News Release

« Back
Printer Friendly Version View printer-friendly version
EPAM Reports Results for Fourth Quarter and Full Year 2016

Fourth quarter revenues of $313.5 million, up 20.5% year-over-year 
Annual revenues of $1.16 billion, up 26.9% year-over-year 
GAAP Diluted EPS of $0.46 for the fourth quarter and $1.87 for the full year 
Non-GAAP Diluted EPS of $0.77 for the fourth quarter and $2.90 for the full year

NEWTOWN, Pa., Feb. 16, 2017 (GLOBE NEWSWIRE) -- EPAM Systems, Inc. (NYSE:EPAM), a leading global provider of product development and software engineering solutions, today announced results for its fourth quarter and full year ended December 31, 2016.

"2016 was a milestone year for EPAM, we tripled revenues since our IPO, closing at over $1 billion. Our continued evolution in extending our Engineering DNA into a full spectrum of services for Digital Business has positioned EPAM as a new breed of service provider, keeping us relevant to clients navigating dynamic market demands," said Arkadiy Dobkin, Chairman, CEO & President, EPAM.

Fourth Quarter 2016 Highlights

  • Revenues increased to $313.5 million, a year-over-year increase of $53.3 million, or 20.5%;
  • In constant currency, revenue was up 22.8% year-over-year;
  • GAAP income from operations was $37.4 million, an increase of $5.6 million or 17.7% compared to $31.8 million in the fourth quarter of 2015;
  • Non-GAAP income from operations was $51.5 million, an increase of $4.6 million, or 9.7%, compared to $46.9 million in the fourth quarter of 2015;
  • Diluted earnings per share (EPS) on a GAAP basis was $0.46, a decrease from $0.52 in the fourth quarter of 2015;
  • Non-GAAP diluted EPS was $0.77, an increase from $0.73 in the fourth quarter of 2015.

Full Year 2016 Highlights

  • Revenues increased to $1.16 billion, a year-over-year increase of $246.0 million, or 26.9%;
  • In constant currency, revenue was up 29.4% year-over-year;
  • GAAP income from operations was $133.7 million, an increase of $27.7 million or 26.2% compared to $106.0 million in 2015;
  • Non-GAAP income from operations was $191.8 million, an increase of $33.1 million, or 20.9%, compared to $158.7 million in 2015;
  • Diluted EPS on a GAAP basis was $1.87, compared to $1.62 in 2015;
  • Non-GAAP diluted EPS was $2.90, compared to $2.47 in 2015.

Cash Flow from Operations

  • Cash from operations was $164.8 million in 2016, up from $76.4 million in 2015; and was $53.7 million in the fourth quarter of 2016, up from $11.8 million in the fourth quarter of 2015;
  • Cash and cash equivalents totaled $362.0 million as of December 31, 2016, an increase of $162.6 million or 81.5% from $199.4 million as of December 31, 2015.

Other Metrics

  • Total headcount was 22,383 as of December 31, 2016, an increase of 22.0% from 18,354 as of December 31, 2015;
  • Total number of delivery professionals was 19,670 as of December 31, 2016, an increase of 22.3% from 16,078 as of December 31, 2015.

2017 Outlook - Full Year and First Quarter

Full Year

  • Revenue growth for fiscal 2017 will be at least 20%, after factoring in an estimated 3% for currency headwinds, meaning expected constant currency growth will be at least 23%.
  • We expect GAAP income from operations to be in the range of 12% to 14% of revenue and non-GAAP income from operations to be in the range of 16% to 18% of revenue.
  • We expect our effective tax rate to be at least 19%. This reflects the adoption of the accounting pronouncement related to stock based compensation effective January 1st.
  • We expect GAAP diluted EPS will be at least $2.45 for the full year, and non-GAAP diluted EPS will be at least $3.38 for the full year based on expected weighted average share count of 54.8 million fully diluted shares outstanding.

First Quarter

  • Revenues will be at least $315 million for the first quarter, reflecting a growth rate of at least 19% after estimating 3% for currency headwinds, meaning expected constant currency growth will be at least 22%.
  • For the first quarter, we expect GAAP income from operations to be in the range of 10% to 11% of revenue and non-GAAP income from operations to be in the range of 15% to 16% of revenue.
  • We expect our effective tax rate to be at least 20%.
  • We expect GAAP diluted EPS will be at least $0.49 for the quarter, and non-GAAP diluted EPS will be at least $0.72 for the quarter based on an expected weighted average share count of 53.9 million fully diluted shares outstanding.

