EPAM - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the EPAM Systems' Third 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. Please be advised that today's conference is being recorded. 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 XXXX morning, the and received your good results. fiscal have of earnings third everyone. copy company's now, quarter Thank of for the

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

are made remind subject on as the I'd begin, some that we statements. uncertainties, you These risk 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 now turn that all Investor over materials measures GAAP our reported in the to earnings said, Ark. quarterly I'll reconciled Additionally, results call available located the to our have to of that in been section

Arkadiy Dobkin

Thank joining Good for and us thank today. you, you morning, David. everyone,

earnings year-over-year which the approximate in For reported terms. QX, million, $XXX same we an non-GAAP share delivered of solid growth growth from in revenue XXXX. almost XX% with per of XX% quarter results, And represents $X.XX,

our in our to we EPAM more like was to and adapt life of corporate respond our opportunities we new leadership forced connect performance, shared Boston platforms what ourselves us then was it's thought we social, color work many people in that adaptability and people, goal shared and But to found business ability all to and educational, to March in address you political continuously in Boston. year, anywhere remind journey for meeting in and us multiple apart, circumstances Investor very the an on be apply goals to we build our to and for programs. return to changes efficient The QX of urgent XXXX significant enable started platform we seems and next more the the increase Obviously innovation with Extend operate providing bring Before situation, our with transfer to EPAM in. engineering, processes before integrated seamlessly that consulting us effective to to everybody enterprise Day then I and that unexpectedly would transformation in our become change, all into very first had gen the aspirations across across aspirational realities in into social our our very do. we later with for clients. this which open through but and I and digital delivery, challenging of long XXXX. forget those about quickly quickly to November completely even adaptive geographies It we turbulence specific for the like could when lifetimes it worth to for

recognized surprise, be planned that to crisis same During the that faster were we at had that do And global we we at better many to pace. our time, much still realized but the time, things prepared thought. of the done, needed than we before to initially we

result QX our in highlight QX of with that last pre-COVID this for line we say our in to back point, and quarter. services can come more me demand this is things. let reminder, our that QX several with year, So At overall

under most future. very long the in relatively to structure is damaged much companies industries be the some While specific continue changed, pressure demand likely are of a will the for revenue and and from visibly standpoint time

drive in portfolio enough during strongly most work manner. very clients accelerate whatever the last another their months adaptive other see with within own We Some and next our and to motivated new and might client several better be industries is. change us to for are and not to current survive. across the On to enterprises who significantly much itself hand, it trends become urgent prepared companies such started unexpected

in continue key traditional as and direct priorities and we strategically our much result, applicability educational inclusively our our it our or EPAM terms, data other empowered ways we while strengthen EPAM of knowledge what clients said and future talent extending we more capabilities. which in our to direction. thinking DNA more the transformation flexible cloud-enabled by in platforms to we're and In words, deliver. and all also include of digital in XXXX, Or Continuum distributed more productivity practical (XX:XX:XX) engineering direction. integrated our November the traditional efforts, offering approach, into to direction, call Anywhere And So business we're invest consulting called that work which talent

addition, investing many system further have globe investment with programs more will we believe diversified the unlike for which technology integrators, we name to make expanded (XX:XX:XX) broader also that strategy differentiate in and quality in compete R&D environment sure this the not along global (XX:XX:XX) consultancies. continue and We In we're hubs overall to future. growth competitive continued global services companies positively us in but evolving brand with (XX:XX:XX) only across

made engagements in focus adoption programs, critical expand in help their cases, becoming identify review digital us to new efforts traditional on we customer Couple can our opportunities model illustrate. new customer which the some become centric. and examples and new to an value of adaptive our requirement organization to engagement ways in some our majority for customers a models Our We or our zero it have on that the much working has of to believe more of engagement. to of models created accelerate and to our

world, especially delivering under them spirit growth ability X,XXX customer, footprint in and One given their company digital and expected websites expand control. segment. the consumers this while accelerating shift their could the keeping of to consistency the helped experiences the And deliver without cost marketing web to collaboration while innovative connected digital EPAM cost overall massive model have than we work transform operational more allowing while market improve not to home time platform that really and perception saving. clear still we our XXX to brand held market largest domains, significant privately owned around done a from With family and in

outcomes. interesting example several and leader reimagine to support tens medical devices just Another a system from of of around role evolving whose ago of world. services, used Their the health months the of health work thousands global the products for was in at they radically facilities we hardware information are (XX:XX:XX), providing the started plan actual technology to (XX:XX:XX) goal is

focus keeping our economic delivery a of speed. With of program and Our customers quality. expectation our at way a (XX:XX:XX) of up from efforts which our doing and eye will impacted levels cloud dynamic while those and as growth how rate we that, All, the in and there which and health to highest very exercise sizable demand the have social new environment, revenue a on an the of consulting indicate step unrest, new our sustainability and continues that during high for in our plan QX we technology could on and zero crisis, global of delivery transformational well scale supply last anxieties. We the on capabilities and be several underway daily different measured years. with are to creating the template one productivity, as balanced with in engage (XX:XX:XX) in to be growth, we full sequential architecture,

