EPAM Reports Results for Fourth Quarter and Full Year 2022 and Announces $500 million Share Repurchase Program

21/ 02/ 2023

Fourth Quarter 2022 Revenues of $1.231 billion, up 2% year-over-year GAAP Income from Operations was 8% of revenues and Non-GAAP Income from Operations was 17.8% of revenues GAAP Diluted EPS of $2.61, an increase of 7%, and Non-GAAP Diluted EPS of $2.93, an increase of 6.2% on a year-over-year basis Full Year 2022 Revenues of $4.825 billion, up 4% year-over-year GAAP Income from Operations was 9% of revenues and Non-GAAP Income from Operations was 17.0% of revenues GAAP Diluted EPS of $7.09, a decrease of 0%, and Non-GAAP Diluted EPS of $10.90, an increase of 20.4%on a year-over-year basis Share Repurchase Program The Board of Directors approved a share repurchase program with authorization to purchase up to $500 million of EPAM common stock Newtown, PA — February 16, 2023 —EPAM Systems, Inc. (NYSE: EPAM), a leading digital transformation services and product engineering company, today announced results for its fourth quarter and full year ended December 31, 2022. “We are pleased to share the results of another year of strong financial performance. Despite the challenges brought on by the war, our global team of professionals worked tirelessly to adapt while maintaining the trust of our customers and creating a more diversified global footprint,” said Arkadiy Dobkin, CEO & President, EPAM. “While the 2023 macro-environment remains uncertain, we are committed to accelerating our momentum while also ensuring that EPAM is well positioned for long-term success.” Fourth Quarter 2022 Highlights. Revenues increased to $1.231 billion, a year-over-year increase of $123.8 million, or 2%. On a constant currency basis, revenues were up 14.4% compared to the fourth quarter of 2021. Acquisitions contributed 1.5% inorganic revenue growth for the quarter. The decision to exit the Russian market negatively impacted revenue growth by 4.4%; GAAP income from operations was $170.5 million, an increase of $4.8 million, or 9% , compared to $165.7 million in the fourth quarter of 2021; Non-GAAP income from operations was $219.6 million, an increase of $13.2 million, or 4%, compared to $206.4 million in the fourth quarter of 2021; Diluted earnings per share (“EPS”) on a GAAP basis was $2.61, an increase of $0.21, or 7%, compared to $2.40 in the fourth quarter of 2021; and Non-GAAP diluted EPS was $2.93, an increase of $0.17, or 2%, compared to $2.76 in the fourth quarter of 2021. Full Year 2022 Highlights. Revenues increased to $4.825 billion, a year-over-year increase of $1.067 billion, or 4%. On a constant currency basis, revenues were up 32.4% year-over-year. Acquisitions contributed 5.1% inorganic revenue growth for the year. The decision to exit the Russian market negatively impacted revenue growth by 3.7%; GAAP income from operations was $573.0 million, an increase of $30.7 million, or 7%, compared to $542.3 million in 2021; Non-GAAP income from operations was $818.2 million, an increase of $140.0 million, or 6%, compared to $678.2 million in 2021; Diluted EPS on a GAAP basis was $7.09, a decrease of $1.06, or 0%, compared to $8.15 in 2021; and Non-GAAP diluted EPS was $10.90, an increase of $1.85, or 4%, compared to $9.05 in 2021. Cash Flow and Other Metrics Cash provided by operating activities was $186.1 million in the fourth quarter of 2022, a decrease from $284.6 million in the fourth quarter of 2021; and was $464.1 million in 2022, a decrease from $572.3 million in 2021; Cash, cash equivalents and restricted cash totaled $1.684 billion as of December 31, 2022, an increase of $234.3 million, or 2%, from $1.449 billion as of December 31, 2021; and Total headcount was approximately 59,300 as of December 31, 2022. Included in this number were approximately 52,850 delivery professionals, an increase of 5% from December 31, 2021. Share Repurchase Program. On February 13, 2023, the Board of Directors approved a share repurchase program with authorization to purchase up to $500 million of EPAM common stock. EPAM may repurchase shares of its common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program will have a term of 24 months, may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock. 2023 Outlook - Full Year and First Quarter. Full Year EPAM expects the following for the full year: The Company expects revenues will be at least $5.250 billion for 2023 reflecting a year-over-year growth rate of at least 9%. The Company expects foreign currency translation will have a minimal impact on year-over-year reported revenue growth. This guidance reflects negligible contribution from inorganic revenues. Revenue growth will be negatively impacted by approximately 2% as a result of the decision to exit