EPAM(EPAM)2024-08-08 21:27Revenue Performance - Revenues for the first six months of 2024 decreased by 2.9% to $2.312 billion compared to $2.381 billion in the same period of 2023[119] - Americas region generated $691.2 million in revenue for Q2 2024, representing 60.3% of total revenue, a slight increase from 58.0% in Q2 2023[126] - United States revenues increased 2.0% to $662.6 million in Q2 2024 compared to $649.6 million in Q2 2023[127] - EMEA region revenues decreased to $431.3 million in Q2 2024 from $459.1 million in Q2 2023, with UK, Switzerland, and Germany as top contributors[126][127] - APAC region revenues decreased by $0.1 million (0.6%) in Q2 2024 and $3.7 million (7.2%) in H1 2024 compared to 2023[128] - North America segment revenues increased by $18.6 million (2.7%) in Q2 2024 compared to Q2 2023, reaching $698.6 million[144] - Europe segment revenues decreased by $35.5 million (7.3%) in Q2 2024 compared to Q2 2023, totaling $448.0 million[147] - Life Sciences & Healthcare revenues in North America grew by 20.6% in Q2 2024 compared to Q2 2023, reaching $120.6 million[146] - Financial Services revenues in North America declined by 8.7% in Q2 2024 compared to Q2 2023, falling to $123.4 million[146] - Consumer Goods, Retail & Travel revenues in Europe declined by 8.8% in Q2 2024 compared to Q2 2023, totaling $138.3 million[149] - Life Sciences & Healthcare revenues in Europe grew by 34.8% in Q2 2024 compared to Q2 2023, reaching $19.5 million[149] - Business Information & Media revenues in Europe declined by 34.0% in Q2 2024 compared to Q2 2023, falling to $55.0 million[149] Profitability and Operating Performance - Income from operations as a percentage of revenues decreased to 10.0% for the six months ended June 30, 2024, down from 11.1% in the same period of 2023[119] - Net income for the six months ended June 30, 2024 was $214.888 million, representing 9.3% of revenues, compared to $222.325 million (9.3% of revenues) in the same period of 2023[124] - Diluted earnings per share for the six months ended June 30, 2024 was $3.67, down from $3.75 in the same period of 2023[124] - North America segment operating profit decreased by $8.8 million (6.7%) in Q2 2024 compared to Q2 2023, falling to $122.8 million[144] - Europe segment operating profit decreased by 15.8% in Q2 2024 compared to Q2 2023, dropping to $54.5 million[147] Cost Structure - Cost of revenues as a percentage of revenues increased to 71.2% for the six months ended June 30, 2024, up from 69.9% in the same period of 2023[124] - Cost of revenues increased 0.3% to $810.9 million in Q2 2024, representing 70.7% of revenue, up from 69.1% in Q2 2023[130] - Selling, general and administrative expenses decreased 0.2% to $194.1 million in Q2 2024, representing 16.9% of revenue[133] - Depreciation and amortization expense decreased to $21.1 million in Q2 2024 from $22.8 million in Q2 2023[135] Tax and Compensation - The effective tax rate for the six months ended June 30, 2024 was 16.5%, down from 19.8% in the same period of 2023[124] - Effective tax rate increased to 26.3% in Q2 2024 from 20.0% in Q2 2023, primarily due to decreased excess tax benefits from stock awards[139] - Company recorded $20.8 million in excess tax benefits from stock awards in H1 2024, compared to $13.4 million in H1 2023[140] - Stock-based compensation expense for the six months ended June 30, 2024 was $39.294 million, up from $31.427 million in the same period of 2023[124] - The company recorded a tax shortfall of $0.1 million during the three months ended June 30, 2024, compared to excess tax benefits of $7.4 million in the same period of 2023[140] Cash Flow and Liquidity - Cash and cash equivalents totaled $1.787 billion as of June 30, 2024, with short-term investments of $61.5 million and $675.0 million available under the revolving credit facility[152] - Net cash provided by operating activities for the six months ended June 30, 2024, was $186.9 million, compared to $176.4 million in the same period of 2023[153] - Net cash used in investing activities for the six months ended June 30, 2024, was $73.8 million, primarily due to $11.5 million in capital expenditures and $56.7 million for business acquisitions[155] - Net cash used in financing activities for the six months ended June 30, 2024, was $338.2 million, mainly due to $335.1 million spent on share repurchases[156] - Cash, cash equivalents, and restricted cash decreased by $251.5 million in the first six months of 2024, ending at $1.79 billion[153] - The company's operating activities were impacted by lower variable compensation payments and increased days sales outstanding in 2024 compared to 2023[154] - The company believes its existing cash and cash equivalents, combined with expected cash flow from operations, will meet operating and capital expenditure requirements for the next twelve months[158] - The company may require additional cash resources due to changed business conditions or future developments, potentially leading to equity or debt financing[159] Geopolitical and Operational Impact - Ukraine remains the company's largest delivery location as of June 30, 2024, with the majority of employees in safe locations and operating at pre-war productivity levels[113] - The company has maintained its $100 million humanitarian aid commitment to its people in Ukraine[113] - The company completed the sale of its remaining holdings in Russia on July 26, 2023, and no longer has operations associated with the Russia segment[150] - The company no longer has operations in Russia following the sale of its remaining holdings on July 26, 2023[141] - The company's cash flow generation is influenced by performance, economic conditions, industry trends, and the impact of the Ukraine invasion[159] Inflation and Future Risks - Inflation has not had a material impact on the company's business to date, but future higher-than-normal inflation rates could adversely affect operations and financial condition[151] - The company's forward-looking statements are subject to risks and uncertainties, including geopolitical events and economic conditions[163] Other Financial Information - Interest and other income increased to $12.0 million in Q2 2024 from $11.7 million in Q2 2023, driven by higher interest income[136] - Foreign exchange loss for the six months ended June 30, 2024 was $706 thousand, compared to a loss of $10.618 million in the same period of 2023[124] - The company has no material off-balance sheet commitments or arrangements other than those disclosed in its financial statements[161]