EPAM - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the EPAM Systems Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, David Straube, Head of Investor Relations. Please go ahead, sir.

David Straube

Thank you, operator, and good morning, everyone. By now you should have received a copy of the earnings release for the Company’s fourth quarter fiscal 2020 results.

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

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

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

Arkadiy Dobkin

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

we of was for nine, today were Let we different just the thinking year to all us, call, very then what were me In and what back XX-months from XXXX, and know I a start ago. a preparation all taking three-months and six the look say last from we least. back reviewed year, for starting during briefly which sharing to

an adaptive tells in looking year XX-plus interesting for optimistically organic XXXX. with February on still full last it and of practically hope us think I percent focusing growth, normal enterprise year, story for our another story. into short,

we reality Time much we and transformation very point, further. that Company At before. our while us decision connected and condensed making in-line outlined be made transformational strategic accelerating realities, these which to reporting with to of back for go we changes, had what on our each protecting planned would and for standpoints. not most original The our will we appreciation much Just us everything preparation portfolio from a that to much of than understand many time and at didn’t than to was saw liquidity thinking this of ourselves and point, very of first I time, uncertain constant their three-months and who for three-months, clients. by we client impact, would the situation, worsening share for We, currency end around At for need some pushed our to our and long we new practically really else for to with form deep enterprise preparing are start signs our to end another up reality we impacted when us the some drive and really and XXXX start In power which first this very at stabilization client a and the more in the for we surprise, XX% our know our people reorganize our viability a realized sharing world. financial to the will like all line later, clients for situation. times, plans have normal like information over and and now, still thousand When didn’t more realization ever fast for the XXXX how growth also to everybody up future, do about ensuring an even experienced to be not if XX% for QX. EPAMers forever. such as revenue issues, very period, would would where adaptive be necessity faster agility play enough did possible the company, in trusting continued priority to closely urgent be by critical defensive communities It as extended performance support our will of a as a very other the business. for again most will to new ourselves of become

larger increasingly our encouraging. to see also which strategic period, the started portfolio clients, ended several large across new several was During take we an logos of and share for we will existing that our

the new into We investments company. and Scalable growth turn EPAM just to transformation XX-months ago, of all name clients have like models, our to cloud-enabled significant we of how today, operate Continuum, flexible. regard to of and and into where all. data we and all future The sales, verticals analytics, across financial but new believe more proposition locations efforts only because or back world much we leading investments strongly EPAM all services, EPAM I comfortable be around of strongly to service comfortable first life not last the in presence, in encouraging Day, and and enabled mention recognition AI delivery new and truly become integrated by Thanks distributed seeing DNA delivery us the analysts, of and for we educational from anywhere goal very remind these test a we our many engineering geopolitical the locations and simply adaptive take our knowledge enough consulting from the broad a in turbulences nine-months. see offerings of supported while stated Investor few. again that turning the to also of tie our by In in to sciences, advance back consumer and around platform Finally, those much base EPAM into challenging our with to insurance productivity of and our a preparing paying everybody and growth. realization would those digital three-months per during goal We our Continuum, set still capabilities, business time. become are in

Our extended enable tools all which network working comprised approach and capabilities more more expert and of approach quickly organizational very market, EPAM our and of global, goes experiences cross-pollination efficiently. teams agile EPAM but of ways build people, into through us working, beyond to and much shared Continuum to should

and driving in enabling work to EPAM our and current complex this are today in portion portfolio, of results program faster past. represents we the customers our agenda, strong ongoing are is While larger results scale and significant than ever for value that that a investment seeing higher

a at story fastest-growing which already as is but studies in [indiscernible] well During our became shared technology client XXXX, our Those just year, already. top last as large not among we currently. XX several healthcare included platform, clients specific

share short those, addition new let stories. In two us to

its transformation the position to the strategy transform combination helping a of and the digital innovation and first then, services. one and year-ago engineering for over a to the transformation partner, strategy just The accelerate and started top IT to journey engineering implementation through as has and consulting agile company insurance a property project Since and an go-to become IT global XX functions cloud company implementation as giant. program casualty EPAM

on engineering. client is EPAM global very is care provides second engagement an clinical, Omni-channel physical including value including research management, services, design, digital wholesale building The integrated product The and traditional stream and experience, recent retail for pharmacy our product of product, management engineering full digital design, device end-to-end elements physical of capabilities. consulting is our use and leader. full services, top making