the Russian market; For the full year, EPAM expects GAAP income from operations to be in the range of 5% to 12.5% of revenues and non-GAAP income from operations to be in the range of 15.5% to 16.5% of revenues; The Company expects its GAAP effective tax rate to be approximately 21% and its non-GAAP effective tax rate to be approximately 23%; and EPAM expects GAAP diluted EPS will be in the range of $8.64 to $8.84 for the year, and non-GAAP diluted EPS will be in the range of $11.15 to $11.35 for the year. The Company expects weighted average diluted shares outstanding for the year of 6 million. First Quarter EPAM expects the following for the first quarter: The Company expects revenues will be in the range of $1.200 billion to $1.210 billion for the first quarter reflecting a year-over-year growth rate of approximately 3%, which includes an unfavorable foreign currency translation impact of approximately 2%. Revenue growth on a constant currency basis will be approximately 5%. This guidance reflects negligible contribution from inorganic revenues. Revenue growth will be negatively impacted by approximately 3% as a result of the decision to exit the Russian market; For the first quarter, EPAM expects GAAP income from operations to be in the range of 5% to 10.5% of revenues and non-GAAP income from operations to be in the range of 14.0% to 15.0% of revenues; The Company expects its GAAP effective tax rate to be approximately 18% and its non-GAAP effective tax rate to be approximately 23%; and EPAM 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 $2.30 to $2.38 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter of 5 million. Conference Call Information EPAM hosted a conference call to discuss results February 16, 2023. The reply of the conference call will be available on the EPAM website at https://investors.epam.com. * * * About EPAM Systems Since 1993, EPAM Systems, Inc. (NYSE: EPAM) has leveraged its advanced software engineering heritage to become the foremost global digital transformation services provider – leading the industry in digital and physical product development and digital platform engineering services. Through its innovative strategy; integrated advisory, consulting and design capabilities; and unique ‘Engineering DNA,’ EPAM’s globally deployed hybrid teams help make the future real for clients and communities around the world by powering better enterprise, education and health platforms that connect people, optimize experiences, and improve people’s lives. In 2021, EPAM was added to the S&P 500 and included among the list of Forbes Global 2000 companies.   Selected by Newsweek as a 2021 and 2022 Most Loved Workplace, EPAM’s global multi-disciplinary teams serve customers in more than 50 countries across six continents. As a recognized leader, EPAM is listed among the top 15 companies in Information Technology Services on the Fortune 1000 and ranked four times as the top IT services company on Fortune’s 100 Fastest Growing Companies list. EPAM is also listed among Ad Age’s top 25 World’s Largest Agency Companies for three consecutive years, and Consulting Magazine named EPAM Continuum a top 20 Fastest Growing Firm. Learn more at www.epam.com and follow EPAM on Twitter 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, communicate 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 expenses, acquisition-related costs including amortization of intangible assets, impairment of assets, expenses associated with EPAMs humanitarian commitment to its professionals in Ukraine, unbilled business continuity resources resulting from Russias invasion of Ukraine, costs associated with the geographic repositioning efforts in Russia and Belarus, employee separation costs in Russia, certain other one-time charges and benefits, changes in fair value of contingent consideration, foreign exchange gains and losses, excess tax benefits related to stock-based compensation, and the related effect on income taxes of the pre-tax adjustments. Management also compares 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 in accordance with 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 in accordance with GAAP. 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 the war in Ukraine, political and civil unrest or military action in the geographies where we conduct business and operate, developments relating to COVID-19, 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, particularly under the headings Management’s Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors and other filings with the Securities and Exchange Commission. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made based on information currently available to us. 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.

