Fourth Quarter 2024
- Revenues of $1.248 billion,
up 7.9% year-over-year
- GAAP Income from Operations was 10.9% of revenues and
Non-GAAP Income from Operations was 16.7% of revenues
- GAAP Diluted EPS of $1.80,
an increase of 8.4%, and Non-GAAP Diluted EPS of $2.84, an increase of 3.3% on a year-over-year
basis
Full Year 2024
- Revenues of $4.728 billion,
up 0.8% year-over-year
- GAAP Income from Operations was 11.5% of revenues and
Non-GAAP Income from Operations was 16.5% of revenues
- GAAP Diluted EPS of $7.84,
an increase of 11.0%, and Non-GAAP Diluted EPS of $10.86, an increase of 2.5% on a year-over-year
basis
NEWTOWN,
Pa., Feb. 20, 2025 /PRNewswire/ -- EPAM
Systems, Inc. (NYSE: EPAM), a leading digital transformation
services and product engineering company, today announced results
for its fourth quarter and full year ended December 31, 2024.
"After navigating a dynamic year, we are pleased to report a
strong fourth quarter. We continued to build sequential momentum,
and saw a return to year-over-year organic growth, while we
simultaneously accelerated our global strategy with the
acquisitions of NEORIS and First Derivative," said Arkadiy Dobkin, CEO & President, EPAM. "As
we look ahead, we believe 2025 will be a year of transition, as
clients balance their cost focus with the need to accelerate their
transformational and GenAI journeys. We see a strong need to
continue to invest in our talent, advanced technological and
consulting capabilities, and the integration of recent acquisitions
to best position ourselves to capture market share once demand
returns to more normalized levels."
Fourth Quarter 2024 Highlights
- Revenues increased to $1.248
billion, a year-over-year increase of $91.1 million, or 7.9%. On an organic constant
currency basis, revenues grew 1.0% compared to the fourth quarter
of 2023;
- GAAP income from operations was $136.5
million, an increase of $14.0
million, or 11.4%, compared to $122.5
million in the fourth quarter of 2023;
- Non-GAAP income from operations was $208.2 million, an increase of $7.8 million, or 3.9%, compared to $200.4 million in the fourth quarter of
2023;
- Diluted earnings per share ("EPS") on a GAAP basis was
$1.80, an increase of $0.14, or 8.4%, compared to $1.66 in the fourth quarter of 2023;
- Non-GAAP diluted EPS was $2.84,
an increase of $0.09, or 3.3%,
compared to $2.75 in the fourth
quarter of 2023;
- Completed the acquisition of NEORIS creating a competitive
offering for clients across Latin
America and in Spanish- and Portuguese-speaking countries,
while broadening EPAM's global and nearshore delivery capabilities
across Latin America and
Europe; and
- Completed the acquisition of First Derivative strengthening
EPAM's financial services consulting and delivery capabilities in
North America, Europe and APAC and expanding our client
portfolio in financial services.
Full Year 2024 Highlights
- Revenues increased to $4.728
billion, a year-over-year increase of $37.4 million, or 0.8%. On an organic constant
currency basis, revenues declined 1.7% year-over-year;
- We recorded a benefit of $68.8
million for research & development government incentives
in Poland. Specifically,
$23.5 million of the benefit related
to activities performed during 2023 and $45.3 million of the benefit related to
activities performed during the full year of 2024. This benefit was
included as a reduction to our Cost of revenues. 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 continuing in the future;
- GAAP income from operations was $544.6
million, an increase of $43.3
million, or 8.6%, compared to $501.2
million in 2023. GAAP income from operations benefited from
the recognition of $68.8 million of
incentives related to research and development activities performed
in Poland and was negatively
impacted by $31.3 million of costs
incurred in connection with the Company's Cost Optimization
Programs;
- Non-GAAP income from operations was $779.2 million, an increase of $14.1 million, or 1.8%, compared to $765.1 million in 2023. Non-GAAP income from
operations benefited from the recognition of $45.3 million of incentives related to research
and development activities performed in Poland in 2024;
- Diluted EPS on a GAAP basis was $7.84, an increase of $0.78, or 11.0%, compared to $7.06 in 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; and
- Non-GAAP diluted EPS was $10.86,
an increase of $0.27, or 2.5%,
compared to $10.59 in 2023. EPS on a
non-GAAP basis was positively impacted by the recognition of the
Polish incentives for activities performed during the full year of
2024, which increased income from operations. However, this benefit
was partially offset by an increase to the effective tax rate.
