EPAM Systems (NYSE: EPAM ) has not recovered really from the Russia and Ukraine exposure since 2022. The company has been quietly rebuilding its workforce, relocated staff from the regions, acquiring and building capabilities and even showing signs of returning growth. TheI am a stock analyst with over 20 years of experience in quantitative research, financial modeling, and risk management. My focus is on equity valuation, market trends, and portfolio optimization to uncover high-growth investment opportuni ...

Core Insights - White Hat, a cybersecurity company acquired by EPAM in 2021, won the 2025 Outstanding Security Performance Award in the category of Outstanding Cybersecurity Consultant [1][2] - The award recognizes White Hat's innovation in AI-driven security and an attacker-focused approach, demonstrating significant client impact [2][5] - Since its acquisition, White Hat has more than doubled its revenue through domestic growth and international expansion [4] Company Overview - Founded in 2013, White Hat provides cybersecurity services by adopting an adversarial perspective, enabling organizations to proactively identify vulnerabilities [3] - The company serves a diverse client base, including global enterprises, financial institutions, government agencies, and critical infrastructure operators [3][7] - White Hat's services include strategic consulting, threat hunting, APT simulations, and advanced offense-led penetration testing, supported by its proprietary 'Eye of the Enemy' platform and 360° Incident Response suite [5][7] Leadership and Recognition - The recognition from the Cyber OSPAs highlights White Hat's leadership and commitment to excellence in the cybersecurity sector [7] - CEO Nir Tenzer emphasized the importance of the award as a milestone for the team and reaffirmed the company's commitment to helping clients navigate complex threat landscapes [6]

Core Viewpoint - EPAM Systems reported strong first-quarter results for 2025, with non-GAAP earnings per share of $2.41, exceeding estimates and showing year-over-year revenue growth of 11.1% to $1.3 billion, driven by technological innovations and solid performance across various industry verticals [1][2][3]. Financial Performance - Non-GAAP earnings per share for Q1 2025 were $2.41, beating the Zacks Consensus Estimate by 6.2%, although down from $2.46 in the same quarter last year [1] - Revenues for Q1 2025 reached $1.3 billion, surpassing the consensus mark by 1.37% [1] - Non-GAAP gross profit increased by 5.7% year over year to $374.2 million, with a gross margin of 28.7%, down 170 basis points [5] - Non-GAAP operating income grew by 1.3% year over year to $175.8 million, with an operating margin of 13.5%, down 140 basis points [5] Revenue Breakdown - Financial Services contributed $314 million (24.1% of total revenues), up 29.3% year over year [3] - Consumer Goods, Travel, and Retail revenues were $255.5 million (19.6% of total revenues), down 1.4% year over year [3] - Software and Hi-Tech revenues were $190 million (14.6% of total revenues), up 10.5% year over year [4] - Life Sciences and Health revenues were $155 million (11.9% of total revenues), also up 10.5% year over year [4] - Emerging revenues reached $221 million (17.8% of total revenues), up 22.8% year over year [4] - Business Info and Media revenues were $167 million (12.5% of total revenues), down 2.2% year over year [4] Guidance - For Q2 2025, EPAM expects revenues between $1.325 billion and $1.34 billion, indicating a year-over-year growth of 16.2% at the midpoint [7] - The full-year 2025 revenue growth guidance has been revised to 11.5% to 14.5%, up from the previous 10% to 14% [9] - The Zacks Consensus Estimate for full-year 2025 revenues is $5.27 billion, reflecting an 11.4% year-over-year growth [9] - Non-GAAP earnings per share for FY 2025 are now expected to be between $10.70 and $10.95, an increase from the prior estimate of $10.45 to $10.75 [9]