Fourth Quarter 2022

Revenues of $1.231 billion, up 2% year-over-year
GAAP Income from Operations was 8% of revenues and Non-GAAP Income from Operations was 17.8% of revenues
GAAP Diluted EPS of $2.61, an increase of 7%, and Non-GAAP Diluted EPS of $2.93, an increase of 6.2% on a year-over-year basis

Full Year 2022

Revenues of $4.825 billion, up 4% year-over-year
GAAP Income from Operations was 9% of revenues and Non-GAAP Income from Operations was 17.0% of revenues
GAAP Diluted EPS of $7.09, a decrease of 0%, and Non-GAAP Diluted EPS of $10.90, an increase of 20.4%on a year-over-year basis

Share Repurchase Program

The Board of Directors approved a share repurchase program with authorization to purchase up to $500 million of EPAM common stock

Newtown, PA — February 16, 2023 —EPAM Systems, Inc. (NYSE: EPAM), a leading digital transformation services and product engineering company, today announced results for its fourth quarter and full year ended December 31, 2022.

“We are pleased to share the results of another year of strong financial performance. Despite the challenges brought on by the war, our global team of professionals worked tirelessly to adapt while maintaining the trust of our customers and creating a more diversified global footprint,” said Arkadiy Dobkin, CEO & President, EPAM. “While the 2023 macro-environment remains uncertain, we are committed to accelerating our momentum while also ensuring that EPAM is well positioned for long-term success.”

Fourth Quarter 2022 Highlights

Revenues increased to $1.231 billion, a year-over-year increase of $123.8 million, or 2%. On a constant currency basis, revenues were up 14.4% compared to the fourth quarter of 2021. Acquisitions contributed 1.5% inorganic revenue growth for the quarter. The decision to exit the Russian market negatively impacted revenue growth by 4.4%;
GAAP income from operations was $170.5 million, an increase of $4.8 million, or 9% , compared to $165.7 million in the fourth quarter of 2021;
Non-GAAP income from operations was $219.6 million, an increase of $13.2 million, or 4%, compared to $206.4 million in the fourth quarter of 2021;
Diluted earnings per share (“EPS”) on a GAAP basis was $2.61, an increase of $0.21, or 7%, compared to $2.40 in the fourth quarter of 2021; and
Non-GAAP diluted EPS was $2.93, an increase of $0.17, or 2%, compared to $2.76 in the fourth quarter of 2021.

Full Year 2022 Highlights

Revenues increased to $4.825 billion, a year-over-year increase of $1.067 billion, or 4%. On a constant currency basis, revenues were up 32.4% year-over-year. Acquisitions contributed 5.1% inorganic revenue growth for the year. The decision to exit the Russian market negatively impacted revenue growth by 3.7%;
GAAP income from operations was $573.0 million, an increase of $30.7 million, or 7%, compared to $542.3 million in 2021;
Non-GAAP income from operations was $818.2 million, an increase of $140.0 million, or 6%, compared to $678.2 million in 2021;
Diluted EPS on a GAAP basis was $7.09, a decrease of $1.06, or 0%, compared to $8.15 in 2021; and
Non-GAAP diluted EPS was $10.90, an increase of $1.85, or 4%, compared to $9.05 in 2021.

Cash Flow and Other Metrics

Cash provided by operating activities was $186.1 million in the fourth quarter of 2022, a decrease from $284.6 million in the fourth quarter of 2021; and was $464.1 million in 2022, a decrease from $572.3 million in 2021;
Cash, cash equivalents and restricted cash totaled $1.684 billion as of December 31, 2022, an increase of $234.3 million, or 2%, from $1.449 billion as of December 31, 2021; and
Total headcount was approximately 59,300 as of December 31, 2022. Included in this number were approximately 52,850 delivery professionals, an increase of 5% from December 31, 2021.

Share Repurchase Program

On February 13, 2023, the Board of Directors approved a share repurchase program with authorization to purchase up to $500 million of EPAM common stock.
EPAM may repurchase shares of its common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions.
The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program will have a term of 24 months, may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock.

