EPAM - Earnings call transcript Q1 2022

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Operator

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the EPAM Systems First Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. now host, turn Investor David would to conference Relations. I speaker your Straube, Instructions] like the to over [Operator Head of Please go ahead.

David Straube

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

of If not, Peterson, like CEO Dobkin, and is and Jason a available the I’d some contain filings. that company’s remind epam.com in comments statements made Arkadiy subject you may listening those and section. call and the With are Financial call have today’s Chief to Officer. the described Investors me copy forward-looking on are SEC on on earnings release today’s President; in These statements. uncertainties to risks as

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

Arkadiy Dobkin

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

thought previous regional spirit potential deep in our never-ending of operate during call, in Ukraine years, that assurance maturity and my the finished and XXXX importantly, us and making keeping were our to engineering local safe and to reached thousands of the week global earnings including measurement, the quarter DNA friends, allows continue to our Belarus, the strong reach of was employees global when address their of history. challenges on and clients, in most our that other everybody of XXXX impacted our earnings everyone has and unimaginable manage well expect families, millions Russian ability possible. and I our by remarks quarter XXXX and the say by a real and we entrepreneurial that tens prepared times XXXX of Like and, our world any we future EPAM communities for all our our to of been Ukraine neighbors broad has applying tens any the reported leveraging insight the By in What with with didn’t we changed our later. unlike last our level we changed around along has The over people, XX, the few as war. Ukraine the as difficult and employees, performance our invasion the in February our world. QX while XXXX During

a Now statement. EPAM, Ukraine. a let with as repeat fully me simple stands company,

to that since of of well-being started has months by war last the Ukraine. around be government, time absolute our employees the beginning and our continues the was their Ukraine. resources the employees families other, our and the help been Today, their globe and in and each Russian the support in safety donating priority colleagues region During to continue and to top in the

has company families of help the logistical provided Ukrainian safe significant outside to support Additionally, areas and Ukraine. financial and their move to inside employees our and

charitable team, of range has from aids. relief those of Ukraine announced, help great EPAM financial and broad of their vulnerable responding a responsibilities, dedicated challenging mentioned. Ukraine, number And ones. and direct been Fund produce and our clients provide to and ground and humanitarian and to have organizations the Ukrainian Thinking despite this about Assistance with the As EPAM’s This deliver gestures people conditions is Ukraine. management close to $XXX different increased a personally committed customer customers Ukraine, the unimaginable and we aid people today has Along assistance our Ukrainian separate million established situations US$XXX type in from results. for grateful team. we there in with in across clients, every on and colleagues support for we to to broadly incredible of an our needs to efforts and previously partners to to the in sometimes previously thank our each on from are EPAM see that very I million impressed to continuing the interest their support of resilient want addition work commitment been our and outpouring the Ukraine. those one extremely have continue together and fund with more directing assistance, work to

level unfolding months somehow broad ago. to also daily, were the readiness ourselves today we wrong, of be unknown. than the guided disruptive find we better our prepared imagined we we events address to of right where despite However, about and Because three nature just

investments hardening and quickly have processes procedures. continued and for respond enabled us platforms, logistical operational establish to our in recovery Our teams framework phased a and

us way in the least Let several a bit structured presenting thinking by current are it more we journey illustrate way try our of about things. stages or at to currently

of maintaining during call it and that. believe is this and thousands we First, and initiation many the of Phase X, of from continues is Those relationship to safety of our little despite illustrate numbers geopolitical safety Under our beyond while a very conditions current last for focus will inside QX details to detention to out interrelated, self their for a in move will results few success. important we families, our a operations, guidance phase addition in as shortly. and and stabilization been to it with Jason helping west period and the preserving country completed largely customer challenges. has specific more as QX our opportunities notable we [ph] deliver famers to our months for initiatives, our the our east on people Ukrainian abroad, the define and war initial the

Russia, to In made we employees. and Ukraine, concerns projects which geographies, the a continuity decision plans market we the the for we allocation broader with global the also is to to is of alternatives actions and the our crisis step are also with in with managing clients, reposition address in humanitarian very April, the through established response guided Russian different with to are which previously customers had while teams operations and our working the to much So our including request multiple we government. exit their business