to better not the predict. while our we expectation, all this half too second XXXX be of point shaping understand the we is well than So out still initial woods at and to XXXX that of is at up are difficult

to platforms, protecting challenges continue look investing navigate forward, maturing we platform services while on current and differentiator. consulting All (XX:XX:XX) We As of experience to support our core with efforts. our our believe the financial capabilities, adaptive the our provider that position is and position, our our attributes leading product energy digital combined we strongly guarding our and engineering as people, in key

out come in it Fastest category. to included information ago, the think moment company EPAM result are number post-pandemic in our and published consecutive is that XXXX, growing third just and a environment ranking XXX I few will list and percent days XXst challenging And their XX-plus time (XX:XX:XX) time Companies We the second overall one growth technology Fortune that service Growing driven with magazine confident and for rate. mention for the it's of this right ability in continue at to in

over Now, Jason. hand to let the call me

Jason Peterson

across better And you, on Ark. We expected cash and good revenue with basis Thank profitability combined year-over-year reported in stronger in a strong of of morning, revenue third reflecting higher than XX.X% $XXX.X growth increase range currency everyone. due was hiring positive with well demand previously billable constant In environment QX and quarter, foreign than X%. at expected results the greater solid our than availability million, combined a delivery delivered a came solid generation. XX% in very flow to for approximately resulting a as exchange with utilization. guided our quarter organization terms, impact higher as in the Revenue

drivers Ark our As broad mentioned, activity end markets remain the unchanged. of in

Our to of needed better insights they applications transformation for agendas, drive customers making. the the deeper are and and tools advancing cloud, their allowing data and cases, moving digital to in the modernizing building many business frameworks from volume their generate, decision

the very industry growth & strong QX Healthcare Life Media industry largest & continues in to at vertical grew Business XX.X% quarter Looking vertical. our XX.X%. Information results, be delivered performance, Sciences and

banking the quarter the in Software quarter. grew the in & in part Financial the in European X.X% expected Hi-tech client. down by Services of X.X% ramp Growth grew QX. impacted was

growth our XX.XX% and is end slowdown offset our working number energy travel offset related impacted disruptions And industry in Consumer in this Excluding was a retail, certain of this consumer a XX.X%. & sector. in the across manufacturing across by Services the partially vertical part of in to a growth Financial branded verticals COVID-XX. growth quarter. telecommunications, variability decline declined by customers through clients The Emerging and a to X% driven goods client, automotive Growth market vertical Travel driven customers. extent lesser was growth by in by in delivered in in by

signs or in pleased were to environment. outside the by was revenues mining. our region year-over-year achieved XX.X% to constant services our Sequential year-over-year finally However, our of revenues, grew X.X% or growth a in quarter of of From by a X.X%, Europe customers X.X% clients are and XX.X% clients XX.X% the APAC of year-over-year top top growth was of XX X.X% clients early quarter XX.X% XX.X% in as new XX.X% year-over-year. higher by clients grew of the QX and In response our America, currency. business in clients. grew a our level geographic primarily for improved QX our in CIS our see changing growth year-over-year investments And we in and XX in financial third of from in representing our make QX X.X% clients driven the constant revenues of XX.X% perspective, Growth XX. XX the and our XX.X% top currency of X.X% outside demand top terms was region CIS our constant from in they sequential encouraged coming many currency. largest representing constant representing currency. or grew growth than X.X% represents logos revenues. was our outside We contribution and higher number XX top now substantially North

I first income business continue Moving a our usual to lower that statement. should with down is run that the levels. cost we than note basis the

quarters. over While is delivered lower are expenses, the relocations levels travel, there spend have including the two business, efficiencies of SG&A temporary basis also operational administrative we the contributors, last producing by cost certain lower and reduced driven across

Looking forward, could but the be we in efficiency a longer-term. maintained anticipate of benefits environment, a higher some expect that of level cost post-pandemic

foreign $XX.X same the margin from $XXX.X Our and a level revenue last by reduced $XX.X was Gross GAAP million partially by XX.X% was substantially XX.X% of income non-GAAP in were XX.X% SG&A QX or came and for revenue year. or the marketing to last quarter, driven quarter of of the the the million impacted XX.X%, to quarter compared gross compared XX.X% in the Non-GAAP last XX.X% Similar the SG&A for Non-GAAP to last of from in effect period last activity-related was million to revenue year. of margin XX.X% utilization from the continued relocations, events levels GAAP revenue compared COVID-XX compared higher of administrative-related in was operations in year. was was to in other SG&A and of compared operations revenue, lower quarter travel of of And in in $XX.X XX.X% last income QX last by or same year. revenue XX.X% XX% offset in of at benefit XX.X% year. in million quarter, QX or concessions, compared expenses. GAAP exchange. of quarter XX.X%, to year. gross the for to quarter the quarter QX margin

