EPAM Reports Results for Fourth Quarter and Full Year 2016
February 16 2017 - 6:00AM
Fourth quarter revenues of $313.5 million, up 20.5%
year-over-year Annual revenues of $1.16
billion, up 26.9% year-over-year GAAP Diluted
EPS of $0.46 for the fourth quarter and $1.87 for
the full year Non-GAAP Diluted EPS of $0.77
for the fourth quarter and $2.90 for the full
year
EPAM Systems, Inc. (NYSE:EPAM), a leading global provider of
product development and software engineering solutions, today
announced results for its fourth quarter and full year ended
December 31, 2016.
"2016 was a milestone year for EPAM, we tripled revenues since
our IPO, closing at over $1 billion. Our continued evolution in
extending our Engineering DNA into a full spectrum of services for
Digital Business has positioned EPAM as a new breed of service
provider, keeping us relevant to clients navigating dynamic market
demands," said Arkadiy Dobkin, Chairman, CEO & President,
EPAM.
Fourth Quarter 2016 Highlights
- Revenues increased to $313.5 million, a year-over-year increase
of $53.3 million, or 20.5%;
- In constant currency, revenue was up 22.8% year-over-year;
- GAAP income from operations was $37.4 million, an increase of
$5.6 million or 17.7% compared to $31.8 million in the fourth
quarter of 2015;
- Non-GAAP income from operations was $51.5 million, an increase
of $4.6 million, or 9.7%, compared to $46.9 million in the fourth
quarter of 2015;
- Diluted earnings per share (EPS) on a GAAP basis was $0.46, a
decrease from $0.52 in the fourth quarter of 2015;
- Non-GAAP diluted EPS was $0.77, an increase from $0.73 in the
fourth quarter of 2015.
Full Year 2016 Highlights
- Revenues increased to $1.16 billion, a year-over-year increase
of $246.0 million, or 26.9%;
- In constant currency, revenue was up 29.4% year-over-year;
- GAAP income from operations was $133.7 million, an increase of
$27.7 million or 26.2% compared to $106.0 million in 2015;
- Non-GAAP income from operations was $191.8 million, an increase
of $33.1 million, or 20.9%, compared to $158.7 million in
2015;
- Diluted EPS on a GAAP basis was $1.87, compared to
$1.62 in 2015;
- Non-GAAP diluted EPS was $2.90, compared to $2.47 in 2015.
Cash Flow from Operations
- Cash from operations was $164.8 million in 2016, up from $76.4
million in 2015; and was $53.7 million in the fourth quarter of
2016, up from $11.8 million in the fourth quarter of 2015;
- Cash and cash equivalents totaled $362.0 million as of
December 31, 2016, an increase of $162.6 million or 81.5% from
$199.4 million as of December 31, 2015.
Other Metrics
- Total headcount was 22,383 as of December 31, 2016, an
increase of 22.0% from 18,354 as of December 31, 2015;
- Total number of delivery professionals was 19,670 as of
December 31, 2016, an increase of 22.3% from 16,078 as of
December 31, 2015.
2017 Outlook - Full Year and First
Quarter
Full Year
- Revenue growth for fiscal 2017 will be at least 20%, after
factoring in an estimated 3% for currency headwinds, meaning
expected constant currency growth will be at least 23%.
- We expect GAAP income from operations to be in the range of 12%
to 14% of revenue and non-GAAP income from operations to be in the
range of 16% to 18% of revenue.
- We expect our effective tax rate to be at least 19%. This
reflects the adoption of the accounting pronouncement related to
stock based compensation effective January 1st.
- We expect GAAP diluted EPS will be at least $2.45 for the full
year, and non-GAAP diluted EPS will be at least $3.38 for the full
year based on expected weighted average share count of 54.8 million
fully diluted shares outstanding.
First Quarter
- Revenues will be at least $315 million for the first quarter,
reflecting a growth rate of at least 19% after estimating 3% for
currency headwinds, meaning expected constant currency growth will
be at least 22%.
- For the first quarter, we expect GAAP income from operations to
be in the range of 10% to 11% of revenue and non-GAAP income from
operations to be in the range of 15% to 16% of revenue.
