EPAM - Earnings call transcript Q2 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

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 second quarter 2022 results.

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

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

Arkadiy Dobkin

reminding XX, Analyst a that and everyone. morning, higher-level time, were in result, want for you, our don't you for of May efforts we phases. end Today, expect that, expected, plan adjusting joining At us that call our Good said to I months our months. by Thank today. didn't plans we overlapping and adapting new to following start means we on three for war when the continually now. our Thank are delivery and what of very the you company as operations, to we a near earnings the definitive the our working shared we Day our then as for And series approach conclusion and David. war the quickly. our ago term. Investors on or see in a time, still organization normal we developing is are ways based it of much That fully we and

are by we the making quickly go progress those let's across So phases.

the war experienced continue what levels customers much productivity in safe country our in phase war. line our are the or time, in of either teams we this to safety supporting our within work our Ukraine. all first neighboring of employees or at and The the operations stabilization of focus in is the And of countries. employees very locations, with before At during our

we families Ukrainian as support employees well continue In new our people. addition, to Ukrainian the as in normal, this and their

EPAM by add would one of Ukraine moved thank more $XXX our Assistance which humanitarian of they now morale incredible I level relief and are assistance providing we commitment, demonstrate. employees, to have forms various to with take want we just them million constantly and our that Fund March. are and for We of commitment and the purpose in we their resilience opportunity Ukrainian done

The operations acceleration our investments our second are digitization of also yes, tiers. efforts, critical quality and growth diverse delivery key this which But it of across while phase other includes capabilities. our our and And framework rapidly several all of delivery of expanded multiple is includes global first diversification many of ensures our continued the of platform. aspects we geographical efforts of

talent existing locations located market as by foundation our employees. the are grow digital Asia, is and across Eastern establishing develop many locations the Latin delivery India, active Europe as EPAM hubs We sites hubs. newly-created and in and Central in simultaneously to expected also their EPAM several America Asia opportunities fastly countries and those to decided supported local strong a well Central and and redeployment Western of of outside of establishing explore current cultural home This further We Central in its well. many already delivery and as

a last exist doubled reach result, major also now more than as replenished footprint. around Latin Central didn't America. Europe, geographies, four for Asia which Today's platform a level now. outside our at we three customers February XX% Russia, second in moved of and And just underway Western exiting XXXX. delivery our operations from those to commitment across few of there in to in years Eastern Looking just to the quickly capacity this our close the Today, us XX% Central roughly And our and back. and reduced growth now well our EPAM accelerated includes India, Part of are have with and we our XXXX we shortly. of impacted where serves of world, count reach process, process a regions, completing means years. country global XX% delivery to and half efforts from in of we we our the XX expect the countries in anticipate which

I people say said, that, levels, a regulatory and to With seniority a to at under country, Thank the full difficult X,XXX still predict means share different people who is from our local very transformation X,XXX that footprint are you are With still thank went we requirements global transition over challenging big the massive timelines. QX that working delivery We at this end dozens to countries organizations and talent management would just today. talent you. through enabling of across many timing of efforts precisely. and number very simultaneously like the which of EPAM within financial of under that to can in the

in demand Continuing the serve also for and phase portfolio. Moving our global expand framework. growing our for services to to customer

of Over sense who absolute mitigation factors. risk have on all we of majority the requested five relocated their their projects last based work client repositioned months, to be

such with into be needs their some Belarus. be to are from diversification, and Ukraine we today our to developing expect As while factors. in would feel customer of at seeing like address serviced and prepared extremely better that demand we global point, this, continue will a future we also incoming state know, happen continue different significant portfolio, preferences, much that and we proportion needs. I region continuously requests the We open and future new on such fast this to depending external With to to our the the now responsive to are even increased just that client

thanks such growth and And to of growth. to of Another multiple and disruption top huge current change through expressed portfolio. with our in have war be today indication support been terrible could due in phase our their our us during stayed XX success with XX of Ukraine. top client and Most third them by of phases us and the a

Finally, the our on of a Phase last focus X. profitability, framework is element or

and the to continue new XXXX. align into and geographies, this effort rate has This repositioned performance throughout year will have locations. work we As structures optimize delivery been to the begun of new

