STOCK TITAN

EPAM Reports Strong Results for Second Quarter 2021 and Raises Full Year Outlook

Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Very Positive)
Tags
Rhea-AI Summary

EPAM Systems reported robust second-quarter results for 2021, with revenues of $881.4 million, up 39.4% year-over-year. GAAP income from operations surged 50.2% to $125.3 million, while diluted EPS rose 70.2% to $1.94. The company raised its full-year revenue growth outlook to at least 37%, expecting acquisitions to contribute approximately 3%. For Q3, projected revenues range between $957 million and $965 million, reflecting a year-over-year growth of around 47%.

Positive
  • Revenues increased by $249.0 million, or 39.4%, year-over-year.
  • GAAP income from operations rose by 50.2% to $125.3 million.
  • Diluted EPS on a GAAP basis increased by 70.2% to $1.94.
  • Full year revenue growth outlook raised to at least 37%.
  • Projected Q3 revenues expected to grow by approximately 47% year-over-year.
Negative
  • Cash provided by operating activities decreased to $81.7 million from $209.4 million year-over-year.
  • Cash, cash equivalents, and restricted cash decreased by 2.9% from the end of 2020.

NEWTOWN, Pa., Aug. 5, 2021 /PRNewswire/ -- EPAM Systems, Inc. (NYSE: EPAM), a leading global provider of digital platform engineering and software development services, today announced results for its second quarter ended June 30, 2021.

"Our strong second quarter results demonstrated EPAM's ability to quickly adapt to the changing market conditions, accelerating the rate at which we solve our clients' most complex digital transformation and technology modernization challenges," said Arkadiy Dobkin, CEO & President, EPAM. "To continue doing that, we plan to further expand our capabilities and our global talent footprint – deepening our customer relationships and diversifying our solutions portfolio – to deliver value for our clients and ourselves." 

Second Quarter 2021 Highlights

  • Revenues increased to $881.4 million, a year-over-year increase of $249.0 million, or 39.4%. On a constant currency basis, revenues were up 35.9% compared to the second quarter of 2020. Acquisitions completed in the last twelve months contributed 3.1% to revenue growth in the quarter;
  • GAAP income from operations was $125.3 million, an increase of $41.8 million, or 50.2%, compared to $83.4 million in the second quarter of 2020;
  • Non-GAAP income from operations was $155.2 million, an increase of $47.0 million, or 43.5%, compared to $108.2 million in the second quarter of 2020;
  • Diluted earnings per share ("EPS") on a GAAP basis was $1.94, an increase of $0.80, or 70.2%, compared to $1.14 in the second quarter of 2020; and
  • Non-GAAP diluted EPS was $2.05, an increase of $0.59, or 40.4%, compared to $1.46 in the second quarter of 2020.

Cash Flow and Other Metrics

  • Cash provided by operating activities was $81.7 million for the first six months of 2021, compared to $209.4 million for the first six months of 2020;
  • Cash, cash equivalents and restricted cash totaled $1,285.0 million as of June 30, 2021, a decrease of $38.5 million, or 2.9%, from $1,323.5 million as of December 31, 2020; and
  • Total headcount was approximately 47,850 as of June 30, 2021. Included in this number were approximately 42,800 delivery professionals, an increase of 32.6% from June 30, 2020.

2021 Outlook - Full Year and Third Quarter

Full Year

Given the strength of the first half of 2021 combined with a strong demand environment, EPAM is raising its full year outlook:

  • The Company now expects revenue growth for 2021 to be at least 37% on a GAAP basis, which includes a favorable foreign currency translation impact of approximately 2%. Revenue growth on a constant currency basis will now be at least 35%. The Company expects acquisitions will contribute approximately 3% to reported revenues;
  • For the full year, EPAM expects GAAP income from operations to be in the range of 13.5% to 14.5% of revenues and non-GAAP income from operations to now be in the range of 17% to 18% of revenues;
  • The Company expects its GAAP effective tax rate to now be approximately 11% and its non-GAAP effective tax rate to be approximately 23%; and
  • EPAM expects GAAP diluted EPS to now be in the range of $7.70 to $7.89 for the year, and non-GAAP diluted EPS to now be in the range of $8.25 to $8.44 for the year. The Company expects weighted average diluted shares outstanding for the year of 59.0 million.