- We expect our effective tax rate to be at least 20%.
- We expect GAAP diluted EPS will be at least $0.49 for the
quarter, and non-GAAP diluted EPS will be at least $0.72 for
the quarter based on an expected weighted average share count of
53.9 million fully diluted shares outstanding.
Conference Call Information
EPAM will host a conference call to discuss
results on Thursday, February 16, 2017 at 8:00 a.m. Eastern Time.
The live conference call will be available by dialing +1 (877)
407-0784 or +1 (201) 689-8560 (outside of the U.S.). A
webcast of the conference call can be accessed at the Investor
Relations section of the Company's website
at http://investors.epam.com. A replay will be available
approximately one hour after the call by dialing +1 (844) 512-2921
or +1 (412) 317-6671 (outside of the U.S.) and entering the
conference ID 13654193. The replay will be available until March 2,
2017.
About EPAM Systems
Since 1993, EPAM Systems, Inc. (NYSE:EPAM), has leveraged its
core engineering expertise to become a leading global product
development and digital platform engineering services company.
Through its “Engineering DNA” and innovative strategy, consulting,
and design capabilities, EPAM works in collaboration with its
customers to deliver innovative solutions that turn complex
business challenges into real business opportunities. EPAM’s global
teams serve customers in over 25 countries across North America,
Europe, Asia and Australia. EPAM is a recognized market leader
among independent research agencies and was ranked #8
in FORBES 25 Fastest Growing Public Tech Companies, as a top
information technology services company on FORTUNE’S 100
Fastest Growing Companies, and as a top UK Digital Design &
Build Agency.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-offs and
recoveries, amortization of purchased intangible assets, goodwill
impairment, legal settlements, foreign exchange gains and losses,
acquisition-related costs, and the related effect on taxes.
Management may also compare operating results on a basis of
“constant currency”, which is also a non-GAAP financial measure.
This measure excludes the effect of foreign currency exchange rate
fluctuations by translating the current period revenues and
expenses into U.S. dollars at the weighted average exchange rates
of the prior period of comparison. 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 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.David Straube, Senior
Director, Investor RelationsPhone: +1-267-759-9000 x64588Fax:
+1-267-759-8989investor_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 December
31, |
|
Year Ended December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
$ |
313,525 |
|
|
$ |
260,253 |
|
|
$ |
1,160,132 |
|
|
$ |
914,128 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Cost of
revenues (exclusive of depreciation and amortization)
|
198,226 |
|
|
158,291 |
|
|
737,186 |
|
|
566,913 |
|
Selling,
general and administrative expenses |
71,432 |
|
|
64,414 |
|
|
264,658 |
|
|
222,759 |
|
Depreciation and amortization expenses |
6,237 |
|
|
4,899 |
|
|
23,387 |
|
|
17,395 |
|
Other
operating expenses, net |