I levels our to made in remain growth our possible have ongoing needs. our higher investment do in is keep and indeed investment mentioned So by consistent even place XXXX business, expect we of with the everything priority, which will

from Moving XXXX on to results. and start numbers, let’s our

industry constant revenues, included fiscal a reflecting of in year-over-year verticals. For earnings growth, XX% close XXXX. which increase currency billion ended $X.XX, of share XXXX, X.X Non-GAAP growth the in fiscal we over XX% double-digit our per at to majority

million generated flow than of of we A X.X last Lastly, for cash it times result, average XXX four-years. was year. free the the more our

in client-facing digital also across new to For our all employees than engineering with our remind front, challenging XXXX, more our very teams services, believe come consistently of and key maturing simple point, the statement. position the are And this during to in like as product At platform and consulting that our X,XXX for will our beginning. a expertise, again. combined the We think time, to out we net leading I this But was people very quarter sequential year, a differentiator. repeating provider growth increased and we the strongly obvious EPAM welcomed at best the were corporate as XX%-plus in functions. ability confident we we decade during by would what a of is in during From we XX% in last the XXXX ever QX our an very when the statement, environment revenue wasn’t revenue probably more to QX saw that practically especially worst XX-months we almost telling. with continue result. post-pandemic a comparison our company QX value-based is that growth the at past organic drop growing rate It happening sequential result-driven with

XXXX, want demonstrate to looking demand be active we for services. a see and very to continues to ahead that our market strong So

end application the optimization and partners. and engagement engagement interacting development market. partners. data connect requires that other of of led different platform platform clients need with lead of enterprise, first past the are and our and adapting design, transformation. really by the strong engineering. cloud Product analytics, with with as to customers in requires well their organization building of the business the as of power With faster changing hybrid expansion even of enabled and our of the the The ways models pace events This with landscape, means by all key we with clients those to transformation will technology and And consulting. have development large-scale which be It digital engagement with for to with monetization custom co-innovation alignment process some platform year,

digital fast-growing be spoke product In past, platform segment, to the estimate than which size. in the engineering billion. positioning more about Regarding market $XXX analysts we EPAM

XX% services, integration are represents opportunities over software with combination broad and While are cloud In be segment, of XXXX analysts we about such work, and which enhanced in or a projecting services we technology environment. consulting alone to resurging post-pandemic the services for position still in seeing billion market. training firmly cloud-native which in market, leading total $XXX application total development, the of a the custom development IT play integration global us EPAM and

anticipate effect of about our for and longer-term EPAM this of to industries. some the While few of and the thinking customers customers, and for a certain in still pandemic probably disruption lagging damage markets our new we in context continued demand

we XXXX and for still to past XXXX to fiscal be XX-plus more we results specific geopolitical are not time specifics will risks, provide However, year call today, of post-pandemic zone Jason out let and me which over when believe organically. outlook, presuming being is percent business in the our the while in we the and obviously annual already XXXX. of our do are to that, growth hand a XXXX With

Jason Peterson

and Thank good you, everyone. Ark, morning,

our pleased the given with XXXX are performance, dynamic fiscal year especially environment. We

durability in million, of on clients a a people during EPAM’s needs year-over-year reported the the the quarter, of even demonstrate came due results Revenue from of Our meet positive EPAM constant currency a our environment. to aforementioned generated of to delivery ability revenue in our challenging basis our ability XX.X% Revenues approximately foreign in also our portfolio, XX points. $XXX.X and than of expand exchange reflecting benefited fourth previously capacity contribution. to of demand impact higher guided adaptability terms, foreign somewhat and stronger-than-anticipated In increase exchange basis times. highlight XX.X% response the a to

driven performance improvement, established growth and relationships level over and both Our the sequential produced QX new clients from by strong in a existing industry XX-months. customer higher work vertical very new of revenue from last

degree, across client group. performance models Healthcare growth to investments lesser new from grew year-over-year wealth improve platform traditional Financial Sciences and services development data XX.X% delivered and XX.X% media and by this at banking, driven information in Business grew coming XX%. quarter quarter. the growth management. & insurance to R&D the to and, with Life Growth support analytics, was Looking efficiency. business a in

XX.X% and retail the our their environments. from solid growth the and in improving and increased quarter. QX, in year-over-year. to returned dramatic along Consumer in saw changes response within growth operating as we grew Travel Hi-Tech with consumer In clients investments & made clients, performance strong Software X.X% to

materials. our X.X% now and quarter APAC XX.X% and CIS in geographic grew constant was XX.X% XX% XX.X% driven CIS, was QX, driven of region, XX.X%, In services. grew region financial or the representing our year-over-year of XX.X% terms XX.X% QX in grew and constant of the currency. a year-over-year constant in finally, emerging currency North year-over-year down Europe, largest currency. or was currency. our perspective, our outside X.X% automotive primarily or driven and APAC growth X.X% our clients our was Finally, services fourth clients XX.X%. by Similar America, vertical clients by XX% revenues, growth revenues. statement. of top year-over-year our quarter, our represents QX to primarily And the in in in clients by grew And growth financial growth, moving representing revenues, income in XX.X% telecommunications, the in XX.X% XX.X% delivered From growth XX clients XX year-over-year materials. in QX representing revenues, constant in and top

run that quarter, we levels. As previous mentioned the last lower continue base a cost than business is to with