While we early profit to XXXX. on will return progress provide still we during our specifics phase, half approaching EPAM's this to first of on believe levels too ranges the historical

to all the strongly focus analysts addition and our progress In investment on leading across to our now supporting Continuum by is complex key we areas. brand and growing engagements. of that, EPAM recognized continue more several consulting led advisory agenda

supply in with enabled offerings and date, we now all with large disruption global despite forward least growth With allow to I continuously into moving our Our space. fast at about as are with programs, from our key In enabled or our delivery we maintain continue have we model, constant that, additional to provide it traction how this we our see currency us right efforts rebalancing progress to would our And in the revenue initiatives side. digital This educational cloud demand environment, and initiatives. invented partners data the our our on advanced to modernization current comments feel short, by other EPAM's see progressing as by platforms. strengthening should massive encountered. and relations good rate, well of the sequential some remote IP like

growing competitors in intact. all and today same of we, like indicators are of really near-term the a mixed better our we and still At demand market. time, doing expected, than number environment see the we we the you, While economic caution believe remains

strong our activity demand medium-term also normal target. which believe the support in growth organic above to continue XX% will driven to or trends, broad-based drive our industry ability have at the past We in old our

people, our long-term of XXXX. immune we in summarize, being any investors. better the the for of future past creation much growth to today for to as And also positioned disruption priority than impact clients EPAM current the impact positioned So global and our remains value while war of we economic our To and the are not events, shifts. as the for our we much to during well opportunities, contain, remains believe possible, shall for the address

entirely directions, strategic ensure certain people, this different customers the normal EPAM, towards of future new to we significant operation extent, than months. right much happening now in of is market our the of agility call the progress productivity longer-term Russia, level elements this constantly in changing our plans. We effectively is last our new to of have the and for effort closing been this over have we now addition, area accelerating big to business what medium diversification, an of and made resilience key which what our other in have Because created accepting accelerated strategy. environment. of in very growth part and are our significantly The And five operations overall normal

adaptive overall, And So and I these helping as beginning repeating, fully well-being war, and us of closing, stands our in and their all at it's be and employees challenging during a to call, been times. the the EPAM, EPAM build our faster. not you of and our and thank earnings times Since these easy top better of on company time, absolute effort and mentioned continues to as One Ukraine. safety worth for priority the employees are loyalty with to families. our QX has their more this more all

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

Jason Peterson

unprecedented morning, good set In were everyone. sooner-than-anticipated the quarter, growth. major and sequential another results a delivery time of These the Ark, second was when locations. experiencing revenue return delivered results, all you, strong at to Thank a VPM's including EPAM company across disruptions produced

with and during humanitarian relocations Russian expenditures mentioned Ukraine, non-GAAP addition our in EPAM's excluded related we our associated results. QX operations non-GAAP exit from As been to employee financial our the costs of to customary call, earnings have adjustments, commitment accelerated to

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

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

verticals exit on sciences performance & strong as by grew recent adjusted Travel care health management, driven sciences. the industry, quarter. and our Life from industry growth, XX.X%, with addition effect life was conversion. the negatively our and Looking I Growth contributions retail coming results. Financial revenue U.S. verticals. healthcare dollar impacted growth reported well growth provide of XX.X%, organic services consumer Russia from acquisitions. Beginning will helpful, asset the our ongoing grew growth banking. to from our at strong industry foreign Were XX.X%, customers with and in regions with from in year-over-year and grew coming in operations geographic the an exchange by our of of as the primarily payments

the business & XX.X% growth or constant in by Business customers, currency. growth industry. XX.X% primarily in in information was the XX.X% Russia our driven Excluding delivered information customers quarter, media

in XX.X% Software and verticals growth, XX.X% by our and automotive. clients driven in delivered emerging And hi-tech manufacturing grew finally, the energy, quarter. telecommunications,

XX a in Excluding or or QX currency. XX% our our QX, contracted was representing customers, year-over-year driven And terms combined CEE, constant XX.X% services grew performance APAC revenues currency. X% incremental our constant in XX XX.X% strong clients From our XX% Russian our currency of the or or finally, grew top representing XX.X% year-over-year, the to constant and XX.X% revenues, recent in the revenues of customers. from year-over-year constant top in year-over-year of ramp of in EMEA, revenues. in In currency. region grew represents from grew growth XX.X% by while with XX.X% XX% Americas, the acquisitions. EMEA growth, down largest perspective, our revenues, impacted representing XX.X% organic from geographic Revenue of year-over-year our was was QX QX revenues, contribution XX% X% or constant our grew outside XX%. currency. growth clients XX.X% now quarter by our Russian XX%

the statement. to income down Moving

QX XXXX, compared utilization XXXX in or of in was same income lower from transition expenditures XX.X% Our was same QX year. negatively X.X% revenue last Russia. of in margin XX.X% quarter the XX.X% last work margin XX.X% year. to risk in Non-GAAP humanitarian in in profitability associated QX operations gross quarter of from for by to year. was ongoing million of in of last The to the QX higher-cost lower to Russian $XXX in for for Ukrainian employees. period at $XX of quarter GAAP well Compared XX.X% was XX.X% in SG&A of revenue GAAP costs XX% exit year. compared to with million XX.X% came was margin to impacted level to in XX.X% the and the for was gross GAAP QX $XXX as non-GAAP of employees, compared operations, geographies million quarter revenue compared to as QX SG&A revenue And of quarter of revenue the customer income was XX.X% year. primarily last compared or operations year. or our of last the driven or the $XXX by last of and our relocation Non-GAAP revenue support of compared the million XX.X% of

