EPAM - Earnings call transcript Q1 2024

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Operator

Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2024 EPAM Systems Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to David Straube, Head of Investor Relations. Please go ahead.

David Straube

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

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

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

Arkadiy Dobkin

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

guidance First, our change. about

cyclical release, global there continuing from some we different As seeing full our even signs encouraging as types for are environment. you demands, adjust demand QX in thinking well of all leads of new us very press saw nature which in of to our XXXX new are then both deals our And for and in year domain-specific in outlook. volatility while XXXX, -- follow now

directing more with XXXX growth supported assumptions during This was very of would environment XXXX. growth continuation be, to after, XXXX. more and the positive least was beginning macro of our interactions of a for right our at we which and As belief into I that believe the half take view, will now a optimistic, part remainder mentioned back was the quickly potential the during us XXXX. That sequential our clients re-prioritization end by come trends the in fourth of with year, quarter will upturn view the the earnings call, clients for of that our for XXXX active and broadly demand initial was of anticipated XXXX's first second

that is plans. What geopolitical macroeconomic once we build improvements would also the of can drive digital the and more data, still now which from scenarios in to we we out We enter revenue IT the markets the and services for that the in demand throughout continue sectors with and and XXXX for engineering, transformation and understand measurable AI overall environment digital that further we cloud QX, the factors of volatility us into and much believe specifically are have indicators year. reminder

still to much start While programs we periods are in anticipated the be more to many now scopes. by modest implemented some in in decided future been them of have postponed to are discussions, or place, active and

locations to cost forced addition, delivery -- level we growth, our our slowdown rebalancing for platform lower in In some revenue of too. need

but And of quarter, second our highlights critically more now. Jason trends discussed year the revenue so for us, anticipated, areas the into current at QX important across making of some we our share were as from it expectation our to for depth today. updated will details in accelerated outlook will all Throughout call. me progress and let last business in which up been during we've now, continuing for be our part considerably as not high XXXX see in provide least materializing we level of previous

our to growing centers but our while recently as also offerings plan effectiveness needs. LATAM location rapidly, overall managed to more open digital less opened our our office traditionally is new in second-largest services. creating not stated expensive and platform of priorities in support rebalancing. as well by of by strengthening cloud, capability distribution Gurugram our only our years. We cost ones Italian to AI-enabled and our maintaining the rebalancing expensive strong delivery locations our from another growing our Italian in are [ commitment We data, transformation to repositioning client additional headcount, delivery is terms locations of and ] India,

there, and we expand announced key As software division. and expanding engineering our first we of multi genAI quarter, development capabilities with the we're offices locations In the a our Vates, company Chile. in refine Argentina and award-winning acquisition

We development. are genAI, ML corresponding crucial capabilities existing in continuously the our in technical predictive investing and future, and IP for and and including, AI new data

services. continued also domain in industry to We advisory capabilities consulting improve our and

company teamed solutions the a above. experience, by AI the in responding change with seen the business to balanced of energy both across business characterized have up smart cost logos, a customer leading emerging more regulatory modernization. weighted a both need takeout ongoing go-to-market, our to our enhanced health reinvestment market competitors, is and secure This transform and encouraging that AWS cloud experience, between establish our to of During signs combined metering of to portfolio-wide need consulting to with domain-specific long-term beginning equally customer stories to and edge independently our expectations, we and XXXX, partners, demands, with vertical-led recently demand believe new and that we in and illustrate the will adoption and for provide with U.K. efforts perspective, for growth. unique us short its environment data, and the relevant existing EPAM sustainability growth. Couple approaches leads

service was and key customer of to payment frameworks channels, to built transformations engagement Our flexibility. service ensure agile around shift processes

believe and market platform empowered for by critical customers into the we world's helping known application will that next car For and are of real-time rental intelligent of capabilities demand. the and truly it drive pricing intelligent best a enhance better logo, AI is that future of redesign will further our global new a price to one data leadership. platform a brands, experiences engineering the iteration We increasing their drive

India largest us Brazil. In our believe we clients much next-gen growth locations footprint to to of streams we reason stronger is long-term newer including include much sign, encouraging past quarter. some and domain-led this verticals another new saw net general, and propositions America, focus shares and in Latin also the are and in related engagement on Argentina which modernization Finally, returning now support, expanded with with delivery our

our most in healthcare genAI-driven from initiatives. On previously. ramping EPAM advisory consulting to with level starting we as of well cases. science helping yet engagements a new capabilities. business combination side, data while in the level course of the clients AI. as cloud, a valuable another in of AI portfolio, differentiating engagement summarize, for ramping often verticals are and while programs lead a and of higher partners some through our new use than our power part opportunities. of will with quarters. Across insights. gradual of our and the outlook strategic initiated These of are next to genAI with we balanced us. To formerly programs and we progression example, number our visible business use the platform, part business where scaled genAI-related QX, and program AI-enabled interest few generative revenue and demand namely seeing areas journeys, starts by to development transformation media, us the a from impact and work are our geos, digital And to our more clients these business, it's EPAM physical verticals, well market seeing up and clients and seeing ramp-downs to still number balanced in to of large the we able their of then from IP opportunities, and And continue drive impact as buyers For aren't engineering see in change data services programs of are our including as offset across of help for life and today product limited tools picture to of information core the a all QX, establish key specific more revenue this we allowing strategic today, In coming while more modernization to will new return a still to to we AI, is from related We our over a a delivery with XXXX, the as that up emerging of breakthroughs believe of are very scale selected we and meaningful unlock in

end today, realized of of and not with QX, line those in our mentioned the we scale that changes earlier by the speed were As already expectations.