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

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

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

Our GAAP income to in or mentioned the revenue of of year. in of the QX XXX.X income operations compared or of XXX last XX.X the results revenue of to million million or last revenue benefits continue to XX% short-term was XX.X% items. see quarter of previously quarter XX.X% or operations in from in XX.X% from million SG&A from XXX.X revenue QX was year. million Non-GAAP compared

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

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

at with the and of billion in year, XX-days flow Free million quarter same years, cash from operations XX-days lowest adjusted million same million at XX.X conversion XX-days, cash XXX.X to balance the compares of was quarter our and to QX cash We for compared to for quarter least cash same XXX% in was ended a QX XXX.X flow turning the X.X Cash and year. last in and In in Now in sheet. the flow to DSO was net equivalents. income. in XXX.X last quarter compared QX, the end XXXX. the five- XXXX resulting million

we are can We DSO this with very pleased in believe future performance manage XXs. upper and the levels

on of and Moving increase X.X%, and metrics. our a few consultants, last XX,XXX ended quarter engineers, sequential designers We a the a year-over-year this increase of quarterly to in operational with XX.X% approximately increase five-years. highest

QX Utilization more X,XXX down net XX.X%, from Our QX XX,XXX than a was total year of in last addition of from for headcount was with employees, more EPAMers than the and XX.X% quarter. QX previous XXXX. consistent

to XX.X% a growth results at closed basis. XXXX fiscal year. and on currency billion XX% the XXXX X.XX Revenues reported for Turning over or full constant

and GAAP XXXX, XXX.X increase acquisitions income to was XXX revenue. our XX.X% During contributed fiscal operations points from approximately our million, growth. basis an year-over-year XX.X% of of represented

was operations revenue. of and year income XX.X% XXX.X the million, from non-GAAP of increase Our prior XX.X% represented over an

in came year the for rate at tax XX.X%. effective GAAP Our

benefits conversion. million flow and XXX.X from income Excluding a rate XX.X%. there of stock-based And flow non-GAAP diluted GAAP compensation $X.XX. share cash reflecting other stock-based cash shares certain was approximately a was the and $X.XX, a XXX% finally, our $X.XX. impact for earnings excludes pre-pandemic and over XXXX, operations items, was million effective XXX.X certain net were to of which adjustments EPS, XX.X tax reflecting fiscal outstanding. expectations for was one-time on And acquisition-related higher increase to related XXXX. compensation, per XX% the In one-time adjustments, million XXX.X XXXX Diluted than Non-GAAP weighted free excess costs basis tax adjusted compared average our million, fiscal was fiscal

to turn let’s guidance. Now

across resuming fiscal full-year as well improved our visibility Given for the guidance relative as portfolio, are we XXXX. the stability

we anticipate across our demand. make with be growth expect the While in-line we to At business the time, levels to diversified sufficient certain have the vary at to meet levels. we the elevated drive portfolio renewed will industry to resources patterns verticals throughout year, investing pre-pandemic across more we growth same

area a infrastructure be will the geographies terms of XX% in X% we in in constant our increasingly in impact. exchange factoring will increasingly Starting be long-term will EPAM. the support support Revenue creation to our XXXX least new global be foreign Additionally, XX% a of growth. to and investing larger focus and a growth will with after outlook. reported on currency at be at favorable full-year least basis One

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

Our higher our income a geographies investment from expansion XXXX. in planned level capabilities reflects in of operations and the of

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

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

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

For QX in expect the of the revenue of be foreign we FY of on XXX be producing a XX% range. of growth at to revenues the to million approximately to midpoint In expect of XXXX, approximately growth the we rate range impact X%. year-over-year million, XXX exchange favorable QX,

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

be stock our non-GAAP approximately We approximately tax a to by level impacted connection be tax compensation annual will vesting effective restricted of our benefits tax rate the cycle. units be X% the quarter We rate in GAAP higher effective to XX%. our related GAAP excess effective rate expect and to of in anticipate to tax

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

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

for XX.X to X.X for our foreign key Amortization spread million be Stock quarter. the XX XX.X to million expected XXXX. XX.X loss quarter. million quarter. quarters. tax X.X QX, compensation in approximately of around measurements. excess year, for in are XX.X few each million in expected results expected is for evenly The QX, that and to full-year, million for the expect year, million call GAAP non-GAAP to Operator, each XX intangibles finally, to In exchange we across And support year, QX and approximately XX.X in each a is remaining to remaining the remaining across tax assumptions million million adjustments we balance lies benefits with The ahead remaining million impact non-GAAP million, in X.X with of in a and by XX.X X.X pleased XXXX and be million be and in and the the with questions. approximately spread million summary, in effective expected expenses high-quality QX QX is QX the open is the delivered million QX for be in fiscal XX.X each approximately around be up for million what the evenly $X encouraged with let’s are we Finally, quarter. with

Operator

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

may proceed with your You question.

