get better which But verticals are verticals getting

Jason Peterson

Yes.

into the the need let's had the even impact by, to to back at the to travel certain customers began thing, come quarter, things say, to in see and be you immediate funny an do the of respond coming we late look, in certain hey, say, have by changes So able April travel, which – would the to market.

it's, better, annual be continue rate I say time, some would we going so at from perspective. growth cases, but clearly to And the in that to challenged an expect same that's maybe

the in strong media. continue their and large budgets. see companies to We technology see – and expect growth information to technology to business looking strong Large modernize

So a care, mixed. feel to we the about, think but And Ark got health we bit talked some new good opportunity be we've services logos. new little a for not care that I then, us. also has there, be as continues about Health financial only think, might strong opportunities

little got – technology bank, talked growth large will us. to for defensive We've talked up about to conversation and technology in a about, European at – that the As Ark the in of clients again down the a clients, bit stance. that some that probably But a including had show the smaller tech rates. we one then and again, we good of beginning more that some continue mixed growth. continues ramp take his a show is And got we've QX

Arkadiy Dobkin

they're problem months. next like, So are right because across to need six the there what to to feels to really they in understand what there that going most the were practically like next most looking exactly opportunities almost general, think they where almost impacted each like even in still thinking do I it's industry during it That's do prevent now the why and industries, economy The that each nobody be impacted time. situation.

jump wait right – resources, bit, So some of not. some a or of little and now them the decision, or juggling them have

place. be then practically them they reverse but – at would and like is beginning answer completely the stopped over end decisions. So my QX short opportunities some And that at the this of all of

Ashwin Shirvaikar

understand. Understand. I

given time XQ new out XQ, So try of the as for the gave – for XQ upside? these was of for the figure we went visibility clearly about your puts visibility. outlook for outlook kind potential How and terms as same level looks you there and that of that to feeling XQ? you and visibility And visibility what's takes, some are here. like through increased quarter, your to the When of you a in you've relative it

Jason Peterson

Yes.

And in an on our there of at standup beginning informed and a supported collecting QX, update processes the those I ramp certainly, we tone track of also So we carefully very demand and about okay. awful systems the obviously, use of different. QX, daily was radically, to activity we've degrees a that North which on now, behavior. conversations I of always of America of and kind customer meetings, morning would say, talked of that what At series basis. fact initiated are where had the Right guidance, we've that we series call we systems in the a the afternoon, the beginning XXX were lot feedback think, down the Europe are by and

And sound strangely, improving would say, around have, on, or work a understand or at depends is staying much now, in a much to And And, whether kind comfort. of this I whether working. uncertainty the again, We've not dynamic on we certain home on work extent, employees but have so more we business. true, are would they're going supply. and you vacation how available of maybe sort how T&M that demand. is to about more talked clearly funny, it

Ashwin Shirvaikar

it. absolutely. That you. Yes, is color Got useful. Thank

Operator

Thank you.

Faucette Our next question comes with Morgan James Stanley. from

Your line open. is

Jonathan Lee

the Hi, guys. Congrats for James. on quarter Jonathan is on this

larger but seen pressure still customers from competitors? looking best-in-class partners? have for you You are Or any beneficiary diversified of the being mentioned consolidation, vendor

Arkadiy Dobkin

digital view, because partners of our how point consolidation view, how best-in-class best-in-class be to important going game the of And exactly in customers future. considering now specifically we're right be now. winning some showing In from understands in – again, coming this because everybody looking our to to back right crisis

Jonathan Lee

That's the it. the touched on can demand Got environment, you by then sort vertical. you of helpful. starts on of pace project color strengthened but And provide

are verticals others? of than faster which So sort upstarts seeing

Arkadiy Dobkin

some portfolio. and But lot dependent health there more is is feel life care, still of a Honestly, across of we're Again, customer still clients But this probably, at media dependent. acceleration least our it view, vertical seeing and definitely inside specific it's well. how capital specific as volatility. in and communication my science than

to them of them industry impacted, it's mentioned making like this Because sometimes and even much answer So very that question. is some difficult strategic be This certain surprised. decision some of others. growing than like this faster I

Jonathan Lee

you. Thank helpful. That’s

Operator

you. Thank

Our with next Stifel. question David comes Grossman from

open. is Your line

David Grossman

that on percentages dynamic morning. the if work-from-home? Good you. think to elevated at has client's bit the pandemic as back when what's half that whether in And the as little perspective an year? of wondering you how stay I'm Thank could your own you evolve level, – the about expect of the the even would you talk abated? a just How well