Third Quarter

EPAM expects the following for the third quarter:

  • Revenues will be in the range of $957 million to $965 million on a GAAP basis for the third quarter reflecting a year-over-year growth rate of approximately 47% at the mid-point of the range. The Company expects foreign currency translation will have an approximate 1% favorable impact on year-over-year reported revenue growth and expects year-over-year revenue growth on a constant currency basis to be approximately 46% at the mid-point of the range. The Company expects acquisitions will contribute approximately 4.5% to reported revenues; 
  • For the third quarter, EPAM expects GAAP income from operations to be in the range of 13.5% to 14.5% of revenues and non-GAAP income from operations to be in the range of 17% to 18% of revenues;
  • The Company expects its GAAP effective tax rate to be approximately 13% and its non-GAAP effective tax rate to be approximately 23%; and
  • EPAM expects GAAP diluted EPS will be in the range of $1.89 to $1.96 for the quarter, and non-GAAP diluted EPS will be in the range of $2.15 to $2.22 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter of 59.2 million.

Conference Call Information

EPAM will host a conference call to discuss the results on Thursday, August 5, 2021 at 8:00 a.m. EDT. The live conference call will be available by dialing +1 (844) 707-0662 or +1 (703) 318-2250 (outside of the U.S.). A webcast of the conference call can be accessed at the Investor Relations section of the Company's website at https://investors.epam.com. A replay will be available approximately one hour after the call by dialing +1 (855) 859-2056 or +1 (404) 537-3406 (outside of the U.S.) and entering the conference ID 9890089. The replay will be available until August 12, 2021.

About EPAM Systems

Since 1993, EPAM Systems, Inc. (NYSE: EPAM) has leveraged its software engineering expertise to become a leading global product development, digital platform engineering, and top digital and product design agency. Through its 'Engineering DNA' and innovative strategy, consulting, and design capabilities, EPAM works in collaboration with its customers to deliver next-gen solutions that turn complex business challenges into real business outcomes. EPAM's global teams serve customers in more than 35 countries across North America, Europe, Asia and Australia. As a recognized market leader in multiple categories among top global independent research agencies, EPAM was one of only four technology companies to appear on Forbes 25 Fastest Growing Public Tech Companies list every year of publication since 2013 and ranked as the top IT services company on Fortune's 100 Fastest-Growing Companies list in 2019 and 2020. Learn more at www.epam.com and follow us on Twitter @EPAMSYSTEMS 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 intangible assets, impairment of assets, 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 operating results on a basis of "constant currency," which is also a non-GAAP financial measure. This measure excludes the effect of foreign currency exchange rate fluctuations by translating the current period revenues and expenses into U.S. dollars at the weighted average exchange rates of the 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, the anticipated impact of the COVID-19 pandemic and civil unrest in the geographies where we conduct business and where our operations are located and the effect that these events may have on our revenues, operations, access to capital, profitability and customer demand. 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, the discussion in the Company's Quarterly Report on Form 10-Q, filed on or after the date of this press release,  particularly under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" 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 in light of 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

June 30,


Six Months Ended

June 30,


2021


2020


2021


2020

Revenues

$

881,366



$

632,383



$

1,662,141



$

1,283,742


Operating expenses:








Cost of revenues (exclusive of depreciation and amortization)

583,728



419,540



1,103,056



843,342


Selling, general and administrative expenses

151,910



114,191



288,299



239,299


Depreciation and amortization expense

20,454



15,226



38,261



30,166


Income from operations

125,274



83,426



232,525



170,935


Interest and other income, net

2,580



1,817



7,954



4,203


Foreign exchange loss

(4,693)



(9,167)



(2,394)



(2,643)


Income before provision for income taxes

123,161



76,076



238,085



172,495


Provision for income taxes

8,490



9,452



14,368



20,306


Net income

$

114,671



$

66,624



$

223,717



$

152,189










Net income per share:








Basic

$

2.03



$

1.20



$

3.97



$

2.74


Diluted

$

1.94



$

1.14



$

3.80



$

2.62


Shares used in calculation of net income per share:








Basic

56,463



55,701



56,317



55,494


Diluted

59,011



58,246



58,896



58,194





EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)



As of

June 30,

2021


As of

December 31,

2020

Assets




Current assets




Cash and cash equivalents

$

1,283,233



$

1,322,143


Short-term investments



60,007


Trade receivables and contract assets, net of allowance of $7,647 and $4,886, respectively

