Q4 2021 Epam Systems Inc Earnings Call
Good day, and thank you for standing by welcome to the E Systems' fourth quarter and full year 2021 earnings conference call.
Speaker 1: And thank you for standing by. Welcome to the EPAM System fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.
Please be advised that today's call is being <unk>.
Accordingly have you any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, David <unk> head of Investor Relations. Please.
Speaker 1: If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, David Strawberry.
Thank you operator, and good morning, everyone. By now you should have received your copy of the earnings release for the company's fourth quarter and full year 2021 results. If you have not copies are available on <unk> dot com in the investors.
Speaker 2: Thank you, operator, and good morning, everyone. By now, you should have received your copy of the earnings release for the company's fourth quarter and full year 2021 results. If you have not, a copy is available on EPAM.com in the investor section.
Speaker 2: With me on today's call are Katty Dobkin, CEO and President, and Jason Peterson, Chief Financial Officer. I would like to remind those listening that some of the comments made on today's call may contain forward-looking statements.
With me on today's call are cut adoption, CEO , and President and Jason Peterson Chief Financial Officer.
Like to remind those listening that some of the comments made on today's call may contain forward looking statements. These statements are subject to risks and uncertainties as described in the company's earnings release and SEC filings.
Speaker 2: These statements are subject to risk and uncertainties as described in the company's earnings release and SEC filings.
Speaker 2: Additionally, all references to reported results that are non-GAAP measures have been reconciled to the comparable GAAP measures and are available in our quarterly earnings material located in the investors section of our website. With that said, I will now turn the call over to ARK. Sorry, it's not going to go print. All right,Flow Setting, Great.
Additionally, all references to reported results that are non-GAAP measures have been reconciled to the comparable GAAP measures and are available in our quarterly earnings material.
Hated in the investors section of our website.
With that said I will now turn the call over to Ark.
Thank you David.
Good day, everyone and thank you for joining us today.
Before turning to Jason to grow back to detail update on our first quarter 2021 results now 'twenty to Q2 outlook I would like to spend some time reflect last year's performance and set us on source.
Speaker 3: Before turning to Jason to provide a detailed update on our first quarter overall 2021 results and our 2021 E2 outlook, I would like to spend some time reflecting on last year's performance and share some thoughts on our positioning for 2020.
Positioning for 2022.
But even before doing that I would like to share a couple of other thoughts.
Speaker 3: But even before doing that, I would like to share a couple others.
Just last week, we celebrated the Tim.
Speaker 3: Just last week, we celebrated the 10th anniversary of our initial public offering at the New York Stock Exchange.
And your velocity of our initial public offering as a new York stock exchange.
Speaker 3: So that is why this call is a bit special. Exactly 10 years ago, we provided our first guidance on our first on it.
So this is why this is a bit special exactly 10 years ago, we provided the first guidance.
First on <unk>.
Speaker 3: E-Pal in Q1 2012 was a company with 7,000 people and about 335 million in the area. We really thought back then.
Hey, Paul.
Q1 was a company that 7000 people and about three Congress with your question.
You may recall beds.
This reflected a strong.
<unk>.
The <unk> was very much an unknown stuffed up.
Speaker 3: The tip-up was very much an unknown structure. The minimal
Is it meaningful.
Presence in the United States and Western Europe .
Speaker 3: and with development centers across just a few countries in Eastern Europe .
Develop on centers closed just a few countries in eastern Europe .
It's.
As David has narrowed because of all of that.
Speaker 3: During our first call, we heard that our quarterly revenue grew 34%.
During our first call we finished with our quarterly revenue grew 34%.
Speaker 3: and our annual headcount increased by about 30%. And we graduated the 12th Season
Annual could call it increased by about 30%.
It is about.
Speaker 3: 2012 revenue should go up around 23, 25% from the period year of 2011.
2012 revenue should go up around 23, 25% from the prior to year two.
2011.
10 years later, we are very different company.
Speaker 3: Since our IPO, EPUB has grown more than tenfold, expanding our global footprint across five continents and growing our team of professionals to more than 58,000 people.
Since our IPO, a pump is growing more than tenfold, expanding our global footprint across five continents and growing our team of professionals to more than 50000 people.
And of course for two countries to become a recognized world leader in digital engineering and consulting services.
Speaker 3: to become a recognized world leader in digital engineering and consulting.
Speaker 3: So at this moment, I would like to personally thank all of our employees, customers, and the
So at this moment I would like to personally.
Our employees customers and shareholders, who participated in achieving this notable milestone inbound Jordan.
Speaker 3: which we just liberated last week on New York Stock Exchange podium.
We just celebrated last week on New York Stock Exchange program.
Speaker 3: unfortunately in very small team due to
Unfortunately, it's very small.
Due to.
Understandable quality solution.
Speaker 3: What is also important is that 10 years later we still feel very much as a fast growing, constantly changing and learning startups.
What is also important is it 10 years later, we still feel very much as a fast growing constantly changing and lawn and startup.
Speaker 3: As of today, we still can share that in our fourth quarter, we grew 53% and 44 organically, increased our annual headcount.
As of today, there is still concern within our first quarter, we grew 53% and 44 organically increased our annual could come.
Speaker 3: by 43% and plan to grow ravenous by at least 37% in 2022.
43% and plan to grow revenues by at least 37% in 2022.
Speaker 3: So in short, we are running today faster than we did back then, during our first post-APL days. To be on a bit more formal side.
So in short we are trying to do it faster than we did for example, using our first post IPO days.
To be on a bit more formal side.
2021 <unk> related to Oman.
Speaker 3: 3.8 billion in revenues, reflecting on greater than 40% year-over-year growth, which include a strong result across all dimensions of our portfolio.
$3 8 billion engraving us.
Clifton and greater than 40% year over year growth, which included strong results across all dimensions of our first quarter.
Speaker 3: Non-GAO earnings per share were $9.05, a 43% increase over fiscal 2020.
non-GAAP earnings per share were.
$9 five.
Just to put it.
<unk> increase over fiscal 2020.
Speaker 3: And in 2021, we also generated 461 million of free care.
And then 2021, and we also generated $461 million of free cash flow.
During our previous calls three months ago.
Speaker 3: During our previous calls three months ago, we shared the history of our transformational efforts while we were setting our three-year mission.
We started the Houston, followed transformational efforts <unk>, our three eastern plants.
Speaker 3: I will not go into those details again, but would like to mention that 2021 was actually a special year for us.
I will not go into those.
The details again, but would like to mention that 2021 was actually a special year for us.
Okay.
Speaker 3: for the third time in a row since our API was double the company in three years.
Time in a row since our IPO, we doubled the company in three years.
Speaker 3: 2021 was the year when we were aggressively building and expanding EPAM capabilities through our strong organic apps, especially across cloud data and consulting credits. And also it was a record year from an M&A point of view which helped us to fill some wide spaces and also to mature our work in consulting, cybersecurity, digital marketing, digital platform, cloud delivery, as well as in data analytics. It also allows
2021 was a year when you reach a rebuilding and expansion pump capabilities through our strong organic growth.
Specialty gross cloud data consulting <unk> and Allstate.
<unk> here from an M&A point of view, we help us too few soundbites basis, and also to mature listings and consulting cyber security or digital marketing digital platform cloud delivery as well as in data analytics.
It also allows us.
To better diversify our global delivery organization.
Speaker 3: For sure, our 2021 results would not have been possible if not for our ability to attract and retain time.
For sure our twenties when you what the results would not have been possible if not for our ability to attract and retain talent.
To meat and frozen in demand in 2021, we refined our <unk> proposition to relate to pharma was the NIM generation technologies.
Speaker 3: To meet the extraordinary demand in 2021, we refined our employee value proposition to elevate the power at the home for the next generation technologies. We are engineers, designers, architects, and consultants, and embrace modern practices, cutting edge tech, and deep collaboration approach during our client engagement.
Engineers designers architects and consultants and embraced more than practices cutting edge tech and.
In deep collaboration.
The promotion during our client engagement.
Speaker 3: We added more than 17,300 e-palmars, which is approximately two and a half times more employees in our previous record, starting in the year of 2019.
We added more than 17600 pumps, which is approximately two and half times more employees in our previous vehicle, but in year two.
2019.
Speaker 3: 2021 was the second year in a row, but very much distributed with very high percentage of remote work, and with still very limited opportunities to meet in person with our team members and clients on the regular.
So looking at 'twenty, one was the second hit in a row <unk> distributed visibility, 5% the shift to remote work and we're still very limited opportunities to meet in person because our team members and clients on the rig deliveries.
So it was a year when we doubled our efforts to focus on talent engagement practices through understanding the people capabilities and investing in training and development and <unk>.
Speaker 3: So it was a year when we doubled our efforts to focus on talent engagement practices through understanding of people's capabilities, investing in their training and development, and providing a wide area of
Providing a wide area.
Speaker 3: of opportunities to communicate and gather together virtually.
With opportunities to communicate and gather together future.
Speaker 3: as a team, as well as through finding the best suitable engagement both from professional and from vocational point of view.
As a team as well as through finding suitable engagements.
And from additional point of view.
Okay.
Speaker 3: Additionally, we drove deeper connections across our global talent pool to each other and to global community of people and partners through our digital platform.
Additionally, we drove deeper connections across our global talent pool to each other into global community of partners through our digital platforms.
Speaker 3: All of these help us to keep high level of productivity and our attrition levels manageable in the current very challenging environment.
All of these help us to keep high level of productivity and now at least.
<unk> levels manageable and the currently challenging environment.
In 2021, so I alluded to a power plant.
Speaker 3: In 2021, the majority of our clients have been at the center of significant amount of transformation that has driven very strong demand for our services across all years.
As a center of significant amount of transformation.
Driven very strong demand for our services across all the channels.
And sales in consumer were observed in next three loans post pandemic priority just once again move to the front of the discretion to dispense agenda.
Speaker 3: In traveling consumer, we observe an extra rebound as post-pandemic priorities once again move to the, for the front of the discretion of this path again.
Speaker 3: In financial services, we saw demand growth in both our existing customers and in several new and previously smaller clients. We continue the same of modernisation and innovation of key business domains.
In financial services, we saw demand growth in both our existing customers and in several new previously smaller clients.
We will continue the same of the Digitization and integration of key business domains.
Insurance, which was relatively new focus area.
Speaker 3: Insurance, which was a relatively new focus area within our financial services last year, is today one of our fastest growing subjects.
Our financial services last year is today, one of our fastest growing sub segments.
Telecommunications automotive pronounce ballpark of our emerging vertical segment.
Speaker 3: Telecommunications, automotive and energy, all part of our emerging vertical set.
Speaker 3: Outpaced previous EA performance as clients in this sector turned to the pump for expertise in innovation, design, experience, and product and platform engineering.
<unk> previous vehicle performance as clients and this sets us to pump expertise and innovation design experience and product and platform into even quicker.
Life Science, and healthcare and software and high Tech was continuing to grow fast and demonstrating the potential of <unk>.
Speaker 3: Life science and healthcare and so and so in high tech both continue to grow fast and demonstrate the potential to accelerate fast.
Speaker 3: while business information and media slowed down during the year, return to a 30 plus percent growth rate in Q4.
While the business information and media slowed down during the year return to 30 plus percent growth rate in Q4.
Speaker 3: 2021 was also a noticeable year from a market recognition point.
121 was also a noticeable year from a market condition point of view.
Some of them we showed it previously but I would list those together to demonstrate the progress we achieved was being not only the engineers anymore, but moving beyond into the integrated consulting and advancing <unk> <unk> zone.
Speaker 3: Some of them we shared previously, but I would list those together to demonstrate the progress we achieved, or being not only the engineers anymore, but moving beyond into the integrated consulting and advanced launched something far more exciting and growing.
