EPAM Reports Results for Third Quarter 2024 and Raises Full Year Outlook
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.
- 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
- 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
The NEORIS acquisition adds
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
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
, up$1.16 8 billion1.3% year-over-year - GAAP income from operations was
15.2% of revenues and non-GAAP income from operations was19.1% of revenues for the third quarter - Third quarter GAAP diluted EPS of
, an increase of$2.37 , and non-GAAP diluted EPS of$0.72 , an increase of$3.12 on a year-over-year basis$0.39 - For the full year, EPAM increases expected range for revenues to now be
to$4.68 5 billion , increases expected GAAP diluted EPS to now be in the range of$4.69 5 billion to$7.78 and non-GAAP diluted EPS to now be in the range of$7.86 to$10.73 $10.81 - For the fourth quarter, EPAM expects revenues to be in the range of
to$1.20 5 billion , GAAP diluted EPS to be in the range of$1.21 5 billion to$1.73 and non-GAAP diluted EPS to be in the range of$1.81 to$2.70 $2.78
"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
, a year-over-year increase of$1.16 8 billion , or$15.4 million 1.3% . On an organic constant currency basis excluding the impact of the exit fromRussia , revenues were down0.3% compared to the third quarter of 2023; - We recorded a benefit of
for research & development government incentives in$52.0 million Poland . Specifically, of the benefit related to activities performed during 2023 and$22.9 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.$29.1 million - GAAP income from operations was
, an increase of$177.0 million , or$63.0 million 55.2% , compared to in the third quarter of 2023. GAAP income from operations benefited from the recognition of$114.0 million of incentives related to research and development activities performed in$52.0 million Poland ; - Non-GAAP income from operations was
, an increase of$222.9 million , or$27.3 million 14.0% , compared to in the third quarter of 2023. Non-GAAP income from operations benefited from the recognition of$195.6 million of incentives related to research and development activities performed in$29.1 million Poland in 2024; - Diluted earnings per share ("EPS") on a GAAP basis was
, an increase of$2.37 , or$0.72 43.6% , compared to 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;$1.65 - Non-GAAP diluted EPS was
, an increase of$3.12 , or$0.39 14.3% , compared to 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$2.73 - 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 inLatin America ,Spain and theU.S.
Cash Flow and Other Metrics
- Cash provided by operating activities was
for the first nine months of 2024, compared to cash provided by operating activities of$428.9 million for the first nine months of 2023;$391.3 million - Cash, cash equivalents and restricted cash totaled
as of September 30, 2024, a decrease of$2.04 1 billion , or$2.4 million 0.1% , from as of December 31, 2023; and$2.04 3 billion - 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
to$4.68 5 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$4.69 5 billion2.4% of which1.2% 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 fromRussia will decline2.3% 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% to11.5% of revenues and non-GAAP income from operations to now be in the range of16.0% to16.5% 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 approximately24% ; and - EPAM expects GAAP diluted EPS to now be in the range of
to$7.78 and non-GAAP diluted EPS to now be in the range of$7.86 to$10.73 . The Company continues to expect weighted average diluted shares outstanding for the year to be 57.9 million.$10.81
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
to$1.20 5 billion for the fourth quarter reflecting year-over-year growth of$1.21 5 billion4.6% at the midpoint of the range. Included in the outlook is an inorganic revenue contribution of5.7% of which4.7% 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 fromRussia will decline1.5% at the midpoint of the range; - For the fourth quarter, EPAM expects GAAP income from operations to be in the range of
10.5% to11.5% of revenues and non-GAAP income from operations to be in the range of16.0% to17.0% of revenues. Included in the outlook for both GAAP and non-GAAP is a benefit from the Poland R&D incentive;$9.0 million - The Company expects its GAAP effective tax rate to be approximately
26% and its non-GAAP effective tax rate to be approximately24% ; and - EPAM expects GAAP diluted EPS will be in the range of
to$1.73 for the quarter, and non-GAAP diluted EPS will be in the range of$1.81 to$2.70 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter to be 57.2 million.$2.78
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
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
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 | |||||
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 and | 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, | 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 | |||
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 | 0.2 % | 0.4 % | |
Revenue decline on an organic constant currency basis excluding the impact of the exit from | (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) | $ 2,739 | $ 2,409,183 | $ (37,781) | $ 2,371,402 | |||||||
Selling, general and administrative expenses(2) | $ (42,979) | $ 599,331 | $ 491,639 | ||||||||
Income from operations(3) | $ 45,947 | $ 408,072 | $ 162,950 | $ 571,022 | |||||||
Operating margin | 15.2 % | 3.9 % | 19.1 % | 11.7 % | 4.7 % | 16.4 % | |||||
Net income(4) | $ 42,740 | $ 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) | $ 2,458,881 | $ (67,281) | $ 2,391,600 | ||||||
Selling, general and administrative expenses(2) | $ 194,829 | $ (28,828) | $ 601,093 | $ (76,021) | $ 525,072 | ||||||
Income from operations(3) | $ 114,028 | $ 81,584 | $ 378,745 | $ 564,677 | |||||||
Operating margin | 9.9 % | 7.1 % | 17.0 % | 10.7 % | 5.3 % | 16.0 % | |||||
Net income(4) | $ 97,204 | $ 63,876 | $ 319,529 | $ 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 | 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 | 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 |
(c) Given the uncertainty in the region introduced by |
(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 |
(f) On July 26, 2023, the Company completed the sale of its remaining operations in |
(g) One-time benefit related to the implementation of tax planning to disregard certain foreign subsidiaries as separate entities for |
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 | |||
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 | — % | 0.3 % | |
Revenue decline on an organic constant currency basis excluding the impact of the exit from | (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 | |||
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 | 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 |
(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 | |||
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 | 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 |
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SOURCE EPAM Systems, Inc.
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