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Share Name | Share Symbol | Market | Type |
---|---|---|---|
EPAM Systems Inc | NYSE:EPAM | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
3.94 | 1.65% | 242.12 | 245.605 | 240.40 | 243.91 | 347,079 | 01:00:00 |
Third quarter revenues of $298 million, up 26% year-over-yearGAAP Diluted EPS of $0.49, up 11% year-over-yearNon-GAAP Diluted EPS of $0.76, up 19% year-over-year
Third Quarter 2016 Highlights
Cash Flow from Operations
Other Metrics
2016 Outlook - Full Year and Fourth Quarter
Full Year
Fourth Quarter
Also effective for the quarter are the following executive announcements:
“It is with a mix of gratitude and sadness that I announce that Anthony Conte, the Company’s Senior Vice President, Chief Financial Officer and Treasurer has notified the Company that he plans to step down in the third quarter of 2017 in order to pursue personal and other business interests,” said Arkadiy Dobkin, Chairman, CEO & President, EPAM. “Over his 10-year career with EPAM, Anthony’s financial and business leadership has been a key part of EPAM’s growth and success. The Company will conduct a search to find a successor. Anthony will participate in selection of his successor and assist with the transition.”
Mr. Dobkin continued, “We have recently welcomed Larry Solomon as our Chief People Officer. Larry came to us after spending nearly 30 years at Accenture, most recently as the Senior Managing Director and Accenture’s North America Operating Officer. Larry will lead all aspects of Talent Management & Talent Acquisition, Workforce Planning & Management, as well as other HR-related functions within EPAM across the globe. We anticipate that his significant experience and background will help elevate EPAM’s talent and workforce management capabilities.”
Conference Call Information
EPAM will host a conference call to discuss results on Monday, November 7, 2016 at 8:00 a.m. Eastern Time. The live conference call can be accessed by dialing 1-877-407-0784 (domestic) or 1-201-689-8560 (international). A telephonic replay will also be available approximately one hour after the call and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The passcode for the replay is 13648357. The telephonic replay will be available until November 21, 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 19,000 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-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 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.
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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues | $ | 298,293 | $ | 236,049 | $ | 846,607 | $ | 653,875 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization) | 190,797 | 148,479 | 538,960 | 408,622 | ||||||||||||
Selling, general and administrative expenses | 67,491 | 55,431 | 193,226 | 158,345 | ||||||||||||
Depreciation and amortization expense | 5,925 | 4,393 | 17,150 | 12,496 | ||||||||||||
Other operating expenses/(income), net | 178 | (30 | ) | 958 | 210 | |||||||||||
Income from operations | 33,902 | 27,776 | 96,313 | 74,202 | ||||||||||||
Interest and other income, net | 1,067 | 865 | 3,416 | 3,322 | ||||||||||||
Foreign exchange (loss)/gain | (1,728 | ) | 32 | (5,313 | ) | (6,187 | ) | |||||||||
Income before provision for income taxes | 33,241 | 28,673 | 94,416 | 71,337 | ||||||||||||
Provision for income taxes | 7,067 | 5,800 | 19,913 | 14,519 | ||||||||||||
Net income | $ | 26,174 | $ | 22,873 | $ | 74,503 | $ | 56,818 | ||||||||
Foreign currency translation adjustments | 358 | (8,341 | ) | 2,671 | (7,397 | ) | ||||||||||
Comprehensive income | $ | 26,532 | $ | 14,532 | $ | 77,174 | $ | 49,421 | ||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.51 | $ | 0.47 | $ | 1.48 | $ | 1.17 | ||||||||
