Q2 2024 EPAM Systems Inc Earnings Call

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Operator: Today and welcome to the second quarter of 2024, EPAM Systems earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you.

Speaker Change: Good day and welcome to the second quarter of 2024 EPAM Systems Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to withdraw your question, please press star 1 again.

Operator: Speaker's Remarks Now there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. For Operator Assistance throughout the call, please press star 0. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Michael Shandall, Head of Investor Relations, to begin the conference. Mike, over to you.

Speaker Change: After the speaker's remarks, there will be a question and answer session.

Speaker Change: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Speaker Change: If you would like to withdraw your question, please press star 1 again.

Speaker Change: For operator assistance throughout the call, please press star zero.

Speaker Change: And finally, I would like to advise all participants that this call is being recorded. Thank you.

Michael Chandel: I'd like to welcome Michael Chandel, Head of Investor Relations to begin the conference. Mike, over to you. Good morning, everyone, and thank you for joining us today. As the operator just mentioned, I'm Michael Chandel, Head of Investor Relations. By now, you should have received your copy of the earnings release for the company's second quarter 2024 results. If you have not copies available on EPAM.com in the investor section with me on today's call or Arkadiy Dobkin, CEO and president and Jason Peterson, Chief Financial Officer.

Michael Shandall: I'd now like to welcome Michael Shandall, Head of Investor Relations, to begin the conference. Mike, over to you.

Mike Reschendel: Good morning, everyone, and thank you for joining us today. As the operator just mentioned, I'm Mike Reschendel, Head of Investor Relations. By now, you should have received your copy of the earnings release for the company's second quarter 2024 results. If you have not, a copy is available on epam.com in the investor section.

Michael Shandall: Good morning, everyone, and thank you for joining us today. As the operator just mentioned, I'm Mike Reschendel, Head of Investor Relations. By now, you should have received your copy of the earnings release for the company's second quarter 2024 results. If you have not, a copy is available on epam.com in the Investor section.

Mike Reschendel: 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. The statements are subject to risk and uncertainties as described in the company's earnings release and SEC violence. 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 will now turn the call over to Ark.

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

Michael Chandel: 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 filings. Additionally, all references to report results that are non-gap measures have been reconciled to the comparable gap measures and are available in our quarterly earnings materials located in the investor section of our website.

Speaker Change: 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 filings.

Arc: 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 Investors section of our website. With that said, I will now turn the call over to Ark.

Arkadiy Dobkin: With that said, I will now turn the call over to Ark. Thank you, Mike.

Arkadiy Dobkin: Thank you, Mike. Good morning, everyone.

Arkadiy Dobkin: Good morning, everyone. Thank you for joining us today. Our underlying business continues to show signs of stabilization. In the second quarter, we deliver it very strong growth in our health care and life sciences, vertical and strong growth in our emerging vertical. But we also saw some slight sequential improvements in financial services. In some of the verticals, namely business information and media, we continue to work through the impact of the rubbed downs from the few large clients we have mentioned before.

Arc: Thank you, Mike. Good morning, everyone. Thank you for joining us today.

Arkadiy Dobkin: Thank you for joining us today. First, I would like to start off with our second quarter results, which came generally in line with our expectations. We believe our performance in the second quarter of 2024 reflects our continuing strong execution and adaptability amidst a still complex demand environment. Let me share some current highlights of our business from Q2 up to today. Our underlying business continues to show signs of stabilization. In the second quarter, we delivered very strong growth in our health care and life sciences vertical and strong growth in our emerging vertical, but we also saw some slight sequential improvements in financial service.

Unknown Executive: First, I would like to start off with our second quarter results, which came generally in line with our expectations, but we also saw some slight sequential improvements in financial services. At the same time, clients are still cautious with larger programs, and our visibility towards significant increases continues to be constrained by a mix of clients' cost-saving priorities, delays in program starts, and clients' own business changes.

Arc: First I would like to start off with our second quarter results, which came generally in line with our expectations.

Arc: We believe our performance in the second quarter of 2024 reflects our continuous strong execution and adaptability amidst a still complex demand environment. Let me share some current highlights of our business from Q2 up to today.

Arc: Our underlying business continues to show signs of stabilization. In the second quarter, we delivered very strong growth in our health care and life sciences vertical and strong growth in our emerging verticals.

Arc: but we also saw some slight sequential improvements in financial services.