Core Insights - Epam reported revenue of $1.3 billion for the quarter ended March 2025, reflecting an 11.7% increase year-over-year [1] - The company's EPS was $2.41, slightly down from $2.46 in the same quarter last year [1] - Revenue exceeded the Zacks Consensus Estimate of $1.28 billion, resulting in a surprise of +1.37% [1] - The EPS also surpassed expectations with a surprise of +6.17%, compared to the consensus estimate of $2.27 [1] Revenue Breakdown - Revenue from the Americas was $780.29 million, above the average estimate of $770.59 million [4] - Revenue from APAC was $24.29 million, below the average estimate of $26.43 million [4] - Revenue from EMEA reached $497.12 million, exceeding the estimated $481.40 million [4] - Financial Services generated $313.97 million, significantly above the average estimate of $277.80 million [4] - Software & Hi-Tech revenues were $190.07 million, slightly above the estimate of $189.54 million [4] - Life Sciences & Healthcare revenues were $154.95 million, in line with the estimate of $154.86 million [4] - Emerging Verticals generated $220.64 million, surpassing the estimate of $216.61 million [4] - Consumer Goods, Retail & Travel revenues were $255.51 million, below the estimate of $270.07 million [4] Contract Type Performance - Time-and-material revenues were $1.04 billion, slightly below the average estimate of $1.08 billion, with a year-over-year change of +6.1% [4] - Fixed-price revenues were $252.16 million, significantly above the estimate of $191.62 million, representing a +43% change year-over-year [4] - Licensing and other revenues were $7.82 million, below the estimate of $10.48 million, with a +2.7% change year-over-year [4] Stock Performance - Epam's shares returned +22.8% over the past month, outperforming the Zacks S&P 500 composite's +13.7% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance in the near term [3]

Financial Performance - For the first three months of 2025, total revenues increased by 11.7% to $1.302 billion compared to $1.165 billion in the same period of 2024[119] - Income from operations as a percentage of revenues decreased to 7.6% for Q1 2025 from 9.5% in Q1 2024, primarily due to increased cost of revenues[119] - Diluted earnings per share decreased to $1.28 for Q1 2025 from $1.97 in Q1 2024, reflecting a decrease in income from operations and reduced excess tax benefits[119] - Cost of revenues (exclusive of depreciation and amortization) increased to $952.0 million in Q1 2025, representing 73.1% of total revenues, up from 71.6% in Q1 2024[123] - Selling, general and administrative expenses were $218.9 million, representing a 10.3% increase compared to $198.5 million in the same period of 2024, with expenses as a percentage of revenues decreasing to 16.8%[134] - Depreciation and amortization expense increased to $31.4 million from $22.1 million year-over-year, with the expense as a percentage of revenues rising to 2.5%[135] - Interest and other income, net decreased to $5.8 million from $15.0 million, primarily due to a $12.1 million decrease in interest income[136] Revenue Breakdown - Revenues from the Americas accounted for 59.9% of total revenues in Q1 2025, increasing to $780.3 million from $692.9 million in Q1 2024[126] - EMEA revenues were $497.1 million in Q1 2025, representing 38.2% of total revenues, with significant contributions from the UK, Switzerland, and Germany[129] - APAC revenues increased by $1.0 million or 4.3% in Q1 2025, driven by growth in the Life Sciences & Healthcare vertical[130] - Americas segment revenues increased by $72.4 million, or 10.3%, to $777.2 million, with operating profit decreasing by $4.9 million, or 4.1%, to $115.2 million[147] - Europe segment revenues rose to $524.5 million, a 13.8% increase from $460.7 million, with operating profit increasing 19.6% to $71.3 million[149] - Financial Services became the largest industry vertical in the Americas segment, growing 20.2% year-over-year, driven by new revenues from 2024 acquisitions[148] - Financial Services revenue grew by 39.0% to $164.6 million, becoming the largest industry vertical in the Europe segment, driven by new client revenues from 2024 acquisitions[150] - Life Sciences & Healthcare revenue surged by 56.7% to $29.0 million, primarily due to growth from clients in the pharmaceutical and healthcare sectors[150] Tax and Expenses - The effective tax rate for Q1 2025 was 22.2%, compared to 6.0% in Q1 2024[123] - The effective tax rate increased to 22.2% for the three months ended March 31, 2025, compared to 6.0% in the same period of 2024, largely due to lower excess tax benefits[139] Cash Flow and Financial Position - Cash and cash equivalents totaled $1.174 billion as of March 31, 2025, with additional short-term investments of $3.5 million and $675.0 million available under the revolving credit facility[152] - Net cash provided by operating activities was $24.2 million for the three months ended March 31, 2025, a decrease from $129.9 million in the same period of 2024[153] - Cash used in financing activities included $160.0 million for share repurchases in Q1 2025, compared to $120.6 million in Q1 2024[156] - Cash used in investing activities was primarily $9.3 million for capital expenditures in Q1 2025, up from $6.7 million in Q1 2024[155] - The company expects existing cash and cash equivalents, along with projected cash flow from operations, to meet operating and capital expenditure requirements for at least the next twelve months[157] Operational Challenges - The ongoing war in Ukraine has had a material adverse effect on operations, with potential for further impacts due to geopolitical tensions and sanctions[115] - The company continues to monitor inflation impacts, particularly on wages, while implementing pricing and cost management strategies[151] Future Outlook - The company's ability to generate cash is influenced by performance, economic conditions, and industry trends, with potential impacts from the Ukraine invasion[158] - Additional cash resources may be required due to changing business conditions or future investments and acquisitions[158] - If the company issues equity securities to raise funds, existing stockholders may face substantial dilution[158] - Forward-looking statements are based on current expectations and are subject to risks and uncertainties, including geopolitical tensions and market conditions[162] - The adoption and implementation of artificial intelligence technologies may affect client demand and profitability[162] - The company may need to raise additional funds through public or private equity or debt financing to support future activities[158] - The company has no material obligations under guarantee contracts or other arrangements beyond those disclosed in financial statements[160] - The company’s future results may differ materially from expectations due to various risks and uncertainties[163] - The company does not undertake any obligation to update forward-looking statements unless required by law[163]