Diluted | $ | 0.49 | $ | 0.44 | $ | 1.40 | $ | 1.10 | ||||||||
Shares used in calculation of net income per share: | ||||||||||||||||
Basic | 51,131 | 49,043 | 50,172 | 48,506 | ||||||||||||
Diluted | 53,864 | 52,344 | 53,159 | 51,755 |
EPAM SYSTEMS, INC. AND SUBSIDIARIES | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
(US Dollars in thousands, except share and per share data) | |||||||
As ofSeptember 30,2016 | As of December31, 2015 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 330,627 | $ | 199,449 | |||
Time deposits | — | 30,181 | |||||
Accounts receivable, net of allowance of $2,301 and $1,729, respectively | 187,833 | 174,617 | |||||
Unbilled revenues | 82,360 | 95,808 | |||||
Prepaid and other current assets | 32,205 | 14,344 | |||||
Employee loans, net of allowance of $0 and $0, respectively | 2,698 | 2,689 | |||||
Deferred tax assets | — | 11,847 | |||||
Total current assets | 635,723 | 528,935 | |||||
Property and equipment, net | 70,284 | 60,499 | |||||
Restricted cash | 236 | 238 | |||||
Employee loans, net of allowance of $0 and $0, respectively | 3,283 | 3,649 | |||||
Intangible assets, net | 53,867 | 46,860 | |||||
Goodwill | 111,722 | 115,930 | |||||
Deferred tax assets | 26,598 | 18,312 | |||||
Other long-term assets | 7,486 | 4,113 | |||||
Total assets | $ | 909,199 | $ | 778,536 | |||
Liabilities | |||||||
Current liabilities | |||||||
Accounts payable | $ | 4,661 | $ | 2,576 | |||
Accrued expenses and other liabilities | 34,856 | 60,749 | |||||
Deferred revenue | 3,685 | 3,047 | |||||
Due to employees | 34,894 | 26,703 | |||||
Deferred compensation to employees | 4,035 | 5,364 | |||||
Contingent consideration | 800 | — | |||||
Taxes payable | 39,499 | 29,472 | |||||
Total current liabilities | 122,430 | 127,911 | |||||
Long-term debt | 33,062 | 35,000 | |||||
Deferred tax liabilities, long-term | 3,327 | 2,402 | |||||
Other long-term liabilities | 268 | — | |||||
Total liabilities | 159,087 | 165,313 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Common stock, $0.001 par value; 160,000,000 authorized; 51,035,509 and 50,177,044 shares issued, 51,016,500 and 50,166,537 shares outstanding at September 30, 2016 and December 31, 2015, respectively | 50 | 49 | |||||
Additional paid-in capital | 363,154 | 303,363 | |||||
Retained earnings | 419,557 | 345,054 | |||||
Treasury stock | (170 | ) | (93 | ) | |||
Accumulated other comprehensive loss | (32,479 | ) | (35,150 | ) | |||
Total stockholders’ equity | 750,112 | 613,223 | |||||
Total liabilities and stockholders’ equity | $ | 909,199 | $ | 778,536 |
EPAM SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | ||||||||||||||||||||||||
(in thousands, except percent and per share amounts) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2016 | |||||||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization)(1) | $ | 190,797 | $ | (4,518 | ) | $ | 186,279 | $ | 538,960 | $ | (12,600 | ) | $ | 526,360 | ||||||||||
Selling, general and administrative expenses(2) | $ | 67,491 | $ | (9,315 | ) | $ | 58,176 | $ | 193,226 | $ | (25,234 | ) | $ | 167,992 | ||||||||||
Income from operations(3) | $ | 33,902 | $ | 15,822 | $ | 49,724 | $ | 96,313 | $ | 44,037 | $ | 140,350 | ||||||||||||
Operating margin | 11.4 | % | 5.3 | % | 16.7 | % | 11.4 | % | 5.2 | % | 16.6 | % | ||||||||||||
Net income(4) | $ | 26,174 | $ | 14,582 | $ | 40,756 | $ | 74,503 | $ | 38,894 | $ | 113,397 | ||||||||||||
Diluted earnings per share(5) | $ | 0.49 | $ | 0.76 | $ | 1.40 | $ | 2.13 |
Three Months Ended September 30, 2015 | Nine Months Ended September 30, 2015 | |||||||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization)(1) | $ | 148,479 | $ | (3,622 | ) | $ | 144,857 | $ | 408,622 | $ | (9,871 | ) | $ | 398,751 | ||||||||||
