EX-99.1 2 exhibit99_q2x2016.htm EXHIBIT 99.1 Exhibit



Exhibit 99.1
EPAM Reports Results for Second Quarter 2016

Second quarter revenues of $283.8 million, up 30% year-over-year
GAAP Diluted EPS of $0.46, up 24% year-over-year
Non-GAAP Diluted EPS of 0.71, up 22% year-over-year

Newtown, PA - August 4, 2016 - EPAM Systems, Inc. (NYSE: EPAM), a leading global provider of product development and software engineering solutions, today announced results for its second quarter ended June 30, 2016.

“We are pleased with our second quarter results, which delivered 30.3% year-over-year revenue growth,” said Arkadiy Dobkin, CEO and President, EPAM. “As we look at the remainder of 2016, various macro-economic and geo-political challenges could cause some unexpected volatility in the market, but we remain confident that we can achieve our top line growth objectives. Our long-term strategy remains intact and we will continue to focus on delivering the most innovative digital solutions to our customers and investing in our talent, capabilities and global delivery locations.”

Second Quarter 2016 Highlights
•
Revenues increased to $283.8 million, a year-over-year increase of $66.1 million, or 30.3%;
•
In constant currency, revenue was up 33.9% year-over-year;
•
GAAP income from operations was $32.1 million, an increase of $8.5 million compared to $23.6 million in the second quarter of 2015;
•
Non-GAAP income from operations was $47.6 million, an increase of $10.7 million, or 29.1%, from $36.9 million in the second quarter of 2015;
•
Diluted earnings per share (EPS) on a GAAP basis was $0.46, an increase from $0.37 in the second quarter of 2015;
•
Non-GAAP quarterly diluted EPS was $0.71(*) compared to $0.58(*) in the second quarter of 2015;
(*)Excluding the tax effect on non-GAAP adjustments, non-GAAP diluted EPS would result in $0.79 for the second quarter of 2016 and $0.64 for the second quarter of 2015.
Cash Flow from Operations
•
Cash from operations was $49.4 million for the first half of 2016, up from $9.0 million as compared to the first half of 2015; and was $38.5 million in the second quarter of 2016, up from $2.2 million in the second quarter of 2015;
•
As of June 30, 2016, cash and cash equivalents totaled $280.7 million.
Other Metrics
•
As of June 30, 2016, total headcount was 20,761, an increase of 36.5% from 15,213 at June 30, 2015;
•
Total number of delivery professionals increased 37.4% to 18,206 in the second quarter of 2016 from 13,253 in the second quarter of 2015;
•
Billed and unbilled Days Sales Outstanding (DSO) decreased to 88 days for the second quarter of 2016 compared to 94 days in the first quarter of 2016.





2016 Outlook - Full Year and Third Quarter
Full Year
•
We are reaffirming our year-over-year revenue growth guidance of at least 26% after approximately 3% currency headwinds, resulting in constant currency growth of 29%. Given the various macro-economic and geo-political uncertainties, our normal visibility has been impaired and we could experience unexpected volatility over the next several quarters. We remain very confident about the continued long-term growth outlook for the business and the overall markets;
•
The full year GAAP diluted EPS will be at least $2.05, with an effective tax rate of approximately 21%;
•
The full year non-GAAP diluted EPS will be at least $2.97(*), which includes the tax effect from non-GAAP adjustments;
•
The full year weighted average share count is expected to be approximately 53.4 million diluted shares outstanding;
(*)Under the previous reporting method, before considering tax effects on the non-GAAP adjustments, the full year non-GAAP diluted EPS was estimated to be at least $3.20.

Third Quarter
•
Revenues will be at least $295 million for the third quarter of 2016, representing a growth rate of at least 25% over third quarter 2015 revenues. This includes approximately 3% anticipated currency headwinds, meaning constant currency growth of at least 28%;
•
Third quarter 2016 GAAP diluted EPS to be at least $0.52;
•
Third quarter 2016 non-GAAP diluted EPS is expected to be at least $0.73, which includes the tax effect from non-GAAP adjustments and is based on an estimated third quarter 2016 weighted average share count of 53.6 million diluted shares outstanding.


Conference Call Information
EPAM will host a conference call to discuss results on Thursday, August 4, 2016 at 8:00 a.m. Eastern Time. The live conference call can be accessed by dialing 1-855-327-6837 (domestic) or 1-631-891-4304 (international). A telephonic replay will also be available approximately one hour after the call and can be accessed by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international). The passcode for the replay is 10001455. The telephonic replay will be available until August 18, 2016. Interested investors and other parties may also listen to a webcast of the conference call by logging onto the Investor Relations section of the Company’s website at http://investors.epam.com.
About EPAM Systems
EPAM Systems, Inc. (NYSE: EPAM), a leading global product development and platform engineering services company, is focused on delivering results through best-in-class software engineering, combined with innovative strategy, consulting and design capabilities. With 23 years of experience in the information technology industry, EPAM’s 18,000 people serve our customers in over 25 countries across North America, Europe, Asia and Australia. EPAM was ranked #8 in FORBES 25 Fastest Growing Public Tech Companies and ranked as a top information technology services company on FORTUNE’S 100 Fastest Growing Companies.