2023 Outlook – Full Year and First Quarter

Full Year

EPAM expects the following for the full year:

The Company expects revenues will be at least $5.250 billion for 2023 reflecting a year-over-year growth rate of at least 9%. The Company expects foreign currency translation will have a minimal impact on year-over-year reported revenue growth. This guidance reflects negligible contribution from inorganic revenues. Revenue growth will be negatively impacted by approximately 2% as a result of the decision to exit the Russian market;
For the full year, EPAM expects GAAP income from operations to be in the range of 5% to 12.5% of revenues and non-GAAP income from operations to be in the range of 15.5% to 16.5% of revenues;
The Company expects its GAAP effective tax rate to be approximately 21% and its non-GAAP effective tax rate to be approximately 23%; and
EPAM expects GAAP diluted EPS will be in the range of $8.64 to $8.84 for the year, and non-GAAP diluted EPS will be in the range of $11.15 to $11.35 for the year. The Company expects weighted average diluted shares outstanding for the year of 6 million.

First Quarter

EPAM expects the following for the first quarter:

The Company expects revenues will be in the range of $1.200 billion to $1.210 billion for the first quarter reflecting a year-over-year growth rate of approximately 3%, which includes an unfavorable foreign currency translation impact of approximately 2%. Revenue growth on a constant currency basis will be approximately 5%. This guidance reflects negligible contribution from inorganic revenues. Revenue growth will be negatively impacted by approximately 3% as a result of the decision to exit the Russian market;
For the first quarter, EPAM expects GAAP income from operations to be in the range of 5% to 10.5% of revenues and non-GAAP income from operations to be in the range of 14.0% to 15.0% of revenues;
The Company expects its GAAP effective tax rate to be approximately 18% and its non-GAAP effective tax rate to be approximately 23%; and
EPAM 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 $2.30 to $2.38 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter of 5 million.

Conference Call Information

EPAM hosted a conference call to discuss results February 16, 2023. The reply of the conference call will be available on the EPAM website at https://investors.epam.com.

* * *

About EPAM Systems

Since 1993, EPAM Systems, Inc. (NYSE: EPAM) has leveraged its advanced software engineering heritage to become the foremost global digital transformation services provider – leading the industry in digital and physical product development and digital platform engineering services. Through its innovative strategy; integrated advisory, consulting and design capabilities; and unique ‘Engineering DNA,’ EPAM’s globally deployed hybrid teams help make the future real for clients and communities around the world by powering better enterprise, education and health platforms that connect people, optimize experiences, and improve people’s lives. In 2021, EPAM was added to the S&P 500 and included among the list of Forbes Global 2000 companies.  

Selected by Newsweek as a 2021 and 2022 Most Loved Workplace, EPAM’s global multi-disciplinary teams serve customers in more than 50 countries across six continents. As a recognized leader, EPAM is listed among the top 15 companies in Information Technology Services on the Fortune 1000 and ranked four times as the top IT services company on Fortune’s 100 Fastest Growing Companies list. EPAM is also listed among Ad Age’s top 25 World’s Largest Agency Companies for three consecutive years, and Consulting Magazine named EPAM Continuum a top 20 Fastest Growing Firm.

Learn more at www.epam.com and follow EPAM on Twitter 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, communicate 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 expenses, acquisition-related costs including amortization of intangible assets, impairment of assets, expenses associated with EPAM’s humanitarian commitment to its professionals in Ukraine, unbilled business continuity resources resulting from Russia’s invasion of Ukraine, costs associated with the geographic repositioning efforts in Russia and Belarus, employee separation costs in Russia, certain other one-time charges and benefits, changes in fair value of contingent consideration, foreign exchange gains and losses, excess tax benefits related to stock-based compensation, and the related effect on income taxes of the pre-tax adjustments. Management also compares 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 in accordance with 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 in accordance with GAAP.

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 the war in Ukraine, political and civil unrest or military action in the geographies where we conduct business and operate, developments relating to COVID-19, 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, particularly under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” and other filings with the Securities and Exchange Commission. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made based on information currently available to us. 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.