EPAM Reports Results for Second Quarter 2016 Second quarter revenues of $283.8 million, up 30% year-over-year GAAP Diluted EPS of $0.46, up 24% year-over-year Non-GAAP Diluted EPS of 0.71, up 22% year-over-year Newtown, PA - August 04, 2016 -- EPAM Systems, Inc. (NYSE:EPAM), a leading global provider of product development and software engineering solutions, today announced results for its second quarter ended June 30, 2016. “We are pleased with our second quarter results, which delivered 30.3% year-over-year revenue growth,” said Arkadiy Dobkin, CEO and President, EPAM. “As we look at the remainder of 2016, various macro-economic and geo-political challenges could cause some unexpected volatility in the market, but we remain confident that we can achieve our top line growth objectives. Our long-term strategy remains intact and we will continue to focus on delivering the most innovative digital solutions to our customers and investing in our talent, capabilities and global delivery locations.” Second Quarter 2016 Highlights Revenues increased to $283.8 million, a year-over-year increase of $66.1 million, or 30.3%; In constant currency, revenue was up 33.9% year-over-year; GAAP income from operations was $32.1 million, an increase of $8.5 million compared to $23.6 million in the second quarter of 2015; Non-GAAP income from operations was $47.6 million, an increase of $10.7 million, or 29.1%, from $36.9 million in the second quarter of 2015; Diluted earnings per share (EPS) on a GAAP basis was $0.46, an increase from $0.37 in the second quarter of 2015; Non-GAAP quarterly diluted EPS was $0.71(*) compared to $0.58(*) in the second quarter of 2015; (*)Excluding the tax effect on non-GAAP adjustments, non-GAAP diluted EPS would result in $0.79 for the second quarter of 2016 and $0.64 for the second quarter of 2015. Cash Flow from Operations Cash from operations was $49.4 million for the first half of 2016, up from $9.0 million as compared to the first half of 2015; and was $38.5 million in the second quarter of 2016, up from $2.2 million in the second quarter of 2015; As of June 30, 2016, cash and cash equivalents totaled $280.7 million. Other Metrics As of June 30, 2016, total headcount was 20,761, an increase of 36.5% from 15,213 at June 30, 2015; Total number of delivery professionals increased 37.4% to 18,206 in the second quarter of 2016 from 13,253 in the second quarter of 2015; Billed and unbilled Days Sales Outstanding (DSO) decreased to 88 days for the second quarter of 2016 compared to 94 days in the first quarter of 2016. 2016 Outlook - Full Year and Third Quarter Full Year We are reaffirming our year-over-year revenue growth guidance of at least 26% after approximately 3% currency headwinds, resulting in constant currency growth of 29%. Given the various macro-economic and geo-political uncertainties, our normal visibility has been impaired and we could experience unexpected volatility over the next several quarters. We remain very confident about the continued long-term growth outlook for the business and the overall markets; The full year GAAP diluted EPS will be at least $2.05, with an effective tax rate of approximately 21%; The full year non-GAAP diluted EPS will be at least $2.97(*), which includes the tax effect from non-GAAP adjustments; The full year weighted average share count is expected to be approximately 53.4 million diluted shares outstanding; (*)Under the previous reporting method, before considering tax effects on the non-GAAP adjustments, the full year non-GAAP diluted EPS was estimated to be at least $3.20. Third Quarter Revenues will be at least $295 million for the third quarter of 2016, representing a growth rate of at least 25% over third quarter 2015 revenues. This includes approximately 3% anticipated currency headwinds, meaning constant currency growth of at least 28%; Third quarter 2016 GAAP diluted EPS to be at least $0.52; Third quarter 2016 non-GAAP diluted EPS is expected to be at least $0.73, which includes the tax effect from non-GAAP adjustments and is based on an estimated third quarter 2016 weighted average share count of 53.6 million diluted shares outstanding. Conference Call Information EPAM will host a conference call to discuss results on Thursday, August 4, 2016 at 8:00 