Financial Data and Key Metrics Changes - In Q1 2025, the company generated revenue of $1.3 billion, reflecting an 11.7% year-over-year increase on a reported basis [27] - Organic constant currency revenue grew by 1.4% compared to Q1 2024, exceeding initial expectations of flat organic growth [27] - GAAP gross margin for the quarter was 26.9%, down from 28.4% in Q1 2024, while non-GAAP gross margin was 28.7%, compared to 30.4% in the same period last year [32][33] - GAAP income from operations was $99 million (7.6% of revenue), down from $111 million (9.5% of revenue) in Q1 2024 [34] - Non-GAAP diluted EPS was $2.41, a decrease from $2.46 in Q1 2024 [34] Business Line Data and Key Metrics Changes - Financial services delivered strong growth of 29.3% year-over-year, with 4.5% organic growth in constant currency, driven by strength in insurance, banking, and payments [28] - Software and high-tech grew by 9.6% year-over-year, while life sciences and healthcare increased by 10.5% [28] - Consumer goods, retail, and travel decreased by 1.4% year-over-year, largely due to declines in consumer products and retail [29] - Emerging verticals delivered very strong growth of 22.8%, positively impacted by Neoris Industrial Materials customers [29] Market Data and Key Metrics Changes - The Americas, representing 60% of Q1 revenues, grew by 12.6% year-over-year, while EMEA, representing 38% of revenues, increased by 10.7% [30] - APAC, representing 2% of revenues, saw a growth of 4.3% year-over-year [30] - Revenues from the top 20 clients grew by 6.1% year-over-year, while revenues from clients outside the top 20 increased by 14.6% [31] Company Strategy and Development Direction - The company is focused on driving organic growth and maintaining momentum in AI-related capabilities, which are expected to continue throughout the year [10][19] - A planned leadership transition is underway, with Balas Feyros set to become the new CEO on September 1, 2025, indicating a strategic shift towards AI-native transformation [7][8] - The company aims to improve gross margins and utilization rates while navigating macroeconomic uncertainties [33][66] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the second half of 2025, despite macroeconomic uncertainties, citing strong client demand and engagement [12][15] - The company has not seen a material slowdown in client spending, with ongoing improvements in demand for services [39] - Management highlighted a trend of clients returning to EPAM for quality execution after experiencing underperformance with other partners [15] Other Important Information - The company reported cash flow from operations of $24 million in Q1, down from $130 million in the same quarter of 2024, attributed to higher bonus payments and increased days sales outstanding (DSO) [35] - Free cash flow was $15 million, compared to $123 million in Q1 2024 [35] - The company ended Q1 with over 61,700 employees, reflecting total growth of 18.2% and organic growth of 6.4% compared to Q1 2024 [36] Q&A Session Summary Question: Can you provide more color on the second half confidence and underlying macro? - Management indicated that the outlook for the second half remains consistent with previous projections, with no significant changes observed in client purchasing behavior [51][53] Question: How should we expect free cash flow to trend as we move through the year? - Management expects free cash flow conversion to remain around 80% to 90%, with elevated DSO likely to persist due to fixed fee revenues [58][59] Question: Are you sensing any pricing power as organic demand picks up? - Management stated it is too early to call for pricing increases, noting that improvements in demand are still relatively small [60] Question: Can you discuss plans to improve gross margin over the remainder of the year? - Management highlighted seasonal factors that typically benefit the second half and emphasized a renewed focus on improving utilization [65] Question: What are the growth dynamics within customer cohorts? - Management noted a visible trend of clients returning, contributing to improvements in revenue growth outside the top 20 clients [71][72]

