EPAM financials

Main article: EPAM Systems

2024: Epam shares collapse 25% as earnings fall

In the first quarter of 2024, Epam Systems received revenue of $1.17 billion. This is 3.8% less than a year ago, when the figure was $1.21 billion. Such data are given in the financial report published on May 9, 2024. Falling revenues led to a sharp collapse of IT vendor quotes.

The decline in sales is due to macroeconomic challenges, due to which many customers are revising their IT budgets downward. In addition, Epam is influenced by the formed geopolitical situation, because of which it decided to leave the Russian market.

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EPAM

From a geographical point of view, 59% of the total revenue of the EPAM falls on the American region, where the fall compared to 2023 was recorded at 2.4%. Activities in Europe, the Middle East and Africa (EMEA) accounted for 39% of total revenue, and the fall here was 3.2% year-on-year. Sales in the Asia-Pacific region decreased by 13.1% year-on-year and accounted for 2% of total revenue.

Operating profit also shrank. If in the first quarter of 2023 it amounted to $120.37 million, then in the first quarter of 2024 - $110.53 million. That equates to an 8.2% year-on-year drop. Against this backdrop, Epam downgraded its outlook for 2024 overall, with revenue expected to decline from the previous year by 1.4%. Earlier it was said about growth in the range of 1-4%.

Due to the deterioration of expectations for 2024, the value of EPAM shares in a day collapsed by more than a quarter - by 27%. In particular, on May 9, 2024, the price of securities fell to $181.9 apiece, while the day before it was in the range of $246- $249. For comparison: in February 2024, the value of the company's shares exceeded $300, and in 2021 it was more than $700^[1]

2023: For the first time in years, EPAM revenue showed a decline. The company still experiences echoes of the relocation of 13 thousand specialists

Epam's revenue for 2023 decreased by 2.8% to $4.691 billion, the company said in its financial statements in February. Net profit amounted to more than $417 million, which is $2 million, or 0.55%, less than in 2022.

Earlier in Epam approximately such a decrease in turnover for 2023 and predicted - at the level of 3%, associating this with a decrease in the level of demand from customers.

In horizontal terms, the largest decrease was shown by such industries as business information and media, software and hi-tech. But there are also segments in which customer demand has grown: science and health, power, manufacturing and education.

Epam's annual revenue decline is recorded for the first time in many years. In 2022, which turned out to be difficult for the company, there was growth in revenue, although there was a decrease in profit.

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Epam Systems

From a conference call with top managers and analysts of the company dedicated to the results of the year, it follows that Epam still continues to experience the influence of leaving Russia and the mass relocation of its IT specialists. President and Chairman of the Board of Directors of Epam Arkady Dobkin during the call noted that in 2022 the company, against the background of events in Ukraine, provoked more than 13 thousand people, as well as their families to different regions. The key destinations for them were the countries of Europe, Western and Central Asia. But Epam is now also working to expand teams in India and Latin America.

While most of the moves ended in 2022, in 2023 things still had to be put in order. According to Dobkin, in 2024 Epam continues to work on various organizational issues related to the state, both in its traditional locations and in new ones.

At the end of the year, Epam is present in 55 countries and regions with a total staff of more than 53 thousand people^[2].

Epam's financial statements also reflect the item "humanitarian aid in Ukraine": in 2022 they amounted to about $28 million, in 2023 - $11.2 million^[3]

Dobkin says that a large number of Epam customers, who had previously reduced costs due to events in Ukraine, have now begun to increase their interaction with the company again.

Financial reporting reflects Epam's expectations for financial performance in 2024. So, in the first quarter, the company predicts a decrease in revenue by about 4%, but by the end of the whole year it expects to reach a turnover growth of 1-4%.

Russian legal entities Epam, we recall, were liquidated in 2023. This happened after, earlier in 2022, the American headquarters of Epam "wrote out" a record billion dividends from the retained earnings of its key Russian subsidiary. Read more here.

2022: Losses of $19.57 million due to withdrawal from the Russian market

In the first half of 2022, Epam suffered impairment losses on long-term assets in Russia in the amount of $19.57 million as a result of the decision to cease operations in the country, the company said.

This amount includes tangible assets of $15.1 million; $3.8 million - from assets in the form of right of use; $0.7 - goodwill.

According to the results of the first three months of 2022, Epam reported that it had lost about $15.1 million due to impairment of fixed assets in Russia.

As noted in Epam in May 2022, the company is considering various strategy options for its Russian assets, including their potential sale or liquidation. Epam expects to cease operations in the Russian Federation by the end of the second quarter of 2022.

Epam lost $15.1 million in the quarter due to withdrawal from the Russian market, and in the first half of the year this amount increased to $19.57 million

In the second quarter of 2022, Epam said that the company could incur additional significant expenses related to the termination of its operations in Russia, including (but not limited to) restructuring costs and sale losses.

At the end of the first quarter of 2022, Epam recorded an impairment of assets from operating leasing of $3.8 million and goodwill (the company's intangible asset associated with its business reputation - IF) - of $0.7 million. These impairment expenses are included in the commercial, general and administrative expenses in the financial statements, the company clarifies.

