Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. Welcome to the EPAM Systems First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

to Straube, conference Head like speaker to now David today of would hand over the your I Investor Relations. ahead. go Please

David Straube

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

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

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

references Investors reconciled quarterly website. in all measures our reported comparable section non-GAAP materials are are have to in located of available Additionally, earnings been our the results GAAP to that the measure and

that to over the said, Ark. turn I'll With call now

Arkadiy Dobkin

David. Thank saw driving details during for months some today. us shared year. our XXXX you, how we about we Thank ago, and trends you thinking the main factors and what Three of performance joining are the we

we portfolio some As level recall, of this impact in our are not anticipated but will level certain the slowdown of of in slowdown general yet. you demand, own market we

by our and We Ukraine partners. to risk the the work of and signs other customers also war streams some we some [indiscernible] saw risk that of those managing in mitigated to were exposure due are showing

said bring were second markets. so our proposition market we we all engineering operations delivery global time uplift to continuously relevant despite to a expecting our were comparable locations building believe across that, consistently be to to investing strong the frame. And global cost the zone general in of locations we and half to number we and going of specific of growing across EPAM of quality understanding comfort we traditional expecting in metrics outside a that of all remains quality the delivery optimize our traditional And With XXXX. challenges, delivery proactively the that our services scalable for our of our also demand in medium were near extremely broadly into structure back continues delivering

the engineering we we fewer that in later, underestimated market. the understand of rely exclusively the of months had of specifically based transformational that you and macroeconomic enterprises and always the with the themselves stated platform to three in services EPAM are visibility design, engineering sector Global breadth we a we and grow large know, programs. Today, IT backed scale and quarters transformational on XXXX global the leading and impact, companies And firms as the depths our slowdown tech advanced solution. differentiate venture them customers to deploy who almost emerging technology to Helping on digital

environment very for are programs work Instead, the decades. is Our has accelerates exactly is most work programs. signs the of model, it their represents an all it than modernization become currently targets Exactly specifically IT especially and growth been and rate development and new ease growth our with comparison largely revenue, visible last within was Such focused disruptive our that services share and was weakness. a decades. clear other three in responsible the global Unfortunately, focus supports the more data in area for type of last of that during very of significant a largely those companies platform product it months, business cloud work significantly showing few stronger during segment. economic

usually than as complex this challenges likely [indiscernible] beyond we and We doing demand in changed the months economic the must changes. today impact future into requirement associated continuous to On what EPAM and means, what cost picture global for the I long address go yes, share and three and conditions visibly story for benefiting understand to the view strong XXXX restate our But a our optimization, more we're adjusted with our cost practical We from and to growth this on war. outsourcing some and offerings. which accept and with ago. before we the the term efforts, It of you is perspective. market want just to traditional new investment with mid on priorities the is now firms, more headwinds is shared takeout positioning the immediate more all

was and models the me traditional disruption main the change during of with Let last driver [indiscernible]. growth business the decade. start Technology

short adapted on applied (ph) their models who cost we tech new to decades, faster] evidence those those sector. just focused those straight invested by realized new There during transformation become who [tech that business and versus the During new in the markets. leaders those periods technology digital their the who recessional saw companies simple slow relatively for only in periods these and three is cutting

For a on with is situation in complex will line we of led and technology disruptive us those we the adapt of nothing resurgence accelerated growth services is of impact. very that of from that are new changed plus% We strive we to historical based our investments we XX technologies. comeback a and Pushing why retail on and long for current middle believe adoption that new path believe about each we consistent unique trend of downturns temporary to the new in another term basis. to rates to see solution companies, similar in demand and our for in lead rapid pattern. and wave short when advanced consequently term that the That

our pillars believe generation engineering and already platform fundamentally the best don't of use and And continue and we make models capabilities all have active with and or of public accelerated critical network to track like solutions, of [indiscernible] and next a DNA traditional LLMs, across language that on focus development that of horizontal we continuous our also want adoption customers. widespread both with Those us players. will understand aligns than generative in internally actively the versus with anticipation large we cases from and we is With verticals use the product we share our that and technologies. implement new our proceeding and to practitioners AI partner BPO dozens delivery the over functional equation in growth you that to our includes: record Those in global confidence that yes, areas better that, outsourcing our future of which benefit are for traditional decades. we built market the positioned give learn First, other most and differentiated more EPAM us and are do

together and Second, the advising our enabled scale investments own integrated closer always preparing and ML all much for And tomorrow platforms, value from and boost strategy technology is productivity data, can bring today. what us. consulting investments machine and of our us we stronger and a third, broad to and which people plan current deployment for by on our by increased work of possible customer new AI sharing global even be and at engineering. our in drive learning GenAI our of and LLMs real EPAM made digital And experience are what engagements with in continuum and can accelerating services capabilities