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

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

was cash income. year, and to conversion sheet. for quarter flow resulting million, XXXX. $XXX flow balance $XX.X Turning compared Cash million, the operations was in million quarter $XXX.X in to Free from in to adjusted $XXX.X same our compared last cash flow the QX net million of for same XXX.X%

equivalents, spending strong the cash EPAM CapEx and focus in efficiency in and XX short-term in (XX:XX:XX) ended the billion days Our capacity a QX days borrowing XX and available quarter million same cash cash $X.XX of days, to million and with on quarter. approximately the the XXXX led lower and on XX revolver. $XXX $X.X to at the generation billion $XX DSO quarter year. last up record collection, of operational available invoicing end around our environment current in cash made to continued in compared cash in investments given was addition

attrition few than were a level X,XXX combined average. hires below With XXXX slightly Demand low of quarterly in add to of company. only to active our new the on we operational hiring, Moving is able fiscal EPAMers a QX metrics. to more with

at our efficiency hiring up quarter run the with levels We our approximately as recruiting and increase of designers year-over-year. XX,XXX engine high ended to engineers, ramp X.X% continue we We a efforts. consultants,

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

turn Now, to guidance. let's

business. respond changes earlier increasing expenditures. demand, response are continue in the continue run to to lower as in but hiring to focus environment, mentioned SG&A than demand normal our on In we to and this to drives this As economic call, companies the modernization for EPAM expect we with

As a at sequential of result, strong profitability. we expect deliver growth levels QX revenue to elevated

year-over-year the to we impact a $XXX the be to $XXX revenue million QX, expect million negligible. producing in growth of to at growth QX, range expect of in of the For be range. revenues midpoint we on rate the In XX.X% FX

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

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

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

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

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

our strong are with encouraged to pleased would what like dedication continued employees success. results and a and globe let's to for the outcome We our work thank for EPAM's XXXX. the the call of up questions. fiscal by to hard I is Operator, QX their shaping open finish be to are across

Operator

question first comes Cowen. from with Bryan Our Bergin

open. is Your line

Bryan C. Bergin

all you're morning. Thank Good Hope well. you.

can of past industries bit the travel color they mentioned, Just specific growing there move here Is that you European you trajectory you outlook client? financial XXXX. growth start some wind and clients consumer think as on give a and/or to what service recovery any wanted on to Is the gauge of down the complete the and level large again? are at base could you we

Jason Peterson

start with, tactical question. me more Let guess, the maybe I

companies comment down also impact wind you're Other negative in Services' shows though, demand across a substantially client, range I guess, what even some QX another in will of which we I a physical in very the, we economic clearly and the is what to is don't conditions. obviously of right shutdowns overall sort QX happen changing It Financial large demand would in of terms show QX, seeing everything. is on COVID, standpoint, and and and a investment in to with up paused QX. investments the demand impacted. kind now, is means up Energy Who what rates. business and audience goods prices XXXX, in round all energy comment see knows do are From impacted. the and who may we I growth demand those beyond beginning in also if of negative on And consumer what that quite on quite QX strong industries to is accelerate have are So, then, negatively European feel will market. businesses banking strong. and the the think still event the respond of than travel to is but the continue happened retail would of broad that But low we're there's space, it of if the

Bryan C. Bergin

in need there have? Belarus, to hear. the and as ground It's can as give client risk mitigating and from anything we situation? as operational far us contingencies associated to provide you're risks as update civil how can this you And good Okay. just you then, the Anything you unrest far on with consider an just the

Arkadiy Dobkin

of and what's more in interruption and have monitoring and connectivity. general my of norm situation Since environment line were In of Ukraine half of between pretty months, experience two lot much in day kind And on probably conditions a when three it we for last the working stable have than infrastructure Russia. ago. experience escalated already some happening months based definitely we was with very and than of short seeing then, XXXX less

So, and zero specific again monitoring We them, a really built To this and then. BCP adjusting on very were operations. so using Belarus them. detailed situation our impact in practically daily plans far

Bryan C. Bergin

Thanks, guys. Okay.

Arkadiy Dobkin

Thank you.

Operator

comes with David Grossman question Stifel. next Our from

is Your open. line

David Michael Grossman

the a where I how If Thank weakness. relative for on you just saw more that similar fourth of kind experience guidance in the good very wonder just go sequentially, strength like, at the is could of basis, back you. versus look you're quarter, description gave we quarter. the growth year-over-year Jason, back to of that morning. you would And, the was December Good question sequential levels normalized I what But I asked the relative about you just a September trending. business it's again, to in of areas the you're think to seeing if quarter.

well So, enter that as too is something the demand with balance if say we more year next to kind patterns growth we of to it capacity, is like early you as everything should or call that? of it else being equal, you sequential fair return, when issues to just as will, normalized

Jason Peterson

thing in time a more When in revenues at this we the about first that end by got QX – would are we Yeah. about customer I of verticals demand. about were one like when talked say impacted were QX, And XX%. it's said would I industries our say I impacted. I that in we customer the guess we've industry is be that to talked of continuing subsection as third

employees of and you're clearly net QX, quarter. per hire we that is an additions The seeing improving environment. David, usually we so think is one be and having attrition. thing in X,XXX And would I had X,XXX And didn't between much we important,

people. in actually productive And count head decline we of XXX so had a

match we're to quarters scenario to faster right on contributed the head behind available that on point demand with us from availability seeing, back And where additions. supply. the and that of seen the and talent. takes the count a fully to that history And of for get company. hire so, over kind few QX X,XXX with demand. we're standpoint, in we're demand of based growth up kind where supply back head staff still did We can exceeds we net the add And QX in And be we've it certainly expected X,XXX productive in we sort now, would a a that of of production highest than expecting we're of the rate then count

annualized a So it back growth. us build just bit sort time allow takes higher of I those think capacity up for of to to of the little productive rates

