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EPAM Reports Results for Third Quarter 2024 and Raises Full Year Outlook

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EPAM Systems reported Q3 2024 revenues of $1.168 billion, up 1.3% year-over-year. GAAP income from operations was 15.2% of revenues, while non-GAAP income was 19.1%. The company recorded a $52.0 million benefit from Polish R&D government incentives. GAAP diluted EPS increased to $2.37, up $0.72, and non-GAAP diluted EPS rose to $3.12, up $0.39 year-over-year. EPAM raised its full-year 2024 outlook, expecting revenues between $4.685-4.695 billion. The company completed the acquisition of NEORIS, adding approximately 4,800 professionals across Latin America, Spain, and the U.S.

EPAM Systems ha riportato ricavi per il terzo trimestre del 2024 di 1,168 miliardi di dollari, in aumento dell'1,3% rispetto allo stesso periodo dell'anno precedente. Il reddito operativo GAAP è stato del 15,2% dei ricavi, mentre il reddito non GAAP è stato del 19,1%. L'azienda ha registrato un beneficio di 52,0 milioni di dollari grazie agli incentivi governativi per la ricerca e sviluppo in Polonia. L'utile per azione diluito GAAP è aumentato a 2,37 dollari, con un incremento di 0,72 dollari, e l'utile per azione diluito non GAAP è salito a 3,12 dollari, in aumento di 0,39 dollari rispetto all'anno precedente. EPAM ha rivisto al rialzo le sue previsioni per l'intero anno 2024, prevedendo ricavi compresi tra 4,685 e 4,695 miliardi di dollari. L'azienda ha completato l'acquisizione di NEORIS, aggiungendo circa 4.800 professionisti in America Latina, Spagna e Stati Uniti.

EPAM Systems reportó ingresos de 1.168 mil millones de dólares en el tercer trimestre de 2024, un aumento del 1,3% en comparación con el año anterior. El ingreso operativo bajo principios contables generalmente aceptados (GAAP) fue del 15,2% de los ingresos, mientras que el ingreso no GAAP fue del 19,1%. La compañía registró un beneficio de 52,0 millones de dólares por incentivos gubernamentales en investigación y desarrollo en Polonia. Las ganancias por acción diluidas bajo GAAP aumentaron a 2,37 dólares, subiendo 0,72 dólares, y las ganancias por acción diluidas no GAAP aumentaron a 3,12 dólares, subiendo 0,39 dólares en comparación con el año anterior. EPAM elevó sus perspectivas para todo el año 2024, esperando ingresos entre 4.685 y 4.695 mil millones de dólares. La empresa completó la adquisición de NEORIS, sumando aproximadamente 4,800 profesionales en América Latina, España y Estados Unidos.

EPAM Systems는 2024년 3분기 매출이 11억6800만 달러로, 전년 대비 1.3% 증가했다고 보고했습니다. GAAP 기준 운영 이익은 매출의 15.2%였으며, 비 GAAP 기준 이익은 19.1%였습니다. 이 회사는 폴란드의 연구 및 개발 정부 인센티브로 5200만 달러의 혜택을 기록했습니다. GAAP 기준 희석 주당순이익(EPS)은 2.37달러로 0.72달러 상승했으며, 비 GAAP 기준 희석 EPS는 3.12달러로 0.39달러 증가했습니다. EPAM은 2024년 전체 연간 전망을 상향 조정하여 매출이 468.5억~469.5억 달러에 이를 것으로 예상하고 있습니다. 회사는 NEORIS 인수 절차를 완료했으며, 이를 통해 라틴 아메리카, 스페인 및 미국 전역에서 약 4,800명의 전문가를 추가했습니다.

EPAM Systems a reporté des revenus de 1,168 milliard de dollars pour le troisième trimestre 2024, soit une augmentation de 1,3 % par rapport à l'année précédente. Le revenu opérationnel conforme aux normes GAAP représentait 15,2 % des revenus, tandis que le revenu non-GAAP était de 19,1 %. L'entreprise a enregistré un bénéfice de 52,0 millions de dollars grâce aux incitations gouvernementales à la recherche et au développement en Pologne. Le bénéfice par action dilué GAAP a augmenté à 2,37 dollars, soit une hausse de 0,72 dollar, et le bénéfice par action dilué non-GAAP a augmenté à 3,12 dollars, soit une hausse de 0,39 dollar par rapport à l'année précédente. EPAM a relevé ses prévisions pour l'année 2024, prévoyant des revenus compris entre 4,685 et 4,695 milliards de dollars. L'entreprise a finalisé l'acquisition de NEORIS, ajoutant environ 4 800 professionnels en Amérique Latine, en Espagne et aux États-Unis.

