Q4 2023 EPAM Systems Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. I would like to welcome everyone to the EPAM Systems Q4 2023 Earnings Call This time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press the star followed by the number 1 on your telephone. I would like to withdraw your question, Starfall by the One-One.

Ladies and gentlemen, thank you for standing by I would like to welcome everyone to the heat pump systems Q4, 2023 earnings conference call.

Speaker Change: At this time all lines have been placed on mute to prevent any background noise.

Speaker Change: After the Speakers' remarks, there will be a question answer session if.

Speaker Change: If you'd like to ask a question. During this time simply press the star followed by the number one on your telephone keypad.

Speaker Change: If you'd like to withdraw your question. Please press the star followed by the one once again.

Operator: Thank you. I will now have the call transferred over to David Straube, Head of Investor Relations. Thank you, operator. Good morning, everyone.

Speaker Change: I will now hand, the call over to David <unk> head of Investor Relations you May begin your conference.

David: 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 2023 results. If you have not a copy is available on <unk> dot com in the investors section.

David Straube: By now, you should have received your copy of the earnings release for the company's fourth quarter and full year 2023 results. If you have not, a copy is available on epam.com in the investor section. With me on today's call are Arkadiy 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. These statements are subject to risk and uncertainties, as described in the company's earnings release and SEC filing. 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 materials located in the investor section of our website. With that said, I'll now turn the call over to Ark. Thank you, David. Good morning, everyone.

David: With me on today's call are Ekati, Dobkin, CEO, and President and Jason Peterson Chief Financial Officer.

David: I would like to remind those listening at 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. Additionally.

David: Additionally, all references to reported results that are non-GAAP measures have been reconciled to the comparable GAAP measures and are available on our quarterly earnings materials located in the investors section of our website.

Arc: With that said I'll now turn the call over to arc. Thank you David Good morning, everyone. Thank.

Arkadiy Dobkin: Thank you for joining us today. As usual in Q1, it's time for us to reflect on the past 12 months and share what we think about the next 12. Before I do that, I want to thank our team around the world for their dedication to our clients and hard work throughout the last year and for staying committed and engaged in the work ahead of us in 2024. Looking back on 2023.

Arc: Thank you for joining us today as usual in Q1, it's time for us to reflect on the past 12 months.

Arc: What do you think about the next 12.

Arc: Before I do that I want.

Arc: The sanco team around the world for their dedication to our clients and hard work throughout last year, and so staying committed and engaged in the work is there to Boston tooling is looking for.

Arc: Looking back to 2023.

Arc: I will start from a short summary, very much in line with what you said in today's press release.

Arkadiy Dobkin: I will start with a short summary, very much in line with what we shared in today's press release. We believe that EPAM's performance in 2023 reflects our ability to navigate volatile demand brought simultaneously, and simultaneously is the key word here, on us by both geopolitical and macroeconomic conditions. After rebalancing most of our delivery talent footprint across Europe, Western, Central Asia, India, and Latin America and refining our go-to-market approach to meet current demand, we are now focused primarily on harmonizing our delivery quality, optimizing cost effectiveness, and proactively leveraging our extensive advanced technology and growing consulting capabilities to capitalize on Gen AI and AI-driven opportunities of the future. In that context, first a few notes on 2023 and the relevance to 2024. And then I can move on to aspects of our 2024. Let me start with the geopolitical and economic impact on EPAM operations. In February of 2022, the Russian invasion of Ukraine made it necessary for us to relocate over 13,000 people, plus families, to New York.

Arc: We believe that the pump performance in 2023 reflects our ability to navigate volatile demand growth simultaneously and simultaneously the kyowa kirin well not the bank was geopolitical and macroeconomic conditions.

Arc: I'll tell Ya Burlington, most of our deliberate Italian footprint across Europe, and Central Asia, India, and Latin America.

Arc: In refining our go to market approach to meet current demand.

Ill focus primarily of harmonizing, our delivery quality optimizing cost effectiveness and proactively literally extensive advanced technology and growing consulting capabilities.

Arc: On Gen, AI, and AI driven opportunities of the future.

Arc: In that context first a few notes on 2023.

Arc: The relevance of the 'twenty 'twenty four and then I can move on the aspects of our 2024 book.

Arc: Let me start from geopolitical and economic impacts of the new payment durations.

Arc: In February of 2020, twos irrational envision Ukraine maintenance necessary for us to really look.

Arc: Great over 13000 people plus families to new geographies.

Arkadiy Dobkin: While most of these relocations were completed back in 2022, many adjustments did happen last year. And still today, in 2024, we will continue to work on some downstream factors, including the seniority pyramid, team composition, and cost-effectiveness across our traditional and new locations. I want to also especially recognize our team in Ukraine, who proved that despite the level of challenges, they were a reliable partner for our clients, existing and new ones. A few additional notes on repositioning and stabilization of fault island delivery plots.

Arc: While most of this the relocations completed work in 2020 too many adjustments due to happen last year and.

And still today in 2024, we will continue to work concerned.

Arc: Downstream factors, including seniority for Remy team composition and cost effectiveness across all traditional and new locations.

Arc: I want to also especially recognize our team in Ukraine, who prove the despite the level of challenges the accepted a reliable partner for our clients existing and new ones.

Arc: A few additional notes on your positioning and stabilization of our targeting delivery platform.

Arc: As mentioned already 2023 was a year of significantly Burlington, who most of our global delivery.

Arkadiy Dobkin: As mentioned already, 2023 was a year of significant rebalancing for most of our global delays. We worked on scaling India and LATAM and, at the same time, preparing for future growth in development centers across Europe and Western and Central Asia, our key destination for the majority of our allocated talent. In 2023, India continues to be our fastest growing location, practically since 2021. And while we were growing our capabilities there at an accelerated speed, we also worked to ensure that our delivery culture remains focused on quality and client satisfaction. India will likely become our largest location by the end of 2024, or at least match our current scale in Ukraine. Latin America, specifically our locations in Colombia and Mexico, have been maturing significantly as we scale out our cloud and data capabilities there to be prepared to meet rising demand from North American customers.

Arc: We work on scaling the Indian Lockdown.

Arc: And at the same time preparing for future growth and development centers across Europe in Western and Central Asia.

Arc: Distillation.

Arc: Majority of our locate the talent.

Arc: In 2023, India continued to grow fastest growing location practically since 2021.

Arc: And while growing our capabilities there with the accelerated speed. We also worked to ensure that our delivery culture remains focused on quality influenced greatly.

Arc: India will likely become our largest location by the end of 2024 or at least when we issue the current scale in Ukraine.

Arc: In Americas, specifically, our locations in Colombia and Mexico.

Arc: Great Thats maturing significantly as we scale, our cloud and data capabilities.

Arc: To get reported to meet rising demand from North American clients.

Arkadiy Dobkin: And so we are starting 2024 from a significantly refactored geographic delivery platform, much more balanced than ever to bring together the practices, methods, and collaborative ways of working and to focus on harmonizing our engineering competencies and critical capabilities in cloud, data, and now AI, to be present in each of our strategic locations. In 2024, this is one of our key priorities, and we expect these programs to be continuous areas of investment and differentiation for it. As I mentioned in previous calls, there is a growing number of clients who, after slowing their spending with us due to the war, have started to grow their engagements with us again by utilizing our much more diverse geographic footprint and advanced delivery capabilities.

And so we are starting 2024 from significantly.

Arc: <unk> hundred geographic delivery platform.

Arc: More willing than ever to bring together the practices missiles and collaborative ways of working and to focus on harmonizing our engineering competency.

Arc: Contingencies and critical capabilities and cloud data and now in AI to be present now in each of our strategic locations. In 2024. This is one of our key priorities and we expect these programs to be continuous areas of investment and Differentiations for example.

As we mentioned in previous calls there is a growing number of clients, who after slowing their spending with us due to the world.

Arc: <unk> to grow their engagements with us again, utilizing a much more diverse geographic footprint and advanced delivery capabilities.

Arkadiy Dobkin: Supporting this trend will be another key priority as we continue during 2024 to build up our capabilities both geographically and from our services mixed perspective. To illustrate some relevant specific efforts, I will share several ongoing investments in engineering excellence AI learning journeys for all EPAMers, covering standard copilots and other AI-assisted engineering productivity tools for all key delivery roles with specific adoption targets being set up for all locations. This tool was released in 2023, with upgrades coming in Q1 and beyond. New upgrades to our digital delivery platform, now AI-enabled, and leveraging a set of composable assets that include EPAM proprietary, together with open source, components, and tools to connect to a variety of LLMs for supporting the most critical capabilities, protecting private data, and prompting cost-effective and reliable consumption of external LLMs. EPAM, the output.

Arc: Unfortunately, this trend will be another key priority as we continue during 2024 to build up our capabilities, both geographically and from our services mix perspective to illustrate some relevant specific efforts I will share several ongoing investments in engineering excellence are loading Jordan.

Arc: Full of Farmers' current standard Copilots, another six that engineering productivity tools for key delivery roles with specific adaption target's been thoughtful locations. This tool was released in 2023. These upgrades come in in Q1.

Beyond new upgrades to our digital delivery platform now DNA are enabled and leveraging that set of controls the velocity that includes a proprietary together with open source.

Arc: <unk> and tools to connect to a variety of Williams for supporting the most critical capabilities protection private data and prudent and cost effective and reliable consumption for external ellipse.

Arc: <unk> Palmdale platform.

Arkadiy Dobkin: Finally, the Productivity Measurement Framework, allowing the tailoring of engineering and agile-based practices for continuous improvements in individual and team productivity in an AI-assisted development environment. All those efforts should make it possible for us to become the most geographically diverse and broadly AI-assisted delivery talent platform in the industry. Now, about cost. It became obvious at the end of 2022 and throughout 2023 that to navigate the current economic environment, we must continuously consider cost optimization efforts to react properly to all changes around us. Some targeted optimization efforts were ongoing in 2023 across both in-market and global delivery locations. This has improved our utilization in the short term and allowed us to fund several initiatives in 2023 and 2024. We will be considering similar efforts as appropriate in the future to ensure our adaptability. We are also actively working on rebalancing our seniority pyramids by engaging and training junior talent while improving overall seniority in the market and across our key global practices. They're both AI engineers.

Arc: Finally productivity measurement framework, allowing tailoring of engineering can NGL best practices for continuous improvements of individual and team productivity and AI is a development environment.

Arc: All of those efforts should make it possible for us to become the most geographically diverse and broadly as to delivery time and platforms in the industry.

Arc: Now about cost effectiveness.

Arc: It became obvious by the end of 2022.

Arc: Our 2023.

Arc: <unk> current economic environment, we must continuously consider cost optimization efforts to react properly to oil changes around us.

Arc: Some targeted optimization efforts were ongoing in 2023 across the board in the market and global delivery locations.

Arc: This has improved our utilization in the short term and allow us to fund several initiatives in 2023 and 2024.

Arc: We will be considering similar efforts as appropriate in the future to ensure our adaptability unions.

Arc: Also actively working on rebalancing our seniority currently we're engaged in and train and junior talent.

Arc: Improving overall seniority in market and across our key global practices.

The boat AI engine Air France.

Arkadiy Dobkin: For years, we've been investing in and scaling our data, ML, and predictive AI capabilities. Today, many of our clients are engaging us to do the foundational engineering and data ML work required to help them operate their current businesses but also to enable them to start their work with generative AI. Since the mid of last year, a majority of these are relatively small, we have engaged in over 400 GNI-related projects. Our coverage of use cases is broad, from knowledge management to HCI, from product management to supply chain and service optimization, from advanced business process redesign to new interactive agent development, from engineering productivity enhancements by using GNI tools to improving speed and quality of code generation and data. Last year, we launched DILE, our enterprise-level orchestration platform to accelerate the development of GNI-empowered business solutions. Recently, we released it as open source.