posed in To believe back market We start such transform to the that everyone and many it an challenges disruption up, and what this happening when still demand again today. at Still full years. But points complicated be we to predict companies immediate speed. address quarters, toward than our now, come difficult not about is obviously emerging will different right Generative challenge. rather is AI, right sum sooner now in In headwinds, is, the technologies view, to which will have talking later. as with by macroeconomic even including it

talk the of us let our So quarter now last thinking and about XXXX. rest about

first of With performance environment, all complexities the the was quarter our current sorted. in

better revision move And a about the of has expect initial While traditional concerns our transformation year-over-year translated of we further into the us versus pullback already delays have to and taken general today and to start this that by now view complex to growth visibly environment, sequential we more the year our thinking be combination our expectation full With [indiscernible] revenue year. during acknowledge trends. XXXX customers for are spent metric our we talked a revenues that year, on drafting conditions outlook. EPS into to this new gives and

Jason relevant will all details talk about in section. his

the For be approach contracted we now, seeing buyers three to as environment. as pronged current are for long business, we navigate adapting builds new a will

our efforts long mix possibly engagement of pushing cost profitability tactical while term including lower to takeouts consolidation priorities, leading wallet our all address the share items, to present most short term possible metrics. of all customer's and current models, and relationships, protecting First,

would those competitive time increased through business partnerships. new growing the like to and quickly slow use motions advantage. across on and who and a Especially build GTM, winning Second, focus sales champions to

current global two, last success, our larger still realize economic the have specialized and three momentum field the working practice teams as and models and the time ways acquisition a with some line, focused have with take so climate. in developing some customers new and logo done will new engagement especially offerings, which new Over new new on our revenue to quarters organization down of business impact

building, consulting implementation line investing all improving for capability before. across in for on agency work simultaneously, expanding sharp our anticipation DNA continuously the generation we demand strategic third, in services. transformational delivering differentiated what strategy are staying of strategic cloud with Which in priorities. communicated And All is delivery by next our the our Expansion location. [indiscernible] return global engineering

I that, expansion global With strategy, some want updates programs. our continuous share our part investment to as of on delivery

both in the of have in and Western Europe made level strengthening Eastern During quality quarter, and progress such Central and in we Asia. quality the good delivery past Central maintaining

new integrating years moving the both have to many strong benefited regions. across from locations talent EPAM We

and and notably As will be delivery an heritage our of operation differentiation, continue proposition. Central part and of Eastern Ukrainian Europe cornerstone our to core our our most

new high in we to our hire of investments we demand for footprint skills. While global continue our excellence and center across accelerate while

global growing currently regions, to on we part America. our As delivery India the further continue strategy, out focus of Latin two and building fastest

that our the represents mention of new in those by of several sizable who technology some from to new with companies. our the there. across mix large to In brand streams addition also geographies new by regions. across platform, for now only XX starting client's work top corporations to but with very product also logos relatively our traditional software geographies, multiple to us in from those new verticals client happy opening important and but our still also we those EPAM clients, expanding firms existing attracted configuration customers, see footprint to now ones much demonstrated advantages It's locations are And not are and

we now past services Also platform balance excellence delivery the ecosystem, view, In region, years, digital experience and delivering able to all achieve be a global talent investments platform are up illustration of we next it's EPAM the on to footprint the of stand the integrated into and our the good results believe few market. strong with years, capabilities. programs, continued over bring new locations able date. platforms across the by to build We elements we the engineering during in that leveraging we from very years, months acquisition are few education our the will geo quality versus of to expected talent confirming most delivery

while and direction. challenges, fundamentally, accordingly the that very believe we are moving in conclude, still specific temporary are experiencing we but right addressing To we

by solution based is base Many driven services quality consisting consulting to the growth client accelerated delivering and need solutions into will alignment disrupt on disrupted attracted specifically technological future have that believe respective do We to partners business EPAM significant require markets of continuous their by of advanced unique those and technology come driven for leading and build to engineering. are and markets further disruptive implementation complex lead will and like progress. to are investments such component transformers. strategy to of enterprises enterprises technology with global back and they Our

rest pass details of in the for like and and to year. share change would for for to more our the numbers outlook that, QX With to Jason I

Jason Peterson

and Ark, morning, Thank good everyone. you,

disclosures the you to addition in non-GAAP Before exit wanted business covering results, included related of results. items operations and our resources in employee release. financial and expenses to customary manager and our commitment with remind additional QX adjustments, relocations Ukraine related these earnings Russian been EPAM’s to that to associated excluded non-GAAP accelerated and QX our I continuity We've our other costs from specific have

XXX a results. company basis impact quarter, points. $X.XX a the negative constant In revenue of increase generated basis exchange of foreign of a terms, and first reflecting EPAM billion, delivered The currency X.X% year-over-year X.X% solid in reported on

Additionally, basis revenue had exit negative to impact resulting the from reduction in Russian point customer XXX our growth. market on revenues decision a the