EPAM Systems meldete für das dritte Quartal 2024 Einnahmen von 1,168 Milliarden Dollar, was einem Anstieg von 1,3% im Vergleich zum Vorjahr entspricht. Das GAAP-Betriebsergebnis betrug 15,2% der Einnahmen, während das Non-GAAP-Ergebnis bei 19,1% lag. Das Unternehmen verzeichnete einen Vorteil von 52 Millionen Dollar durch staatliche Anreize für Forschung und Entwicklung in Polen. Der verwässerte GAAP-Gewinn pro Aktie stieg auf 2,37 Dollar, was einem Anstieg von 0,72 Dollar entspricht, und der verwässerte Non-GAAP-Gewinn pro Aktie stieg auf 3,12 Dollar, ein Anstieg von 0,39 Dollar im Jahresvergleich. EPAM hat seine Prognose für das Gesamtjahr 2024 angehoben und erwartet Einnahmen zwischen 4,685 und 4,695 Milliarden Dollar. Das Unternehmen hat die Übernahme von NEORIS abgeschlossen und etwa 4.800 Fachkräfte in Lateinamerika, Spanien und den USA hinzugewonnen.

Positive
  • Revenue growth of 1.3% YoY to $1.168 billion in Q3
  • GAAP income from operations increased 55.2% to $177.0 million
  • $52.0 million benefit from Polish R&D government incentives
  • GAAP diluted EPS increased 43.6% to $2.37
  • Raised full-year revenue guidance to $4.685-4.695 billion
  • Strategic expansion through NEORIS acquisition
Negative
  • Organic constant currency revenue declined 0.3% in Q3
  • Expected organic constant currency revenue decline of 2.3% for full year 2024
  • Projected Q4 organic constant currency revenue decline of 1.5%

Insights

EPAM's Q3 results show mixed signals with modest 1.3% revenue growth to $1.168 billion, while organic constant currency revenue declined 0.3%. The standout positive is significant margin improvement, with GAAP operating margin reaching 15.2% and non-GAAP at 19.1%, boosted by $52 million in Polish R&D incentives.

The NEORIS acquisition adds 4.7% inorganic growth for Q4, helping offset organic revenue weakness. However, the full-year guidance suggesting flat growth and 2.3% organic decline indicates persistent market challenges. The strong cash position of $2.041 billion provides flexibility for further strategic acquisitions and operational stability.

The strategic pivot towards geographical diversification through the NEORIS acquisition strengthens EPAM's presence in Latin America and Spain, reducing dependency on traditional markets. The addition of 4,800 professionals enhances delivery capabilities amid the 1.6% quarterly growth in delivery staff to 47,750.

The recurring Polish R&D incentives create a sustainable margin advantage, though partially offset by higher tax rates. The pending First Derivative acquisition signals continued expansion efforts, but organic growth challenges suggest market saturation and pricing pressures in core markets.

  • Third quarter revenues of $1.168 billion, up 1.3% year-over-year
  • GAAP income from operations was 15.2% of revenues and non-GAAP income from operations was 19.1% of revenues for the third quarter
  • Third quarter GAAP diluted EPS of $2.37, an increase of $0.72, and non-GAAP diluted EPS of $3.12, an increase of $0.39 on a year-over-year basis
  • For the full year, EPAM increases expected range for revenues to now be $4.685 billion to $4.695 billion, increases expected GAAP diluted EPS to now be in the range of $7.78 to $7.86 and non-GAAP diluted EPS to now be in the range of $10.73 to $10.81
  • For the fourth quarter, EPAM expects revenues to be in the range of $1.205 billion to $1.215 billion, GAAP diluted EPS to be in the range of $1.73 to $1.81 and non-GAAP diluted EPS to be in the range of $2.70 to $2.78

NEWTOWN, Pa., Nov. 7, 2024 /PRNewswire/ -- EPAM Systems, Inc. (NYSE: EPAM), a leading digital transformation services and product engineering company, today announced results for the third quarter ended September 30, 2024.

