Core Insights - Endava PLC Sponsored ADR (DAVA) is currently rated as a Strong Buy with a Zacks Rank of 1, while Epam (EPAM) has a Zacks Rank of 4, indicating a Sell recommendation [3] - DAVA shows a more favorable earnings estimate revision activity compared to EPAM, suggesting a better analyst outlook for DAVA [3][7] Valuation Metrics - DAVA has a forward P/E ratio of 11.48, while EPAM's forward P/E is 13.84, indicating that DAVA may be undervalued relative to EPAM [5] - The PEG ratio for DAVA is 0.52, which is significantly lower than EPAM's PEG ratio of 2, suggesting that DAVA offers better value considering its expected earnings growth [5] - DAVA's P/B ratio stands at 1.20, compared to EPAM's P/B ratio of 2.27, further supporting the notion that DAVA is more attractively valued [6] Value Grades - Based on the analysis of various valuation metrics, DAVA has earned a Value grade of B, while EPAM has a Value grade of C, indicating that DAVA is perceived as a better value investment [6]

Core Insights - The report by EPAM Systems highlights the current state of AI adoption in enterprises, revealing a significant gap between perceived and actual AI implementation success [3][4] - Companies are entering a new phase of AI deployment, focusing on high-value use cases and aligning technology with business objectives to drive real value [4][9] AI Adoption Status - Nearly half (49%) of surveyed companies consider themselves "advanced" in AI implementation, but only 26% of these have successfully delivered AI use cases to market [3] - 30% of technology-advanced companies have implemented AI at scale, indicating a struggle for many organizations to transition from experimentation to enterprise-wide deployment [7] Investment Trends - Companies plan to increase AI spending by 14% year-over-year in 2025, reflecting a commitment to AI-driven growth [7] - Disruptors expect 53% of their profits in 2025 to be attributed to AI investments, showcasing a tangible financial impact [7] Key Challenges - A lack of alignment between business and technical teams is identified as a major barrier to AI adoption, with 31% of executives citing outdated technology as a challenge [14] - Security remains a priority, with 35% of businesses indicating that inadequate security programs hinder modernization efforts [14] Governance and Talent - While 75% of advanced companies claim to have clear AI strategies, only 4% of disruptors have developed comprehensive governance frameworks, with effective governance expected to take at least 18 months to implement [14] - 43% of surveyed companies plan to hire AI-related roles in 2025, with machine learning engineers and AI researchers being the most sought-after positions [7]

Core Insights - EPAM Systems, Inc. has been awarded the 2025 Google Cloud Industry Solutions Partner of the Year Award for Oil and Gas, recognizing its innovation and commitment to customer service [1][2][3] Company Achievements - The award highlights EPAM's development of an AI-powered geospatial data visualization and GenAI solution, which enhances clients' ability to manage large datasets [2][3] - EPAM has over 2,000 experienced Google Cloud engineers and has been a Premier level Partner for Google Cloud since 2018, indicating a strong collaboration and expertise in cloud solutions [2][3] Industry Impact - The solution developed by EPAM integrates Google's Gemini models, which can also be applied in manufacturing and supply chain contexts, showcasing versatility across industries [2] - EPAM's initiatives, such as EPAM AI/RUN™ and DIALX Lab, leverage advanced AI technologies to drive significant industry impact and foster continuous innovation [4] Client Engagement - The company emphasizes its local engagement with expert teams to deliver tailored solutions that improve clients' competitive edge across various industries [6] - EPAM's focus on enhancing efficiency and resilience for clients aligns with the growing demand for digital transformation in the energy sector [2][4]

