Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to the EPAM Systems Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]

today’s being that advised be conference recorded. is Please to conference Straube, over I of would your the like now David And to hand speaker Relations. Investor Head today, Sir, ahead. please go

David Straube

Good earnings release the should Operator. Thank now results. quarter for everyone. copy the your company’s you you, of have morning, XXXX received second By

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

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

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

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

Arkadiy Dobkin

Thank everyone. and morning, you, good David,

of a mid-quarter would into I our the quarter, I provided we update minutes Before few in June. results get second spend on to like the

in As led dynamics remarks, economy concerns the in over shift a to our prepared I sector. for my the broader said demand

So we pronounced on to focus first about represents more our delivery in been found of has engagement impact engineering our and geopolitical the on quarter. the shift centers and build digital market, which much our the the product due of the segments XX%, XX%

pull-back by while other and evident across especially spend digital being as the impacted was in years This in segments well. broader be of which the industry spread vertical, efforts, investments to after technology development product in strong continues

held first for new clients, in contributed the to we of this the as direct quarters, has percentage our to seen factor high their they economic half build This last and the programs impact of the from conditions some caution businesses. of Over a also over spending our shortfall largest back in XXXX. have have

XXXX. rest will QX and switch to the I of Now

signs, on than still encouraging continue negative on XXXX, a first level minute. the starting of would expect a level we into in a current are I see we saw Today, second based half that more the will lower at of in to the but we we the While of half few this to dynamic year. unpredictability, share that state

that, those we a past turning especially, that we and sector like insight that would With I of future our to and further quarters action while us experience understand several past to the for from based into this do crisis broadly, this are remainder period as to state year more that opportunity, for difficult time know, will is the which, on throughout when applying new years we pragmatic this into and transforming ourselves. all presents plan, be business which the we and consider an several

to and actions delivery current adjustment global strong real-time our stabilization. Some focusing plans savings, of on platform help talent investments go-to-market engagement to for are prepare our plan, us customer ourselves position. rebound key making and programs These

design, content digital services and agency, digital services, win-win. with that What and our also note focus is is product digital to real data primary marketing a engineering combined on consulting, important

services in intact, staying our other allow while tune company global which we three to and In the primary in years with the words, to market capabilities previous are us demands. market the continue double segments, line

empowerment generative the is businesses digitally broadly to believe now working to the more even nascent IT promise IT to moving services core. the and consider entire is core point as sector ways with undergoing significant market an the capabilities evolution AI simple, entire from models faster and the of reinvent new is acceleration. of Our what we of and is And digitalization,

transformative what platform as with generative a strong our more data services. similar driven are We product to AI looking wave have expect of by a even but to fully of once and of before, in traditionally We forefront EPAM trends exactly engineering, promises. as and been combination the and put be analytics again, new result at now, capabilities, underpinned center machine-learning

been services the profile situation our capabilities core on on continues engineering. the So cloud has benefit rebounds. to core capitalize longer will be concentration our and in from that and medium data higher we segment thesis And our in our EPAM once and term will general strongly

by real impact and a available just of currently terms to needs AI more of even visible become platforms future classes models applications reliability very in elements in as gen new will of also complexity integration cloud by specific composite encapsulating and of AI AI The close and security not but as adaptive platforms. industry AI, and with platforms, well trust, management foundational for these

In is the stack -- transformation opportunities our areas of application short, about to well optimistic the our we of key announcements. That one is transformative AI-led transformation, from illustrated coming which investments. are latest core the also by

allocation locations. quarters diversification the including in across our more part drive stabilization same higher global across our to This the further our performed four enabling world, and at critical will over levels of to strong be delivery second is rebalancing the margin quarters, all EPAM optimally effort The of a of while quality gross the engineering standards performance. next time three talent part platform,

generation are actions Our on new other acquisitions. today plans our and focused demand immediate logo and

activity client and to the a return as XXXX, our QX, drove and return soon grow We specifically sign positive high allow at XXXX. stabilizes. current recovery first us should as see when and we During XXXX as logo this to demand. base new of of than the half to levels accelerate We the compared to in

travel of new cancers; shares a dollar resilient organizing in provider molecular and of for infrastructure management diagnostic global sales BXB global supplemental company and benefits the specialized insurance protection, one services in for detection a financial of early-stage marketplace, leading include; space. absence leading QX few solutions; and trading energy companies our large clients platforms, a world’s securities; of multi-national multi-billion European-based the A other example

diverse from consulting capabilities our stack a types programs, to we In of these to different efforts. new are of starting implementation include more