Okay, Bongos again, because the top it services company on pushing one country's fastest growing companies list for the third consecutive year.
Speaker 3: Hipongos ranked as the top IT services company on Fortune 100's fastest growing companies list for the third consecutive...
Speaker 3: and also was included on the list of fourth global 2000 cups.
And also was included on the list of Forbes Global 2000 conference.
We recognized <unk> as one of the top 25 largest agencies in the world.
Speaker 3: recognized by FH as one of the top 25 largest agencies in the world.
Speaker 3: and consulting magazine named EPUM Continuum is one of the top 20 fastest-growing consulting.
And consultant magazine named a pump continue as one of the top 20 fastest growing consultants.
Speaker 3: Also included by Forrester is a PAM continuum in the list of eight largest customer experience strategy consulting practices along with the expansion BCG Deloitte, ENY, IBM, McKinsey and PEDA policy.
Also included by Forrester as a bump continuum and release of <unk> largest customer experience strategy consultant practices alone is exchange of BCG, Deloitte, Eli IBM Mckinsey and Pwc.
Named top tier two more slots workplaces by Newsweek recognize Paul in place and get work.
Speaker 3: named Top 50 Most Loved Workplaces by Newsweek. Recognized for our employees' centric work, what a great place to work in the number of our key time marks.
By great place to work in an envelope and Keith Mark.
Speaker 3: and was also awarded the Best Culture of Learning Talent by LinkedIn. Yes, last week was included.
And was also awarded the best cultural flooding in Thailand by Linkedin.
Just last week was included.
And the top 100, barron's most sustainable companies.
Speaker 3: And lastly, was accepted in SMP500 index.
And lastly was accepted and S&P 500 index in December .
Just several quarters ago and less than we actually we talked probably for the first time about the timing of $5 to $10 billion company, sometimes in the future.
Speaker 3: Just several quarters ago, in last May actually, we talked probably for the first time about becoming a five to ten billion dollar company sometimes in the...
So David knows that we are guiding to close to 5 billion Mark.
Speaker 3: Today we know that we are dying to cross the 5 billion mark already in 2022.
Already in 2022.
So they feel much more confident to set our near term sights on growing into 10 billion dollar company.
Speaker 3: So we feel much more confident to set our near-term size on growing to $10 billion.
Speaker 3: We believe we are well positioned to do so with our overall progress today, and we continue advancing in our key plant markets and growing and very fast, if we survive global delivery.
We believe we are well positioned to do so as an overall progress to date and we continue advancing on all the key client markets and growing very fast.
The supply and global delivery capabilities.
I know it feels like <unk> mission, one is packed because at this point in.
Speaker 3: I know it feels like I'm missing one hot topic.
Speaker 3: And I am sure that you follow the news about Ukraine and Russia as much as we do.
And I am sure there is a few portals and use about Ukraine, and Russia as much as we do.
That is why I would like to share the full and before question at microphone two Jason.
Speaker 3: That is why I would like to share the following before placing a microphone today.
Speaker 3: 2021 was actually a very challenging year, especially for us.
441 was actually very challenging especially for us.
Speaker 3: first due to fast growing geopolitical and social uncertainties across some of our key talent markets. Let us continue combinein the
First due to fast growing geopolitical and social on search interest because some of our key target markets.
And the continued disruption of global R&D.
This is exactly why we are very pleased with our stringent first quarter and overall performance we delivered in 2021.
Speaker 3: That is exactly why we are very pleased with our standing force quarter and overall performance we delivered in 2021.
Despite all of that.
Our results demonstrate the level of maturity published over the years and our ability to operate in land and shallow performance during difficult times.
Speaker 3: Our results demonstrate the level of maturity we've published over the years and our ability to operate and manage our performance during difficult times.
We also should remember that this conflict is not new for the region.
Speaker 3: We also should remember that this conflict is not new for the rich.
Speaker 3: We too will remember 2014 and 2015 and then 2020 as well.
Well, if you remember 2014, and 2015, and then 2020 as well.
Speaker 3: We have dealt well with those in the past and we also learned a lot from them.
We have deals well results in the past and we also learned a lot since then.
Speaker 3: So in 2021, to navigate the situation, we continued something which we started actively implementing since 2014. Both our GIAC and M&A-based efforts to improve our geographic target diversification and to do it without any degradation or le
So in 2021 to navigate these situations we continued Samsung Krish, we started actively implemented since 2014.
And then when they waste efforts to improve our geographic diversification and to do it without any degradation in quality of our delivery.
Speaker 3: This was our key focus over those years, as well as significantly maturing our portfolio of consulting industry and overall engineering equipment.
So this was a key focus for those he has as well as significantly much food and our portfolio of consulting industry inevitable engineering capabilities.
So today, we believe we are well prepared to address the challenges in 2022, while leveraging our broad global at each in addition to our deep regional insight.
Speaker 3: So today we believe we are well prepared to address the challenges ahead in 2022 by leveraging our broad global reach in addition to our deep regional insight and by applying our strong engineering DNA and very importantly, never-ending entrepreneurial spirit to continue making the future real for our clients, our employees and our global and local communities while keeping everyone as safe as possible. So our key priority is the same.
And by applying our strong convenient G&A and very importantly never engine <unk>.
And the renewals period to continue making the future for our clients our employees and our global and local communities, while keeping everyone safe as possible is a key priority at the same time.
With this I would like one more time for <unk> employees customers and shareholders for their continued understanding and support.
Speaker 3: With that, I would like one more time to thank our employees, customers, and shareholders for their continued understanding and support.
Now, let me turn the call over to Jason.
Speaker 4: Thank you Art and good day to all. In the fourth quarter, EPM delivered extremely strong results reflecting continued high levels of demand for the company's services across a full range of industry verticals and geographies.
Thank you Ark and good day at all.
In the fourth quarter <unk> delivered extremely strong results, reflecting continued high levels of demand for the company's services across a full range of industry verticals and geographies.
Speaker 4: During the quarter, EPM generated revenues of $1,107,000,000, a year-over-year increase of 53.1% on a reported basis and 54.1% in constant currency terms, reflecting a negative foreign exchange impact of 100 basis points.
During the quarter <unk> generated revenues of $1 billion $107 million a year a year over year increase of 53, 1% on a reported basis and 54, 1% in constant currency terms, reflecting a negative foreign exchange impact of 100 basis points.
Q4 was the first quarter you Cam delivered quarterly revenues in excess of $1 billion a notable milestone in our company's journey.
Speaker 4: Q4 was the first quarter EPM delivered quarterly revenues in excess of 1 billion, a notable milestone in the company's journey.
Performance across industry verticals in the quarter was consistent and very strong longstanding trends, which have been driving significant growth continue and include the need to modernize and transform applications, while transitioning them cloud.
Speaker 4: Performance across industry verticals in the quarter was consistent and very strong. Long-standing trends which have been driving significant growth continue and include the need to modernize and transform applications while transitioning them to the cloud.
Speaker 4: Human-centered innovation as the merging of physical and digital experiences continues to spread across industries.
Human centered innovation is the merging of physical and digital experiences continues to spread across industries.
And creation of new digital products and businesses, while harnessing the resulting data to improve our customers' revenue growth supply chain operations and customer experiences.
Speaker 4: and creation of new digital products and businesses, while harnessing the resulting data to improve our customers' revenue growth, supply chain operations, and end customer experiences..
Turning to the performance of our industry verticals.
Speaker 4: Travel and consumer grew 91.3%, driven by very strong growth from both our consumer and retail clients.
Travel and consumer grew 91, 3% driven by very strong growth from both our consumer and retail clients.
Speaker 4: The accelerated growth in the quarter is partially the result of recent acquisitions.
The accelerated growth in the quarter is partially the result of recent acquisitions.
Financial services grew 63% with very strong growth coming from payments banking asset management and insurance.
Speaker 4: financial services grew 60.3%, with very strong growth coming from payments, banking, asset management, and insurance.
Speaker 4: larger consulting-led engagements are helping to drive higher levels of growth.
Larger consulting led engagements are helping to drive higher levels of growth.
Software and Hi Tech grew 34, 7% in the quarter.
Speaker 4: Life sciences and healthcare includes 33.9 percent.
Life Sciences, and healthcare grew 33, 9%.
Speaker 4: Business information and media delivered 32.9% growth in the quarter. And finally, our emerging verticals delivered 67.6% growth driven by clients in manufacturing and automotive, energy, and telecommunications.
Business information and media delivered 32, 9% growth in the quarter and finally, our emerging verticals delivered 67, 6% growth.
Driven by clients in manufacturing and automotive energy and telecommunications.
Moving to our geographic performance in Q4, we renamed our geographic regions to better reflect <unk> ongoing geographic expansion.
Speaker 4: Moving to our geographic performance, in Q4, we renamed our geographic regions to better reflect EPAM's ongoing geographic expansion.
Speaker 4: These changes are in name only. The methodology used to report revenues remains unchanged.
These changes are namely the methodology used to report revenues remains unchanged.
Speaker 4: The Americas, our largest region representing 58% of our Q4 revenues, grew 47.2% year over year or 47.4% in constant currency.
The Americas, our largest region, representing 58% of our Q4 revenues grew 47, 2% year over year or 47, 4% in constant currency.
EMEA, representing 35% of Q4 revenues grew 66, 6% year over year or 69, 7% in constant currency.
Speaker 4: A MEA, representing 35% of Q4 revenues, grew 66.6% year over year, or 69.7% in constant spring.
Speaker 4: The accelerated growth in the quarter is partially the result of recent acquisition.
The accelerated growth in the quarter is partially the result of recent acquisitions.
CE, representing 5% of our Q4 revenues grew 46, 4% year over year and 43, 9% in constant currency.
Speaker 4: CEE representing 5% of our Q4 revenues, grew 46.4% year over year, and 43.9% in constant current.
Speaker 4: And finally, APAC grew 38% year over year and 38% in constant currency terms, and now represents 3% of our revenue.
And finally, APAC grew 38% year over year and 38% in constant currency terms and now represents 3% of our revenues.
Speaker 4: In Q4, revenues from our top 20 clients grew 29%, while revenues from clients outside our top 20 grew 70% year over year, driving greater diversification across our revenue base.
In Q4 revenues from our top 20 clients grew 29% while revenues from clients outside our top 20 grew 70% year over year.
Having greater diversification across our revenue base.
Speaker 4: Growth in our clients outside of the top 20, most notably below the top 200, reflect to the higher level of an inorganic contribution during the...
Growth in our clients outside of the top 20, most notably below the top 200 reflected a higher level of inorganic contribution during the quarter.
Moving down the income statement, our GAAP gross margin for the quarter was 34, 3% compared to 35, 6% in Q4 of last year.
Speaker 4: Moving down the income statement, our gap gross margin for the quarter was 34.3% compared to 35.6% in Q4 of last year.
Speaker 4: Non-gap gross margin for the quarter was 35.9% compared to 36.9% for the same quarter last year.
non-GAAP gross margin for the quarter was 35, 9% compared to 36, 9% for the same quarter last year.
Speaker 4: Gross margin in Q4 2021 was impacted by higher levels of funding for our variable compensation programs, given the company's outperformance versus financial targets established at the beginning of the 2021 fiscal year.
Gross margin in Q4, 2021 was impacted by higher levels of funding for variable compensation programs, given the company's outperformance versus financial targets established at the beginning of the 2021 fiscal year.
GAAP SG&A was 17, 2% of revenue compared to 17, 8% in Q4 of last year and.
Speaker 4: GAP SG&A was 17.2% of revenue compared to 17.8% in Q4 of last year. And non-GAAP SG&A came in at 15.6% of revenue compared to 16.2% in the same period last year.
non-GAAP SG&A came in at 15, 6% of revenue compared to 16, 2% in the same period last year.