Company Overview - EPAM Systems, Inc. is a leading global provider of digital engineering, cloud, and AI-enabled transformation services, established in 1993 [3] - The company focuses on addressing clients' transformation challenges through an integrated strategy that combines experience and technology consulting with over 30 years of engineering execution [3] Financial Results Announcement - EPAM Systems will host a conference call on May 8, 2025, at 8:00 a.m. ET to discuss its first quarter 2025 financial results, with a news release to be issued prior to the call [1] Digital Innovation and AI Integration - The company leverages AI and GenAI to deliver transformative solutions that enhance clients' digital innovation and competitive edge [4] - EPAM integrates advanced AI technologies into tailored business strategies through platforms like EPAM AI/RUN™ and initiatives such as DIALX Lab [4] Global Presence and Recognition - EPAM serves customers across six continents and has been recognized as one of the top 15 companies in Information Technology Services in the Fortune 1000 [6] - The company was added to the S&P 500 and Forbes Global 2000 in 2021 and has received accolades from Glassdoor and Newsweek as a Most Loved Workplace [6]

Company Overview - EPAM Systems has undergone a transformation since its peak in 2021, influenced by the war, persistent wage inflation, and tightening IT budgets [1] - The company is currently trading at a significant discount from its historical levels, with a price-to-earnings ratio of just 15x [1] Investment Insights - The investment thesis suggests that identifying high-quality and/or severely mispriced investment ideas is crucial for potential investors [1] - A strong investment opportunity is characterized by the ability to purchase great companies at attractive prices [1]

Market and Economic Risks - The company operates significantly in emerging markets, which exposes it to greater economic, financial, and banking risks compared to developed markets[96]. - A majority of the company's revenues are generated in North America and Western Europe, while most personnel and delivery centers are located in emerging markets, increasing foreign exchange risks[96]. - The company faces risks related to compliance with a variety of legal requirements across different jurisdictions, which could adversely affect operations and financial condition[99]. - Changes in U.S. policies regarding offshore outsourcing could impact the company's ability to deploy employees and conduct business effectively[104]. - The company’s operations may be negatively impacted by geopolitical events, natural disasters, and other disruptions, affecting client spending decisions[146]. Financial and Revenue Risks - The company does not have long-term commitments from clients, making future revenues uncertain and dependent on securing new engagements[109]. - Delays in client payments or contract terminations could lead to increased cash collection times and bad debt expenses, adversely affecting financial results[110]. - A downturn in any of the targeted industries or a slowdown in outsourcing trends could materially affect demand for the company's services and negatively impact financial results[112]. - The company’s effective tax rate may be adversely affected by changes in tax laws and regulations across multiple jurisdictions, impacting overall profitability[147]. - The company believes its current cash and cash flow are sufficient for the next twelve months, but may require additional capital for future investments or acquisitions[144]. Competitive Landscape and Market Position - The competitive landscape is intensifying, particularly with the development of generative AI capabilities, which may lead to pricing pressures and loss of market share[97]. - The company must adapt to rapidly changing technologies and industry standards to remain competitive; failure to do so could lead to loss of clients[118]. - Company revenues are highly dependent on five key industry verticals: Financial Services, Software & Hi-Tech, Business Information & Media, Consumer Goods, Retail & Travel, and Life Sciences & Healthcare[111]. Operational and Compliance Risks - The company faces risks related to pricing structures, which are influenced by internal forecasts and global economic conditions, potentially leading to unprofitable contracts[114]. - Significant resource commitments are required before realizing revenues, and delays in the sales cycle could adversely affect revenue timing and growth[116]. - The company relies on visas for personnel to work at client sites, and any changes in visa regulations could delay project timelines and affect service delivery[105]. - The corporate reputation is crucial for client engagement and retention, and any damage to reputation could adversely affect business and investor confidence[123]. Intellectual Property and Legal Risks - The company relies on a combination of intellectual property protections, but effectiveness may vary by country, exposing it to risks of unauthorized use[125]. - Intellectual property infringement claims could divert management attention and result in significant costs, impacting the company's ability to provide existing services[128]. - The existence and ownership of intellectual property rights related to generative AI technologies are under review, posing potential legal liabilities for the company[130]. - Any adverse outcomes from litigation or claims could materially affect the company's business, financial condition, and results of operations[131]. Cybersecurity and Information Security Risks - The company has experienced cybersecurity incidents and anticipates ongoing threats, with increasingly sophisticated attacks making detection and defense more challenging[134]. - The cost of information security measures and compliance with privacy regulations significantly reduces profitability, potentially leading to client loss and reputational harm[138]. - The company is subject to GDPR and other privacy laws, which impose significant restrictions and can result in substantial financial penalties for non-compliance[139]. - The company must continuously enhance its information security measures to protect sensitive data, which involves significant costs and resources[137]. - The company’s ability to monitor third-party suppliers' information security systems is limited, increasing vulnerability to potential breaches[135]. Financial Volatility and Risk Management - The company’s stock price has shown substantial volatility due to variations in financial results and external market conditions, impacting future operating results[142]. - The company faces counterparty default risk in its hedging program, which could lead to significant losses if a counterparty defaults[145].