Arc: For years, we've been in where.

Arc: Testing and scale in our data ml and predictive AI capabilities.

Arc: Today, many of our clients are engaging us to do the foundational engineering and.

Arc: In data and well work required to held at <unk> current businesses, but also to enable them to start the <unk>.

Arc: Work is generating for that.

Arc: Since mid of last year, where a majority of these are relatively small we engaged in over 400 generally related projects.

Arc: Our coverage of used cases growth from knowledge management.

Arc: <unk> here from product management to supply chain and service optimization from advanced business process redesign to new interactive agent development from engineering productivity enhancements, but using G&A AI tools to improving speed and quality of cogeneration and tested.

Arc: Last year, we launched <unk>.

Arc: Our enterprise level, a titration platform to accelerate development of DNA empowered business solutions recently released it for open source.

Arkadiy Dobkin: We are encouraged by seeing a high level of interest from our clients expressed in over 60 pursuits, with 15 active projects in progress right now, and some already in production implementations across the tech, insurance, retail, automotive, life science, and business information vertical sets. One of the most interesting deployments was done for major global economic data institutions, and one of the most rewarding has been our work in Ukraine on the famous DIA, a government platform which now includes GenNI and AI capabilities, as well. Now, let's talk about Demented Heart.

We are encouraged by seeing the higher level of interest from our clients expressed in over 60 pursuits.

Arc: Houston, our projects in progress right now.

Arc: And some already in production implementations.

Arc: Gross tech insurance retail at a much of life science and business information vertical segments.

Arc: One of the most interesting deployment was done for major global economic data institution and one of the most rewarding has been our work in Ukraine on famous year got it.

Arc: <unk> platform, which now includes the Eni and AI capabilities.

Speaker Change: Well no.

Speaker Change: Oh.

Let's talk about demand environment.

Arkadiy Dobkin: In 2023, we managed to safeguard many of our programs and clients' portfolios. We also saw some pullback in spend last year and expect that this may continue to be a factor into 2024, as our clients execute vendor consolidation exercises to manage their costs. Well, this trend will continue, and in some cases, to our benefit.

Speaker Change: In 2023.

Speaker Change: To save got many of our programs in client portfolios. We also saw some pullback in spend last year and experiences. This may continue to be a factor into 2024.

Speaker Change: Our clients execute when the consolidation exercises to manage their costs.

Speaker Change: While this trend continues and in some cases.

Speaker Change: Our benefits.

Arkadiy Dobkin: We are seeing encouraging signals of a general rebound for build-based solutions. And for traditionally strong EPAM capabilities in advanced tech, data experience consulting, and AI. To capitalize on potential new demand, we are expanding our new business initiative by enhancing our sales strategies and go-to-market partnerships, dedicating resources to creating new accelerators, establishing new engagement models, and innovating our customer interaction method. In 2023, it was also evident that we brought in new clients at a rate higher than in previous years, and we plan to do it again in 2024. Still, overall, we believe, at this point, the 2024 environment will be, at least for the first half of the year, a continuation of the second part of the 2023 trends, with potential demand up toward the second. While we have made significant progress in involving our operations, and despite the challenges we have faced in 2023, our work with clients is being increasingly recognized by leading analysts and provides, in turn, some independent support for the stories we share. All the reports are very recent, the last 2-3 months, and present up-to-date views on the project.

Speaker Change: We are seeing encouraging signals of general demand for built based solutions, and Switzerland, decently strong coupon capabilities and advanced Tech data experienced consulting NII.

Speaker Change: To capitalize on potential new demand, we are expanding our new business initiatives, we are enhancing our sales strategies and go to market.

Speaker Change: Partnerships dedicating resources to create new accelerators establish a new engagement models and innovation our customer interaction method.

Speaker Change: In 2023. It was also evident that the broad new clients at a rate higher than previous years, and we plan to do it again in 2024.

Speaker Change: Still in overall, we believe at this point the 2024 environment will be at least for the first half of the year.

Continuation of second part of 2023 trends.

Speaker Change: Potential demand up towards towards the second half.

Speaker Change: While we have made significant progress on enrolling in our operations and despite the challenges we have faced in 2023.

Speaker Change: Workers clients is being increasingly recognized by the leading analyst and providing tone some independent support for the stories we shared.

Speaker Change: Both reports are very recent last two three months and presented up to date using the pump.

Arkadiy Dobkin: About some new capabilities. In November 2023, EPAM was featured by Gartner and other competitive landscape IT service providers in the Global Insurance Industry Report. That is probably one of the first recognitions by Gartner of our industry expertise and a result of our efforts to bring insurance consultancy and implementation services simultaneously for the client's benefit.

Speaker Change: About some new capabilities in November 'twenty, two 'twenty three Japan was featured by Gardner and competitive landscape series.

Speaker Change: Service providers to the global insurance industry report.

Speaker Change: That is probably one of the first recognition by Gartner of our industry expertise and as a result of our efforts to bring insurance consulting and implementation services simultaneously for the clients benefits.

Arkadiy Dobkin: Putting together an insurance consulting advisory practice was one of the key efforts for us during the last few years. Similar efforts are underway in health care and life science, retail and distribution, oil and gas, among a few others. In Q4 2023, EPAM was featured in Forrester Report, The Cybersecurity Consulting Services Landscape, Q4 2023. EPAM was highlighted as one of the top 33 cybersecurity consulting services providers, which is probably a false recognition of a critical capability we have been developing for the last year.

Speaker Change: Put integrated insurance consulting advisory practice was one of the key effort for us during the last few years.

Speaker Change: Similar efforts today are underway in healthcare and life sciences, retail and distribution oil and gas demand.

Speaker Change: Us.

Speaker Change: In Q4 2023, a pound was future in order to report the cyber security consulting services landscape Q4 2023.

Speaker Change: The pound was highlighted as one of the top so to see cyber security consulting services providers, which is probably towards the recognition of a critical capability. We are developing for the last years.

Speaker Change: Now about some established capabilities each.

Arkadiy Dobkin: Now, about some established capabilities, which were recently confirmed. In November 2023, EPAM was recognized as one of the top three companies in the Magic Quadrant for critical capabilities for customer software development services worldwide by Gartner. Found leadership and strengths were specifically highlighted in leveraging generative AI, pioneering DevOps, and providing superior customer support and unique user experience. In November and December 2023, IDC named EPAM as a leader in three reports, IDC Marketscape for Worldwide Experienced Design Services Vendors.

Speaker Change: Each were confirmed recently.

Speaker Change: In November 2023 coupon was recognized as the top three companies and magic quadrant for critical capabilities for customer software development services worldwide by Gartner.

Speaker Change: From a leadership and strengths, where specifically highlighted and leveraging <unk>.

Speaker Change: Narrative for AI.

Speaker Change: <unk> develops and providing superior customer support and unique user experience.

Speaker Change: In November December 'twenty, two 'twenty three.

Speaker Change: IDC named as a leader in three reports that you see market escape worldwide experience design services vendor assessment.

Arkadiy Dobkin: IDC Marketscape for Worldwide Experience-Built Services Vendor Assessment NIDC Marketscape for Worldwide Software Engineering Services Vendor, Finally, Ed H. recognized EPAM as the sixth largest agency in the United States and number 18 in the world's largest agencies companies category. In just seven years, EPAM has moved from number 130 to number six among U.S. agencies. Before I hand over the call to Jason, I would like to take a moment to share a couple of points on some aspects of our results for 2023 and our outlook for 2024. In 2023, we generated $4.69 billion in revenues, reflecting an increase of 2.8% year-over-year. However, excluding the impact of exiting our Russian operations, revenue declined 1.8%. Adjusted income from operations was 16.3% of revenue and above the midpoint of our initial guided range. Also, the current market conditions don't represent at all an ideal demand environment for EPAM.

<unk> market scale for worldwide experience built services vendor assessment and agency market scale for worldwide software engineering services vendor assess finally.

Speaker Change: AD age recognized upon is the number six largest agencies in the United States. The number 18 in the worlds largest agency companies categories in.

Speaker Change: In just seven years upon has moved from number 130.

Speaker Change: To number six among U S agencies.

Before I hand over the call to Jason I would like to take a moment to share a couple of points on some aspects of our results for 2023 and outlook for 2024.

Speaker Change: In 2023, we generated $4 $69 billion in revenues.

Speaker Change: Collection and correction of two 8% year over year.

Jason Peterson: Excluding the impact of exiting our Russian operations revenue declined one 8% adjusted income from operations was 63% of revenue and above the midpoint of our initial guided range also the current market conditions don't represent a tau and <unk> demand environment for upon our tour.

Arkadiy Dobkin: Our 2023 results highlight our commitment to adapting the company to suit the current circumstances while continuously preparing for the most beneficial demand environment for our demand environment in the future. What I want to point out as well is that our Q4 results show sequential revenue growth for the first time after three previous quarters of sequential decline, about 2024 out. Because of our ability to adapt to new client demands and market conditions, we are optimistic about the opportunities ahead of us towards the end of 2020. Demand for building postponed during the last two years should rebound, driven by long-term pressures for legacy modernizations, by needs for advanced customer-centric solutions, and by the massive interest in understanding how to apply GenEye and General AI capabilities to build new platforms, etc.

23 results highlight our commitment to adapting the company to huge recurrence circumstances will continuously preparing for the more beneficial for us demand environment in the future.

Jason Peterson: What I want to point out as well is that our Q4 results shows the sequential revenue growth first time after three quarters of sequential declines.

Jason Peterson: About 124 outlook because of our ability to adapt to new client demands and market conditions, we have to.

Jason Peterson: Domestic about the opportunities ahead of us towards the end of 2024.

Jason Peterson: The mind to build plus formed during the last two years should rebound driven by long term pressures for legacy Modernizations by needs for advanced customer centric solutions and by the massive interest to understand how to play.

Jason Peterson: Zen Ni and general AI capabilities to build new platforms and solutions.

Arkadiy Dobkin: Even while we continue to navigate the current economic and geopolitical environment carefully, we will invest in strategic initiatives organically and with the support of expanded M&A activities, in demand generation efforts, and in people progress. This will have some effect on our profitability in 2024, but we believe these are the right actions to ensure long-term growth and a stronger market position. Let me turn the call over to Jason to provide more details on our fourth quarter and full year results, in addition to our initial view of 2024 expectations. Thank you, Ark, and good morning, everyone.

Jason Peterson: Meanwhile, we continue to navigate the current economic and geopolitical environment carefully we will invest in strategic initiatives organically and in support of expanded M&A activities and demand generation efforts and then people programs.

This will have some effect on our profitability in 2020 four but we believe this is the right actions to ensure long term growth and stronger market position.

Jason Peterson: Let me turn the call over to Jason to provide more details on our fourth quarter and full year results. In addition to our initial view of 2024 expectations. Thank you Ark and good morning, everyone in the fourth quarter <unk> generated revenues of $1 6 billion a.