Speaker 4: Gap income from operations was 166 million, or 15% of revenue in the quarter, compared to $112 million, or 15.5% of revenue in Q4 of last year.
GAAP income from operations was $166 million or 15% of revenue in the quarter compared to $112 million or 15, 5% of revenue in Q4 of last year.
Speaker 4: Non-gap income from operations was $206 million, or 18.6% of revenues in the quarter, compared to $136 million, or 18.8% of revenue in Q4 of last year.
non-GAAP income from operations was $206 million or 18, 6% of revenues in the quarter compared to 136 million or 18, 8% of revenue in Q4 of last year.
Speaker 4: Our gap effective tax rate for the quarter came in at 11% versus our Q4 guide of 14% due to a higher than expected level of excess tax benefits related to stock-based compensation.
Our GAAP effective tax rate for the quarter came in at 11% versus our Q4 guide of 14%.
Due to a higher than expected level of excess tax benefits related to stock based compensation.
Speaker 4: Our non-GAAP effective tax rate, which excludes excess tax benefits, was 21.9%.
Our non-GAAP effective tax rate, which excludes excess tax benefits was 21, 9%.
Speaker 4: Diluted earnings per share on a GAAP basis was $2.40. Our non-GAAP diluted EPS was $2.76, reflecting a 95 cent increase and 52.5 percent growth over the same quarter in 2020.
Diluted earnings per share on a GAAP basis was $2 40.
Our non-GAAP diluted EPS was $2 76.
Reflecting a 95% increase and 52, 5% growth over the same quarter in 2020.
Speaker 4: In Q4, there were approximately 59.3 million diluted shares out.
In Q4, there were approximately $59 3 million diluted shares outstanding.
Turning to our cash flow and balance sheet.
Speaker 4: Cast flow from operations for Q4 was 285 million, compared to 159 million in the same quarter of 2020.
Cash flow from operations for Q4 was $285 million compared to $159 million in the same quarter of 2020.
Speaker 4: Free cash flow of 228 million produced a 139% conversion of adjusted net income, compared to free cash flow of 141 million in the same quarter last year.
Free cash flow of $228 million produced a 139% conversion of adjusted net income compared to free cash flow of $141 million in the same quarter last year.
Speaker 4: The higher level of free cash flow in the quarter reflects a strong level of cash flow.
Higher level of free cash flow in the quarter reflects a strong level of cash collections.
We ended the quarter with approximately $1 4 billion in cash and cash equivalents, which is net of $366 million used in our acquisition efforts during 2021.
Speaker 4: We ended the quarter with approximately 1.4 billion in cash and cash equivalents, which is net of $366 million used in our acquisition efforts during 2021.
Okay.
Speaker 4: At the end of Q4, DSO was 62, and compares to 70 days in Q3 2021, and 64 days in the same quarter last year. Looking ahead, we expect DSO will trend up in 2022.
At the end of Q4, DSO was 62 and compares to 70 days in Q3, 2021, and 64 days in the same quarter last year.
Looking ahead, we expect DSO will trend up in 2022.
Moving onto a few operational metrics for the quarter. We ended Q4 with more than 52600 consultants designers engineers trainers and architects a.
Speaker 4: We ended Q4 with more than 52,600 consultants, designers, engineers, trainers, and architects. A year-over-year increase of 43...
A year over year increase of 43, 2%.
Our total head count for the quarter with more than 58800 employees.
Speaker 4: Our total headcount for the quarter was more than 58,800 employees.
Speaker 4: In Q4, we had approximately 6,100 net additions, a record number of new additions for EPAM.
In Q4, we had approximately 6100 net additions a record number of new additions for <unk>.
Speaker 4: Utilization was 76.8% compared to 77.9% in Q4 of last year and 77.1% in Q3 2021.
Utilization was 76, 8% compared to 77, 9% in Q4 of last year and.
77, 1% in Q3 2021.
Turning to our results for 2021 Red.
Speaker 4: Revenues for the year were $3,758,000,000.
Revenues for the year were $3 billion $758 million.
Speaker 4: producing 41.3% reported growth and 39.9% on a constant currency basis when compared to 2020.
Producing 41, 3% reported growth and 39, 9% on a constant currency basis, when compared to 2020.
During fiscal 2021, our acquisitions contributed approximately 4% to our growth.
Speaker 4: During fiscal 2021, our acquisitions contributed approximately 4% to our growth.
Speaker 4: Gap income from operations was $542 million, an increase of 43% year over year, and represented 14.4% of revenue.
GAAP income from operations was $542 million, an increase of 43% year over year and represented 14, 4% of revenues.
Speaker 4: Our non-GAAP income from operations was $678 million, an increase of 43.5% over the prior year, and represented 18% of revenue.
Our non-GAAP income from operations was $678 million, an increase of 43, 5% over the prior year and represented 18% of revenue.
Speaker 4: Our GAAP effective tax rate for the year was 9.7 percent. Our non-GAAP effective tax rate was 22 percent.
Our GAAP effective tax rate for the year was nine 7% our non-GAAP effective tax rate was 22%.
Speaker 4: diluted our earnings per share on a GAAP basis with $8.15.
Diluted earnings per share on a GAAP basis was $8 15.
non-GAAP , EPS, which excludes adjustments for stock based compensation.
Speaker 4: non-GAAP EPS, which excludes adjustments for stock-based compensation.
Speaker 4: acquisition related costs and other certain one-time items with $9.05.
Acquisition related costs and other certain onetime items was $9 five.
Reflecting a 42, 7% increase over fiscal 2020.
Speaker 4: reflecting a 42.7% increase over fiscal 2020.
In 2021, there were approximately 59 1 million weighted average diluted shares outstanding.
Speaker 4: In 2021, there were approximately 59.1 million weighted average diluted shares outstanding.
Speaker 4: And finally, cash flow from operations was $572 million, compared to $544 million for 2020. And pre-cash flow was $461 million, reflecting an 86% adjusted net income conversion.
And finally cash flow from operations was $572 million.
Third to $544 million for 2020.
And free cash flow was $461 million, reflecting an 86% adjusted net income conversion.
Speaker 4: We are very pleased with our 2021 results, which exceeded each of the guided metrics we set at the beginning of the year.
We are very pleased with our 2021 results, which exceeded each of the guided metrics, we set at the beginning of the year.
Before I move on to our outlook I'd like to provide a few highlights on our progress in the area of corporate responsibility and ESG.
Speaker 4: Before I move on to our outlook, I'd like to provide a few highlights on our progress in the area of corporate responsibility and ESG.
<unk> has a long standing commitment to serve the communities in which our people and our customers operate.
Speaker 4: E-BAM has a long-standing commitment to serve the communities in which our people and our customers operate. As we continue to expand, we recognize our responsibility to act according to our principles by operating ethically, protecting the environment, and supporting our global and local communities.
We continue to expand we recognize our responsibility to act according to our principles by operating ethically protecting the environment and supporting our global and local communities.
Speaker 4: Our focus on sustainable growth today will be a catalyst to fuel continued expansion in the future.
Our focus on sustainable growth to date will be a catalyst to fuel continued expansion in the future.
Speaker 4: Over the last year, EPAMers have donated more than 30,000 hours of their time and skills across 27 EPAM sites and a partner organization event.
Over the last year repayments have donated more than 30000 hours of their time and skills across 27, <unk> sites and our partner organization events, creating and conducting stem related courses supporting social innovation platforms, and environmental initiatives and supporting events, including the British Interactive Media Association's digital.
Speaker 4: creating and conducting STEM related courses, supporting social innovation platforms and environmental initiatives, and supporting events including the British Interactive Media Association's Digital Day, the Raspberry Pi Foundation's Coolest Projects, and the Global Scratch Club.
De Raspberry Pi foundations coolest projects and the global Scratch conference.
Speaker 4: While we are working through specific long-term commitments to fight climate change, we have continued to challenge ourselves to significantly reduce the effects of our carbon emissions.
While we are working through specific long term commitments to fight climate change, we are continuing to challenge ourselves to significantly reduce the effects.
All of our carbon emissions.
Speaker 4: We're also focused on innovating new sustainability concepts and developing digital solutions to support sustainability in our communities.
We're also focused on innovating, new sustainability concepts and developing digital solutions to support sustainability and our communities.
Now, let's turn to guidance.
Starting with our full year outlook revenue growth will be at least 37% on a reported basis and in constant currency terms will be at least 38% after factoring in an approximate 1% negative foreign exchange impact.
Speaker 4: Starting with our full year outlook, revenue growth will be at least 37% on a reported basis and in constant currency terms will be at least 38% after factoring in an approximate 1% negative foreign exchange impact.
Speaker 4: We expect inorganic revenue contribution to be approximately 6% from acquisitions we closed in the last 12 months.
We expect inorganic revenue contribution to be approximately 6% from acquisitions, we closed in the last 12 months.
Speaker 4: We expect gap income operations to be in the range of 13.5 to 14.5%.
We expect GAAP income from operations to be in the range of 13 five to 14, 5%.
Speaker 4: and non-GAAP income from operations to be in the range of 16.5 to 17.5 percent.
non-GAAP income from operations to be in the range of 16 five to 17, 5%.
Speaker 4: We expect our GAAP effective tax rate to be approximately 15%. Our non-GAAP effective tax rate, which excludes excess tax benefits related to stock-based compensation, will be 22%.
We expect our GAAP effective tax rate to be approximately 15% or.
Our non-GAAP effective tax rate, which excludes excess tax benefits related to stock based compensation will be 22%.
Speaker 4: For earnings per share, we expect that GAAP diluted EPS will be in the range of $10.43 to $10.76 for the full year.
For earnings per share, we expect GAAP diluted EPS will be in the range of $10 43.
To $10 76 for the full year.
Speaker 4: And non-GAAP diluted EPS will be in the range of $11.36 to $11.69 for the full year.
And non-GAAP diluted EPS will be in the range of $11 36 to $11 69 for the full year.
Speaker 4: We expect weighted average share count of 59.8 million fully diluted shares outstanding.
We expect weighted average share count of $59 8 million fully diluted shares outstanding.
Speaker 4: For Q1 of 2022, we expect revenues to be in the range of 1.170 billion to 1.180 billion, producing a year-over-year growth rate of approximately 50% reported at the midpoint of the range.
For Q1 of 2022, we expect revenues to be in the range of $1 170 billion to $1 180 billion producing a year over year growth rate of approximately 50% reported at the midpoint of the range or.
Speaker 4: Our guidance reflects unfavorable FX impact of 1%, and the year-over-year growth rate on a constant currency basis is expected to be 51%.
Our guidance reflects unfavorable FX impact of 1% in the year over year growth rate on a constant currency basis is expected to be 51%.
Speaker 4: Lastly, we expect approximately 9% of our growth to come from revenues contributed by acquisitions closed over the last 12 months.
Lastly, we expect approximately 9% of our growth to come from revenues contributed by acquisitions closed over the last 12 months.
Speaker 4: For the first quarter, we expect gapping from operations to be the range of 14.5 to 15.5%.
For the first quarter, we expect GAAP income from operations to be in the range of $14 five to 15, 5%.
And non-GAAP income from operations to be in the range of 16 five to 17, 5%.
Speaker 4: and non-GAAP income from operations to be in the range of 16.5 to 17.5.
Speaker 4: We expect our GAAP effective tax rate to be approximately 8% and our non-GAAP effective tax rate, which excludes excess tax benefits related to stock-based compensation, to be approximately 22%.
We expect our GAAP effective tax rate to be approximately 8% and our non-GAAP effective tax rate, which excludes excess tax benefits related to stock based compensation to be approximately 22%.
For earnings per share, we expect GAAP diluted EPS to be in the range of $2 65 to $2 73 for the quarter.