682,236



501,062


Prepaid and other current assets

72,549



29,570


Total current assets

2,038,018



1,912,782


Property and equipment, net

173,545



169,533


Operating lease right-of-use assets, net

196,572



228,672


Intangible assets, net

65,130



51,975


Goodwill

335,477



211,956


Deferred tax assets

96,115



92,454


Other noncurrent assets

56,758



53,960


Total assets

$

2,961,615



$

2,721,332






Liabilities




Current liabilities




Accounts payable

$

9,712



$

10,189


Accrued compensation and benefits expenses

309,328



294,709


Accrued expenses and other current liabilities

109,148



79,690


Short-term debt

25,000




Income taxes payable, current

16,939



20,603


Operating lease liabilities, current

52,821



60,759


Total current liabilities

522,948



465,950


Long-term debt

29



25,038


Income taxes payable, noncurrent

41,012



43,448


Operating lease liabilities, noncurrent

151,985



180,604


Other noncurrent liabilities

32,973



23,274


Total liabilities

748,947



738,314


Commitments and contingencies




Stockholders' equity




Common stock, $0.001 par value; 160,000 shares authorized; 56,633 and 56,128 shares issued, 56,613 and 56,108 shares outstanding at June 30, 2021 and December 31, 2020, respectively

57



56


Additional paid-in capital

670,264



660,771


Retained earnings

1,571,597



1,347,880


Treasury stock

(177)



(177)


Accumulated other comprehensive loss

(29,073)



(25,512)


Total stockholders' equity

2,212,668



1,983,018


Total liabilities and stockholders' equity

$

2,961,615



$

2,721,332





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 as reported on a GAAP basis to revenue growth on a constant currency basis is presented in the table below:



Three Months Ended

June 30, 2021


Six Months Ended

June 30, 2021

Revenue growth as reported

39.4

%


29.5

%

Foreign exchange rates impact

(3.5)

%


(2.7)

%

Revenue growth on a constant currency basis(1)

35.9

%


26.8

%



(1)

Constant currency revenue results are calculated by translating current period revenues in local currency into U.S. dollars at the weighted average exchange rates of the comparable prior period.



Reconciliation of various income statement amounts from GAAP to non-GAAP for the three and six months ended June 30, 2021 and 2020:



Three Months Ended

June 30, 2021


Six Months Ended

June 30, 2021


GAAP


Adjustments


Non-GAAP


GAAP


Adjustments


Non-GAAP

Cost of revenues (exclusive of depreciation and amortization)(2)

$

583,728



$

(11,261)



$

572,467



$

1,103,056



$

(22,378)



$

1,080,678


Selling, general and administrative expenses(3)

$

151,910



$

(14,744)



$

137,166



$

288,299



$

(30,122)



$

258,177


Income from operations(4)

$

125,274



$

29,966



$

155,240



$

232,525



$

59,601



$

292,126


Operating margin

14.2

%


3.4

%


17.6

%


14.0

%


3.6

%


17.6

%

Net income(5)

$

114,671



$

6,467



$

121,138



$

223,717



$

3,621



$

227,338


Diluted earnings per share

$

1.94





$

2.05



$

3.80





$

3.86




Three Months Ended

June 30, 2020


Six Months Ended

June 30, 2020


GAAP


Adjustments


Non-GAAP


GAAP


Adjustments


Non-GAAP

Cost of revenues (exclusive of depreciation and amortization)(2)

$

419,540



$

(8,958)



$

410,582



$

843,342



$

(12,942)



$

830,400


Selling, general and administrative expenses(3)

$

114,191



$

(12,828)



$

101,363



$

239,299



$

(23,521)



$

215,778


Income from operations(4)

$

83,426



$

24,780



$

108,206



$

170,935



$

42,592



$

213,527


Operating margin

13.2

%


3.9

%


17.1

%


13.3

%


3.3

%


16.6

%

Net income(5)

$

66,624



$

18,362



$

84,986



$

152,189



$

15,661



$

167,850


Diluted earnings per share

$

1.14





$

1.46



$

2.62





$

2.88



Items (2) through (5) above are detailed in the table below with the specific cross-reference noted in the appropriate item.