a.m. Eastern Time. The live conference call can be accessed by dialing 1-855-327-6837 (domestic) or 1-631-891-4304 (international). A telephonic replay will also be available approximately one hour after the call and can be accessed by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international). The passcode for the replay is 10001455. The telephonic replay will be available untilAugust 18, 2016. Interested investors and other parties may also listen to a webcast of the conference call by logging onto the Investor Relations section of the Company’s website at http://investors.epam.com. About EPAM Systems EPAM Systems, Inc. (NYSE:EPAM), a leading global product development and platform engineering services company, is focused on delivering results through best-in-class software engineering, combined with innovative strategy, consulting and design capabilities. With 23 years of experience in the information technology industry, EPAM’s 18,000 people serve our customers in over 25 countries across North America, Europe, Asia and Australia. EPAM was ranked #8 in FORBES 25 Fastest Growing Public Tech Companies and was ranked as a top information technology services company on FORTUNE’S 100 Fastest Growing Technology Companies. 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-off and recovery, amortization of purchased intangible assets, goodwill impairment, legal settlement, foreign exchange gains and losses, and acquisition-related costs. 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. INVESTOR RELATIONS EPAM Systems, Inc. David Straube Senior Director, Investor Relations, EPAM P: +1-646-286-7807 E-mail: investor_relations@epam.com Other Contacts » MEDIA RELATIONS EPAM Systems, Inc. Danielle Ruess-Saltz Senior Director, Global Corporate Communications P: +1-267-978-7688 E-mail: danielle_ruess-saltz@epam.com Other Contacts » MORE PRESS RELEASES EPAM Reports Results for Fourth Quarter and Full Year 2016 UBS Signs Strategic Multi-Year Agreement With EPAM to Boost Innovation EPAM Recognized as a Leader in Application Outsourcing Capabilities EPAM Expands EU Footprint With Opening of Ireland Office EPAM Reports Results for Third Quarter 2016 View More 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 June 30, Six Months Ended June 30, 2016 2015 2016 2015 Revenues $ 283,832 $ 217,781 $ 548,314 $ 417,826 Operating expenses: Cost of revenues (exclusive of depreciation and amortization) 180,782 134,256 348,163 260,143 Selling, general and administrative expenses 64,241 55,976 125,735 102,914 Depreciation and amortization expense 6,123 3,903 11,225 8,103 Other operating expenses, net 606 40 780 240 Income from operations 32,080 23,606 62,411 46,426 Interest and other income, net 1,138 1,299 2,349 2,457 Foreign exchange loss (2,295) (465) (3,585) (6,219) Income before provision for income taxes 30,923 24,440 61,175 42,664 Provision for income taxes 6,493 5,209 12,846 8,719 Net income $ 24,430 $ 19,231 $ 48,329 $ 33,945 Foreign currency translation adjustments (2,386) 3,674 2,313 944 Comprehensive income $ 22,044 $ 22,905 $ 50,642 $ 34,889 Net income per share: Basic $ 0.49 $ 0.40 $ 0.97 $ 0.70 Diluted $ 0.46 $ 0.37 $ 0.92 $ 0.66 Shares used in calculation of net income per share: Basic 50,211 48,584 49,688 48,237 Diluted 53,271 51,917 52,803 51,461 EPAM SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (US Dollars in thousands, except share and per share data) As of June 30, 2016 As of December 31, 2015 Assets Current assets Cash and cash equivalents $ 280,724 $ 199,449 Time deposits — 30,181 Accounts receivable, net of allowance of $2,997 and $1,729, respectively 178,796 174,617 Unbilled revenues 96,045 95,808 Prepaid and other current assets 15,273 14,344 Employee loans, net of allowance of $0 and $0, respectively 2,684 2,689 Deferred tax assets — 11,847 Total current assets 573,522 528,935 Property and equipment, net 66,751 60,499 Restricted cash 246 238 Employee loans, net of allowance of $0 and $0, respectively 3,478 3,649 Intangible assets, net 55,962 46,860 Goodwill 110,668 115,930 Deferred tax assets 25,991 18,312 Other long-term assets 7,270 4,113 Total assets $ 843,888 $ 778,536 Liabilities Current liabilities Accounts payable $ 3,005 $ 2,576 Accrued expenses and other liabilities 29,557 60,749 Deferred