分组1 - Epam reported quarterly earnings of $2.41 per share, exceeding the Zacks Consensus Estimate of $2.27 per share, but down from $2.46 per share a year ago, representing an earnings surprise of 6.17% [1] - The company achieved revenues of $1.3 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.37% and up from $1.17 billion year-over-year [2] - Over the last four quarters, Epam has consistently surpassed consensus EPS and revenue estimates [2] 分组2 - The stock has underperformed, losing approximately 31.9% since the beginning of the year, compared to a decline of 4.3% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $2.50 on revenues of $1.3 billion, and for the current fiscal year, it is $10.49 on revenues of $5.27 billion [7] - The Computers - IT Services industry, to which Epam belongs, is currently ranked in the top 38% of Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Investor Presentation M A Y 2 0 2 5 EPAM Proprietary & Confidential. Safe Harbor Statement These materials contain forward-looking statements. You should not place undue reliance on these statements because they are subject to numerous uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking statements include information concerning the Company's possible or assumed futur ...

Core Viewpoint - EPAM Systems, Inc. announces a leadership transition with Arkadiy Dobkin moving to Executive Chairman and Balazs Fejes appointed as the new CEO effective September 1, 2025 [1][2] Leadership Transition - Arkadiy Dobkin will focus on strategic initiatives and maintaining key relationships while supporting the company's mission as Executive Chairman [2][3] - Balazs Fejes, with over 20 years at EPAM, is positioned to lead the company forward, emphasizing the expansion of engineering and consulting capabilities [4][6] Company Milestones - Founded in 1993, EPAM has grown to over 61,000 professionals in more than 55 countries, leading digital transformation efforts globally [3][9] - Key milestones include the successful IPO in 2012, inclusion in the S&P 500 in 2021, and recognition as one of the Fortune 100 Fastest-Growing Companies for three consecutive years [5][9] Strategic Focus - The company is committed to advancing AI-native solutions and has positioned itself for future growth, aiming to surpass $5 billion in annual revenue [5][20] - EPAM's leadership has been recognized for its contributions to the tech industry, with Dobkin receiving multiple awards for his leadership [11][9]

Core Insights - EPAM Systems, Inc. reported strong first quarter results for 2025, with revenues of $1.302 billion, reflecting an 11.7% year-over-year increase, and raised its full-year revenue outlook to a growth rate of 11.5% to 14.5% [1][4][5] Financial Performance - First quarter revenues reached $1.302 billion, an increase of $136.2 million or 11.7% year-over-year [4][5] - GAAP income from operations was $99.3 million, a decrease of 10.1% from $110.5 million in the first quarter of 2024 [5] - Non-GAAP income from operations was $175.8 million, an increase of 1.2% compared to $173.6 million in the first quarter of 2024 [5] - GAAP diluted EPS was $1.28, down 35.0% from $1.97 in the first quarter of 2024, while non-GAAP diluted EPS was $2.41, a decrease of 2.0% from $2.46 [5] Cash Flow and Other Metrics - Cash provided by operating activities was $24.2 million for the first quarter of 2025, significantly lower than $129.9 million for the same period in 2024 [5] - Cash, cash equivalents, and restricted cash totaled $1.179 billion as of March 31, 2025, down 8.7% from $1.290 billion as of December 31, 2024 [5] - The company repurchased 796 thousand shares for $160.0 million during the first quarter of 2025 [5] 2025 Outlook - For the full year, EPAM expects GAAP income from operations to be in the range of 9.0% to 10.0% of revenues and non-GAAP income from operations to be in the range of 14.5% to 15.5% of revenues [4][5] - The company anticipates second quarter revenues to be between $1.325 billion and $1.340 billion, reflecting year-over-year growth of 16.2% at the midpoint [13]