Ramsey El-Assal

for do Should think for certain thanks guys, forward? verticals potential evolving? little the business should of growing mix see start question seeing longer-term going how another on lot of about of impact said other of going guess we are a Hi strong verticals clients. sort you faster verticals we about some kind congratulations mentioned EPAM quarter. think you are post-pandemic adjustments you some kind your mix to like to some the COVID-related - I that FI for and the how forward. a or seeing than think is, COVID-related you you my I your question And taking Ark, still of

Arkadiy Dobkin

volatility on quarterly we pretty definitely three, still still on two, volatility is basis across be at when believe a that accounts Probably one, with And in size, place. our we growing, four, historically, good have and depending even again, on verticals. this we with could which annual still five large type versus look of level our

it it was at say. look think, all it quarter-by-quarter, the I changing difficult if champions practically time. is, to So And you

general, would retail, in unpredictability, even to but it is similar at might invest more least more work. for year. which travels we impacted this there even like common the see something So is actually for in investing some be start I might to example, think COVID And by start or prepare industries most for

difficult but to sorry, predict. So

Ramsey El-Assal

Okay.

to hard this point. at So tell

I’m wanted sort the are basically outperform to of margins margins question also to visibility margins is, and easier specifically of confident in I about way context to travel. of of And like what the see sort out that year. of the came in. guess you COVID to margin underperform things How Okay. that you your year? back going thinking I ask versus performance are costs model ask next of next flow the the kind would

Jason Peterson

Okay.

the thinking So kind I two do our I if it really of revenue. the that SG&A that up is think that percentage XX.X% say And thing of or a would somewhat to point of of as will XX% of expected is feel about we the communicate how we middle into next of the go expect that XX.X% break guide range I first to we sort is sort are components, business year. guided

exited So XX.X%. full-year about I think at we the

XX%. be of at something heading you I think XXXX, full-year towards for would looking the

prior some that the results we in later business, amount some and the see of is to spending that But the some additional to XX%. pandemic, at there year. still in from over investments the is running of in were that, that of you And because benefit can return normalcy that is some

India, America the also additions other But in in all is to the talent Poland, will and investments it company. growing gross evidenced from headcount then will an in attract traditional include is into infrastructure business. see margin will in our that include That Europe. bring Latin by to and We places on we of a the will top-line. that the as required guide continue that do we we expect Now geographies, and places think sort talent growth maybe Mexico, standpoint, strong make continue to what expansion other

gross at in on investments, XXXX, negative And margin. a least somewhat so impact have those probably

that idea will are as And the With then to to they they more rapidly. at closer consistent them grow we subscale this they have scale, point, need profitability. get

so as increasingly And and, of of lower much can in we that we a level slightly of larger margin, company. course, incorporates, a invest kind maybe become elevated guide more SG&A, our gross so again, somewhat the of level a again, global infrastructure

Ramsey El-Assal

Okay.

So that appreciate so is super it. helpful. Thank I much.

Operator

you. Thank

question Our next with from comes Stifel. Grossman David

may You proceed your question. with

David Grossman

And kind just Thank Good is unrest as some us margin diversification. Jason, X.X facility of of is if wonder what about morning. new in typical years? you you. Belarus ramps geographic or much just to how comment about How I on the how year, over your could you follow-up, last the can a I any, gross you trajectory the of remind that, a geography? related the new ramp if know of it

Arkadiy Dobkin

Okay.

sink around Let much David, our on start we it is involve like definitely, kind there very is in conflict. from because, some how me, XXXX global Belarus impacting diversification yes, in Crimea what delivery there, influence similar was Russian-Ukrainian and on events happening of

America. we XXXX we I to during period to then in this move were we Latin presence to accelerated And Central, and this think direction. So Europe this direction. India And and continue between Eastern definitely moving and our XXXX,

centers, there. multiple cost and we different which there So there are new structures opening, are are

to Jason to on will So I pass specific. comment

Jason Peterson

Yes.

we and operations couple are of help of standpoint, will so you in somewhat brand-new find of would Ukraine. at-scale what at we a profitability naturally other Lithuania gross got our and initially, are in subscale, this rapidly up So and is in low as may who you Ark some operations like by very will scratch, see us start a you part additional we of still again, geographies. the that point. grow kind of modest And relatively from In it Belarus probably Poland, grow margin infrastructure indicated, looking more case of may would further. in utilization, have we But these are stand From when carried necessarily the But facility facilities. you aren’t a levels way help even where costs have we lower employees some pull Belarus Lithuania, did will than is rates. us those

those those see appropriate have rate So again, as and an profitability rapid the will growth it a entities, delivery centers evening which term, out countries get scale, to a somewhat longer gross in I And think, David, lower of I up and level of think margin. is more more the those then, individual we profitability. you a

Arkadiy Dobkin

expect future, In we XXXX. in similar very general, experienced we which like XXXX and

David Grossman

And to similar your long to where just would look to of how scale take get other it some does those geographies? to more margins

Arkadiy Dobkin

well, so might again, years hard bigger sometimes different this we because practical think, ago. learn across changes and also the we had on six to as some is top that this, at if And tax impact, on be is there much, a it point, completely slight of much there like I the more would that come from globe is impact. significant five, have unpredictable. impact predict more you margin But again, But have that situation on way. points it

Jason Peterson

Yes.

difficult through that next the appropriate somewhat and kind David, we work year, scale as is again, of a of as So get fiscal think fiscal into But think I is Ark to and you said, I to this more when kind more year normalized it tell. margin.