Speaker 4: For earnings per share, we expect GAP diluted EPS to be in the range of $2.65 to $2.73 for the quarter, and non-GAAP diluted EPS to be in the range of $2.58 to $2.66.
And non-GAAP diluted EPS to be in the range of $2 58 to $2 66 for the quarter.
Speaker 4: We expect a weighted average share count of 59.5 million diluted shares out.
We expect a weighted average share count of $59 5 million diluted shares outstanding.
Speaker 4: Finally, a few key assumptions that support our gap to non-gap measurements in 2022.
Finally, a few key assumptions that support our GAAP to non-GAAP measurements in 2022.
Stock based compensation expense is expected to be approximately $116 million.
Speaker 4: Stock-based compensation expense is expected to be approximately $116 million.
Speaker 4: with 19 million in Q1, 31 million in Q2, and 33 million in the remaining quarter.
With $19 million in Q1 $31 million in Q2.
And $33 million in the remaining quarters.
Amortization of intangibles is expected to be approximately $24 million for the year evenly spread across each quarter.
Speaker 4: Amortization in tangibles is expected to be approximately 24 million for the year, evenly spread across each quarter.
Speaker 4: The impact of foreign exchange is expected to be approximately a $6 million loss for the year, evenly spread across each quarter.
The impact of foreign exchange is expected to be approximately a $6 million loss for the year evenly spread across each quarter.
Speaker 4: Tax effective non-GAAP adjustments is expected to be around $27 million for the year, with $4 million in Q1, $7 million in Q2, and $8 million in each remaining quarter.
Tax effective non-GAAP adjustments is expected to be around $27 million for the year with $4 million in Q1 $7 million in Q2 and $8 million in each remaining quarter.
Speaker 4: And finally, we expect excess tax benefits to be around $67 million for the full year, with approximately $27 million in Q1, $18 million in Q2, and $11 million in each remaining quarter.
And finally, we expect excess tax benefits to be around $67 million for the full year.
With approximately 27 million in Q1 $18 million in Q2 and $11 million in each remaining quarter.
Our 2022 outlook reflects a strong demand environment, we see across the business and end markets. We serve in addition to expected ongoing investments across our people platforms and processes, which will equip and positioning <unk> for future growth as we've done in the past, we will adjust our business outlook each quarter.
Speaker 4: Our 2022 outlook reflects the strong demand environment we see across the business and end markets we serve. In addition to expected ongoing investments across our people, platforms and processes.
Speaker 4: which will equip and position EPAM for future growth. As we've done in the past, we will adjust our business outlook each quarter to reflect changes in the demand environment and in our operations.
To reflect changes in the demand environment and in our operations.
Okay, operator, let's open the call up for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Speaker 1: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster.
Please stand by while we compile the Q&A roster.
Our first question comes from Ramsey El <unk> with Barclays. Your line is open.
Speaker 5: Hi, and thanks so much for taking my call and congratulations on your anniversary. I wanted to ask about the situation in Ukraine, whether you could give us a little more color on your potential continuity plans in the event that the conflict there sort of escalated, and also maybe weave in whether the post-pandemic remote work model has made it a little bit easier to contemplate shifting workloads around.
Hi, and thanks, so much for taking my call and congratulations on your on your anniversary.
I wanted to ask about the situation in Ukraine, whether you could give us a little more color on your P.
Potential continuity plans in the event that the conflict there sort of escalated and also maybe we then whether that.
Post pandemic remote work.
Our model has made it a little bit easier to contemplate shifting workloads around.
Okay.
Hello This archiving.
Speaker 3: I think number one is that we continue to work in normal environments. There is not any impact on
I think number one is that we continue to work in.
Normal environment, So there's no any impact.
Due to the regulation.
Disciplined.
So.
Speaker 3: We talked about our experience started from 2014 and in 2015, actually, it was active.
We talk to both our experienced started from 2014 and in 2015.
Actually it was octave.
Speaker 3: operations on the border with Ukraine and was questionable part of the land there. And it was a very active military activity there.
But creations from the border.
Ukraine.
So it's questionable part of the lenses.
It was.
Very active military and occasions that due.
During all this time.
Speaker 3: It didn't have any impact on the palmita.
It didn't have any any impact at all.
Right.
What we can bring.
Speaker 3: What we can bring in addition to what you're reading is that nobody from E-PAL, right now it's pretty big numbers people have.
In addition towards the region.
Sure.
Global deferral right.
Right now it's <unk>.
Now most people yourself.
Speaker 3: almost 13,000 production people in the country.
Almost switching production people.
Got it.
Speaker 3: So we have anybody who was drafted or anybody who was invited or requested for any type of military training or drills or anything.
So we have anybody who was drafted or <unk> or requested for any type of media tickets in any.
<unk> sorry.
So that's probably.
Speaker 3: So that's probably kind of additional color which we can...
Additional color we can we can begin.
Speaker 3: The second point that also seems...
So the second point on that.
Also sales.
Speaker 3: almost eight years of tension in the region.
Almost ats off.
Tension in the region.
Speaker 3: We did a lot of special preparations for this like we
We do do a lot of special preparations for this likelihood.
Speaker 3: practically completely independent from local infrastructure, any project infrastructure, any project activities. And on top of your question about COVID and remote work, it means that from building or any attributes
Practically a completely independent from local infrastructure and new projects infrastructure.
Activities, so and on top of your question about <unk> and they want to work so it means that.
From.
<unk> zinc ore.
Amy.
Attributes.
Speaker 3: engagement depending on locale. It doesn't practically...
Alright.
Engagement.
And in all of luck Hal.
It doesn't practically it doesn't exist.
Ah.
Speaker 3: I think it will be a lot of questions, so I will add a little bit more.
I think it will be a.
Felicia, sorry, a little bit a little bit more of it.
There is no.
<unk>.
Oh.
Okay.
<unk>.
Speaker 3: the locations probably from the total number of people that you have between 50 and 100 participated right now in some platforms.
Relocations.
From the total loan book to do both.
Between TCT Congress participated right now in some platform.
Speaker 3: pilots or testing of DCP activities and we're leaving for in the past or currently for one two three three weeks
Pilots.
Shipyard activities and we're leaving for the past four correct.
123 weeks.
Okay.
Speaker 3: So other than that, again, it's completely...
So other than that again.
Okay.
Okay I appreciate that.
Speaker 5: Okay, I appreciate that. And I wanted to ask also on margin guidance and fiscal 22. It's down about 50 basis points at the midpoint from the fiscal 21 guide. And I know you mentioned investing in people and ops. I was just wondering if you can give a little bit more color about the margin drivers and maybe the cadence we should model through this year.
And I wanted to ask also on.
Margin guidance in fiscal 'twenty, two it's down about 50 basis points at the midpoint from the fiscal 'twenty One guide.
And I know you mentioned investing in people in ops I was just wondering if you can give a little bit more color about the margin drivers and maybe the cadence we should model period this year.
Yeah, So maybe what I'll do is I'll respond to the full year and I'll also talk about Q1, specifically and so what we continue to see is a business that obviously is growing at a rapid rate with extremely strong demand we've talked about our ongoing investment in people and processes.
Speaker 4: Yes, so maybe what I'll do is I'll respond to the full year and also talk about Q1 specifically.
Speaker 4: And so, you know, what we continue to see is a business that obviously is growing at a rapid rate with, you know, extremely strong demand. We've talked about, you know, our ongoing investment in sort of people on processes, education, and also just the ongoing diversification of the business globally. As we grow into different centers around the world, those are probably somewhat less optimized at this time than our, you know, more mature kind of traditional geography.
Education.
And also just the ongoing diversification of the business globally.
As we grow into different centers around the world those are probably somewhat less optimized at this time.
More mature kind of traditional geographies, but if I were really sort of provide the color. It's probably easiest to understand is that we continue to see elevated wage inflation.
Speaker 4: But if I were really to sort of provide the color that's probably easiest to understand is that we continue to see elevated wage inflation.
Speaker 4: Not maybe significantly higher than 2021, but maybe somewhat elevated as we go from 2021 to 2022. We at the same time are also seeing substantially better pricing environment, but the pricing does not fully offset the impact of the wage inflation.
Not maybe significantly higher than then.
In 2021 that may be somewhat.
Elevated as we go through 2021 and 2020, we at the same time, we're also seeing substantially better pricing.
Environment.
But the pricing.
It does not fully offset the impact of the wage inflation. So one of the negatives you've got here is that.
Speaker 4: So, you know, one of the negatives you've got here is that, you know, ongoing impact.
Ongoing impact.
Speaker 4: At the same time, I think that you'll see a little bit more normalization of activities related to travel related to in person. And so I think you'll see a little bit higher over time. You know, we've talked about the fact that the variable compensation is going to come off a bit. Or we expect that it would come off a little bit between 2021 and 2022.
At the same time, I think that youll see a little bit more normalization of activities related to <unk>.
Travel related to in person.
So I think youll see a little bit higher SG&A over time.
We've talked about the fact that the variable compensation is going to come off a bit.
We expect that it would come off a little bit between 2021 and 2022.
Speaker 4: But right now, between the, you know, the somewhat ongoing impact of the wage inflation and pricing not totally sort of compensating and what I expect is somewhat elevated at S, G, and A, for the full year, you know, we've got it to 16 and a half to 17 and a half. And I believe that we'll probably operate at the midpoint or somewhat higher than the midpoint of the 16 to 17 and a half guide. However, I want to be a little clear that the ways in which something is moving from a market playing with a number of different arenates to might be slowing things down a little bit because actually those are yourselves but then the last six pages and 20 Mostly the cost cuts down to the
But right now between.
Somewhat ongoing impact of.
The wage inflation and pricing not totally sort of compensating.
And what I expected somewhat elevated SG&A for the full year, we've guided to 16, 5% to 17 and a half and I believe that will probably operate at the midpoint or somewhat higher than the midpoint of 16 to $17 five guide however.
However, I want to be a little clear on Q1, so they are very significant impacts.
Speaker 4: So there are very significant impacts between Q4 and Q1. And you'll see them every year if you go back and look at history.
Impacts between Q4 in Q1, and you will see them every year. If you go back and look at history, where profitability, particularly gross margin has declined by between 100, and sometimes 200 basis points between Q4, and Q1 and so the first two doses that we just have a lot lower billing capacity or billing days in Q1 and <unk>.
Speaker 4: where profitability, particularly gross margin, has declined by between 100 and sometimes 200 basis points between Q4 and Q3.
Speaker 4: And so the first of those is that we just have a lot lower billing capacity or billing days.
Speaker 4: in Q1. And again, it's somewhat the uniqueness of where we operate, which is we have an awful lot of people celebrating Orthodox Christmas, which occurs in January , not in December . There are a lot more holidays in the CE region. And so you've got lower availability of workdays in January . And then February is a short month for any company. So that has an impact on profitability when you've got a highly time and materials oriented business.
Again, it's somewhat the uniqueness of where we operate which we had an awful lot of people celebrating Orthodox Christmas which occurs in January not in December there are a lot more holidays in the sea region and so you've got lower availability of workdays in January and February is a short month for any company that has it has an impact on <unk>.
<unk> ability when you've got a highly time and materials oriented business.
Speaker 4: The other thing, and again, this would impact any company, not just EPAM, but you've got Social Security caps that usually kick in in the second half of a fiscal year. And then those Social Security resets at the beginning of the year, you have much higher.
The other thing and again this would impact any company not just <unk>, but <unk> got social security caps that usually kicked in in the second half of the fiscal year and then.
Social security resets at the beginning of the year do you have much higher.
Speaker 4: employer social security payments, particularly in Q1. So both of those things have a pretty negative impact on particularly on gross margin. And so when we do the modeling.
In employer, social security payments and particularly in Q1, so both of those things have a pretty negative impact on particularly on gross margin and so when we do the modeling today. Okay again for the full year I would say that that midpoint, we can be somewhat higher than the midpoint. However for Q1, I would say when I look.