operating pleased the profit geographic company was in quarter also a executing with our We when are transformation. a significant

effective Our onetime rate was primarily excess compensation deferred associated planning. tax with tax by a GAAP the related as benefit to negative tax driven for benefits tax quarter XXX.X%, well stock-based as

year-over-year. expenditures, accelerated of Ukraine operations reflecting in and of entity. XX.X%. decrease the held exit negative denominated well EPS earnings benefit of the and impact tax Russian Our per related non-GAAP planned excess the relocations, U.S. ruble effective intercompany GAAP Diluted GAAP tax appreciation was to a as a and $X.XX, the which expenses benefits as excludes or on payables impact FX the our tax staff $X.XX planning, Russian our humanitarian rate, dollar-denominated related share XX.X% to by assets onetime rubles was on includes from costs basis Russian

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

and $XX flow $XX the cash million operations cash of million same in was to and compared free flow flow Free Cash Turning XXXX. from in million was our $XX $XX the of same for for year. to the sheet. flow balance At days quarter cash compared QX XX DSO approximately million to year. compared billion XX XXXX ended quarter equivalents. and quarter with We quarter cash the same was when end in $X.X of XX last the QX, cash last days for days to QX

maintain throughout to around DSO expect level this and We in XXXX.

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

Latin Compared offset for saw XXX to of approximately compared of around was Utilization and XX,XXX headcount in QX reduction in decrease headcount. Central were employees. and was America a to headcount XX.X% last QX XXXX. India, total XX% of XX.X% the Our in net Significant in Russia. year additions QX, Europe we by QX

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

calculations, this for was were the purpose our of Although accounted largely these utilize employees unbilled. to work utilization

the remains Russia the steady significantly during Additionally, was in to, of quarter, quarter XXXX. than utilization somewhat level Ukraine in Utilization similar to lower a in compared lower same but XXXX.

business Now let's outlook. turn to our

business on a year uncertainties reminder, February the outlook to related As invasion our XX, Russia's due withdrew to Ukraine. we full of

full of guidance plan year, resume guidance beginning quarter provide only year. to to the XXXX of expect the For the remainder the for and we our year this next at

in continue assumptions However, our second portfolio, frame we throughout repositioning QX will which we see XXXX. revenue to of expectations of expect progress environment, half I which, time, some stable the sequential continued insights and the combined half our growth provide and At guidance a will will the additional and help drive with this for demand second XXXX. workforce

with year-over-year However, both see comparisons revenue, we expect Russian to QX. customer the revenue tougher our in impacts QX and reduced of

color We the Russia rates. continue to has will impact on EPAM's exit provide regarding the growth

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

weigh projects utilization which population the than the second have higher and to the demand billing rates. our will of to our geographies Ukrainian the reflect the of therefore, factors expect only people, establishment customers, to with Therefore, short-term inefficiencies, wanted the structures has result rate the prevailing the somewhat levels. new levels in increased as relocations higher in expect cases, been existing we Russian lower and pre-war utilization be redirected. economics employees some relocated people, delivery we to of cost of that although in level Those who The some we a employee working maintain movement continue Our a our guidance quarter. we In locations. to profitability. we assumes these of bench, we bill are and these combination to QX. repositioning lag scale expect in that many The during QX will slightly majority through on lower lower align reflect higher process relocate, level will we costs, rates including of a and Parallel

QX. to to families. commitment part expect we profitability However, between in QX employees to Ukrainian the those are achieve in today, And QX to over see and profitability finally, company's an $XX million levels at improvement their as expect $XXX and similar EPAM million forecasting and humanitarian our has of spent QX in currently we

We expenditures and will into expect made throughout XXXX XXXX. be further humanitarian

Now moving XXXX QX outlook. to our

acquisitions in closed expect XX rate of expect revenue growth constant is the than quarter to these point million is million a with in producing billion, out be the contribute Russia of customer currency months. generated to be I in growth from at contribution XX%. points the $XX customers revenues in approximately XXXX. expected also of based We in revenue at to at QX we year-over-year In $XX revenues that $X.XXX least rates Russia-based XX%. basis will over last less terms, XXX least compared revenues least Included growth in

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

tax effective compensation, related tax GAAP benefits approximately We be which stock-based approximately to XX%. expect our tax non-GAAP and excess to rate, rate effective excludes XX% be to

