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EPAM Systems' (EPAM) Q4 Earnings and Revenue Beat Estimates

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EPAM Systems EPAM reported fourth-quarter 2021 non-GAAP earnings of $2.76 per share, beating the Zacks Consensus Estimate of $2.50. The figure improved 52.5% year over year.

Revenues were $1.12 billion, reflecting a year-over-year increase of 53.1%. The top line surpassed the consensus mark of $1.08 billion. On a constant currency (cc) basis, revenues were up 54.1%. Acquisitions completed in the last 12 months contributed 8.7% to fourth-quarter top-line growth.

The company continued to benefit from growth across all geographies and multiple industry verticals. Digital transformation, focus on customer engagement and product developments remained key catalysts.

EPAM Systems, Inc. Price, Consensus and EPS Surprise

EPAM Systems, Inc. Price, Consensus and EPS Surprise
EPAM Systems, Inc. Price, Consensus and EPS Surprise

EPAM Systems, Inc. price-consensus-eps-surprise-chart | EPAM Systems, Inc. Quote

Quarterly Details

Segment-wise, Business Information & Media climbed 33% year over year to $188 million and accounted for 17% of the company’s revenues.

Financial Services jumped 60.3% on a year-over-year basis to $255 million and accounted for 23% of revenues.

While Software & Hi-Tech was up 35% to $184 million, Travel & Consumer grew 91.3% to $233 million. Software & Hi-Tech and Travel & Consumer accounted for 16.6% and 21% of revenues, respectively.

Life Science & Healthcare climbed 34% year over year to $112 million and accounted for 10.2% of revenues. The Emerging segment improved 67.6% year over year to $135 million and contributed 12.2% to revenues.

Geography-wise, EPAM generated 57.6% of the total revenues from Americas, up 47.2% year on year. Revenues from EMEA, contributing 34.8% to total revenues, jumped 66.6% year on year.

CEE, representing 5% of revenues, surged 46.4% year over year, fueled primarily by clients in financial services and materials. APAC was up 38% and accounted for 2.6% of revenues.

In the reported quarter, EPAM renamed three out of four of its revenue geographies to account for the addition and growth of customers from new locations. It has renamed North America as Americas, Europe as EMEA (Europe, Middle East and Africa), and CIS (Commonwealth of Independent States) as CEE (Central and Eastern Europe).

Notably, the total headcount was approximately 58,800 as of Dec 31, 2021.

EPAM’s non-GAAP operating income increased 52% year over year to $206 million. Non-GAAP operating margin contracted 20 basis points (bps) to 18.6%.

Balance Sheet and Cash Flow

As of Dec 31, 2021, EPAM had cash, cash equivalents and restricted cash of $1.45 billion, up from $1.27 billion as of Sep 30, 2021.

As of Dec 31, 2021, long-term debt was $30.2 million, up from $25 million as of Sep 30, 2021.

During the fourth quarter, EPAM generated operating and free cash flows of $285 million and $228 million, respectively.

During full-year 2021, EPAM generated an operating cash flow of $572.3 million and a free cash flow of $460.8 million.

Full-Year Highlights

For full-year 2021, EPAM reported revenues of $3.76 billion, up 41.3% year over year. On a constant-currency basis, revenues increased 39.9%.

The company reported non-GAAP earnings of $9.05 per share, reflecting a year-over-year surge of 42.7%.

Non-GAAP operating income climbed 43.5% to $678 million. Non-GAAP operating margin expanded 20 bps to 18%.

Outlook

Citing a stronger demand environment, EPAM provided the outlook for 2022. The company projects revenues of at least $5.150 billion, suggesting growth of at least 37% on a reported basis. This includes a 1% unfavorable impact of foreign currency translation on revenues.

EPAM expects acquisitions to contribute approximately 6% to top-line growth.

EPAM set the non-GAAP earnings guidance range to $11.36-$11.69 per share. The company forecast its non-GAAP operating margin guidance between 16.5% and 17.5%.

For the first quarter of 2022, EPAM estimates revenues between $1.170 billion and $1.180 billion, suggesting year-over-year growth of 50% at the mid-point. The company expects foreign-currency translation to have minimal impact on year-over-year revenue growth during the quarter.

Management projects non-GAAP operating margin in the 16.5-17.5% range. Non-GAAP earnings are expected to be $2.58-$2.66 per share.

Zacks Rank & Key Picks

EPAM currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader computer and technology sector include the iPhone maker Apple AAPL and Axcelis Technologies ACLS, both sporting a Zacks Rank #1 (Strong Buy), and Analog Devices ADI carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Apple’s second-quarter fiscal 2022 earnings has been revised upward by 3.6% to $1.43 per share over the past 30 days. For fiscal 2022, earnings estimates have moved north by 5.9% to $6.15 per share in the past 30 days.

Apple’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 20.3%. AAPL stock has appreciated 30.2% in the past year.

The Zacks Consensus Estimate for Axcelis’ first-quarter 2022 earnings has been revised upward by 2 cents to 89 cents per share over the past 30 days. For 2022, earnings estimates have moved north by 10.8% to $3.99 per share in the last 30 days.

Axcelis’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 30.3%. Shares of ACLS have rallied 79% in the past year.

The Zacks Consensus Estimate for Analog Devices’ first-quarter fiscal 2022 earnings has been revised upward by 8 cents to $1.85 per share over the past 90 days. For fiscal 2022, earnings estimates have moved north by 7 cents to $7.53 per share in the past 60 days.

Analog Devices’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have gained 1.5% in the past year.


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