EPAM Reports Results for First Quarter 2023 and Updates Full Year Outlook

• First quarter revenues of $1.211 billion, up 3.4% year-over-year
• GAAP Income from Operations was 9.9% of revenues and Non-GAAP Income from Operations was 14.7% of revenues for the first quarter
• First quarter GAAP Diluted EPS of $1.73, an increase of 13.8%, and Non-GAAP Diluted EPS of $2.47, a decrease of 0.8% on a year-over-year basis
• For the full year, EPAM now expects revenues to be in the range of $4.950 billion to $5.000 billion, GAAP Diluted EPS to be in the range of $8.11 to $8.31 and Non-GAAP Diluted EPS to be in the range of $10.60 to $10.80
• For the second quarter, EPAM expects revenues to be in the range of $1.195 billion to $1.205 billion, GAAP Diluted EPS to be in the range of $1.82 to $1.90 and Non-GAAP Diluted EPS to be in the range of $2.38 to $2.46

NEWTOWN, Pa., May 5, 2023 /PRNewswire/ -- EPAM Systems, Inc. (NYSE: EPAM), a leading digital transformation services and product engineering company, today reported results for the first quarter ended March 31, 2023.

"EPAM delivered solid results in the first quarter, made possible by the dedication of our talented team," said Arkadiy Dobkin, CEO & President, EPAM. "I am confident that our strong fundamentals and our ability to adapt the Company to a variety of challenges will enable us to navigate the current market uncertainties while positioning EPAM for the recovery of demand for technology-led transformation services."

First Quarter 2023 Highlights

• Revenues increased to $1.211 billion, a year-over-year increase of $39.3 million, or 3.4%. On an organic constant currency basis excluding the impact of the exit from Russia, revenues were up 7.0% compared to the first quarter of 2022;
• GAAP income from operations was $120.4 million, a decrease of $8.9 million, or 6.9%, compared to $129.2 million in the first quarter of 2022;
• Non-GAAP income from operations was $178.3 million, a decrease of $10.4 million, or 5.5%, compared to $188.7 million in the first quarter of 2022;
• Diluted earnings per share ("EPS") on a GAAP basis was $1.73, an increase of $0.21, or 13.8%, compared to $1.52 in the first quarter of 2022; and
• Non-GAAP diluted EPS was $2.47, a decrease of $0.02, or 0.8%, compared to $2.49 in the first quarter of 2022.

Cash Flow and Other Metrics

• Cash provided by operating activities was $87.3 million for the first three months of 2023, compared to cash used in operating activities of $51.8 million for the first three months of 2022;
• Cash, cash equivalents and restricted cash totaled $1.752 billion as of March 31, 2023, an increase of $68.4 million, or 4.1%, from $1.684 billion as of December 31, 2022; and
• Total headcount was approximately 57,450 as of March 31, 2023. Included in this number were approximately 51,100 delivery professionals, a decrease of 3.3% from December 31, 2022.

2023 Outlook - Full Year and Second Quarter

Full Year

Due to uneven improvement in demand, EPAM now expects the following for the full year:

• The Company now expects revenues will be in the range of $4.950 billion to $5.000 billion for the full year reflecting a year-over-year growth rate of 3% at the midpoint of the range. Revenue growth on an organic constant currency basis excluding the impact of the exit from Russia will be over 3% at the midpoint of the range;
• For the full year, EPAM expects GAAP income from operations to continue to be in the range of 11.5% to 12.5% of revenues and non-GAAP income from operations to continue to be in the range of 15.5% to 16.5% of revenues;
• The Company expects its GAAP effective tax rate to continue to be approximately 21% and its non-GAAP effective tax rate to continue to be approximately 23%; and
• EPAM expects GAAP diluted EPS to now be in the range of $8.11 to $8.31 for the year, and non-GAAP diluted EPS to now be in the range of $10.60 to $10.80 for the year. The Company now expects weighted average diluted shares outstanding for the year of 59.4 million.

Second Quarter

EPAM expects the following for the second quarter:

• Revenues will be in the range of $1.195 billion to $1.205 billion for the second quarter reflecting a year-over-year growth rate of less than 1% at the midpoint of the range. Revenue growth on an organic constant currency basis excluding the impact of the exit from Russia will be less than 1% at the midpoint of the range;
• For the second quarter, EPAM expects GAAP income from operations to be in the range of 10.0% to 11.0% of revenues and non-GAAP income from operations to be in the range of 14.0% to 15.0% of revenues;
• The Company expects its GAAP effective tax rate to be approximately 20% and its non-GAAP effective tax rate to be approximately 23%; and
• EPAM expects GAAP diluted EPS will be in the range of $1.82 to $1.90 for the quarter, and non-GAAP diluted EPS will be in the range of $2.38 to $2.46 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter of 59.4 million.