Speaker 4: Okay, again, for the full year, I would say that that midpoint, we can be somewhat higher than the midpoint. However, for Q1, I would say when I look at the midpoint of 16 and a half to 17 and a half, I would say at or slightly below the midpoint is the modeling that we're doing for Q1 of fiscal 2022. Super helpful. Thank you.
At the midpoint of 16, 5% to $70 five I would say at or slightly below the midpoint is is the modeling that we're doing for Q1 fiscal 2022.
Super helpful. Thank you.
Thank you. Our next question comes from Bryan <unk> with Cowen Your line is open.
Speaker 6: Hi, good morning. Thank you. First, I wanted to follow up on Ukraine. Can you just talk about the nature of client conversations and whether there's any increased selectivity or preference by them for where new work will be delivered from? And then collectively, we see the Belarusian Ukraine as a mix of headcount declined year over year by an overall amount. Just based on your global expansion plans, how are you thinking about the mix of those two countries as you would exit this year?
Hi, good morning, Thank you.
I just wanted to follow up on Ukraine can you just talk about the nature of client conversations and whether there's any increased selectivity or preference by them for where new work will be delivered from and then collectively we see that net Belarus, and Ukraine is a mix of head count declined year over year by a notable amount just based on your global expansion plans.
How are you thinking about the mix of those two countries as you would exit this year.
Okay.
I think in general the reaction and congratulations everybody.
Speaker 3: I think in general the action and conversation very, very similar to what was eight years back. There are some clients which are very wordy and kind of in a situation of waiting and seeing.
<unk> work. So there are some clients feature.
<unk> kind of sits.
Situations, where you can see.
Speaker 3: There are some clients which continue as usual, and this is the majority of them. There are some clients who are preparing for more active VCP if some specific triggers would happen, which is very difficult to define the triggers. This is a very small minority.
There are some clients will continue as usual.
Majority of them.
Some clients who are preparing for more akshay BCP if.
Some specific figures will trail, which is very difficult to define the triggers in this.
Ladies small small minority.
So.
And there is category between those like especially in wait and see who each preferred to start somewhere else.
Speaker 3: And there is category between those, especially in waiting sea, which prefer to start somewhere else. And it was very similar situation again eight years ago.
It was a very similar situation again.
<unk> ago.
And so.
Speaker 3: We have many more options today to alter alternative necessary. I
We have many more options.
Today, two of which are alternative SSAT.
Uh huh.
Because as you know a duplication of what's happening.
Speaker 3: between Belarus and Russia today.... Caribsu, Ukraine
The.
Builders in Russia today.
So globally.
Thereof.
65%.
Hello.
Diluted capacity.
Yes.
Speaker 3: versus eight years ago it was probably over.
Eight years ago with probes.
Yeah.
Okay, and then as far as workforce goes in just the addition of another Big addition, here this quarter sequentially I think we estimate over 4000 organically again can you just talk about your comfort levels in the pace of resource additions.
Speaker 6: Okay, and then as far as workforce goes and just the addition, another big addition here this quarter sequentially, I think we estimate over 4000 organically again, you just talk about your comfort levels in the pace of resource additions and kind of what you're anticipating, you know, attrition utilization within that 2022 hours.
What you are anticipating.
And utilization within that 2022 outlook.
Speaker 4: Yes, let me provide a little bit of color on that and also kind of follow up on one of the other questions you had earlier. And so, you know, you're correct that, you know, we've seen a significant growth in our productive capabilities outside of the traditional Ukraine-Belarus region.
Yes, So let me provide a little bit of color on that and also kind of follow up on.
Other questions you had earlier and so you are correct that we've seen it.
Significant growth in our productive capabilities outside of the traditional Ukraine, Belarus region. So it can be specific Ukraine, Belarus, Russia from a production standpoint grew by 22% on a year over year basis between 2021, and we had greater than 80, almost 90% growth in.
Speaker 4: So to be specific, Ukraine, Belarus, Russia from a production standpoint grew by 22% on a year-over-year basis between 2012 and 2020.
Speaker 4: And we had greater than 80, almost 90% growth in the other regions, including India and Latin America, where we've seen particularly high growth. And so we've moved from a
The other regions, including India, and Latin America, where we've seen particularly high growth and so we've moved from a.
Speaker 4: Ukraine, Belarus, Russia. And again, the idea was that we're becoming an increasingly global company. We're larger. We need to have a broader pool of labor that we access. At the same time, it clearly has diversification benefits from a risk standpoint. So we've gone from 68% of production capacity in Ukraine and Belarus in 2020 to 58%. We expect to continue to see accelerated growth, particularly in places like Latin America.
Ukraine, Belarus, Russia and again the idea was that we are becoming increasingly global company. We are larger we need to.
To have a broader pool of labor that we that we access at the same time. It clearly has diversification benefits from a risk standpoint, so we've gone from 68% production capacity in Ukraine, and Belarus in 2020% to 58%.
We expect to continue to see accelerated growth, particularly in places like Latin America.
Eastern Europe .
Speaker 4: Eastern Europe , let's call it Central Europe , and APAC, and as a result, you'll continue to see, you know, I would expect you would continue to see that number drive down. So I don't know if it would approach 50% or something, but certainly it would be lower than it is today and certainly much lower than it was in 2020.
Central Europe and in APAC and as a result, Youll continue to see I would expect you would continue to see that number derived down. So I don't know if it would approach, 50% or something but certainly it would be lower than it is today and certainly much lower than it was in 2020 from the nutrition and utilization standpoint.
Speaker 4: From a nutrition and utilization standpoint, I think we see utilization at about the same level as 2021. And then from a nutrition standpoint, we are still below 20% with both voluntary and involuntary as we exit Q4. We generally would see a little bit of benefit in Q1 as people wait to get a vesting of stock and bonus. So you usually see a little bit of a dip in attrition in Q1.
I think we see utilization at about the same level as 2021.
And then from an attrition standpoint, we are still below 20% with both voluntary and involuntary as we exit Q4.
We generally would see a little bit of benefit in Q1 as people wait to get.
Vesting of stock in and bonus so you usually see a little bit of a dip in attrition in Q1.
Speaker 4: And for the full year, we think attrition might be up slightly. But at the same time, we expect that 2020-22 attrition will definitely remain below 20% as well. Thank you for the call.
And for the full year, we think attrition might be up slightly.
But at the same time, we expect that 2022 attrition will definitely remain below 20% as well.
Thank you for the call.
Sure.
Thank you. Our next question comes from James Fawcett.
Stanley Your line is open.
Great. Thank you very much Jim.
Continuing to.
Speaker 6: Continue to ask about kind of situation and flexibility. If we think about operationally, if there were disruption or you needed to move out of kind of the region where you're seeing potential disruption out of Ukraine, et cetera.
Ask about kind of situation and flexibility. If we think about operationally. If there were disruption are you needed to move out of kind of.
The reason why Youre seeing.
Yes.
Potential disruption out of Ukraine et cetera.
Speaker 6: How flexible are you and how quickly can you move those operations into other regions for delivery, et cetera? Just thinking about those contingency plans. And then separately on pricing, Jason, you mentioned that the wage increases aren't keeping or, are you saying it's improving someone else's Hammond's
How flexible are you and how quickly can you move those operations into other regions for delivery et cetera.
Just thinking about those contingency plans and then separately on pricing, Jason you mentioned that.
The wage increases arent keeping.
Sure.
Speaker 6: moving faster than you can move pricing. Is there a timeframe under which you can better balance those and fully recapture kind of what you're experiencing from a wage inflation perspective in your pricing with your customers? Thanks.
Moving faster than you can move pricing is there a timeframe under which you can better balance those and.
And fully recapture kind of what you're experiencing from a wage inflation perspective.
Your pricing with your customers. Thanks.
Okay.
Speaker 3: On the first part of the first question, first of all, there is no one kind of...
The first part of the.
The first question first of all there is no one.
End of.
Speaker 3: approach or rule how to operate in this situation because we have BCP plans which are very specific for engagement or accounts or even specific engagement within these accounts depending on risk factors, distribution of the team.
The broad showroom cloud to accurate in those situations because we serve.
We see people asked which really.
Four.
Engagement.
Accounts or even specific engagements.
This accounts dependent.
The risk factors distribution of the team.
Infrastructure.
Speaker 3: general part like mix of clients and
General thoughts.
Mix of clients.
US again is independent from Ukraine Whats fuels.
Speaker 3: Again, it's independent from Ukraine, but still there are some specifics there. So it is very, very specific, and those plans are very detailed, including the definition of the key personnel.
There are some.
Specific so it is very very specific.
Those plans.
Very detail, including leg differentiation with the key personnel.
Okay.
Sure.
Speaker 3: and timing on doing this.
And.
The timing of doing this.
Also.
Speaker 3: It is pretty pragmatic because we were experiencing pressure and very...
It is pretty pragmatic because we experienced pressure.
But.
Yield.
Hey, Wes.
Speaker 3: eight years ago and then during this period multiple escalations as well. It wasn't so much covered by media as happening today but it was very very simple.
This years ago.
During this periods multiple escalations as well as wasn't so much coveted by Mizuho.
<unk> happening today, but it was very similar.
Speaker 3: So we feel that we're pretty, pretty prepared for this. We also.
So we feel that we're pretty accretive.
Preparing for this we also.
Speaker 3: have our understanding again from a lot of local science, which is
Our understanding from a lot of local sites because.
Speaker 3: Again, not necessarily exactly in line with what we're reading on CNN TV. And our understanding what could happen is relatively limited across the border in Ukraine. And we have a number of large development centers across Ukraine. So we have plans how to move people from one to another farther from the border, if necessary.
I guess not necessarily exactly.
Regionally sales in Chile.
Our understanding of what could happen.
Is it relatively limited cross border.
In Ukraine, and we have a number of large developer incentives across your crap. So if you have plans how to move people from one to another farther from the border business at the same time, we do believe that even those which is closer to the world steel and three to kind of save zone today.
Speaker 3: At the same time, we do believe that even those which are closer to the border are still in a pretty safe zone today and will be in the future.
It will be into the future.
Speaker 3: So, but again, specific timing and triggering, it's very specific to clients and engagement.
So I think the specific time and until you get in it's very specific to clients of engagements.
Speaker 4: Yeah, and on the pricing question, you know, we continue to focus on both rate increases with existing clients and then taking new opportunities.
Yeah and on the pricing question.
We continue to focus on both rate increases with existing clients and then taking new opportunities where the value of BPM quality delivery is such that the pricing is also somewhat superior so a little bit more selective in terms of the deals that we take.
Speaker 4: where the value of V-PAM quality delivery is such that the pricing is also somewhat superior, so a little bit more selective in terms of the deals that we take. I think that what, you know, clearly what wage inflation is going to be at the end of 2022, it's kind of hard to predict at the beginning of 2022, but I think what you'll continue to see is sort of price.
I think that what.
Clearly what wage inflation is going to be at the end of 2022, it's kind of hard to predict at the beginning of 2022, but I think what youll continue to see as sort of price.
Speaker 4: not just at the beginning of the year and also in Q2, but we'll continue to see sort of price improvements throughout the year. And you know, hopefully by the time we get to 2023, there's a you know, a better balance between price and wage inflation.
Not just at the beginning of the year and also in Q2, but we will continue to see sort of price improvements throughout the year and hopefully by the time, we get to 2023 there's.
A better balance between price and wage inflation.
Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open.
Speaker 1: Thank you. Our next question comes from Jason Coverburg with Bank of America.
Good morning, guys. So in 2021, you guys just posted I guess, it was 36% revenue growth organic constant currency or guiding to at least 22% or sorry at least 32% on same basis in 2022.