We to be share our Phase a of our are employees in opposition. for delivery region, are in our diversification at consider carriers to our in allow multiple our a balance And the our capabilities. and a who global or growth to us the our if accelerate and we you with remain This farm. continued which in locations what statement alternatives bring of working X, activities their values is fully to advance will, we them committed of Russia to most talent location to company

the for India, begun This already America Asia, new with acceleration the development play this we that have allowing facilitating rapidly future simultaneously the in locations. in was will point exists footprints other as existence on establishing will better closure value is expansion also point, phase, in while scaling We efforts overlaps and underway those employees we early program out I well would support active as At success, develop reposition which opportunity across locations delivery establishing and Central large already, second newly experience this also even allow part, increases in have, we our in growth in maintain throughout seeing our to past the and in the diversification Phase and current those significant and the during for that can continue progress us in update several includes several market created hubs Europe. This current the to locations. creates talent hot and delivery Latin year. well to we This years. talent local local X. delivery report expanding you already many those

will of production it to By less by end capacity. allocation Before was to [indiscernible] our total of was our about and production to Russia in allocation XX%. our Ukraine, of than COVID the we end manage to the XX%. Belarus XXXX, the XXXX, stuff from of reduce region And the believe close we XX%

potentially Additionally, to will which have market Ukraine, strong we on talent post significant contention one. maintain pool our we talent and grow believe a continue be to

is believe XXXX area above. phases will and in with performance into attention portfolio the likely We shall in growth This focusing with these call farm of think, what will the manner. that we rate improving this enter of focus What focus demand recovery our of ranges. target our significant this environment as position profile unique second and family our expect trends us very been that parallel that are on profitability, of disruption driven the business underway of be elevate of still this The demand. our us today. the After And of consistent profitability we well to while we visible revenue as experience rising enabled objective with plan. type has us new growth half two term agenda Phase context I We We carry show rest new organic usual bio as operate this on while combined us. of While very also our levels that our profit to normal unexpected important to period bring to on and on and focus described we locations existing much But the should on place happen, we it’s superior able structures be in to have return improvements, and during plan size and delivery goes place we Phase starting some business to trends growth phase revenue things performance means through for scale XXXX. new to should before historical the already in customer This believe on revenue we second to in and intact. this customers we’ll X growth operate business is remains have and a longer phase throughout occur sequential and half than continue XXXX. DNA much stronger very that from brings to well our to believe on with late. X new optimizing the to for the rather sooner differentiated normal will market to to to time

operational possible, I two the complexity understandable sequential. also it’s level and day-to-day important overlap At of that in as for the they Today, scale of started, underscore we in are next elements while our To are much two are phases interrelated these very this first together very as a disruption this and life think very phases not within activities. phases be to will high XXXX. efforts beyond all impact control. summarize, outlined is already of that to all just effort time, bring the in time. just place same our our a cost much to best our contain some to well, underway into many the of much at And it’s continue the the war present are I getting also responding much phases time, are will put

really not year. and is innovation and customers, strategy engaged stated new, credit, but and partners. ecosystem new deliver we capabilities broader, with on revolving of an grow people, Our were a value tax across Based consulting adapt, our developing integrated over our acceleration last of more strategy, information previously the

to in and industry-leading return profitability line will We model. more a growth

and While able the as and we our more in previously resilient field, execute to our goals. I’m more emerge since I more unimaginable this XX be insights time, XXXX. done Day XXXX you’ll and diverse, we event in where three Analyst a on you’ll developing Boston, the challenging more as Investor still confident share revenue IPO relevant challenge three on in and through years will join May times plans our apart. in hope company have

to at turn additional who about over let the we Jason, QX will our and results as me Now, look QX beyond. call in talk perspective

Jason Peterson

of we Ark, despite morning, Thank to to delivered the from good March of in the in resulting In Russia. new EPAM QX, initial In customers results impact first the costs also company’s strong charges assets EPAM’s incurred you, based quarter, discontinue decision services and humanitarian everyone. the associated in some Certain been long-lived these acceleration and including Ukraine, to expenditures non-GAAP geographic our impairment Ukraine, related results. costs the of accelerated Russian financial excluded of for employee commitment invasion to costs, strategy. diversification with of relocation Russia’s have of

have specific these included other disclosures release. related additional our earnings in and to We QX items

of XX% $X.XX of foreign year-over-year currency generated XXX terms, EPAM basis of XX.X% impact reflecting quarter, a the and on current a points. billion, reported During increase a in constant negative basis exchange revenues

broad revenue the Looking at contributions of organic recent by strong from information Life performance XX.X%, very XX.X% Services in business verticals Healthcare and growth as the growth insurance both and acquisitions. XX% travel and delivered customers, the media grew Financial Consumer banking. quarter. Travel our management, and quarter, XX.X% based and coming with growth our strong well from grew in from retail grew industry as asset driven Sciences