Conference Call Information

EPAM will host a conference call to discuss the results on Friday, May 5, 2023, at 8:00 a.m. EDT. The conference call will be available live on the EPAM website at https://investors.epam.com. Please visit the website at least 15 minutes prior to the call to register for the event. For those who cannot access the live webcast, a replay will be available in the Investor Relations section of the website.

About EPAM Systems

Since 1993, EPAM Systems, Inc. (NYSE: EPAM) has leveraged its advanced software engineering heritage to become the foremost global digital transformation services provider – leading the industry in digital and physical product development and digital platform engineering services. Through its innovative strategy; integrated advisory, consulting, and design capabilities; and unique 'Engineering DNA,' EPAM's globally deployed hybrid teams help make the future real for clients and communities around the world by powering better enterprise, education and health platforms that connect people, optimize experiences, and improve people's lives. In 2021, EPAM was added to the S&P 500 and included among the list of Forbes Global 2000 companies.

Selected by Newsweek as a 2021 and 2022 Most Loved Workplace, EPAM's global multidisciplinary teams serve customers in more than 50 countries across six continents. As a recognized leader, EPAM is listed among the top 15 companies in Information Technology Services on the Fortune 1000 and ranked four times as the top IT services company on Fortune's 100 Fastest Growing Companies list. EPAM is also listed among Ad Age's top 25 World's Largest Agency Companies for three consecutive years, and Consulting Magazine named EPAM Continuum a top 20 Fastest Growing Firm.

Learn more at www.epam.com and follow EPAM on Twitter and LinkedIn.

Non-GAAP Financial Measures

EPAM supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in EPAM's business and uses the measures to establish budgets and operational goals, communicate internally and externally, for managing EPAM's business and evaluating its performance. Management also believes these measures help investors compare EPAM's operating performance with its results in prior periods. EPAM anticipates that it will continue to report both GAAP and certain non-GAAP financial measures in its financial results, including non-GAAP results that exclude stock-based compensation expenses, acquisition-related costs including amortization of acquired intangible assets, impairment of assets, expenses associated with EPAM's humanitarian commitment to its professionals in Ukraine, unbilled business continuity resources resulting from Russia's invasion of Ukraine, costs associated with the geographic repositioning of EPAM employees based outside of Ukraine impacted by the war and geopolitical instability in the region, employee separation costs in Russia, certain other one-time charges and benefits, changes in fair value of contingent consideration, foreign exchange gains and losses, excess tax benefits related to stock-based compensation, and the related effect on income taxes of the pre-tax adjustments. Management also compares revenues on an "organic constant currency basis excluding the impact of the exit from Russia," which is also a non-GAAP financial measure. This measure excludes the effect of acquisitions by removing revenues from an acquired company in the twelve months after completing an acquisition, foreign currency exchange rate fluctuations by translating the current period revenues into U.S. dollars at the weighted average exchange rates of the prior period of comparison and the decision to exit from Russia by removing revenues from customers located in Russia in both the current period and prior period of comparison. Because EPAM's reported non-GAAP financial measures are not calculated in accordance with GAAP, these measures are not comparable to GAAP and may not be comparable to similarly described non-GAAP measures reported by other companies within EPAM's industry. Consequently, EPAM's non-GAAP financial measures should not be evaluated in isolation or supplant comparable GAAP measures, but rather, should be considered together with the information in EPAM's consolidated financial statements, which are prepared in accordance with GAAP. 

Forward-Looking Statements

This press release includes estimates and statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our business and operations. These statements may include words such as "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. Those future events and trends may relate to, among other things, developments relating to the war in Ukraine and escalation of the war in the surrounding region, political and civil unrest or military action in the geographies where we conduct business and operate, difficult conditions in global capital markets, foreign exchange markets and the broader economy, and the effect that these events may have on our revenues, operations, access to capital, and profitability. Other factors that could cause actual results to differ materially from those expressed or implied include general economic conditions, the risk factors discussed in the Company's most recent Annual Report on Form 10-K and the factors discussed in the Company's Quarterly Reports on Form 10-Q, particularly under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" and other filings with the Securities and Exchange Commission. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made based on information currently available to us. EPAM undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

Reconciliation of expected GAAP to non-GAAP income from operations as a percentage of revenues is presented in the table below:

Reconciliation of expected GAAP to non-GAAP effective tax rate is presented in the table below:

Reconciliation of expected GAAP to non-GAAP diluted earnings per share is presented in the table below:

View original content to download multimedia:https://www.prnewswire.com/news-releases/epam-reports-results-for-first-quarter-2023-and-updates-full-year-outlook-301816860.html

SOURCE EPAM Systems, Inc.