Jason Peterson: In the fourth quarter, EPAM generated revenues of $1.16 billion, a year-over-year decrease of 6% on a reported basis and a 7.3% decrease in constant currency terms, reflecting a positive foreign exchange impact of 130 basis points. The reduction in Russian customer revenues resulting from our decision to exit the market had a 70 basis point negative impact on year-over-year revenue growth. The modest sequential growth in the quarter was the result of stabilizing demand. However, revenues in Q4 were higher than we expected when we set Q4 guidance due to both stronger client demand and significant benefits from favorable foreign exchange. Beginning with our industry verticals, life sciences and healthcare grew 11.6%. Growth in the quarter was driven primarily by clients in life science. Traveling consumers decreased 4.4%, with solid growth in travel and hospitality, offset by declines in revenues derived from consumer goods and retail customers.

Jason Peterson: A year over year decrease of 6% on a reported basis and seven 3% decrease in constant currency terms.

Jason Peterson: <unk> a positive foreign exchange impact of 130 basis points.

Jason Peterson: The reduction in Russian customer revenues, resulting from our decision to exit the market at a 70 basis point negative impact on year over year revenue growth.

Jason Peterson: The modest sequential growth in the quarter was the result of stabilizing demand.

Jason Peterson: Revenues in Q4 were higher than we expected when we said Q4 guidance due to both stronger client demand and significant benefit from favorable foreign exchange.

Jason Peterson: Beginning with our industry verticals life Sciences, and healthcare grew 11, 6%.

Jason Peterson: Growth in the quarter was driven primarily by clients in life Sciences.

Jason Peterson: Travel and consumer decreased four 4% with solid growth in travel and hospitality offset by declines in revenues derived from consumer goods and retail customers financial.

Jason Peterson: Financial services contracted 7.1%, driven by declines in banking, partially offset by work performed for marketplace exchange and finance information and analytics clients. Excluding the impact of the exit of our Russian operations, revenue on a year-over-year basis declined 5.5 percent. Business information and media declined 14.8% in the quarter. Revenues in the quarter continue to be impacted primarily by a reduction in spend across a number of large clients due to uncertainty in their end markets, particularly mortgage data. Software and high-tech declined 16.8% in the quarter.

Jason Peterson: Services contracted seven 1% driven by declines in banking, partially offset by work performed for marketplace exchange and finance information and analytics clients.

Jason Peterson: Excluding the impact of the exit of our Russian operations revenue on a year over year basis declined five 5%.

Jason Peterson: This information and media declined 14, 8% in the quarter revenues in the quarter continued to be impacted primarily by a reduction in spend across a number of large clients.

Jason Peterson: Due to uncertainty in their end markets, particularly in the mortgage data space.

Jason Peterson: Software and Hi Tech declined 16, 8% in the quarter the year over year growth rate was negatively impacted by the reduction in revenue from our former top 20 client we mentioned during our previous earnings calls.

Jason Peterson: The year-over-year growth rate was negatively impacted by the reduction in revenue from a former top 20 client we mentioned during our previous earnings calls and generally slower growth in revenues across the range of customers in the vertical. And finally, our emerging verticals delivered growth of 4.2%, driven by clients in energy, manufacturing, and education. From a geographic perspective, the Americas, our largest region representing 58% of our Q4 revenues, declined 7.6% year-over-year or 7.7% at constant current exchange rates. On a sequential basis, growth remained relatively flat, consistent with the previous quarter.

Jason Peterson: And generally slower growth in revenues across a range of customers in the vertical.

Jason Peterson: And finally, our emerging verticals delivered growth of four 2% driven by clients in energy manufacturing and education.

Jason Peterson: From a geographic perspective, the Americas, our largest region, representing 58% of our Q4 revenues declined seven 6% year over year or seven 7% in constant currency.

Jason Peterson: On a sequential basis growth remained relatively flat consistent with a break this quarter.

Jason Peterson: EMEA, representing 39% of our Q4 revenues was flat year over year and declined three 5% in constant currency.

Jason Peterson: APAC declined 10, 9% in both reported in constant currency terms and now represents 2% of our revenues.

Jason Peterson: AMEA, representing 39% of our Q4 revenues, was flat year-over-year and declined 3.5% in constant currency. APAC declined 10.9% in both reported and constant currency terms, and now represents 2% of our revenue. And finally, CEE, representing 0.1% of our Q4 revenues, contracted 91.6% year over year, or 91.3% in constant currency. Revenue in the quarter was impacted by the exit of our operations in Russia.

Jason Peterson: And finally see representing 0.1% of our Q4 revenues contracted 91, 6% year over year or <unk> 91, 3% in constant currency revenue in the quarter was impacted by the exit of our operations in Russia.

Speaker Change: Going forward I will no longer comment on the sea region and our quarterly prepared remarks, given that its revenue contribution is immaterial relative to our total revenues in.

Speaker Change: In Q4 revenues from our top 20 clients declined 5% year over year, while revenues from clients outside our top 20 contracted 7% moving down the income statement, our GAAP gross margin for the quarter was 31, 1% compared to 32, 4% in Q4 of last year.

Jason Peterson: Going forward, I will no longer comment on the CE region in our quarterly prepared remarks, given that its revenue contribution is immaterial relative to our total revenue. In Q4, revenues from our top 20 clients declined 5% year over year, while revenues from clients outside our top 20 contracted 7%. Moving down the income statement, our gap gross margin for the quarter was 31.1%, compared to 32.4% in Q4 of last year. Non-GAP gross margin for the quarter was 33%, compared to 34.1% for the same quarter last year.

Speaker Change: non-GAAP gross margin for the quarter was 33% compared to 34, 1% for the same quarter of last year.

Speaker Change: Gross margin in Q4, 2022 was positively impacted by the timing of year end revenue recognition.

Speaker Change: GAAP SG&A was 18, 5% of revenue compared to 16, 6% in Q4 of last year.

Speaker Change: GAAP SG&A in the quarter was impacted by one time charges, including expenses associated with the Companys cost optimization program.

Speaker Change: non-GAAP SG&A came in at 14, 2% of revenue compared to 14, 8% in the same period last year.

Speaker Change: SG&A expense for Q4, 2023 reflects some cost efficiencies achieved in the quarter as well as lower variable compensation compared to Q4 2022.

Jason Peterson: Gross margin in Q4 2022 was positively impacted by the timing of year-end revenue recognition. Gap SG&A was 18.5% of revenue compared to 16.6% in Q4 of last year. Gap SG&A in the quarter was impacted by one-time charges, including expenses associated with the company's cost optimization program. Non-GAAP SG&A came in at 14.2% of revenue compared to 14.8% in the same period last year. SG&A expense for Q4 2023 reflects some cost efficiencies achieved in the quarter, as well as lower variable compensation compared to Q4 2023. Gap income from operations was $122 million, or 10.6% of revenue in the quarter compared to $170 million, or 13.8% of revenue in Q4 of last year.

Speaker Change: GAAP income from operations was $122 million or 10, 6% of revenue in the quarter compared to $170 million or 13, 8% of revenue in Q4 of last year.

Speaker Change: non-GAAP income from operations was 200 million or 17, 3% of revenue in the quarter compared to $220 million or 17, 8% of revenue in Q4 of last year.

Speaker Change: Our GAAP effective tax rate for the quarter came in at 23, 4% versus our Q4 guide of 24%.

Speaker Change: Due to greater than expected excess tax benefits related to stock based compensation par.

Speaker Change: Partially offset by higher state taxes, and the impact of losses in certain non U S acquired subsidiaries.

Speaker Change: Our non-GAAP effective tax rate.

Which includes the impact of state taxes, and subsidiary losses and excludes excess tax benefits was 25, 1%.

Speaker Change: Diluted earnings per share on a GAAP basis was $1 66.

Jason Peterson: Non-GAAP income from operations was $200 million or 17.3% of revenue in the quarter compared to $220 million or 17.8% of revenue in Q4 of last year. Our gap effective tax rate for the quarter came in at 23.4% versus our Q4 guide of 24%, due to greater-than-expected excess tax benefits related to stock-based compensation, partially upset by higher state taxes and the impact of losses in certain non-U.S. acquired subsidiaries, are non-GAAP effective tax rates, which includes the impact of state taxes and subsidiary losses and excludes excess tax benefits, was 25.1%, diluted earnings per share on a gap basis was $1 and 66 are non-GAP diluted EPS with $2.75, reflecting a decrease of 18 cents or 6.1% compared to the same quarter in 2020.

Speaker Change: Our non-GAAP diluted EPS was $2 75.

Speaker Change: Reflecting a decrease of 18.

Or six 1% compared to the same quarter in 2022.

Speaker Change: In Q4, there were approximately $58 9 million diluted shares outstanding.

Speaker Change: Turning to cash flow and our balance sheet cash flow from operations for Q4 was $171 million.

Speaker Change: Compared to 186 million in the same quarter of 2022.

Speaker Change: Free cash flow was $161 million compared to free cash flow of $165 million in the same quarter last year, we ended the quarter with approximately $2 billion in cash and cash equivalents.

Speaker Change: At the end of Q4, DSO was 71 days and compares to 73 days in Q3, 2023, and 70 days in the same quarter last year.

Speaker Change: Share repurchases in the fourth quarter were approximately 143000 shares for.

Speaker Change: For $36 5 million at an average price of $255 96 per share.

Speaker Change: As of December 31, we had approximately $335 million of share repurchase authority remaining.

Speaker Change: Now moving onto a few operational metrics for the quarter. We ended Q4 with more than 47350 consultants designers engineers trainers and architects a decline of 10, 4% compared to Q4 2022.

Jason Peterson: In Q4, there were approximately 58.9 million diluted shares outstanding. Turning to cash flow and our balance sheet, cash flow from operations for Q4 was $171 million, compared to $186 million in the same quarter of 2022. Free cash flow was $161 million compared to $165 million in the same quarter last year. We ended the quarter with approximately $2 billion in cash and cash equivalents. At the end of Q4, DSL was 71 days, which compares to 73 days in Q3 2023 and 70 days in the same quarter last year. Share repurchases in the fourth quarter were approximately 143,000 shares for $36.5 million at an average price of $255.96 per share.

Speaker Change: This is the result of lower levels of hiring combined with both voluntary and involuntary attrition as we continue to balance supply and demand.

Speaker Change: Our total head count for the quarter was more than 53150 employees.

Speaker Change: Utilization was 74, 4% compared to 73, 6% in Q4 of last year.

Speaker Change: 72, 7% in Q3 2023.

Speaker Change: Turning to our full year results for 2023.

Revenues for the year were $4 69 billion producing a decline of two 8% reported.

Speaker Change: And a decline of three 4% in constant currency terms compared to 2022 <unk>.

Speaker Change: Excluding Russia revenue the reported year over year growth rate would have been negative one 8% reported and negative two 4% in constant currency terms.

Speaker Change: GAAP income from operations was $501 million, a decrease of 12, 5% year over year and represented 10, 7% of revenue.

Speaker Change: Our non-GAAP income from operations was $765 million.

Jason Peterson: As of December 31st, we had approximately $335 million of share repurchase authority remaining. Now, moving on to a few operational metrics for the. We ended Q4 with more than 47,350 consultants, designers, engineers, trainers, and architects, a decline of 10.4% compared to Q4 2022. This is the result of lower levels of hiring combined with both voluntary and involuntary attrition as we continue to balance supply and demand. Our total headcount for the quarter was more than 53,150 employees.

Speaker Change: A decrease of six 5% compared to the prior year and represented 16, 3% of revenue.

Speaker Change: Our GAAP effective tax rate for the year was 22, 3% our non-GAAP effective tax rate was 23, 7%.

Speaker Change: Diluted earnings per share on a GAAP basis was $7 six non.