finally, in XX% quarter our to delivered XX.X% now XX.X% was And of XX.X% in customers from stronger EMEA revenues XX.X% outside year-over-year top largest constant by currency. our acquisitions. year-over-year revenues the CEE year-over-year QX energy, grew Hi-Tech clients XX% America In grew is finally reduced the in XX% of and constant our year-over-year manufacturing and X% in XX.X% of our EMEA services combined was performance XX grew XX.X% the grew of was QX representing growth organic telecommunications, From grew grew X% grew driven in revenues growth impact XX.X% and automotive. located or driven Software in or clients year-over-year currency. and the our contribution terms. region constant incremental over initial our Russia. perspective, of an our verticals our constant by revenues currency. XX% QX XX%. revenues representing in quarter recent emerging a by XX.X% while Growth currency or from XX.X% top with from revenues. APAC And representing represents geographic in QX, XX discontinuance clients

statement. the income down Moving

million of to and by to revenue non-GAAP utilization margin to was compared Our the Ukraine. work at inability revenue same year. last GAAP of Russian SG&A quarter QX year. done came QX lower well driven from from for XX.X% level last operations of XX.X% level XX.X% million the same the impacted XXXX bad the last certain the as XX.X% $XXX XX.X% $XXX associated higher in Russia. year. negatively with was in margin SG&A GAAP XX.X% of in for Russia, to revenue revenue customers, our quarter Belarus million QX revenue in income in to of last for in resulting reserves XX.X% of or of compared was customers in $XXX $XXX or Non-GAAP from debt, the last by compared operations quarter Non-GAAP quarter recognize higher to or XX% of XX.X% and of of year. income or compared year. as the in located quarter was largely compared XX.X% year period SG&A the XX.X% in XX.X% quarter of revenue reflected of in a QX gross to was compared Gross margin last GAAP of of a gross was revenue of QX for the in million

Our GAAP XX.X%. the effective was tax rate quarter for

ruble of relocation on were unwound Russian tax contracts Russian a forward of Ukrainian the decline accelerated and Our certain charges non-GAAP losses tax EPS basis the reflecting impairment to assets, per share that expenses to related $X.XX charge benefits which quarter. a was GAAP staff in excess $X.XX, impact excludes rate, includes XX.X% decrease the earnings to includes a related on long Diluted humanitarian tax one-time or year-over-year. and related effective XX.X% was GAAP expenditures, lived credits. or

EPS a $X.XX the same diluted over $X.XX, QX, quarter were In million in approximately XX.X% or non-GAAP diluted shares XX.X Our XXXX. was outstanding. increase reflecting there growth

million $XX.X Now our expenditures QX our support operations cash related turning the cash QX inflow performance. initiative in of to negatively variable Cash based flow of of our of a higher flow to balance $XX a cash XXXX same quarter company-wide flow compensation of cash and payment net impacted to and humanitarian for compared net XXXX. was was level by Ukrainian sheet. on a million, outflow from the

days in year. quarter years. and QX free At $X in timing cash We compensation paid year. proportion with same for in XX XX in quarter $XX.X in the negative of the DSO was same cash days the ended We XXXX higher than with of a to to cash billion was QX, flow last flow the prior for $X.X of compared approximately equivalents. quarter QX million, days cash compares payments and also positive Free end accelerated variable the last million XX

current maintain levels We DSO throughout XXXX. expect above slightly to

metrics. engineers, XX.X%. on consultants, few increase moving We than with year-over-year a quarter the of a to XX,XXX Now and designers entered more operational

we Our an negatively employees. headcount X,XXX Ukraine quarter, production growth growth In total headcount the by planned for net actual QX impacted reduction was and had production lower than XX,XXX was around in additions, in based Russia approximately headcount.

year compared continued Russia, last We in experience and growth XX.X% to QX headcount of other accelerated in to countries Utilization was in in XX.X% production Ukraine, Belarus. QX and XXXX. than XX.X%

backup Our QX employees substantially Ukraine. been projects utilization delivered to includes support assigned those a have in who from capacity

our utilized being for did utilization largely counted was Ukraine maintained somewhat basis, calculations, year-over-year purpose in the operating Although, the decline as current Utilization work levels environment. on but were high at extremely of a these considering unbilled. employees this as