Some will support our we of those clients growth journey. expect next

announced have ramping-up. modernization Tires, with their Recently, across digital Canadian innovation with drive there. started Canadian In be markets. lead accelerate system relationship see strategic engineering and retail their clients to we existing Leveraging addition, Tire a a Microsoft Canadian will EPAM also in long partner our with and some seven-year who partnership decade programs to integrator trusted proven

with to So But to in probably next there strong indeed coming be We quarter are that anyway, demand is in us. EPAM for more the our demand entry and function, some of even share confirms it how especially low in normal of some also for which overall that current terms relevant market the to continues be. are remain progress, to signs able a build share good will going is of very environment to hyperscalers. relationship signs go-to-market competitive, those more point

across solutions to In partnership a markets, Hi-tech with Google help specific Cloud focusing June, energy sciences, economy to verticals, healthcare, modernize our cloud global life and to larger our global strategic efforts on services, their businesses. and transform our financial entertainment, consumer and in announced we including and customers

progress direction major of Network. weeks all we next might AWS. momentum overall, In, by More encouraged with to on very just couple recently plan establishing We that you XXXX for XXX-degree this publicly. we venerable with the few we over made soon. strong a other Partner with relationship have sharing major course preview, players our to recognitions Microsoft energized Year in of very and other seeing and be three a partners, and But as cloud Great made seen are Partner were the Microsoft are the come real with also more Microsoft’s the

Two points. final

want integration, and there tremendous strategies the First, and done in application considering reiterate is designing just models I work view and and our be to business that to amount development modernization, continued for in change. a of

win and new to help and commitment can consulting a our us compete create confidence next-generation growth. will Our demand once to to observing expanding retention their to optimization and gain capabilities now work climate initiatives engineering a return customers agency

Second, AI to more wanted one on time. touch I

As these on it obviously mind is everyone’s days.

the for to our at course, And customers success? impact you and position and do how long-term to business our we what see large? more to So its industry EPAM doing critically are of

EPAM in technology has history of of the real. been to make has our promises the and over action to R&D years call investing a long

plan current directional speed the sharing than dollar on spend share specific can thinking of difficult with investments rather So we AI, about how amount to change. instead are which any estimate We is to very we today.

being and EPAM already has broad to announced. of Currently, mind. two and are categories and working be we principles to be have this our terms you translates of This investments to in responsible pragmatic relevancy of deliverability do on saw some probably and clients; it pick cost-effective. two we second, you in for to things Whatever with

best accelerators we We position large portion help are work using we doing is orchestrate work available to that of of we transformation significant the works building A from language growth operate and to program how company. we models how ourselves from are how related IT capabilities this and and build full -- our change in tools. the

do in cloud ourselves those our ensure internally across technology that. thousands will future address and across difficult. leading on cases importantly, real aspects cost-effective are focus so, Otherwise, providers use to expanding with and aligning research partnership, experience to also We and on on including progress critical solutions. centers consulting first To all, of of are working be responsible, very focus, and we focused to

The today. stage that AI maturity application at the reality of landscape entry is production still services much is ready the very

accelerating in market a While it we very is see specifically for segment. our us, large primary opportunity and

experiment focusing scaled and currently on We to more production real are type proof-of-concepts of pilots and to activities from learn all scale initiatives. some

decade content are paradigms. advances this the for and over application, next-generation native will as that and a advanced AI-led UI UX architecture delivery demand as well engineering, like computing, creation derivative the our requirements models, artificial of hybrid drive to new more and just for demand intelligence we data drove in cloud cloud So engineering wave and advanced confident ago,

the who clients, which make engine already for are be of aim real to companies believe Our of race, technology up enterprises technology-led arms significant future in mindset growth. should a will started themselves segment the in we a

we are pipeline. within to that, demand already of Some starting see our

an With our details outlook QX and for remainder like pass XXXX. Jason to more to that, business would I update to numbers and for for share of the for

Jason Peterson

you, Thank and everyone. Ark, morning, good

our non-GAAP to I and humanitarian EPAM’s from employee commitment addition excluded Russia’s that from Ukraine, customary results, have to invasion you Ukraine, continuity non-GAAP accelerated QX been our covering in including business results. of resulting Before to relocations financial expenditures adjustments, remind resources wanted

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

and favorable a foreign second year-over-year of basis revenue decrease basis exchange X.X% of terms, X.X% generated a of reported of quarter, points. reflecting EPAM the billion, on decrease impact In currency a XX constant $X.XX a in

of year-over-year number had project a quarter the as negative reduction clients, to exit program related our by in our Revenue was across in to reductions resulting impacted from revenue XXX-basis-point starts. caution impact revenues market customer on the new client as in growth. The well spending decision ongoing Russian

Excluding revenues, X.X%, and revenue the Russia reported have constant currency decreased would year-over-year respectively. X.X% and by for

consumer industry and from grew asset declines by services due X.X%, in retail, Beginning with travel a On and management hospitality. growth and declined basis, verticals. insurance X%, solid with services. coming Financial primarily offset our year-over-year partially to travel in growth