Arkadiy Dobkin

But, first this have not see XXXX still happening David, clear like is we – I very time the in to say be COVID knows as and hit this that what like Who will first so the keep mind. everybody. is you – (XX:XX:XX-XX:XX:XX) will

David Michael Grossman

the at – right in right. it environment sounds that moment like your you supply by the fair But Are is – in exceeding constrained is least rebound Right, the operating supplies, you're now. revenue statement? demand least is moment, demand still for a for growth the still where at an till

Arkadiy Dobkin

new nothing here. That's

balancing also these we're as know. So between so you two,

David Michael Grossman

right. Right,

Arkadiy Dobkin

normal, this take pretty have a machines like (XX:XX:XX) mentioned Jason hold you yes, back you the coming right to we're when more look and back with couple is like go need again, So now. time it fast to – to and but

David Michael Grossman

are efficiencies a – some are going And a that being Can getting how about thinking also how these remarks in business, of sustained clients little on in on can work Right. even now. how forward? relationships thinking from going the while your some they I business you in help and that bit you in unpack XXX% us model right expense home weave work we the from what these forward and to home going that it's think your things but in travel is more of about some comment temporary you of more not of a how should the about about And other these a prepared efficiencies maybe enduring? your priced are response interpret result side just maybe made all as

Jason Peterson

SG&A what costs and more tactical said from what standpoint. client on talked the seeing or a I'll try we're you around to give the Ark

XX% So, as of around we've two revenue. of been quarters the percentage SG&A a last

don't probably ahead I that XX% that to SG&A about is And XX% QX, XX% in You'll to would expect anytime would of XX%. remember guess the look year too last I low. but I obviously think that be will XX% was talking talking about I think I as do SG&A I even head range of soon, we revenue. towards

clearly have much pretty in limited SG&A continue You to no travel, the travel side.

some haven't as we doing not added are facilities We benefits. We've got conditions. as under administrative rapidly usual virtually. have done We're would marketing events. Investor conferences

don't And be as future, deep But long sort so, together I in that know suspect physical in continue environment. what will no no as – travel, do right? coming I the happens there savings of, COVID, to we're this,

the then a as I solid seeing maybe functions. matching for think some demand somewhat think efficiently, we terms pretty that are in SG&A you as continue I from see goes there's think then opportunities, in savings. corporate and definitely on, areas so, And supply that of that let's you say, to future, the in And a margin few more around and to our run long

I look sort say profitability know opportunities so, too And somewhat early in the there's I'm me some don't for what Ark... for hopeful But to, it's could if that of, future. like efficiency.

Arkadiy Dobkin

years, add in about. very of think, completely was or would think this how I the from Clearly new it back it to I for work could be. to acceptance, many to talking what know what And what difficult nine everybody Yeah. home go forward. it COVID work just really months pushed everybody, I new from And it's general, ago. of, don't and, don't kind anything way

stay couple probably more it's than close pretty accepted I'm well, much would So, distribution sure it that acceptance project to be a is much as long for but the year so. going be to and models The will on year. level changing. a different pretty the testing, trend. and would sure and for securities already like different to be be months approaches more be I'm will there will If of

David Michael Grossman

home been haven't from yet, relates conditions done of, and work it terms approached contract standpoint pricing kind as force? is really from how So, being to, much a sales

Jason Peterson

this time, at Not No. David.

David Michael Grossman

Yeah. guys. right, Great. Thanks very much. All

Jason Peterson

Thank you. Great.

Operator

with comes question Citigroup. Ashwin next Our from Shirvaikar

open. Your line is

Ashwin Vassant Shirvaikar

delve the want Good quarter. into more Thanks. like as attributes positive. about very that? Congratulations, the say project, demand bit can talk is and this the contract I granular conversations believe, used if seems words. Jason, size, you I pricing, pipeline, The guys. about to deeper those making can If it commentary – of and strong, And things you you get the for future. talk up pace, decision things sets conversion you those to overall the that,

Arkadiy Dobkin

I is to new which over number a it's there already There bring are are spectrum There and some this tried there to which new color programs. right plans think we all now. is of But some pretty some logos, vendor some went the fast and consolidations. actually are slowdowns.

normal that know it's time, closer can clients. in we what in I don't some and I if okay? say felt think, changed, from you'll but in feel much, completely So, overall general, it speed it's more pressure like much to feels that more I

Ashwin Vassant Shirvaikar

Understood.

Jason Peterson

I mean...

Ashwin Vassant Shirvaikar

ahead. Go yeah. Yeah,

Sorry.