Russia on would a been over X.X% reported basis. constant have and revenues year-over-year currency growth Excluding revenue X%

our industry from growth vertical. retail. with would hospitality Absent coming X.X%. in growth driven ongoing and Russia in this solid grew muted travel and growth also Asset been impacted Insurance with X.X% Beginning by Financial in consumer exit services the and Management strong Services. have grew operations verticals, growth growth impact, The of X.X% travel and

customer growth Russia revenues, have X.X% the Business media Excluding information XX.X%. would quarter. in been delivered growth and

Software and growth. range in our top the a revenue generally vertical. and in former Hi-tech a QX in XX of earnings across The of reduction we call revenues customer produced in customers lack mentioned slower reflected no growth the from a quarter in growth

of in Americas, during down a earnings representing CEE And QX delivered region XX.X% XX% perspective, XX.X% our X.X% call. currency. strong Growth geographic of was year-over-year XX.X%. driven constant QX Life or X% year-over-year finally, or by our XX.X% XX% currency. revenues representing by XX% constant ramp QX the our our largest growth XX.X%, currency. transformational and in representing QX quarter revenues X% contracted Sciences clients Healthcare or EMEA manufacturing, the emerging energy. of our automotive mentioned grew verticals of a revenues of in grew large in constant From impacted program and in year-over-year our declined

year-over-year to X.X% was the quarter grew top in top X.X%. X.X% ramp down financial operations represents customers. APAC our and from resulting our finally, exit in a by currency or grew while was Revenue our work the of of ramp of our down declined clients client. in XX XX In year-over-year, revenues. impacted And X.X% our quarter revenues primarily terms the now outside by at revenues services Revenue constant and services from clients the Russian to decision X% impacted Russia QX,

XXXX SG&A XX.X% moving last And was for quarter XX.X% statement, income and of year-over-year demand last or Both QX XX.X% compared of lower period to was in company the better to utilization in down income GAAP million to align for in in its for quarter million cost the from $XXX structure or GAAP margin and compared QX XX.X% revenues XX.X% year. year. was gross XXXX compared with XX.X% Non-GAAP compression the GAAP year. a as Non expense GAAP the in account include to revenues of XX.X% was at Gross impact quarter SG&A year. of QX revenue in in GAAP in revenue last negative of came compared the our same severance the SG&A XX.X% of related $X.X same gross environment. works million some the QX margins. margin last margin incurred QX of year. GAAP XX% last non X.X% current of in reflects to compared in expense the quarter operations $XXX to

XX.X% last or compared $XXX XX.X% of to year. revenue revenue of million or $XXX in operations in was from million QX income of quarter Non-GAAP the

tax benefits our of due quarter lower XX%, in effective GAAP versus excess to compensation. stock to primarily QX came related for based the guide XX.X% tax Our at rate

non-GAAP effective which benefit Diluted share on Our $X.XX. tax basis GAAP excess rate, earnings was was excludes tax XX.X%. a per

outstanding. shares Our million were the XXXX. non-GAAP as in there $X.XX, approximately XX.X decrease same QX, diluted $X.XX was quarter reflecting In to diluted compared EPS

impacted and was XXXX in was for year. was balance based of last a free QX cash Turning the flow $XX $X.X QX higher variable company-wide compares a cash performance. the compared days year. and increase quarter the to of of DSO for days to million was flow compensation same quarter $XX Free billion flow for cash from XXXX payment DSO same over by an to level positive flow with ended negative million of $XX negative negatively the quarter quarter cash equivalents. XX last We flow compared and of same days QX, million cash on end the At XX in XXXX our XXXX. to cash a operations the sheet, a XX and in our million cash in QX and $XX

Looking ahead, we DSO throughout steady XXXX. will remain expect

to in a trainers headcount We X.X% a is headcount, a organization result engineers, lower the produce QX QX XXXX. consultants, with of few the based of moving level Russia completed reduction operational program XX,XXX levels hiring encouraged and decrease of across attrition. designed a largely to compared net Now to metrics. designers, and modest ended declined architects. Production on than in headcount more The

Our headcount was for XX.X% XXXX. of QX QX in to quarter last XX,XXX employees. total XX.X% more the in was and than year compared XX.X% Utilization

outlook. business Now to our let's turn

our We from and of new are to beginning demand programs see generating customers. results on the focus

we seeing around in sufficiently XXXX. by has to the markets. a yet that uneven uncertainty QX environment However, support client program continuation to in began and demand caution stabilized slower to the confidence. spending certain end continues are downs environment ramp not economic The in due characterized also making, decision global client demand And environment be

As sufficiently level a initial overall is not our result, revenue our improving outlook. support demand of to