Business the was space. end in clients X.X% a reduction particularly in large mortgage the quarter. uncertainty quarter information and a media by at decreased their impacted in based data number on in in markets, of the spend Revenue

customer from Hi-tech in in a customers in the XX.X%. The earnings revenue revenue mentioned in of contracted during generally across we reflected the our slower and a XX growth decline and Software former previous range vertical. top quarter call the reduction

work existing transformational previous by our mentioned ramp in impacted Healthcare was and sequential program and quarter and logos. of declined basis, new XX.X%. earnings in Sciences was large down both a a by Life X.X%, the new driven calls. Sciences Healthcare a actually On during positive Life Revenue the growth at

our finally, of X.X%, and emerging delivered manufacturing And in growth by verticals solid automotive. clients energy, driven

by the we during currency. X.X% or the perspective, rate customer impacted geographic mentioned of a life was The year-over-year X.X% in our in QX Americas, previous ramp our constant healthcare and in down largest call. From sciences of revenues, declined quarter growth XX% region earnings part representing

representing revenues QX EMEA, grew X.X% in XX% our year-over-year X.X% or constant of currency.

contracted XX.X% in CEE in represented Russia our to in currency. exit customers. and constant by quarter decision our services impacted was Revenue operations the our QX revenues XX.X% resulting ramp-down X% Russia or year-over-year to the of

represents now APAC revenues. XX.X% finally, our work vertical. XX.X% And X% constant and impacted year-over-year quarter the or primarily the in declined was by terms ramp-down Revenue our of of financial currency in services within

declined X.X%. revenues while our outside QX, top our year-over-year, X.X% top customers In declined revenues from from XX XX clients

Moving income the down statement.

same quarter a GAAP compensation last Non-GAAP of by margin XX.X% negative the to quarter in partially was for of the year. was Our gross margin of to for gross year. level XX.X% lower XX.X%, margin lower for compared XX.X%, QX the QX the reflects compared offset last utilization. Gross in XXXX expense, impact variable quarter

in financial same period the its for reduced as in expected last to GAAP of focus XXXX due year. QX performance year. ongoing Non-GAAP SG&A to on compared from the variable was both compared of expenses in QX significant a quarter came in level in the compensation included and company’s in managing expense XX.X% revenue at revenue, XXXX cost during reflect of QX more Ukraine. last of XX.X% XX.X% to SG&A of in revenue, invasion year. XX.X% Russia’s the Reductions of the well resulting cost level base, SG&A SG&A lower as

$X severance-related with in works align its EPAM expense included better SG&A, million GAAP as QX, current demand company both cost structure incurred in the non-GAAP to In environment. and the

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

for Our tax quarter XX%. in Non-GAAP rate tax effective was rate the XX.X%. GAAP effective at came

share GAAP was Diluted on per earnings $X.XX. a basis

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

in of quarter flow QX last $XX for was from flow $XX cash was quarter Free in $XX to million, free Turning $XX operations Cash flow cash year. to million million, million same compared balance cash the sheet. to XXXX. and compared flow the same our of

At the for was for to days QX compares days the end XXXX year. QX, last of XX quarter and DSO XX XX days same and

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

XXX,XXX the $XXX.XX per of were in quarter share. $XX.X at million second repurchases Share for approximately price average shares an

we share cash billion had equivalents. and As $X.X the of remaining. XXth, authority million ended We June repurchase cash approximately of approximately quarter with $XXX in

of combined Moving few Production the demand. and operational engineers, involuntary trainers with XX,XXX to voluntary as headcount on XXXX, declined continue we XX% supply and result more lower ended QX to to a than attrition architects. consultants, levels compared hiring, QX with designers, metrics. balance We and of

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

Now to let’s turn business outlook. our

seen a our logo efforts have level higher new we mentioned, and acquisitions Ark As of revenue focused from on generation. demand

to encouraging, client is enough of is further level progress new in this the and While revenue generated starts. ramp-downs reductions not in program budgets, expected offset delays

of decline QX. are a outlined With in demand revenue our for and in Xth we call, growth or sequential flat QX we on sequential the muted our expectations outcomes, range further maintaining environment, with June

Our highly Ukrainian maintaining delivery remain to operate organization and our uninterrupted production. continues efficiently teams focused on

than those will we lower somewhat levels productivity assumes or continue Ukraine in to achieved that guidance to able Our in deliver at from be XXXX.

will our to on return and expense preservation in of in capabilities thoughtfully calibrate we of levels for cycles, preparation previous higher our focusing levels, a while with our investing to talent Consistent the demand. continue

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

to primarily utilization half of slightly expected a year, vacations. second by higher of expect the We level driven the decline in

$XX.X result sale But also July, of Russian end results. an a will and will year our the we on which sale full million, to which in of our at from Lastly, of in recognize impact estimated completed Russian business, QX GAAP we will the loss revenues decline QX QX.

drive in further will headcount. a modest Additionally, reduction this

range. revenue our reflecting to of outlook. in excluding to year X%, we decline of be midpoint billion the to range billion, the year-over-year in the On the basis, We $X.XX exit the $X.XX now currency be expect approximately Russia, on X%. revenue a at of constant Moving approximately decline of an full to also both organic expect impact