247 |
|
|
884 |
|
|
1,205 |
|
|
1,094 |
|
Income from operations |
37,383 |
|
|
31,765 |
|
|
133,696 |
|
|
105,967 |
|
Interest
and other income, net |
1,432 |
|
|
1,409 |
|
|
4,848 |
|
|
4,731 |
|
Foreign
exchange (loss)/gain |
(6,765 |
) |
|
1,559 |
|
|
(12,078 |
) |
|
(4,628 |
) |
Income before provision for income taxes |
32,050 |
|
|
34,733 |
|
|
126,466 |
|
|
106,070 |
|
Provision
for income taxes |
7,287 |
|
|
7,095 |
|
|
27,200 |
|
|
21,614 |
|
Net
income |
$ |
24,763 |
|
|
$ |
27,638 |
|
|
$ |
99,266 |
|
|
$ |
84,456 |
|
Foreign currency
translation adjustments |
(5,209 |
) |
|
(5,699 |
) |
|
(2,538 |
) |
|
(13,096 |
) |
Comprehensive
income |
$ |
19,554 |
|
|
$ |
21,939 |
|
|
$ |
96,728 |
|
|
$ |
71,360 |
|
|
|
|
|
|
|
|
|
Net income per
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.49 |
|
|
$ |
0.56 |
|
|
$ |
1.97 |
|
|
$ |
1.73 |
|
Diluted |
$ |
0.46 |
|
|
$ |
0.52 |
|
|
$ |
1.87 |
|
|
$ |
1.62 |
|
Shares used in
calculation of net income per share: |
|
|
|
|
|
|
|
Basic |
50,717 |
|
49,360 |
|
50,309 |
|
48,721 |
Diluted |
53,380 |
|
52,670 |
|
53,215 |
|
51,986 |
|
EPAM SYSTEMS, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(US Dollars in thousands, except share and per
share data) |
|
|
As of December 31,
2016 |
|
As of December 31,
2015 |
Assets |
|
|
|
Current assets |
|
|
|
Cash and
cash equivalents |
$ |
362,025 |
|
|
$ |
199,449 |
|
Restricted cash |
2,400 |
|
|
— |
|
Time
deposits |
403 |
|
|
30,181 |
|
Accounts
receivable, net of allowance of $1,434 and $1,729,
respectively |
199,982 |
|
|
174,617 |
|
Unbilled
revenues |
63,325 |
|
|
95,808 |
|
Prepaid
and other current assets, net of allowance of $644 and $0,
respectively |
15,690 |
|
|
14,344 |
|
Employee
loans, net of allowance of $0 and $0, respectively |
2,726 |
|
|
2,689 |
|
Deferred
tax assets |
— |
|
|
11,847 |
|
Total current assets |
646,551 |
|
|
528,935 |
|
Property and equipment,
net |
73,616 |
|
|
60,499 |
|
Restricted cash |
239 |
|
|
238 |
|
Employee loans, net of
allowance of $0 and $0, respectively |
3,252 |
|
|
3,649 |
|
Intangible assets,
net |
51,260 |
|
|
46,860 |
|
Goodwill |
109,289 |
|
|
115,930 |
|
Deferred tax
assets |
31,005 |
|
|
18,312 |
|
Other long-term
assets |
10,599 |
|
|
4,113 |
|
Total
assets |
$ |
925,811 |
|
|
$ |
778,536 |
|
|
|
|
|
Liabilities |
|
|
|
Current
liabilities |
|
|
|
Accounts
payable |
$ |
3,213 |
|
|
$ |
2,576 |
|
Accrued
expenses and other liabilities |
49,895 |
|
|
63,796 |
|
Due to
employees |
32,203 |
|
|
26,703 |
|
Deferred
compensation due to employees |
5,900 |
|
|
5,364 |
|
Taxes
payable |
25,008 |
|
|
29,472 |
|
Total current liabilities |
116,219 |
|
|
127,911 |
|
Long-term debt |
25,048 |
|
|
35,000 |
|
Other long-term
liabilities |
3,132 |
|
|
2,402 |
|
Total
liabilities |
144,399 |
|
|
165,313 |
|
Commitments and
contingencies |
|
|
|
Stockholders’
equity |
|
|
|
Common stock, $0.001
par value; 160,000,000 authorized; 51,117,422 and 50,177,044 shares
issued, 51,097,687 and 50,166,537 shares outstanding at December
31, 2016 and December 31, 2015, respectively |
50 |
|
|
49 |
|
Additional paid-in
capital |
374,907 |
|
|
303,363 |
|
Retained earnings |