Arkadiy Dobkin

and the I at of whole working-from-home think will practically clients the working-from-home. the exercise expect of turned the again, be it's much addition most the setup. to some But of we that starting second into of it's wave, kind demanding this, normal outcome the more to acceleration And second in to a situation interesting – like again, environment. return digital more point, much acceptance longer

and long us how much proportion be still term. much for will the with new better here. get this still in were we of turn to than and infrastructure do will from now expected. is anything short, almost months, I changing that six it's, like environment to and XX/XX this like for is will another one better okay, to think able say environment to XX/XX than we for to much, whole permanent. we And in be to not having better But understands for companies lessons going going that because have like answer. expected. another Everybody Probably And see. three, works. much anybody six to definitely months be it going I it The rethinking this I'm right when we stay But productive, sure, it thing then this need people XX/XX, considering, was or or

this, of competitors. probably a probably again, with of we mentioned we small to preparing distributed our offices for the number one company that any in While, were before I most comparison

better prepare this. for So it

from support operation to this. even And again, going and exact systems we're we'll still improving like the to be to I But proportions, Now of have the and we'll platforms benefiting think distribution. see. level higher

David Grossman

outcome your for the is best And preference? mind? your what in is EPAM What

Arkadiy Dobkin

dimension large terms the work, not able city but given talent, advantage definitely or point provide flexibility do location from benefit infrastructure. not of from its view, city. have this benefit it's it's will of we additional to independently or level office It just can where From going who it that – from it's We additional office, small anybody EPAM. believe best be finding best talent here. The of can in and of right how for to the

David Grossman

Right.

Okay. And top come of back customer then XX. cohort just to – I outside want so much your has about the question that historically go – growth to

is that element XX also well all you you're need quarter hear did here to to your I did as supply the an you clients But limited your have there redirecting where explanation, the accounts. reason mentioned? repeat in just other the So so supply don't this of as bigger that. if this temporary just historically so things your more – I'm is I of growth top only something that there from a you is ask And much is is coming outside permanent? the shift wondering or the

Arkadiy Dobkin

you're known that established We outside have relationship because and In growing do XX understand it's believe facts. it's we'll faster. known – different bit this you focus very opinion and doing, and sometimes on relationships little a start to easier changing you so environment, be what grow we'll dynamic quickly if eventually and

top of part like, XX. it's about not confused But be So general, this. let's in

all X% we're between of would this. again it – X%, absolutely like grow XX rebalanced to be have We XXX, of or inside have top so that sure and we top down many opportunities that up X%,

David Grossman

Right.

algebra, I I a headcount historic growth hurt it growth, of if X%. in the But mean, you just Okay. I you just the of And at envelope, headcount look looks to which then you of of absence just about I want go understand. through think last thing. kind Jason, one like back bit, kind indicated the didn't

is the utilization, point the issue. If by looks that headcount pricing like Does right you offset impact you? from to basis sound you're that about assume XXX about it

Jason Peterson

somewhat look draw, math second but you maybe I'm with rough kind conclusion be just of, it would concerned might a me about for my consistent Let at that. here. what Yes, yes,

David Grossman

Got very much. it. All right, guys. Thanks

Operator

Thank you.

is Our with from Wells question Fargo. last Edward Caso

line Your is open.

Edward Caso

in-person us much curious versus Thank you is the sense interviews? did past, trying is of and virtual. How done recent are get to how the Hi, historically? laterals? of I'd a I hire And people you grads – be assume it school cycle How grads. at most just Just remind could virtually? how the from many I you. in many How hiring about moment was you recent good morning. just

So reaccelerate Thanks. that might ability how hiring? to your impact

Arkadiy Dobkin

Yes, to in but different people of XX% interview scalable these more boot of we which well. special why locations system. like is style about and go which logistic. different. part like to from camps. of And of the But much we're to boot have in was camps bring infrastructure to It explaining our whole kind level quarter our process ecosystem. platform we're of distributed is talking each part as almost that's includes workflow, and the and down slow whole that's the of And already platform of the locations, But through it right internal like people coming level. be thousands could universities, hundreds people probably And the

of point this it's from the very this So culture as virtually, much doing view, well. part of

So...

Edward Caso

My other question – oh, ahead. go

Arkadiy Dobkin

distributed we need to centers efforts point From we across whole takes is taking how But time, of the much like multiple able much engine again, be into and this quickly. all. and still should to view, reengage boot how relatively put account to around development camps it

Edward Caso

kind question the efforts. My on the last hold other you put it of What assume looks your I in months. few around is M&A like? Right. pipeline

looking And are looking? areas and then So what again. given you're of sort sheet significant balance capabilities you back your

Arkadiy Dobkin

think point are I M&A view, From of there don't changes. any

on put was never hold. it So

of would in similar past. it's to were focus, – the I very say So accelerated even very, actually area that it's probably what

change thinking So no is there is as here. usual. The

But we would announce. be again, So so in when it nothing M&A. happening will change

Edward Caso

you. Thank

Operator

closing turn Thank concludes Arkadiy I the session. over you. question-and-answer back call now would like the to Dobkin for This remarks. to

Arkadiy Dobkin

this we're ago. what's Thank about much joining like everybody positive months And than you for is be thought us. happening safe hope will now. in It's better that And right interesting again, time. we pretty three

in three is So continuously what see can will share stabilizing Hopefully, let's months. you. Thank stabilizing. and we be again, it environment

Operator

call. this participating. today's gentlemen, Ladies and for Thank concludes you conference

You disconnect. now may

EPAM Systems (EPAM) 8 Aug 202020 Q2 Earnings call transcript