We be to with the continue range to business. the our expect to which XX.X%, to includes the from in XX.X% GAAP loss operations in be income to from income of XX%. now XX% non-GAAP the range The associated sale of of operations Russian

our to XX%. to effective tax continue be expect rate We GAAP approximately

stock-based effective tax be expected to XX%. benefits tax non-GAAP related Our to excess rate, compensation to excludes which continue is

the range now to we now GAAP now For non-GAAP that count average shares $X of share expect outstanding. share, EPS the earnings $XX.XX $X.XX per for expect fully weighted be will full We diluted full diluted will of year to and in EPS of the the in XX.X million for be $X.XX diluted year. range

our to XXXX Moving outlook. QX

decline On $X.XX Russia, to in producing excluding the be to decline range basis, we year-over-year exit of constant the to to of billion, $X.XX revenue X%. currency organic the of by X.X%. X% revenues expect expect a We X.X% to impact an billion in

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

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

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

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

of $X.X non-GAAP million for The is be remaining remaining million foreign QX measurements $XX.X for of in of approximately adjustments of QX. be Stock-based around and be the exchange expected each to is year. Finally, that gain a Amortization the intangibles for compensation and each the million is our quarters. to of $X.X quarters. of expected to support effect remaining few million to each expected of key quarters. $X.X be is assumptions expense third GAAP $XX impact million non-GAAP remainder the for expected a to for approximately the Tax quarter the

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

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

the more are our now interest a our outside income one GAAP to be level income significant position, items. assumption remaining interest healthy we and other million non-GAAP and Finally, to for each expecting are cash of of quarters. now With of $XX.X generating

thank our focus to like I’d dedication Lastly, for our and customers. continued on employees their

questions. open the call for up Operator, let’s

Operator

Instructions] Thank Bergin will question Bryan come Cowen. you. first from Our TD [Operator of

Your line open. is

Bryan Bergin

attribution Hi. just large to to at we slower wanted in to understand morning, versus you. visibility, Good to that just client as conversion decline the are like closer still and levels Thank perhaps conversations space, stability. I guys. I you having this guess, about clients? implied existing large XX versus or the am in base you work Can curious, among ramps the the kick and among look your top XQ, just with and coming dollar Are XX work? getting delays in you lower the top at decline of I intake in talk off base sequential XQ and trying of the clients new stability

Arkadiy Dobkin

Hello. Good morning.

than ago. visibility a predictability probably is think or of couple it I quarters was better

there some is clients asynchronous making couple is decisions. also started slowdown and better. of So we plan some working But when ago points of with they we were between still And are which there it. a and quarters can a the

still there. unknown there elements is So, of

it we general, much in is feel stable. more again, But

we satisfied when happened. some some also that in to who see see back about tried comment discussions. Again, starting it’s signs it additional with they not to difficult coming discussion clients that return were top We But growth. vendors in some XX exactly us to

about active but that I one still think, the particularly would taking situations from in during get from the of last perspective, didn’t work we unproductive client Ukraine, deliberately the despite from more feeling period expectation day. account months, have of stability XX conditions, in So, general,

this to -- for those So, link, feel [ph] why the don’t the starting that. who people believe continue that clients

and still So, unknown going is slowdown more bit. stable, I think, little in a general, there still

next the that So start quarters. we of in will be like couple hope it

Bryan Bergin

Thanks. can you as give the Belarus operating how And just the in on is current mix the sense billable quarter, a between follow-up versus Okay. workforce of a roughly us a versus LatAm close the just Central comprised on and Europe APAC? Ukraine, of footprint diversification, June

Jason Peterson

Yeah.

So from under we are CIS region. XX% a

primarily, Ukraine you So as Belarus. that’s indicated, and

little We of bit are continuing growth to in India. see maybe a

again, delivery footprint. working now, And and continues continues right for of are a see be current delivery through part our demand, future expected stabilization probably, that a significant location while some be Latin in So to we but us. significant to we America,

Bryan Bergin

Okay. you. Thank

Operator

moment you. our next Thank please question. for One

come line the of will question from of Bank Jason next Kupferberg Our America. of

Your line is open.

Tyler DuPont

for Hi. This Jason. operating Good to taking for morning, DuPont on Ark margins. Jason. by question. just I asking the wanted Tyler and Thanks is start about

end color range. XXX of pretty led to greater there some what and about During or or of sort where they spend thinking you guidance that than outperformance year, parsing sort the the margins quarter, of strong, you incremental the a the sort half just have how seen any of back Can investment available, two bps opportunities the top minute of out is through there? are any

Jason Peterson

Yeah.