Cash Flow and Other Metrics
- Cash provided by operating activities was $130.3 million in the fourth quarter of 2024, a
decrease from $171.4 million in
the fourth quarter of 2023; and was $559.2 million in 2024, a decrease from
$562.6 million in 2023;
- The Company repurchased 53 thousand shares of its common stock
for $13.0 million during the
fourth quarter of 2024 under its share repurchase program. During
the year ended December 31, 2024, the Company repurchased
1,854 thousand shares of its common stock for $398.0 million under its share repurchase
programs. As of December 31, 2024, the Company had
$437.0 million remaining under
its share repurchase authorization;
- Cash, cash equivalents and restricted cash totaled $1.290 billion as of December 31, 2024, a
decrease of $752.7 million, or
36.8%, from $2.043 billion as of
December 31, 2023 largely the result of payments for the
acquisitions of NEORIS and First Derivative; and
- Total headcount was approximately 61,200 as of
December 31, 2024. Included in this number were approximately
55,100 delivery professionals, an increase of 16.3% from
December 31, 2023.
2025 Outlook - Full Year and First Quarter
Full Year
EPAM expects the following for the full year:
- The Company expects the year-over-year revenue growth rate to
be in the range of 10.0% to 14.0% for 2025. The Company
expects the year-over-year revenue growth rate on an organic
constant currency basis to be in the range of 1.0% to 5.0%;
- For the full year, EPAM expects GAAP income from operations to
be in the range of 9.0% to 10.0% of revenues and non-GAAP income
from operations to be in the range of 14.5% to 15.5% of
revenues;
- The Company expects its GAAP effective tax rate and its
non-GAAP effective tax rate to both be approximately 24.0%;
and
- EPAM expects GAAP diluted EPS will be in the range of
$6.78 to $7.08 for the year, and non-GAAP diluted EPS
will be in the range of $10.45 to
$10.75 for the year. The Company
expects weighted average diluted shares outstanding for the year of
58.1 million.
First Quarter
EPAM expects the following for the first quarter:
- The Company expects revenues will be in the range of
$1.275 billion to $1.290 billion for the first quarter reflecting a
year-over-year increase of 10.0% at the midpoint of the range. The
Company expects year-over-year revenue growth on an organic
constant currency basis to be approximately flat at the midpoint of
the range;
- For the first quarter, EPAM expects GAAP income from operations
to be in the range of 6.5% to 7.5% of revenues and non-GAAP income
from operations to be in the range of 12.5% to 13.5% of
revenues;
- The Company expects its GAAP effective tax rate to be
approximately 19% and its non-GAAP effective tax rate to be
approximately 24%; and
- EPAM expects GAAP diluted EPS will be in the range of
$1.27 to $1.37 for the quarter, and non-GAAP diluted
EPS will be in the range of $2.22 to
$2.32 for the quarter. The Company
expects weighted average diluted shares outstanding for the quarter
of 57.7 million.
Conference Call Information
EPAM will host a conference call to discuss results on Thursday,
February 20, 2025 at 8:00 a.m.
EST. 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 leverage AI and GenAI to deliver transformative solutions
that accelerate our clients' digital innovation and enhance their
competitive edge. Through platforms like EPAM AI/RUN™ and
initiatives like DIALX Lab, we integrate advanced AI technologies
into tailored business strategies, driving significant industry
impact and fostering continuous innovation.