For more information, please visit http://www.epam.com/ and follow us on Twitter (@EPAMSYSTEMS) and LinkedIn​.









Non-GAAP Financial Measures
EPAM supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in EPAM’s business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing EPAM’s business and evaluating its performance. Management also believes these measures help investors compare EPAM’s operating performance with its results in prior periods. EPAM anticipates that it will continue to report both GAAP and certain non-GAAP financial measures in its financial results, including non-GAAP results that exclude stock-based compensation expense, write-off and recovery, amortization of purchased intangible assets, goodwill impairment, legal settlement, foreign exchange gains and losses, and acquisition-related costs. Because EPAM’s reported non-GAAP financial measures are not calculated according to GAAP, these measures are not comparable to GAAP and may not be comparable to similarly described non-GAAP measures reported by other companies within EPAM’s industry. Consequently, EPAM’s non-GAAP financial measures should not be evaluated in isolation or supplant comparable GAAP measures, but, rather, should be considered together with the information in EPAM’s condensed consolidated financial statements, which are prepared according to GAAP.
Forward-Looking Statements
This press release includes statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. EPAM undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

Contact:
EPAM Systems, Inc.
Anthony J. Conte, Chief Financial Officer
Phone: +1-267-759-9000 x64588
Fax: +1-267-759-8989
investor_relations@epam.com





EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(US Dollars in thousands, except share and per share data)

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Revenues
$
283,832

 
$
217,781

 
$
548,314

 
$
417,826

Operating expenses:
 
 
 
 
 
 
 
Cost of revenues (exclusive of depreciation and amortization)
180,782

 
134,256

 
348,163

 
260,143

Selling, general and administrative expenses
64,241

 
55,976

 
125,735

 
102,914

Depreciation and amortization expense
6,123

 
3,903

 
11,225

 
8,103

Other operating expenses, net
606

 
40

 
780

 
240

Income from operations
32,080

 
23,606

 
62,411

 
46,426

Interest and other income, net
1,138

 
1,299

 
2,349

 
2,457

Foreign exchange loss
(2,295
)
 
(465
)
 
(3,585
)
 
(6,219
)
Income before provision for income taxes
30,923

 
24,440

 
61,175

 
42,664

Provision for income taxes
6,493

 
5,209

 
12,846

 
8,719

Net income
$
24,430

 
$
19,231

 
$
48,329

 
$
33,945

Foreign currency translation adjustments
(2,386
)
 
3,674

 
2,313

 
944

Comprehensive income
$
22,044

 
$
22,905

 
$
50,642

 
$
34,889

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.49

 
$
0.40

 
$
0.97

 
$
0.70

Diluted
$
0.46

 
$
0.37

 
$
0.92

 
$
0.66

Shares used in calculation of net income per share:
 
 
 
 
 
 
 
Basic
50,211

 
48,584

 
49,688

 
48,237

Diluted
53,271

 
51,917

 
52,803

 
51,461





























EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(US Dollars in thousands, except share and per share data)

 
As of  
 June 30, 
 2016
 
As of  
 December 31, 
 2015
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
280,724

 
$
199,449

Time deposits
—

 
30,181

Accounts receivable, net of allowance of $2,997 and $1,729, respectively
178,796

 
174,617

Unbilled revenues
96,045

 
95,808

Prepaid and other current assets
15,273

 
14,344

Employee loans, net of allowance of $0 and $0, respectively
2,684

 
2,689

Deferred tax assets
—

 
11,847

Total current assets
573,522

 
528,935

Property and equipment, net
66,751

 
60,499

Restricted cash
246

 
238

Employee loans, net of allowance of $0 and $0, respectively
3,478

 
3,649

Intangible assets, net
55,962

 
46,860

Goodwill
110,668

 
115,930

Deferred tax assets
25,991

 
18,312

Other long-term assets
7,270

 
4,113

Total assets
$
843,888

 
$
778,536

 
 
 
 
Liabilities
 
 
 
Current liabilities
 
 
 
Accounts payable
$
3,005

 
$
2,576

Accrued expenses and other liabilities
29,557

 
60,749

Deferred revenue
3,356

 
3,047

Due to employees
33,421

 
26,703

Deferred compensation to employees
910

 
5,364

Taxes payable
21,765

 
29,472

Total current liabilities
92,014

 
127,911

Long-term debt
40,088

 
35,000

Deferred tax liabilities
2,819

 
2,402

Total liabilities
134,921

 
165,313

Commitments and contingencies
 
 
 
Stockholders’ equity
 

 
 

Common stock, $0.001 par value; 160,000,000 authorized; 50,884,007 and 50,177,044 shares issued, 50,866,612 and 50,166,537 shares outstanding at June 30, 2016 and December 31, 2015, respectively
50

 
49

Additional paid-in capital
348,527

 
303,363

Retained earnings
393,383

 
345,054

Treasury stock
(156
)
 
