Date of report (Date of earliest event reported): November 3, 2014 | ||
EPAM SYSTEMS, INC. | ||
(Exact name of registrant as specified in its charter) | ||
Delaware | 1-35418 | 223536104 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
41 University Drive, Suite 202 Newtown, Pennsylvania | 18940 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: 267-759-9000 | ||
Not Applicable | ||
(Former name or former address, if changed since last report) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
By: | /s/ Anthony J. Conte | |
Name: | Anthony J. Conte | |
Title: | Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer) |
• | Revenues increased to $192.8 million, up 37.5% year-over-year and 10.3% sequentially |
• | GAAP income from operations was $21.8 million, an increase of $1.6 million or 7.9% from $20.2 million in the third quarter of 2013 |
• | Non-GAAP income from operations was $31.8 million, an increase of $8.0 million or 33.2% from $23.8 million in the third quarter of 2013 |
• | Non-GAAP quarterly diluted EPS was $0.60, up 39.5% from $0.43 in the third quarter of 2013 |
• | Quarterly diluted earnings per share (EPS) on a GAAP basis was $0.38, up 11.8% from $0.34 in the third quarter of 2013 |
• | EPAM ranked #3 overall and #1 for tech companies on Forbes 2014 List of America’s Best Small Companies. |
• | CEO Arkadiy Dobkin named to Forbes Best Small Companies All Star List |
• | EPAM won Liberty Global’s Best Product & Service Quality award and was also shortlisted in the top 3 for the Best Innovator category |
• | EPAM Recognized as a Global R&D and Product Development Services Leader for Enterprise Software and Consumer Software Markets by Zinnov, a management consulting firm |
• | EPAM Recognized among Top 10 Largest Commerce Service Providers by Leading Independent Research Firm |
• | EPAM ranked #131 on Software Magazine's 32nd Annual Software 500 |
• | EPAM was included in the shortlist of companies considered for the implementation of a Consolidated Audit Trail (CAT), a system to be developed in response to SEC Rule 613, adopted in July 2012 |
As of September 30, 2014 | As of December 31, 2013 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 191,246 | $ | 169,207 | |||
Accounts receivable, net of allowance of $2,385 and $1,800, respectively | 113,940 | 95,431 | |||||
Unbilled revenues | 70,926 | 43,108 | |||||
Prepaid and other current assets | 18,188 | 14,355 | |||||
Employee loans, net of allowance of $0 and $0, respectively, current | 2,349 | 1,989 | |||||
Time deposits | 1,061 | 1,188 | |||||
Restricted cash, current | — | 298 | |||||
Deferred tax assets, current | 4,230 | 5,392 | |||||
Total current assets | 401,940 | 330,968 | |||||
Property and equipment, net | 54,665 | 53,315 | |||||
Restricted cash, long-term | 208 | 225 | |||||
Employee loans, net of allowance of $0 and $0, respectively, long-term | 4,207 | 4,401 | |||||
Intangible assets, net | 46,280 | 13,734 | |||||
Goodwill | 39,055 | 22,268 | |||||
Deferred tax assets, long-term | 14,929 | 4,557 | |||||
Other long-term assets | 3,747 | 3,409 | |||||
Total assets | $ | 565,031 | $ | 432,877 | |||
Liabilities | |||||||
Current liabilities | |||||||
Accounts payable | $ | 6,027 | $ | 2,835 | |||
Accrued expenses and other liabilities | 31,665 | 20,175 | |||||
Deferred revenue, current | 2,282 | 4,543 | |||||
Due to employees | 22,371 | 12,665 | |||||
Taxes payable | 20,317 | 14,171 | |||||
Deferred tax liabilities, current | 1,406 | 275 | |||||
Total current liabilities | 84,068 | 54,664 | |||||
Other long-term liabilities | 31,672 | — | |||||
Deferred revenue, long-term | 113 | 533 | |||||
Taxes payable, long-term | — | 1,228 | |||||
Deferred tax liabilities, long-term | 3,478 | 351 | |||||
Total liabilities | 119,331 | 56,776 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Common stock, $0.001 par value; 160,000,000 authorized; 48,405,957 and 47,569,463 shares issued, 47,691,502 and 46,614,916 shares outstanding at September 30, 2014 and December 31, 2013, respectively | 48 | 46 | |||||
Additional paid-in capital | 220,722 | 195,585 | |||||
Retained earnings | 242,204 | 190,986 | |||||
Treasury stock | (6,500 | ) | (8,684 | ) | |||
Accumulated other comprehensive loss | (10,774 | ) | (1,832 | ) | |||
Total stockholders’ equity | 445,700 | 376,101 | |||||
Total liabilities and stockholders’ equity | $ | 565,031 | $ | 432,877 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | $ | 192,764 | $ | 140,150 | $ | 527,843 | $ | 397,532 | |||||||
Operating expenses: | |||||||||||||||
Cost of revenues (exclusive of depreciation and amortization) | 122,509 | 88,539 | 335,065 | 250,023 | |||||||||||
Selling, general and administrative expenses | 42,875 | 27,893 | 113,905 | 83,517 | |||||||||||
Depreciation and amortization expense | 5,510 | 3,906 | 14,650 | 11,377 | |||||||||||