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

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

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

In addition of to guidance. pleased Russia's QX QX to reconciliation detailed expect Please earnings in GAAP resulting our Ukraine. release see from have these and customary ongoing of QX, with lot adjustments non-GAAP adjustments, which to consistent a non-GAAP GAAP their I to a the invasion performance, for to our non-GAAP is We're customers. dedication employees of they for to questions. call thank the want globe, provide work our result our the of QX our around service with and the by open for whom hard Operator, world-class let's that we

Operator

of question Our Bryan Cowen. comes Bergin from

Bryan Bergin

to growth wanted with question. start I composition a

new you turned the versus XQ? a to attribution of you you're out new servicing, just client clients growth see base really half? global how if to if inflow clients to understand And this on existing return it all you thinking back versus logo flow course haven't comment transition. seeing the can that So of how And about existing progressing the to recovery already. new of that trying Just gotten the between over amid trying second you're of understand in how

Jason Peterson

existing really with March, solid bit Bryan, that little on the question. for certainly retaining of was in May probably our thanks and new customers. I probably Jason, think because in focused more growth, a in slowdown so focus, a existing to continue you'll QX, the customers and April customers remember see demand revenue a standpoint is growth and we and in this From

got QX, can probably So as And time we grow on you our we then by new began continue the with second to revenue activity. the beat. logo again of existing to we half to by the significantly focus customers, see

quite got probably we that new But so to top demand we logo-driven existing And our to a growth I'd our that expect come second that think of new you've a again, just as in bit I the customers. right see line, half. now, continue in both and say

Bryan Bergin

of the to workforce workforce, you Russia, you to go sense can how from the in just sequential thinking sense. you're quarter-over-quarter broader attrition about just Okay. the excluded the if half. the headcount you us And That return second makes landed as billable ability the give quarter? pre-war then a second global headcount footprint through And your levels really across how the on

Jason Peterson

talk mention Ark let headcount, going attrition. to but just I'm me let about

Ark, our So in if attrition rates to and do talk higher Russia, we've had want involuntary we headcount? have you consistent both and attrition, voluntary about exclude QX, very remained where QX QX.

Arkadiy Dobkin

Yes. think we're by I general, impacted total right comfortable the But in And to situation. we our definitely, be understand, will on that is our to now. headcount, Russia number return in exiting to able pre-war just pretty

year difficult perspective this an quarter which XX% with everybody against in think sometimes annual I the per XXXX, sometimes headcount like from special growth a growing for XX% where plus, to XXXX, it's we were was basis. compare the on

But European And to speed. 'XX, will what to our think experiencing be Eastern for in have, same landscape and this don't sharing on annual be we were Asia in in growth the or outside well. I also on we So as we we We this in with the position back anybody and this. will America, were 'XX, traditional in coming example, ourselves comfortable which quarter-by-quarter definitely, Analyst to during what Western back Central India and Latin we're Day. of based coming

able address making the demand. we us that's to comfortable will that So pretty be

Operator

Peller from Darrin comes Our next of Wolfe Research. question

Darrin Peller

And And you've making changes in those a you're really over the the give how on now. or on see execution. last seeing of to where really that you've the newer headcount. out I the new growing of been just really it's performance the locations, centers whether move newer It's what your update people markets delivery to quarters good quick of kind to you actual us with out just hone playing it's couple want and in been headcount

Arkadiy Dobkin

increase Ukraine, Russia. Belarus in was X,XXX people all clearly and this was QX. of X,XXX of And and our between So outside

we to comfortable past, share -- why compare with we the it continuously will think if as that now well rates and be experienced which before. the explain able feel future we grow So with you similar exactly right we in

Darrin Peller

Okay.

utilization revenue? where then you execution do about a same frame of we those, time And of a And so of the as produce full so follow-up, in see can actually the types give Latin Europe, terms think being Eastern more in they the rate further and quick run incremental when it's of at the you talking Investor and regions progressed. I and some you were if a American in areas areas, just us quick update your in could about on Day, mean, the newer at some even how

Jason Peterson

Yes.

if expect, we the you revenue as So from we world utilization is originally than beat QX, would that in in a expected. standpoint, why about talk utilization you low we a I utilization of quite the is what saw, of bit our Russia. But was reasons had one had the the quite had rest higher

pretty remained have levels in everything that's going Ukraine, particularly and utilization quite on considering there. solid So solid

the But in And we of said, some made geographies these progress of XX% about adding bench traditional as QX of add headcount capacity QX end of sort in up building region. the think transitioning utilization. larger there. resources support in, around donating transition more a country you really geographies. both I that these these Ark CIS ability work you We've we're our as little really may sort Because bit go Ark to resources from a We have we're capacity good see lower are levels good in And somewhat and let's said, might demand. from with to say, countries. we as to as country in expecting bench you up feel our again, to we somewhat then and delivery of one new another, newer to

think demand I and execution QX. but feel not ability in QX, only our in QX about So support we our ongoing good to