Speaker Change: non-GAAP EPS, which includes adjustments for stock based compensation acquisition related costs and certain other onetime items, including costs associated with our cost optimization program was $10 59.

Speaker Change: Reflecting a two 8% decrease over fiscal 2022.

Speaker Change: In 2023, there were approximately $59 1 million weighted average diluted shares outstanding.

Jason Peterson: Utilization was 74.4% compared to 73.6% in Q4 of last year and 72.7% in Q3 2022. Turning to our full-year results for 2023, remedies for the year were $4.69 billion, producing a decline of 2.8% reported and a decline of 3.4% in constant currency terms compared to 2022. Excluding Russia revenues, the reported year over year growth rate would have been negative 1.8% reported and negative Gap income from operations was $501 million, a decrease of 12.5% year-over-year, and represented 10.7% of revenue. Our non-GAAP income from operations was $765 million, a decrease of 6.5% compared to the prior year, and represented 16.3% of revenue. Our effective tax rate for the year was 22.3%.

Speaker Change: Cash flow from operations was $563 million compared to $464 million for 2022.

Speaker Change: And free cash flow was $534 million, reflecting an 85, 4% adjusted net income conversion.

Speaker Change: And finally share repurchases in 2023 were approximately 686000 shares.

Speaker Change: For $164 9 million at an average price.

$240 and <unk> 49 per share.

Speaker Change: Our 2023 results reflects <unk> ability to manage the business through a challenging macro conditions, while positioning the company for the return to a more normalized demand environment.

Speaker Change: Now, let's turn to guidance.

Speaker Change: Moving to the specifics of our 2024 and Q1 outlook I would like to provide some thoughts to help frame our guidance as Ark mentioned the demand environment remains uneven. We believe this will persist at least in the first half of 2024.

Speaker Change: We've been pleased with the progress we're making on demand generation and we will continue to prioritize revenue growth into 2024, which in some pursuits includes some degree of discounting.

Jason Peterson: Our non-gap effective tax rate was 23.7%, diluted earnings per share on a gap basis was $7, and non-GAP EPS, which includes adjustments for stock-based compensation, acquisition-related costs, and certain other one-time items, including costs associated with our cost optimization program, was $10.59, reflecting a 2.8% decrease over fiscal 2022. In 2023, there were approximately 59.1 million weighted average diluted Cash flow from operations was $563 million compared to $464 million for 2022, and pre-cash flow was $534 million, reflecting 85.4% adjusted net income conversion. And finally, share repurchases in 2023 were approximately 686,000 shares for $164.9 million at an average price of $240.49 per share.

Speaker Change: In 2024, we expect to incur incremental cost due to more normalized variable compensation levels. In addition to wage inflation in certain geographies. This higher level compensation combined with the limited ability to improve client pricing in the near term we will continue to put pressures on margins in 2024.

Speaker Change: Finally, despite the war our operations in Ukraine have not been materially impacted and our teams remain highly focused on maintaining uninterrupted production.

Speaker Change: Our guidance assumes that we will continue to be able to deliver from our Ukraine delivery centers at productivity levels similar to those achieved in 2023.

Now starting with our full year outlook revenue growth will be in the range of 1% to 4% on both a reported and constant currency basis. The impact of foreign exchange is expected to be negligible.

Speaker Change: At this time, we expect a nominal revenue contribution from inorganic revenue for 2024.

Speaker Change: Lastly, we are seeing some improvement of demand.

Speaker Change: Visibility for the year is still limited.

Speaker Change: Although we are guiding to modest sequential growth in Q1 increases in demand may not sufficiently offset revenue impacts resulting from seasonality in all quarters. In 2024, we expect GAAP income from operations to be in the range of nine 5% to 10, 5%.

Jason Peterson: Our 2023 results reflect EPAM's ability to manage the business through challenging macro conditions while positioning the company for the return to a more normalized demand environment. Now, let's turn to guidance. Before moving to the specifics of our 2024 and Q1 outlook, I would like to provide some thoughts to help frame our guide. As Art mentioned, the demand environment remains uneven. We believe this will persist at least in the first half of 2024. We have been pleased with the progress we are making on demand generation and will continue to prioritize revenue growth into 2024, which in some pursuits involves some degree of difficulty. In 2024, we expect to incur incremental costs due to more normalized variable compensation levels, in addition to wage inflation and the insurgency algorithm. This higher level of compensation, combined with the limited ability to improve client pricing in the near term, will continue to put pressures on margins in 2024. Finally, despite the war, our operations in Ukraine have not been materially impacted, and our teams remain highly focused on maintaining uninterrupted production.

Speaker Change: And non-GAAP income from operations to be in the range of 14, 5% to 15, 5%.

Speaker Change: We expect our GAAP effective tax rate to be approximately 21%.

Speaker Change: Our non-GAAP effective tax rate, which excludes excess tax benefits related to stock based compensation will be 24% earnings per share. We expect GAAP diluted EPS will be in the range of $7 20 to $7 60 for the full year.

Speaker Change: And non-GAAP diluted EPS will be in the range of $10 to $10 40 for the full year.

Speaker Change: We expect weighted average share count of $59 3 million fully diluted shares outstanding.

Speaker Change: For Q1 of 'twenty 'twenty four we expect revenues to be in the range of one one 505 to $1 165 billion.

Speaker Change: Producing a year over year decline of approximately 4%.

Speaker Change: With the expected impact of FX to be minimal.

Speaker Change: For the first quarter, we expect GAAP income from operations to be in the range of 9% to 10% and.

Speaker Change: non-GAAP income from operations to be in the range of 13, 5% to 14, 5%.

Speaker Change: Our Q1 income from operations guide reflects the impact of the resetting and social security caps normalized variable compensation and somewhat higher bench levels, where we expect to see improvement throughout the year.

Speaker Change: We expect our GAAP effective tax rate to be approximately 11% and our non-GAAP effective tax rate, which excludes excess tax benefits related to stock based compensation to be approximately 24%.

Jason Peterson: Our guidance assumes that we will continue to be able to deliver from our Ukraine delivery centers at productivity levels similar to those achieved in 2023. Now starting with a full year outlook, revenue growth will be in the range of 1% to 4%, on both the reported and constant currency basis. The impact of foreign exchange is expected to be next.

Speaker Change: For earnings per share, we expect GAAP diluted EPS to be in the range of $1 79 to $1 87 for the quarter.

Speaker Change: And non-GAAP diluted EPS to be in the range of $2 26 to $2 34 for the quarter.

Speaker Change: We expect a weighted average share count of $59 1 million diluted shares outstanding.

Jason Peterson: At this time, we expect a nominal revenue contribution from organic revenue for 2024. Lastly, we're seeing some improvement in demand, but visibility for the year is still limited. Although we are guiding to modest sequential growth in Q1, increases in demand may not sufficiently offset revenue impacts resulting from seasonality in all quarters in 2024. We expect gap income from operations to be in the range of 9.5% to 10.5%, and non-GAAP income from operations to be in the range of 14.5% to 15.5%. We expect our gap effective tax rate to be approximately 21%. Our non-GAAP effective tax rate, which excludes excess tax benefits related to stock-based compensation, will be 24%.

Speaker Change: Finally, a few key assumptions that support our GAAP to non-GAAP measurements for 2024.

Speaker Change: Stock based compensation expense is expected to be approximately $198 million with $44 million in Q1 $48 million in Q2 and $53 million in each remaining quarter.

Speaker Change: Amortization of intangibles is expected to be approximately $26 million for the year evenly spread across each quarter.

Speaker Change: The impact of foreign exchange is expected to be a $1 million loss for each of the quarters.

Speaker Change: Tax effective non-GAAP adjustments is expected to be approximately $46 million for the year with $11 million in Q1 $11 million in Q2 and $12 million in each remaining quarter.

Speaker Change: We expect excess tax benefits to be around $28 million for the full year with approximately $17 million in Q1 5 million in Q2 and $3 million in each remaining quarter. Finally, one more assumption outside of our GAAP to non-GAAP items are growing cash reserves are generating interest income and <unk> is receiving governmental incentives from several countries in which we are.

Jason Peterson: Earnings per share, we expect the gap to the DPS will be in the range of $7.20 to $7.60 for the full year, and non-GAP diluted EPS will be in the range of $10 to $10.40 for the full year. We expect a weighted average share count of 59.3 million fully diluted shares outstanding. For Q1 of 2024, we expect revenues to be in the range of $1.155 to $1.165 billion, producing a year-over-year decline of approximately 4%, with the expected impact of FX to be minimal. For the first quarter, we expect gap income from operations to be in the range of nine to 10%, and non-gap income from operations to be in the range of 13.5% to 14.5%. Our Q1 Income Operations Guide reflects the impact of the resetting of social security caps, normalized variable compensation, and somewhat higher bench levels, where we expect to see improvements throughout. We expect our GAAP-effective tax rate to be approximately 11%, and our non-GAAP-effective tax rate, which excludes excess tax benefits related to stock-based compensation, to be approximately 24%.

Stablish delivery operations.

Speaker Change: As a result in 2024, we are anticipating an increased level of other income.

Speaker Change: We expect interest and other income to be around $66 million for the full year with $16 million in Q1 $20 million in Q2 and $15 million in each remaining quarter. My thanks to all the <unk>, who made 2023 successful year and we will.

Speaker Change: Help us drive growth throughout 2024.

Speaker Change: Operator, let's open the call up for questions.

Speaker Change: Thank you at this time I would like to remind all participants in order to ask a question. Please press the star followed by the number one on your telephone keypad.

Speaker Change: In the interest of time, we kindly request that analysts limit their questions to one and if time permits you may powerful follow up question.

Speaker Change: Okay.

Speaker Change: Thank you. Our first question comes from the line of Ramsey El <unk> of Barclays. Please go ahead.

Ramsey El: Hi, Thank you for taking my question this morning.

Ramsey El: Wanted to ask about your view on the second half of 'twenty four sort of inflection you sounded incrementally confident I think that the demand environment might pivot into a positive direction at that point can you just comment further on what's giving you confidence and visibility our client conversations changing are you seeing a batch.

Jason Peterson: For earnings per share, we expect capital-added EPS to be in the range of $1.79 to $1.87 for the quarter, and non-capital-added EPS to be in the range of $2.26 to $2.34 for the quarter. We expect a weighted average share count of 59.1 million diluted shares out. Finally, a few key assumptions that support our gap to non-gap measurements for 2024. Stock-based compensation expense is expected to be approximately $198 million, with $44 million in Q1, $48 million in Q2, and $53 million in each remaining quarter.

Ramsey El: <unk> delayed projects buildup, what has changed in your forward view.

That supporting that sort of incrementally positive sense that the second half is where things may inflict.

Ramsey El: I think it's.

Ramsey El: Exactly what you said.

Ramsey El: Uhm.

Ramsey El: Before.

Ramsey El: Good luck congratulations to today.

Ramsey El: Delayed still.

Ramsey El: And.

Ramsey El: No.

Ramsey El: Great.

Yes.

Ramsey El: Do you believe.

Ramsey El: Future delays.

Ramsey El: Go to <unk>.

Ramsey El: Because.

Ramsey El: The company is growing.

Yes.

Jason Peterson: Amortization of intangibles is expected to be approximately 26 million for the year, evenly spread across each. The impact of foreign exchange is expected to be a $1 million loss for each of the following three quarters. Tax effective non-GAAP adjustments is expected to be approximately $46 million for the year, with $11 million in Q1, $11 million in Q2, and $12 million in each remaining quarter. We expect excess tax benefits to be around $28 million for the full year, with approximately $17 million in Q1, $5 million in Q2, and $3 million in each remaining quarter.