Moving to cycle. this the part our in of how we managing business

focus looking on new wallet our demand converting we driving opportunities for and proactively focus expanding also efficiency and and organization. we're As with drive clients, throughout the to share

over the from our business to perspective and geographical year, course a is We ongoing. that have of the program last rebalance ongoing shared efforts

transform rebalancing the for geographical consulting. We've through current environment are and operational other domain-led engineering is AI to more to the our the stated year, return will look now navigate years. as our teams, continual some steps those in-market on market, with now some entire particularly enhanced with efficiencies company. Those approach build looking attention to of EPAM and the we and driving been on cloud, balance long-term be X remainder well are the and resizing investment enhancing and both and way eventual more strategic as important as during programs, down investments. demand which internally intentional a our to finely-tuned have and at of efficiency a and Throughout slowed of near-term the driving efforts application centricity segments, critically and this focusing in focus market market capability experience automation propositions key AI for productivity and for we refine areas data, of our our investment and geographic client as taking partners of and we further around singular footprint, of towards while necessary last portions Our much tilting gone propositions

models. With by are our by EPAM legacy and for delivery results a in genAI customer-centric position applications platform we and business new applying significantly details platforms, and advanced me to confident rebound, pass in and solutions needs that genAI Jason our and be strong, and in precious our intelligent lead let and XXXX. this long-term to provide interest enabled and are capabilities fundamentals into driven QX new transformative for existing the Our diversified modernization, fully will integrating significant on enterprise that, guidance innovative global

Jason Peterson

favorable in and revenue exchange negative a to decrease longer a XX year-over-year on basis of you, good revenue exit billion, foreign from XX X.X% we the currency impact point an exit will Russian everyone. impact of basis basis growth. had terms, generate approximate or of generated from In EPAM first X.X% year-over-year $X.XXX reported a Thank our this Russian reflecting clients. revenue quarter, Ark, The morning, constant Due on points. impact market, of the

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

sciences growth consumer and in of healthcare performance. has retail due year-over-year travel. and very travel quarter in year-over-year largely declines vertical by strong end and the decreased To portfolio. offset a sciences clients solid delivered vertical portion life a Sequentially, travel. healthcare. driven Life was growth in the and retail, our to travel by in the consumer our Moving Growth growth the market, partially reflect both driven grew diverse more On basis, XX%. vertical sequential the solid by renamed in modestly goods, vertical of X.X%, to been

year-over-year some and and contracted our of financial on and XXXX. geographic in driven discussed our QX was clients from our geography. and was our services outside year-over-year media declined emerging X.X% a XX% our representing new XX% relatively declined the declined payment to primarily the down top-XX substantially clients suggesting finally, finally, while of Revenue in the Revenue was revenues compared year-over-year year-over-year, perspective, constant of Financial QX, a And year-over-year revenue XX.X% region, the stronger the stability level of in XX.X%, constant Americas, and top-XX performance currency and in of declined now basis. was vertical. QX signs growth by year-over-year X.X% driven the X%. and Sequentially, telecom. From asset the energy APAC X.X% revenues, sector. Business X.X% Software revenues in contracted previously impacted solid The on management a of X% and of currency ramp verticals declines from information by largest stabilization group revenue top in constant X.X% grew reflecting year-over-year logo contributions. X.X%, ramp-down growth our quarter decreased QX reported XX.X% driven XX in by our vertical. In banking, impacted within currency. hi-tech or terms delivered a in represents And XX.X% both by of by quarter and revenues declined sequential X.X% our services ongoing of basis, inorganic this work EMEA revenues. in representing clients XX.X% latter client.