Operator

Blair. Maggie of comes Our next Nolan question William from

Margaret Nolan

of you cards there regarding of year? next complicating on phase impact of the aspect check those as, the rate inflation delivery resolution an into that do those kind well that new a be XXXX? the as Or adjustment then wanted new of you're obviously, kind I to expect by it, adjusting the delivery is in persists to locations conversations will this. on And how going -- locations wage probably

Jason Peterson

a see And algebra. there's I'll to Maybe comment immediately. in terms you get Yes. geographies know, customers, you What increases. resources terms almost then of the ability Ark our but as just transition have as let on we rate new that in in compensation to we Maggie, is lag, a of change

And so some a lag where increases XXXX. We might there the all we Traditional to immediate, operating of see be run rate data updated this, are might quarter enter customers until have rate not where which as dashboards. increases we some daily on basis. some customers structure, a collect we customers EPAM where on and we is

changes conversations. good have of in And cases, to rate other can we see have progress, rate we're the making both that actually in terms place. so in changes some In the In we we place the have in already year. agreement cases, later the

completed enter with So about with vast don't Maggie, conversations want you do I be XXXX. as conversations we think QX clients? higher know, to we're making really majority good Ark, rates of those the progress let's to say, and talk I I would of expect,

Arkadiy Dobkin

number is I think, of on pretty right adjustments. process. And clients result exactly significant said, from still the process. know the this of we're agreed like feel in rate Jason already a now, the We optimistic

the two of Some delayed month, for is next it three. or

already that we there too moving that's today, this as the to XXXX. pre-war are we similar what expect So conditions approaching profitability many mentioned Again, rate parts. in approaching

what in about it's the well these we think euro them pay and because compensation of exchange, dollars and what's within currencies if and future. situation then as related we example, happening, not the Some market sometimes, U.S. foreign even events, to for

conversation. So more a and difficult we this, the right rates this it's sense. way, are on But are in optimistic on

Margaret Nolan

atypical just cash into cash trend And does should the going flow Jason, of late? quarter what's generated you quarter this here? how then how That's helpful. compare your the expectation for you've And all from the expenditures expectations had with then given the

Jason Peterson

flow pretty cash would I good. was say Yes. that

XX, flow think cash sort expect conversion to to hold it we to of we're pretty do have right impact. DSO sort keep I to around and ability negative XX maybe of cash encouraging. DSO tried slightly is trying in did XX. now, or in at historical over to And which lower end position And and with kind And We QX, may up modestly to our basis. more than XXX% a go-forward patterns. a them on is consistent both cash our generate and of had be

Operator

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

Tyler DuPont

Tyler Jason. you guidance can in could by back XQ sooner? you Last and on based DuPont quarter, are pre-war pre-war quantify first be so suggested on you do the XQ happen what And you But for those to even that your far, just results the growth is the part 'XX. had for benchmarks could normalized levels? This feel like margins this

Jason Peterson

when guiding think in what, fixed QX. in level call we we it to, see portion here And -- that is so we're just XX% a what the case we in said, today, clear QX. I that wasn't to of to XX% expected the in profitability I similar XX% could -- in

said, other little the end we you Ark to sort through of I expect is the date, a that's than to by And that trending it's XXXX what of and back demand exactly again, to our mean up. the would the year. range, . seen guide. that high work already when the pretty we're profitability sort we as but we to very, more talk progress communicate good, continuing that elevated can think, have pricing that's as But see rather towards very early range. So XX% last historical I XX% feel where still of adjustments, we to traditional too And during kind about periods

Tyler DuPont

just And more. Perfect. one Okay.

ones can you have that continue do diversification on more discuss past out line, on path are for the been relatively been of feel your you your have a some build headcount As you maybe phase regions challenging? riskiest that headcount And of the you easier that that the to diversification, bit versus efforts?