"We are pleased with our strong third-quarter results and the ongoing improvement across our business. We continue to help our clients adapt and modernize their businesses, including deploying world-class solutions enabled by GenAI," said Arkadiy Dobkin, CEO & President at EPAM. "Our recent acquisition of NEORIS illustrates our strong commitment to diversifying our global delivery platform and our readiness to enter new markets to best serve our enterprise clients."

Third Quarter 2024 Highlights

  • Revenues increased to $1.168 billion, a year-over-year increase of $15.4 million, or 1.3%. On an organic constant currency basis excluding the impact of the exit from Russia, revenues were down 0.3% compared to the third quarter of 2023;
  • We recorded a benefit of $52.0 million for research & development government incentives in Poland. Specifically, $22.9 million of the benefit related to activities performed during 2023 and $29.1 million of the benefit related to activities performed during the first nine months of 2024. This benefit was included as a reduction to our Cost of revenues. The incentives are granted under Polish law, which allows businesses to reduce their tax base through bonus deductions for certain costs, including compensation expenses, incurred while performing innovative activities. The impact of this benefit on net income was partially offset as the incentives drove a higher effective tax rate for both GAAP and non-GAAP results. We expect the incentive will be recurring with benefits recognized in the fourth quarter and continuing thereafter.
  • GAAP income from operations was $177.0 million, an increase of $63.0 million, or 55.2%, compared to $114.0 million in the third quarter of 2023. GAAP income from operations benefited from the recognition of $52.0 million of incentives related to research and development activities performed in Poland;
  • Non-GAAP income from operations was $222.9 million, an increase of $27.3 million, or 14.0%, compared to $195.6 million in the third quarter of 2023. Non-GAAP income from operations benefited from the recognition of $29.1 million of incentives related to research and development activities performed in Poland in 2024;
  • Diluted earnings per share ("EPS") on a GAAP basis was $2.37, an increase of $0.72, or 43.6%, compared to $1.65 in the third quarter of 2023. EPS on a GAAP basis was positively impacted by the recognition of the Polish incentives, which increased income from operations. However, this benefit was partially offset by an increase to the effective tax rate;
  • Non-GAAP diluted EPS was $3.12, an increase of $0.39, or 14.3%, compared to $2.73 in the third quarter of 2023. EPS on a non-GAAP basis was positively impacted by the recognition of the Polish incentives for activities performed during the first nine months of 2024, which increased income from operations. However, this benefit was partially offset by an increase to the effective tax rate; and
  • On November 1, 2024, EPAM completed its acquisition of NEORIS, a Miami-headquartered global advanced technology consultancy with approximately 4,800 professionals across major talent hubs in Latin America, Spain and the U.S.

Cash Flow and Other Metrics

  • Cash provided by operating activities was $428.9 million for the first nine months of 2024, compared to cash provided by operating activities of $391.3 million for the first nine months of 2023;
  • Cash, cash equivalents and restricted cash totaled $2.041 billion as of September 30, 2024, a decrease of $2.4 million, or 0.1%, from $2.043 billion as of December 31, 2023; and
  • Total headcount was approximately 53,250 as of September 30, 2024. Included in this number were approximately 47,750 delivery professionals, an increase of 1.6% from June 30, 2024.

2024 Outlook - Full Year and Fourth Quarter

Full Year

The outlook reflects the impact of closed acquisitions including NEORIS. We have not included the impact of the pending acquisition of First Derivative. EPAM now expects the following for the full year:

  • The Company now expects revenues to be $4.685 billion to $4.695 billion for the full year reflecting flat year-over-year growth at the midpoint of the range. Included in the outlook is an inorganic revenue contribution of 2.4% of which 1.2% comes from NEORIS which was acquired on November 1, 2024. The Company now expects revenues on an organic constant currency basis excluding the impact of the exit from Russia will decline 2.3% at the midpoint of the range;
  • For the full year, EPAM expects GAAP income from operations to now be in the range of 11.0% to 11.5% of revenues and non-GAAP income from operations to now be in the range of 16.0% to 16.5% of revenues;
  • The Company expects its GAAP effective tax rate to now be approximately 23% and continues to expect its non-GAAP effective tax rate to be approximately 24%; and
  • EPAM expects GAAP diluted EPS to now be in the range of $7.78 to $7.86 and non-GAAP diluted EPS to now be in the range of $10.73 to $10.81. The Company continues to expect weighted average diluted shares outstanding for the year to be 57.9 million.