Speaker 7: Good morning, guys. So in 2021, you guys just posted, I guess it was 36% revenue growth, organic constant currency, or guiding to at least 22% or sorry, at least 32% on the same basis in 2022. So it's just the incredibly strong growth seems like it's continuing to persist. I mean, how do you now think about
So it's just the incredibly strong growth seems like its continuing to persist I mean, how do you now think about your true kind of underlying organic revenue growth rate on kind of a multi year basis. I mean, we used to talk about 20% plus and obviously, there's been a surge in demand from the pandemic, but just as you've SaaS.
Speaker 7: your true kind of underlying organic revenue growth rate on kind of a multi-year basis. I mean, we used to talk about 20% plus and obviously there's been a surge in demand from the pandemic, but just as you've assessed, you know, how long that may last and how your competitive position has evolved, would really be curious on your thoughts on what you think normalized growth, you know, looks like, you know, even beyond 2022.
How long that that May last and how your competitive position has evolved would really be curious on your thoughts on what you think normalized growth looks like.
Even beyond 2022.
Yes, So let me just.
Speaker 4: Yeah, so let me just, I guess, restate what you said, you know, absolutely correct that in a 37% growth guide,
Ted.
I guess restate, what you said absolutely correct that in at 37% growth Guide.
Speaker 4: the organic constant currency contribution would be about 32%. That compares to the 35.5 ish, you know, kind of percent organic constant currency contribution or growth rate in 2021. So what you've seen in 2021 and also as we enter 2022 is we've had three quarters now if you include the guide for Q1 of 2022 where we're 50% year over year revenue growth rate.
Organic constant currency contribution would be about 32% that compares to the $35 five ish kind of percent.
Organic.
At constant currency contribution.
Both rate in 2021, so what you've seen.
In 2021 and also as we enter 2022 is we've had three quarters. Now. If you include the guide for Q1 of 2022 or 50%.
Year over year revenue growth rates and so clearly that's an extraordinary number part of that has been the result of the huge additional.
Speaker 4: And so clearly that's an extraordinary number. Part of that has been the result of the, you know, the huge additional headcount additions on an organic basis, plus some of the acquisition related activity.
<unk> head count additions on an organic basis, plus some of the acquisition related activity. So we don't think that 50% year over year revenue growth rate is sustainable and I think if you sort of decompose that guide with the growth rate in Q1 and.
Speaker 4: So, you know, we don't think that 50% year-over-year revenue growth rate is sustainable. And I think if you sort of decompose the guide with the growth rate in Q1 and the guidance that we have for the full year, you'll see that we would expect a deceleration in growth rate throughout.
The guidance that we have for the full year Youll see that we would expect a deceleration in growth rate.
Throughout the year.
Speaker 4: But even as you exit Q4, I think you're going to see us with a growth rate, you know, including acquisitions.
But even as you exited Q4, I think youre going to see us with a growth rate.
Including acquisitions in excess of 25%. So I think what you would do is you would exit Q4 with a somewhat accelerated growth rate relative to the historic.
Speaker 4: In excess of 25%. So I think what you would do is you would exit Q4 with a somewhat accelerated growth rate relative to the historic.
Speaker 4: Above 20% and we'll get to the guy for 2023 as we get closer to that time period.
Above 20% and we'll get to the guide for 2023, as we get closer to that time period, but again, you would see it somewhat.
Speaker 4: But again, you would see a somewhat of a decelerating growth rate throughout the year. And that is somewhat intentional. We believe that it's appropriate to get back to a more sustainable growth rate. But I still think you'll see its exit Q4 at a growth rate that is higher than that traditional, you know, somewhat above 20%.
Salary and growth rates throughout the year and that instead is somewhat intentional we believe that it's appropriate to get back to a more sustainable growth rate.
But I don't think Youll see us exit Q4 at a growth rate that is higher than that traditional.
Somewhat above 20%.
Right right Okay.
Yes.
Speaker 7: Yeah, no, that all makes sense. And then if we think about your headcount growth targets for the year, obviously you're going to have some pricing to help on the revenue side.
Makes sense and then if we think about your head count growth targets for the year.
So youre going to have some some pricing to help on the on the revenue side.
Speaker 7: So, should we think about headcount growth kind of modestly lagging revenue growth in 2022?
So should we think about head count growth kind of modestly lagging revenue growth in 2022.
Yeah.
Speaker 4: Or do you have something you want to say in response to the other people?
Or do you have something you wanted to think sponsor yet.
Speaker 3: I just wanted to add to what Jason was saying. I think the main lesson right now is that we have thought about
I just wanted to two adjacent to it.
I think as a way of kind of lift right now.
Sure.
So to vote.
Speaker 3: growth in 20 last person before and what
And 40 less person before.
Kathryn due to the last year that we tested ourselves.
Speaker 3: happened during the last year that we tested ourselves at a much higher level. So we still have to wait and see and expect that it will come to more normal growth rates in the future, but where this border will be coming 20-25% or 25-30% or whatever, we will need to test it. But again, we feel more comfortable to answer now the question which we were asked in the past.
Much higher level. So we still have to wait and see as expectations. If you will come to a more normal growth rate since the future.
But whereas this border will be covered.
20% to 25% with 25% 30%.
You need to test it.
<unk> got we feel more comfortable to us for the question.
<unk> would you be able to grow faster.
Speaker 3: Would you be able to grow faster than what you were saying?
Sam.
Speaker 3: Yes, it is possible, and that's probably the positive lesson which we have right now.
Yes, it is possible and that's what we have.
This is a kind of positive positive lesser issue separate.
Speaker 4: And I guess for the growth rate, you know, one of the things that, you know, you see when you've got this organic growth rate of it from a headcount standpoint of greater than 4000 and Q3 and Q4. Plus, of course, the acquisitions that we've done by the time you get to Q1 and Q2, it does produce very, very high.
And I guess for the growth rates one of the things that you see when you've got this organic.
Growth rate of it from a head count standpoint of greater than 4000 in Q3 and Q4.
Plus of course, the acquisitions that we've done by the time, we get to Q1 and Q2 it does produce.
Very very high growth.
Speaker 4: Again, particularly on a year-over-year basis, we are comparing Q1 of 2022 to Q1 of 2021, and you've had all that headcount addition in the second half of 2021. Right now, the last two quarters, we've had organic headcount growth of about...
Again, particularly on a year over year basis were comparing Q1 of 2020 due to Q1 of 2021 and <unk> had all of that head. Count addition, in the second half of 2021 right now.
The last two quarters, we've had organic head count growth of about 4000 are somewhat over 4000 in right now what we're planning is for organic head count growth somewhat above 3000, okay with the idea that we believe that that might be a more sustainable growth rate for the time being and Thats still produces the.
Speaker 4: 4,000 or somewhat over 4,000. And right now, what we're planning is for organic head count growth somewhat above 3,000. OK, with the idea that we believe that that might be a more sustainable growth rate for the time being. And that still produces the strong growth rates that we're talking about, the 37% plus for the full year 2022. Great.
Strong growth rates that we're talking about the 37% plus for the full year of 2022.
Okay.
Great well thanks for that.
Thank you. Our next question comes from Surinder <unk> with Jefferies. Your line is open.
Speaker 8: Thank you.
Thank you.
A question about.
Kind of get the breakthrough demand that you guys are seeing at this point.
Speaker 8: kind of the breadth of demand that you guys are seeing at this point, obviously even if we adjust out the acquisition.
Obviously, even if we adjust out the acquisitions.
Speaker 8: very strong growth outside the top 20 in terms of your client.
Very strong growth outside the top 20 in terms of your clients.
Speaker 8: Can you maybe talk about the pace at which you're adding new clients and the considerations when you onboard those clients? How selective do you have to be in the current environment or how selective are you and what are the considerations? Are these all clients that you believe that will get to...
Can you maybe talk about the pace at which you're adding new clients and the considerations. When you onboard those clients how selective do you have to be in the current environment of our house selective argue and what are the considerations are these old clients that you believe that we will get to.
Speaker 8: five million in revenues at some point, or how should we think about the trade-offs of having?
$5 million in revenues at some point or how should we think about the trade offs of having the breadth of clients versus a strategy that's may be focused on.
Speaker 8: breadth of clients versus a strategy that's maybe focused on.
Speaker 8: EPAM becoming more ingrained with a larger percentage of the...
<unk>, becoming more ingrained with it.
Larger percentage of a given clients revenues.
Speaker 3: So we're definitely more selective than in the past, and we definitely had a new client which......
So we are definitely more selections and robust.
And new clients we share.
Speaker 3: In our view, what we review in this is much more
In our view.
Whether you use us as much.
Speaker 3: more high potential and we have probably dozens of clients which we landed during the last 12 months which already bring in at least 1 million per quarter and growing fast. So I think it's actually becoming much more strategic portfolio.
High potential and we have probably dozens of clients reach.
We landed during the last 12 months, which already bring us in at least 1 million per quarter and growing for us So I think as.
Actually becoming much more strategic.
Florida.
So.
Speaker 4: But you are continuing to see the traditional EPAM growth in existing customers, and as Arc said, you know, a continued growth level from new customers, but maybe we're a little bit more strategic and selective about the new customers that we bring into EPAM.
But you are continuing to see the traditional APM growth in existing customers and as Ark said <unk>.
Continued growth level from new customers, but maybe we're a little bit more strategic and selective about that the new customers that we bring in detail.
Speaker 4: You know, the other thing I think we're hearing is demand continues to be, you know, we've
The other thing I think we're hearing as demand continues to be.
Speaker 4: probably still in somewhat of the unprecedented camp. Maybe clients are a little bit more thoughtful around their budgets, but again still strong, strong desire to invest.
Probably still in some in somewhat of the unprecedented camp maybe clients are a little bit more thoughtful around their budgets, but again still a strong strong desire to invest.
Speaker 4: you know, and there's still an awful lot of work to do. And it again, continues to be very broad based across industry vertical.
And there's still an awful lot of work.
To do and again continues to be very broad based across industry verticals.
Speaker 3: We're having more and more clients, which is like 12, 24 months becoming our top 50 or even top 20 as well. Yeah. And that speaks to, I think, clients, and we keep hearing this when we do our channel checks internally, clients sort of looking at ePAM differently as a true transformation partner with the ability to take on projects of much greater sort of scale and scope.
More and more clients wishes.
12, 24 months, becoming tougher.
Top 20 as well.
And that speaks to I think clients and we keep hearing this when we do our channel checks internally clients sort of looking at <unk> differently as a true transformation partner with the ability to take on projects of much greater scale and scope.
Speaker 8: Got it. And then would the reverse be true in this situation if you're being more selective that you're turning away?
Got it and then with the reverse be true in this situation if youre being more selective that you are turning away business at this point.
Speaker 4: I mean, I wouldn't say that we're turning away business, but I mean, I think there's been a disconnect between supply and demand for the last.
I mean, I wouldn't say that we're turning away business, but I mean, I think there's been a disconnect between supply and demand for the last.
Speaker 4: probably year and a half or certainly throughout 2021.
A year and a half or certainly the throughout 2021.
Speaker 4: And so, you know, by definition, you are being somewhat selective. I think in some cases, you know, Eric said it well, right, is that we're looking for clients that have the potential to grow. Sometimes we're obviously looking for very interesting projects or programs. We're looking for clients who have sufficient funding. And we're also looking for clients who are willing to pay the rates that we've been talking about when it comes to price.
So by definition, you are being somewhat selective I think in some cases as Ark said it well right is that we are looking for clients that have the potential to grow sometimes we're obviously looking for very interesting projects or programs. We're looking for clients, who have sufficient funding and we're also looking for clients who are willing to pay the rates that we've been talking about.
When it comes to price and so all of those things would would factor in and there'll be some self selecting by clients.
Speaker 4: And so all those things would factor in and, you know, there'll be some self-selecting by clients who...