Moving down the income statement.

same quarter negatively Our due last GAAP gross currencies margin to certain the the Non-GAAP in strengthening compared for our the year. was year. was quarter foreign to QX XX.X% for by XX.X% delivery XX.X% margin impacted for compared last in gross QX in was margin of XX.X% locations. Gross of XXXX to of exchange quarter

XXXX year. Additionally, SG&A of revenue impact same ongoing negative at Non-GAAP last the in EPAM's of after to the the inability SG&A period of compared is revenue XX.X% promotion XX.X% was profitability. GAAP XX% QX came on QX result to last quarter campaign SG&A XXXX of continues QX have adjust a in in prices or $XXX year. our $XXX a in to increasing efficiency to of or improvement cost XX.X% of operations our focus Non-GAAP QX on income spend. in compared revenue to year. of the million or quarter revenue income revenue compared the million last year. in in to in compared was operations from was X.X% or from of and $XXX million of in revenue our managing base million XX.X% XX.X% QX $XXX in last X.X% GAAP quarter of

tax Non-GAAP per effective basis quarter higher a included GAAP of benefits $X.XX. to rate was a earnings effective at compensation. X%, level rate which GAAP tax tax for came related XX.X%. stock-based was Our in excess Diluted share on the

of were EPS decrease diluted approximately in QX, last outstanding. compared $X.XX QX shares million there was diluted reflecting $X.XX non-GAAP a Our XX.X year-over-year. to $X.XX year, In

quarter days are quarter $XXX of approval days at for last days and DSO shares balance XX clients a $XX flow to an reflected XX compared million to flow flow from Turning million same taking XXX,XXX an QX first time variable year. in price the and to QX XXXX $XXX repurchases in At lower Cash Cash The the Free million cash same $XXX.XX quarter last share. for related payments. Share flow payout XX the XXXX. cash for review million flow in the level reflects was same increase end from of $XX in compensation some free our of XXXX. to in compared sheet. per cash of the the to million was operations $XXX approximately of and uptick in DSO operations was quarter were QX, average the and quarter for year. compares in of the

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

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

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

Now turn let's outlook. our to business

see We a are to in continuing modest improvement demand.

our At and cautious, to XXXX sequential to set guidance. the growth client time, achieved we in that modest demand QX improving we when growth QX, solid continues sequential original X% is expected show our modest QX. growth QX decision-making for on sequential degree to flat modest in the by expected be forecast improvement, However, not of QX and to based followed at averaging XXXX and least

As needed a in growth. to revenue, on sequential generate to reminder, growth XXXX we sequential in regular based XXXX declines year-over-year produce the quarterly

in now we sequential expect limited decline, remainder showing decline QX. revenue improvement, have by seasonal possible to of year, a followed modest in demand the QX QX a pronounced the a impact more revenues improving flat on to with with For factors modest growth

offset costs of recently U.S. some the is although the we generation that growth from modest our acquisitions, compensation. dollar. and maintaining continue will largely XXXX, will resulting demand contribution prioritize completed exchange on focus strength from to incremental foreign to by Additionally, ongoing XXXX. In headwinds, We're contribution seeing incremental are we related to throughout revenue revenue incur

lower and pricing Additionally, will ongoing in-market EPAM's margins. impact utilization negatively some resources gross for to pressure continue

level for of business XX% the a committed non-GAAP at least adjusted However, running to we profitability IFO. are at

initiate savings on objectives planning cost growth. focusing can we to long-term measures while ensure are additional achieve our to still We profit that

run high of a uninterrupted continue Ukraine Finally, to at maintaining levels our our of focus quality utilization, dedication testament to operations delivery. on and team's in

that our assumes in similar from to levels able we deliver to at guidance Ukraine Our be productivity delivery to levels achieved will XXXX. centers continue

the approximately contribution is full-year growth negative foreign X% to is outlook. in of billion, of completed $X.XXX already basis a have of to acquisitions. the XX impact $X.XXX Moving range. our Revenue the expected be points. rate this range now At The exchange expected of of billion now revenue to X.X% negative growth impact at of a time, expect on midpoint from we to approximately

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

GAAP be our expect XX%. will tax We effective now rate

benefits $X.XX outstanding. we full fully $XX so Our the continue will Earnings of as year, range will to for to which for non-GAAP tax $XX.XX share, on we share to rate, million to in diluted $X.XX XX.X diluted of range non-GAAP EPS effective tax count in be focused now compensation, weighted the the related be We expect average excludes the remain now GAAP shares per are EPS expect excess the XX%. diluted of full to stock-based and maintaining year.

Moving to our QX outlook. XXXX

of the X.X%. in range We the expect to of foreign the decline to of negative exchange of X.X% billion, $X.XXX midpoint the revenue impact year-over-year producing $X.XXX range to be be with billion at a expected

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

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

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

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

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

We expect QX excess million for million and each remaining quarters. tax for $X benefits to be around of $X.X the

at We and cannot charges reasonable second certainty. amounts in the restructuring expect estimate the of XXXX this incremental half time, with

We expect not QX our to charges in guidance. provide during restructuring detailed Incremental call. included our estimates are currently

these results. However, not our impact non-GAAP will charges

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

work demand, lower normalized environment. cycle we run EPAM demand of efficiently, will company continue to on While our to capitalize we more through the way the a positioning

clients up dedication EPAM. Operator, our continued for my results for for Lastly, call serving on our all thanks employees and and to focus the open let's questions. of driving their

Operator

Your question TD Bryan the Instructions] with comes [Operator line first Bergin Cowen. from of