that partner our are to So, growth programs, AI cautious that the future. are demand seeing, trying us sales to certain in capabilities and about that with make we investments still return that making the channels and clearly, significant are certain in to making we while allow we are we would spending, clearly, environment

are But has efficiency some with locations you tuning hiring, we then, bit we delivery is seeing you on around and a then attrition net by lower in headcount. these it’s which offset And reductions very seeing is what of headcount, clearly are in hiring, modest and and and resulted doing little in there. different caution SG&A -- what also are generally, focused are are you

element. piece it is about script, year. variable performance expectations a versus funded in full talk for did -- I the other we It’s the think is and our by The compensation there

were related to of with in will benefit the the some the benefit and for $X.XXX expectations again, in year. variable remainder have we year, the up lesser, in as change revenue we but some expected QX. And compensation. the in of shows the we then, from With QX full a toppish standpoint just did sort expense That adjust billion

improvement generally, a From still somewhat I QX for going days. don’t a I you maybe of good QX and you that even with have went utilization decline the is to more think in a to of if standpoint, guided XX.X% quarter the probably so to us little or for bill see not profitability bit QX. to the midpoint -- we probably range, are much expecting the XX.X% lower

impacts a decline in days, think to I definitely all gross number in may be QX, last to lower profitability days QX, between to margins vacations XX% bill that, generally in in and lower year. could I see due QX quarter end up range somewhat the of XX% in and and a expect lower the QX bill with of which a of would profitability

Tyler DuPont

look Bryan to potentially additional base, macro sort of in? last and on or Okay. the story I in of half appreciate we on across my the click then of for total demand to towards environment are the that, or Thanks. follow-up, between as in Great. any are verticals assuming expectations the operating and sort Jason. here declines XQ sequential I any back to if And client geographies your your the the regard wanted year, balance of I double stability of alluded the XQ. you demand evolution you of just specifically sort softness the question the know

there be sort would clarity environment any So appreciated? the demand helping frame just us of

Jason Peterson

a you am I the and numbers, and what give we So more going Ark QX color. provide seeing then I standpoint to for will maybe From let comment are forecast -- to budget just I from major of across seen that have the to think, you our in fairly sequential a decline see verticals. of are customers, a large likely some with number sequential you currently standpoint, reductions continue

energy in I sequential emerging, got think has growth you significant could a manufacturing footprint. which the see

think growth to likely we in traction sciences, year I -- healthcare are good are see XXXX. here fiscal in a to the continue could where sequential you and making life see

am that kind seeing that’s what from standpoint. I So of

I beginning think I Ark from have that of in more their as clients of in sort indicated, little see the we reduce year, a stabilize impact but. and to you are some customer increase still spend bit And are that decisions QX. spend think later hopeful has could even to

Arkadiy Dobkin

Yeah.

shared shared our a still with think time, I a different ago. to But I quarters activities we sort that’s soft. It’s existing with new that we still we conversations of we during months, the to slightly and at still at starting see right reacted question. difficult more beginning same the happen. also it’s see It’s different It’s we going There we the the down. still based what that’s of are first logos unpredictable. At kind what thought couple Again, beginning. predict, right of clients, of of couple really saw conversations and forecasted now. on what

Tyler DuPont

Great. Thank you, both.

Arkadiy Dobkin

Thank you.

Operator

Grossman next of our you. question will Stifel. question. David from moment for come next please One Thank The

is Your open. line

David Grossman

wonder Thank if sequential desire to -- things when the questions just revenue risk here own follow-ups if from headwinds diminish of geographically. going been is just back asked. I to have forward? a of getting I the quick to could couple morning. to customer dynamics and the mean, of their Good some first I If just you. that would here, from things begin stabilize stabilized kind diversify the

Jason Peterson

Yeah. Yes.

So, improvement to QX to to QX. sequential impact are have stay an you QX stabilize. demand would in clearly, just would aware and this we of to bill so in to have a expect when you think, so to flat QX, I then, is David, have decline QX day you And got sequential the QX

have could QX walking possible little with bit days. you But the -- we so lower QX that’s see maybe that, to of growth QX the And do as uphill or think we talked a about guidance to QX. you you are bill in

David Grossman

Right.

excluding… So

Arkadiy Dobkin

Yeah, David. Go ahead. Yeah.

David Grossman

dynamic. flattish to stabilize be so seasonal the If No. right? right, from seasonality, I would just wanted excluding sequentially, here, things clarify, things excluding

Arkadiy Dobkin

that’s earlier last said I what before. in we time felt were the think that three have expected than feeling thinking asking talked that We today, we would when. Because like I May difficult about June we are quarters, worse okay? it’s four I we two predict when in think commented, which situation you and to And are of clearly we still quarters, when very kind quarters.

probably believe So this within be growth to we timeframe, clearly quarter-after-quarter. I the will will sequential -- that we this to will start will updating when But get sequential recover. we do -- situation quarterly

So slow see we definitely it down.

seeing they some from some type time. within themselves which are clients. signs would some the when take We of But again, have different they clients decisions, inertia, definitely made some

with has okay? very of we as another don’t But this four level, some I level three level. be now, that’s anything some say can started some clearly satisfaction quarters some other Some us will not or than less opportunities. maybe from changed of given think to high, two what will more market All feel, matters be

David Grossman

items Got right. Thanks. some there without details, back getting I high that ramping? a of into that are of just would own efforts attrition? diversify. geographies geographically of into you it. kind too recruiting are And internal your level sense give that. these us would insight new All provide then kind some dashboard to can how to appreciate And share far utilization, the yield that Anything

Arkadiy Dobkin

Okay.

delivery, global feel progress we our what this... is about with asking diversifying our are about like You

David Grossman

Correct.