Jason Peterson

from that growth the headcount, seen feel the building we've Okay. strong of India, Yes, of -- to strong ability standpoint Europe. in we're of terms in America. add Latin we out Central very growth actually ahead seen own goals in And our we've

we want we've to the regions. to the be any challenge. difficulty . mean, capacity outside the And of so bit to meet we call demand continues and yes, hiring think I But have what that a of impacted don't create I market to had a real

in in now, good our through And to to effectively relocations we build the capacity but through pretty couldn't hiring the feel of the out additional outside that region. region say ability and change so not the think headcount, right I future, both things about

Operator

comes next of Stanley. James Our from Faucette Morgan question

James Faucette

demand expect are I Obviously, you're client wanted dig decide customers delivery they But as they having trends the good, there has -- how cetera. been are and that on doing customers to around you in change is still around, their to moving want regions? on quite again do and client resources indicate the et what relationships. locations are that? settled if you and to preferred get that And quickly delivery retention

Arkadiy Dobkin

And scenarios. no question. addressed in I and would risk kind kind of in of there mitigate right clients there very is region groups come think a Everybody in. there out be And it's are pre-war danger. approach really continuously some think to trying -- I clients as simple in new some of is it the clients working which in which answer of which well. move are are there are There almost some

and but numbers of going again, think business seeing by We're situation. in moving target. you understand, understand in month general, little we general what But to have. not shared by I the day, probably a So too, something aggregate day sometimes, as unexpected. in usual all in -- we we which it's clearly month, exactly We're as working kind bit

continue outside, our growing think how currency of approach business of QX nothing XX%. of a move of we as you But where you if So disconnected, was to usual. when business think delivery growth capacity, organic apparently have thousands Russia outside and it's rest in as to people we especially our without like is because this happening and Russia, if still constant growth we're that lot

which that take exiting if account there. you So is demand that means we there normal in

which precise know similar were XXXX, are are respect, change, I've little which capacity time. right precise released clients on up given them. completely not is there bit we trying a I So what to this some in approaching a but second which And to no picking answer, from answer. clients the There experiencing you is in

James Faucette

hey, conversations to that a at approaching little you having clients or is we're are what And both been And these got how of like And the it, projects though. really indications are cycles on else, seeing and are lengthening conversations if potential? your you existing those outlook, of in with it. That's everything because and say, And macro it put helpful sales having we'd off of have all? in be top uncertain? whether macro-related terms at clients, all? then Got any your contemplated softening,

Arkadiy Dobkin

Eastern to you... relating you situation Are Europe or in

James Faucette

economy, just generally, economy more yes, Or the yes. the

Arkadiy Dobkin

Okay.

us said first necessary of it's sometimes for conversation to distinguish happen. to might difficult another clients this all, one think, not why it's exactly because I

months maybe. quarter. be where of again, So these still happening even happening. it's bit But resources ago, the this XX But more they XX reasoning that are or were could difficult are for volatile by often, economy. And happening conversations a it's our it's by were because ago. If they situation months little majority quarter the like

for us. very difficult distinguish it's So to

Operator

Our of Instructions] [Operator Surinder next question Jefferies. comes from

Surinder Thind

model. make I I potential said on question delivery sense delivery kind -- how to to desire that where delivery up are that realize of for asking factors Or sure your clients there year-end -- about there's that clients here. of kind change to the client this quarter should all the in fluid. just clients' were from, quarter, it's the we their and evolve continuing targets Like requested is the earlier push-pull in evolve? sets a that conversations for Following of think the just wanted last I for But new are understand changes? Are those you about the

Arkadiy Dobkin

little think moving but we're I again, is ourselves, everything a -- target. repeating bit think I So

Some clients settled. we're quarter were asking last if

tomorrow be be Some clients and asking might will as today well. asking

same we locations pretty you So independently where see time, the strong. at the is aggregate, still if picture from demand

we're and would -- leaving eight trends clients up. ago these see other right be And we sense be growth America will apply bigger, the need. but So were what also be as see the well. that's would some we're and that's and years region of talking be pretty well. as from we this, Latin region. is what clients three West But what of and outside And similar When India, to comfortable picking What quarters. what completely about point to the -- we war dependent on Central view what What with we current of communicating, it's able with in Asia, which would were would comparison, actually pretty line we're and would in that some I of we region be probably not of results and happening. on speed comfortable mentioned, when happening in with what and top experienced the exactly some we're two grow

Surinder Thind

or in wanted then of the relocate on of terms it clarification And a like sounds you requested individuals done. are relocation Russia, Understood. to all that just have

it the or at So Any in of left is what there? Russia that within that point? all assumed transitioned this And or work color additional any there quarter will X? color is next be

Arkadiy Dobkin

Yes.

is month than this, which might in another We’re have finalizing in right outside now, which requirements, of the the or And already people. regulated completely. the and we through will be their Russians that this of EPAM, conditions I how we headcount take less mentioned going Russia today exit And which X,XXX currently Russia today we're rest after so.