Bryan Bergin

larger to a this slowdowns? whether handful client-specific in idiosyncratic slowness outlook about attribution or versus more your the due portfolio you any there on more talk to delivery? to to here broad-based turnaround reception to and trying macro change or attribution unpack Belarus factors so Ukraine exposure. to is market-driven detail growth in a ultimately clients' more with And of to change Wanted really the some across start your and the Can here is

Arkadiy Dobkin

you. Thank

-- reflecting I remarks, from what our think in we our opening was happening standpoint. exactly

of I and I would potential opportunities. on think, predict conversations would standard of beginning were based for versus [ look to optimism, the growth trying QX, ] and say, QX level like we how

level predict try many realistic focus of position volatility, put the of all not on trends realized but second very to the scope. that and this that things delayed put were market to we us in guidance different the our part what time, were programs and in same in other at them of some a at now right and scenario more economic -- So actually with really based but And QX, see what on was the and know. we started, future we

is there losing we're -- nothing not some happening but So not having kind clients. problems. unexpected of We're

we're there our are increasing So of delivery. some when more share trends specific India

exchange, more in -- are details. hours -- Jason there and pass to that's can availability locations So to I there QX, foreign are and billable

Jason Peterson

improvement being we is Bryan, trying the released, this said Ark I kind see Yes, there's be an are to we're point just some budgets what is that still is taking than that -- descoped. to being going client -- which programs think of rather we're decision-making slow, predict demand, today, partially are at what in

just not we're had seeing so And quite obviously, improvement hoped we that for.

but obviously, So part. The referenced, quarters, able we've couple that one thing is to the strong our Poland, see been demand like for talked miss more a locations sufficient about on some of over was now which Ark analysis it still Ukraine, that. we do it we've last on

still very good is utilization Ukraine, for in instance. So

are in we growth seeing more pronounced However, India.

of is beginning India, -- terms produce that our measured we've an new particularly last in ongoing what of the seeing a done engagements weeks, couple that over the is headwind we're growth in bit dollars. for so shift in a what rate towards to And of calculations mix revenue

show year. is of somewhat to for beginning and in up that And impact impact sequential larger terms a full so a the

of probably we my that fully. not guess when anticipated did guidance, was the is Some but

Bryan Bergin

Okay.

good detail. Okay. on appreciate That's is that. I follow-up My that. partly here very

that platform, just this the if to Jason, the how to trying more lower-cost just a color and you heard structure year's growth? on able rein countries, take? And distributed may across long are ultimately -- weighs Can how on it delivery then, quantify like what refining on too to operations that rebalancing you're I shift this bit locations in. point, add you much global became last as sounds and So the the correctly, the you're

Jason Peterson

Yes.

could be? lot XXXX. do calculation, Europe, constant where step approaching you sensitivity if if client constant and I'm that of XXXX, The again, a the $XXX incremental mix continues impact to as Is Europe in ahead it's Eastern on and -- the in India. calculation, be a again, think to is India? year-over-year the confirm we obvious -- go are the rates lower India, of have just the is impact So a It to something In coming would same drag did the if we to currency what want in bill a that going million currency profitability? is a still -- solid. demand demand The on India. cost but India to very in into structure basis. India for next Again, profitable I questions, we still Central lower profitability a but is how due were

revenue So growth. any produce it's not headwinds is dragging it down means. is beginning against to some profitability by doing what But

we at in would Some traditional guess anticipated again, it beginning of year. fully is of provided guidance been My that anticipated. have guidance that, the our our or wasn't the

Operator

Securities. of from Your Lee with the question is Guggenheim next Jonathan line

Yu Lee

of environment Given gives the you the your in more a dynamic growth able potentially function confidence prepared is of sequential customer what, flat bill And that achieve days? XQ? you're way to in you positioned XQ XQ and your conversation, the demand in remarks,

Arkadiy Dobkin

talking in QX? growth You're sequential about

Jason Peterson

Jonathan. Yes,

to in going The seasonal are we laid is guidance, the QX. really factors growth So to out way see or -- drive. we have sequential just about okay, the question the whether not

driven so QX is the bill by QX substantially QX. in days And more to would seasonality, available be which growth

Yu Lee

want And to just Bryan's a I build question. on earlier follow-up,

take that in there, quality, of comfortable level highlighted needs You've past? more the much there? the you happen And -- that India you're seeing work you're you've seeing harmonization are actually your delivery, place. how with given And to expansion

Jason Peterson

delivery. or I think feel quite peers we delivery, quality of good good European the And of clearly India low scale think our Europe, and differentiated, it's our continue say, number work we let's competitors' to India. about who levels India quality feel prefer got very our the Eastern still geography, okay, the Eastern a we versus, good clients to ability about India We of feel And attrition. we done and relatively again, have about still of have to good that but differentiate. we've in we've we our the