David Grossman

see. a work the more the would just sense into getting models with insight allow that this distributed And you more I’m going more point, how that to workplace curious, in the point, it those Do this you they any customers? centralized evolve with just working have of into this is are better you cost too if have be in so kind broader I a industry. evolution is give that do a this comfortable access then how you shared future workforce updates a you to looking just not but more savings our talent at at for any maybe or evolving. curious get on client the how satellites or at Any just maybe it pool fragmented may insights to early location? is just of operate

Arkadiy Dobkin

two like is it think questions, in different I definitely. general,

changes right side, But one more different was additional proofs part and of for ago. to kind And is acceptance environment people before. we and of experiment has On another lose real high prepared was any become bit internally, in practically to programs to COVID locations we flexible support prediction felt virtual infrastructure. of invest more That XX-months also ago have world. much multiple like that that to but cost three-years distributed of the establish we ago. quality is will are talent when story. thinking there model. the all like which factors, all, multiple sure, And very how here. for source, much helps in be is find than accelerator like more this a you happening. started and build than expected about started around how attributes more this we and to probably clearly, are Even not situation. but simple saved, a to And the there there little it cost a And for a And client-by-client it for because this specific like talking distributed there First years distribution, more it you are are to in

the of well. acceptance model actually, competition it in talent inflation distributed because as is becoming for Sometimes increase and bigger, wage growing

model. moving parts many cost too are the it say now would how right change to there So

David Grossman

Alright. Great. could in. And if just I more just one

XX Below your historically coming, pandemic, overall has rate. you a is you growth During opportunity been to important maybe top contributor and saw the pretty growth the XX. more on That where top the the focused more was there.

do coming for expect some you - gaining is the share just kind logo in that sometime XX is talked same from I’m wallet the remarks distribution or and about you pre-pandemic of wins curious, your clients gaining of Should we next new larger share. we expect this several So and top saw where new returning you of over growth the the the terms normal in months? prepared

Jason Peterson

Yes.

of David, one from interesting this a in X the that quarters. think, about I in three the number have being things to revenue modest XX four been that is year or top that of customers within is bolted right have quarter had we

to need last quarters top the for to means I really time, XX-months. top so about you I make are they the XX where allow what when accelerate fiscal immediately do the new almost rate. the their customer I some And internally, Ark’s couple that that began outside revenues, customers at the will the the that move statistics feeling top revenues, the and investments and clients And are does XX. that which from investments business, see of revenue transform being some rapidly the customers the the some them distort last in think larger same of kind new from think into at XX in look that in logo in the of generating growth of think XX XXXX. within And growth we year top talked

a that total percentage seeing are revenue. are of increasing as those We

to in shows that as sort think of the QX we the move I up in fiscal from QX metrics, particularly to year. concentration QX XXXX

Arkadiy Dobkin

good are the of so and them, and top. And companies in is I lot at come XX well, think XX one top change as from a there of becoming top in which level a some exactly volatility below

David Grossman

Okay, great. much. Thank very you

Operator

Thank you.

from Thind comes with question Jefferies. next Our Surinder

You may with your proceed question.

Surinder Thind

you. Thank XXXX, to from ahead revenues anticipate a and It maybe kind start, is like when what XX-months evolution? the you talk new can to of of on in just question customers should next share, go-to-market that are how then you from are wallet look kind about you current you think getting of mix that anticipating we over and To that the and of how be customers seems that changing? strategy terms you

Jason Peterson

Yes.

at of very and we XX. revenues. into kind seeing Ark that of traditionally journey kind top lot rapidly EPAM we with move haven’t their of I at the Instead, end is trends are the we out think as customers begin a customer But So forecasted the pointed historically. new look

to consumer create now quite find is to is to is And retailers of to customers. expand growth different revisit because has goods with customers, travel seeing who one, as either products with not and many there making companies investments in ways an that have so you connect e-commerce we noted, it interesting, again, are strategy, right our business but And while it are to improved, to significant and Hospitality. Travel existing are deliver their already again because

that lot seeing spending So of of lot you area. are a in

in digital of with manufacturing, of again, a seeing are sort You more connection. lot a spending

large relatively for will high are think I you small we that that these levels so customers of we also from of growth us. expecting in some And customers are see in of couple a growth But XXXX. have