Conference Call Information

EPAM will host a conference call to discuss results on Thursday, February 16, 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 13654193. The replay will be available until March 2, 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.
For more information, please visit http://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, 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.

Forward-Looking Statements

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.

Contact:
EPAM Systems, Inc.
David Straube, Senior Director, Investor Relations
Phone: +1-267-759-9000 x64588
Fax: +1-267-759-8989
investor_relations@epam.com

 
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(US Dollars in thousands, except share and per share data)
 
  Three Months Ended
 December 31,
  Year Ended
 December 31,
  2016   2015   2016   2015
Revenues $ 313,525     $ 260,253     $ 1,160,132     $ 914,128  
Operating expenses:              
Cost of revenues (exclusive of depreciation and amortization)     198,226     158,291     737,186     566,913  
Selling, general and administrative expenses 71,432     64,414     264,658     222,759  
Depreciation and amortization expenses 6,237     4,899     23,387     17,395  
Other operating expenses, net 247     884     1,205     1,094  
Income from operations 37,383     31,765     133,696     105,967  
Interest and other income, net 1,432     1,409     4,848     4,731  
Foreign exchange (loss)/gain (6,765 )   1,559     (12,078 )   (4,628 )
Income before provision for income taxes 32,050     34,733     126,466     106,070  
Provision for income taxes 7,287     7,095     27,200     21,614  
Net income $ 24,763     $ 27,638     $ 99,266     $ 84,456  
Foreign currency translation adjustments (5,209 )   (5,699 )   (2,538 )   (13,096 )
Comprehensive income $ 19,554     $ 21,939     $ 96,728     $ 71,360  
               
Net income per share:              
Basic $ 0.49     $ 0.56     $ 1.97     $ 1.73  
Diluted $ 0.46     $ 0.52     $ 1.87     $ 1.62  
Shares used in calculation of net income per share:              
Basic 50,717   49,360   50,309   48,721
Diluted 53,380   52,670   53,215   51,986

 

 
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(US Dollars in thousands, except share and per share data)
 
  As of
 December 31, 
 2016
  As of
 December 31, 
 2015
Assets      
Current assets      
Cash and cash equivalents $ 362,025     $ 199,449  
Restricted cash 2,400      
Time deposits 403     30,181  
Accounts receivable, net of allowance of $1,434 and $1,729, respectively 199,982     174,617  
Unbilled revenues 63,325     95,808  
Prepaid and other current assets, net of allowance of $644 and $0, respectively 15,690     14,344  
Employee loans, net of allowance of $0 and $0, respectively 2,726     2,689  
Deferred tax assets     11,847  
     Total current assets 646,551     528,935  
Property and equipment, net 73,616     60,499  
Restricted cash 239     238  
Employee loans, net of allowance of $0 and $0, respectively 3,252     3,649  
Intangible assets, net 51,260     46,860  
Goodwill 109,289     115,930  
Deferred tax assets 31,005     18,312  
Other long-term assets 10,599     4,113  
Total assets $ 925,811     $ 778,536  
       
Liabilities      
Current liabilities      
Accounts payable $ 3,213     $ 2,576  
Accrued expenses and other liabilities 49,895     63,796  
Due to employees 32,203     26,703  
Deferred compensation due to employees 5,900     5,364  
Taxes payable 25,008     29,472  
     Total current liabilities 116,219     127,911  
Long-term debt 25,048     35,000  
Other long-term liabilities 3,132     2,402  
Total liabilities 144,399     165,313  
Commitments and contingencies      
Stockholders’ equity      
Common stock, $0.001 par value; 160,000,000 authorized; 51,117,422 and 50,177,044 shares issued, 51,097,687 and 50,166,537 shares outstanding at December 31, 2016 and December 31, 2015, respectively     50     49  
Additional paid-in capital 374,907     303,363  
Retained earnings 444,320     345,054  
Treasury stock (177 )   (93 )
Accumulated other comprehensive loss (37,688 )   (35,150 )
Total stockholders’ equity 781,412     613,223  
Total liabilities and stockholders’ equity $ 925,811     $ 778,536  

 

 
EPAM SYSTEMS, INC. AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
(US Dollars in thousands, except percent and per share amounts)
(Unaudited)
 