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 Most Loved 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 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," which is
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, the decision to exit
from Russia by removing revenues
from clients located in Russia in
both the current period and prior period of comparison, and foreign
currency exchange rate fluctuations by translating current period
revenues 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, 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 customer 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
|
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|
(Unaudited)
|
|
(In thousands, except per share
data)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Revenues
|
$
1,248,351
|
|
$
1,157,257
|
|
$
4,727,940
|
|
$
4,690,540
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization)
|
868,314
|
|
797,633
|
|
3,277,497
|
|
3,256,514
|
|
Selling, general and
administrative expenses
|
216,969
|
|
213,972
|
|
816,300
|
|
815,065
|
|
Depreciation and
amortization expense
|
26,556
|
|
23,158
|
|
89,559
|
|
91,800
|
|
Loss on sale of
business
|
—
|
|
—
|
|
—
|
|
25,922
|
|
Income from
operations
|
136,512
|
|
122,494
|
|
544,584
|
|
501,239
|
|
Interest and other
income, net
|
6,451
|
|
13,962
|
|
46,876
|
|
51,124
|
|
Foreign exchange
loss
|
(5,632)
|
|
(9,053)
|
|
(7,048)
|
|
(15,778)
|
|
Income before
provision for income taxes
|
137,331
|
|
127,403
|
|
584,412
|
|
536,585
|
|
Provision for income
taxes
|
34,032
|
|
29,849
|
|
129,879
|
|
119,502
|
|
Net
income
|
$ 103,299
|
|
$
97,554
|
|
$ 454,533
|
|
$ 417,083
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
Basic
|
$
1.82
|
|
$
1.69
|
|
$
7.93
|
|
$
7.21
|
|
Diluted
|
$
1.80
|
|
$
1.66
|
|
$
7.84
|
|
$
7.06
|
|
Shares used in
calculation of net income per share:
|
|
|
|
|
|
|
|
|
Basic
|
56,818
|
|
57,767
|
|
57,288
|
|
57,829
|
|
Diluted
|
57,435
|
|
58,913
|
|
57,983
|
|
59,085
|
|
EPAM SYSTEMS,
INC. AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
(Unaudited)
|
|
(In thousands,
except par value)
|
|
|
As of
December
31,
2024
|
|
As of
December
31,
2023
|
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
1,286,267
|
|
$
2,036,235
|
|
Trade receivables and
contract assets, net of allowance of $5,612 and $11,864,
respectively
|
1,002,175
|
|
897,032
|
|
Short-term
investments
|
1,690
|
|
60,739
|
|
Prepaid and other
current assets
|
136,116
|
|
97,355
|
|
Total current
assets
|
2,426,248
|
|
3,091,361
|
|
Property and equipment,
net
|
207,667
|
|
235,053
|
|
Operating lease
right-of-use assets, net
|
128,244
|
|
134,898
|
|
Intangible assets,
net
|
436,418
|
|
71,118
|
|
Goodwill
|
1,181,575
|
|
562,459
|
|
Deferred tax
assets
|
269,799
|
|
197,901
|
|
Other noncurrent
assets
|
100,522
|
|
59,575
|
|
Total
assets
|
$
4,750,473
|
|
$
4,352,365
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
$
44,702
|
|
$
31,992
|
|
Accrued compensation
and benefits expenses
|
484,952
|
|
412,747
|
|
Accrued expenses and
other current liabilities
|
201,356
|
|
124,823
|
|
Income taxes payable,
current
|
50,395
|
|
38,812
|
|
Operating lease
liabilities, current
|
39,634
|
|
36,558
|
|
Total current
liabilities
|
821,039
|
|
644,932
|
|
Long-term
debt
|
25,194
|
|
26,126
|
|
Operating lease
liabilities, noncurrent
|
98,426
|
|
109,261
|
|
Deferred tax
liabilities, noncurrent
|
92,362
|
|
8,744
|
|
Other noncurrent
liabilities
|
82,301
|
|
91,832
|
|
Total
liabilities
|
1,119,322
|
|
880,895
|
|
Commitments and
contingencies
|
|
|
|
|
Equity
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Common stock, $0.001
par value; 160,000 authorized; 56,869 shares issued and outstanding
at December 31, 2024, and 57,787 shares issued and outstanding at
