EPAM Reports Results for First Quarter 2022
Press Release: May 5, 2022
- First quarter revenues of
$1.172 billion , up 50.1% year-over-year - GAAP Income from Operations was 11.0% of revenues and Non-GAAP Income from Operations was 16.1% of revenues for the first quarter
- First quarter GAAP Diluted EPS of
$1.52 , a decrease of 18.3%, and Non-GAAP Diluted EPS of$2.49 , an increase of 37.6% on a year-over-year basis - For the second quarter, EPAM expects revenue to be at least
$1.140 billion , GAAP Diluted EPS to be at least$0.73 and Non-GAAP Diluted EPS to be at least$1.70
"The Russian invasion of
EPAM's strategy, which centers on adapting, growing and driving value across a broader and more engaged ecosystem of people, customers, and partners, continues to guide the Company. EPAM has accelerated elements of this strategy focusing on diversification of its global delivery platform, by scaling existing and new geographic locations, while continuing to add breadth and depth of talent and capabilities.
This accelerated diversification of the Company's global delivery capability will help support both the near-term repositioning of customer projects from the impacted region, and future growth beyond 2022.
First Quarter 2022 Highlights
- Revenues increased to
$1.172 billion , a year-over-year increase of$390.8 million , or 50.1%. On a constant currency basis, revenues were up 53.0% compared to the first quarter of 2021. Acquisitions completed in the last twelve months contributed 9.9% to revenue growth in the quarter; - GAAP income from operations was
$129.2 million , an increase of$22.0 million , or 20.5%, compared to$107.3 million in the first quarter of 2021; - Non-GAAP income from operations was
$188.7 million , an increase of$51.8 million , or 37.8%, compared to$136.9 million in the first quarter of 2021; - Diluted earnings per share ("EPS") on a GAAP basis was
$1.52 , a decrease of$0.34 , or 18.3%, compared to$1.86 in the first quarter of 2021; and - Non-GAAP diluted EPS was
$2.49 , an increase of$0.68 , or 37.6%, compared to$1.81 in the first quarter of 2021.
Cash Flow and Other Metrics
- Cash used by operating activities was
$51.8 million for the first three months of 2022, compared to cash provided by operating activities of$12.8 million for the first three months of 2021; - Cash, cash equivalents and restricted cash totaled
$1.308 billion as ofMarch 31, 2022 , a decrease of$141.4 million , or 9.8%, from$1.449 billion as ofDecember 31, 2021 ; and - Total headcount was approximately 61,600 as of
March 31, 2022 . Included in this number were approximately 55,100 delivery professionals, an increase of 41.8% fromMarch 31, 2021 .
Second Quarter Outlook
EPAM expects the following for the second quarter:
- Revenues will be at least
$1.140 billion on a GAAP basis for the second quarter reflecting a year-over-year growth rate of at least 29% which includes an unfavorable foreign currency translation impact of approximately 5%. Revenue growth on a constant currency basis will be at least 34%. The Company expects acquisitions will contribute approximately 6% to reported revenues; - For the second quarter, EPAM expects GAAP income from operations to be in the range of 3% to 5% of revenues and non-GAAP income from operations to be in the range of 10% to 12% of revenues;
- The Company expects its GAAP effective tax rate to be approximately 19% and its non-GAAP effective tax rate to be approximately 23%; and
- EPAM expects GAAP diluted EPS will be at least
$0.73 for the quarter, and non-GAAP diluted EPS will be at least$1.70 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter of 59.5 million.
