EPAM Reports Results for Fourth Quarter and Full Year 2020
Press Release: February 18, 2021
"Our strong year-end financial performance is underscored by our diverse set of offerings and was made possible by the thousands of EPAMers who persevered through unprecedented challenges. As 2020 drove significantly higher levels of digital change across the industries and geographies we serve, we helped our clients solve their most complex, and often unexpected, business problems," said Arkadiy Dobkin, CEO & President, EPAM. "This year's results are also a reflection of EPAM's adaptiveness and the increasing relevance of our constantly expanding capabilities."
Fourth Quarter 2020 Highlights
- Revenues increased to
$723.5 million , a year-over-year increase of$90.7 million , or 14.3%, and on a constant currency basis, revenues were up 13.7% over the corresponding period last year; - GAAP income from operations was
$112.0 million , an increase of$27.2 million , or 32.2% , compared to$84.7 million in the fourth quarter of 2019; - Non-GAAP income from operations was
$135.9 million , an increase of$28.2 million , or 26.2%, compared to$107.6 million in the fourth quarter of 2019; - Diluted earnings per share ("EPS") on a GAAP basis was
$1.46 , an increase of$0.17 , or 13.2%, compared to$1.29 in the fourth quarter of 2019; and - Non-GAAP diluted EPS was
$1.81 , an increase of$0.30 , or 19.9%, compared to$1.51 in the fourth quarter of 2019.
Full Year 2020 Highlights
- Revenues increased to
$2.66 billion , a year-over-year increase of$365.7 million , or 15.9%, and on a constant currency basis, revenues were up 16.0% year-over-year; - GAAP income from operations was
$379.3 million , an increase of$76.5 million , or 25.3%, compared to$302.9 million in 2019; - Non-GAAP income from operations was
$472.7 million , an increase of$83.5 million , or 21.5%, compared to$389.2 million in 2019; - Diluted EPS on a GAAP basis was
$5.60 , an increase of$1.07 , or 23.6%, compared to$4.53 in 2019; and - Non-GAAP diluted EPS was
$6.34 , an increase of$0.92 , or 17.0%, compared to$5.42 in 2019.
Cash Flow and Other Metrics
- Cash provided by operating activities was
$159.3 million in the fourth quarter of 2020, an increase from$124.6 million in the fourth quarter of 2019; and was$544.4 million in 2020, an increase from$287.5 million in 2019; - Cash, cash equivalents and restricted cash totaled
$1,323.5 million as ofDecember 31, 2020 , an increase of$385.8 million , or 41.1%, from$937.7 million as ofDecember 31, 2019 ; and - Total headcount was approximately 41,200 as of
December 31, 2020 . Included in this number were approximately 36,700 delivery professionals, an increase of 12.8% fromDecember 31, 2019 .
2021 Outlook - Full Year and First Quarter
Full Year
The Company expects the following for the full year:
- The Company expects revenue growth for 2021 to be at least 23% on a GAAP basis. The Company expects that foreign currency translation will have a 1% favorable impact on full year reported revenues. The Company expects revenue growth on a constant currency basis will be at least 22%;
- For the full year, the Company 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 16.5% to 17.5% of revenues;
- The Company expects its GAAP effective tax rate to be approximately 12% and its non-GAAP effective tax rate to be approximately 23%; and
- The Company expects GAAP diluted EPS will be in the range of
$6.65 to$6.86 for the year, and non-GAAP diluted EPS will be in the range of$7.20 to$7.41 for the year. The Company expects weighted average diluted shares outstanding for the year of 59.2 million.
First Quarter
The Company expects the following for the first quarter:
- Revenues will be in the range of
$757 million to$765 million for the first quarter reflecting a year-over-year growth rate of approximately 17% at the mid-point of the range. The Company expects that foreign currency translation will have a 2% favorable impact on year-over-year revenue growth during the quarter. The Company expects year-over-year revenue growth on a constant currency basis to be approximately 15% at the mid-point of the range; - For the first quarter, the Company expects GAAP income from operations to be in the range of 12.5% to 13.5% of revenues and non-GAAP income from operations to be in the range of 16% to 17% of revenues;
- The Company expects its GAAP effective tax rate to be approximately 1% and its non-GAAP effective tax rate to be approximately 23%; and
- The Company expects GAAP diluted EPS will be in the range of
$1.66 to$1.74 for the quarter, and non-GAAP diluted EPS will be in the range of$1.62 to$1.70 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter of 58.9 million.
Conference Call Information
EPAM will host a conference call to discuss results on
About
Since 1993,
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, the anticipated impact of the COVID-19 pandemic and civil unrest in the geographies where we conduct business and operate and the effect that they 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 and the factors discussed in the Company's Quarterly Reports on Form 10-Q for the 2020 fiscal year, particularly under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" and other filings with the
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) |
|||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||||
Revenues |
$ |
723,493 |
$ |
632,775 |
$ |
2,659,478 |
$ |
2,293,798 |
|||||||
Operating expenses: |
|||||||||||||||
Cost of revenues (exclusive of depreciation and amortization) |
465,792 |
410,069 |
1,732,522 |
1,488,198 |
|||||||||||
Selling, general and administrative expenses |
128,929 |
124,999 |
484,758 |
457,433 |
|||||||||||
Depreciation and amortization expense |
16,779 |
12,962 |
62,874 |
45,317 |
|||||||||||
Income from operations |
111,993 |
84,745 |
379,324 |
302,850 |
|||||||||||
Interest and other (expense)/ income, net |
(2,053) |
1,950 |
3,822 |
8,725 |
|||||||||||
Foreign exchange loss |
(7,920) |
(1,898) |
(4,667) |
(12,049) |
|||||||||||
Income before provision for income taxes |
102,020 |
84,797 |
378,479 |
299,526 |
|||||||||||
Provision for income taxes |
16,481 |
10,273 |
51,319 |
38,469 |
|||||||||||
Net income |
$ |
85,539 |
$ |
74,524 |
$ |
327,160 |
$ |
261,057 |
|||||||
Net income per share: |
|||||||||||||||
Basic |
$ |
1.53 |
$ |
1.35 |
$ |
5.87 |
$ |
4.77 |
|||||||
Diluted |
$ |
1.46 |
$ |
1.29 |
$ |
5.60 |
$ |
4.53 |
|||||||
Shares used in calculation of net income per share: |
|||||||||||||||
Basic |
56,031 |
55,062 |
55,727 |
54,719 |
|||||||||||
Diluted |
58,774 |
57,965 |
58,446 |
57,668 |
CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except par value) |
|||||||
As of |
As of |
||||||
Assets |
|||||||
Current assets |
|||||||
Cash and cash equivalents |
$ |
1,322,143 |
$ |
936,552 |
|||
Short-term investments |
60,007 |
9 |
|||||
Trade receivables and contract assets, net of allowance of |
501,062 |
497,716 |
|||||
Prepaid and other current assets |
29,570 |
39,934 |
|||||
Total current assets |
1,912,782 |
1,474,211 |
|||||
Property and equipment, net |
169,533 |
165,259 |
|||||
Operating lease right-of-use assets, net |
228,672 |
238,991 |
|||||
Intangible assets, net |
51,975 |
56,258 |
|||||
|
211,956 |
195,043 |
|||||
Deferred tax assets |
92,454 |
75,013 |
|||||
Other noncurrent assets |
53,960 |
39,433 |
|||||
Total assets |
$ |
2,721,332 |
$ |
2,244,208 |
|||
Liabilities |
|||||||
Current liabilities |
|||||||
Accounts payable |
$ |
10,189 |
$ |
7,831 |
|||
Accrued compensation and benefits expenses |
294,709 |
230,035 |
|||||
Accrued expenses and other current liabilities |
79,690 |
82,476 |
|||||
Income taxes payable, current |
20,603 |
9,064 |
|||||
Operating lease liabilities, current |
60,759 |
57,542 |
|||||
Total current liabilities |
465,950 |
386,948 |
|||||
Long-term debt |
25,038 |
25,074 |
|||||
Income taxes payable, noncurrent |
43,448 |
45,878 |
|||||
Operating lease liabilities, noncurrent |
180,604 |
180,848 |
|||||
Other noncurrent liabilities |
23,274 |
9,315 |
|||||
Total liabilities |
738,314 |
648,063 |
|||||
Commitments and contingencies |
|||||||
Stockholders' equity |
|||||||
Common stock, |
56 |
55 |
|||||
Additional paid-in capital |
660,771 |
607,051 |
|||||
Retained earnings |
1,347,880 |
1,020,590 |
|||||
|
(177) |
(177) |
|||||
Accumulated other comprehensive loss |
(25,512) |
(31,374) |
|||||
Total stockholders' equity |
1,983,018 |
1,596,145 |
|||||
Total liabilities and stockholders' equity |
$ |
2,721,332 |
$ |
2,244,208 |
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 |
Year Ended |
||||
Revenue growth as reported |
14.3 |
% |
15.9 |
% |
|
Foreign exchange rates impact |
(0.6) |
% |
0.1 |
% |
|
Revenue growth on a constant currency basis (1) |
13.7 |
% |
16.0 |
% |
(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 and years ended |
|||||||||||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||||||
GAAP |
Adjustments |
Non-GAAP |
GAAP |
Adjustments |
Non-GAAP |
||||||||||||||||||
Cost of revenues (exclusive of |
$ |
465,792 |
$ |
(8,989) |
$ |
456,803 |
$ |
1,732,522 |
$ |
(32,785) |
$ |
1,699,737 |
|||||||||||
Selling, general and |
$ |
128,929 |
$ |
(11,746) |
$ |
117,183 |
$ |
484,758 |
$ |
(48,243) |
$ |
436,515 |
|||||||||||
Income from operations(4) |
$ |
111,993 |
$ |
23,860 |
$ |
135,853 |
$ |
379,324 |
$ |
93,368 |
$ |
472,692 |
|||||||||||
Operating margin |
15.5 |
% |
3.3 |
% |
18.8 |
% |
14.3 |
% |
3.5 |
% |
17.8 |
% |
|||||||||||
Net income(5) |
$ |
85,539 |
$ |
20,565 |
$ |
106,104 |
$ |
327,160 |
$ |
43,480 |
$ |
370,640 |
|||||||||||
Diluted earnings per share |
$ |
1.46 |
$ |
1.81 |
$ |
5.60 |
$ |
6.34 |
Three Months Ended |
Year Ended |
||||||||||||||||||||||
GAAP |
Adjustments |
Non-GAAP |
GAAP |
Adjustments |
Non-GAAP |
||||||||||||||||||
Cost of revenues (exclusive of |
$ |
410,069 |
$ |
(9,739) |
$ |
400,330 |
$ |
1,488,198 |
$ |
(37,580) |
$ |
1,450,618 |
|||||||||||
Selling, general and |
$ |
124,999 |
$ |
(10,542) |
$ |
114,457 |
$ |
457,433 |
$ |
(38,806) |
$ |
418,627 |
|||||||||||
Income from operations(4) |
$ |
84,745 |
$ |
22,902 |
$ |
107,647 |
$ |
302,850 |
$ |
86,300 |
$ |
389,150 |
|||||||||||
Operating margin |
13.4 |
% |
3.6 |
% |
17.0 |
% |
13.2 |
% |
3.8 |
% |
17.0 |
% |
|||||||||||
Net income(5) |
$ |
74,524 |
$ |
12,731 |
$ |
87,255 |
$ |
261,057 |
$ |
51,651 |
$ |
312,708 |
|||||||||||
Diluted earnings per share |
$ |
1.29 |
$ |
1.51 |
$ |
4.53 |
$ |
5.42 |
Items (2) through (5) above are detailed in the table below with the specific cross-reference noted in the appropriate item. |
Three Months Ended |
Year Ended |
||||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||||
Stock-based compensation expenses |
$ |
8,989 |
$ |
9,739 |
$ |
32,785 |
$ |
37,580 |
|||||||
Total adjustments to GAAP cost of revenues(2) |
8,989 |
9,739 |
32,785 |
37,580 |
|||||||||||
Stock-based compensation expenses |
11,455 |
9,273 |
42,453 |
34,456 |
|||||||||||
Other acquisition-related expenses |
1,009 |
1,269 |
1,868 |
3,774 |
|||||||||||
One-time (benefits)/charges |
(718) |
— |
3,922 |
576 |
|||||||||||
Total adjustments to GAAP selling, general and administrative expenses(3) |
11,746 |
10,542 |
48,243 |
38,806 |
|||||||||||
Amortization of purchased intangible assets |
3,125 |
2,621 |
12,340 |
9,914 |
|||||||||||
Total adjustments to GAAP income from operations(4) |
23,860 |
22,902 |
93,368 |
86,300 |
|||||||||||
Change in fair value of contingent consideration included in Interest and other (expense)/ income, net |
3,308 |
420 |
1,827 |
1,776 |
|||||||||||
Impairment of investment |
— |
— |
313 |
— |
|||||||||||
Foreign exchange loss |
7,920 |
1,898 |
4,667 |
12,049 |
|||||||||||
Provision for income taxes: |
|||||||||||||||
Tax effect on non-GAAP adjustments |
(6,868) |
(4,586) |
(20,049) |
(20,089) |
|||||||||||
Excess tax benefits related to stock-based compensation |
(7,655) |
(7,903) |
(36,646) |
(28,385) |
|||||||||||
Total adjustments to GAAP net income(5) |
$ |
20,565 |
$ |
12,731 |
$ |
43,480 |
$ |
51,651 |
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 |
|||||
Reconciliation of expected revenue growth on a GAAP basis to expected revenue growth on a constant currency basis is presented in the table below: |
|||||
First Quarter 2021 |
Full Year 2021 |
||||
Revenue growth |
17 |
% |
23 |
% |
|
Foreign exchange rates impact |
(2) |
% |
(1) |
% |
|
Revenue growth on a constant currency basis(6) |
15 |
% |
22 |
% |
(6) |
Constant currency revenue results are calculated by translating current period projected 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: |
|||||
First Quarter 2021 |
Full Year 2021 |
||||
GAAP income from operations as a percentage of revenues |
12.5% to 13.5% |
13.5% to 14.5% |
|||
Stock-based compensation expenses |
3.1 |
% |
2.6 |
% |
|
Included in cost of revenues (exclusive of depreciation and amortization) |
1.4 |
% |
1.1 |
% |
|
Included in selling, general and administrative expenses |
1.7 |
% |
1.5 |
% |
|
Amortization of purchased intangible assets |
0.4 |
% |
0.4 |
% |
|
Non-GAAP income from operations as a percentage of revenues |
16% to 17% |
16.5% to 17.5% |
Reconciliation of expected GAAP to non-GAAP effective tax rate is presented in the table below: |
|||||
First Quarter 2021 |
Full Year 2021 |
||||
GAAP effective tax rate (approximately) |
1 |
% |
12 |
% |
|
Tax effect on non-GAAP adjustments |
3.8 |
% |
3.3 |
% |
|
Excess tax benefits related to stock-based compensation |
18.2 |
% |
7.7 |
% |
|
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: |
|||||
First Quarter 2021 |
Full Year 2021 |
||||
GAAP diluted earnings per share |
|
|
|||
Stock-based compensation expenses |
0.38 |
1.47 |
|||
Included in cost of revenues (exclusive of depreciation and amortization) |
0.17 |
0.64 |
|||
Included in selling, general and administrative expenses |
0.21 |
0.83 |
|||
Other acquisition-related expenses |
— |
0.02 |
|||
Amortization of purchased intangible assets |
0.05 |
0.21 |
|||
Foreign exchange loss |
0.02 |
0.09 |
|||
Provision for income taxes: |
|||||
Tax effect on non-GAAP adjustments |
(0.08) |
(0.37) |
|||
Excess tax benefits related to stock-based compensation |
(0.41) |
(0.87) |
|||
Non-GAAP diluted earnings per share |
|
|
View original content to download multimedia:http://www.prnewswire.com/news-releases/epam-reports-results-for-fourth-quarter-and-full-year-2020-301230620.html
SOURCE
EPAM Systems, Inc., David Straube, Head of Investor Relations, Phone: +1-267-759-9000 x59419, david_straube@epam.com