December 31, 2023
|
57
|
|
58
|
|
Additional paid-in
capital
|
1,190,222
|
|
1,008,766
|
|
Retained
earnings
|
2,555,796
|
|
2,501,107
|
|
Accumulated other
comprehensive loss
|
(116,864)
|
|
(39,040)
|
|
Total EPAM Systems,
Inc. stockholders' equity
|
3,629,211
|
|
3,470,891
|
|
Noncontrolling interest
in consolidated subsidiaries
|
1,940
|
|
579
|
|
Total
equity
|
3,631,151
|
|
3,471,470
|
|
Total liabilities
and equity
|
$
4,750,473
|
|
$
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 as reported on a GAAP basis to revenue
growth/(decline) on an organic constant currency basis is presented
in the table below:
|
|
|
Three Months
Ended
December 31, 2024
|
|
Year Ended
December 31, 2024
|
|
Revenue growth as
reported
|
7.9 %
|
|
0.8 %
|
|
Foreign exchange rates
impact
|
0.4 %
|
|
(0.1) %
|
|
Inorganic revenue
growth
|
(7.3) %
|
|
(2.7) %
|
|
Impact of exit from
Russia
|
— %
|
|
0.3 %
|
|
Revenue
growth/(decline) on an organic constant currency
basis
|
1.0 %
|
|
(1.7) %
|
|
Reconciliation of
various income statement amounts from GAAP to non-GAAP for the
three months and years ended December 31, 2024 and 2023:
|
|
|
Three Months Ended
December 31, 2024
|
|
Year Ended December
31, 2024
|
|
GAAP
|
|
Adjustments
|
|
Non-GAAP
|
|
GAAP
|
|
Adjustments
|
|
Non-GAAP
|
|
Cost of revenues
(exclusive of depreciation and
amortization)(1)
|
$ 868,314
|
|
$ (22,040)
|
|
$ 846,274
|
|
$
3,277,497
|
|
$
(59,821)
|
|
$
3,217,676
|
|
Selling, general and
administrative expenses(2)
|
$ 216,969
|
|
$ (37,637)
|
|
$ 179,332
|
|
$
816,300
|
|
$ (145,329)
|
|
$
670,971
|
|
Income from
operations(3)
|
$ 136,512
|
|
$
71,675
|
|
$ 208,187
|
|
$
544,584
|
|
$
234,625
|
|
$
779,209
|
|
Operating
margin
|
10.9 %
|
|
5.8 %
|
|
16.7 %
|
|
11.5 %
|
|
5.0 %
|
|
16.5 %
|
|
Net
income(4)
|
$ 103,299
|
|
$
60,066
|
|
$ 163,365
|
|
$
454,533
|
|
$
175,430
|
|
$
629,963
|
|
Diluted earnings per
share
|
$ 1.80
|
|
|
|
$ 2.84
|
|
$
7.84
|
|
|
|
$
10.86
|
|
Three Months Ended
December 31, 2023
|
|
Year Ended December
31, 2023
|
|
GAAP
|
|
Adjustments
|
|
Non-GAAP
|
|
GAAP
|
|
Adjustments
|
|
Non-GAAP
|
|
Cost of revenues
(exclusive of depreciation and
amortization)(1)
|
$ 797,633
|
|
$ (22,183)
|
|
$
775,450
|
|
$
3,256,514
|
|
$
(89,464)
|
|
$
3,167,050
|
|
Selling, general and
administrative expenses(2)
|
$ 213,972
|
|
$ (49,747)
|
|
$
164,225
|
|
$
815,065
|
|
$ (125,768)
|
|
$
689,297
|
|
Income from
operations(3)
|
$ 122,494
|
|
$
77,939
|
|
$
200,433
|
|
$
501,239
|
|
$
263,871
|
|
$
765,110
|
|
Operating
margin
|
10.6 %
|
|
6.7 %
|
|
17.3 %
|
|
10.7 %
|
|
5.6 %
|
|
16.3 %
|
|
Net
income(4)
|
$
97,554
|
|
$
64,211
|
|
$
161,765
|
|
$
417,083
|
|
$
208,555
|
|
$
625,638
|
|
Diluted earnings per
share
|
$ 1.66
|
|
|
|
$ 2.75
|
|
$
7.06
|
|
|
|
$
10.59
|
|
Items (1) through (4)
above are detailed in the following table with the specific
cross-reference noted in the appropriate item.
|
|
Three Months
Ended
December
31,
|
|
Year
Ended
December
31,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Stock-based
compensation expenses
|
$ 22,074
|
|
$ 19,228
|
|
$ 80,944
|
|
$ 68,797
|
|
Poland R&D
incentives(a)
|
(556)
|
|
—
|
|
(23,473)
|
|
—
|
|
Humanitarian support
in Ukraine(b)
|
522
|
|
2,955
|
|
2,350
|
|
11,252
|
|
Unbilled business
continuity resources(c)
|
—
|
|
—
|
|
—
|
|
9,415
|
|
Total adjustments to
GAAP cost of revenues(1)
|
22,040
|
|
22,183
|
|
59,821
|
|
89,464
|
|
Stock-based
compensation expenses
|
22,624
|
|
18,966
|
|
86,353
|
|
78,933
|
|
Cost Optimization
charges(d)
|
4,837
|
|
27,936
|
|
31,270
|
|
35,052
|
|
Other
acquisition-related expenses
|
7,031
|
|
275
|
|
15,808
|
|
2,723
|
|
Humanitarian support
in Ukraine(b)
|
3,127
|
|
836
|
|
10,821
|
|
6,145
|
|
Geographic
repositioning(e)
|
(4)
|
|
916
|
|
849
|
|
1,793
|
|
One-time
charges