As in on not call, our earnings Ukraine have focused materially our impacted maintaining production. QX our teams operations highlighted remain highly during uninterested been and

cycles, Our preparation preservation levels XXXX. our somewhat deliver continue at that in those the lower delivery guidance achieved to focusing levels, able of than thoughtfully at and while calibrate return investing for will productivity our capabilities or expense to from our we we be of to our centers will Consistent assumes a Ukraine with in continue talent previous in demand. on

see improving will hiring decline second to limit in demand. due typical limited hiring will we and half we QX in headcount expect somewhat to and attrition more We the until continue

the expect remainder the mid-XXs year. We throughout utilization of the in

revenues, primarily revenue the in of the of half reduction in our Russian XXXX. a Russia the tougher reminder, exit operations comparison produces first year-over-year customer and a As

from of sequential the excluding exit at we We our be of midpoint the On We're organic both expect to full Russia, will Moving both range. an billion constant currently year-over-year and in rate of expect expecting year approximately growth just impact of revenue the to growth billion reflecting X% to range $X the QX over X%. outlook. revenue QX. be basis, $X.XX growth the now in a currency

either we able generate be However, in year-over-year to to growth no expect digit double quarter. longer

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

in dollars to of GAAP tax GAAP $XX.XX to the GAAP to excludes year. approximately share, diluted diluted for be average which non our be fully will range range effective of rate in year $X.XX GAAP benefits now share XX%, dollars weighted outstanding. now shares we EPS will the to expect tax tax expect based non full $XX.XX XX.X of expect $X.XX continue continue now the to the our will count diluted excess Earnings compensation and to We also per the million be XX%. effective be for rate, stock related We EPS full

to billion, than expect expect impact basis also from to we range midpoint Russia, range. the less moving be year-over-year producing currency our of X%. than On at we revenue the excluding $X.XXX QX growth $X.XXX Now of both to the billion the of an be X% to exit the organic of in XXXX constant revenues less outlook, growth rate

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

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

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

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

$XX expected and that QX, year. of Finally, be support the each compensation assumption a approximately to measurements GAAP the quarter non GAAP for expense for few million to key quarters. $XX and remaining million our the Stock of second is based in remainder

to quarters. of quarters. remaining intangibles be each each for exchange be $X to million expected to impact the effect of for year. is million the adjustments million of expected of remainder Tax $X of QX for The the of remaining and Amortization foreign the is be for negligible non-GAAP is approximately $X.X expected

$X expect QX million for and tax We around for benefits for $X to QX million excess be $X million QX.

to see a non-GAAP non for expect GAAP adjustments we customary the resulting ongoing adjustments QX reconciliation these Please Russia's GAAP our release in quarter non our XXXX, of GAAP guidance. earnings prior to consistent to to addition GAAP of and invasion with In detailed from in have XXXX Ukraine.

to position interest expected cash original our assumption one interest items. healthy years level income. our With of are GAAP more we non-GAAP developed our relative full we had elevated to of Finally, We of generating outside an a year significant guidance. level past when income

due the them EPS impact regarding larger are we interest our XX, on However, explicit. assumptions making updating to XX income in positive and

remainder of For QX the be quarters. each year, million for of the for we $X income expect $X to interest the and million remaining

on our Lastly, to employees and continued our I'd their thank let's the questions. open for call focus Operator, like customers. dedication for

Operator

[Operator Instructions] Stanley. from James Faucette Morgan will come first with question The

Your open. line is

James Faucette

much. macroeconomic rest Thank environment. like for you sounds the details is so view most year Great. far Appreciate the revision morning. attributable to of color It and your this the and of all very

that reengagement all those and quarter had need outlook of detail impacting wondering of give has about do talked And some I more with if the that that back are in you at and right to the and that Just how engagement you know conversations just can on gone previous I'm kind engagement wondering kinds assumptions clients. there your if was underlying there. now. you

Arkadiy Dobkin

everybody. morning, Good

trends. think asking if because were I a we you're or [indiscernible]

working and are economy. was from One conditions of of second the concerns because special coming clients [indiscernible] we

is our previous think a main And of so, playing were here. definitely in And I them both estimation. driver the what role

already on impact economy we this at and if the on of was behavior point the and beginning what's from guidance will Europe the the the of our news well. banking hear kind as the remember, from first this, beginning and of clients think forecast sector North biggest at top we of definitely happening. always call the March driving see you our very February from America and in quickly I on guidance of And previous

And these to was translated were increased which very visible. all of [indiscernible],

as Specifically on mentioned. programs, I the transformational

at a general think I events. point, we this slowdown So [indiscernible] it’s believe latest

James Faucette

that then, EPAM, like and ramp -- on just Got sense guess, the softness, that those of is you want downs from And clarity I ramp sounds it. Thank broad any And how you think delivery but to of I for based, sure to like you downs? that, given that. how understand much is It maybe idiosyncratic much I feel that that probably it's any Ark. of macro challenges sounds driven. or it really that. make more like

Arkadiy Dobkin

clearly exactly by driven that's I’m on saying were new based happening things some client call, our and economy. the question and now Yes, what were after previous that

James Faucette

Great. Thanks Ark. for that

Operator

for next our Please stand question. by

next Our Peller Research. Wolfe with from comes question Darrin

Your line is now open.