Operator

comes from of the Your Blair. next question line Nolan William Maggie with

Margaret Nolan

in also some the It way which commentary that's understand in projects, particular there to particular in it delays, line, sounded in types the drove sound like pushouts how there of that much But change like rate cancellations, the about were encouraging. understand I of some of projects. your your didn't is vein cards were and that trying impacting expectations? top but I'm verticals India

Arkadiy Dobkin

practically So Energy I specific example, are the think done in sciences previous bucket. highlighted verticals. which there life period. same it's for like broad -- as impacted are in well. that we there verticals We highlighted on decisions actually better, were which by is There no vertical, healthcare, some some which operate

no decisions. pretty of were scope a in cautions, QX, implementation. delays again, but broad, So and definitely cancellations, or rather is programs, expected But kind -- conversation which in the put general, in slowness number to of but again, delayed -- happening, jump start of there were in and we it's down

Jason Peterson

incremental specific appear about And they have at I say kind a if we relative we're portfolio, European... remarks. in some see business. In slow to And feel we're weakness talked were certain feedback in that a in may the prepared we But to some I where sort to portion would does stabilized, more clients, North that the budget our see we America, to it that have activate change we're it's that's getting like feared growth of seeing think to the although and begin talk caution probably of did the point, is we Europe, are as and to beginning in of our budget. see sequential we

Margaret Nolan

made of changes delivery. terms of obviously you've in then in pricing, some And Okay. terms

putting been of extra You've largest, on your longest-duration some attention clients.

intended So to the some change you win a Are is make? ago they differently rates? notable roughly there any progressing year were those of you changes in than retention when client that announced or

Arkadiy Dobkin

think I repeat we Billable changes. about In it's there [indiscernible]. is specific of Mostly, no shared. have the if attributed delayed things which is kind any dramatic already calculated decisions QX, one. kind we it's and we're hours, talking multiple just very which it's parameters, of to general, like FX,

with of decisions try before. So now versus slow happen. the might exactly But again, of we and in is see project to line we what kind this we seeing what what were down, thinking we rest

Jason Peterson

when no demand half confidence the had second of sequential clearly the in Yes, we we have than longer released improvement guidance. the

Operator

with line Thind of The from Surinder next question Jefferies. the comes

Surinder Thind

any color in projects? on what point start begin intra-quarter then to XQ in clients started? be color that of Just at of kind there you sense would helpful. to how Is you any push did provide see the quarter off there And trends the can

Jason Peterson

Yes. Maybe the I in I'll do what QX. word is guess, is happened use, I'll unpack, what

foreign much closer this the we're saw a a we we guide point and probably and from contribution we about in above pretty QX at had make at bit that we be for To rather of bit slower the original pretty expected just $XXX,XXX. were modest be guide, come could benefit with some million quarter to So entered is we those little range, the not was middle much get range that could the get we we make. What amount that $X and consensus the the M&A about that I two little a revenue of that size during expected, maybe to adjusted our would wanted to sure a would that exchange, did end range of and we top had, beat. which that or and in the factors, than high with things than

little slower bit not much, than in QX, So but we somewhat. things a were expected

able sort little you assumption in India up that just this We impact. seeing a demand. India. this improving even of portfolio sequential that point, probably we're towards have showed Ark if -- but to shift and the we stability And with going been said, an in bit see continue to as not calculate adjust at willing guide for to of to are we're shift we feel And the improvement

Surinder Thind

clients top-XX the just understanding of terms XX. versus within the those in then top outside And trends

to that, You Part a rates. called activity. the out new in acquisition, others also material but logo believe to I attributed the of pretty difference just you growth

cycle much at Just point and how things just on growth new the there? are any contributing within are the logos to this color where

Jason Peterson

Yes.

And about the so let XX. talk top me

of XX top the due that business of their more a clients about over media and challenged to and we and significant okay? addition -- quarters business I number kind to and QX information is we ramped the XX-client. down top we've and of the and That Europe, spend media is this in couple in client talked in about say, We exit. seeing all they -- talked again, client in markets, in that does as in QX some last But known, the information of another again would the portfolio, it. So have in are is end had reduction that a portion

So kind up. things of show those

type an originally awful kind contribution existing enough is, client of the then stability on of again, but from we logo not drive in of growth it's generally, North size the to see the but standpoint, portfolio, but in expected. And beginning lot a in what's are standpoint. a then Europe, there's activity, of that to portion from North we rate revenues. logo new in America had obviously smaller encouraging terms new America of of Again, growth going And in part

Operator

from of question next Jason The line Kupferberg with of comes America. Bank the

Jason Kupferberg

crowded. to pretty competition for I wanted stay a and talk there. just minute topic the it's on about India Obviously,

a landscape of a on of somewhat the basis, newcomer. is and terms in relative Just more vendor EPAM

So was traditional then service of think at I just last Ukraine in the year, could #X competitive how at country? was more mix, your if the future, at still XX%, delivery India become you curious do there the look largest geographies? And we versus think your end XX%. see landscape see not-too-distant India mean, potentially headcount to you I