Fourth Quarter

The outlook reflects the impact of closed acquisitions including NEORIS. We have not included the impact of the pending acquisition of First Derivative. EPAM expects the following for the fourth quarter:

  • The Company expects revenues will be in the range of $1.205 billion to $1.215 billion for the fourth quarter reflecting year-over-year growth of 4.6% at the midpoint of the range. Included in the outlook is an inorganic revenue contribution of 5.7% of which 4.7% comes from NEORIS which was acquired on November 1, 2024. The Company expects that revenues on an organic constant currency basis excluding the impact of the exit from Russia will decline 1.5% at the midpoint of the range;
  • For the fourth quarter, EPAM expects GAAP income from operations to be in the range of 10.5% to 11.5% of revenues and non-GAAP income from operations to be in the range of 16.0% to 17.0% of revenues. Included in the outlook for both GAAP and non-GAAP is a $9.0 million benefit from the Poland R&D incentive;
  • The Company expects its GAAP effective tax rate to be approximately 26% and its non-GAAP effective tax rate to be approximately 24%; and
  • EPAM expects GAAP diluted EPS will be in the range of $1.73 to $1.81 for the quarter, and non-GAAP diluted EPS will be in the range of $2.70 to $2.78 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter to be 57.2 million.

Conference Call Information

EPAM will host a conference call to discuss the results on Thursday, November 7, 2024, 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 used its software engineering expertise to become a leading global provider of digital engineering, cloud and AI-enabled transformation services, and a leading business and experience consulting partner for global enterprises and ambitious startups. We address our clients' transformation challenges by focusing EPAM Continuum's integrated strategy, experience and technology consulting with our 30+ years of engineering execution to speed our clients' time to market and drive greater value from their innovations and digital investments.

We make GenAI real with our AI LLM orchestration, testing and engineering solutions, EPAM DIAL, EPAM EliteA™ and EPAM AI/RUN™, respectively.

We deliver globally but engage locally with our expert teams of consultants, architects, designers and engineers, making the future real for our clients, our partners, and our people around the world. We believe the right solutions are the ones that improve people's lives and fuel competitive advantage for our clients across diverse industries. Our thinking comes to life in the experiences, products and platforms we design and bring to market.

Added to the S&P 500 and the Forbes Global 2000 in 2021 and recognized by Glassdoor and Newsweek as a Top 100 Best Workplace, our multidisciplinary teams serve customers across six continents. We are proud to be among the top 15 companies in Information Technology Services in the Fortune 1000 and to be recognized as a leader in the IDC MarketScapes for Worldwide Experience Build Services, Worldwide Experience Design Services and Worldwide Software Engineering Services.

Learn more at www.epam.com and follow us on 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 incurred in connection with restructuring programs including the Company's exit from 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" and an "organic constant currency basis," which are also non-GAAP financial measures. These measures exclude the effect of acquisitions by removing revenues from an acquired company in the twelve months after completing an acquisition and 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. In addition, revenues on an "organic constant currency basis excluding the impact of the exit from Russia" reflect the decision to exit from Russia by removing revenues from clients 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 client demand and 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.

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)



Three Months Ended

September 30,


Nine Months Ended

September 30,


2024


2023


2024


2023

Revenues

$    1,167,527


$    1,152,136


$ 3,479,589


$ 3,533,283

Operating expenses:








Cost of revenues (exclusive of depreciation and amortization)

763,992


794,265


2,409,183


2,458,881

Selling, general and administrative expenses

206,820


194,829


599,331


601,093

Depreciation and amortization expense

19,736


23,092


63,003


68,642

Loss on sale of business


25,922



25,922

Income from operations

176,979


114,028


408,072


378,745

Interest and other income, net

13,347


13,931


40,425


37,162

Foreign exchange (loss)/gain

(710)


3,893


(1,416)


(6,725)

Income before provision for income taxes

189,616


131,852


447,081


409,182

Provision for income taxes

53,270


34,648


95,847


89,653

Net income

$       136,346


$         97,204


$     351,234


$     319,529









Net income per share:








Basic

$              2.40


$              1.68


$           6.11


$           5.52

Diluted

$              2.37


$              1.65


$           6.04


$           5.40

Shares used in calculation of net income per share:








Basic

56,910


57,853


57,445


57,850

Diluted

57,425


58,948


58,166


59,143

 

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)



As of

September 30,

2024


As of

December 31,

2023

Assets




Current assets




Cash and cash equivalents

$    2,036,394


$    2,036,235

Trade receivables and contract assets, net of allowance of $5,864

 and $11,864, respectively

935,077


897,032

Short-term investments

22,316


60,739

Prepaid and other current assets

113,069


97,355

Total current assets

3,106,856


3,091,361

Property and equipment, net

207,502


235,053

Operating lease right-of-use assets, net

129,929


134,898

Intangible assets, net

74,494


71,118

Goodwill

621,903


562,459

Deferred tax assets

218,320


197,901

Other noncurrent assets

98,193


59,575

Total assets

$    4,457,197


$    4,352,365





Liabilities




Current liabilities




Accounts payable

$         30,774


$         31,992

Accrued compensation and benefits expenses

422,548


412,747

Accrued expenses and other current liabilities

155,817


124,823

Income taxes payable, current

34,346


38,812

Operating lease liabilities, current

37,561


36,558

Total current liabilities

681,046


644,932

Long-term debt

25,331


26,126

Operating lease liabilities, noncurrent

102,551


109,261

Other noncurrent liabilities

93,640


100,576

Total liabilities

902,568


880,895

Commitments and contingencies




Equity




Stockholders' equity




Common stock, $0.001 par value; 160,000 shares authorized; 56,708 shares issued and outstanding at September 30, 2024, and 57,787 shares issued and outstanding at December 31, 2023

57


58

Additional paid-in capital

1,129,238


1,008,766

Retained earnings

2,465,269


2,501,107

Accumulated other comprehensive loss

(40,517)


(39,040)

Total EPAM Systems, Inc. stockholders' equity

3,554,047


3,470,891

Noncontrolling interest in consolidated subsidiaries

582


579

Total equity

3,554,629


3,471,470

Total liabilities and equity

$    4,457,197


$    4,352,365

 

EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(Unaudited)

(In thousands, except percent and per share amounts)


Reconciliation of revenue growth/(decline) as reported on a GAAP basis to revenue decline on an organic constant currency basis excluding the impact of the exit from Russia is presented in the table below:



Three Months Ended

September 30, 2024


Nine Months Ended

September 30, 2024

Revenue growth/(decline) as reported

1.3 %


(1.5) %

Foreign exchange rates impact

(0.4) %


(0.3) %

Inorganic revenue growth

(1.4) %


(1.3) %

Impact of exit from Russia

0.2 %


0.4 %

Revenue decline on an organic constant currency basis excluding the impact of the exit from Russia

(0.3) %


(2.7) %

 

Reconciliation of various income statement amounts from GAAP to non-GAAP for the three and nine months ended September 30, 2024 and 2023:



Three Months Ended

September 30, 2024


Nine Months Ended

September 30, 2024


GAAP


Adjustments


Non-GAAP


GAAP


Adjustments


Non-GAAP

Cost of revenues (exclusive of depreciation and amortization)(1)

$ 763,992


$      2,739


$ 766,731


$  2,409,183


$   (37,781)


$  2,371,402

Selling, general and administrative expenses(2)

$ 206,820


$   (42,979)


$ 163,841


$     599,331


$ (107,692)


$     491,639

Income from operations(3)

$ 176,979


$    45,947


$ 222,926


$     408,072


$  162,950


$     571,022

Operating margin

15.2 %


3.9 %


19.1 %


11.7 %


4.7 %


16.4 %

Net income(4)

$ 136,346


$    42,740


$ 179,086


$     351,234


$  115,364


$    466,598

Diluted earnings per share

$       2.37




$       3.12


$           6.04




$          8.02

 


Three Months Ended

September 30, 2023


Nine Months Ended

September 30, 2023


GAAP


Adjustments


Non-GAAP


GAAP


Adjustments


Non-GAAP

Cost of revenues (exclusive of depreciation and amortization)(1)

$  794,265


$   (21,146)


$ 773,119


$  2,458,881


$  (67,281)


$  2,391,600

Selling, general and administrative expenses(2)

$  194,829


$   (28,828)


$ 166,001


$     601,093


$  (76,021)


$     525,072

Income from operations(3)

$  114,028


$    81,584


$ 195,612


$     378,745


$ 185,932


$     564,677

Operating margin

9.9 %


7.1 %


17.0 %


10.7 %


5.3 %


16.0 %

Net income(4)

$    97,204


$    63,876


$ 161,080


$     319,529


$ 144,344


$     463,873

Diluted earnings per share

$        1.65




$       2.73


$           5.40




$           7.84

 

Items (1) through (4) above are detailed in the table below with the specific cross-reference noted in the appropriate item.

