Third quarter revenues of $377.5 million, up 26.6% year-over-year
GAAP Diluted EPS of $0.77 for the third quarter
Non-GAAP Diluted EPS of $0.92 for the third quarter
Newtown, PA -- November 2, 2017 -- EPAM Systems, Inc. (NYSE:EPAM), a leading global provider of digital platform engineering and software development services, today announced results for its third quarter ended September 30, 2017.
“Our third-quarter results were driven by strong demand from our clients, fueled by their need to stay competitive under constant disruption,” said Arkadiy Dobkin, CEO & President, EPAM. “Our focus on continuously improving and adding capabilities, and hiring and developing the best talent, has helped us keep pace with the next wave of emerging technologies and offer our clients the most valuable business solutions.”
Third Quarter 2017 Highlights
- Revenues increased to $377.5 million, a year-over-year increase of $79.2 million, or 26.6% due to strong broad-based demand across the industries we serve and geographies in which we operate. In constant currency, revenue was up 24.6% year-over-year;
- GAAP income from operations was $49.2 million, an increase of $15.3 million or 45.3% compared to $33.9 million in the third quarter of 2016;
- Non-GAAP income from operations was $62.6 million, an increase of $12.9 million, or 25.9%, compared to $49.7 million in the third quarter of 2016;
- Diluted earnings per share (EPS) on a GAAP basis was $0.77, an increase from $0.49 in the third quarter of 2016;
- Non-GAAP diluted EPS was $0.92, an increase from $0.76 in the third quarter of 2016 based on a weighted average share count of 55.2 million fully diluted shares outstanding.
Cash Flow from Operations
- Cash from operations was $124.0 million for the first nine months of 2017, up from $111.2 million for the first nine months of 2016;
- Cash and cash equivalents totaled $512.5 million as of September 30, 2017, an increase of $150.5 million or 41.6% from $362.0 million as of December 31, 2016.
- Total headcount was 24,547 as of September 30, 2017, an increase of 13.0% from 21,720 as of September 30, 2016;
- Total number of delivery professionals was 21,638 as of September 30, 2017, an increase of 13.5% from 19,070 as of September 30, 2016.
2017 Outlook - Full Year and Fourth Quarter
- Revenue growth for fiscal 2017 will now be at least 24%, after reflecting an updated foreign exchange assumption of an estimated 1% for currency tailwinds. We expect constant currency growth will continue to be at least 23%.
- We expect GAAP income from operations to continue to be in the range of 12% to 13% of revenue and non-GAAP income from operations to continue to be in the range of 16% to 17% of revenue.
- We now expect our GAAP effective tax rate to be approximately 16% and our non-GAAP effective tax rate to be approximately 21%. This reflects the adoption of the accounting pronouncement related to stock based compensation effective January 1st 2017.
- Based on stronger than previously expected second-half revenues, for earnings per share:
• We now expect GAAP diluted EPS will be at least $2.68 for the full year; and
• Non-GAAP diluted EPS will now be at least $3.41 for the full year based on an expected weighted average share count of 54.9 million fully diluted shares outstanding.
- Revenues will be at least $395 million for the fourth quarter, reflecting a year-over-year growth rate of at least 26% after estimating 3% for currency tailwinds, meaning expected constant currency growth will be at least 23%.
- For the fourth quarter, we expect GAAP income from operations to be in the range of 13% to 14% of revenue and non-GAAP income from operations to be in the range of 16.5% to 17.5% of revenue.
- We expect our GAAP effective tax rate to be approximately 17% and our non-GAAP effective tax rate to be approximately 20%.
- We expect GAAP diluted EPS will be at least $0.78 for the quarter, and non-GAAP diluted EPS will be at least $0.96 for the quarter based on an expected weighted average share count of 55.8 million fully diluted shares outstanding.
Conference Call Information
EPAM will host a conference call to discuss results on Thursday, November 2, 2017 at 8:00 a.m. Eastern time. The live conference call will be available by dialing +1 (877) 407-0784 or +1 (201) 689-8560 (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 http://investors.epam.com. A replay will be available approximately one hour after the call by dialing +1 (844) 512-2921 or +1 (412) 317-6671 (outside of the U.S.) and entering the conference ID 13670468. The replay will be available until November 16, 2017.
About EPAM Systems
Since 1993, EPAM Systems, Inc. (NYSE: EPAM), has leveraged its core engineering expertise to become a leading global product development and digital platform engineering services company. Through its “Engineering DNA” and innovative strategy, consulting, and design capabilities, EPAM works in collaboration with its customers to deliver innovative solutions that turn complex business challenges into real business opportunities. EPAM’s global teams serve customers in over 25 countries across North America, Europe, Asia and Australia. EPAM is a recognized market leader among independent research agencies and was ranked #8 in FORBES 25 Fastest Growing Public Tech Companies, as a top information technology services company on FORTUNE’S 100 Fastest Growing Companies, and as a top UK Digital Design & Build Agency.
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, communicated 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 expense, write-offs and recoveries, amortization of purchased intangible assets, goodwill impairment, legal settlements, foreign exchange gains and losses, acquisition-related costs, and the related effect on taxes. Management may also compare 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 according to 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 according to GAAP.
This press release includes 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. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. 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.