Operator

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

Ramsey El-Assal

some if yourselves wondering some degree geopolitical gaps the challenges could situation of that potentially find the M&A or to us in. you leverage update you your come of you M&A to the help and address the was have could which I out around thinking of on fill in

Arkadiy Dobkin

M&A approach past Very for change similar us, I us in like for for M&A much. it's think additional the didn't capabilities.

region. the part. we the this think platform which of the M&A for comfortable, delivery beginning we foundations But all have. point don't be feel and important specifically growth of will in locations, already delivery some from current pretty these Sometimes, the I

So capabilities industry in again, but good and are in it's maybe pretty expertise in us with traditional already agent sourcing locations, footprint because and consultant for not we critical sometimes, market a we new established growth.

Ramsey El-Assal

macro has referring Okay. of to business. to And and Eastern follow-up is the with you Europe of my the context just resilience just I'm recessionary I'm cyclical. dealing again, environment pressures? question Can not you typically, more somewhat economic conflict And the think on services about referring around been talk the there. the IT in how a more pressures, EPAM broadly. military cyclical sort of about I then think historically,

the that period. digital secular some sort might think quite recession. I the tailwind I'm just Ark, view today a of during tailwinds a curious, help fares But a your business a how recessionary through provide may about of hypothetical bit

Arkadiy Dobkin

for always recession for the quarters we past predict and the experience next were experience past, It's practically the to in from going So how how and I usually have applicable But do difficult is be. three we grow again. started past. two, to future think the to the then left different in

much mentioning adjustments. I challenges and able XXXX, I resilient And think necessary for In kind industry, happening, XXXX more much in kind what quarters, XXXX. headcount of actually in of to will are we make more that's well. general, and all all we our as with us specifically, think adaptive be what's address a couple potentially tune of to

again, the war, elements about about more some years, during be and years, these and not of recession couple And we ourselves that it's the this than last today prepared we as for much during it about last would in right we talked Investor we feel already much prepared in unknown. Days, comfortable, couple it it Belarus of talked about now, think, only I situation So about more of market for happening. well, trained on anybody better else if probably

Operator

question next from Our JPMorgan. of comes Puneet Jain

Puneet Jain

I gross a on quarter, have Good guys. question like margins.

dynamics profile in the the dynamics, be before the gross can margin Or might this invasion? there levels? XX%, margins locations, used result to to go different Given back profile pre-war prior that pricing gross like medium to term is a XX% changing, it the labor maybe like your over delivery what new compared

Jason Peterson

Yes.

So this is Jason.

of I margin, gross And in so to our expected somewhat we continue demand. just margin certain QX locations the to think in due had and gross came from manage of than to at deliver ability standpoint kind better

of which are we some a We which people shift there's bit as expecting a in are and geographies in we an think improvement geographies, into new expensive And between more QX. gross leaving. than talked temporary margin as impact the QX of they're about, we've

relative largely address running were talk when were our profitability, very are really something, And But we right? of XXXX. And IFO traditional could so we to a about kind that we enter there temporary impact by or XX% on of to when XX% be bit at levels that more the to thinking return a range. the about time little the to we so of at XX% running there we compression high be margin will expect we sort

see good We efficiency continue from to standpoint. an SG&A

And we'll our manage again, of IFO two towards slightly it the the the gross quarters between guide about to towards back of particularly of be hot to I and XXXX. been during lower us so would they've But ability again, just the good feel components. that sort have adjusted head than assume think But probably I levels could margin. they higher

Puneet Jain

execute? terms seen of new any all? And then, speed the there at you any Like been and sales healthy obviously, client cycles remains comments Has in type they macro award type projects change projects you mentioned all or at in which priority in the any they changes changes Understood. of have the good there. in or projects of

Jason Peterson

are noted some an people or efficiency shift towards cost about efficiency. I maybe eventual -- We talking

have that seen We time. at this not

EPAM is we then that well engineering see migration, So all application drivers, the modernization, still known traditional platform cloud data, for. and the

the still And in as that guiding we underlying reason and why we it does in I see drivers. and growth comfortable those we towards question or? of both that about sequential well. And QX feel expected think QX part as as But answer so talked

Operator

Our comes Arvind Piper Sandler. question of next from Ramnani

Arvind Ramnani

kind and your closer operations globe. the months about six roughly taking new look at maybe input scaling to -- geos these just of your a I across of -- ask of at ahead wanted geos and kind looking in kind

looking and of at promising look Ukraine -- goes you of markets, of years? of As are looked to Belarus up next out scale local say, kind in as you two over in digest what terms kind of and Russia kind you've talent couple outside which the

Arkadiy Dobkin

of months, when that, Day the of talking went we something it's in I And And think level were I during answer substantial the prepared our some repeat India. couple details. talent about to in was growing already were how this. on actually And of focus happened. to war countries we during the growing XXXX. of before years, happening We level to started of in impressed across last with number difficult previous six talent like some what's can We add which America there. And during become for XXXX, the minutes are specifically to one only us, shared for Central And and in in what pretty market starting the fastest Analyst continue a of we do Western, years. think we were during a respects, example, last it's in we couple I we versus focus May. Asia, to Latin

of potential that again talent We're our war, several will like why locations comfortable too. we're which pretty traditional don't today. a people And was we And growing people these Central of Europe, to in the scale complement significantly all abysmal that them as able That's very as we who seeing of number forget after well. strong outside times have this decided pretty answering we is and of with to some the relocate. still good already be experience And locations. with Eastern and

advantage in DNA So basically, and new EPAM EPAM for experience we ups have being of an us.