444,320 |
|
|
345,054 |
|
Treasury stock |
(177 |
) |
|
(93 |
) |
Accumulated other
comprehensive loss |
(37,688 |
) |
|
(35,150 |
) |
Total
stockholders’ equity |
781,412 |
|
|
613,223 |
|
Total
liabilities and stockholders’ equity |
$ |
925,811 |
|
|
$ |
778,536 |
|
|
EPAM SYSTEMS, INC. AND
SUBSIDIARIES |
Reconciliations of Non-GAAP Financial Measures
to Comparable GAAP Financial Measures |
(US Dollars in thousands, except percent and
per share amounts) |
(Unaudited) |
|
|
Three Months Ended December 31,
2016 |
|
Year Ended December 31, 2016 |
|
GAAP |
|
Adjustments |
|
Non-GAAP |
|
GAAP |
|
Adjustments |
|
Non-GAAP |
Cost of revenues
(exclusive of depreciation and amortization)(1) |
$ |
198,226 |
|
|
$ |
(4,019 |
) |
|
$ |
194,207 |
|
|
$ |
737,186 |
|
|
$ |
(16,619 |
) |
|
$ |
720,567 |
|
Selling, general and
administrative expenses(2) |
$ |
71,432 |
|
|
$ |
(8,097 |
) |
|
$ |
63,335 |
|
|
$ |
264,658 |
|
|
$ |
(33,331 |
) |
|
$ |
231,327 |
|
Income
from operations(3) |
$ |
37,383 |
|
|
$ |
14,083 |
|
|
$ |
51,466 |
|
|
$ |
133,696 |
|
|
$ |
58,120 |
|
|
$ |
191,816 |
|
Operating
margin |
11.9 |
% |
|
4.5 |
% |
|
16.4 |
% |
|
11.5 |
% |
|
5.0 |
% |
|
16.5 |
% |
Net
income(4) |
$ |
24,763 |
|
|
$ |
16,290 |
|
|
$ |
41,053 |
|
|
$ |
99,266 |
|
|
$ |
55,184 |
|
|
$ |
154,450 |
|
Diluted earnings per
share(5) |
$ |
0.46 |
|
|
|
|
$ |
0.77 |
|
|
$ |
1.87 |
|
|
|
|
$ |
2.90 |
|
|
Three Months Ended December 31,
2015 |
|
Year Ended December 31, 2015 |
|
GAAP |
|
Adjustments |
|
Non-GAAP |
|
GAAP |
|
Adjustments |
|
Non-GAAP |
Cost of revenues
(exclusive of depreciation and amortization)(1) |
$ |
158,291 |
|
|
$ |
(3,824 |
) |
|
$ |
154,467 |
|
|
$ |
566,913 |
|
|
$ |
(13,695 |
) |
|
$ |
553,218 |
|
Selling, general and
administrative expenses(2) |
$ |
64,414 |
|
|
$ |
(8,903 |
) |
|
$ |
55,511 |
|
|
$ |
222,759 |
|
|
$ |
(32,871 |
) |
|
$ |
189,888 |
|
Income
from operations(3) |
$ |
31,765 |
|
|
$ |
15,142 |
|
|
$ |
46,907 |
|
|
$ |
105,967 |
|
|
$ |
52,723 |
|
|
$ |
158,690 |
|
Operating
margin |
12.2 |
% |
|
5.8 |
% |
|
18.0 |
% |
|
11.6 |
% |
|
5.8 |
% |
|
17.4 |
% |
Net
income(4) |
$ |
27,638 |
|
|
$ |
10,735 |
|
|
$ |
38,373 |
|
|
$ |
84,456 |
|
|
$ |
44,097 |
|
|
$ |
128,553 |
|
Diluted earnings per
share(5) |
$ |
0.52 |
|
|
|
|
$ |
0.73 |
|
|
$ |
1.62 |
|
|
|
|
$ |
2.47 |
|
Items (1) through (4)
above are detailed in the table below with the specific
cross-reference noted in the appropriate item. |
|
|
|
|
|
Three Months Ended December
31, |
|
Year Ended December 31, |
Notes: |
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
Stock-based compensation expenses - non-acquisition related |
$ |
4,019 |
|
|
$ |
3,824 |
|
|
$ |
16,619 |
|
|
$ |
13,695 |
|
Total
adjustments to GAAP cost of revenues(1) |
4,019 |
|
|
3,824 |
|
|
16,619 |
|
|
13,695 |
|
Stock-based compensation expenses - acquisition related |
3,014 |
|
|
4,705 |
|
|
12,884 |
|
|
18,690 |
|
Stock-based compensation expenses - all other |
4,691 |
|
|
3,954 |
|
|
19,741 |
|
|
13,448 |
|
Other
acquisition-related expenses |
392 |
|
|
244 |
|
|
706 |
|
|
733 |
|
Total
adjustments to GAAP selling, general and administrative expenses(2)
|
8,097 |
|
|