Darrin Peller

Hey, thanks guys.

some seeing If anything specific the you from or that just bit post end Ukraine you've executing into instead, way have day the And the really just you're all or mean the whether the of is factor? need that's some post is environment demand talent around at a you in and to more just the of that new versus not demand a the some tougher of it's really newer not of Russia, you built should. regions you there's the to regions. what could what that by been regions more now, I by is help really little maybe dissecting you're And execute

and around to What's guess that is on latest pass on through follow to just pricing the related executing I regions pricing environment then on and your that? quick ability dynamics wage how newer through. you the in those a are And on pass that to

Arkadiy Dobkin

bring exactly during clients to all we life right become were now. I [indiscernible] and morning like It And And like of the specifically think what economy to when we're executing we're this on as about started the that's this it's this, today. and trying is try visible, on very it, coming to approaches. play. acting several discounts that's definitely with highlight but part reacting question kind accordingly the this color definitely talking of we ago of quarters the pricing what kind are multiple that

of and and on necessarily trying which traditional the continuously we and client client maintain We're them, not approach. changing actively relationship what with try help the models do and our them. understand to put to ourselves do some the insurance in yes, choice. that something focusing we short serving in term can One we We

portion So what's that's today. big a of -- and happening

let's So question. your answer to

While at doing this. to the same deals definitely continuously we at future this cost not still the focus we and time still we XX there at happening, pressure in we all like transformational mentioned. And [indiscernible] is But that’s ago. level months on are continue work Again, the here. as

Jason Peterson

expected we the through campaign but clearly an and of a clearly going see you're more were headcount inflation year, to by of pricing that over the seeing wage real and last that's we're little our did And the promo that to clearly having are of challenges we And or our bit. new time environment talked price both in spend From engagements cautious terms sort a sort a about, environment or wage pencils wage the think of inflation terms is here we we QX. impact to and summer. add we the the increases requiring not muted sharpen than decisions. finding then uncertain do I So, get issue think year. more on super of remainder of clients And macro just of the of rates. standpoint, And one kind an investment environment kind is in even no we as to supportive of in done. we customers Ark uncertain get delivery ability in terms or of work But as said, really it's

Darrin Peller

Just quick a follow-up. very

as to a into take macro much job You you possible more to a at oftentimes. having do it most, that in accounting how fair? conservative try mean as visibility that conservative take stat I know being given uncertainty always good case, is you've feel we guys of the have than wanted of guidance probably this of I being done about and now?

Arkadiy Dobkin

we Listen, reflect differently. right we seeing last what think were I quarter, we're what you're And exactly now. on asking, seeing this unfortunately, but understand we

Darrin Peller

Understood.

Arkadiy Dobkin

pretty very it different I And clients more of sharpened. stability this reaction the a right much is we different, environment. can the was new quarter with like now is compare second a of don't this think XXXX,

to now, that's quarter. we what different, think what needs quarter-by-quarter right I see. yes, because that we the will about And So be it's but was next adjustments everybody think

Darrin Peller

Okay. Understood. Thanks, Jason. Thanks, Ark.

Operator

comes from our next question. Bryan with for standby next question The Please Cowen. Bergin TD

open. Your line is

Bryan Bergin

the Thanks Hi, for taking question. guys. morning. Good

follow-up just one, behavior. budget a on First

cut So you're spend. if deferral delay outright seeing so is of more clients I'm and an programs or curious if this cancel

like a trying is more or this pent-up understand wait-and-see less XXXX? approach? actually for recovery dollars potential later if or potential could more that budget out year there the if I'm form So are to

Arkadiy Dobkin

about And same belief, previous think of this in our what quarters of a Not in versus quarters three, quarters, saw also based But now. that I try mistakes the making right terms quarters. case, educate still as question else. market with will the happened terms but technology to restore. four thinking we're how [indiscernible] we thinking slide our many on in We how in we that's two, we on years. we're think That's it. everybody based mentioned what we're

Jason Peterson

very looking those largely, those space couple -- decision space based kind making and saw client that just which And on profits. sort largely and revenues were were in they we not the a care much they future in at so, one how downs we A of about, their were health of ramp and the economy-based. one tech of talked

adjustment let's generally contraction. we're spend, today say, or is of, What is seeing more which kind trimming to a a

look, going to any eventually, said, sort businesses that a need just And saying, people competitive as the not their we returned make future. to their So of Bryan, investments reducing Hey, in spend. not work. have make a It's people Ark successful it's I'm think the people and to to do

Arkadiy Dobkin

then. all what of will to for delay said it's the that it have combination we will the for we one do somebody happening and telling we And next environment. quarter another you definitely start is several quarter, next we different and When quarter, across for quarter

a definitely us not not but it's this. cancellation, count to that's allowing Okay, on

Bryan Bergin

helpful. Okay. That's

over here. Okay. margin shifting And then just to

margin expecting around to can get And just balance forward? how to trying then, the diversification and any trend I'm levers talk really you're gross the global a profitability sense the recover? margin efforts. update as to you on So your business on thoughts does about just near-term structural

Jason Peterson

Yes.