XX, to invasion outlook. to the our business to Now withdrew outlook turn Russia’s On let’s our we business February of due uncertainties Ukraine. related

year, plan guidance our for the beginning year. remainder the quarter XXXX For of guidance the this to expectation the year next with to only of full resuming of the provide we

terrible country. Additionally, to in a is around broad for currently me continues the aggression which assumptions, thinking help frame of events, most XXXX. but significant to our with Eastern Russian fighting the the and remainder concentrated will on a QX provide of help pull Ukraine, portion take let align of our the few guidance

continue relatively safer are who our in of to We country. located see the of levels productivity substantially high portions staff from Ukrainian

those Ukrainian slightly experienced guidance than will QX QX. Our lower in at maintain utilization assumes that levels we

of the X,XXX relocate where out their spent of Further commitment of be year. of as made and country company’s so their $XX During the be we humanitarian have EPAM part throughout Employees has $XXX relocated numbers Russia. invasion, employees we To-date, expect will QX destination of expenditures QX. of million relocated and in relocate we of the weeks to the positions to Russian the more our remainder productive. families. significant locations and expected are are Ukrainian Russia humanitarian Russian initial over to being and employees countries. safe Ukraine to able they’re in our employees billable to were And employees far to approximately fill delivery and billable million moved of throughout outside to outside

At planning for the However, result QX, lower lower considerably of for in remaining expect Belarus. time, based this that we’re during in will staff country. demand resources operations levels utilization levels we those Russia to maintain in

However, as clients business of like number we plans continuity rate would defined In expect utilization In begun and we deliver effort the for to many the higher a to to reflect level than we countries with a us execute will redirected. our to demand billing Belarus. parallel have result lower people, rates increasing the in repositioning of to of who reflect other cost has from economics our be the been the prevailing geographies costs. structures align which cases,

some Although, we establishment lag expect bill in higher of rates. these the

some locations. we as short-term scale our combination will on Additionally, expect put profitability of we pressure in downward these The inefficiencies factors QX. delivery newer

expect a with the half half second ongoing return of to first the levels of in XXXX However, of to improvement we and historical in profitability see to something our profitability XXXX. closer

in accelerating the portfolio based expect second demand, strong continued positive diversification, our growth we sequential Lastly, progress return the in half revenue and our to to on global of XXXX. in customer stability

XXXX to moving on our Now outlook. QX

expected growth to a XX%. XXX at growth constant at over contribution least to at Included least of months. approximately growth revenue acquisitions the rate points be these closed producing to revenue revenues is $X.XX from terms, expect year-over-year basis In rates XX last be come is XX%. billion, in We least of currency

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

Earnings for GAAP quarter be approximately and expect benefits related the we least to at tax our our for the rate, to least at $X.XX expect effective and quarter. be per to approximately be We GAAP tax excludes XX%. to diluted XX% stock-based non-GAAP compensation diluted effective share, which rate $X.XX to EPS EPS non-GAAP tax excess be

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

expected measurements in expected expense compensation be is Finally, the tangibles impact approximately a to benefits And second finally, $X our Amortization in of expected The foreign the expected around exchange support around million $XX.X be million. non-GAAP Stock-based to to be effective Tax key quarter. loss. we assumptions the a adjustments approximately is be few of quarter. million. to million to be tax is $X that $XX.X GAAP expect approximately million. non-GAAP to $X.X excess is

and measurements additional company. improving summary, earnings challenging and non-GAAP of QX March, on In we release addition result EPAM we repositioning will expect QX, the to results. QX non-GAAP of see the for half for in are geographic to of see our despite Ukraine. the of adjustments invasion these reconciliation QX with non-GAAP will that Russia’s In year, Please detailed are profitability traditional Then QX remainder consistent In of our the focus pleased a of GAAP to in a with we growth. GAAP both to the to continue second year, sequential our guidance. have return

Now, opportunity living you EPAMers Operator, a from I EPAMers, for open My like operations and your It to and you’re all through those call also to have still hard all necessary that imagine all prayers doing let’s meet take Ukraine. for and are families. the you. to but delivery obligations that in is up would to huge all thank EPAM with for of and the country. of questions. I working respect thoughts is sustain living this particularly amount

Operator

Instructions] [Operator with of Our coming you. Bryan question from the Cowen. line Thank first Bergin

is Your open. line

Bryan Bergin

hope morning. I here. colleagues all Hi, good Thank your of you. remain safe And

around First you retention. have for is client question I

new experienced you very conversion the progressing and to reductions existing So just pace? historical solid of client results color the how for you clients had more relative their client here. us give choice conversations? risk maybe work exposure. revenue around with can to any And losses you But obviously, Have just is

Arkadiy Dobkin

invasion weeks clients – So sorts I through couple of and then opinions and it changed. pretty months think lot where also the during couple and went it’s of similar assumptions us, understandable of a first last through kind multiple to that

clients But cases very we work to several and have cases, as to growing back weeks and and – very, stop do starting were exceptions with grow we with then So us where in returning clients well. us it’s much where decided us. with have several multiple

we I expect I ago. it’s is the – would and as months think several it would And of think practically than I week. better level describe each much comfort confidence growing

to producing multiple clients during talking people happening today. – really Ukraine expression the amazement my appreciation of Jason already and productivity, have and We and in level how expressing who our what there and the same myself like this

during last week, we again Ukraine So asking – come, clients accurate see location. to well. starting specifically we new work hiring and as to some the And and in in business starting

would summarize So that I think this.