  Three Months Ended December 31, 2016   Year Ended December 31, 2016
  GAAP   Adjustments   Non-GAAP   GAAP   Adjustments   Non-GAAP
Cost of revenues (exclusive of depreciation and amortization)(1)     $ 198,226     $ (4,019 )   $ 194,207     $ 737,186     $ (16,619 )   $ 720,567  
Selling, general and administrative expenses(2) $ 71,432     $ (8,097 )   $ 63,335     $ 264,658     $ (33,331 )   $ 231,327  
Income from operations(3) $ 37,383     $ 14,083     $ 51,466     $ 133,696     $ 58,120     $ 191,816  
Operating margin 11.9 %   4.5 %   16.4 %   11.5 %   5.0 %   16.5 %
Net income(4) $ 24,763     $ 16,290     $ 41,053     $ 99,266     $ 55,184     $ 154,450  
Diluted earnings per share(5) $ 0.46         $ 0.77     $ 1.87         $ 2.90  


  Three Months Ended December 31, 2015   Year Ended December 31, 2015
  GAAP   Adjustments   Non-GAAP   GAAP   Adjustments   Non-GAAP
Cost of revenues (exclusive of depreciation and amortization)(1)     $ 158,291     $ (3,824 )   $ 154,467     $ 566,913     $ (13,695 )   $ 553,218  
Selling, general and administrative expenses(2) $ 64,414     $ (8,903 )   $ 55,511     $ 222,759     $ (32,871 )   $ 189,888  
Income from operations(3) $ 31,765     $ 15,142     $ 46,907     $ 105,967     $ 52,723     $ 158,690  
Operating margin 12.2 %   5.8 %   18.0 %   11.6 %   5.8 %   17.4 %
Net income(4) $ 27,638     $ 10,735     $ 38,373     $ 84,456     $ 44,097     $ 128,553  
Diluted earnings per share(5) $ 0.52         $ 0.73     $ 1.62         $ 2.47  


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


       
  Three Months Ended
 December 31,
  Year Ended
 December 31,
Notes:
2016   2015   2016   2015
               
Stock-based compensation expenses - non-acquisition related $ 4,019     $ 3,824     $ 16,619     $ 13,695  
Total adjustments to GAAP cost of revenues(1) 4,019     3,824     16,619     13,695  
Stock-based compensation expenses - acquisition related 3,014     4,705     12,884     18,690  
Stock-based compensation expenses - all other 4,691     3,954     19,741     13,448  
Other acquisition-related expenses 392     244     706     733  
Total adjustments to GAAP selling, general and administrative expenses(2)     8,097     8,903     33,331     32,871  
Amortization of purchased intangible assets 1,967     1,674     8,170     5,416  
One-time charges     741         741  
Total adjustments to GAAP income from operations(3) $ 14,083     $ 15,142     $ 58,120     $ 52,723  
Foreign exchange loss/(gain) 6,765     (1,559 )   12,078     4,628  
Tax effect on non-GAAP adjustments (4,558 )   (2,848 )   (15,014 )   (13,254 )
Total adjustments to GAAP net income(4) $ 16,290     $ 10,735     $ 55,184     $ 44,097  


(5 ) There were no adjustments to GAAP average diluted common shares outstanding during the three months and year ended December 31, 2016 and 2015.


 
EPAM SYSTEMS, INC. AND SUBSIDIARIES
Reconciliations of Revenue Growth to Constant Currency Revenue Growth
(in percent)
(Unaudited)
 
  Three Months
Ended
 December 31,
2016
  Year Ended
 December 31,
2016
Revenue growth as reported 20.5 %   26.9 %
Foreign exchange rates impact 2.3 %   2.5 %
Revenue growth at constant currency(6)     22.8 %   29.4 %


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

EPAM SYSTEMS, INC. AND SUBSIDIARIES
Reconciliations of Guidance Non-GAAP Measures to Comparable GAAP Measures
(in percent, except per share amounts)
(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 GAAP to Non-GAAP diluted earnings per share is presented in the table below:

  First Quarter
2017
  Full Year
2017
GAAP diluted earnings per share (at least) $ 0.49     $ 2.45  
Stock-based compensation expenses 0.25     1.01  
Included in cost of revenues 0.08     0.41  
Included in selling, general and administrative expenses     0.17     0.60  
Amortization of purchased intangible assets 0.04     0.14  
Foreign exchange loss 0.03     0.13  
Tax effect on non-GAAP adjustments (0.09 )   (0.35 )
Non-GAAP diluted earnings per share (at least) $ 0.72     $ 3.38  

Reconciliation of projected revenue growth in constant currency is presented in the table below:

  First Quarter 2017   Full Year 2017
Revenue growth (at least) 19.0 %   20.0 %
Foreign exchange rates impact 3.0 %   3.0 %
Revenue growth at constant currency (at least)(7)     22.0 %   23.0 %


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

Primary Logo

EPAM