I second is with rather that the thinking the mid-XXs remain in So in the going is guidance updated half. high XXs probably than to think that, the more we're utilization

up generally utilization. However, QX, in caps second have social the bill in of little trend half, security bit characteristics the higher with a and in date we do

second am I control. gross be around the maybe definitely SG&A and will variable expecting areas XX% that for half. we're working to somewhere the So expense, of margin other

a XX% below SG&A so, be revenue. likely of will percentage as And

to to looking we're what close then the that sort be XX% XX% at our the top of to for is closer XX% means full our of is -- And to will range. probably traditional year. business do run what the still second But end half the

Bryan Bergin

you. Okay. Thank

Operator

comes question Stifel. next The question. next the for from Grossman standby David Please with

now is Your open. line

David Grossman

I you. if could a midpoint looks $X morning. sequential was your in half of kind the of go wonder If asked at the increases to guiding billion, take of I year. you guidance Thank Good it a are to look revenue back like in just about bit for earlier. little the year, that just back question I the

you see. said to you're think, what Ark, I you guiding So

of growth half that the imply accelerate you year? on that sequentially some backlog does visibility or of give new have kind that So will back in confidence that ramps you revenue the

Arkadiy Dobkin

increase across programs to experimentation see about and like and lot starting Especially components. lot based how we show of we a think for which conversation started demand. this, think speak, is you as moderate technology a we've much I seen in of on potentially industry practically if changing; seek conversations in we up all

So increase. that's how get the now we'll be HX, moderate right but it would for

Jason Peterson

new Yes. logo And and a see activity. of the XX in the seeing growth QX XX of for we below aren't you significant guidance the top the some despite, amount obviously, figures top and is,

of fair of relatively small. wins, a David, are being that those of challenge right new signed. programs a number is The there's lot new So MSAs most now,

contributing but sort over growth so, grow And hopeful in might of time. to past as that they extent they're we the years, not they'll same the revenue are have

the technology to when two it to the growth particularly those top XX that the clients tends the a particularly we've about on move below talked top in with top health just top care of quick and and comment in then growth the XX rates XX. saw rates, they and XX, from out XX with distort the below the the we the clients And cohorts of between is movement top

of growth And somewhat we're lower a our XX that's seeing outside clients. why level top so,

David Grossman

course about that XX when any still I you just the guess, activity or I think shift back get workloads comments, year. guess, to XX And major any go this to it. ago vendors -- until that year? just workload would you to vendor really you I seen the a other talked you clients notification, of client that's days late a and Got last shifted to your Have over other suggest another possibility didn't days last

Arkadiy Dobkin

with of XX more saw specifically we with consolidation and cost specifically, last I decisions effort were same and is pretty industry. the and pricing don't sales. kind And consolidation At programs, during efforts more time, a delays promising. which days, cost across delays the think saw cuts, the the big as there we versus strategic delays we

across it So portfolio in area, be sure. could this impact for the

David Grossman

to clear, I can... just So be

Arkadiy Dobkin

we're the was the This the we And progress budgets becoming explain to show the the stat, of sure. transformational is [indiscernible] results. that redistribution on is recent exactly That's whole part try what morning the which know I try driver. we again, it. to a But pressure. that's all this of why We -- main when

we is side, and what critically other that's the the important, believe it's On reason.

see times will Now and of quarters, like then deliver situation as actually coming -- on situation now. decisions and right as share of deliver clients right because because technologies our is making We this, unfortunately have new projections exactly and many we changing both work to many how you which and we were cost back redistribution quality the now to this the need of because changes. be with deliver business

David Grossman

All right.

got very Thanks it. think I much. I

Operator

Please standby from Blair. question comes Nolan William next Maggie question. our next for The with

now is Your line open.

Margaret Nolan

you the sales you. kind new little client were to force area this a that mentioned a bit, you've of focus get additions for Thanks past into Jason, quarters in started big but focused after an still Is the is that focusing XXXX? XXXX more that alongside that sort changing for delivery on demand investing XXXX. of on really Or you're environment? into in for area

Jason Peterson

company, past a No. That third just focus have activity. logo you and of in on the the growing million there's first maintaining over the seen relationship or the a continues maybe existing existing really in in of dollars And might initiated to -- focus now right a second and challenge significant quarter. accounts, $XX new years, addition new quarter to revenue huge in of millions the only quarter right? relationships So and be in

just cautious now, about And right people more budgets. their are

are So kind of projects. quarters, the I with over period may smaller of those starting relationships take into But think XXXX.

But some those a shift back face-to-face the trimming bit larger going you to kind of think a another I are growth, I And numbers. or little are of I a they of is one where of time, number got to is we and it doing relationship relationships to the will up show scenario think think we budgets. and of work their I some they're not having forward, discontinued vendor. talked new are what clients, produce step our steps begin in with at two same

in are then the when in that's these looking from and had And trim in February. from to way offsets and so, that see of was while expected QX kind their coming spend, we of get some we more we also behavior of have guided clients, pronounced these incremental than larger we sort our we that clients new revenues

Margaret Nolan

share Okay. priority or then how comment now on can is much repurchase? you And a right of M&A

Jason Peterson

Yes.