Arkadiy Dobkin

with think progress I our we're in India. satisfied very

the of we -- So the by and the be total end year, might of headcount. to closer XX%

fastest -- or probably on par So growing. be larger than it's largest still we'll be going And with maybe Ukraine Ukraine. to the

it fastest We for there and and India many in times. become talked So a we're the from invested growing doing long we perspective, location. the quality about firmly, past time this

down. in went but was maybe think one XXXX, it like XXXX now, even I remember in even before it fastest I market don't the one of or

data we're trying built build, built -- -- So like significant to we and digital We and build. also or to trying not significant practice engagement mentioned today practice.

things So necessary as well. practice there all in put genAI build we to

[ scale, which it's because well exactly [ growing location, just a to EPAM in but we as So embodies what don't try which ] duplicate we see differentiation all the ]. quality that's kind traditionally. And we of a

technology well. and So type for be us to same of mostly At there competition. our also that time, competition continues there as mentioned is and talents captive companies, the for that we different is

and So I and important more bigger very positive it think think, role. in we will experience, play general,

built are talent, in -- very to over of years yes. committed we the we kind and Europe which While our

said company we be from will in probably kind our diverse of sector. talent before, we perspective most As the the

Jason Peterson

provider what I'll thing don't we we differentiated in there. of relative we Eastern premium lowest other seek based is a rates in we kind that, which believe similar the we quality India operate. to only in The differentiated -- to Europe, offering a to to add what India, cost be in charge on Again, peers' and do any we market

Jason Kupferberg

clients? say, said is win I that response existing And I'm earlier you've think to an which on whether any your question, just in to share wallet Okay. is change you logos rate seen good new in your top-XX material curious your within, hear. intact,

Arkadiy Dobkin

several mentioned are again, we there Like clients, already. which

-- at think in it's view. wallet-share I good, of very least from general, So but point

in increase of clients. some the visible have We

slowdown starting like mentioned We have are actually and execution and capacity to kind decrease visible which pretty there companies, some back ] like turned before, good [ we've decision. And then long-term we seen a again, with with when there and which in couple make stability of us. which us are saying the growing

So comfortable XX. -- think pretty our we do in we're top this I what with

Operator

Your the Katri next Moshe Wedbush of from comes Securities. with line question

Moshe Katri

guys there. board? How is back again, macro How would maybe of quickly It's you how there. just to just on can at the switched is fluid, quickly. pretty some deferrals have fluid be, the is see and rates pretty these let's just is improving. not can off you the the Just out things environment say, and converting obviously, is it that obviously, expected pipeline -- -- can Let's the you the quickly what and pace I'm Fed get around? How environment So and volatility say, programs these one? The demand on cut be question characterize turn and hearing pretty kind that? is, that here this would you

Arkadiy Dobkin

we exactly said to predict That's -- want say we we already, don't what anymore.

comfortable. will we I see. right that's kind carefully fast, actually The have sure So could in we becoming not general, more very the this real when this of try from kind to pragmatic our delivery can why, we necessary this whole again, years restart don't from before happen last now. change. And of were fundamentals better environment starting be situation. let's not I'm or change. very current needed. more fast. capabilities be -- could change, we're of for diversification repeat we very if for environment. think all a feel prepare ourselves happen risks, will in to that it our during very again, saying and company fast only in that why this will well that But couple us change capabilities relatively demand from of opinion then kind can will but Historically, And the volatility demand be point I all what our any I And whether when of the and that that's thing managing

Moshe Katri

some came continuing went clients, throughout and else, Okay. That's back. you quarter? the back trend when And see they EPAM. scope, spoke just expanded fair. this follow-up. they coming quarter, to Originally, to about that were you then same a EPAM Last clients they somewhere Are

Arkadiy Dobkin

Yes. happening, were not necessarily delivery clients this us. going back down This also happening to come when of with again, but positive come and it's of now is happening things, our and huge ] It's comfortable message. when very diversification kind become a just It's to clients it's back. and is [ starting not

make open more it growth I think we're India. to we're because thing market that sure that to not what stabilize another question, that's necessarily is that clients. developments, visible your where new vision doing well, to some and our that's we share exactly and happening. exactly work we But we exactly and do continuously were as optically plan locations to in protecting revenue proportional yes, And for And again

Operator

Ramsey Your next question line the from comes Barclays. of El-Assal with

Ramsey El-Assal

And as margin margins color additional with and year? some Could if that be could progress the you that, the provide help you us appreciated. on cadence would we through

Jason Peterson

Yes.

bill QX, lower does could expecting the have a as non-GAAP that below right basis. on we got about, usually I talked effect depressive be on that, for we've so QX, in So we a margin, or XX% that and gross am and now at slightly days margins,

that to you'll I range, think XXXX, see of XX%. this and us then into margins blend for the the the sort And see second you'd kind margins to first would around think of XX% XX%. half XX% gross XX% in of I half,

as stronger half. from the you time, little of same margins you'll we the continue see get somewhat improving again, costs, second benefit bill to a days So focus the in at on and our bit