Ramsey El: We've taken.

Ramsey El: We can generate.

Ramsey El: Will you.

Ramsey El: At this time.

Ramsey El: Chris.

Ramsey El: Discussion.

Ramsey El: Radio programs.

Ramsey El: Yes.

Ramsey El: Yes.

Ramsey El: This shouldn't be too.

Ramsey El: <unk>.

Ramsey El: So ladies and <unk>.

Ramsey El: Sure.

Speaker Change: Got it okay. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question comes from the line of Bryan Bergin of TV Cowen. Please go ahead.

Bryan C. Bergin: Hi, Good morning. Thank you I wanted to start on margin here. So a good result in the <unk> can you talk about maybe what costs and investments now our most notable that come back in for 24, and the cadence considerations I heard I heard some investments and demand Gen and go to market I think can you flesh that a bit more and I guess the root of the question is.

Jason Peterson: Finally, one more assumption outside of our GAAP to non-GAAP items. Our growing cash reserves are generating interest income, and EPAM is receiving governmental incentives from several countries in which we have established delivery operations. As a result, in 2024, we are anticipating an increased level of other income. We expect interest and other income to be around $66 million for the full year, with $16 million in Q1, $20 million in Q2, and $15 million in each remaining quarter.

Bryan C. Bergin: Or do you consider more transitory versus potentially structural cost differences as you go forward.

Speaker Change: Yes so.

Speaker Change: We obviously have been very thoughtful around what our cost structure would look like this year and are mindful.

Speaker Change: The guide here around profitability.

Speaker Change: Second we made Brian what we did want to return to a more typical variable compensation and then we thought a lot about the pricing environment.

Operator: My thanks to all the EPAMers who made 2023 a successful year and will help us drive growth throughout 2024. Operator, let's open the call up for questions. Thank you. At this time, I would like to remind our participants that in order to ask a question, please press the star followed by the number one on your telephone keypad.

Speaker Change: And the wage environment.

Speaker Change: Decided that we would move forward with our traditional sort of salary increases our promo in Q2 of this year, we've got very little voluntary attrition, we want to keep it that way.

Speaker Change: Because we do have confidence in and our.

Speaker Change: A return to growth later in the year. So I would say that people programs are probably.

Speaker Change: Most significant.

Operator: In the interest of time, we kindly request that analysts limit their questions to one, and if time permits, you may poll for a follow-up. Thank you. Our first question comes from the line of Ramzi Ellisal of Barclays. Please go ahead.

But then we do have significant investments in AI and again, we thought about whether or not we would want to.

Speaker Change: Scale those back and we thought that that wasn't appropriate considering some of the traction that we believe that we're getting.

Arkadiy Dobkin: Hi, thank you for taking my question this morning. I wanted to ask about your view on the second half of 24 sort of inflection. You sounded incrementally confident, I think, that the demand environment might pivot into a positive direction at that point. Can you just comment further on what's giving you confidence in this visibility? Are client conversations changing?

Speaker Change: At this point and then as you talked about.

Speaker Change: Grams that are primarily focused on sort of demand generation.

Some of our partnership programs.

And then continuing to enhance our domain capabilities.

Speaker Change: If you have any thoughts about either.

Speaker Change: Demand generation.

Speaker Change: Yes.

Speaker Change: And then what would you say.

Speaker Change: Still a lot.

Speaker Change: Experimentation.

Speaker Change: We've got a lot of consumption and.

Speaker Change: Luisa.

Two implementations.

Arkadiy Dobkin: Are you seeing a backlog of delayed projects build up? What has changed in your forward view that's supporting this sort of incrementally positive sense that the second half is where things may inflect? I think it's exactly what you said.

Still the broker plus pretty sizeable but.

Speaker Change: What you also see is a lot of.

Speaker Change: Proof of concepts actually prudent too.

Speaker Change: To support it.

Additionally, <unk> pro.

Speaker Change: So a lot because well.

Speaker Change: Steven Jason good well.

Arkadiy Dobkin: With, We were thinking about a lot of activities before, and a lot of conversations still happening today, but the decision point delayed. In our view, how these activities were increased, we... I do believe that future delays will be very difficult to kind of hold because the companies will need to address growing debt, and we take in. This is a pretty responsible view of what might be happening as this type of increase. I'd be pleased to discuss with all of you. Many programs and kinds of desires which we have. You're the last, or should be, called to self-realization.

Speaker Change: Good.

Speaker Change: Unit is data.

Speaker Change: Just type opportunities as well.

Speaker Change: Well enough.

Speaker Change: That's correct.

Speaker Change: Okay.

Speaker Change: Staying at it.

Speaker Change: Visibly.

Speaker Change: Need to invest in <unk>.

Speaker Change: Sure.

Speaker Change: Different activities to <unk>.

Scale rollout to date. So that's why also we.

Speaker Change: We believe.

Speaker Change: It will.

Speaker Change: Yes.

Speaker Change: The work for you.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Two.

Speaker Change: Yes, we think clearly get a return on the investment and then Brian will be working on utilization and our seniority pyramid throughout the year I think youll see an improvement in gross margin in the second half of 2024, hopefully setting us up for better.

Arkadiy Dobkin: So we are kind of learning and shaping our activities. Got it. Okay, thanks. Thank you. Our next question comes from the line of Bryan Bergin of TD Cohen. Hi, good morning.

Speaker Change: Better profitability.

Speaker Change: Right.

Jason Peterson: Thank you. I wanted to start on the margin here. So, a good result in the 4QAOM.

Speaker Change: Okay. Thanks, and then follow up just as it relates to kind of your larger client award expectations are the ramp downs that you had thought.

Jason Peterson: Can you talk about maybe what costs and investments now are most notable that come back in for 24 and the cadence considerations? I heard some investments in demand generation and go to market, I think. Can you flesh that out a bit more?

Speaker Change: As you entered 24 progressing as you had expected and as the second half improvement consistent across your larger clients I'm thinking about your top down your top 20 base.

Jason Peterson: And I guess the root of the question is, what do you consider more transitory versus potentially structural cost differences as you go forward? Yeah, so, you know, we obviously have been very thoughtful around what our cost structure would look like this year and are mindful of the guidance here around profitability. The decision we made, Bryan, was that, you know, we did want to return to a more typical variable compensation, and then we thought a lot about the pricing environment and the wage environment and decided that we would move forward with our traditional sort of salary increases or promotions in Q2 of this year. We've got very low voluntary attrition.

Speaker Change: We had talked about.

Speaker Change: And an expected ramp down in Q1.

Speaker Change: Is upon us and it is obviously part of our Q1 guide.

Speaker Change: Other than that.

Speaker Change: <unk>.

Speaker Change: Significant incremental kind of ramp downs and we are feeling like demand is stable I think.

Speaker Change: I'm a customer standpoint, we are seeing good strong.

Speaker Change: Our traction in life Sciences.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: Clearly, we're seeing a lot of opportunities in energy.

Speaker Change: And I expect that we probably return to sequential growth in a number of our industry verticals.

Speaker Change: Here in Q1, so I would say, yes generally the demand is a little broader from at least in answer to your vertical customers.

Jason Peterson: We want to keep it that way because we do have confidence in a return to growth later in the year. So I would say the people programs are probably the most significant. But we do have significant investments in AI.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you. Our next question comes from the line of David Grossman of Stifel. Please go ahead.

Speaker Change: Okay.

David Grossman: Hi, good morning, Thank you.

Arkadiy Dobkin: And again, we thought about whether or not we would want to scale those back, and we thought that that wasn't appropriate, considering some of the traction that we believe that we're getting in AI at this point. And then, as you talked about the programs that are primarily focused on sort of demand generation, some of our partnership programs, and then, you know, continuing to enhance our domain capabilities. And I don't know, Mark, if you have any thoughts about either the AI or demand generation. Yeah, as everybody's saying, it's to the webinar.

Just looking at the head count adds and it looks like here.

David Grossman: The year over year basis pretty much down in most geographies I think with the exception of.

David Grossman: A couple or maybe just to India, and I guess I'm, just trying to understand the injunction to pose that dynamic against expectation of.

David Grossman: Accelerating growth in the back half of the year perhaps.

David Grossman: You're targeting a higher utilization rate than you experienced in 'twenty three or other factors at play and just wondering if you could help flesh that out for us.

Arkadiy Dobkin: Thank you, to the point that it will trigger additional tales of data engineering programs a lot, because while experimentation is going well and proof of concept looks good, usually, the data for this type of activity is massaged well enough and, as soon as you go into production activities, in many cases, distinguished..., visibly need to invest in data engineering and..., different activities to, at scale, provide the data. So that's why also we believe that this figure will happen and the amount of work for this type of activity will be... Fruitful to us.

David Grossman: Whether or not the kind of changing how we should think about.

David Grossman: Changing the geographic mix.

David Grossman: The impact that growth given the bill rate differential between India for example, and.

David Grossman: Ukraine and eastern Europe.

Speaker Change: Yes, it's a good good questions.

Speaker Change: The first that I would say is as you look at that our fact sheet, where you can see the head count declines across a range of geographies.

Speaker Change: <unk>.

Speaker Change: Alright, thanks, guys.

Speaker Change: <unk> comments here.

Speaker Change: I guess the fixed portion of today.

Jason Peterson: Yes, we think they'll clearly be a return on the AI investment. And then Bryan will be working on utilization and our security pyramids throughout the year. I think you'll see an improvement in gristmarks in the second half of 2024, hopefully setting us up for more, you know, better profitability in 2025. Okay, thanks. And then in follow-up, just as it relates to kind of your larger client award expectations, are the ramps down that you had thought, You know, as you entered 24 progressing as you had expected, and is the second half improvement consistent across your larger clients? I'm thinking about your top 10, your top 20 base.

Speaker Change: We did obviously you have to increase head count across a broad range of countries.

Speaker Change: Yes, it's kind of a contingency in case things didn't go as well if they ultimately end up going in Ukraine, and so we then afterwards.

Speaker Change: Tuned head count somewhat.

Speaker Change: Just forget we've done some amount of excess hiring across a broad range of geographies.

Speaker Change: Justin.

Contingency in case, we weren't able to deliver a successfully from Ukraine. At this point you are clearly seeing growth in India Youll continue to see growth in Latin America.

Speaker Change: We do expect that the ink.

Speaker Change: Tremendous growth in India.

Jason Peterson: We talked about a known and expected ramp-down in Q1 that, you know, is upon us, and it is obviously part of our Q1 guide. You know, other than that, you'll see..., you know, significant incremental kind of ramp-downs, and we are feeling like demand is stabilizing. From a customer standpoint, you know, we are seeing good, strong traction in life sciences; we, you know, clearly are seeing a lot of opportunities in energy. And I expect that we will probably return to sequential growth in a number of our industry verticals here in Kewaun. So I would say yes, it's generally that the demand is a little broader from at least an industry vertical and customer standpoint. Okay, thank you. Our next question comes from the line of David Grossman of Stifle. Please go ahead. Good morning, thank you.

Speaker Change: Is it going to put some pressure on revenue per head count.

Speaker Change: And that's part of the reason for the guide at the 1% to 4% that we've got in there.

Speaker Change: Yes.

Speaker Change: Thank you Peter.

Speaker Change: Remember, we're using a little bit.

One year ago.

Speaker Change: At the beginning of fluid into industry.

It was a way.

Speaker Change: Got you.

Speaker Change: <unk>.