Conference Call Information
EPAM will host a conference call to discuss the results on
About
Since 1993,
Selected by Newsweek as a 2021 Most Loved Workplace, EPAM's global multi-disciplinary teams serve customers in more than 45 countries across five continents. As a recognized leader, EPAM is listed among the top 15 companies in Information Technology Services on the Fortune 1000 and ranked as the top IT services company on Fortune's 100 Fastest-Growing Companies list for the last three consecutive years. EPAM is also listed among Ad Age's top 25 World's Largest Agency Companies for three consecutive years, and
Learn more at www.epam.com and follow EPAM on Twitter and 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 on-going hostilities in
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||
(Unaudited) |
||||||
(In thousands, except per share data) |
||||||
Three Months Ended |
||||||
2022 |
2021 |
|||||
Revenues |
$ 1,171,614 |
$ 780,775 |
||||
Operating expenses: |
||||||
Cost of revenues (exclusive of depreciation and amortization) |
780,836 |
519,328 |
||||
Selling, general and administrative expenses |
237,277 |
136,389 |
||||
Depreciation and amortization expense |
24,259 |
17,807 |
||||
Income from operations |
129,242 |
107,251 |
||||
Interest and other (loss)/income, net |
(165) |
5,374 |
||||
Foreign exchange (loss)/gain |
(22,785) |
2,299 |
||||
Income before provision for income taxes |
106,292 |
114,924 |
||||
Provision for income taxes |
16,573 |
5,878 |
||||
Net income |
$ 89,719 |
$ 109,046 |
||||
Net income per share: |
||||||
Basic |
$ 1.58 |
$ 1.94 |
||||
Diluted |
$ 1.52 |
$ 1.86 |
||||
Shares used in calculation of net income per share: |
||||||
Basic |
56,915 |
56,170 |
||||
Diluted |
58,941 |
58,778 |
|
||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
(Unaudited) |
||||||
(In thousands, except par value) |
||||||
As of 2022 |
As of 2021 |
|||||
Assets |
||||||
Current assets |
||||||
Cash and cash equivalents |
$ 1,276,461 |
$ 1,446,625 |
||||
Trade receivables and contract assets, net of allowance of and |
901,260 |
768,928 |
||||
Prepaid and other current assets |
89,032 |
53,927 |
||||
Total current assets |
2,266,753 |
2,269,480 |
||||
Property and equipment, net |
219,639 |
236,214 |
||||
Operating lease right-of-use assets, net |
175,514 |
184,841 |
||||
Intangible assets, net |
97,569 |
101,143 |
||||
|
534,136 |
530,723 |
||||
Deferred tax assets |
161,302 |
143,928 |
||||
Other noncurrent assets |
52,657 |
56,898 |
||||
Total assets |
$ 3,507,570 |
$ 3,523,227 |
||||
Liabilities |
||||||
Current liabilities |
||||||
Accounts payable |
$ 19,406 |
$ 24,847 |
||||
Accrued compensation and benefits expenses |
408,789 |
502,997 |
||||
Accrued expenses and other current liabilities |
177,872 |
142,014 |
||||
Short-term debt |
9,900 |
16,018 |
||||
Income taxes payable, current |
20,264 |
27,440 |
||||
Operating lease liabilities, current |
47,021 |
50,104 |
||||
Total current liabilities |
683,252 |
763,420 |
||||
Long-term debt |
30,550 |
30,234 |
||||
Income taxes payable, noncurrent |
44,103 |
42,454 |
||||
Operating lease liabilities, noncurrent |
140,814 |
142,802 |
||||
Other noncurrent liabilities |
55,095 |
48,480 |
||||
Total liabilities |
953,814 |
1,027,390 |
||||
Commitments and contingencies |
||||||
Stockholders' equity |
||||||
Common stock, |
57 |
57 |
||||
Additional paid-in capital |
719,122 |
711,912 |
||||
Retained earnings |
1,919,251 |
1,829,532 |
||||
|
(177) |
(177) |
||||
Accumulated other comprehensive loss |
(86,150) |
(54,207) |
||||
|
2,552,103 |
2,487,117 |
||||
Noncontrolling interest in consolidated subsidiaries |
1,653 |
8,720 |
||||
Total stockholders' equity |
$ 2,553,756 |
$ 2,495,837 |
||||
Total liabilities and stockholders' equity |
$ 3,507,570 |
$ 3,523,227 |
|
||
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 |
||
Three Months Ended |
||
Revenue growth as reported |
50.1 % |
|
Foreign exchange rates impact |
2.9 % |
|
Revenue growth on a constant currency basis(1) |
53.0 % |
(1) |
Constant currency revenue results are calculated by translating current period revenues in local currency into |
Reconciliation of various income statement amounts from GAAP to non-GAAP for the three months ended |
Three Months Ended |
|||||
GAAP |
Adjustments |
Non-GAAP |
|||
Cost of revenues (exclusive of depreciation and amortization)(2) |
$ 780,836 |
$ 54 |
|
||
Selling, general and administrative expenses(3) |
$ 237,277 |
$ (54,254) |
|
||
Income from operations(4) |
$ 129,242 |
$ 59,444 |
|
||
Operating margin |
11.0 % |
5.1 % |
16.1 % |
||
Net income(5) |
$ 89,719 |
$ 57,324 |
|
||
Diluted earnings per share |
$ 1.52 |
$ 2.49 |
|||
Three Months Ended |
|||||
GAAP |
Adjustments |
Non-GAAP |
|||
Cost of revenues (exclusive of depreciation and amortization)(2) |
$ 519,328 |
$ (11,117) |
$ 508,211 |
||
Selling, general and administrative expenses(3) |
$ 136,389 |
$ (15,378) |
$ 121,011 |
||
Income from operations(4) |
$ 107,251 |
$ 29,635 |
$ 136,886 |
||
Operating margin |
13.7 % |
3.8 % |
17.5 % |
||
Net income(5) |
$ 109,046 |
$ (2,846) |
$ 106,200 |
||
Diluted earnings per share |
$ 1.86 |
$ 1.81 |
Items (2) through (5) above are detailed in the table below with the specific cross-reference noted in the appropriate item. |
Three Months Ended |
|||
2022 |
2021 |
||
Stock-based compensation (benefit)/ expense |
$ (424) |
$ 11,117 |
|
Humanitarian support in |
19,156 |
— |
|
Unbilled business continuity resources (b) |
2,570 |
— |
|
Discretionary compensation (c) |
(21,356) |
— |
|
Total adjustments to GAAP cost of revenues(2) |
(54) |
11,117 |
|
Stock-based compensation expenses |
7,536 |
13,436 |
|
Other acquisition-related expenses |
579 |
1,933 |
|
One-time charges |
1,363 |
9 |
|
Humanitarian support in |
6,500 |
— |
|
Geographic repositioning (d) |
18,706 |
— |
|
Russia long-lived asset impairment charges (e) |
19,570 |
— |
|
Total adjustments to GAAP selling, general and administrative expenses(3) |
54,254 |
15,378 |
|
Amortization of acquired intangible assets |
5,244 |
3,140 |
|
Total adjustments to GAAP income from operations(4) |
59,444 |
29,635 |
|
Change in fair value of contingent consideration included in Interest and other income, net |
3,373 |
(4,944) |
|
Impairment of financial asset |
1,300 |
— |
|
Foreign exchange loss/(gain) |
22,785 |
(2,299) |
|
Provision for income taxes: |
|||
Tax effect on non-GAAP adjustments |
(16,469) |
(3,734) |
|
Excess tax benefits related to stock-based compensation |
(13,109) |
(21,504) |
|
Total adjustments to GAAP net income(5) |
$ 57,324 |
$ (2,846) |
(a) Humanitarian support in |
(b) Given the uncertainty in the region introduced by |
(c) Discretionary compensation includes the reduction of previously accrued amounts associated with the Company's variable compensation program for the year ended |
(d) Geographic repositioning includes expenses associated with the Company's accelerated efforts to relocate employees in |
(e) As a result of the Company's decision to no longer serve customers in |
|
||
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 |
||
Reconciliation of expected revenue growth on a GAAP basis to expected revenue growth on a constant currency basis is |
||
Second Quarter 2022 |
||
Revenue growth (at least) |
29 % |
|
Foreign exchange rates impact |
5 % |
|
Revenue growth on a constant currency basis (at least) (6) |
34 % |
(6) |
Constant currency revenue results are calculated by translating expected revenues in local currency into |
Reconciliation of expected GAAP to non-GAAP income from operations as a percentage of revenues is presented in the table below: |
Second Quarter 2022 |
|
GAAP income from operations as a percentage of revenues |
3% to 5% |
Stock-based compensation expenses |
2.4 % |
Included in cost of revenues (exclusive of depreciation and amortization) |
1.1 % |
Included in selling, general and administrative expenses |
1.3 % |
Humanitarian support in |
1.1 % |
Unbilled business continuity resources (b) |
0.7 % |
Geographic repositioning (d) |
0.9 % |
One-time charges |
1.3 % |
Other acquisition-related expenses |
0.1 % |
Amortization of purchased intangible assets |
0.5 % |
Non-GAAP income from operations as a percentage of revenues |
10% to 12% |
Reconciliation of expected GAAP to non-GAAP effective tax rate is presented in the table below: |
Second Quarter 2022 |
|
GAAP effective tax rate (approximately) |
19 % |
Tax effect on non-GAAP adjustments |
3.2 % |
Excess tax benefits related to stock-based compensation |
0.8 % |
Non-GAAP effective tax rate (approximately) |
23 % |
Reconciliation of expected GAAP to non-GAAP diluted earnings per share is presented in the table below: |
Second Quarter 2022 |
|
GAAP diluted earnings per share (at least) |
$ 0.73 |
Stock-based compensation expenses |
0.46 |
Included in cost of revenues (exclusive of depreciation and amortization) |
0.21 |
Included in selling, general and administrative expenses |
0.25 |
Humanitarian support in |
0.21 |
Unbilled business continuity resources (b) |
0.12 |
Geographic repositioning (d) |
0.16 |
One-time charges |
0.23 |
Other acquisition-related expenses |
0.01 |
Amortization of purchased intangible assets |
0.10 |
Foreign exchange loss |
0.03 |
Provision for income taxes: |
|
Tax effect on non-GAAP adjustments |
(0.28) |
Excess tax benefits related to stock-based compensation |
(0.07) |
Non-GAAP diluted earnings per share (at least) |
$ 1.70 |
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SOURCE
EPAM Systems, Inc., David Straube, Head of Investor Relations, Phone: +1-267-759-9000 x59419, Email: david_straube@epam.com