Bryan Bergin

Okay.

good four. of Okay. then into some around the I on wanted That’s dig hear. so provided contexts just to outlook, the profitability to phase this you And

Thank those sounds any it the like about in you’re But that and achieve plans So future. risks model potential to getting there back you consider? profitability future really you first there’s thinking operating prior your considerations So believe you are XXXX? what structural think half view just versus the of in in prior I said the you. are levels that here the to

Jason Peterson

Yes.

have doing remains who utilization we’ve are somewhat – the asking we for Russian as talk have of going towards got stop exit to work also we that in So Clearly the QX then, XXXX, lower clients. guess, – modeled We’ve Ukraine, and back we I and levels some to as prepared mentioned the initially us situation to utilization, about lower about, particularly as you maybe for And during Russia, just we’re operations delivery. are journey remarks. as we’ve do if talk dynamic. then head clients seeking I exited we determined because is

with stay said, us of EPAM, Ark ask but Belarus. delivery outside do As to

QX. got And that in And a in in of lot got you’ve with think you’ll you’ve through so lower I work that QX probably improving here utilization. region, entire somewhat utilization

and next maintaining Russia. obviously You centers, delivery a do associated ramping while have people you still we’ve with are next associated in delivery country of the standup this centers is existing we’re some as take some with series and particularly of And up. have immediately we into more the in delivery in their down new past our move delivery growing creating you expensive those current whole costs locations, And compensation the then, countries. pretty is, people’s cases and about what into talked geography, costs some

compensation And the to discussion percentage costs. efficiency, rate half. then as those the in then got in increase. utilization I be increase are through and we’ve SG&A an begin the believe that SG&A will year. then but there’s come be to up back that’s already work go to revenue down a of second QX, act, through think just there have I work then clients of Those And the needs all on sort rate underway, discussions. you with throughout the a probably about in the because we’ll So balancing associated conversations working and But

Bryan Bergin

Thank good. you. Very Okay.

Operator

of the And with next from Darrin Wolfe our coming question Research. line Peller

open. line Your is

Darrin Peller

guys. Thanks

First as really of well all, stay doing just safe and everybody’s as hope possible.

and I supply could you guys next this. there’s for few you’re to if Turkey, just for very if any manage through And portfolio The moving it’s the to way some you leverage know see it’s in areas go-to balanced been note, like Belarus to think looking the the impressive are new side a business, from when past, identified you understand really markets you Secondly, be, just help that if see that newer, forward want of quarters, us about understand your markets your differentiated talent there’s are whether Russian would other too. specifically maybe of centers differentiated becoming I base you’ve real the Ukraine you new that on development. there going

could then that, breakdown is the those you’d of within some there base way can us of if quarters that it help a your wondering to percentage be employee understand I’m so moves just And on of after that And the breakdown, top any couple you be of these expect source. occur?

Arkadiy Dobkin

because Yes. people we the in Russia the much and the end And we think the in directionally indicated I Belarus, of already how question. by expect between Thank think few you closing next year, we we’re months. for Ukraine

be are this some now number indicated from this will to also specifically, happening Russia Belarus we relocated hoping, as Jason Western Central and and from well in I our multiple Asia mentioned well. right well and location employees Asia that now BCP The as is because and of right we as We from based good on the Europe requirements considering our right clients. mostly think countries, – now

of talent, we idea But countries where So and to ferry can the think scale. believe going configuration, now the details we and culture. this long will it we EPAM. connectivity time. we what don’t number can at company exists we which I we be bring definitely accelerate we to building But bring EPAM we have. a recruitment specific this think able to that were that percentages, which a also [indiscernible], there which in identify for we And And

the time, India same months, the at market Latin was America. us So and XX last fastest the actually during for growing

this we And working accelerating in it even started and actually market. for so about on be we diversification this were us, talking talent before, more will we that and in we focus is

will traditional growth. our centers be new So focus talent client Europe, in the existing will Latin and this dev reallocated will which our and locations, which complemented India creates in the be America and from stability centers comfort, dev with will be and driving believe

Okay.