Arkadiy Dobkin

Okay.

David Grossman

Correct.

Arkadiy Dobkin

Okay.

the So, progress. pretty I with think, much actually we are satisfied

largest America we [inaudible] XXXX, India I was Latin had part you we location think which what pay where built we that our to in definitely to said, and India, all starting second the least lab, started do. planning at have the right out. now efforts we are of May in of and

it India Ukraine more to XX%, now, together, of total closer XX%, the -- will by end production the it’s for like Latin XX% Belarus right probably, and the America caveat, capacity. XX%. Where be year, So

improving. the definitely effort put in quality are The there we and which

programs to how stay bar the and and have and share long how also with who depart knowledge raise time very for to people operations. a specific improvement between We

I expecting much Ukraine. think three we we know with growth, committed sequential will when, We still quarters, in back. we that the much very quarters, four are be to growth be coming we Yes, do don’t but aligned maybe there. believe very which it quarters will two

of number it, it’s, knows traditional, call Asia, have besides actually during India last who America, well significant is located more Latin people is it which the So XX Central interesting, because and be which months. we could how I Western a

potentially very in the demand we have these think, to interesting started again, comfortable. countries growth clients for opportunity us. a So, good will and of ways demographics experience be very coming I and And back, target the for this good it a the and with we have getting

finally, Central there. environment, Hungary, Poland, Eastern always quality what, engineering demand And this very us. more Clients Europe, location is EU, traditional fast -- location, outside high inside it’s quality very EU, high comfortable In mostly sometimes of very for good demand. of

level from good traditional centers. located because it’s also becoming So our data of talents stronger

we So feel I probably will actually started, grow. delivery be think direction as to will go soon building in most the to platform. of the rebound comfortable as the we global balanced And

focuses balance One of margins across different is in there by the things all sectors are we back this, our reallocating mentioned of these I improve carefully very gross cost the cost important and of the we locations. structure kind and structures are we because to in outlined, which going

short we minimum. actually clients, kind question, So a provide it’s expected of which recent but very us, will to it’s much clients quality simply from able it’s be if

David Grossman

very Thanks Really that appreciate it. color. much. Got

Arkadiy Dobkin

Thank you.

Operator

Thank you. for our And question. come next Blair. of moment William will Nolan one please from Maggie question next The

open. is line Your

Maggie Nolan

you. Thank Hi.

and Just to us for when around of little kind thought margins. this to and preliminary that all comment on into mean magnitude? what might question see Can follow-up up of you last a start there, on margins things we Ark, to of your the XXXX, a might what give gross last pick bit

Jason Peterson

Yeah.

step bit will delivery different or in. the quite Ark did specifics we of obviously, moved probably even the probably geographies, so into cost cases, rebalance have quickly. And we about ranges. higher some to terms balance not in the are including But more in a markets. to let’s say, explained, as little In of look We I we think somewhat. of, kind ready XXXX kind I would we that locations, talk traditional on-site

a with margins. begin more is that then the up we as over somewhat that, organization geographies, we us quickly, new ended then And move year later into new pyramid talked we therefore other of as of we have or improve give balanced relocated would quarters and juniors either about working and in delivery more a sort to as couple of to are stood geographies the the more also pyramid delivery senior sort and introduce and up particularly, thing we last

looking improve would combined the And sort we so and improvement, of that, obviously, stabilize are that to with utilization time over be do things to gross margins

Maggie Nolan

the and Thank bit ability And all the to good little that about convert time on Can logos keep for patterns quarter. a during them taking to then intact revenue? progress kind you. this any on talk Okay. of to those are to on this hear that seeing new terms in the additions, new logo sales then it’s was you of you it force the transformation the

Arkadiy Dobkin

of business on sales So, will illustrated comment logo also dynamics. is while think, new that kind I new force and is some I

think, it’s working directionally, right now. I positively So through

our so points quarters were with think and these coming… middle have slow deal I all it down. of will we of in after we it’s when to comments ago, now, allocations people, all the like several Right thousands

Jason Peterson

Yeah.

driving much actively focused manage executives teams, the the force substantially us on opportunities say, and are incremental both on with to the external over internal growth. So that and much account last, quarters focus of and very the had sales there’s the a we four behind things

Maggie Nolan

Thank you.