Core Viewpoint - EPAM Systems reported strong fourth-quarter results for 2024, with earnings and revenues exceeding expectations, but provided disappointing guidance for 2025, leading to a decline in share price over the past year [1][3]. Financial Performance - EPAM's fourth-quarter non-GAAP earnings were $2.84 per share, beating the Zacks Consensus Estimate by 3.3%, and increased from $2.75 per share in the same quarter last year [1]. - The company's revenues for the fourth quarter reached $1.25 billion, surpassing the consensus mark by 3.3%, and reflecting a year-over-year growth of 7.9% [2]. - Non-GAAP gross profit increased by 5.3% year over year to $402.1 million, while the gross margin contracted by 80 basis points to 32.2% [6]. Segment Performance - Revenue growth was driven by various industry verticals, with Financial Services generating $280.9 million (up 15.9% year over year) and Emerging revenues at $211.8 million (up 24.8% year over year) [4][5]. - However, revenues from Consumer Goods, Travel, and Retail declined by 3% year over year to $250.6 million [4]. Guidance and Estimates - For Q1 2025, EPAM expects revenues between $1.275 billion and $1.29 billion, indicating a year-over-year growth of 10% at the midpoint, while the Zacks Consensus Estimate is $1.27 billion [9]. - The company anticipates non-GAAP earnings for Q1 to be between $2.22 and $2.32 per share, below the Zacks Consensus Estimate of $2.57 per share [10]. - For the full year 2025, EPAM expects revenue growth of 10.0-14.0%, with a consensus estimate of $4.69 billion, indicating minimal year-over-year growth of 0.04% [10]. Balance Sheet and Cash Flow - As of December 31, 2024, EPAM had cash and cash equivalents of $1.29 billion, down from $2.04 billion as of September 30, 2024 [7]. - The company reported cash flow from operations of $130.3 million and free cash flow of $114.5 million for the fourth quarter [7].