In January-March 2022, Epam's commercial, general and administrative expenses turned out to be $237.3 million, which is 74% higher than spending a year ago. This includes expenses of $18.7 million for moving employees to other countries. It is expected that the share of Epam employees working in Russia, Belarus and Ukraine in 2022 will be halved - to 30% from 60% in 2021.

We believe that some customers may to some extent refuse to work in Belarus and Ukraine, but Epam is diversifying its geographical structure at a faster pace than expected, which in many cases is due to the relocation of existing EPAM employees, said Bank of America analyst Jason Kupferberg.[4]

2021: Revenue growth 41.3% to $3.758 billion

On February 18, 2022, EPAM Systems announced its 2021 results. The company continues to grow strongly, taking a high position in the market and offering its customers and partners from the Global 2000 list solutions for digital business transformation.

As of the end of 2021, EPAM's revenue amounted to $3.758 billion, which is 41.3% more than in 2020.

The number of EPAM personnel as of December 31, 2021 amounted to about 58,800 employees, including more than 52,600 production specialists, which is 43.2% higher compared to the same period in 2020.

Highlights of 2021:

• In constant currency, revenue rose 39.9% from 2020. The acquisitions contributed to a 4.3% increase in revenue for the year;
• GAAP operating income was $542 million, an increase of $163 million, or 43.0%, from $379 million in 2020;
• Non-GAAP operating income was $678 million, an increase of $205 million, or 43.5%, from $473 million in 2020;
• GAAP diluted earnings per share were $8.15, an increase of $2.55, or 45.5%, from $5.60 in 2020;
• Non-GAAP diluted earnings per share were $9.05, an increase of $2.71, or 42.7%, from $6.34 in 2020.

Forecast for 2022:

• The company expects revenue of at least $5.150 billion for 2022, reflecting an annualized growth rate of at least 37%, which includes an adverse impact of about 1% on foreign currency translation. Revenue growth in constant currency basis will be at least 38%. The company expects the acquisitions to generate approximately 6% of reported revenue;
• Throughout the year, EPAM expects revenue from GAAP operations to be in the range of 13.5% to 14.5% of revenues, and income from non-GAAP operations to be in the range of 16.5% to 17.5% of revenues;
• The Company expects its effective GAAP tax rate to be approximately 15% and its effective non-GAAP tax rate to be approximately 22%; and
• EPAM expects GAAP diluted earnings per share to be in the range of $10.43 to $10.76 for the year, and non-GAAP diluted earnings per share to be in the range of $11.36 to $11.69 for the year. The company expects the weighted average number of diluted shares outstanding for the year to be 59.8 million.

2020: Revenue growth 15.9%, to $2.66 billion

At the end of 2020, Epam Systems raised $2.66 billion, which is 15.9% more than a year earlier. Sales at the company have been growing for 10 years in a row.

The largest market for the company remains North America. There, the company's revenues at the end of 2020 reached almost $1.6 billion, or 60% of the total. Epam's revenue in this region climbed 14.8% compared to 2019.

In Europe, Epam's turnover in 2020 amounted to $879.9 million, an increase of 17.8% compared to the previous year. The European market accounted for about a third of sales. The share of the CIS countries in the total turnover of the manufacturer turned out to be 4.3% with revenue of $114.7 million at the end of 2020. Compared to 2019, the company's revenues in these countries rose by 14.2%. In the Asia-Pacific region, EPAM sales increased by 23.7%, to $69.8 million (in annual revenue this corresponds to 2.6%).

Epam revenue grows for the 10th year in a row

In the direction of Business Information & Media, Epam's revenue amounted to $560.7 million, an increase of 33.2% compared to a year ago. In the category of financial services, a 10.9 percent increase in turnover was registered, up to $555.3 million. Sales in the Software & Hi-Tech division increased by 14.6% to $496.8 million.

For January-December 2020, Epam's net profit amounted to $327.16 million against $261.06 million in 2019.

The number of Epam employees by December 31, 2020 amounted to about 41,200 employees, including 36,700 production specialists, which is 12.8% higher compared to the same period of the previous year.

By December 31, 2020, the company had accumulated cash and cash equivalents in the amount of $1.32 billion, which is $385.8 million, or 41.1%, higher than a year ago. Total assets increased during this time from $2.24 billion to $2.72 billion. By the end of 2020, Epam was doing business in more than 35 countries, including Russia.^[5]

2019

9 years in a row, revenue has grown by more than 20%

Epam Systems ended 2019 with revenue of $2.29 billion, which is $450.9 million or 24.5% more than the one registered a year earlier. Excluding currency fluctuations, sales increased by 25.8%. It is noted that the company's revenue has been growing by more than 20% for 36 consecutive quarters.

It follows from the financial report that in 2019, orders in North America brought the software manufacturer about 61% of revenue. The share of the European market in total income was 33%, the CIS countries - 4%, the Asia-Pacific region - 2%.

The breakdown of revenue by customer is as follows:

• representatives of the financial sector brought the company 22% of annual revenue;
• companies in the fields of tourism and the consumer market - 19%;
• IT customers - 19%;
• from the media - 18%;
• from health care - 11%.