Jason Peterson

said, acceleration modernization. to focus be a an – of there sort seems kind on what, just ...really, you Ark – increased of of that know

do accelerated you that customers series so, really do journey. seem pace the And their of to have a have of

their clients the I they're again, nicely where focused his talked actually is other COVID remarks likely on visit face-to-face And continue agendas. sort head that industry think been I companies that are prepared software healthcare one QX our of about in times high-tech the towards And the top and believe, the seen vertical. quickly. to they you've in about, on quickly. very along Certain couldn't meet And just that couldn't centers. we during think developing delivery they had very our Ark talked IT the to XX move and establishing relationship of company relationships very when relationship I then, space. was the and But, very, yeah, established accelerating

to to strong have the Insurance be continues demand. growth We where BIM space. area continue in an see accelerated we

software to portion growth life beyond. in sciences the in healthcare high and QX portfolio. in And then, of or expect and We strong tech high-tech growth see solid and IT our

Ashwin Vassant Shirvaikar

Okay.

Arkadiy Dobkin

I the difference... think

Ashwin Vassant Shirvaikar

Yeah. ahead. Go

Arkadiy Dobkin

happening. like much understands it And it when would going thought I the it. be three right we ...sorry, that our more Like what COVID you before, like now change like normal the that what's difference up this. action from could months be on that everybody on down, is think longer based feel going that was term, standpoint now and is probably like to

some all is question time. the So there in there

Ashwin Vassant Shirvaikar

Yeah. Understood.

there this you The $X because balance more good solid in was may and balance thinking cash cash sheet, acquisitions, other with performance. And something for the be transformational, capital your the cash obviously, more bigger with your then, any the with current environment? Where to on sheet believe quirkiness likely Are any have first flow the over look question philosophy? just usage of quarter of? or you flow a continue or you're pull the I billion regards What's or strategy allocation cash. to forwards time

Jason Peterson

Yeah.

So we those the item to head slowed I of onetime-ish out only – think can obviously has and things somewhat growth. you're your of that, count building not support is that facilities as CapEx down some

is And significant profitability and but in you've had driven down it's really improvement a days. so, CapEx, DSO, by the which your slowdown to XX in strong the

decision-making. expect or of the standpoint we inorganic you'll cash the the still I kind of the we're active. thinking be do opportunities us it And the Again, on things opportunity smaller quarters. be what's but could to generation. in deals cash prudent generally do we'll continues always of what carefully again, than most to larger done and the so that's it past there's think the some our it, see The be years. over some side, I the than we're with in in And valuation going seen on do larger we've of strategy. something be somewhat But somewhat to focus announce And couple you've evaluated next past. will driven From how definitely about

Ashwin Vassant Shirvaikar

you, it. Thank Got guys.

Arkadiy Dobkin

Thank you.

Operator

next Faucette Stanley. Our James comes Morgan from question with

open. Your line is

Jonathan Y. Lee

for impact? Thanks Europe? it? XQ the making taking or you does of Hey. because about This recent decision shut And question. concern How thinking James. delays is contemplate guidance are for Have around clients across on any my downs Jonathan, expressed

Jason Peterson

Yeah.

on Europe in downs or potential So, demand downs (XX:XX:XX). and shut impact client of shut

Arkadiy Dobkin

any We correlation didn't yet. see specific

couple than So, there how again, time, March, it's nobody it's the seems work. April clearly, it's everybody question much like Right same I when very going more (XX:XX:XX) comfortable. the at to was minutes knew just it ago, now, different mentioned

see. impact which no So, we

similar will be saw numbers two the to XXX,XXX month like No we impact the were Who what seeing What months everything would so ago, far. there. ago, But it's knows. question, US the (XX:XX:XX). exiting impact next? another yesterday again directions So, months in two? Like what people or be

Jason Peterson

the guidance maybe clients part know to in time of not be December we and any we've that to say we on seen at making whether have said, tried would I haven't productive in we month has time. of that about impact that so at furloughs take terms potential our the of could thoughtful Ark also this into or any (XX:XX:XX) decline sort tried But of not Europe might consideration. this decision on as in

Arkadiy Dobkin

again is I'm home distributed saying everybody else and I'm But that's nothing through, in different comfortable so know general, like, really here. that work – I environment working saying, what everybody from from like

Jonathan Y. Lee

consolidation on the helpful. some hear prepared it. we some some the across that and consultancies? and space Can vendor of the against elaborate IT services larger particularly And you about I think broader mentioned remarks. continue integrators in your competitive systems environment dynamics Got and That's you of of to

Arkadiy Dobkin

of as of because have lists vendor didn't that were were share, definitely the generally benefiting in don't but hit clients happen the We their So, to some multiple any were like when benefiting well. numbers (XX:XX:XX) companies specific happened QX, a this. reviewing vendors and we in from lot

So, happen. and to that's continuing happening

Jason Peterson

would our some brand QX more in definitely of has delivery COVID. during QX challenging that the times our not in but We reliability just the standpoint. improving, And also only had wins that consolidation and been vendor say I from in

So, more or gave some and say that pick competitors clients to the business opportunity those more of us up trouble challenges some had our in inside let's accounts. some

Jonathan Y. Lee

Congrats helpful. Very on quarter, the guys.

Operator

El-Assal question Barclays. Our Ramsey comes from next with

Your line is open.