Operator

Thank moment you. one for our question. next And

from Barclays. the Our of of next question will Ramsey line come El-Assal

open. is line Your

Ramsey El-Assal

the again? talk kind comment addressable environment Hi. and whether expand act Good about picks is the or question. this the taking your up I your also on or you how might part then positioning demand hyperscalers. relationships for these once to integrations wanted morning. market, of with Thanks with growth Can and capabilities EPAM for tighter of just your my follow-up partnerships mentioning strategy,

Arkadiy Dobkin

Yeah.

the market it’s all everybody client’s doors year new. And focusing we where else, like of of this are like think from much of because on in competitors about we relationship can doing change during closer same also nothing because is kind perspective open in hyperscalers now I the talking and a and additional comparison dynamic view, ago. general both point definitely,

strength migration another On and as the is from. come in is side, the becoming very usually. complex just partner means to should as where of cloud kind business become is so modernization stronger of EPAM It interesting not this efforts because

not complex actually is us, the year EPAM This -- can partnership innovation. but more do with because this. we has in complex the only become modernization confirmation for well, on for a what on them based partner That’s mentioned a That’s hyperscalers exactly with which this Microsoft. important, why as reputation, the of category of status

be partnership this we which improved of specifically our following be next mentioned, levels, we as confirming deliver of because couple the And announcement during to weeks, will some complexity. will ability

And modernization huge it’s and very back, good cloud add which will everything lot, wasn’t a a point definitely and components. because view rebound, finished, on data AI preparation in of data engineering all demand for categories, in because demand projects our be for from when pressure of it’s the

very relationship So be the will hyperscalers critical.

Ramsey El-Assal

in right. Can business in America? for All very different growth you. you of seeing different is contrast it similar don’t is tabulated not regardless the they although geographies the Europe are have Thank -- And geography? the across a environment are geographies, the follow-up those currency But number. or it necessarily demand me. trends It admittedly, constant like a environment different versus looks North you rates in

Jason Peterson

Yeah.

clients we is foreign Think both kind in that of couple about seeing tech. about American reductions conservatism were healthcare Europe showing So, are certainly, actually of American what Those due But to of and budget clients. more the we larger North is what and is North up in some clients. happened the talked exchange. of have some in

have in in these reductions Europe. types seen of We spend of less

side At the same also traction time, even Europe. we pretty got in the have some consumer and retail in good

work the be there does as to yes, divergence, but a happens see will of we through a year. so, of And what bit seem we the remainder

Ramsey El-Assal

a lot. Thanks Fantastic.

Operator

you. Thank

Arkadiy Dobkin

still but specific client talking are I we happened about what [ph], in… assume still, is it it’s several it’s general, In all Mostly situations. benefitting,

Jason Peterson

North America.

Arkadiy Dobkin

and were economic independent …in general situations those North environment. from America

Operator

Thank question. you. for One moment next our

come of Securities. Our Wedbush question will next from Moshe Katri

open. line Your is

Moshe Katri

Hey. Good A here. Thanks. morning. follow-ups couple of

new including comparable talking do are some as are as you getting you about been the we of looking -- Eastern same at centers, you that logos, selling you India, getting other actually the via billability? can you So confirm in delivery So Europe? the bill are rates have

Jason Peterson

bill usually you talk about less So you it probably rates more with environment what kind engagements. trying out of today’s to an what of where potentially deliver we new That’s in And demand environment. can is are to just Moshe, as generally, India. occur get get if you likely higher happens

than Eastern geographies lower Southwest, in we Central Western of than the the But price Central points geographies not somewhat of maybe few Asia. does Soviet India have significantly certainly in lower somewhat Europe, points some than of get different sort or Asia price a in Europe.

Moshe Katri

Okay.

to coming the accustomed more that? So versus would on dilutive to logos that what that mitigate to are are new any or you say margins is you were board there way

Jason Peterson

Yeah.

different you got if -- that percent, and different in can got thing. same have you type So you different cost and the of margin cost different have structures, have benefits of bill rates still You geographies right?

so And attained is expect higher I new again can margin, and no, or margins. being don’t higher I or super would that so price doesn’t business expressive price, in of necessarily say, lower -- lower mitigate, mean kind even, yes, we

our to pencils kind but our working are of in We sharpen pricing. be appropriate

Moshe Katri

makes All And That right. sense. last…

Jason Peterson

Absolutely.

Moshe Katri

one here. Sorry. Last

to And those capacity your I down Hyderabad. India your is how significant logos accelerate to of remember, center be talk important So about a plans expand have critical there. and able continue in Thanks. of to a or Can able get going be onboard actually in you the bit we road? future India you to to visited new kind to terms growth

Arkadiy Dobkin

well. not like it The it everybody us, is in or I two Still, But different for we grey need bit the as only was area. for to ago environment and you years understand knows general, Yeah. XX whole is for rate it months deals little in not a what know like market ago. everyone, current answered new structure

things is will in demand it other demand up, for and side. the build then normal for actually stuff happening turning could which scale correction the be the change So will more complexity other go into

So, there is nothing magical here.

number months the So today deals was, different if XX coming again, very It’s it environment ago. months, is new one. XX

Hyderabad, visited to five when started -- we few which when recently strongly have don’t we about but now, biggest centers. visited. growing still two know I we but right which strongly a are Hyderabad you as now is remember others, We development India, we the don’t is -- Number growing others two and have well. one, I very

It’s the So one it’s of are That’s what switch of not future, an definitely that’s our parts. completely. but to before. like important going mentioned we part I

are very global delivery really how balanced build looking network EPAM. We to for

Moshe Katri

Thanks.