Surinder Thind

of and to then it. they a projects. bigger to or client you are you of of you the lot just conversations talk that some in on those are or smaller like sounds just trying follow-on are terms are seeing renewal of Can And in chunks clients feel trying that overall start Got the having, off bite it about willing to the projects? little a things embarking bit or

Arkadiy Dobkin

that are to that the unexpected of of and believe analyze there direction a already happen which prepare strategy what of good programs number did because they happen. might clients sure think of actually and out aggressively I make very definitely things moving large to in this create I for number do next kind visibility the

during big better are some there them increasing is of So will a quarters from be are again, big But but here. I engagement is well. one a for some what seeing, shaped as or programs, number shaped, of think much number the it of we two us next of them

Surinder Thind

about back I how guidance. above that, a guess, should look the couple into - visibility does, And helpful. you potential I’m above related impact of XX%? to we recovery. just larger over guide, just faster-than-anticipated and look projects come I think larger of and out end the and in of maybe then have up is as guys But your XXXX? is to stuff of for final That these that, the question kind the some part then of kind you how last visibility about forward or in assuming projects When that, where when of terms the quarters, well think you that you

Arkadiy Dobkin

can I something know message if from we don’t don’t predict which our it. you share how know you

our we kind very And this And of some bigger. enough are program I bigger picture, to also pre-COVID. to like we in think happening, cycles. doing while we are comfortable similar there were annual return big guidance become we were doing this

So of in rational it some point from way, is our very view.

very our were times. similar we again, now like to visibility methods doing predictability what think, I So pre-COVID right in and

Surinder Thind

Thank you. Okay.

Operator

you. Thank

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

You may proceed with your question.

Jason Kupferberg

their big morning to guys. CIO decrease survey because that wanted they did with broaden to digital basically so of journey parts can meaningful just you your who think I dynamic that a kind a we that they keeps more just picture within as question. extended in just continue showed client the of the continues of Good get digitized, getting find that largely Hey. a runway if to We the of digital observing with start longer. And that And believe transformation base journey. the their I’m out? recently be are a transformational kind efforts is scope business is wondering are done enterprises percentage of digital provide

Arkadiy Dobkin

based are most you clients So that saying with saying are your of already this? they that on research, the done

Jason Kupferberg

to if find saying areas Well, decline longer as they done, we you digitize, I’m are are that because is largely they saying getting observing of a in there that. more is runway percentage actually the enterprises the are wondering and

Arkadiy Dobkin

- do we because think I think it is don’t I like -.

Jason Peterson

double is negative. it a So

number the in they say that done. are decline a is that it So

Arkadiy Dobkin

okay. yes - in decline Oh,

Jason Peterson

Right.

Arkadiy Dobkin

men it actually So broad, - is okay. I

to cloud see different years. it is mean about of does around it we is huge thinking a migration kind in a this well-defined think several It very as this. last is digitizing differently well. But change when this what talk clients not difficult also very definitely, the because asking I modernization, it and and area

audience is and impact we everybody a this several real more too. questions, a related previous of of to I all of much we all this. see decade, view, talking for And about much which during answered as accelerator huge And happening point years. we interested them almost this, it to from is kind the of think COVID for see the While and definitely more focus on last

Jason Kupferberg

right. Right,

And Okay. for about XXXX you a and making utilization bit assumptions the can guidance? just tell the Jason, are pricing us you in

Jason Peterson

Yes.

So in QX. utilization exit fairly utilization, consistent think, we with that is I here with

open provides the demand some particularly robust probably demand again signaling of open expected still decline. inflation. is think where we there we’d the mixed utilization. opportunities. so in What are little wage Ark indicated, are and And not probably so a engagements, wage particularly see in idea talked customers, of But to have range resources are of impacted we existing sectors in us are in work rate some for inflation. would type elevated uptick as And X% more expecting in we a a significant less range we X%. is, expecting didn’t increase. the Historically, a rate to X% seeing, who XXXX, XXXX maybe to quite that theX% are are unless again, are increase, environment I not it of that of bit in probably X% the a newer economy, do as I is significant about kind level stay with open in more a somewhat And to that to pricing and the the X% to XXXX a Wage high that XXXX inflation was they for and and come

Jason Kupferberg

it you. Thank Okay, makes sense.

Operator

Blair. comes Our Instructions] Maggie Nolan question from [Operator you. William next Thank with

question. with You your may proceed

Margaret Nolan

you. Thank

us Following new into you geographies, of up why geographies on in process the of you behind out, those those assessment then and markets? build decision to your build-out locations insight give what your the some picked attract to can chose ability you talent

Arkadiy Dobkin

built can There geopolitical of market, heavily we right relocate consideration different partially scale some which of be the And is to there India, they acceleration, some was might out, for which also remember well. things. right Definitely, which our There much, looking of talent it university are portion that - countries. this. in have two a still Latin for system. our And days migration which much people prove in acceleration number now, to is by the for combination example, a but we there as would at And includes in be in there. locations. very for of But new preparation not locations. smaller can a we quality us. are attracted of kind who traditional for but do those for usually, wishing in countries more geographies, our the when of countries, In in while criteria so you these comfortable that since is also couple infrastructure global XXXX a IPO IT in second some a and now, degree concentrated And we of for very competitors, like is countries practically kind across some America. as us this, And like new natural we decided these of situation, much are is situation, we kind of select it was due again, were that necessarily relatively And