 


Three Months Ended

September 30,


Nine Months Ended

September 30,


2024


2023


2024


2023

Stock-based compensation expenses

$         19,576


$         18,142


$     58,870


$     49,569

Poland R&D incentives(a)

(22,917)



(22,917)


Humanitarian support in Ukraine(b)

602


3,004


1,828


8,297

Unbilled business continuity resources(c)




9,415

Total adjustments to GAAP cost of revenues(1)

(2,739)


21,146


37,781


67,281

Stock-based compensation expenses

22,548


19,705


63,729


59,967

Cost Optimization charges(d)

9,903


7,116


26,433


7,116

Other acquisition-related expenses

7,098


867


8,777


2,448

Humanitarian support in Ukraine(b)

2,955


643


7,694


5,309

Geographic repositioning(e)

28


435


853


877

One-time charges, net

447


62


206


304

Total adjustments to GAAP selling, general and administrative expenses(2)

42,979


28,828


107,692


76,021

Amortization of acquired intangible assets

5,707


5,688


17,477


16,708

Loss on sale of business(f)


25,922



25,922

Total adjustments to GAAP income from operations(3)

45,947


81,584


162,950


185,932

Foreign exchange loss/(gain)

710


(3,893)


1,416


6,725

One-time benefit included in Interest and other income, net

(1,812)



(1,812)


Change in fair value of contingent consideration included in Interest and other income, net

1,492


300


4,027


1,818

Provision for income taxes:








Tax effect on non-GAAP adjustments

(3,855)


(12,395)


(28,882)


(34,060)

Tax shortfall/(excess tax benefits) related to stock-based compensation

258


(1,720)


(20,505)


(15,103)

Net discrete benefit from tax planning(g)



(1,830)


(968)

Total adjustments to GAAP net income(4)

$         42,740


$         63,876


$   115,364


$   144,344


(a) We have excluded from non-GAAP results the portion of the benefit from Poland R&D incentives related to qualifying activities performed in 2023 as it represents a nonrecurring one-time benefit.


(b) Humanitarian support in Ukraine includes expenses related to EPAM's $100 million humanitarian commitment in response to Russia's invasion of Ukraine to support EPAM professionals and their families in and displaced from Ukraine. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.


(c) Given the uncertainty in the region introduced by Russia's invasion of Ukraine, EPAM has assigned delivery professionals in locations outside of the region to ensure the continuity of delivery for clients who have substantial delivery exposure to Ukraine or other delivery concerns resulting from the invasion. These employees are not billed to clients and operate largely in a standby or backup capacity. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.


(d) Cost Optimization charges include severance, facilities and contract termination charges incurred in connection with the programs initiated in the third quarter of 2023 and second quarter of 2024. Consistent with the Company's historical non-GAAP policy, costs incurred in connection with formal restructuring initiatives have been excluded from non-GAAP results as these are one-time and unusual in nature.


(e) Geographic repositioning includes expenses associated with the relocation to other countries of employees based outside of Ukraine impacted by the war and geopolitical instability in the region, and includes the cost of accommodations, travel and food. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.


(f) On July 26, 2023, the Company completed the sale of its remaining operations in Russia and recorded a loss on sale of approximately $25.9 million during the third quarter of 2023, including the recognition of the accumulated currency translation loss related to this foreign entity that was previously included in Accumulated other comprehensive loss in the condensed consolidated financial statements. The Company excluded this loss from non-GAAP results as it is one-time and unusual in nature.


(g) One-time benefit related to the implementation of tax planning to disregard certain foreign subsidiaries as separate entities for U.S. income tax purposes. Consistent with the Company's historical non-GAAP policy, the benefit related to the implementation of tax planning has been excluded from non-GAAP results as it is one-time and unusual in nature.