So M&A continues to be a priority.

make us drive we're that integrated to think and assets sort acquiring that business. successfully can As we help certain of our always, and will evolve we be want

we on have today. going so, And active discussions

predetermined can't what and likely program was active we going and we've in comment shares. the million $XX then modest, continue I to in would a we we're don't would buybacks when, forward I buyback to our share occurring did level that have QX but I the share you be from quarter. think, And it terms got XX,XXX less move of initiate expect a some expect close for but QX, in than certainly, standpoint, something in future. back, And would conversations active bought see to with participation, although we

Arkadiy Dobkin

there is term. We're as it -- I pretty to it's M&A, looking before. which longer or and no specific would for the make short have better we any for is much on term And -- things, efforts same approach situation strategic,

it's the would term longer So, all be happening [indiscernible] about what in

Margaret Nolan

Jason. Okay. Thanks, Thanks, Ark.

Operator

question with our Barclays. The for Ramsey by next El-Assal stand Please from question. next comes

Your open. line is now

Ramsey El-Assal

you of just little take there a just -- to kind kind much on for have get matter in ask with to Hi. that you made skills some to have work getting the question Do taking my a to is hand, Thanks cost more obviously, Or have your bit address does there? about the you you you it for of a reskill I clients, pivot the an takeout wanted clients? terms -- is to Or or shifting time meet orientation about and this morning. of internal of just of how it it demand? is of comments change to required focused invest? shifting sort

Arkadiy Dobkin

were skills -- from engagements. we communicated, we [indiscernible] building same have on capabilities again, time, you people a And focus not what we believe in have skills our lines. situations we it's apply know, of the this do who do understand have this definitely to the But services to we we So area. some we as primary for have in as at technology cost-out

[indiscernible]. effort, we even repurpose our It's I small this it. general, type do this in company portion don't with of in what of think specific cases. and a it put there we still, it's to goal for around about it's is relatively efforts risk no So

which those quarters, trend So this market back. come type this we is effort us believe will much before for of more the tactical be will

area So specific growth. we in very still the future for invest the

Ramsey El-Assal

easier evolving? -- deal, on there logo a small? there? versus the versus a And the any Are could provide has there composition pipeline resistance is to been more -- path shift also Is new of more now? right it little there is of particular Okay. least large color pipeline expansion? Is a you the How type it of

Jason Peterson

there are that there, second mainframe revenues generate are type handful that will I significant deals revenues. that out expected cloud large to were are mean to of half still a significant in have the they engagements

conference for in They're programs. which talked of in transformation we of are new sort of work At the platforms looking large-scale this off the think new that, clients their is investment. about updates rather on I for time, And near-term size. looking as kicking platforms. creating return existing There generally modifications are last they're relatively is than smaller who call most kind we're to fewer seeing this well, that

back or the as again, in let's makes people the view long it's are it instability make to in it investments the to macroeconomic programs. people difficult bottoms in of more QX is or say, QX for QX XXXX, to aren't And going the, certain large-scale just whether be transformation

Ramsey El-Assal

so Got it. much. Thank you

Operator

Shirvaikar with Citi. for Please question. the next standby question comes next Ashwin from The

is line now Your open.

Ashwin Shirvaikar

the top the appreciate Thank at you. thoughtful of the folks. Good I call. morning, Ark, comments

be variability not question visibility revenues, quarter-to-quarter revenues. having line based to Is Jason, on of the First you margins need on operating Jason. flexible kind goes into because mentioned the to and hold idea, the to

that line on the will that margins? the you idea hold is So

Jason Peterson

Yes.

the two we're us or making advance successful continues we maybe nature. focus that to XX% at business that's be three of costs, in really in return around stronger will being below a be at the that drive to to very And allow terms over do and demand to variable continue as Our some range. the quarters. least or addressing whether slightly Ark in time, our discretionary it make same the to or sure a the investments Ashwin, on in to business that more period market. to anything about, controlling that's four trying spending And are time talked careful And capabilities of

year throughout profitability XX%. trying So the maintain at to

profitability then go will make half that that second below on continued characteristics efficiency, margin I the find then that And are expect is what will XX%. there SG&A SG&A because And have you'll focus with gross stronger just stronger.

careful so that And ourselves will again, about So to our a the focus at the be anything same be on want hinders spending. do to to growth. we longer term, we it time, don't discretionary to want return

Ashwin Shirvaikar

all of And they the relates Central up that and before Understand. European clients, delivery point or at and -- more diversified more do have Or portfolio countries? your not services do it this the a older understand delivery sort it's does particularly a clients, of East that your than more three that as tenured to factor? you as the primarily come

intent an service also on. out broaden going just to wanted Ark. on, to portfolio there the management and here clarify I deeply more And application Is get things from in so into response like to what's

