EPAM Systems Reports Results for Third Quarter 2014
Third Quarter Revenues Up 38% Year-Over-Year and 10% Sequentially
Newtown, PA - November 3, 2014 - EPAM Systems, Inc. (EPAM), a leading provider of complex software engineering solutions and a leader in Central and Eastern European IT services delivery, today announced results for the quarter ended September 30, 2014.
Third Quarter 2014 Highlights
· 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 generated cash from operations of $23.1 million in the third quarter of 2014 and $56.2 million on a year-to-date basis. At September 30, 2014, cash and cash equivalents were $191.2 million.
Reconciliations of non-GAAP financial measures to operating results and diluted EPS are included at the end of this release.
Corporate Highlights
· 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
Full Year and Fourth Quarter 2014 Outlook
"EPAM continues its transition into a more strategic, consultative, and industry-aware partner for our clients. Combined with our traditionally strong software product engineering capabilities, this allows us to bring a very unique value to the market." said Arkadiy Dobkin, CEO and President of EPAM. "The increasing number of public awards and recognitions we continue to receive together with another solid financial quarter demonstrates the strength of our offering and the long-term potential of EPAM." concluded Mr. Dobkin.
Based on current conditions, EPAM is increasing full year guidance of expected revenue growth in the range of $728 million to $730 million. Non-GAAP net income growth for 2014 is expected to be in the range of 33% to 35% year-over-year, with an effective tax rate of approximately 19%.
For the fourth quarter of 2014, EPAM expects revenues between $200 million and $202 million, representing a growth rate of 27% to 28% over fourth quarter 2013 revenues. Fourth quarter 2014 non-GAAP diluted EPS is expected to be in the range of $0.59 to $0.61 based on an estimated fourth quarter 2014 weighted average of 50.0 million diluted shares. GAAP diluted EPS is expected to be in the range of $0.36 to $0.38.
Conference Call Information
EPAM will hold a conference call to discuss its third quarter 2014 results at 8:00 a.m. Eastern time, on Tuesday, November 4, 2014. A live webcast of the call may be accessed over the Internet from EPAM`s Investor Relations website at http://investors.epam.com. Participants should follow the instructions provided on the website to download and install the necessary audio applications. The live conference call can be accessed by dialing 1-877-407-0784 (international) or 1-201-689-8560 (domestic).
A replay of the live conference call will be available approximately one hour after the call. The replay will be available on EPAM`s website or by dialing 1-877-870-5176 (international) or 1-858-384-5517 (domestic) and entering the replay passcode 13593426. The telephonic replay will be available until November 19, 2014.
About EPAM Systems
Established in 1993, EPAM Systems, Inc. (EPAM) is recognized as a leader in software product development by independent research agencies. Headquartered in the United States, EPAM serves clients worldwide utilizing its award-winning global delivery platform and its locations in 19 countries across North America, Europe, Asia and Australia. EPAM was ranked #6 in 2013 America`s 25 Fastest-Growing Tech Companies, and #3 in 2014 America`s Best Small Companies lists by Forbes Magazine.
For more information, please visit http://www.epam.com.
Non-GAAP Financial Measures
EPAM supplements results reported in accordance with principles generally accepted in the United States, 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 and compare EPAM and similar companies. 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. However, because EPAM`s reported non-GAAP financial measures are not calculated according to GAAP, these measures are not comparable to GAAP and may not necessarily 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 its 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(US Dollars in thousands, except share and per share data)
As of | As of | ||||||
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 | |||
EPAM SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(US Dollars in thousands, except share and per share data)
Three Months Ended | Nine Months Ended | ||||||||||||||
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 | |||||||||||
EPAM SYSTEMS, INC. AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(in thousands, except percent and per share amounts)
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 | |||||||||||
Notes:
(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 | Nine Months Ended | ||||||||||||||
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 | Nine Months Ended | ||||||||||||||
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 | Nine Months Ended | ||||||||||||||
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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The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: EPAM Systems, Inc. via GlobeNewswire
HUG#1868216