I think right I we think now. share very specific numbers that’s share. don’t what we can can

Darrin Peller

industry receptivity will you they’re pricing of and from come on can one being obviously price. just others is then through follow-up comment heard seeing We discussions And mentioned you the receptivity? passed quick your after Ark. right, industry pretty yesterday on in inflation that very in the this. around the just a All competitors it, understanding But –

of you what folks, offset? price what in having have are now especially move kind to that customers the of to to reaction context do So

Jason Peterson

Yes.

we’ve is we over So, talked – I last the on immense And just of that quarters the employees then our seeing couple because also technical their it, conversations think of about resources up. of cost market, been a of are the supply that between the have of go those imbalance for while. easier and top the clients demand,

in So the cognition there’s that inflation there some market. is

get think of understanding been I there’s I is I’ve were that pleased easier. from a discussions an just think these by different conversations so do they thing one in And EPAM. productivity with The level clients,

an that standpoint truly countries, difficult what they all a differentiated. EPAM make get different to And to had so is understanding from these there’s we’ve that as delivery transitions from

with And it maintaining having the of about is stability so of that supportive the but also customers, conversations helped that’s we’ll be pricing.

I So, that. that’s answer think how I’d

Darrin Peller

Thanks. All safe. right guys. and Thanks be

Arkadiy Dobkin

you. Thank

Operator

question And coming from Sandler. of next Piper with is Arvind Ramnani the line our

is line open. Your

Arvind Ramnani

a thanks couple And had of Hey, on operating really taking I congrats tough my in a questions. questions. for just environment.

and you provided some more some, of we’re kind We but how on you resilience checks this high-level productivity we productivity have Ukraine. to from Ukraine? folks levels you sort levels amazed feedback with how ground on say, the provide specific quite Can that delivering you’re of the I feedback of the let’s heard you’re able feedback, know done with from high these on of some provide can from deliver granular Ukraine?

Arkadiy Dobkin

pretty the had we country largest Ukraine, several like our And with major as So there. location. centers, in centers know, infrastructure distributed data delivery you

So data region of to our possible to establish during well. as centers main [ph] like bring around Kyiv number where as in the new many people the part of Ukraine was western focus first a the the of and smaller cities we as weeks, the central have

practically So which well, activity major Kyiv of from didn’t infrastructure view, in and center. we as of any have is major development point interruptions point city, our view so

two, these the we were necessary happening. between of work covering So practically majority

were keeping employees and who here situation our their else straight don’t work. So, what I the with this actually know we like difficult praising for focusing besides mind

– to women, as well. work who relocate was to a and were to Hungary these from people, couple specifically able locations Poland of So and that thousand plus

Arvind Ramnani

your Where of as transition these there? Hungary? then Belarus or Perfect. just to and being to the Russia talent Poland from most of moved to, like right? most are where this or Ukraine, are exiting they them to being them Or you being moved And moved are moved who folks Is U.S.?

Arkadiy Dobkin

countries of but only now, Asia, sophisticated pretty all now. end countries this areas. it – will Central be I It’s was of are in Turkey it’s Serbia. by start No, Poland. key operation if Poland, where countries obviously, like call. But people is it’s destinations, would a right probably this And the this – being right to countries list in there might be and pretty specific several the not is one

at this, in as So to it’s move Canada depending And then the profile. depending people, same it’s have very time, final one-phase could well, names. not on even we quickly. after because which But some skills U.S. known all destination, exercise situation people find or the on be

us. longer-term very it’s operation much So for

Arvind Ramnani

want I being clients? clients. earlier and But to still question what of feedback from traction new sort me, prospective clients? with clients and like is I Are Terrific. logos up Bryan’s And existing for to follow existing think question supportive. selling just new getting on on newer of the sort Clearly, last are you

Arkadiy Dobkin

Yes.

this the like, to existing operation address Definitely, okay. their with us bringing to moving comfortable are very are real, people logos in and focus stabilize us we’ve normal. us the trusted of very happen, As destination clearly, real of clients there opportunities network still of new growth and industry people with clients mentioned, and and very, existing to in working they’re there is coming new like who kind was which because

of Some the of bring. level differentiation can which people in really service believe you these

practically it’s now So flat But is now. can still balance you that QX see, as this which we’re QX, between a and happening. right right means

on stabilization we QX We’re exactly. QX getting believe But we that tell and and really happening. what’s more be should cannot reflecting

the for expectation, guiding be otherwise, we year. will Our

Arvind Ramnani

and you much. with impressed EPAM. very That’s the Thank you in Terrific. folks

Arkadiy Dobkin

Great, thank you.