Epam Systems has seen more than 20% growth in revenue for 9 consecutive years

Epam's top 20 customers accounted for 41% of sales in 2019. If we talk about the 10 most profitable customers, then their share in the total revenue of the company amounted to 29%. The indicator for the top 5 customers is 20%.

In 2019, Epam entered into 22 contracts worth from $20 million and 27 transactions for $10-20 million. Most contracts - 206 - had a price in the range from $1 million to $5 million. Half as many deals (105) were made with customers who agreed to buy $0.5-1 million worth of Epam software or services.

Epam received approximately 60% of revenue at the end of 2019 in dollars. In second place are ruble contracts (10%), in third - transactions in Polish zlotys (5%).

Epam's net profit also rose - from $240.3 million in 2018 to $261.1 million a year later.

By December 31, 2020, $937 million was accumulated in Epam accounts, and the size of credit lines opened in the United States was measured at $275 million. The 12-month flow of money from operating activities amounted to $287 million.^[6]

Entering the top 100 fastest growing companies in the world

In September 2019, Epam was ranked as the fastest growing company by Fortune. The company is located on the 71st line.

2017: Revenue growth 25% to $1.45 billion

In 2017, Epam Systems revenue amounted to $1.45 billion, an increase of $290.3 million or 25% compared to the previous year. Excluding the impact of volatile exchange rates, sales rose 23.9%.

The company completed the reporting 12-month period closed on December 31, 2018 with a net profit of $72.76 million, which is less than the profit indicator of one year ago ($92.27 million).

Financial performance of Epam Systems

About more than half (58%) of Epam Systems' revenue for the year was in North America. In Europe, the company generates 35% of revenue. In the CIS countries, the share of revenue was 5%, in the Asia-Pacific region - 2%.

At the same time, as follows from the report for 2017, most of the company's specialists work in the CIS countries: 7400 - in Belarus, 4800 - in Ukraine, 3800 - in Russia. In Central Europe, the company employs 3,000 people. Asia Pacific and North America employ 1,800 and 1,600 workers.

As for customers, most of Epam Systems' revenue in 2017 was generated by representatives of the financial sector - 23% of the total turnover. Slightly less earnings - 22% - fell on the sphere of tourism and consumers. The IT sector (20%), media (18%) and medicine (8%) are the next revenue markets in which the company operates. For comparison, in 2006, almost all revenues (about 75%) of Epam Systems were concentrated in the IT industry.

Share of Regions and Markets in Epam Systems Revenue

Epam Systems continues to see its dependence on its biggest customers decline. Thus, the 20 most profitable customers brought the company 45% of revenue in 2017 against 49% a year earlier. The contribution of 10 companies providing Epam Systems most of the revenues amounted to 34% (in 2016 - 38%), and the top 5 customers accounted for 24% of the annual turnover (28% in 2016). In 2017, there was no customer that accounted for more than 10% of Epam Systems' revenue.^[7]

2015: Revenue growth 25.2% to $914.1 million

The company's revenue in 2015 increased to $914.1 million, which is 25.2% higher than in 2014. Last year's profit would be $84.5 million, which is 21.4% more than a year earlier.

According to the results of the IV quarter of 2015, the developer recorded revenue of a record $260.3 million, while profit amounted to $27.6 million. Compared to the same period in 2014, revenue increased by 28.7%, profit - by 50%.

The company's revenue in the second quarter of 2015 increased by 24.7% to $217.8 million^[8].

The company's net profit rose 30% to $19.2 million. The balance of funds in the company's accounts as of June 30 amounted to $175.7 million against $192 million as of March 31.

2014: Revenue growth 31% to $730 million

The company's revenue grew by 31% over the year and amounted to $730 million, operating profit increased by 12.7% to $86.2 million, net profit - by 12% to $69.6 million.

Investors feared that due to events in Ukraine, Epam would have problems, since the company has several development centers in this country at once. If in mid-February last year Epam stock quotes reached $44, then by mid-April they fell to $30. True, then the growth began and now the shares are already trading at $61.

As of 2014, it has 17 representative offices in 35 countries. Epam Systems performs projects in more than 30 countries around the world.

2013: Revenue of $555 million (+ 28 %)

In 2013, EPAM's revenue amounted to $555 million, an increase of 28% over the year. The company's net profit rose 13% to $62 million. EPAM earned the most on clients from the banking sector (28% of total revenue), technology (24%) and tourism (21%).

2011: Revenue for 9 months $239.4 million, profit - $32 million

In the first 9 months of 2011, EPAM's revenue reached $239.4 million, operating profit - $39.5 million, net profit - $32 million.

2010: Revenue of $222 million

EPAM revenue in 2010 amounted to $222 million, of which $110 million fell on sales in North America, $68 million in Europe and $31 million in Russia. Operating profit for the same period amounted to $33 million, net profit - $31 million.

In March 2011, Commercial Director EPAM SystemsYuriy Ovcharenko said that his company's annual revenue in 2010 increased by 40%. At the same time, income in the American, European and Russian markets increased evenly. Custom development generated 61% of revenue, the rest came from IT services and consulting. Moreover, the first direction grew more slowly.

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