Speaker Change: Revenue was flat.

Speaker Change: <unk>.

Speaker Change: Today's reporting 24.

Speaker Change: No.

Which means that.

Speaker Change: Yes.

Speaker Change: Gross inarguably pupil issue.

Speaker Change: We're pretty disciplined into our suits than what you see in this case.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: You have to be.

Speaker Change: Well if you plan.

Speaker Change: <unk> and.

Jason Peterson: I'm just looking at the headcount ads, and it looks like you're on a year-over-year basis pretty much down in most geographies, I think with the exception of a couple or maybe just India. And I guess I'm just trying to understand and juxtapose that dynamic against the expectation of, you know, accelerating growth in the back half of the year and perhaps you're targeting a higher utilization rate than you experienced in 23 or other factors at play and just wondering if you could help flush that out for us and whether or not the kind of changing, how we should think about the changing geographic mix and its impact on growth given the bill rate differential between India, for example Yeah, so good, good questions.

Speaker Change: <unk>.

Speaker Change: And on top of this.

Speaker Change: As we get to know us well.

Speaker Change: A lot of kids.

Speaker Change: So when you said it was actually.

Speaker Change: Well I was going to be.

Speaker Change: We're pleased to shape to changing conditions.

Speaker Change: It's pretty much in line with guidance for this year.

Speaker Change: Still keep it.

Speaker Change: Okay.

Speaker Change: It is.

Speaker Change: Restaurants to be able to start with.

Speaker Change: Great.

Speaker Change: So.

Speaker Change: It will just speed.

Speaker Change: Well actually collections yet.

Speaker Change: So if I if I take those comments and the comments you in a previous question about.

Jason Peterson: Um, you know, the, uh, first thing I would say is, as you look at that fact sheet, where you can see, obviously, the headcount declines across a range of geographies. If we, you know, kind of arch comments here during, I guess, the fixed portion of today, is that, you know, we did obviously have to increase headcount across a broad range of countries as kind of a contingency in case things didn't go as well as they ultimately ended up going in Ukraine. And so we then afterwards, you know, tuned headcount somewhat on just because we've done some amount of access hiring across a broad range of geography, just as a contingency in case we weren't able to deliver it successfully from Ukraine. At this point, you're clearly seeing growth in India.

Speaker Change: The margin dynamic for the year.

Speaker Change: Does that imply that the cadence of margins should improve or if we think about margin improvement at.

Speaker Change: 24 progresses that we will get back to you.

Speaker Change: Kind of more of a historical level as we exit 'twenty four.

Speaker Change: Certainly I expect.

Speaker Change: Margins in the first half that's both Q1 and Q2 and then.

Speaker Change: Fairly significant improvement in the second half.

Speaker Change: And that would do.

Speaker Change: Due to the available billing days as well as improvements in utilization and impairment.

Speaker Change: So I don't know whether or not that's the same as where we've been kind of historically, but I do expect us to head back towards the more typical profitability as.

Jason Peterson: You'll continue to see growth in Latin America. We do expect that the incremental growth in India is going to put some pressure on revenue per headcount, and that's part of the reason for the guide to the 1-4% that we've got in there. I think I would add the following. If you remember our original guide.

Speaker Change: As we get closer to the end of the year and as we had.

Speaker Change: Bob.

Bob: Alright got it thanks very much.

Bob: Yeah.

Bob: Thank you. Our next question comes from Lana Chan from Jpmorgan. Please go ahead.

Bob: Hey.

Lana Chan: Thanks for taking my question and good quarter.

Lana Chan: So you mentioned like.

Lana Chan: There is some like the adjustment of seniority of employees that are ahead of you are probably something you'll do this year could you shed likelihood upgrades experian like.

Arkadiy Dobkin: One year ago, at the beginning of 2023, so it was kind of optimistic, and revenue was higher than the guidance for today for 2024. So, that means that we've prepared for the growth in the number of people which we had back then was corresponding to our sources. Then 2023, in this case, becomes for us an adjustment period where we have to breathe relative numbers kind of back to reality, and on top of this, as we were saying, we were just now thinking about markets from a cost perspective as well. So 2023 was actually... 12 months when we breathed us back into shape, to changing conditions. From this point of view, it's very, very much in line with our guidance for this year. We still keep it.

Lana Chan: Running above North America due to maybe low attrition low housing right now.

Speaker Change: What should we expect for us.

Speaker Change: Our revenue per employee as like.

Speaker Change: Average experience.

Speaker Change: It's a little bit.

Speaker Change: I think.

Speaker Change: This adjustment Stephanie.

Speaker Change: What they don't really the revenue per employ exist.

Speaker Change: Kind of limit each.

Speaker Change: Because.

Speaker Change: Yes.

<unk>.

Speaker Change: Watch.

Speaker Change: We.

Speaker Change: Kind of up to one hour delivery locations.

Speaker Change: Yes.

Speaker Change: For example.

Speaker Change: <unk>.

Jason Peterson: Bye, to be able to start hiring back, to train in large quantities, so we feel about this number is pretty comfortable and actually reflecting the reality. So if I take those comments and the comments you made in a previous question about, you know, the or the margin dynamic for the year, does that imply that the cadence of margins should improve? Or, you know, if we think about margin improvement as 24 progresses, will that get back to, you know, kind of a historical level as we exit 24? You know, certainly I expect lower gross margins in the first half, that is, both Q1 and Q2, and then, you know, a fairly significant improvement in the second half, and that would be both due to the available bill days, as well as improvements in utilization and pyramid. So, you know, I don't know whether or not that's the same as where we've been kind of historically, but I do expect us to head back towards more typical profitability as we get closer to the end of the year and as we enter 2025. All right, got it. Thanks very much.

Speaker Change: Look lethal I assume 20% towards the last year.

Speaker Change: I assume it was.

Speaker Change: Yeah.

Speaker Change: Mike.

Mike: Yeah before.

Within a few percent.

Mike: So which is a.

Mike: Definitely impact us.

Mike: Lloyds Assembly.

Mike: Between.

Mike: People win.

Mike: Eastern Europe Central Europe.

Speaker Change: Got it.

Speaker Change: That should be taken in the call talking about doing onsite right.

Speaker Change: So.

Speaker Change: I shouldn't read into this.

Speaker Change: Yes, it was.

Speaker Change: Yeah.

Speaker Change: Got it got it and your utilization like improved on a sequential basis like what should we expect more normalized utilization given that you are operating under a much more distributed delivery models now.

Speaker Change: Yes, I mean, our goal would be to go back towards more typical.

The higher <unk>.

Arkadiy Dobkin: Thank you. Our next question comes from J.P. Morgan. Hey, thanks for taking my question and good quarter. So, Ark, you mentioned that there is some like the adjustment of seniority of employees that are ahead of you, probably something you'll do this year. Could you share, like, if your average experience is running above normal due to maybe low attrition and low hiring right now?

Speaker Change: Yes.

Speaker Change: I don't think that the distribution is going to have a significant impact on our.

Speaker Change: Our targeted utilization levels.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from the line of Maggie Nolan of William Blair.

Maggie Nolan: Please go hi, thank you.

Maggie Nolan: Jason can you be a little bit more explicit on your commentary about seasonality versus demand offset on a quarter by quarter basis, and maybe just remind us which quarter at that point has been more difficult to overcome seasonal pressures given that that may be different from historical Kevin you're changing geographic footprint.

Arkadiy Dobkin: And what should we expect for revenue per employee as if the average experience deteriorates a little bit? Um, I think, uh... These are just the script for you.

Arkadiy Dobkin: What I don't believe is the revenue per employee, exactly the kind of metric which doesn't reflect the reality because it depends. Thank you very much. Have a good day, kind of optimizing our delivery location. India is growing, and India, for example, is growing. Not little, I think it's 20% of last year, and I think it was even... much higher the year before, like more than 50%.

Maggie Nolan: Holiday schedules et cetera.

Speaker Change: Okay, great. Thanks for giving me the chance to clarify that Q.

Speaker Change: Q2 is generally.

Speaker Change: There's less capacity or less sort of available built as Q3 is usually very strong quarters, usually see.

Speaker Change: Right.

Speaker Change: Significant sort of sequential growth Q2 to Q3, the comment that I made in my prepared remarks, it's really that we are seeing.

Arkadiy Dobkin: Okay, so this is actually definitely impacting the revenue for employees, the same as the switch between people moving from Eastern Europe to Central Europe or growing in Latin America. That should be taken into account, not talking about even on-site. So, simply not looking at this metric as a critical metric. Got it, got it.

Speaker Change: What feels like a better demand environment more stability.

Speaker Change: Larger number of conversations with clients in some kind of larger deal size opportunities, but Q1 to Q2 definitely asset negative seasonal impact and so I just wanted to call out there was some potential that that seasonality.

Jason Peterson: And your utilization, like it improved on a sequential basis, like what should we expect for normalized utilization given that you are operating under a much more distributed delivery model now? Yeah, I mean, our goal would be to go back towards more typical, you know, which was about the higher 70s. So I don't think that the distribution is going to have a significant impact on, you know, our targeted utilization level.

Speaker Change: Hi could cause us to be.

Speaker Change: Sequentially flat to maybe even possibly down.

Speaker Change: But generally the expectations are that we see sequential growth Q1 and Q2.

Speaker Change: But again it will take.

Jason Peterson: Okay, thank you. Thank you. Our next question comes from the line of Maggie Nolan from William Blair. Please go ahead.

The improving demand environment to get us there.

Speaker Change: Okay. Thank you.

Jason Peterson: Hi, Thank you. Jason, can you be a little bit more explicit in your commentary about seasonality versus demand offsets on a quarter-by-quarter basis and maybe just remind us which quarters are going to be more difficult to overcome seasonal pressures, given that, you know, that may be different from historical, given you're changing your geographic footprint and holiday schedules, et cetera? Okay, great. Thanks for giving me the chance to clarify that. So Q2 is generally, you know, there's less capacity or less sort of available build days. Q3 is usually a very strong quarter, so you usually see, you know, quite significant sort of sequential growth from Q2 to Q3. The comment that I made in my prepared remarks was really that, you know, we are seeing, you know, what feels like a better demand environment, more stability, you know, a larger number of conversations with clients, and some kind of larger deal-size opportunities, but Q1 to Q2 definitely has a negative seasonal impact And so I just wanted to call out that, you know, there was some potential that that seasonality could cause us to be, you know, sequentially flapped, maybe even possibly down.

Speaker Change: And then you've mentioned.

Speaker Change: Pricing for a couple of different quarters, now and sharpening. Your pencil are you doing anything that you feel will help protect your ability to raise pricing in future quarters and years.

Speaker Change: And how do you get comfortable with.

Speaker Change: At the level that you're setting your rate card now versus the ability to increase and I think that's fair.

Speaker Change: And there's probably a few things going on I think we're trying to make certain that we don't have multiyear commitments to kind of walk us in even when you do that.

You have opportunities to come back to clients.

Speaker Change: So generally I would say traditional asset JV structure express or about a year in length.

Speaker Change: The other thing that we are continuing to do and I think you would see it.

Speaker Change: The mix of our commercials is that what youre seeing more <unk>.

Speaker Change: Fee engagements, where there is not.

Speaker Change: Not only is it more sort of consulting led.

Speaker Change: But also there is a little bit more opportunity for us to take responsibility for delay.

Speaker Change: <unk>.

Speaker Change: And that gives us an opportunity as well.

Speaker Change: Thanks for all the detail.

Speaker Change: Yes.