Jason Peterson

Thanks much. very

Operator

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

open. is line Your

Ashwin Shirvaikar

Hi, Ark. Jason. Hi, you. Thank

going to much that diversification much add I you is things is, the do? guess delivery of can for truly quarter. on of respect It’s list you some all, accelerate there question First using my and that of operationally amazing. not would achieved what to you just M&A? the employees Or too your this

Arkadiy Dobkin

I think we’re I difficult looking M&A in strategy at don’t think changed. And very our this the opportunities. even period,

for level looking skills of but additional very locations, because not additional ones actually We’re looking large different a integration. we’re and that’s for

our that exactly it’s faster in we’re necessary. grow right But different probably not mind would mentioned, on now. you so As be looking accelerators we for can geographies small some

Jason Peterson

Yes.

management entry we’re us grow currently be actually experience which them. in then in might They operating. countries around and or those they points in give countries beachheads we the not So

and they in Latin regions, ways, including many might small different Balkans start but allow in us So beyond accelerate America. to the

Ashwin Shirvaikar

perhaps a Understood. having that? And I transitioning is you comment you? Understood. perhaps with out out with new mentioned restarted. development that hear your from conversations, figuring business that I previously, delivery Could with you you regards color did And growth indicator think to maybe are even more as client figuring to an around provide

Arkadiy Dobkin

So I get didn’t really the exactly. question

Jason Peterson

development… new The business

Arkadiy Dobkin

pretty we business quality New all, have we first significant – of from year – built the presence of development, it’s well, And the good have of again, reputation during delivery. have last outside we region.

have still So coming to we us. people

actually capabilities them the opportunity type this having mix we well. of region. which looking some were And are And have of we talent to clients many relocate looking as and now now in difficult this for actually and right for right

since a we cautious this to very it’s now. But So new right coming, it’s both not positive happening not a definitely really difficult the it’s direction careful, in see situation that of logos March. huge people because beginning say

Ashwin Shirvaikar

you. Thank it. Got Understood.

Arkadiy Dobkin

you. Thank

Operator

from The next the El-Assal Barclays. Ramsey line question of with coming

open. is line Your

Ramsey El-Assal

And cetera? taking on you we amazing how of terms you efforts, fast to ask that’s of meant backlog understanding relocated? of your quickly? there doing the complete, my relocation the the moving today describe at those to and situation people travel, as balance largely can are is, was, stands – for see. there a able it question the sort you following I that are Thank people make job least still lag who in guys is Or I are due relocation away, people a Or also questions is conflict. relocating waiting the all process you’re guess there to right when to you as is that actually, Can pretty productive those et today, be with what Hi. is ground

Arkadiy Dobkin

I aspects all telling are what’s happening components not challenges very easy don’t logistical describe as this. multiple and an we’re multiple of and this think of we to difficult process because is would that be there there there directly are sharing really it’s

and that important do that we we end be our of believe – of what’s talking our more would what year, Ukraine all capacity. Belarus instead So in specifics, not like than XX% I the the think by of the about locations

right I think of important rest this, focus, rather that’s would now. I the skip

Ramsey El-Assal

them the things to enough. in just order on issues are having the to lean morale are issues going, other outside In or on of been Fair in terms okay which the or operation enough. having degree the with – you the having who side attrition to sort to that need words, lever has kind are And you keep to staff of any of well? any burnout Fair there zone. going, conflict keep you’re as

Arkadiy Dobkin

I’ll comment put numbers out on attrition and a there. few

to but that attrition. some has that primarily involuntary been any we it very if is attrition voluntary incremental have say Russia. the have certainly has so surprise related also a want Well, I a And – to positive, attrition don’t call incremental didn’t let’s we

the stand what around – attrition from are are QX. point saw And from to we – a let’s seeing so from are similar levels standpoint. and around, XX% up in we voluntary we say But the an we range attrition very an QX

all employees of attrition we least EPAM supportive have. at change this the at little executed obviously done we’ve needs be that’s time, in to as are that and and why highly So as very work successful

Ramsey El-Assal

Thank know. to I great appreciate it. That’s you.

Operator

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

Your line is open.