Operator

next our you. question. one Thank moment And for

will Puneet come question next of Our JPMorgan. Jain from

Your line is open.

Puneet Jain

this or about investments Do that anytime ask in their sometime could to Hi. to my maybe something come of this is through work taking for it year? systems on expect spend budget, to also you is or meaning their modernize CapEx XQ question. next in wanted re-platform clients demand. I type that come year, on Thanks like not core year’s might that

Jason Peterson

Do more to to spend or and growth a budget likely you expect occurring return QX XXXX? to first in see of in see modernization half the

Arkadiy Dobkin

to that. answer difficult It’s

right now. a way of so I is think times. we answered much question don’t couple already difficult. in another visibility. not this That’s know We There

spending. Some of start them, clients who let’s it’s in when see, really unexpected knows, will will quarter the so. QX But happening be sometimes

Puneet Jain

pricing seeing any like-to-like on basis? you are And pressure it. Got

Jason Peterson

a so more pronounced Ark than obviously like-for-like it I up basis, on pressure in pricing a picked did I earlier. way The think

So this environment you to pencil. definitely is an need your where sharpen

in engagements, is traditionally improve question in the up are to showing so is earlier, in to newer that’s that that in an particularly And sort and price where Moshe’s it fiscal but year. being really, cost certain opportunity thoughtful, pricing. is of this and it’s less we are sensitive And environment clients an case

Puneet Jain

Got it. Thank you.

Operator

question. one Thank please you. our next moment for And

question Sandler. Ramnani Piper Next Arvind from will come of

Your open. line is

Arvind Ramnani

are wanted work on question. industries on and or able they color coming from provide for the you clients. clients? Are your some I your about maybe specific nature new my geos you Thanks taking of to ask Hi. to new

Arkadiy Dobkin

let’s today. categories. which good pretty kind in is happens new time, and think oil clients, from view, at I this are industries say, like, two gas, more rest okay? our specific is of But this exception The some shape, the an in there of again,

type get okay? competitive what programs, results, try to and demonstrate for an transformative of of like opportunity kind clients and of recall faster time you actually trigger of recovery to as before these who and decided clients market invest as advantage exactly build as go this a some the Some some say, instead utilize it will that’s and will soon and

And with I client to category, to programs, think, is, build trying do for stronger relations a to utilize prepared it’s transformative future which at just trying the time vendors but point, and for this. the this second not this return be

everybody trying or to the on not still it’s was it be will which like for and landscape. debt about our AI the demand finished by, view, triggered market technology, very we rebound and since talk seems is right now very, talent generative in with it technical in there Because, happening will strong operations, everything everything when have change but in with not what’s and will done actually

of speculation [ph], the will Well, that on So well. people soon EPAM a lot it demand would as that okay. replace talent very pressure like companies put

Arvind Ramnani

And kind know similar of mean, you small they start they when your start new you typically, a then of That’s Is client with ramp kind over and Yeah. clients? dynamic I that that these I have relationships, time. helpful.

Arkadiy Dobkin

years. to we I driving There the -- few be vendors. six five, why give, example we on it might few large are and that’s that be pretty will is think, across growth which different a kind mentioned examples there of they So are them, of our that next

place and them, specific just are some is won more framework There and contracts, which it’s we a which how happening. of there started is

beginning it to visible the to of end results. bring year, maybe of like year, might the So the next start results closer

big, some which standpoint. the very programs, specific technology but new not very is interesting are very, there from And but

of it’s that better see we So that If mean market the kind change. trends, a will would of actually variety it’s this.

Arvind Ramnani

Belarus Belarus. want just are exposure did in last me. trends any Can just you some pushback -- and your and I headcount about to with from seeing Belarus? I sort of And of sort Perfect. question also to share ask you utilization

Arkadiy Dobkin

Belarus answered have Ukraine I here. of and kind think I for

some delivery nothing it Ukraine Ukraine stayed with happening who right that think quality comfortable coming now. clients more clients proves I see We are of was from much with back. the Again, making more of comfortable. new impact activities but last the normal it’s the of key kind kind clients production XX months, a during Yes, is or part of this. on normal, any

With and Belarus, there. operate slowdown. who clients a it’s some have still we there have exiting We are which clients

headcount of slightly of Belarus view, is, So, kind from than of else. anything faster as point

Arvind Ramnani

you Thank very much. Perfect.

Operator

Thank you. to queue. remarks. now I like closing am I seeing no further questions for back conference Arkadiy turn to would the Dobkin the in

Arkadiy Dobkin

Yeah. Thank you. Thank you, everybody.

ago. months. a get stable and in than But three in more you general, update feel that unpredictability, will we we with predictable quarter in think bit all the I little we

So thank months. in much and talk you you three very to

Operator

This participating. call. Thank you conference for today’s all conclude

You day. pleasant and have a may disconnect now

EPAM Systems (EPAM) 3 Aug 232023 Q2 Earnings call transcript