Speaker Change: Thank you. Our next question comes from the line of two Anderson of Jefferies. Please go ahead.

Anderson: Thank you.

Jason Peterson: But, you know, generally, the expectations are that we see sequential growth from Q1 to Q2. But again, it will take, you know, definitely improving the demand environment to get us there. Okay, thank you.

Two Anderson: In terms of just as we look at the year ahead.

Anderson: Uh huh.

Anderson: How much of a reshaping of the pyramid do you think you'd need at this point in terms of having the appropriate skill set.

Two Anderson: For the demand environment evolves, and then I guess related to that.

Jason Peterson: And then you've mentioned... pricing for a couple of different quarters now and sharpening your pencils. Are you doing anything that you feel will help protect your ability to raise pricing in future quarters and years? And, you know, how do you get comfortable with the level that you're setting your rate cards to now versus the ability to increase it in the future?

Two Anderson: How quickly are you able to hire at this point.

Two Anderson: Was.

Two Anderson: An increasing demand in terms of how much do you need to keep and how quickly can you.

Speaker Change: Hi, we're against that.

Speaker Change: Okay I think it's.

Speaker Change: Interest and good questions to address first of all because there is a lot of <unk>.

Jason Peterson: There are probably a few things going on. I think we're trying to make certain that we don't have multi-year commitments that kind of lock us in. Even when you do, you do have opportunities to come back to clients. So generally, Maggie, I would say traditional S&W structures for us are about a year in length.

Speaker Change: Switching to.

Speaker Change: Even how quickly productivity will be growing.

Speaker Change: We have a wish list.

Speaker Change: Carefully what type of new people will be needed our Q&A as a market.

Speaker Change: We put a lot of investment.

It's what you said it already specifically in respect to us what it means we need to link towards practically was where it was call it the water.

Jason Peterson: The other thing that we are continuing to do, and I think you would see it in the mix of our commercials, is that you're seeing more fixed fee engagements where there's not only more sort of consulting-led, but also a little bit more opportunity for us to take responsibility for delivery. And that gives us an opportunity to make profitability as well. Thanks for all the detail.

Speaker Change: <unk>.

Speaker Change: Productivity improvements with video license.

Clients will be.

Speaker Change: Kind of supports seamless because a lot of <unk>.

Questions about legal aspects of.

Speaker Change: <unk> doing those things too.

Jason Peterson: Thank you. Thank you. Our next question comes from the line of Jorinda Thind of Jefferies. Thank you.

Speaker Change: Sure.

Yes as to develop so it's about what that should you need like a year from now.

Arkadiy Dobkin: In terms of just as we look at the year ahead, how much of a reshaping of the pyramid do you think you need at this point in terms of having the appropriate skill set for the demand environment as it evolves? And then, related to that, how quickly are you able to hire at this point if there is, you know, an increase in demand in terms of how much bench space do you need to keep and how quickly can you? Hierarchies

Speaker Change: Sure.

Speaker Change: Alright.

Speaker Change: The ability to hire again.

Speaker Change: We also inhibit players.

Speaker Change: This is really a way to cave.

Speaker Change: So the ability to keep.

Speaker Change: <unk>.

Speaker Change: Sure.

Speaker Change: Core previous investments.

Speaker Change: In educational training for Juniors and again.

Speaker Change: Let me go into play it is changes on the fly.

Speaker Change: Unions. The last time, we went to continue or change it.

Arkadiy Dobkin: Okay, I think it's an interesting question to address. First of all, because there is a lot of uncertainty about how quickly productivity will be growing, and we're watching this very, very carefully. What type of new people will actually be needed in the market? And we put in a lot of investment efforts, and that's what we shared already, specifically in this activity. What it means is that we need to watch practically month by month, quarter by quarter, how productivity improvements will be realized and how clients will be kind of supporting this because there are a lot of questions about legal aspects of... generating the code or doing assistance. AI assistive development.

But we <unk>.

Speaker Change: Got it okay.

Speaker Change: Be able to accelerate when needed, especially with the softness of the market.

Speaker Change: During the last several years.

Speaker Change: Guidance was produced on the markets and junior levels wishes.

Speaker Change: Yeah.

Speaker Change: Not necessary, we're finding jobs.

Speaker Change: So I think its build and operate.

Speaker Change: Mark as we will be back.

Speaker Change: What we did before.

Speaker Change: Normal too.

Speaker Change: The increase.

Speaker Change: Questions, Yes, we continue to have.

Speaker Change: We are flexible we clearly have been investing to make certain that we can add.

Speaker Change: Capacity across a broad range of geographies so good about.

Speaker Change: That are available that responded to that.

Speaker Change: Yeah.

Speaker Change: Got it I guess just as a clarification. So the idea is that you.

Arkadiy Dobkin: So it's about what actually we will need a year from now for, All day. So on the ability to hire, and again, we invest in here, we plan, we're watching this very, very closely. So for the ability to hire, we keep all our core previous investment in educational training for juniors, and again, how and what we're going to train is changing on the fly during the last time, and we're going to continue changing. So we have pretty high confidence that we would be able to accelerate when needed, especially with the softness of the market. During the last several years, a lot of... Silent was produced on the market in junior levels Not necessary; we are finding jobs. So I think it's building up right now, and when markets are back to where they were before, we'll see, because it was normal too. No questions.

Speaker Change: You can hire within a quarter to address needs in terms of having the flexibility to capability. The training I guess, that's kind of what I was trying to get at.

Speaker Change: Yes.

Speaker Change: It would be fair, we've got obviously utilization opportunities.

Speaker Change: First and foremost, but then yes, we're a quarter window would probably be appropriate.

Speaker Change: This is a portion of it.

Speaker Change: During the quarter.

Speaker Change: Ed.

Speaker Change: We will look to job as.

Speaker Change: So it's still going to be spread.

Speaker Change: Good.

Speaker Change: We still look.

Let's see.

Speaker Change: Great no demand will be.

Speaker Change: Again kind of in 'twenty or 'twenty, one it will be much more software.

Speaker Change: If you remember well into 'twenty, one and it was.

Speaker Change: Very quickly become close to market.

Speaker Change: What we do well.

Speaker Change: Yeah.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you as a reminder, and as we have limited time and the desire to get to as many analysts as possible. We kindly request that questions are limited to one per caller and if Tom if time permits you might call for follow up questions.

Arkadiy Dobkin: Yeah, we continue to have, you know, we're flexible. We clearly have been investing to make certain that we can add capacity across a broad range of geographies. So, yeah, we'll go about our ability to respond to demand. Got it. I guess just as a clarification, so the idea is that, you know, you can hire within a quarter to address needs in terms of having the flexibility, the capability, the training. I guess that's kind of what I was trying to get at. Yeah, I think that would be fair.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Mushy country of weapons Security. Please go ahead.

Mushy: Hey, Thanks, Congrats on a strong execution.

Mushy: Alright, when he started the call you indicated the clients that moderated spending with <unk> last year coming back can.

Speaker Change: Can you talk a bit more about that.

Is it is it.

Mushy: I went to some you know some of your competitors are coming back theyre changing their plans whats, prompting that.

Mushy: Okay.

Mushy: Yes.

Speaker Change: Hi, Tim.

Jason Peterson: We've got obviously utilization opportunities, you know, first and foremost, but then yeah, a quarter window would probably be appropriate. And this is all proportionally. The one quote is that the wind will not jump as...

Tim: So many times during the last year. It was it didn't begin to lose a year. When we were much more optimistic we didn't realize it in <unk>.

Arkadiy Dobkin: It's crazy, so it's still going to be spread around the quarters. We're still not. Right now, demand will be performing kind of in 2021. It will be much more soft.

Speaker Change: Race <unk> Bob.

Speaker Change: And switching to that we will be able to engage the world. So a lot of calls clients. We're doing individual is pointed toward your to reach kind of delaying decisions with us actually.

Arkadiy Dobkin: So, and if you remember 2021 and it was. Very quickly, it became a hot market, and we were performing pretty well. That's very helpful.

Glenn too.

Arkadiy Dobkin: As a reminder, and as we have limited time and a desire to get to as many analysts as possible, we kindly request that questions are limited to one per caller. And if time permits, you may poll for a follow-up. Our next question comes from Moshe Katri of Woodburn. Go to www.epamsystems.com to purchase a copy of the EPAM Systems book.

Speaker Change: You guys started to replace numerous piece to us, but unfortunately, we realized in blocks of this only.

Speaker Change: Kind of examples of Q2 and it when you see.

Speaker Change: And some of it is.

Speaker Change: Auctions.

Speaker Change: We continue to look.

Speaker Change: In part we still have clients, who did glad you asked because decisions.

Speaker Change: So I had with somebody else. So this was this is Larry visa building blocks into Airways lots Chicago.

Arkadiy Dobkin: Hey, thanks. Congratulations on strong execution. Ark, when you started the call, you indicated the clients that moderated spending with EPAM last year are coming back. Can you talk a bit more about that? Is it that they went to some, you know, so your competitors are coming back, they're changing their plans. What's prompting that?

Speaker Change: I would say on the simultaneous impact of these two six.

Speaker Change: What's critical philosophy.

Speaker Change: It really put us upside through our competitors.

Speaker Change: Well as you want part of this.

Speaker Change: So with economy is starting to slow down.

Arkadiy Dobkin: Okay. I think we were talking about it many times during the last year, but at the beginning of the year, when we were much more optimistic, we didn't realize that the impact of the war raised the risk profile for EPAM and uncertainty that we would be able to navigate the war. So a lot of calls clients were doing in the middle of 2022, which kind of delaying decisions with us or actually going to, has started to replace, not putting new RFPs to us, but unfortunately, we realize the impact of this only at the end of Q1 2020. And Samuels is, actions are making a pretty long-term impact.

Speaker Change: Good condition for rates cost and everything else.

Speaker Change: Pick up.

Speaker Change: This was was second flow so.

Speaker Change: But it just seems which we also mentioned that there are some clients who work to us.

Speaker Change: And some of them growing as well.

Speaker Change: But definitely this is Bob.

Speaker Change: Three is partially will be for part of 2024.

Speaker Change: If you assume because the same time.

Speaker Change: We're bringing in some new business.

Speaker Change: Two can feel St. Louis that's kind of it budgets as part of the story.

Speaker Change: Decline in going into a new floor definitely little bit smaller than declared it was 2020.

Arkadiy Dobkin: We still have clients who are declining because when the decision is made, and they sign with somebody else, it's happening. So this has a very visible impact in 2018. Plus Academy, this way.

Speaker Change: And when that May continue.

Speaker Change: We see clients, who may have experimented with other vendors.

Speaker Change: Re engaging with us with both discussions and in some cases actually transferring work backed us just based on the fact that they didn't get as much done with other vendors.

Arkadiy Dobkin: I would say the simultaneous impact of these two things was the most critical for us, which really put us aside from our competitors, which have... Only one part of it. So, when the economy started to slow down, then, again, competition for rates, costs, and everything else picked up. And this was second.

Speaker Change: That makes sense I know does that because there are more comfortable what would your execution from places like India Latin America is that kind of.

Speaker Change: Yes.

Speaker Change: And so well to both factors some of them become much more comfortable reviews, Ukraine, because it was 80 in Boston was recorded.

Arkadiy Dobkin: So, positive things, which we also mentioned, are some clients who are coming back to us, and some of them are growing as well. But definitely, this is part of 2023, and partially will be for us part of 2024. If you think at the same time about how we are bringing some new business, to compensate for this, that's kind of a positive part of the story.