revenue 3,356 3,047 Due to employees 33,421 26,703 Deferred compensation to employees 910 5,364 Taxes payable 21,765 29,472 Total current liabilities 92,014 127,911 Long-term debt 40,088 35,000 Deferred tax liabilities 2,819 2,402 Total liabilities 134,921 165,313 Commitments and contingencies Stockholders’ equity Common stock, $0.001 par value; 160,000,000 authorized; 50,884,007 and 50,177,044 shares issued, 50,866,612 and 50,166,537 shares outstanding at June 30, 2016 and December 31, 2015, respectively 50 49 Additional paid-in capital 348,527 303,363 Retained earnings 393,383 345,054 Treasury stock (156) (93) Accumulated other comprehensive loss (32,837) (35,150) Total stockholders’ equity 708,967 613,223 Total liabilities and stockholders’ equity $ 843,888 $ 778,536 EPAM SYSTEMS, INC. AND SUBSIDIARIES Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures (in thousands, except percent and per share amounts) (Unaudited) Three Months Ended June 30, 2016 Six Months Ended June 30, 2016 GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP Cost of revenues (exclusive of depreciation and amortization)(1) $ 180,782 $ (4,438) $ 176,344 $ 348,163 $ (8,082) $ 340,081 Selling, general and administrative expenses(2) $ 64,241 $ (8,599) $ 55,642 $ 125,735 $ (15,919) $ 109,816 Income from operations(3) $ 32,080 $ 15,558 $ 47,638 $ 62,411 $ 28,215 $ 90,626 Operating margin 11.3% 5.5% 16.8% 11.4% 5.1% 16.5% Net income(4) $ 24,430 $ 13,501 $ 37,931 $ 48,329 $ 24,312 $ 72,641 Diluted earnings per share(5) $ 0.46 $ 0.71 $ 0.92 $ 1.38 Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP Cost of revenues (exclusive of depreciation and amortization)(1) $ 134,256 $ (3,765) $ 130,491 $ 260,143 $ (6,249) $ 253,894 Selling, general and administrative expenses(2) $ 55,976 $ (8,488) $ 47,488 $ 102,914 $ (15,200) $ 87,714 Income from operations(3) $ 23,606 $ 13,287 $ 36,893 $ 46,426 $ 23,901 $ 70,327 Operating margin 10.8% 6.1% 16.9% 11.1% 5.7% 16.8% Net income(4) $ 19,231 $ 10,849 $ 30,080 $ 33,945 $ 22,649 $ 56,594 Diluted earnings per share(5) $ 0.37 $ 0.58 $ 0.66 $ 1.10 Notes: (1) Adjustments to GAAP cost of revenues (exclusive of depreciation and amortization) were comprised of non-acquisition related stock-based compensation expense recorded in the periods presented. (2) Adjustments to GAAP selling general and administrative expenses: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Stock-based compensation expenses - Acquisition related $ 2,970 $ 4,951 $ 5,980 $ 9,443 Stock-based compensation expenses - All other 5,322 3,537 9,632 5,695 Other acquisition-related expenses 307 — 307 62 Total adjustments to GAAP selling, general and administrative expenses $ 8,599 $ 8,488 $ 15,919 $ 15,200 (3) Adjustments to GAAP income from operations: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Stock-based compensation expense $ 12,730 $ 12,253 $ 23,694 $ 21,387 reported within cost of revenues 4,438 3,765 8,082 6,249 reported within selling, general and administrative expenses - acquisition related 2,970 4,951 5,980 9,443 reported within selling, general and administrative expenses - all other 5,322 3,537 9,632 5,695 Other acquisition-related expenses 307 — 307 62 Amortization of purchased intangible assets 2,521 1,034 4,214 2,452 Total adjustments to GAAP income from operations $ 15,558 $ 13,287 $ 28,215 $ 23,901 (4) Adjustments to GAAP net income: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Stock-based compensation expense $ 12,730 $ 12,253 $ 23,694 $ 21,387 reported within cost of revenues 4,438 3,765 8,082 6,249 reported within selling, general and administrative expenses - acquisition related 2,970 4,951 5,980 9,443 reported within selling, general and administrative expenses - all other 5,322 3,537 9,632 5,695 Other acquisition-related expenses 307 — 307 62 Amortization of purchased intangible assets 2,521 1,034 4,214 2,452 Foreign exchange loss 2,295 465 3,585 6,219 Tax effect on non-GAAP adjustments (4,352) (2,903) (7,488) (7,471) Adjustments to GAAP net income $ 13,501 $ 10,849 $ 24,312 $ 22,649 (5) There were no adjustments to GAAP average diluted common shares outstanding during the three and six months ended June 30, 2016 and 2015. Investor Relations Contact Privacy Policy © 2017 EPAM Systems, Inc. All Rights Reserved.