Selling, general and administrative expenses(2) | $ | 55,431 | $ | (8,768 | ) | $ | 46,663 | $ | 158,345 | $ | (23,968 | ) | $ | 134,377 | ||||||||||
Income from operations(3) | $ | 27,776 | $ | 13,680 | $ | 41,456 | $ | 74,202 | $ | 37,581 | $ | 111,783 | ||||||||||||
Operating margin | 11.8 | % | 5.8 | % | 17.6 | % | 11.3 | % | 5.8 | % | 17.1 | % | ||||||||||||
Net income(4) | $ | 22,873 | $ | 10,713 | $ | 33,586 | $ | 56,818 | $ | 33,362 | $ | 90,180 | ||||||||||||
Diluted earnings per share(5) | $ | 0.44 | $ | 0.64 | $ | 1.10 | $ | 1.74 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Notes: | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Stock-based compensation expenses - non-acquisition related | $ | 4,518 | $ | 3,622 | $ | 12,600 | $ | 9,871 | ||||||||
Total adjustments to GAAP cost of revenues(1) | 4,518 | 3,622 | 12,600 | 9,871 | ||||||||||||
Stock-based compensation expenses - Acquisition related | 3,890 | 4,542 | 9,870 | 13,985 | ||||||||||||
Stock-based compensation expenses - All other | 5,418 | 3,799 | 15,050 | 9,494 | ||||||||||||
Other acquisition-related expenses | 7 | 427 | 314 | 489 | ||||||||||||
Total adjustments to GAAP selling, general and administrative expenses(2) | 9,315 | 8,768 | 25,234 | 23,968 | ||||||||||||
Amortization of purchased intangible assets | 1,989 | 1,290 | 6,203 | 3,742 | ||||||||||||
Total adjustments to GAAP income from operations(3) | $ | 15,822 | $ | 13,680 | $ | 44,037 | $ | 37,581 | ||||||||
Foreign exchange loss/(gain) | 1,728 | (32 | ) | 5,313 | 6,187 | |||||||||||
Tax effect on non-GAAP adjustments | (2,968 | ) | (2,935 | ) | (10,456 | ) | (10,406 | ) | ||||||||
Total adjustments to GAAP net income(4) | $ | 14,582 | $ | 10,713 | $ | 38,894 | $ | 33,362 | ||||||||
(5) There were no adjustments to GAAP average diluted common shares outstanding during the three and nine months ended September 30, 2016 and 2015. |
EPAM SYSTEMS, INC. AND SUBSIDIARIES | ||
Reconciliations of Revenue Growth to Constant Currency Revenue Growth | ||
(in percent) | ||
(Unaudited) | ||
Three MonthsEnded September 30, 2016 | ||
Revenue growth as reported | 26.4 | % |
Foreign exchange rates impact | 2.3 | % |
Revenue growth at constant currency(6) | 28.7 | % |
(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 SUBSIDIARIES | |||||||
Reconciliations of Non-GAAP Guidance Measures to Comparable GAAP Measures | |||||||
(in percent, except per share amounts) | |||||||
(Unaudited) | |||||||
Reconciliation of GAAP to Non-GAAP diluted earnings per share is presented in the table below: | |||||||
FourthQuarter | Full Year | ||||||
GAAP diluted earnings per share (at least) | $ | 0.54 | $ | 1.94 | |||
Stock-based compensation expenses | 0.25 | 0.95 | |||||
Included in cost of revenues | 0.08 | 0.32 | |||||
Included in selling, general and administrative expenses | 0.17 | 0.63 | |||||
Other acquisition-related expenses | — | 0.01 | |||||
Amortization of purchased intangible assets | 0.04 | 0.15 | |||||
Foreign exchange loss | 0.02 | 0.12 | |||||
Tax effect on non-GAAP adjustments | (0.07 | ) | (0.27 | ) | |||
Non-GAAP diluted earnings per share (at least) | $ | 0.78 | $ | 2.90 |
Reconciliation of projected revenue growth in constant currency is presented in the table below: | |||||
Fourth QuarterGuidance | Full YearGuidance | ||||
Revenue growth (at least) | 19.0 | % | 26.5 | % | |
Foreign exchange rates impact | 2.0 | % | 2.5 | % | |
Revenue growth at constant currency (at least)(7) | 21.0 | % | 29.0 | % | |
(7) Constant currency revenue results are calculated by translating current period projected revenue in local currencyinto U.S. dollars at the weighted average exchange rates of the comparable prior period. |
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
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