Ramsey El-Assal

where as to year? today. about question of new my before relative which next signings today more one's I relative and contribution cross-sell also of wanted much stands so to we maybe the logo into critical kind the that head growth to ask taking Thanks and pandemic, balance for versus

Arkadiy Dobkin

we have think And digital, very new I we're more. be always would traditionally, (XX:XX:XX) the of clients. services of basically about as growing kind logo traditional again. from where them And bringing quickly kind answer both consulting, to simple and with extremely talking more like of existing growing from the the benefiting seen So side the seen extremely entered us important. level we've of allow door side same diversify more the clients we're lot one one from is important. when another mentioned brands we And figuring structure cross-sell grow and with and for fast At client this a case existing capabilities couple still a and very a us opportunity the we've which cross-sell. engineering, time, as But to when our times today portfolio real we of already

more before. that's So, much happening than

Ramsey El-Assal

bit? headed us also It's – sort general, ask, context things of a wanted some attrition And comments the happening then pandemic? be in that's track? And more would on you general well, perfect. in then you there And appreciated. to of than is just metrics and just into the of I environment update Are that How the okay, before, your okay. the key can talent normalizing

Arkadiy Dobkin

distribution, because started, and it's I pressure, that's lot consistent are, like work impact vendors. place more in general in competition and also even comment it answering the very you And this a the changing more years. outside didn't where to pretty to eight with to from of all really Because general push reach of the critical. think huge pressure home, about crisis this not on going to last you the in since for if out a There is companies additional like – is for QX to as was So, to more this. Talent had (XX:XX:XX-XX:XX:XX). happened question think

XXXX in Boston during of advances our us So is serious important We we easier. last (XX:XX:XX) in our when months as as educational, last operation. part part times and well. this At and this, the presentation expanding more met year even XX November we Actually about talked for of the to locations many same well. trainings becoming globally tried area of to this and it time, was very a all big about become the

more have we're much control say. as I to trying So

Jason Peterson

demand the within commented also Ark focused here internal has the, on company employees, metrics. talent. clearly to continued decline, focused I'll committed at employees EPAM. of I the certain of kind but on that on for comment to well-being of remain the The the some making the attrition guess, journey just on safety and

annual actually our campaign. completed promotion So, we

we've and this of annual fully QX the compensation done That that actually for year. the company so, And whole already impact in embedded is increases results.

base. to others including, So supporting see increase. that and making we're other certain things done a make improving of than the think number we're has actually rather we that our we a an contributed to try And decline certain Ark as I employee demand that leadership in we've attrition

Ramsey El-Assal

Great. I appreciate your Thank answers. you.

Operator

Friedman Our next with from comes question Susquehanna. James

Your line is open.

James E. Friedman

your in about talked in changes prepared Ark, engagement. remarks you

you're that wondering example the the You client. Is gave helpful. the that of a be could both? the engaging company perspective way would and the Any healthcare customers, the though that customer, on bit. that customer their that spirit you I engages on was way elaborate if the

Arkadiy Dobkin

some you with nine don't happened And eye that but I very if months its quickly should much previous couple six, companies right think the programs, are were think to perspective place transformation opening, started which their years during ago, that out done again, what's find simple. be COVID think in general done. the with they that actually on very very digital what thinking was

this were very examples companies jump financing illustrate in some do as well view, that to actually exactly realized From point. they if, which again, programs to of this have allowed it. postponing business allowed, both quickly point the And if

really ecosystem different jump be I lot realized one one, know, two, probably vendors. that probably this. already do I maybe that's X, very across trend. jumping then year, felt but to second and And this and For don't years it they were future. to immediately digital with now waiting in the first before maybe the very a put XX there three true a think the And for pressure a different maybe should the whole quickly

whole and the situation unfortunate companies right picture, still now. by general demand a very is the industries is again, which impacted While some in

James E. Friedman

thought your highest the that I felt I you that said the growth. that seemed also Q I you if – that you what's important, could so said be that but (XX:XX:XX) that... apologize Ark, among misheard QX

Arkadiy Dobkin

sequential What we meant gross QX QX... versus that

James E. Friedman

you. Got

Arkadiy Dobkin

the the is right of two, probably ...looks highest last three now during one years.

James E. Friedman

That makes sense.

Arkadiy Dobkin

sequential This growth. is

because to situations. we understand to also we're we cannot because compare dynamic went and But need whole down the different from Okay? you going this normal then year a up

James E. Friedman

also last companies said you the then some thing, may survive. And not that

think? What's important about? you So What that sounds too. do that

Arkadiy Dobkin

human very or reality about say XX we're now as that X have in if ago in number which that it's will it six huge like, under company being (XX:XX:XX) they about handle how five to companies very I longer, of situation. knowledge another to but months. best. pretty think now companies some are we some much and some as long another the our Who the talking and will nobody can pretty general tied again I'm sure months months COVID again. (XX:XX:XX) kind and this knows of ago pressure, definitely And a the physical markets we very specific be be and predictions were different six for space. months you're hoping understanding able And

James E. Friedman

Yeah. Thank you.