Ramsey El-Assal

also lot And big these are have of sort view a portfolio right demand sort A of now, of your in headwinds context? you spend. nondiscretionary that terms headwinds discretionary? in a of What your versus out quick they Do follow-up. calling discretionary your of peers is headwinds view of percentage portfolio who own

Jason Peterson

define on I type multiyear of I Yes. how depends thing. all -- all know, we have guess large maintenance, we that multiyear We've think never portfolio or it of you had that. as BPO a

the of still some programs, is those to build, newer as have intact So in we our about, kind but kind Ark descoped which slow people are of that And digital. cases, generally ramp, we generally lot work indicated, as of believe modernization are of a programs. is some talked

future. and in expenditures. those it programs when delay to So the But we demand that arguably, discretion, can certainly is still think comes you

Operator

of Your line question Potter Ryan comes Citigroup. from next with the

Ryan Potter

like pressure certainly from that's client engagements? greater to more to I is Just past? you start maybe a environment figure certain the to seen locations Have pricing. discounting offering were are last or out on business still changes wanted finding presence like the some if the new to And earnings? cost on in pricing you're areas some you lower current to leading you arrangements in any if net India on trying since when pricing pushback

Arkadiy Dobkin

So did pricing environment we believe the improve. not

So -- improvement go up. demand only will if as the happen could

quo, the India. is I and current and pretty status -- challenging think continuously in pricing tough So with environment

Jason Peterson

is what a it I increases to for not continues demand, it's the market challenging. to the bill rates. the So -- would bias yes, it towards call trying it with, market imbalance be in get of incrementally an rate of reasons why continues one certain. to a kind comes worse, and India to It's be less-friendly at kind is And when there of but lower supply

Ryan Potter

I Got your on it. hiring. And a follow-up, and level guess, investment of kind net

a will challenging likely seeing you maintain you decrease those? And investments headcount further from back sequentially growth a expecting bench Now meet that do it of you returns? to these the then off have to demand to as more kind you perspective, levels? you the some re-prioritize the environment, trying headcount you are demand Are to to when you're year look of of or were started dial the

Jason Peterson

you'll talked us in as invest to India continue we've call. think see this on I

prepared think than think, for of in remarks, maybe our see increase kind place continue to with would America. in-market us I resources. are seeing more even Latin position That caution that we I this you'll in our and do do a to budget where implied we bench have it this, I or I demand is think be less continues we clients, like. stated with

Europe do, today, cost resources. of it higher also again, in demand that is to Latin particularly India We certainly quarters coming what for and our for think for America. you'll of that us more us. And continues and a Eastern least challenge see the challenging again, a in for invest there's market environment still that's So couple market. I But bit for and continue in, to the a think be to future Central a environment, at

Operator

next comes with the Your of line Friedman Susquehanna. from question James

James Friedman

conversation. started billing your in remember a was of big remarks, some called I when DSO. you out you and the prepared first in trends there, the on Jason, that

like and I'm You improved in something this the to Is we that wondering immeasurably. that just going watch DSO? for billability collections? on is what's need

Jason Peterson

Yes.

that. any of And our careful also of and certain kind AR. appropriate that focused obviously, potential really we're is again, that, make avoid write-off to we're recognition revenue So managing trying very to on

about just to concerned I not we make and assume clients time it's based And are more seeing I'm review that that. What environment. are So on payments the and type taking of thing.

remainder that's it, write-offs, recognition carefully. kind potential at terms XX of we of think And I yes, environment and DSO or to XX going But more bit where little so or are it a suspect the okay? either today's Again, wish bit remain I everyone in we is trying above is of little could that their flow unlikely the maintain have to managing cash manage a revenue XX but concerns in for I I year. don't about

James Friedman

unpack dynamic the it. your the both to to how else. commentary And remarks, everything the Like ramp the prepared and way versus any revenue impacting this this is you guidance? because in there you much revenue -- alluded alluded then sluggishness Got in the downs ramp-down to is

Jason Peterson

continuing competitor where of QX about between we And had to that another a and associated function. QX. their over talked with Well, a QX client BIM down as year-over-year basis the -- then be that impact, that a as well sequential had large a There'll quarterly sequential sort on impact slightly BIM taken had we same this has a so IT we -- customer obviously a revenue step QX. And large spending, if tighten up they that's tighten their who level client up a they certainly the to client, are were we of And that sort reducing because their is up don't that... whether call generating showing of them, I'd our the ramp rates. is kind it know and headcount they're in level down, but of certainly, from it I growth of reducing a spending.