8,903 |
|
|
33,331 |
|
|
32,871 |
|
Amortization of purchased intangible assets |
1,967 |
|
|
1,674 |
|
|
8,170 |
|
|
5,416 |
|
One-time
charges |
— |
|
|
741 |
|
|
— |
|
|
741 |
|
Total
adjustments to GAAP income from operations(3) |
$ |
14,083 |
|
|
$ |
15,142 |
|
|
$ |
58,120 |
|
|
$ |
52,723 |
|
Foreign
exchange loss/(gain) |
6,765 |
|
|
(1,559 |
) |
|
12,078 |
|
|
4,628 |
|
Tax
effect on non-GAAP adjustments |
(4,558 |
) |
|
(2,848 |
) |
|
(15,014 |
) |
|
(13,254 |
) |
Total
adjustments to GAAP net income(4) |
$ |
16,290 |
|
|
$ |
10,735 |
|
|
$ |
55,184 |
|
|
$ |
44,097 |
|
(5 |
) |
There were no
adjustments to GAAP average diluted common shares outstanding
during the three months and year ended December 31, 2016 and
2015. |
|
EPAM SYSTEMS, INC. AND
SUBSIDIARIES |
Reconciliations of Revenue Growth to Constant
Currency Revenue Growth |
(in percent) |
(Unaudited) |
|
|
Three Months Ended December 31,
2016 |
|
Year Ended December 31,
2016 |
Revenue growth
as reported |
20.5 |
% |
|
26.9 |
% |
Foreign
exchange rates impact |
2.3 |
% |
|
2.5 |
% |
Revenue growth at constant currency(6)
|
22.8 |
% |
|
29.4 |
% |
(6 |
) |
Constant currency
revenue results are calculated by translating current period
revenue in local currency into U.S. dollars at the weighted average
exchange rates of the comparable prior period. |
|
|
|
EPAM SYSTEMS, INC. AND
SUBSIDIARIESReconciliations of Guidance Non-GAAP
Measures to Comparable GAAP Measures(in percent,
except per share amounts)(Unaudited)
The below guidance constitutes forward-looking statements within
the meaning of the federal securities laws and is based on a number
of assumptions that are subject to change and many of which are
outside the control of the Company. Actual results may differ
materially from the Company’s expectations depending on factors
discussed in the Company’s filings with the Securities and Exchange
Commission.
Reconciliation of GAAP to Non-GAAP diluted earnings per share is
presented in the table below:
|
First Quarter 2017 |
|
Full Year 2017 |
GAAP diluted
earnings per share (at least) |
$ |
0.49 |
|
|
$ |
2.45 |
|
Stock-based
compensation expenses |
0.25 |
|
|
1.01 |
|
Included
in cost of revenues |
0.08 |
|
|
0.41 |
|
Included
in selling, general and administrative expenses |
0.17 |
|
|
0.60 |
|
Amortization of
purchased intangible assets |
0.04 |
|
|
0.14 |
|
Foreign exchange
loss |
0.03 |
|
|
0.13 |
|
Tax effect on non-GAAP
adjustments |
(0.09 |
) |
|
(0.35 |
) |
Non-GAAP diluted earnings per share (at
least) |
$ |
0.72 |
|
|
$ |
3.38 |
|
Reconciliation of projected revenue growth in constant currency
is presented in the table below:
|
First Quarter 2017 |
|
Full Year 2017 |
Revenue growth
(at least) |
19.0 |
% |
|
20.0 |
% |
Foreign
exchange rates impact |
3.0 |
% |
|
3.0 |
% |
Revenue growth at constant currency (at least)(7)
|
22.0 |
% |
|
23.0 |
% |
(7 |
) |
Constant currency
revenue results are calculated by translating current period
projected revenue in local currency into U.S. dollars at the
weighted average exchange rates of the comparable prior
period. |
|
|
|
EPAM Systems (NYSE:EPAM)
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