Arkadiy Dobkin

speak. as this from At what the -- we beginning. do same time okay, we is So let's -- the

understand absolutely, clients we First different today. of all, that a have kind delivery of structure

new new the that which existing experience So before. bank this and they to also clients that's I more didn't with we talking bringing about was coming what clients geographies,

taken direction us war for our in started good almost into it's months. services, a as like because come typical investments pretty new engineering was which the as again, have clients new is locations differentiation which two like because And client, have the services before already and them of as mentioned, time. even I or we which for some with differentiation. we we globalization done It's well And very not XX And quarters. regions technology progress for appreciate different already and one were

us then from which very our Italian of First strongly locations Western as benefiting actively in is from Asia, all for but the Latin as degrees Central in like traditional well. historical America well. Other India,

more there bit for some well. view this projects predictable of in move because a clients, too, talent the of from is because point which So, little

point this of view, everybody from is So there direction. that is

portfolio So the the do of more our with staff. we experiencing definitely, saw business, from new

to relatively we but We increasing components work, of it well, addition growing years it's on it smaller mentioned. management which what as but component management well, taken addition do transformation transformational application on And a big soon the as do modernization, as we do. were focused as we still as also I over we have application it's of still portion user program,

while I the that that's there that that of They right to the some think impacted why believe is believe already that and are believe because start to QX be do and quarters. it too be see HX, clients in don't we delayed will delay load. to them was we What we now would definitely full will able and growth be some multiple there programs delayed many that for afford realizing we

it think start I HX. -- it's So will with

Ashwin Shirvaikar

for you that. Thank Understood.

Operator

Jason comes America. question. Kupferberg The with next of the for question from standby Bank Please next

line is open. Your

Tyler DuPont

the for is Good time, Tyler taking DuPont morning, I'm know Ark quick. and try to on for I'll I Jason. Thanks question. on putting be so up This Jason.

linearity maybe could clarify a ask briefly end, I think a if it spend my of just to quarter. touched and in time the on but to of you different you the this, on way talking about just bit

For that fall so, the picture in some in would And be last February. fully at sector helpful. was about of any And Did demand crisis? second week talked there off clarity attributable positive you that print example, time, significantly green the to the banking shoots. the Or March, particularly? if is just

Arkadiy Dobkin

right. All

announcement couple of impacted we a months. a other to think believe the most on I of with like just of of due lot necessarily put or hold. it's but industries programs companies lot banking impacting last services, market And decisions. do And see the was technology-driven that you the other not this news financial can of the company of

of of the part the situation. reaction is same sharp very So of sole this the kind

this provide. For big majority services majority, of of which aspect as transformational that all do. is And we a the what we reminder,

Tyler DuPont

Okay. financials it a a while solid high-tech like then And follow-up, and experienced put life of to little sciences appreciate growth seems a to and a bit up pretty a see Ark. was Great. surprised bit travel slowdown. numbers to I the as just Thanks, that. degree, seem I lesser more ex-Russia,

spend So you down the clients you're I of how on client what could parse a as ramp that to, out the verticals? last across in trimming described, I base? was wondering from seeing of if much example, decline, of mentioned for more compared the Jason those was large just Like of those call guess,

Jason Peterson

Yes.

and ended sort sort a significant kind They expect program. work, but year. And generated a of care, effectively revenues largely health sciences the not So on we'll and generate of in last ramp specifically, we they Life it's client of from a put down. this some revenues very specific restarted program a difference to significant year that the program, we been from that there's the quickly,

a all from the in again, then, And high think a but just then have got the kind news in tech generalized of also we see you the you've slowdown client, sector. I and one spend from standpoint, high-tech

Arkadiy Dobkin

done was with investment but driven And this investment if a was of during in be core some how as done could time some you done should high-tech you will, software much seen in would because pool. accidental couple and is, situation, logical see, obvious and be that much things of more how the vestment there were well all sinking current the and way lot some if you've life industries, science, be very by clients, if ways a ways, or

of pandemic. lot or of industry now think thinking science a it's big by a is I huge spread the portion pandemic So right due after to

Tyler DuPont

Okay. Thanks.

Operator

At back like call this now remarks. I would turn for closing the time, to Ark to

Arkadiy Dobkin

much now but the our competition for us. again But about a seeing have period growth come for drive conversation about talk this kind soon yes, all a and would a significant future. to very, our et of AI, be ecosystem belief and life in inclined will different of after will as future rebuilt that nice the be help be little well. we derived unusual who technology will that us joining it cetera. you lot it's digital too in and do Thank well, open And, bit We didn't to those believe will very for engagement, like to again,

in to months. you talk and three you, thank So

Operator

concludes This Thank for you conference participating. call. today's

disconnect. now may You

EPAM Systems (EPAM) 5 May 232023 Q1 Earnings call transcript