Speaker Change: Interruption. So so we're thinking we'll be liaison.

Speaker Change: Our stance there so it's also.

Speaker Change: <unk> improves that we can deliver from different locations.

Speaker Change: India was probably one of those.

Speaker Change: Kind of where you.

Speaker Change: The critical components here so.

Speaker Change: And thirdly.

Speaker Change: I assume it looks like.

William.

Speaker Change: Some.

Speaker Change: The worse too.

Some competitors.

Speaker Change: Elsewhere in those cities.

Arkadiy Dobkin: Declining in 2024 definitely will be smaller than declining in 2026. And then we continue to see clients who may have experimented with other vendors reengaging with us in both discussions and, in some cases, actually transferring work back to us just based on the fact that they didn't get as much done with those other vendors. That makes sense. Is that because they're more comfortable with your execution in places like India or Latin America?

Speaker Change: Due to a lift to us or wages.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Those will be.

Speaker Change: But it will be possible to it.

Speaker Change: So I think it's between the all of us.

Understood. Thank you.

Speaker Change: Thank you. Our next question comes from line of Darrin Peller of Wolfe Research. Please go ahead.

Darrin Peller: Yes, guys I wanted to follow up a bit on the competitive landscape for a minute.

Darrin Peller: And the main question is really just sort of circling back you said youre seeing some customers come back to you you also talked about adding new I think more than usual new customers over the past year and youre seeing that progressing into this year. So.

Arkadiy Dobkin: Is that kind of... Yeah, it's multiple factors. Some of them became much more comfortable with Ukraine because there was no impact on the quality of interruption. So some were thinking we'll be leaving and now staying there. So it's also we proved that we can deliver from different locations. India was probably one of the... major critical components here. I think when we're removing some, All the worst to...

Darrin Peller: Putting that all into context, just theres been a lot of discussion of competitors trying to be more aggressive taking advantage of what happened in the war in Ukraine.

Darrin Peller: Are you seeing competitively I mean has anything truly changed.

And then maybe dovetailing that into the <unk>.

Arkadiy Dobkin: Some competitors, the results were not satisfactory, and they started to come back to us or waiting when their commitment with new vendors would be, kind of, expired, and it would be possible to... So I think it's between all of these a lot. I understand. Thank you. Thank you. Darrin Teller Yeah, guys, I want to follow up a bit on the competitive landscape for a minute. And the main question is really just sort of circling back, you said you're seeing some customers come back to you, and you also talked about adding a ton of new, I think more than usual new customers over the past year, and you're seeing that progressing into this year. So putting that all into context, just, you know, there's been a lot of discussion of competitors trying to be more aggressive, taking advantage of what happened in What are you seeing competitively?

Darrin Peller: The potential we could see for this year you said you added a bunch more than usual new customers you've been adding at a run rate.

Darrin Peller: I guess that informs your decision on what Youre seeing in terms of guidance for the second half of the year why why not a little bit more in the first half since it was being added last year.

Speaker Change: Hey, guys.

Speaker Change: So I think whether you're talking about increasing decline.

Speaker Change: No it's true.

Speaker Change: Difference with previous years as smaller clients wallet.

Speaker Change: Clients with Windows.

Speaker Change: But slowly engagements.

Speaker Change: And overall, it's still appeal.

A lot of fresh approval.

Speaker Change: Okay.

Speaker Change: Jason.

Jason Peterson: So this led to our states.

Speaker Change: Akshay adjusted our.

Arkadiy Dobkin: I mean, has anything truly changed? And then maybe, you know, dovetailing that into the potential we could see for this year. You said you added a bunch more than usual new customers you've been adding at a run rate. I guess that informs your decision on what you're seeing in terms of guidance for the second half of the year. Why, you know, why not a little bit more in the first half since it was added last year?

Speaker Change: <unk> is 123, okay.

Speaker Change: And starting to use different.

Speaker Change: Yes.

Speaker Change: Different approaches to.

Speaker Change: That.

Speaker Change: As well, but.

Speaker Change: It was much more visible all the transition between bus.

Arkadiy Dobkin: Thanks, guys. So I think when we're talking about increasing the client... Thank you. Clients may be smaller, but they are smaller in gauge.

Speaker Change: <unk> second point is what.

Speaker Change: What history with.

Speaker Change: Still seeing that.

Speaker Change: Civil Earth will be continuous for.

Arkadiy Dobkin: And overall, it still feels good. A lot of pressure for all. It's all coming back to our statement that we actually adjusted our behavior during 2023, okay, and started to use different, different approaches to kind of protect the client base as well. But It was much more visible, the transition between the first half and the second half of 2020.

Speaker Change: So next quarter.

Speaker Change: And that's exactly explain as old as did I think competitive situations, we see clients starting new programs, we participate in and then just bigger bigger programs.

Speaker Change: Walk us through the first half of <unk>.

When you see so we see this acceleration will be separately.

Speaker Change: We will give us opportunity to.

Speaker Change: To do it.

Speaker Change: Yeah.

Speaker Change: One well.

Arkadiy Dobkin: We still think that something similar will be continuous for... See you in the next quarter. And that's exactly explaining all this dynamics and competitive situation. We see that clients start in the programs. We participated in this bigger, better program than they were considered in the first half of 2023. So we think this acceleration that will be happening in the second half will give us an opportunity to demonstrate one, Who else? I just. I have loads of points which I was putting in, but that will be later. Who will live?

Speaker Change: Just.

Speaker Change: Okay.

<unk> three share points.

Speaker Change: Emulator.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Right definitely stronger new logo activity stronger new customer.

Speaker Change: Revenues don't forget that we do have the ramp down in Q1 and the one customer.

Speaker Change: And as Ark said, some kind of slower kind of decision, making but again generally the demand environment at least feels like its stabilizing and potentially improving.

Speaker Change: Thank you.

Speaker Change: Y O U.

Speaker Change: Utility work.

Arkadiy Dobkin: But you're right, definitely stronger, new logo activity, stronger, new customer revenues. Don't forget that we do have the ramp down in Q1 from the one customer, and as Ark said, some kind of slower decision making.

Speaker Change: <unk>.

Speaker Change: The pools.

Speaker Change: Sure.

Speaker Change: Kind of a full expected.

Speaker Change: From what you sell through the real growth.

Speaker Change: It's still a function of.

Speaker Change: Right.

Speaker Change: The words.

Speaker Change: We considered it will start to second one okay.

Arkadiy Dobkin: But again, generally, the demand environment at least feels like it's stabilizing and potentially improving. Thank you. Until, full speed is what we all expect, from margins and from real growth. It's still a function of.

Speaker Change: It's worth level, so conservative right, though at least we think is a discuss here.

Speaker Change: Great.

Arkadiy Dobkin: Right Demands. This Right Demands... We consider it will start to be realized, so the second part, yeah, that film. This year, definitely, less predictable before he was here.

Speaker Change: So what would be scope and instill.

Speaker Change: This list here.

Speaker Change: Definitely.

Speaker Change: Less predictable.

Speaker Change: Hello.

Speaker Change: Before before yes.

Speaker Change: We all know that it's not about us as to what was it.

Arkadiy Dobkin: We all know it, and it's not about us, it's about the whole IT sector. Should we do one last quick call or question and then wrap up? Thank you. Our final question comes from Sean Kennedy of Metehoo. Please go ahead.

Speaker Change: Correlates shipments.

Speaker Change: So we did one last quick question.

Speaker Change: Question of improper.

Speaker Change: Thank you. Our final question comes from the line of Sean Kennedy of Mizuho. Please go ahead.

Arkadiy Dobkin: Hi, everyone. Good morning, and thank you for taking my question. So I understand it's still very early for Gen AI, but what specific types of Gen AI capabilities are your clients most excited about currently? And do you expect those to change as the technology matures? So I think, still, there are... at this point.

Sean Kennedy: Hi, everyone. Good morning, and thank you for taking my question.

Sean Kennedy: Understand it's still very early on Shanghai, but what specific types of generic AI capabilities are your clients. Most excited about currently and you expect those to change as the technology matures.

Sean Kennedy: Yeah.

Sean Kennedy: Yeah.

Sean Kennedy: So I think Steve.

Speaker Change: Still there are.

Arkadiy Dobkin: A lot of experimentation and a lot of... kind of more straightforward thinking about Gen AI as it's practically available for end consumers and how this can change interfaces. And again, very straightforward. Everybody's thinking how to have the right access to the hybrid data between general LLMs and these specific ones, and most of the companies experimenting in this area are creating some type of compilers. And I'm talking about application areas and just utilizing Gen-AI as a productivity tool for individuals in workhorses or something.

Speaker Change: Good.

Speaker Change: A lot of experimentation.

Speaker Change: Hello, more straightforward CL king.

Speaker Change: Okay.

Jen.

Speaker Change: And once it's available practically as consumers and causes good <unk>.

Speaker Change: In some cases.

Speaker Change: Hey, guys very straightforward evolution can tell too.

Speaker Change: Got it alright excess to the diabetes data in general.

Speaker Change: Phil This specific was at loss.

Speaker Change: Company has experience in this area and create some type of co pilots and I am talking about application areas, and just which Eliza J and AI as a productivity tools for individuals and we're cautious ourselves I'm talking about.

Arkadiy Dobkin: I'm talking about like... capabilities, new insight. The difficulties of the visit will be changing quarter by quarter. So. And I think some exciting things which we've seen right now will become very quickly commodities, and much more sophisticated things will be happening in like 12 months. Thank you. Good morning.

Speaker Change: Inflation.

Speaker Change: Capabilities new insight.

Speaker Change: The difficulties.

Speaker Change: We will be changing quarter by quarter.

Speaker Change: So.

Speaker Change: And.

Speaker Change: I think some excited since which we see as right now wouldn't be found very quickly by mortgage and much more sophisticated <unk> 12 months ago.

Speaker Change: Got it thank you.

Speaker Change: Thank you Seth.

Arkadiy Dobkin: All right, thanks. Thank you. I will now turn the call back over to Arkadiy Dobkin, Chief Executive Officer and President, for closing. Thank you very much, as usual, for your questions. I think we've, it's been a pleasure this morning, driving the market and our performance in 2023, still actually critical for 2024. But again, we feel much better after showing that we can stabilize the revenue, the client base, and even little, but some growth versus the continuous decline which was happening during the previous four quarters.

Speaker Change: Alright. Thanks.

Speaker Change: Thank you I will now turn the call back over to Al Qaeda Top Kim Chief Executive Officer and President.

Speaker Change: Concluding remarks.

Speaker Change: Okay. Thank you very much for your ratios.

Speaker Change: Okay.

Speaker Change: This increase.

Speaker Change: And in general just.

Speaker Change: The Digitization is happening at the same time, we are still in that a lot of unknowns looks good to us and some trends which were.

Speaker Change: Driving the market and our performance in 2023 still actually critical for 2020 four but we.

Speaker Change: We feel like it wears off.

Speaker Change: Sure the biggest.

Speaker Change: Douglas.

Speaker Change: Revenues declined.

Speaker Change: David It was lethal, but some growth versus.

Speaker Change: Continuous decline, which was coming in.

Speaker Change: The previous four quarters.

Arkadiy Dobkin: Thank you very much, and I'll talk to you in three months. Thank you. Thank you. This concludes today's conference. Thank you for participating, and you may now go.

Speaker Change: Thank you very much and talk to two months.

Speaker Change: Thank you.

Speaker Change: Thank you. This concludes today's conference call. We thank you for participating and you may now disconnect.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: