EPAM Reports Strong Results for First Quarter 2021 and Raises Outlook for 2021
Press Release: May 6, 2021
- First quarter revenues of $780.8 million, up 19.9% year-over-year
- GAAP Income from Operations was 13.7% of revenues and Non-GAAP Income from Operations was 17.5% of revenues for the first quarter
- GAAP Diluted EPS of $1.86 and Non-GAAP Diluted EPS of $1.81 for the first quarter
- EPAM raises full-year 2021 outlook; now expects revenue growth to be at least 29%, diluted EPS to be in the range of $7.09 to $7.31 and non-GAAP diluted EPS to be in the range of $7.54 to $7.76
"Our strong start to 2021 highlights the rapid pace of digital transformation, application modernization and the need for new business models across industries," said Arkadiy Dobkin, CEO & President, EPAM. "Our global expertise in integrated consulting, software engineering, and cloud-native technology, serves as the foundation for our current and future growth. EPAM continues to attract and onboard global talent at an accelerated rate as we position the company to bring even more comprehensive solutions to our clients as they navigate a very dynamic business environment."

First Quarter 2021 Highlights
- Revenues increased to
$780.8 million , a year-over-year increase of$129.4 million , or 19.9%. On a constant currency basis, revenues were up 17.8% compared to the first quarter of 2020. Acquisitions completed in the last twelve months contributed 0.3% to reported revenues; - GAAP income from operations was
$107.3 million , an increase of$19.7 million , or 22.6%, compared to$87.5 million in the first quarter of 2020; - Non-GAAP income from operations was
$136.9 million , an increase of$31.6 million , or 30.0%, compared to$105.3 million in the first quarter of 2020; - Diluted earnings per share ("EPS") on a GAAP basis was
$1.86 , an increase of$0.39 , or 26.5%, compared to$1.47 in the first quarter of 2020; and - Non-GAAP diluted EPS was
$1.81 , an increase of$0.38 , or 26.6%, compared to$1.43 in the first quarter of 2020.
Cash Flow and Other Metrics
- Cash provided by operating activities was
$12.8 million for the first three months of 2021, compared to$63.3 million for the first three months of 2020; - Cash, cash equivalents and restricted cash totaled
$1,374.3 million as ofMarch 31, 2021 , an increase of$50.8 million , or 3.8%, from$1,323.5 million as ofDecember 31, 2020 ; and - Total headcount was approximately 43,500 as of
March 31, 2021 . Included in this number were approximately 38,800 delivery professionals, an increase of 17.3% fromMarch 31, 2020 .
2021 Outlook - Full Year and Second Quarter
Full Year
As a result of a stronger demand environment, the Company now expects the following for the full year:
- The Company now expects revenue growth for 2021 to be at least 29% on a GAAP basis. The Company expects that foreign currency translation will have an approximate 1% favorable impact on full year reported revenues and revenue growth on a constant currency basis will be at least 28%. The Company expects acquisitions will contribute approximately 2% to reported revenues;
- 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 now expects GAAP diluted EPS to be in the range of
$7.09 to$7.31 for the year, and non-GAAP diluted EPS to be in the range of$7.54 to$7.76 for the year. The Company now expects weighted average diluted shares outstanding for the year of 59.0 million.
Second Quarter
The Company expects the following for the second quarter:
- Revenues will be in the range of
$853 million to$861 million on a GAAP basis for the second quarter reflecting a year-over-year growth rate of approximately 35.5% at the mid-point of the range. The Company expects foreign currency translation will have an approximate 3% favorable impact on year-over-year reported revenue growth and expects year-over-year revenue growth on a constant currency basis to be approximately 32.5% at the mid-point of the range. The Company expects acquisitions will contribute approximately 2.5% to reported revenues; - For the second quarter, 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 11% and its non-GAAP effective tax rate to be approximately 23%; and
- The Company expects GAAP diluted EPS will be in the range of
$1.76 to$1.83 for the quarter, and non-GAAP diluted EPS will be in the range of$1.88 to$1.95 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter of 59.0 million.
Conference Call Information
EPAM will host a conference call to discuss the 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 where our operations are located and the effect that these events 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, the discussion in the Company's Quarterly Report on Form 10-Q, filed on or after the date of this press release, particularly under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other filings with the
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
|||||||
(Unaudited) |
|||||||
(In thousands, except per share data) |
|||||||
Three Months Ended |
|||||||
2021 |
2020 |
||||||
Revenues |
$ |
780,775 |
$ |
651,359 |
|||
Operating expenses: |
|||||||
Cost of revenues (exclusive of depreciation and amortization) |
519,328 |
423,802 |
|||||
Selling, general and administrative expenses |
136,389 |
125,108 |
|||||
Depreciation and amortization expense |
17,807 |
14,940 |
|||||
Income from operations |
107,251 |
87,509 |
|||||
Interest and other income, net |
5,374 |
2,386 |
|||||
Foreign exchange gain |
2,299 |
6,524 |
|||||
Income before provision for income taxes |
114,924 |
96,419 |
|||||
Provision for income taxes |
5,878 |
10,854 |
|||||
Net income |
$ |
109,046 |
$ |
85,565 |
|||
Net income per share: |
|||||||
Basic |
$ |
1.94 |
$ |
1.55 |
|||
Diluted |
$ |
1.86 |
$ |
1.47 |
|||
Shares used in calculation of net income per share: |
|||||||
Basic |
56,170 |
55,287 |
|||||
Diluted |
58,778 |
58,143 |
|
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
(Unaudited) |
|||||||
(In thousands, except par value) |
|||||||
As of 2021 |
As of 2020 |
||||||
Assets |
|||||||
Current assets |
|||||||
Cash and cash equivalents |
$ |
1,372,829 |
$ |
1,322,143 |
|||
Short-term investments |
— |
60,007 |
|||||
Trade receivables and contract assets, net of allowance of and |
585,041 |
501,062 |
|||||
Prepaid and other current assets |
46,848 |
29,570 |
|||||
Total current assets |
2,004,718 |
1,912,782 |
|||||
Property and equipment, net |
164,749 |
169,533 |
|||||
Operating lease right-of-use assets, net |
207,350 |
228,672 |
|||||
Intangible assets, net |
48,547 |
51,975 |
|||||
|
210,881 |
211,956 |
|||||
Deferred tax assets |
90,188 |
92,454 |
|||||
Other noncurrent assets |
54,108 |
53,960 |
|||||
Total assets |
$ |
2,780,541 |
$ |
2,721,332 |
|||
Liabilities |
|||||||
Current liabilities |
|||||||
Accounts payable |
$ |
7,168 |
$ |
10,189 |
|||
Accrued compensation and benefits expenses |
315,991 |
294,709 |
|||||
Accrued expenses and other current liabilities |
75,326 |
79,690 |
|||||
Income taxes payable, current |
9,097 |
20,603 |
|||||
Operating lease liabilities, current |
56,179 |
60,759 |
|||||
Total current liabilities |
463,761 |
465,950 |
|||||
Long-term debt |
25,032 |
25,038 |
|||||
Income taxes payable, noncurrent |
43,925 |
43,448 |
|||||
Operating lease liabilities, noncurrent |
162,005 |
180,604 |
|||||
Other noncurrent liabilities |
21,879 |
23,274 |
|||||
Total liabilities |
716,602 |
738,314 |
|||||
Commitments and contingencies |
|||||||
Stockholders' equity |
|||||||
Common stock, |
56 |
56 |
|||||
Additional paid-in capital |
647,884 |
660,771 |
|||||
Retained earnings |
1,456,926 |
1,347,880 |
|||||
|
(177) |
(177) |
|||||
Accumulated other comprehensive loss |
(40,750) |
(25,512) |
|||||
Total stockholders' equity |
2,063,939 |
1,983,018 |
|||||
Total liabilities and stockholders' equity |
$ |
2,780,541 |
$ |
2,721,332 |
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 |
||
Revenue growth as reported |
19.9 |
% |
Foreign exchange rates impact |
(2.1) |
% |
Revenue growth on a constant currency basis(1) |
17.8 |
% |
(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) |
$ |
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 |
Three Months Ended |
|||||||||||
GAAP |
Adjustments |
Non-GAAP |
|||||||||
Cost of revenues (exclusive of depreciation and amortization)(2) |
$ |
423,802 |
$ |
(3,984) |
$ |
419,818 |
|||||
Selling, general and administrative expenses(3) |
$ |
125,108 |
$ |
(10,693) |
$ |
114,415 |
|||||
Income from operations(4) |
$ |
87,509 |
$ |
17,812 |
$ |
105,321 |
|||||
Operating margin |
13.4 |
% |
2.8 |
% |
16.2 |
% |
|||||
Net income(5) |
$ |
85,565 |
$ |
(2,701) |
$ |
82,864 |
|||||
Diluted earnings per share |
$ |
1.47 |
$ |
1.43 |
Items (2) through (5) above are detailed in the table below with the specific cross-reference noted in the appropriate item. |
Three Months Ended |
|||||||
2021 |
2020 |
||||||
Stock-based compensation expenses |
$ |
11,117 |
$ |
3,984 |
|||
Total adjustments to GAAP cost of revenues(2) |
11,117 |
3,984 |
|||||
Stock-based compensation expenses |
13,436 |
7,897 |
|||||
Other acquisition-related expenses |
1,933 |
468 |
|||||
One-time charges |
9 |
2,328 |
|||||
Total adjustments to GAAP selling, general and administrative expenses(3) |
15,378 |
10,693 |
|||||
Amortization of acquired intangible assets |
3,140 |
3,135 |
|||||
Total adjustments to GAAP income from operations(4) |
29,635 |
17,812 |
|||||
Change in fair value of contingent consideration included in Interest and other income, |
(4,944) |
(438) |
|||||
Foreign exchange gain |
(2,299) |
(6,524) |
|||||
Provision for income taxes: |
|||||||
Tax effect on non-GAAP adjustments |
(3,734) |
(1,854) |
|||||
Excess tax benefits related to stock-based compensation |
(21,504) |
(11,697) |
|||||
Total adjustments to GAAP net income(5) |
$ |
(2,846) |
$ |
(2,701) |
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:
Second Quarter 2021 |
Full Year 2021 (at least) |
||||
Revenue growth |
35.5 |
% |
29 |
% |
|
Foreign exchange rates impact |
(3) |
% |
(1) |
% |
|
Revenue growth on a constant currency basis (6) |
32.5 |
% |
28 |
% |
(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 2021 |
Full Year 2021 |
||||
GAAP income from operations as a percentage of revenues |
13.5% to 14.5% |
13.5% to 14.5% |
|||
Stock-based compensation expenses |
2.6 |
% |
2.5 |
% |
|
Included in cost of revenues (exclusive of depreciation and amortization) |
1.1 |
% |
1.1 |
% |
|
Included in selling, general and administrative expenses |
1.5 |
% |
1.4 |
% |
|
Other acquisition-related expenses |
— |
% |
0.1 |
% |
|
Amortization of purchased intangible assets |
0.4 |
% |
0.4 |
% |
|
Non-GAAP income from operations as a percentage of revenues |
16.5% to 17.5% |
16.5% to 17.5% |
Reconciliation of expected GAAP to non-GAAP effective tax rate is presented in the table below:
Second Quarter 2021 |
Full Year 2021 |
||||
GAAP effective tax rate (approximately) |
11 |
% |
12 |
% |
|
Tax effect on non-GAAP adjustments |
3.4 |
% |
3.0 |
% |
|
Excess tax benefits related to stock-based compensation |
8.6 |
% |
8.0 |
% |
|
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:
Second Quarter 2021 |
Full Year 2021 |
||||
GAAP diluted earnings per share |
|
|
|||
Stock-based compensation expenses |
0.37 |
1.51 |
|||
Included in cost of revenues (exclusive of depreciation and amortization) |
0.16 |
0.66 |
|||
Included in selling, general and administrative expenses |
0.21 |
0.85 |
|||
Other acquisition-related expenses |
0.01 |
0.04 |
|||
Amortization of purchased intangible assets |
0.05 |
0.21 |
|||
Change in fair value of contingent consideration |
— |
(0.08) |
|||
Foreign exchange loss |
0.03 |
0.04 |
|||
Provision for income taxes: |
|||||
Tax effect on non-GAAP adjustments |
(0.10) |
(0.35) |
|||
Excess tax benefits related to stock-based compensation |
(0.24) |
(0.92) |
|||
Non-GAAP diluted earnings per share |
|
|
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SOURCE
EPAM Systems, Inc., David Straube, Head of Investor Relations, Phone: +1-267-759-9000 x59419, david_straube@epam.com