Three Months Ended



Six Months Ended



June 30,



June 30,



2021



2020



2021



2020


Stock-based compensation expense

$

11,261



$

8,858



$

22,378



$

12,942


Total adjustments to GAAP cost of revenues(2)

$

11,261



$

8,958



$

22,378



$

12,942


Stock-based compensation expenses

$

12,637



$

10,481



$

26,073



$

18,378


Other acquisition-related expenses

$

2,099



$

148



$

4,032



$

616


One-time charges

$

8



$

2,199



$

17



$

4,527


Total adjustments to GAAP selling, general and administrative expenses(3)

$

14,744



$

12,828



$

30,122



$

23,521


Amortization of acquired intangible assets

$

3,961



$

2,994



$

7,101



$

6,129


Total adjustments to GAAP income from operations(4)

$

29,966



$

24,780



$

59,601



$

42,592


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

$

(692)



$

(1,000)



$

(5,636)



$

(1,438)


Impairment of investment

$



$

313



$



$

313


Foreign exchange loss

$

4,693



$

9,167



$

2,394



$

2,643


Provision for income taxes:








Tax effect on non-GAAP adjustments

$

(6,525)



$

(6,769)



$

(10,259)



$

(8,623)


Excess tax benefits related to stock-based compensation

$

(20,975)



$

(8,129)



$

(42,479)



$

(19,826)


Total adjustments to GAAP net income(5)

$

6,467



$

18,362



$

3,621



$

15,661





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 growth on a constant currency basis is presented in the table below:



Third Quarter 2021

(at mid-point of range)


Full Year 2021

(at least)

Revenue growth

47

%


37

%

Foreign exchange rates impact

(1)

%


(2)

%

Revenue growth on a constant currency basis (6)

46

%


35

%



(6)

Constant currency revenue results are calculated by translating expected revenues in local currency into U.S. dollars at the weighted average exchange rates of the comparable prior period.



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



Third Quarter 2021


Full Year 2021

GAAP income from operations as a percentage of revenues

13.5% to 14.5%



13.5% to 14.5%


Stock-based compensation expenses

2.9

%


2.8

%

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

1.3

%


1.3

%

Included in selling, general and administrative expenses

1.6

%


1.5

%

Other acquisition-related expenses

0.1

%


0.2

%

Amortization of purchased intangible assets

0.5

%


0.5

%

Non-GAAP income from operations as a percentage of revenues

17% to 18%



17% to 18%




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



Third Quarter 2021


Full Year 2021

GAAP effective tax rate (approximately)

13

%


11

%

Tax effect on non-GAAP adjustments

3.6

%


3.2

%

 Excess tax benefits related to stock-based compensation

6.4

%


8.8

%

Non-GAAP effective tax rate (approximately)

23

%


23

%



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



Third Quarter 2021


Full Year 2021

GAAP diluted earnings per share

$1.89 to $1.96



$7.70 to $7.89


Stock-based compensation expenses

0.47



1.72


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

0.22



0.80


Included in selling, general and administrative expenses

0.25



0.92


Other acquisition-related expenses

0.03



0.12


Amortization of purchased intangible assets

0.09



0.31


Change in fair value of contingent consideration



(0.10)


Foreign exchange loss

0.03



0.09


Provision for income taxes:




     Tax effect on non-GAAP adjustments

(0.13)



(0.42)


     Excess tax benefits related to stock-based compensation

(0.23)



(1.17)


Non-GAAP diluted earnings per share

$2.15 to $2.22



$8.25 to $8.44


 

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/epam-reports-strong-results-for-second-quarter-2021-and-raises-full-year-outlook-301348998.html

SOURCE EPAM Systems, Inc.

FAQ

What were EPAM's second quarter 2021 revenue figures?

EPAM reported revenues of $881.4 million for the second quarter of 2021.

What is the projected revenue growth for EPAM in 2021?

EPAM expects revenue growth for 2021 to be at least 37%.

How much did EPAM's diluted earnings per share increase in Q2 2021?

Diluted EPS on a GAAP basis increased by 70.2% to $1.94 in Q2 2021.

What are EPAM's revenue projections for the third quarter of 2021?

EPAM expects revenues in the range of $957 million to $965 million for Q3 2021.

What was the impact of acquisitions on EPAM's Q2 revenue growth?

Acquisitions completed in the last twelve months contributed 3.1% to EPAM's revenue growth in Q2 2021.

EPAM SYSTEMS, INC.

NYSE:EPAM

EPAM Rankings

EPAM Latest News

EPAM Stock Data

13.89B
54.79M
3.39%
94.26%
1.22%
Information Technology Services
Services-computer Programming Services
Link
United States of America
NEWTOWN