Arkadiy Dobkin

switch when There which environment. downs, is to about any all delivery, of related -- new is to There of a a there talked to locations. of new again faster pricing growing is well, which redistribution lower-cost this are Just it and real us. business, are is ramp we to impact kind and no there kind from there as

factor. happen. as -- right a normal It's as always not So it's -- happening It's normal but, like more would in well, now, but real very a ramp no, a way. downs, like

Operator

The question next with from Stanley. Morgan Faucette line of comes James the

James Faucette

in you're changing like of a are of are just that kind are that just seeing does rates your ask et given in you right assumptions not the from thinking pipeline, from your planning hiring but cetera, last -- and cetera, assumptions to of the experiences Wanted more how now? et in your terms conversion And how you conservatism right of impact planning quarters, planning terms what about building how perspective, few timing, now, of or in or perspective? terms you

Arkadiy Dobkin

little are put much and will back. optimistic because, past definitely we we our a lessons, pragmatic bit in We were come when learning more markets the view more yes,

of So right kind very now, we're level pragmatically strong of a to looking I good with this don't of conservatism. at -- And level know what add.

more is doing differently. quarter think where if looking it that's this change, situation like But say So next on or will good, I start directionally what will we end for will future that we XX to the Until, based we the of happening. We're one actually, this. by another exactly conditions days, direction. predict can general is predict and the the

James Faucette

distribution mind delivery when that I being any revenue geographic sense for we we headwind? Do of revenue in for, should think kind mixing Great. and level like your that That have and And shifts of guess, of perspective are a stable makes about pricing asking with hit like, a sense. there? then a from long customers terms might you in a your the how

Jason Peterson

me How think see far. of at trend to our Eastern about Central stabilizes. with balanced that I And believe don't good it comment, we've or options demand I the And there's sort we're creating of and something insightful. see a a still it kind of I some done clients. time, then that delivery that I so Ark think Europe At going for job a to a optionality is say much probably as point, but be will forever I think and more Let smarter and it XXXX, throughout trend. going for same

Arkadiy Dobkin

client when Right is just now, base -- solutions, be is And with shift the benefit which a GenAI-enabled consider our services to in balanced -- we we much will kind of which component and possible very and the which again, specifically capability, we well IT more put that me. platform as of said and kind from feel playing able this it situation, and is old of this factor believe to the we that do say maximum. And be and applications, our plan, build, cloud, as we changes solutions. a global quality actually transformational miss changes different but this, equalize of point as the world difficult to as enterprise I'll from before, playing, GenAI, platforms not and our actually delivery this of change it's we'll demand geographical subsegment, to view, future. in it's, an very it. With believe we complex will actually segment to modernization in

said. be the will as over the soon similar this to as well. And then very growing of demand what then be will this for I just And from As Jason all happening, talent it place. view, will equalized think be point

of to it we I here think balanced, think dollar would vendor us be portion delivery Latin will happen this but will in kind because demand the I hoping America and believe and and -- hour. Europe And around per is a sooner. But India we should way per and think will be big I turn now. side, I would and of all EPAM, we the of dollar happen. think investor were of it of kind Europe Still, value all there be side be just right very and coming no quality and will versus Central it all about Eastern that

Operator

from comes Sandler. line question next of Your the Piper with Arvind Ramnani

Arvind Ramnani

look are better you procedure I go we understanding -- where so that's to of fluid have the basically kind an just guidance change do to with something by predict? of and because the Like you just -- velocity of do account? things understand in when like kind consider just to of of just of account get wanted up really clearly is are an at trying that difficult sort you environment things kind guidance, come

Jason Peterson

Yes.

that as had stage. awarded it's -- the hard haven't we moving kind talked been descoped. or We've either choppiness Ark or have then they've of to And in they the so and the this programs quarters some talked we've or started at about, about unevenness been predict cases,

come the again, "We'd said, revenue lower-cost We this, to in a all us rate. back but things clients who of have growth to and impact kind And you like geography." do those

of So level client again, way win there all that, sort the we not the expected. a to evolve demand RFP but and that is we're had significant environment of estimation just and amount finding continues originally

Arvind Ramnani

-- Okay. to of you'll just kind doing trying That to just about is one with continue doing uses of then think or of just as kind makes it cash sense. of these buybacks, And or build? you basically things see M&A additional of or that kind

Jason Peterson

kind to call yes the end Arvind, I'm I of we're past the of say just a to But or of time. going be both. little because the would response my short at

allow clearly to all more to delivery So us end and you continue expand that you buybacks again, in And also continue see us acquisitions and quarters. coming our position, will see locations. will more are do us and markets to strategic both more the do do in

Operator

to remarks. for Dobkin our the over I session. And concludes would Q&A closing like call turn Arkadiy to this back

Arkadiy Dobkin

As today. always, thank for joining everybody you,

not forward I bring for surprises think think next going we're least similar time, the call. today. next to we're looking at I to And

So let's look pragmatically everything. to

probably fortunately, on we're can this because and pretty much. about and we're but more genAI have there good time good you doing next Thank area, didn't this topic So very any doing spend how we time. we feel very today about questions

Operator

This the today's of conference your concludes Enjoy call. day. rest

disconnect. You may now

EPAM Systems (EPAM) 9 May 242024 Q1 Earnings call transcript