Speaker 4: You know, and obviously some self selecting by EPM as to which clients we do this.
And obviously, some some self selecting bayou payments to which clients we do business with.
Okay. It sounds like.
Speaker 3: Yeah, I think like, let's rephrase it. Like first of all, from the general portfolio configuration, we're still looking for some clients, we
Let me rephrase it like first of all from the general portfolio configuration to Luca for some clients reach.
As in the past.
Speaker 3: as in the past, allowing us to really work in the very much cutting edge of technology and improve our engineering.
Allows us to really work.
<unk> got an age of technology and improve our engineering.
Speaker 3: kind of capabilities and understanding what's happening because that's the skills which we strategically focus in the past, right now, and will be doing in the future, and we hope that it's differentiated. At the same time, I think our criteria is changing, and it's criteria changing not only because of environment, because of the size of operation, but the general direction of the company where we can offer now much more end-to-end story.
Kind of capabilities and understand the scope of it because that's the skills, which we strategically focus.
But right now as we will be doing it as a future.
Because it is different shifts at the same time I assume.
Criteria has changed the strategy change and not only because of the new items because the size of liquidation.
Yeah.
General direction of the company, where we can work much more end to end story.
Speaker 3: from consulting to engineering. And we're looking for some clients which actually looking for somebody who can speed up the whole continuum kind of transformation.
From consulting to Italy, and we were looking for some clients we actually.
Lincoln for somebody who can speed up the whole continuum.
Formation.
So and resolve this credit areas together definitely there is very different selections.
Speaker 3: So, and with all these criteria together, definitely there is very different selection criteria. And some clients which will be working in the past, we probably not bringing on board today.
And some clients we should be well.
It is a bus we probe.
Those regions both today.
Speaker 8: got it. And then in terms of just a follow-on in terms of the questions around geopolitical risk,
Got it and then in terms of just a follow on in terms of the questions around geopolitical risk.
When you kind of look ahead.
Speaker 8: Is there any acceleration in your view of, or perhaps acceleration towards investing towards building global delivery capabilities faster? Or do you kind of just kind of continue at the current pace given?
Is there any acceleration in your view of perhaps accelerating towards investing towards building global delivery capabilities faster or do you kind of just kind of continue at the current pace given that.
Speaker 8: Obviously, you cited rates earlier where.
Obviously, you cited rates earlier, where.
Speaker 8: you are building the majority, a large percentage of your capabilities already out there. Do you accelerate that or do you just kind of
You are building the majority or a large percentage of our capabilities already out there to accelerate that or do you just kind of keep going.
Speaker 3: I think we do pretty obvious acceleration, but we also need to consider that it's not only because of geopolitical risk. It's in general, and that's why we try today to give you...
I think we do.
We're just acceleration, but you also need we also need to consider that it's not only because of geopolitical risk.
In general and Thats, why we try to do kind of to give you.
For perspective, what's happened during the last 10 years from 7000 people too.
Speaker 3: perspective what's happened during the last 10 years from 7,000 people to
<unk>.
Speaker 3: 58,000 people. So it's not only about geopolitics, it's in general, the globalization of our services. And we started to do it back then, 10 years ago. Very big acceleration happened in 2014, 15, when we practically opened India and Latin America, and India and Latin America growing right now faster than Eastern Europe .
58000 people so it's not only about geopolitics as in general globalization of our series.
We started to do <unk> 10 years ago.
Very big acceleration in 2014 to 15.
Particularly.
India, and Latin America, and EMEA, and Latin America growing right now faster than eastern Europe .
So most creativity is important and.
Speaker 3: So both criteria is important and as.
Speaker 3: Jason mentioned already before, by the end of this year, probably depends on our core locations will be closer to 50% versus 80 plus percent, which we have 10 years back. Got it. That's helpful. Thank you. Those are my questions. Yeah. Thank you.
Jason.
Virtual noted before.
This year, probably show a whole core locations, we will be <unk>.
Closer to 50%, we have 80 plus percent, which we have 10.
<unk> quip.
Got it that's helpful. Thank you those are my questions. Thank.
Thank you.
Our next question comes from Maggie Nolan with William Blair. Your line is open.
Thank you congratulations.
Speaker 9: Arc, you dangled this kind of $10 billion company in front of us. I'm wondering what remains consistent about the company as you get to that level, and then what operationally or strategically would be significantly different.
Argue you dangled this kind of $10 billion company in front of US I'm wondering what remained consistent throughout the company and you get to that level, and then what operationally or strategically would be significantly different than <unk> 10 billion or as you get to $10 billion.
Speaker 3: First of all, we're doing it in front of us, not only in front of you.
First of all we're doing is instrument of us not only in front of you.
And.
Speaker 3: I think it's a lot of criteria there and we talked about all of them.
I think it's a lot of great area, there and we talked about total zone.
Speaker 3: over the last years. We are building a company which is becoming more of an end-to-end solution provider and this sounds very trivial but...
What was the last years.
We are building a company rich becoming more end to end solutions provider. This is sounds trivial but.
Speaker 3: how to do it well, it's much less real than it seems to be because we believe that...
How to do it well.
Much less video.
Two because we believe it.
It is still open.
Speaker 3: open opportunity to do it right.
Open opportunity to do it to do it right and this is.
Sure.
Speaker 3: continuous inflow of the talent, so we need to find a way how to grow the talent and that's a very big component of our ecosystem, education, digital platform, how to make sure that people from different sides are working together efficiently.
Continuous inflows of talent, so we need to look to as a way to grow the Thailand zones.
A pretty big component of <unk>.
<unk> ecosystem applications digital platform to make sure that people from different sites working together efficiency. So it's a lot of.
Speaker 3: simple things which have to come together in our view, because it is a very competitive market. And while we think in the 10 billion is very realistic, how to do it better is still the challenge.
<unk> III <unk> two to come together in our view because it is a very competitive market in the world isn't because of $10 billion.
It really is hard to do it better.
Still the Shelley so.
I think as.
Sure.
Speaker 3: Very separate conversation. Hopefully we will be able to answer this a little bit in more details in May when we're planning to do
Very separate because your social co politically.
Able to us a little bit in more details in lay with <unk>.
To do so.
Rest of day.
Speaker 9: Okay, thanks. And then I think, Jason, I think it was you that mentioned that consulting was one of the drivers behind the growth in financial services. Is that widespread across the business? And then when you first rolled out consulting, it wasn't billed separately, and you had cautioned us to think about it as something that would be driving margins up. Has that changed as your consulting capabilities have matured over the last several years?
Okay. Thanks, and then I think Jason I think it was you had mentioned that consulting with one of the drivers behind the growth in financial services is that widespread across the business.
And then when you first rolled out consulting it wasn't billed separately and you would caution us to think about it as something that would be driving margins up has that changed at your consulting capabilities have matured over the last several years.
Speaker 3: I think it's not only about financial services, it's happening in multiple sectors.
I think it's not only about financial services.
And in the multiple ship to us.
Sure.
Speaker 3: in retail right now so and for us goal still not to have a separate consulting client.
In retail right now so for us <unk> to grow for serpent consult consultant glide.
Sure.
Speaker 3: of services, but actually very much integrated. And we still don't have
CRA space, but actually very much integrated and we still don't have very specific separate.
Speaker 3: very specific, separate kind of accounting for this.
Kind of.
Accounting for this because it's not just specific numbers of people in this category is very much over the list across the province, we have consulting capabilities and very different.
Speaker 3: specific number of people in this category. It's very much overlapped. Across the department, we have consulting capabilities that are very different.
Organizational kind of.
Speaker 3: units of IPAM and the whole effort how to orchestrate it correctly is right.
Units awfully pump.
As a whole.
If a client orchestrated fedex leases right people.
Speaker 3: So, now from this point of view, nothing changed at this point.
So from.
I was just putting two you nothing changed at this point.
Okay.
Thank you.
Thank you. Thank you.
Our next question comes from Ashwin <unk> with Citi. Your line is open.
Thank you.
Speaker 10: Thank you. Good morning. Congratulations on the quarter and the milestone.
Good morning.
Congratulations on the quarter and the milestone.
Speaker 10: It's a good journey. Happy to be along on it. I guess my first question is, when I looked at every single revenue bucket cohort has grown. So you have clients over 20 million between 10 and 20, between five and 10 and so on.
Good Jeremy.
It can be along on it.
I guess my first question is when I looked at it.
Every single revenue bucket cohort has grown.
So.
So clients over $20 million between 10, and 2000 between filing and so on.
Speaker 10: all of them have grown, which is obviously a good thing, but it leads to the question of...
All of them have grown.
Which is obviously a good thing, but it leads to the question.
Speaker 10: of sort of what is sort of the serviceable market opportunity in front of you from the current set of clients, just from increasing penetration. Could you perhaps help quantify or put a direction on that if you could?
Sort of what is sort of the serviceable market opportunity in front of the field from current set of clients from in teasing penetration.
Could you perhaps quantify or.
It can be an action on that.
If you could.
Speaker 4: Yeah, I probably couldn't do anything more than just kind of anecdotally, but, you know, even in our largest customers, there's a, you know, in our top 10 or top 20, there's a significant opportunity across a range of those customers for significant ongoing growth.
Yes.
I, probably couldnt do anything more than just kind of anecdotally, but even in our largest customers. There is in our top 10 or top 20, there's a significant opportunity across a range of those customers for a significant ongoing growth.
Speaker 4: Certainly in some of the areas which are kind of established for many companies, but still somewhat newer areas for EPAM, think insurance. We're still very early days in terms of our penetration of those accounts, so there's a significant opportunity there. In financial services, you're continuing to see growth in existing banks, new banks, wealth management, asset management, and very, very high growth in insurance.
Certainly in some of the areas, which are kind of established for many companies, but still somewhat newer areas for <unk> think insurance, we're still very early days in terms of our penetration with those accounts. So there's a significant opportunity there.
In financial services.
Are you going to see growth in the existing banks, new banks wealth management asset management, and very very high growth in insurance healthcare and life Sciences continues to be a.
Speaker 4: Health there in life sciences continues to be a significant growth opportunity for the company with both existing and new clients. And then, you know, certainly as you look at the emerging, you know, as I talked about in the past manufacturing logistics for us is not even a breakout. It's still kind of part of our emerging vertical.
Significant growth opportunity for the company it with both existing and new clients and then.
Certainly as you look at the emerging.
I talked about in the past manufacturing logistics for us is not even a breakout its still kind of a part of our emerging verticals.
Speaker 4: And so I don't think the story has changed that much and that there continues to be a significant growth opportunity with existing customers. And then a lot of those new customers that are talked about that are already at a million dollars or more per quarter, there's significant wallet opportunity in those new customers.
So I don't think the story has changed that much and that continues to be a significant growth opportunity with existing customers and then a lot of those new customers that are talked about that are already at a $1 million or more per quarter.
Significant wallet opportunity and those new customers.
Speaker 3: And I think you're asking how much we have run rate from existing client-based. And I think we do believe that it's a huge opportunity exactly present in our existing clients.
And I think you asked him why.
Sure.
The rate from existing client base and I think.
We do believe is a huge opportunity executive president Ian.
Our existence.
Alliance.
It seems like on this program.
It's probably true for many other vendors today after quoted kind of the new life was discovered in old clients.
Speaker 3: many other vendors today, that after COVID, kind of the new life was discovered in old clients.
Speaker 3: It was a lot of concern like two years ago and then some of them started to behave very, very differently from our expectation because, again, as we were sharing before, most of them understand that all investments which were done in digital before probably not enough or should be already done because the situation around us changed so much. So there is a very big opportunity for existing clients.
It was a lot of consumer like two years ago and reserve some of that starting to be face very very differently.
Our expectations, because I think that as.
As we.
And before most of them understands the total investments in.