Other operating expenses, net | 35 | (418 | ) | 2,055 | (686 | ) | |||||||||
Income from operations | 21,835 | 20,230 | 62,168 | 53,301 | |||||||||||
Interest and other income, net | 1,261 | 846 | 3,401 | 2,245 | |||||||||||
Foreign exchange loss | (718 | ) | (720 | ) | (3,198 | ) | (2,088 | ) | |||||||
Income before provision for income taxes | 22,378 | 20,356 | 62,371 | 53,458 | |||||||||||
Provision for income taxes | 3,338 | 3,919 | 11,153 | 10,223 | |||||||||||
Net income | $ | 19,040 | $ | 16,437 | $ | 51,218 | $ | 43,235 | |||||||
Foreign currency translation adjustments | (8,260 | ) | 2,975 | (8,943 | ) | (413 | ) | ||||||||
Comprehensive income | $ | 10,780 | $ | 19,412 | $ | 42,275 | $ | 42,822 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.40 | $ | 0.36 | $ | 1.09 | $ | 0.95 | |||||||
Diluted | $ | 0.38 | $ | 0.34 | $ | 1.03 | $ | 0.90 | |||||||
Shares used in calculation of net income per share: | |||||||||||||||
Basic | 47,315 | 46,162 | 47,058 | 45,492 | |||||||||||
Diluted | 49,829 | 48,720 | 49,530 | 48,120 |
Three Months Ended September 30, 2014 | Nine Months Ended September 30, 2014 | ||||||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization)(1) | $ | 122,509 | $ | (2,463 | ) | $ | 120,046 | $ | 335,065 | $ | (6,391 | ) | $ | 328,674 | |||||||||
Selling, general and administrative expenses(2) | $ | 42,875 | $ | (4,962 | ) | $ | 37,913 | $ | 113,905 | $ | (11,013 | ) | $ | 102,892 | |||||||||
Income from operations(3) | $ | 21,835 | $ | 9,933 | $ | 31,768 | $ | 62,168 | $ | 24,784 | $ | 86,952 | |||||||||||
Operating margin | 11.3 | % | 5.2 | % | 16.5 | % | 11.8 | % | 4.7 | % | 16.5 | % | |||||||||||
Net income(4) | $ | 19,040 | $ | 10,651 | $ | 29,691 | $ | 51,218 | $ | 27,982 | $ | 79,200 | |||||||||||
Diluted earnings per share(5) | $ | 0.38 | $ | 0.22 | $ | 0.60 | $ | 1.03 | $ | 0.57 | $ | 1.60 |
Three Months Ended September 30, 2013 | Nine Months Ended September 30, 2013 | ||||||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization)(1) | $ | 88,539 | $ | (1,498 | ) | $ | 87,041 | $ | 250,023 | $ | (3,356 | ) | $ | 246,667 | |||||||||
Selling, general and administrative expenses(2) | $ | 27,893 | $ | (1,867 | ) | $ | 26,026 | $ | 83,517 | $ | (6,483 | ) | $ | 77,034 | |||||||||
Income from operations(3) | $ | 20,230 | $ | 3,612 | $ | 23,842 | $ | 53,301 | $ | 11,158 | $ | 64,459 | |||||||||||
Operating margin | 14.4 | % | 2.6 | % | 17.0 | % | 13.4 | % | 2.8 | % | 16.2 | % | |||||||||||
Net income(4) | $ | 16,437 | $ | 4,332 | $ | 20,769 | $ | 43,235 | $ | 13,246 | $ | 56,481 | |||||||||||
Diluted earnings per share (5) | $ | 0.34 | $ | 0.09 | $ | 0.43 | $ | 0.90 | $ | 0.27 | $ | 1.17 |
(1) | Adjustments to GAAP cost of revenues (exclusive of depreciation and amortization) were comprised of stock-based compensation expense recorded in the periods presented. |
(2) | Adjustments to GAAP selling general and administrative expenses: |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Stock-based compensation expense | $ | 4,962 | $ | 1,867 | $ | 10,133 | $ | 6,435 | |||||||
Acquisition-related costs | — | — | 880 | 48 | |||||||||||
Total adjustments to GAAP selling, general and administrative expenses | $ | 4,962 | $ | 1,867 | $ | 11,013 | $ | 6,483 |
(3) | Adjustments to GAAP income from operations: |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Stock-based compensation expense | $ | 7,425 | $ | 3,365 | $ | 16,524 | $ | 9,791 | |||||||
reported within cost of revenues | 2,463 | 1,498 | 6,391 | 3,356 | |||||||||||
reported within selling, general and administrative expenses | 4,962 | 1,867 | 10,133 | 6,435 | |||||||||||
Acquisition-related costs | — | — | 880 | 48 | |||||||||||
Amortization of purchased intangible assets | 2,508 | 723 | 5,380 | 2,126 | |||||||||||
One-time charges | — | (476 | ) | 2,000 | (807 | ) | |||||||||
Total adjustments to GAAP income from operations | $ | 9,933 | $ | 3,612 | $ | 24,784 | $ | 11,158 |
(4) | Adjustments to GAAP net income: |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Stock-based compensation expense | $ | 7,425 | $ | 3,365 | $ | 16,524 | $ | 9,791 | |||||||
reported within cost of revenues | 2,463 | 1,498 | 6,391 | 3,356 | |||||||||||
reported within selling, general and administrative expenses | 4,962 | 1,867 | 10,133 | 6,435 | |||||||||||
Acquisition-related costs | — | — | 880 | 48 | |||||||||||
Amortization of purchased intangible assets | 2,508 | 723 | 5,380 | 2,126 | |||||||||||
One-time charges | — | (476 | ) | 2,000 | (807 | ) | |||||||||
Foreign exchange loss | 718 | 720 | 3,198 | 2,088 | |||||||||||
Total adjustments to GAAP net income | $ | 10,651 | $ | 4,332 | $ | 27,982 | $ | 13,246 |
(5) | There were no adjustments to GAAP average diluted common shares outstanding during the three and nine months ended September 30, 2014 and 2013. |
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