(93
)
Accumulated other comprehensive loss
(32,837
)
 
(35,150
)
Total stockholders’ equity
708,967

 
613,223

Total liabilities and stockholders’ equity
$
843,888

 
$
778,536





EPAM SYSTEMS, INC. AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(in thousands, except percent and per share amounts)
(Unaudited)

 
Three Months Ended June 30, 2016
 
Six Months Ended June 30, 2016
 
GAAP
 
Adjustments
 
Non-GAAP
 
GAAP
 
Adjustments
 
Non-GAAP
Cost of revenues (exclusive of depreciation and amortization)(1)
$
180,782

 
$
(4,438
)
 
$
176,344

 
$
348,163

 
$
(8,082
)
 
$
340,081

Selling, general and administrative expenses(2)
$
64,241

 
$
(8,599
)
 
$
55,642

 
$
125,735

 
$
(15,919
)
 
$
109,816

Income from operations(3)
$
32,080

 
$
15,558

 
$
47,638

 
$
62,411

 
$
28,215

 
$
90,626

Operating margin
11.3
%
 
5.5
%
 
16.8
%
 
11.4
%
 
5.1
%
 
16.5
%
Net income(4)
$
24,430

 
$
13,501

 
$
37,931

 
$
48,329

 
$
24,312

 
$
72,641

Diluted earnings per share(5)
$
0.46

 
 
 
$
0.71

 
$
0.92

 
 
 
$
1.38


 
Three Months Ended June 30, 2015
 
Six Months Ended June 30, 2015
 
GAAP
 
Adjustments
 
Non-GAAP
 
GAAP
 
Adjustments
 
Non-GAAP
Cost of revenues (exclusive of depreciation and amortization)(1)
$
134,256

 
$
(3,765
)
 
$
130,491

 
$
260,143

 
$
(6,249
)
 
$
253,894

Selling, general and administrative expenses(2)
$
55,976

 
$
(8,488
)
 
$
47,488

 
$
102,914

 
$
(15,200
)
 
$
87,714

Income from operations(3)
$
23,606

 
$
13,287

 
$
36,893

 
$
46,426

 
$
23,901

 
$
70,327

Operating margin
10.8
%
 
6.1
%
 
16.9
%
 
11.1
%
 
5.7
%
 
16.8
%
Net income(4)
$
19,231

 
$
10,849

 
$
30,080

 
$
33,945

 
$
22,649

 
$
56,594

Diluted earnings per share(5)
$
0.37

 
 
 
$
0.58

 
$
0.66

 
 
 
$
1.10


Notes:
(1)
Adjustments to GAAP cost of revenues (exclusive of depreciation and amortization) were comprised of non-acquisition related stock-based compensation expense recorded in the periods presented.
(2)
Adjustments to GAAP selling general and administrative expenses:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Stock-based compensation expenses - Acquisition related
$
2,970

 
$
4,951

 
$
5,980

 
$
9,443

Stock-based compensation expenses - All other
5,322

 
3,537

 
9,632

 
5,695

Other acquisition-related expenses
307

 
—

 
307

 
62

Total adjustments to GAAP selling, general and administrative expenses
$
8,599

 
$
8,488

 
$
15,919

 
$
15,200





(3)
Adjustments to GAAP income from operations:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Stock-based compensation expense
$
12,730

 
$
12,253

 
$
23,694

 
$
21,387

reported within cost of revenues
4,438

 
3,765

 
8,082

 
6,249

 reported within selling, general and administrative expenses - acquisition related
2,970

 
4,951

 
5,980

 
9,443

 reported within selling, general and administrative expenses - all other
5,322

 
3,537

 
9,632

 
5,695

Other acquisition-related expenses
307

 
—

 
307

 
62

Amortization of purchased intangible assets
2,521

 
1,034

 
4,214

 
2,452

Total adjustments to GAAP income from operations
$
15,558

 
$
13,287

 
$
28,215

 
$
23,901


(4)
Adjustments to GAAP net income:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Stock-based compensation expense
$
12,730

 
$
12,253

 
$
23,694

 
$
21,387

reported within cost of revenues
4,438

 
3,765

 
8,082

 
6,249

 reported within selling, general and administrative expenses - acquisition related
2,970

 
4,951

 
5,980

 
9,443

 reported within selling, general and administrative expenses - all other
5,322

 
3,537

 
9,632

 
5,695

Other acquisition-related expenses
307

 
—

 
307

 
62

Amortization of purchased intangible assets
2,521

 
1,034

 
4,214

 
2,452

Foreign exchange loss
2,295

 
465

 
3,585

 
6,219

Tax effect on non-GAAP adjustments
(4,352
)
 
(2,903
)
 
(7,488
)
 
(7,471
)
Adjustments to GAAP net income
$
13,501

 
$
10,849

 
$
24,312

 
$
22,649

(5)
There were no adjustments to GAAP average diluted common shares outstanding during the three and six months ended June 30, 2016 and 2015.