Operator

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

line open. Your is

Jason Kupferberg

the question. Guys, morning. thought Good follow commentary wanted I you I was up very SG&A to margin gave Jason. with another helpful,

forward. elevated So, concessions the gross but there's on I'm year going too. wondering you've and about just takes know had obviously utilization some puts this some been margins I client

and about for margin a expectations how So be next moving gross as our we finer the try we year? put point on should thinking parts

Jason Peterson

Yes.

of focus QX. So kind maybe I'll first on just

you've available you have in got days. So is of higher working QX what days bill or levels generally

generally the to on in and a Utilization we concessions gross But run profit will negative. little are higher a margin. a that bit extent. so in continues that COVID-related a which QX lesser declines has has and growth certain have And in then revenue be somewhat higher impacted see to impact probably days And positive have QX. to beginning both you

pieces, be overall same in the there's probably In some we fiscal pricing level And go-forward and quite concessions talking a so of types in We'll some call a asked strong. the was it I On were a it. seen to remain I clearly there's see global a until shouldn't the areas, about some in But the had But have, gross time basis, year. and same happens that the XXXX a there's is QX improvement our the until questions of about is you'll more we pricing COVID think get bit, thoughtfulness right? will years. see the you in with think what QX. talking economy, the bit exactly of just around margin way macro At you'll opportunity as earlier kind that because to moving enter reduction little have around the that past it the may don't environment pricing be. we not demand clearly see used I everything, around

Jason Kupferberg

approach to What's initial those in of terms impacting is of and COVID for just how processes? the sense Perfect. client overall the your budgeting processes XXXX timing

Arkadiy Dobkin

acceleration movement. There question. I think lot we in of is answered already kind this of a

about You're processes or program execution exactly? (XX:XX:XX) asking internal depending program what or on – the

Jason Kupferberg

those process budgets terms shape as is is year. next changing think or overall about COVID? plans approach how of they the I to think their of for timing when year, in just light time in they their clients the start, this start for budgeting the of next just Just would year

not any as prior to are customers, sense going going to year be or getting for whether than pushed you're are look you out budgeting this talking years? to in your they're So, processes or different

Arkadiy Dobkin

I Even it cycles kind is starting (XX:XX:XX) cycles now of very quickly. the but months, think And But that the and time. little same bit I traditionally, the at the be even change monthly more we're plan be long annual conversation early everybody will and much be made or will this would understands everybody next little differently. decision bit time. little that several in think could it's time, at early this thinking – think year, quarterly I this in bit cycles, a whatever this normal at happening but everybody definitely, still it feeling a in in

to it's too comment. So, beginning November in any early the of but case, at

Jason Kupferberg

(XX:XX:XX) guys. you. Makes Got you, Thank Okay. situation. sense. All right.

Jason Peterson

you. Thank

Operator

Nolan next question with William comes from Blair. Maggie Our

Your line is open.

Maggie Nolan

pricing clients should versus timeframe? How maybe to structure ask Thank cetera? fixed versus expect any are you. March seeing time-and-materials, for et Hi. much you the changes pricing we concessions And

Jason Peterson

think higher I fact generation the you'd again, our I I – towards continue with fee subtle don't But you'll a fixed mean, to that from it in revenue sheet. still T&M may we've be substantially a drift see component. slightly standpoint. fixed had fee a it to shift But bit a think little we're going

Arkadiy Dobkin

And it's definitely was very different environment March. than in

rate capabilities And visible think at like I was demand, growing it when now. for of the very execute exactly environment we're interesting we kind to and pretty least those while to much XX coming So not right competition increases conversation about back and a months different faster. expecting ago. it's seeing for very talking right It's programs we're us

different feels in very some again, – there it are was than March, situations, So, April.

Maggie Nolan

a And in efforts a to create geographic more that goals of of are embracing global remote way? timeline in terms work whether for your kind there a distribution be arrangements workforce or more (XX:XX:XX) Okay. meaningful any diverse then specific or

Arkadiy Dobkin

as as probably going we general, in Europe years and understand. for eight the India, And but I happening conversation, well. global coming Eastern to you America, China, just and what we're pure we is delivery doing this seeing strategy this pretty last long Yeah. (XX:XX:XX) how diversified from our Latin is speak

happening. it's our We're work a by supported support coming to quickly. this have practices again, talent strongly right future seeing for COVID this, again platform to management, platforms. to would back efforts about of just diversification it distribution work So, globalization mentioned future happening us we're what means with And well. there's the level think for the this, of of the actually well. On I of we next as and And the be pushing just that right thinking top as

Jason Peterson

Mexico, And again, so the Europe. more fastest-growing just us on QX, geographies tactical for in metrics, kind India, of

So, become diversify to, increasingly global. we kind and of, continue

to expand the growing you footprint. But CIS region, the continue we're of, our geographic most sort rapidly Within in a, see Ukraine.

Maggie Nolan

Thank you.

Operator

with question comes Bespalov Our from next Capital. VTB Vladimir

is Your line open.