Margaret Nolan

thank client it the then was decline good a your take top of XX, growth with sequential some at in buckets, we the And top there of maybe X. look you. the if Got exception slight the there,

little the This when any bit of going on year, comments growth XX, driver the you then is is think that So outside top of nice it on last there? Company. And growth. a consolidated the company for was the trailed what about kind a year,

in client navigate So recovery you of COVID? the that bucket of is how as there those any about kind client reinvigorate be any that or dynamics from we there thoughts relationships relationship, to aware that should

Jason Peterson

Yes.

is fair. that So

of to customer seeing in XX is in going high Ark I are diversified I going said the verticals the think the that growth still which is, We with business little certainty much the which a think it growth. that think the or customers drive absolute are whether very at think bit at we very still top portfolio, a of we about call, a beginning to we predict And have levels are as looking some is So year. to hard fiscal industry it given customers. certainly

have that I are media we few slow that customers high down. is could call in with We large business One thing going out very are to space. growth the had a information seeing

clients top XXXX. a might saw relationships of now year see very are who certainly as in growth much with those We think we we number in continue XXXX not in have much significant to fiscal that very XX. We as our

coming from manufacturing growth customers. got have new We some

to got some with coming health growth some customers have flavor a care more IT from them. We of

may four-years a are below in companies, think inside as large a think portfolios. but little established bit was I as vendor as traditional again, and of those it get so seen or a those you I growth see rate be you the And are continue have do going three the not return that way XX, the we ago quite relationships done to EPAM more growth get it companies with can that because do things to inside to

Margaret Nolan

Ark. Jason thanks and Thanks Alright.

Jason Peterson

Hey you. thank

Operator

Thank you.

with Cowen. Our next Bryan question Bergin from comes

proceed with may You your question.

Bryan Bergin

Hey guys good morning. on Question hiring here.

you XXXX feel add? a And operated X,XXX you level ceiling as like you in headcount do couple you in months? you newer pace regions? added of before the the how scale You How of have the significant billable Did expansion model feel nearer quarter. be last on-boarded of these headcount here to about should comfortably are early the some thinking we

Jason Peterson

our in have add capability invested or our So capacity headcount. we clearly, additional to

we clearly, And in But the this up biggest the us continue the putting had we allows we are make those of so catching we QX, to bigger, from structure as that. history are QX have talk is as do growth company. clearly, in place get incremental of kind we investments, QX. that to that about we a But and

than we past for to right But in running we, that instance, a level so expected allows we And that growth we place very years, because putting at seeing that infrastructure strong we QX. in demand. is as are have now, the much are as not us an enter in meet and might headcount demand we part are hotter again, have

Arkadiy Dobkin

not often challenge is demand and you make to think is that stuff. keep grow, in sure just almost supply. And a grow actually responsibly to but the balance to this very like those through between I

we kind this try key Form one of of that which the view, point is of challenges navigate. to

Bryan Bergin

receptiveness M&A you Okay. on component know following I are thinking a M&A how that, the on about expansion? as can and you cash the guess of comment geographic you position

Jason Peterson

Right.

I’m to about something past. what the this, quarter, I talked in going have every add and think, to So said I I

our potential at discussions targets. And we active pipeline, are M&A in with advanced in So quite companies. the point, our this discussions several quite acquisition with

talking that about expect the that do be I we so not-too-distant will in And future. more

we But facing. and in. use some we have established acquisition get would capabilities. end don’t country a as position But an in role also, with And probably play to a so have We to might focus of on customer management much more us us continue a a helping well. again, focus may kind experience markets, geography on cases, an be that team in the as

in think you those of will XXXX. things I kind both see So of

Bryan Bergin

Okay. Thank you.

Operator

you. Thank

Shirvaikar Ashwin Our Citi. comes from next with question

may proceed your with question. You

Ashwin Shirvaikar

with the is is vast My TAM. morning regards Thank you and is, to M&A, question from focus? provide future that on lot and revenue from more Europe, perspective. have quarter capability perspective, specifics to of continue And EPAM of diversification? footprint good have thoughts on you revenues or Jason. you. of how a detail couple any a provided from your globalization question from Jason, My about a a majority you that are You Ark, perspective? America larger you if the on of times delivery thinking a Jason, geography good increasingly good revenue of morning our Ark, a come comments North focus first can mentioned here. And global

Jason Peterson

Ark I’m and sure I as to have first, say will well answer something here.

focusing places Europe. still in So is I Western like in that cases, may think customer some more the investment be market

be an continues expansion, for that I to think of think opportunity longer-term I company. APAC in terms the do