Financial Data and Key Metrics Changes - In Q4 2024, EPAM generated revenues of $1.25 billion, a year-over-year increase of 7.9% on a reported basis, including revenues from recent acquisitions [37] - Organic revenues grew 1% compared to Q4 2023, marking a return to year-over-year organic revenue growth for the first time since Q1 2023 [37][38] - GAAP gross margin for Q4 was 30.4%, down from 31.1% in Q4 of the previous year, while non-GAAP gross margin was 32.2%, compared to 33% in the same period last year [44] - GAAP income from operations was $137 million, or 10.9% of revenue, compared to $122 million, or 10.6% of revenue in Q4 of last year [46] - Non-GAAP diluted EPS was $2.84, reflecting an increase of 3.3% compared to the same quarter in 2023 [47] Business Line Data and Key Metrics Changes - Financial services delivered strong growth of 15.9% year-over-year, with 4.3% organic and 11.6% inorganic growth [39] - Life sciences and healthcare increased 8.6% year-over-year, reflecting 5.7% organic and 2.9% inorganic growth [39] - Emerging verticals delivered very strong growth of 24.8%, with 3% organic and 21.8% inorganic growth [41] - The travel and consumer vertical declined by 3% year-over-year, reflecting a negative 5.7% organic and a positive 2.7% inorganic growth [40] Market Data and Key Metrics Changes - The Americas, representing 60% of Q4 revenues, increased 11.4% year-over-year, reflecting 2.7% organic and 8.7% inorganic growth [42] - EMEA, representing 38% of Q4 revenues, increased 3.1% year-over-year, reflecting negative 1.4% organic and positive 4.5% inorganic growth [42] - APAC increased 4.3% year-over-year and represents 2% of revenues [43] Company Strategy and Development Direction - The company is focused on becoming the most globally geo-balanced talent company for AI native digital business services, with recent acquisitions aimed at expanding global client relationships and penetrating new markets [9] - EPAM is investing in GenAI and AI-driven client engagement, with 75% of top country clients engaged in GenAI initiatives [23] - The company anticipates that 2025 will be a transformative year, driven by increased client demand for advanced AI native and agentic software and data engineering services [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2025 being a better year than 2024, despite caution regarding growth market sensitivity and macroeconomic risks [11][16] - There is a belief that the demand for AI-related services will increase, with clients transitioning to more engineering-led programs [15] - Management acknowledged ongoing cost sensitivity among clients, which remains a critical decision factor [16] Other Important Information - The company ended Q4 with approximately $1.3 billion in cash and cash equivalents, lower than the previous year due to recent acquisitions [48] - Total headcount reached 61,200 employees, with a growth of 16.3% compared to Q4 of 2023 [49] - The company expects flat year-over-year organic revenue growth in Q1 2025, followed by continued improvement throughout the year [56] Q&A Session Summary Question: Can you elaborate on the expectations embedded in the revenue guidance? - Management indicated a cautious approach to revenue expectations for NEORIS and FD, with a zero to 4% revenue growth for organic and a 1% to 5% growth when considering foreign exchange headwinds [70][71] Question: What are the implications of investments in Agentic AI and IP? - Management highlighted the importance of investing in GenAI and retaining top talent, which has led to increased compensation costs and pressure on margins [74][76] Question: How did client spending behavior progress through Q4? - Management noted a good number of new clients entering the pipeline, with some quickly reaching significant revenue levels, while also seeing the return of previous clients [90][91] Question: What is the outlook for revenue growth and profitability? - Management expects improved profitability in the second half of 2025, aiming to return to typical profit levels of 16% or better [97]

分组1 - Epam reported quarterly earnings of $2.84 per share, exceeding the Zacks Consensus Estimate of $2.75 per share, and showing an increase from $2.75 per share a year ago, representing an earnings surprise of 3.27% [1] - The company achieved revenues of $1.25 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 2.92%, and up from $1.16 billion year-over-year [2] - Epam has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] 分组2 - The stock has gained approximately 10.4% since the beginning of the year, outperforming the S&P 500's gain of 4.5% [3] - The current consensus EPS estimate for the upcoming quarter is $2.57 on revenues of $1.27 billion, and for the current fiscal year, it is $11.29 on revenues of $5.26 billion [7] - The Computers - IT Services industry, to which Epam belongs, is currently ranked in the top 29% of over 250 Zacks industries, indicating a favorable outlook [8]

Contents 01 | | Who We Are | 4 | | --- | --- | --- | | 02 | The EPAM Story | 7 | | 03 | Our Positioning | 11 | | 04 | Market Trends | 13 | | 05 | How We Do It | 15 | | 06 | Artificial Intelligence | 18 | | 07 | Corporate Recognition | 28 | | 08 | Investment Highlights | 30 | EPAM Proprietary & Confidential. 3 01 Investor Presentation F E B R U A R 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 ...