In digital before probably not enough or should we read that you're done because situation around us has changed so much so there.
So it is very reasonable to from our existing client base.
Speaker 3: That's why we have to be very selective who we bring on top of them as a new.
So that's why we have to be very selective who we bring in a capital sale.
Lewis.
Speaker 10: Understood understood the other question I had was, you know, obviously this is a multi or trend not necessarily a new thing, but as. Gross margins, you know. Steadily have gone towards the mid thirties. It's a pretty clear asset to that.
Understood understood.
The other question I had was obviously this is a multiyear trend not necessarily any obtained as.
Gross margins.
Steadily have gone towards the mid Thirty's.
It's pretty clear SG&A offset to that.
Speaker 10: And a two-part question, if you could kind of break down the gross margin, is that more a function of, you know, adding capabilities, you know, when wage inflation gets added to the mix incrementally?
And.
Kind of a two part question if you could kind of break down the gross margin is that more a function of adding capabilities.
And then wage inflation gets added to the mix incrementally.
Speaker 10: How does that change and for how long do you have perhaps the SG&A offset capability so that operating margins continue to get delayed.
How does that change and for how long do you have perhaps the SG&A offset capability. So that operating margins continued to get delivered.
Speaker 4: Yeah, so, you know, I have kind of a, I guess, about a five year history with the company. And, you know, I remember when, to be quite honest, we struggled to sort of stay above 16% profitability. So here, when we're guiding the 16 and a half to 17 and a half with the possibility of being, let's say, somewhat above the 17% for 2022, it feels still like a pretty good place. You are right, the gross margins have declined over time. Some of what's happened over the last couple years really has been the whole kind of wage inflation.
Yes, so I have kind of I guess about a five year history with the company and I remember when to be quite honest, we struggled to sort of stay above 16% profitability. So here when we're guiding to 16, 5% to 17 and a half with the possibility of being let's say somewhat above the 17% for 2022, it feels still like it.
Pretty good place you are right. The gross margins have declined over time some of what's happened over the last couple of years really has been the whole kind of wage inflation in.
Speaker 4: in the market, which I think is unprecedented and probably can't last forever. So I do think you might see some stabilization at some point in the future. Hard to speculate when.
In the market, which I think is unprecedented unprecedented and probably can't last forever. So I do think you might see some stabilization at some point in the future hard to speculate when.
Speaker 4: Some of it would be the additional capabilities, and specifically, I would say the new geographies. So again, you know, if we were just to grow in our historic Russia, Belarus, Ukraine, you know, and continue to sort of focus on optimizing the cost effectiveness of those delivery locations, you might see a somewhat different gross margin profile, but you would also see, you know, a different sort of growth potential.
Some of it would be the additional capabilities and.
And specifically I would say the new new geographies so again.
We were just to grow in our historic Russia, Belarus, Ukraine.
And continuing to focus on optimizing the cost effectiveness of those delivery locations you might see a somewhat different gross margin profile, but you would also see a different sort of growth potential and so I think it really has been beneficial but at the same time, it probably has come with a little bit of moderation. The other thing I don't think I totally called out is that.
Speaker 4: And so I think it really has been beneficial, but at the same time, it probably has come with a little bit of moderation. The other thing I don't think I totally called out is that our recent acquisitions in many cases are operating more in the low teens and in some cases the single digits from an adjusted IFO standpoint, and that puts a little bit of downward pressure, particularly on the 2022 results, where we've got greater acquisition related revenue.
Our recent acquisitions in many cases are operating more in the low teens and in some cases the single digits from an adjusted FIFO standpoint, and that puts a little bit of downward pressure, particularly on the 2022 results, where we've got greater acquisition related revenue.
Speaker 4: The SG&A, I think, will continue to stay low in part because I do think facilities as a cost is going to continue to be a benefit. And so I do expect to exit the fiscal year that we'd still kind of be below 16 percent. And so I think the balance of those things allows the company to potentially operate somewhat above 17 percent in 2022. And I think that's not a bad place to be with a 37 percent plus growth rate. Really, I agree with that. Thank you.
SG&A I think we will continue to state level in part because I do think facilities as a cost is going to continue to be a benefit.
So I do expect that as we exit the fiscal year that we'd still be below 16% and so I think the balance of those things allows the company to potentially operate somewhat above 17% in 2022, and I think thats not a bad place to be with a 37% plus growth rate.
Okay, great. Thank you.
Thank you.
Our last question comes from David Grossman with Stifel. Your line is open.
Speaker 11: Thank you. I was hoping I'd just ask 2 really quick follow ups to some of the questions that have been asked. So the 1st is on the growth of the cohort.
Thank you I was hoping that just two really quick follow ups to some of the questions that have been announced so the first is on loan growth.
The cohorts.
Speaker 11: outside of the top 20. You know it's accelerated, it's been accelerating all year. I guess my interpretation of that dynamic was that you know there was a resource allocation decision that had to be made during the pandemic.
Side of the top 20 accelerated its accelerating all year I guess my interpretation of that dynamic was that there was a resource allocation decision that had to be made during the pandemic.
Speaker 11: Now that things have kind of changed a little bit from a resourcing standpoint that you've been able now to pursue growth outside the top 20, which historically has actually been one of the major contributors to your growth rates. So—
Things have.
Kind of changed a little bit from a resourcing standpoint.
<unk> been able now to pursue growth outside the top 20, which historically has actually been one of the major contributors to your growth rate. So.
Speaker 11: Is there any really thing different going on there? Or maybe I'm missing something. I would say yes to that thesis. And then the other piece is the recent acquisitions.
Is there any really anything different going on there or maybe I'm missing.
I would say yes.
Yes to that thesis and then the other pieces the recent acquisitions have.
Speaker 4: have incorporated clients that are generally below the top 20 and in some cases below the top 200. And so that has also contributed to the growth.
Incorporated.
Clients that are generally below that top 20 and in some cases below the top 200, and so that has also contributed to the growth.
Speaker 4: But certainly, you know, I think particularly deep in the pandemic, you know, much of that resources were consumed by a handful of clients. And obviously that's changed throughout 2021 right. Okay.
But certainly I think particularly deep in the pandemic.
Much of it resources were consumed by a handful of clients and obviously thats changed throughout 2021.
Right, Okay, and then just to follow up on the situation in the Ukraine, historically and geopolitical hotspots. The issue is getting people to work or transportation disruption to that in infrastructure.
Speaker 11: The situation in the Ukraine, historically in geopolitical hotspots, the issue is getting people to work or transportation and disruption to that and infrastructure.
Speaker 11: with clients having fairly sophisticated global risk management strategies of their own before they even decide, you know, to pull work over and
With clients, having fairly sophisticated global risk management strategies of their own before they even decide to put work over in to different geographic areas. So you seem to have addressed with work from home they're.
Speaker 11: to different geographic areas. So you seem to have addressed, you know, with work from home, you know, the getting to work, you know, kind of risk seems to have diminished and you've got your own infrastructure. So, you know, you grew through the last crisis. You know, we all remember that. So.
Getting to work kind of risk seems to have diminished and you've got your own infrastructure. So.
Grew through the last crisis, we all remember that so.
Are the risks in this current situation any different.
Speaker 11: in this current situation any different? You know, kind of what they've been historically, is anything different about, you know, the situation that we should be thinking about.
Kind of what they've been historically is there anything different about the situation that we should be thinking about.
Speaker 3: David, you know you're asking pretty difficult question because like big guys cannot answer. And at the same time, we definitely went through multiple geopolitical kind of tensions and crisis during the last not even 10 years which I started to share today kind of 20 plus years.
David You know U S. Computex completes a difficult question because the big guys can cannot answer.
At the same time, we definitely went through multiple geopolitical kind of potential is in crisis as students are lost.
<unk>.
To share today kind of.
2020 plus years.
Speaker 3: And, in my view, from our operational point of view, there is not much difference.
And in my view.
From our operational point of view is there is no much.
<unk>.
Speaker 3: And, but the only answer we will get like probably in another three months or maybe nine months or maybe 24 months. But from...
And.
But <unk>.
We will get like probably in another three months somewhere in the nine months, maybe even 24 months, but from.
Speaker 3: work which we're doing. I think...
The work, which we do it.
Sink.
Speaker 3: impact would be very, very minimal, in my opinion. And also what also
The impact would be very very minimal in my opinion and also.
Our Tulsa.
In this <unk>.
Speaker 3: in this specific like history was telling us that even if some clients policies and risk mitigations actions will be changing the direction
Even if some clients full issues and there is mitigation actions, we will be changing direction.
Speaker 3: In general, the demand for the talent is so big that we are pretty sure that we will be operating.
In general.
This was a talent is so that we are pretty sure.
We will be a duration.
Speaker 3: in the countries where we are today, like years from now, too, and it would be in demand. Talent in demand.
In the countries, where we are today like Es from now to it would be it would be India, Thailand and demand.
Bob.
Speaker 3: And that's exactly what happened, again, for example, eight years ago, when one or two clients were...
And Thats exactly whats happened again for example, it years ago wanted to clients.
It was too.
Speaker 3: too difficult for them to swallow the situation.
Too difficult for them to swallow the situation.
Speaker 3: practically immediately different clients were willing to accept the
Practically immediately.
<unk> clients.
Willing to accept it.
Yes.
Kind of.
Sure.
Therefore, we should bring from from cities.
Yeah, and I'd, just say David that the guidance for the full year also concludes that any impact would be minimal and so thats the basis for our guests, but we but we cannot predict the future.
Speaker 4: And I should just say, David, that the guidance for the full year also concludes that any impact would be minimal. And so that's the basis for our guides. But we cannot predict the future.
Speaker 3: We are making history and we have pretty interesting configuration of our management team which have a lot of experience in the regions and going through this over there.
So the cost for.
The history, we have.
As you know we have three two pretty interesting configuration of our management team.
Experience in lesions and good schools oses.
Speaker 11: Right, so it sounds so that the client responds.
Alright, so it sounds though that.
The client response.
Speaker 11: to the crisis has been really, I mean, I'm sure there are differences here and there, but if you aggregate it all together, it sounds like the response hasn't been terribly dissimilar to what you experienced eight years ago. I can tell you that at this point, probably eight years ago, it was more difficult situation from some client reactions. I think it's much more.
Since the crisis has been really.
I mean, that's sort of the differences here and there but.
If you aggregate it altogether it sounds like the response it hasnt been terribly dissimilar to what you experienced state here.
Okay.
Yes, I can tell you that at this point, probably eight years ago. It was more difficult situations from sub glass reactions I think is much more.
Speaker 3: balance this time. As I said, we have some pilots for BCP, but it's very, very minimal right now.
Well at this time.
As I said, we have some pilots for BCP was relatively meaningful right now.
Right.
Okay, great. Thanks very much.
Thank you I would now like to turn the call back over to Arcata Dobkin for closing remarks.
Speaker 3: OK, thank you again everybody.
Okay. Thank you and thank you again everybody.
I hope it was.
Sure.
Speaker 3: Not necessarily usual call today. And first of all, because we celebrated just 10 years of our IPO, but also addressing the challenge simultaneously. And as I just shared, we have a strong team which went through multiple crises. And we do believe that it's just one of them. And we probably will have some in the future as well. Pretty sure about it. So thank you, and talk to you in three months.
Not necessarily usual call today.
First of all because we celebrate and just <unk>, but also addressing the challenge simultaneously.
And as I, just shared that we have a strong team of reinsurance through a crisis and we do believe that if it's just one of them and we probably will have some of the future as well.
Previously about it so <unk> talked to you in three months.
Thank you. This concludes this concludes today's conference call. Thank you for participating you may now disconnect.
Speaker 1: Thank you for participating.
Speaker 12: As important, sho you to change.
Okay.
Yes.
[music].
[music].
[music].
[music].