I America. in say, most we does Europe out revenue would of and of know, underpenetrated Asia still you And As the Western are, Pac. North

So that an is longer think term, definitely opportunity. I

is And you in APAC. see opportunities that, rates slightly think particularly, are the market. in Singapore I think elevated interesting beginning I growth to there

see in And show think in so I I’m of that But necessarily not but future will expecting think I kind more to of XXXX, kind you a in term, longer material way years. revenue. up greater

Arkadiy Dobkin

Yes.

to general mentioned, clients because ourselves expand. to was for example, and a and eight-years markets, last starting that priority establish these is bit America I the and North how Western to came what the we by markets Europe the Jason direction, China during little which is And The when UBS, seven, serve better. of of happening is probably far in priority. rest think from global main our

markets with APAC global be even clients, I really growth but different significant. serve with it almost unlimited are. think Latin very our in well, markets to North we to we the APAC, would to size, anticipated. again, America, But is, extension growth it we with Europe clients, Western And which potentially in going is So local from have in the some not where the and America much be opportunity

Ashwin Shirvaikar

investments? capability Ordinarily, out good is pull a to course the I I if impacted how wouldn’t light set it you could perhaps to shed nature was that look know. was was it that through future you and always evolve of that of talk you XXXX, it given on specific clients that with how your So added. was guys particularly that you that more more thought integrated was - was see to did, if That the Understood. so? performed the or more affecting see discretionary how that I you acquisition consulting, that that you that Continuum adapt key curious you can acquisition but

Arkadiy Dobkin

Yes.

multiple stated us, That that I that examples. of point do not like we capabilities. is of technology our good this believe times wins I a our two surprise, way, we these triggered for acquisitions last service definitely range where the today a and to together of we think in in engineering, Continuum some we being saw ourselves point comfortable illustrate a is a a positive the very wins new to of capabilities. very we started big capabilities us looking linking during statement, try in organically. difficult in bring return very I even the entered of and to such which on is it consulting And clients much firms point past, through from a about the general, say, are and this experienced separate the consulting view, from year, it but couple a to business years, how think why, a more kind impact. actually create, have journey much all strong real more specific and which And we offering against world, and point more traditional important consultancy them And engineering. of foundation you from XXXX, at actually multiple of selected. to number we did line to past consulting for making significant for the with we my material consultancy in in the programs potential. couple also, had the build But we We for in thinking us in And direction top build different with think

So right are signs very is well good that forward there it moving now.

Ashwin Shirvaikar

it. Got Thank you guys.

Operator

you. back Sandler. call I like over Arvind comes Ramnani question with to turn would - our Piper Thank the now next from

You may your with proceed question.

Arvind Ramnani

improves? as Hey Great. portfolio. seeing environment congrats Are another seems on demand quite you quarter. overall across robust The environment the terrific pricing your strength demand

Jason Peterson

Yes.

that It the have with think of engagements. is their of there demand bit with opportunities still long-standing a they kind more I challenged, I are is you and some right. strong the some produces people think of more is some there demand, terms uncertainty. little relationships, And right, bit in supply a But depends particularly, when it newer little mixed, lot on own are and of opportunities. of where are a

And And informs of past. is range the up still rates see IFO. midpoint on kind maybe the guidance adjusted so of frequently XX% we the pricing as in that ability bit But as important the tick a that little being to what we have opportunity. with cautious

Arvind Ramnani

levels probably anticipating to productivity. Great. planning of a Great. year, XX-months off that sort like high Are were and environment? be how kind of time could look vacation levels in levels had And operationally, kind when staffing staffing But there next a last of you for to this? XX-months, of elevated post-pandemic things of sort. thinking your of fewer of account you and there I the some are and Clearly, question at you about vacations

Arkadiy Dobkin

the in discussed you. interesting months put on for triggered model executive of our very the Yes. nine-months calls, after Like But general, a X a it, Thank a question, going is team definitely lot debates. or lot and afterwards very, which It we right in internal vacations, vacation management accelerated is the for we current now. COVID be are give source, [indiscernible] moving are will than But will it we yes, done. one of anticipated that we seeing parts up now. increased some assuming model more vacations right of really But our this. projecting

Arvind Ramnani

Thank luck and for good XXXX. you Great, terrific.

Jason Peterson

I appreciate you. Thank it.

Operator

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

Arkadiy Dobkin

you, you. it really mix everybody, we will Thank all attending. we Yes. Thank of that different XXXX. be And Again, all how for know tough while a hope was will we different XXXX that things. understand year be

situation. different picture. quarter positively hopefully, whole are have our quarter We overall And from update change second the be the looking completely next to last to where year will

next it be will you hopefully, time. year. this Thank much, very different So you talk and to

Operator

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

You disconnect. may now

EPAM Systems (EPAM) 18 Feb 212020 Q4 Earnings call transcript