Arvind Ramnani

Terrific. And just one quick follow-up.

in you by the was provide geos? to able this impacted terms margin, due transition your color how some to utilization been Just to much versus gross of it's Russia of the in clearly, transition. on higher impact cost Are

Jason Peterson

give sort impacting impact, whole different there's a you me the There's we are that a whenever of of description profitability. series think. Let things of --

continue QX. I the to into going we're in going so, to least it that so impact do having to know, more at in the And utilization. than what new geographies, going QX. new the don't is or into did change -- Russian is We're we And people geographies the probably to move that

holding still pattern, costs sort have you're get up. though going a of their who increases gone to some waiting accumulation to even And are in rate so people of see

QX clients making of profitability between continue it, we're comfortable working why rates progress And and we're more QX we and and profitability with have But that around we that's appropriate the Central an and India, So had think than similar lower Arvind. through in menu we feel also I we've And same geographies. centers in that always I again, increase relatively think Western other. relatively good for the that cost to in options have then Asia, QX. see rather you'll being again, QX

we so offer for of a opportunities range clients. And full

Operator

Grossman Our of Stifel. next question from comes David

David Grossman

things to earlier you follow I just couple said wanted of call. in a the up

of think believe, back that's capacity you delivery The regions from come last the said first at impacted and expect the the to the about XX%, in down you I was, half your I from year. XX% of of end year,

change, right. just those is that way the that it make work? distribution came secondly, of think seems about I that decline So I when you want at the And look half about of to Russia. from closing to down sure that got numbers

Arkadiy Dobkin

the of present approximately now end be Right At clearly By bit were about as we under work Yes. we're And between beginning to at little well, XX%. of this distribution we of year, XX% is countries. year, a this XX%. expect to yes. closer three the

David Grossman

to decline, just -- like the half that Well, works that like math of XX% that of change, XX% I it way. down about it shutting -- that wanted of I was was seems looks Russia.

Arkadiy Dobkin

That's right.

David Grossman

you're geographies U.S. new being and Is question with that the paid you second of the that the new are expansion about percentage employees in geographies? dollars, opening. is changing then just the at And -- was the had that of Okay. that opening all I open

Arkadiy Dobkin

geographies in, and still which denominated some try in salaries in calculation. and in USD, specifically story locations, mix, West a to bit have still we a it's going especially we which paying a factor, because we Asia, new in in complicated in west -- -- be Central to USD be calculate enter will the when be clearly will whole which it's you But So moved little it it. not make

Jason Peterson

David. Yes,

mixed. the it's were rubles. Russian So paid the But Russian population employees -- in

end currency countries the are where up up to we And some going for currency of local are as of in some that countries are them going U.S. are in compensation. a using to paid them dollar end and in

David Grossman

your of percentage idea just of USD? of Any is in what cost goods,

Jason Peterson

do be I to can't the also to me provide to do off can see historically we information that we've would let to me my me some let think but I for -- information -- some of hard But do and on my that do talked to it provide top it, head, later. David, the I off market. top actually, that want can't so try of about head, the what

Operator

remarks. I'm and call any turn showing no over time. I'd Arkadiy further questions at CEO, this Dobkin, like to the back for to President closing

Arkadiy Dobkin

thank and operator, everybody you, today. you, joined who us Thank

if works. And and comfortable much I that time. in more But like have ago. any stabilizing than in we we like would questions, challenging we're to And David months that see we're to say of think again, you. now how delivery kind redesign we know we and our platform, Thank it is expect five always, help. four, As doing still to available better general, you we're

David Straube

call, the of we some we I'd acknowledge, Valerie, out the to quality like close issues with commentary call. portion before experienced the audio management

of a the site in section posted epam.com. have of copy prepared remarks on earnings quarterly We Investor our Relations our QX

on So further please our prepared go if clarifications remarks. you need there

Operator

for does Ladies conclude participating. and conference. Thank gentlemen, you today's all this

now may You Have a disconnect. great day.

EPAM Systems (EPAM) 5 Aug 222022 Q2 Earnings call transcript