|
22
|
|
818
|
|
228
|
|
1,122
|
|
Total adjustments to
GAAP selling, general and administrative expenses(2)
|
37,637
|
|
49,747
|
|
145,329
|
|
125,768
|
|
Amortization of
purchased intangible assets
|
11,998
|
|
6,009
|
|
29,475
|
|
22,717
|
|
Loss on sale of
business(f)
|
—
|
|
—
|
|
—
|
|
25,922
|
|
Total adjustments to
GAAP income from operations(3)
|
71,675
|
|
77,939
|
|
234,625
|
|
263,871
|
|
Foreign exchange
loss
|
5,632
|
|
9,053
|
|
7,048
|
|
15,778
|
|
Change in fair value
of contingent consideration included in Interest and other income,
net
|
1,673
|
|
1,000
|
|
5,700
|
|
2,818
|
|
One-time
benefits/(charges) included in Interest and other income,
net
|
(1,331)
|
|
700
|
|
(3,143)
|
|
700
|
|
Provision for income
taxes:
|
|
|
|
|
|
|
|
|
Tax effect on non-GAAP
adjustments
|
(15,640)
|
|
(19,755)
|
|
(44,522)
|
|
(53,815)
|
|
Excess tax benefits
related to stock-based compensation
|
(1,943)
|
|
(4,726)
|
|
(22,448)
|
|
(19,829)
|
|
Net discrete benefit
from tax planning(g)
|
—
|
|
—
|
|
(1,830)
|
|
(968)
|
|
Total adjustments to
GAAP net income(4)
|
$ 60,066
|
|
$ 64,211
|
|
$
175,430
|
|
$
208,555
|
|
|
|
(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 customers 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 year ended December 31, 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 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 growth
on an organic constant currency basis is presented in the table
below:
|
|
|
First Quarter
2025
|
|
Full Year
2025
|
|
(at midpoint
of
range)
|
|
|
|
Revenue
growth
|
10.0 %
|
|
10.0% to
14.0%
|
|
Foreign exchange rates
impact
|
1.4 %
|
|
0.9 %
|
|
Inorganic revenue
growth
|
(11.4) %
|
|
(9.9) %
|
|
Revenue growth on
an organic constant currency basis
|
— %
|
|
1.0% to
5.0%
|
|
Reconciliation of
expected GAAP to non-GAAP income from operations as a percentage of
revenues is presented in the table below:
|
|
|
First Quarter
2025
|
|
Full Year
2025
|
|
GAAP income from
operations as a percentage of revenues
|
6.5% to
7.5%
|
|
9.0% to
10.0%
|
|
Stock-based
compensation expenses
|
3.9 %
|
|
3.7 %
|
|
Included in cost of
revenues (exclusive of depreciation and
amortization)
|
1.9 %
|
|
1.8 %
|
|
Included in
selling, general and administrative expenses
|
2.0 %
|
|
1.9 %
|
|
Humanitarian support in
Ukraine(b)
|
0.2 %
|
|
0.3 %
|
|
Cost Optimization
charges(d)
|
0.5 %
|
|
0.2 %
|
|
Amortization of
acquired intangible assets
|
1.4 %
|
|
1.3 %
|
|
Non-GAAP income
from operations as a percentage of revenues(h)
|
12.5% to
13.5%
|
|
14.5% to
15.5%
|
|
|
(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:
|
|
|
First Quarter
2025
|
|
Full Year
2025
|
|
GAAP effective tax
rate (approximately)
|
19 %
|
|
24 %
|
|
Excess tax benefits
related to stock-based compensation
|
7.5 %
|
|
2.6 %
|
|
Tax effect on non-GAAP
adjustments
|
(2.5) %
|
|
(2.6) %
|
|
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:
|
|
|
First Quarter
2025
|
|
Full Year
2025
|
|
GAAP diluted
earnings per share
|
$1.27 to
$1.37
|
|
$6.78 to
$7.08
|
|
Stock-based
compensation expenses
|
0.87
|
|
3.33
|
|
Included in cost of
revenues (exclusive of depreciation and
amortization)
|
0.42
|
|
1.61
|
|
Included in
selling, general and administrative expenses
|
0.45
|
|
1.72
|
|
Humanitarian support in
Ukraine(b)
|
0.07
|
|
0.25
|
|
Cost Optimization
charges(d)
|
0.10
|
|
0.12
|
|
Amortization of
acquired intangible assets
|
0.31
|
|
1.17
|
|
Foreign exchange
loss
|
0.02
|
|
0.07
|
|
Provision for income
taxes:
|
|
|
|
|
Tax effect on non-GAAP
adjustments
|
(0.29)
|
|
(1.04)
|
|
Excess tax benefits related
to stock-based compensation
|
(0.13)
|
|
(0.23)
|
|
Non-GAAP diluted
earnings per share(h)
|
$2.22 to
$2.32
|
|
$10.45 to
$10.75
|
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SOURCE EPAM Systems, Inc.