Vladimir Bespalov

I to you ask you and on thank for the Congratulations number Hello. utilization. taking about my want questions.

this quarter third time vacations, is different. very it of but usually The period a was

comments, this, that some in time things has any going would also future on that made I the and your the guidance, with during by some in this might risk a supply call not ask built in you want to materializing time which which and say, issue, are there of yet. lot clients for accumulated the I potential you and is So, December like would affect the ask side vacation And employees been forward?

everything this, of if of you. hiring, maybe, could the terms from is in support kind kind like is you fourth what things if supply of attrition, in everything growth, growth and So, utilization side, good? good quarter the Thank what

Jason Peterson

All right.

around clarify So, The the vacation bit try can a the just impact let come, types we either still disruption. right? described, on just what furloughs on or other of to potentially furloughs thoughtful comment. you any or me be little So,

And of so, point, again, see there's what again, December. at this we'll and just a thoughtfulness. the And, still in happens here remainder November

from think be. size, of to of standpoint kind it exceeds too demand would the like what hard I numbers there's But many upside in puts takes be could sort clearly, supply. of, size the of sort to and

comment that I we level we a that $XXX we benefit acquisition is the and much the to inorganic. million quarter should think or FX and well-reasoned also $XXX on see lower feel a number environment. the I expect much based have of don't in million

constant of over is sequential pretty – truly growth midpoint, growth organic year-over-year growth rates the in it's we've So, And that Ark percent seen time. the that kind much we've of rates. that seen XX-plus it's one highest said, rates sequential as XX.X%, currency a

again, of it's sort good And so, a guidance. revenue I solid think it's –

Arkadiy Dobkin

The question was about future? QX or general the for

Vladimir Bespalov

be you future, about mostly if the would was great. QX it but It on comment could

Arkadiy Dobkin

answer I our the about traditional of and a like we again, think the And would XX% our demand to so. supply. come supply and would balance that's between plus, it's be, back to quality

XX% So, for still future. out the that's targeting plus why we're solid

Vladimir Bespalov

maybe there and very Thank this, much. How that? no And little bit. is on like with you you the you things could this problem a vacations accumulated see comment do or

Jason Peterson

of terms focused say, and let's incorporates, looks profitability guidance like an there's what on – productive revenue our pretty think and appropriate don't again I and capacity what in that estimate mean, like. the looks I both we're Yeah. any

So, I wouldn't to expect anything unusual there. occur

Vladimir Bespalov

Thank very much. Okay. you

Jason Peterson

Thank you.

Operator

from from Arvind question last our Sandler. with is Piper Our Ramnani line

line is Your open.

Arvind Ramnani

but conferences, generating to how about leads, if at even how answered, grow could have their but Thanks Hi. you remote industry your or been nicely. large Most environment? quite questions. at at certainly talk clients? Can about deals working you're your my talking your existing a continued a not at you're visit clients just You're bit new for little continuing – to talk enterprise close or questions have either my closing to sales you clients in offices able of

Arkadiy Dobkin

I don't how to honestly this exactly answer question. know

So, Microsoft now. Teams (sic) (XX:XX:XX) and Zooms [Zoom] through basically,

than way be as I don't we Yes, it think other and but think So, a well, impact how to I that, everybody will found it else thought changes. huge people communicate. might

Arvind Ramnani

next operational learned have there lessons perspective this an just to related at change Yeah. you kind operational the kind two in question, for that Great. of some from that And you of look you are then, look you no, to XXXX, a if ahead you're to post-pandemic perspective things Are years? from use world? looking there as expect

Jason Peterson

area would of getting And probably got made think collection of DSO accelerate the sort has accounts. processes part real cash we've of number in changes demand invoicing our in have real resources done to that what our of say I think areas just financial one sort balances. and cash of In other collection supply that processes. a decline some as I and the particularly it's nimbler, and onto think in from things in that somewhat the matching. of standpoint we a I And and cash contributed we to improvement of there's I

Arvind Ramnani

year. and the Thanks right. of remainder good All the for luck

Jason Peterson

you Thank much. so

Arkadiy Dobkin

Thank you.

Operator

Arkadiy you. I'd call Thank back now like over remarks. closing to the turn Dobkin to for

Arkadiy Dobkin

months. call you I to three help healthy talk will you you David as any this and And in you Thank questions, is again if hope to today. the Thank always. during time. stay attending available have for everybody

Operator

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

now may You disconnect.

David Straube	EPAM Systems, Inc.
Arkadiy Dobkin	EPAM Systems, Inc.
Jason Peterson	EPAM Systems, Inc.
Bryan C. Bergin	Cowen & Co. LLC
David Michael Grossman	Stifel, Nicolaus & Co., Inc.
Ashwin Vassant Shirvaikar	Citigroup Global Markets, Inc.
Jonathan Y. Lee	Morgan Stanley & Co. LLC
Ramsey El-Assal	Barclays Capital, Inc.
James E. Friedman	Susquehanna Financial Group LLLP
Jason Kupferberg	BofA Securities, Inc.
Maggie Nolan	William Blair & Co. LLC
Vladimir Bespalov	VTB Capital CJSC
Arvind Ramnani	Piper Sandler & Co.

EPAM Systems (EPAM) 5 Nov 202020 Q3 Earnings call transcript