David Grossman

to Thank the to from supply had your outside could, building speak maybe even kind in region? was you I key took scale I is of outside that curious and the from Good there kind perhaps lessons some what side learned and start to strengths just ago just me, some and of you morning. differences I’m India and in Ukraine, maybe the Belarus the share in if maybe you. some historical helping up back wondering efforts you lessons the go I the similarities operation supply fits maybe and of, of excuse starts. that years could

Arkadiy Dobkin

XX and question, the because then. some – it other who you Think back saw and did for on ago call analyst like years visited specifically, locations our and EPAM the with [indiscernible]

only. four in ago, were years XX countries operated practically we So

investments India; to asking Eastern actually Mexico scalable how feel it’s to us in of And at of our And similar then XX didn’t platforms, America infrastructure, in anybody later our relatively countries when really. lessons in experience, mentioned trying in a not this lot and of thinking much, in not, we start during India the this open bring And as we of up those put or was time system. digital nobody in trigger relatively Europe. together for So productions we learn put you build all what XXXX to we else eco that of people. our kind operation. possible And locational in completely of you thousands than a the much well. applying scalable centers, Latin kind started was in through to and

fastest us. growing year flat the growing for So India was it wasn’t location was But first location us for years practically last going it for the down. three or fastest even

acquired while long still changed time So and management, same we ago. operations we which the we have

happening happy. this like were one And different Latin very us. We management across they the put would and would like selecting for Columbia if for locations in transition today. fastest-growing that X, standards teams Mexico why to we X very So of this last is India did we year, probably that’s have And company the Number to very a similar Very of very us different there America. themselves. We end growing And support open as carefully to locations Number team Latin very year be probably acquisition America well, the we’re it by to quickly. on see for which us. small has

when assumptions by we back we to the normal many some our do end we – what that pretty are to unknown. But confident how with believe we’re new year close be difficult to rates. I we’re locations. so So happen, there that be that’s bringing to it’s growing And this will think could even confident why again, it of know

David Grossman

Right.

least what that you’ve very any similar So highlight? seen you there is today? your is in that in are sit from – there just it where thus key at locations far you looking to geographies operate differences you other Or today, these would

Arkadiy Dobkin

It level maturity level kind But software differences. be the where definitely is there kind are not. EPAM. of we’re standard reach of that to in be which for believe there. a different it’s engineering able of would have do locations that So we Countries say would stage, multiple not quality which today we of different development there is to moving responsible

as can I don’t this. our it would So stop see before. say right growth was We now which obstacles

Jason Peterson

newer And right? of number types differences of tools of be delivery Ark methodologies, the the might these locations, David, one a people the culture, referred to. larger different circumstances, much EPAM got that moving we’ve into so So all bringing delivery

culture seen And in so we EPAM into into a maybe of locations start you prior kind greater with, I of say, would injection of than have each would these new movement geographies.

David Grossman

Got just clarify it. thing. to and one for that you wanted Great. I Thank

misunderstood that comment maybe in it Or just maintaining bench clarify larger to I in you people Jason, back did now utilization Ukraine Are was misunderstand I comment? about a you, bench maybe that. comment. think and a But just could the just included just – perhaps up? the you the I you made

Jason Peterson

Yes. No, that’s fair.

customers. And were that said, maintain was were the certain clarify added. that that me obviously individuals let is some here, to Ark for got QX that – and as were focus delivery So we’ve maintain of we probably to everybody able make that

of They’d for effectively purpose roles, have concern certain are charging affected continuity in clearly not in of they’re is But we’re numbers that make backup resources And this at we did And potentially so utilization billed. not non-GAAP up Generally, countries provided. had certain are discussions time those expense are any of the was that make number a exclude those there that at time. in there already sort being to the and the were customers. region. currently in to added point billable. significant we some positions have in beginning the available. we’d that now, as of but them billing fairly show Ukraine, but are that if billable we’re outside become about kind billable that idea the for to right We that to they’re of not technically employees They because

David Grossman

a just you give this backup for of point? of the sense work kind scale us Could of Right. us at that

Jason Peterson

Yes.

see I the to the it press – the think out can got that in percentage, with will see the of so you And think terms you of and it costs it. actually in I release; sort call guide. can we’ve associated

it’s release. there And in the so press

David Grossman

it. of all Got All luck Good you. right. to

you’ve of able been should You accomplish. very be what proud to

Jason Peterson

David. you, Thank

Arkadiy Dobkin

you. Thank

Operator

to the am I showing further at to [Operator Mr. for over would back I like Dobkin this questions time. closing remarks. turn And no any now Instructions] call

Arkadiy Dobkin

you. Thank

EPAM like their would for I and to all, commitment. thank and dedication the personally of First team leadership entire

been something through lot we’re of a we during during – which right the last expected of and the now definitely dealing months. with have couple We years last never

doing also and see where us know partners. and call, them. much. us, with And of in this if the our staying everybody we with so always, clients as to and very Thank Boston people for appreciate couple a you really I So direct on you in have weeks. our questions, And you hopefully, will you

Operator

that gentlemen, Thank conference and conclude for participation. does Ladies today. you the for your

now may You disconnect.

EPAM Systems (EPAM) 5 May 222022 Q1 Earnings call transcript