 

EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Guidance Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(Unaudited)


The below guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. Actual results may differ materially from the Company's expectations depending on factors discussed in the Company's filings with the Securities and Exchange Commission.


Reconciliation of expected revenue growth on a GAAP basis to expected revenue decline on an organic constant currency basis excluding the impact of the exit from Russia is presented in the table below:



Fourth Quarter 2024


Full Year 2024

Revenue growth (at midpoint of the range)

4.6 %


— %

Foreign exchange rates impact

(0.3) %


(0.2) %

Inorganic revenue growth

(5.7) %


(2.4) %

Impact of exit from Russia

— %


0.3 %

Revenue decline on an organic constant currency basis excluding the impact of the exit from Russia (at midpoint of the range)

(1.4) %


(2.3) %

 

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



Fourth Quarter 2024


Full Year 2024

GAAP income from operations as a percentage of revenues

10.5% to 11.5%


11.0% to 11.5%

Stock-based compensation expenses

3.6 %


3.6 %

Included in cost of revenues (exclusive of depreciation and amortization)

1.7 %


1.7 %

Included in selling, general and administrative expenses

1.9 %


1.9 %

Poland R&D incentives(a)


(0.5) %

Humanitarian support in Ukraine(b)

0.4 %


0.3 %

Cost Optimization charges(d)

0.8 %


0.7 %

One-time charges and Other acquisition-related expenses(h)

— %


0.3 %

Amortization of acquired intangible assets

0.7 %


0.6 %

Non-GAAP income from operations as a percentage of revenues 

16.0% to 17.0%


16.0% to 16.5%


(h) EPAM has not included the impact of potential future One-time charges including asset impairments, unusual gains and losses, expenses incurred in connection with future cost optimization actions, and Other acquisition-related expenses because the Company is unable to predict these amounts with reasonable certainty.

 

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



Fourth Quarter 2024


Full Year 2024

GAAP effective tax rate (approximately)

26 %


23 %

Tax effect on non-GAAP adjustments

(1.6) %


(2.4) %

(Tax shortfall)/excess tax benefits related to stock-based compensation

(0.4) %


3.4 %

Non-GAAP effective tax rate (approximately)

24 %


24 %

 

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



Fourth Quarter 2024


Full Year 2024

GAAP diluted earnings per share

$1.73 to $1.81


$7.78 to $7.86

Stock-based compensation expenses

0.76


2.87

Included in cost of revenues (exclusive of depreciation and amortization)

0.35


1.37

Included in selling, general and administrative expenses

0.41


1.50

Poland R&D incentives(a)


(0.40)

Humanitarian support in Ukraine(b)

0.09


0.26

Cost Optimization charges(d)

0.16


0.61

One-time charges and Other acquisition-related expenses(h)

0.03


0.17

Amortization of acquired intangible assets

0.15


0.45

Change in fair value of contingent consideration


0.07

Foreign exchange loss

0.02


0.04

Provision for income taxes:




     Tax effect on non-GAAP adjustments

(0.25)


(0.74)

     Tax shortfall/(excess tax benefits) related to stock-based compensation

0.01


(0.35)

  Net discrete benefit from tax planning(g)


(0.03)

Non-GAAP diluted earnings per share

$2.70 to $2.78


$10.73 to $10.81

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/epam-reports-results-for-third-quarter-2024-and-raises-full-year-outlook-302298302.html

SOURCE EPAM Systems, Inc.

FAQ

What was EPAM's revenue growth in Q3 2024?

EPAM (NYSE: EPAM) reported Q3 2024 revenues of $1.168 billion, representing a 1.3% year-over-year increase.

How much did EPAM's EPS increase in Q3 2024?

EPAM's GAAP diluted EPS increased by $0.72 to $2.37, while non-GAAP diluted EPS rose by $0.39 to $3.12 in Q3 2024.

What is EPAM's revenue guidance for full-year 2024?

EPAM raised its full-year 2024 revenue guidance to $4.685-4.695 billion, reflecting flat year-over-year growth at the midpoint.

What major acquisition did EPAM complete in November 2024?

EPAM completed the acquisition of NEORIS on November 1, 2024, adding approximately 4,800 professionals across Latin America, Spain, and the U.S.

EPAM SYSTEMS, INC.

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