Arkadiy Dobkin: In some of the verticals, namely business information and media, we continue to work through the impact of the rubdowns from the few large clients we have mentioned. On the demand side, we do see broad-based signs of stabilization as well across both EMEA and North America. At the same time, clients are still cautious with larger programs, and now visibility towards a significant increase continues to be constrained by a mix of clients' cost-saving priorities, delays in program starts, and clients' own business changes. As a result of this complex environment, we are currently assuming no net improvements in overall demand for the remainder of the year.

Arc: In some of the verticals, namely business information and media, we continue to work through the impact of the rubdowns from the few large clients we have mentioned before.

Arkadiy Dobkin: On the demand environment, we do see broad-based signs of stabilization as well across both the media and North America. At the same time, clients are still cautious with larger programs, and now visibility towards significant increase continues to be constrained by a mix of clients who are saving priorities, delays in program starts and clients on business changes. As a result of this complex environment, we are currently assuming no net improvements in overall demand for the remainder of the year.

Arc: On the demand environment, we do see broad-based signs of stabilization as well across both EMEA and North America.

Arc: At the same time, clients are still cautious with larger programs, and our visibility towards significant increase continues to be constrained by a mix of clients' cost-saving priorities, delays in program starts, and clients' own business changes.

Arc: As a result of this complex environment, we are currently assuming no net improvements in overall demand for the remainder of the year.

Unknown Executive: Jason will provide more details of our updated outlook for 2020. To be clear, notwithstanding the overall demand picture, we are optimistic about certain sectors of our target market and our current portfolio returning to modest growth stories in the next two, three quarters, as we see it now, as well as increasing evidence that our consulting and advanced technology capabilities are driving new types of final opportunities for us. We believe this traditional EPAM advantage will continue to serve our clients well, especially as they turn from mostly cost-driven considerations back towards driving growth and innovation through the use of advanced technologies for their complex transformation and modernization.

Arkadiy Dobkin: Jason will provide more details of our updated outlook for 2020. To be clear, notwithstanding the overall demand picture, we are optimistic about certain sectors of our target market and our current portfolio returning to modest growth in the next two, or three quarters, as we see it now. Overall, while we adjust our offerings and our delivery mix to suit the parameters of the current demand environment, we continue to see significant traction in our data and analytics, core engineering, and digital engagement offerings, especially through the broad transformation of each with AI, as well as increasing evidence that our consulting and advanced technology capabilities are driving new top of the funnel opportunities for us.

Arkadiy Dobkin: Recent will provide more details of our updated outlook for 2024. To be clear, notwithstanding the overall demand fiction, we are optimistic about certain sectors of our target market and our current portfolio, returning to modest growth story in the next two to three quarters, as we see it now. In overall, while we adjust our offerings and our delivery mix to see the parameters of the current demand environment, we continue to see significant traction in our data and analytics, core engineering and digital engagement offerings, especially through the broad transformation of each with AI, as well as increasing evidence that our consulting and advanced technology capabilities are driving new top of the final opportunities for us.

Arc: Jason will provide more details of our updated outlook for 2024.

Jason Peterson: To be clear, notwithstanding the overall demand picture, we are optimistic about certain sectors of our target market and our current portfolio returning to a modest growth story in the next 2-3 quarters, as we see it now.

Arkadiy Dobkin: So, meanwhile, we remain focused on responsive remanaging our business in this part of the cycle, building on our strong fundamentals and ensuring that the PAM continues to be the partners of choice when the development environment improves.

Jason Peterson: In overall, while we adjust our offerings in our delivery mix to suit the parameters of the current demand environment, we continue to see significant traction in our data and analytics, core engineering, and digital engagement offerings, especially through the broad transformation of each with AI.

Jason Peterson: As well as increasing evidence that our consulting and advanced technology capabilities are driving new types of the final opportunities for us.

Arkadiy Dobkin: So meanwhile, we remain focused on responsibly managing our business in this part of the cycle, building on our strong fundamentals and ensuring that EPAM continues to be the partners of choice in the demand environment. Turning now to our global deliveries. In Europe, our differentiated capabilities continue to create significant opportunities for our clients to leverage the top talent on the most complex business and technical challenges. We believe this traditional EPAM advantage will continue to serve our clients well, especially as they turn from mostly cost-driven considerations back toward driving growth and innovation through the use of advanced technologies for their complex transformation and modernization.

Jason Peterson: So, meanwhile, we remain focused on responsibly managing our business in this part of the cycle, building on our strong fundamentals, and ensuring that EPAM continues to be the partners of choice for the demand environment improvement.

Arkadiy Dobkin: Turning now to our global delivery strategy. In Europe, our differentiated capabilities continue to create significant opportunities for our clients to leverage the top talent on their most complex business and technical challenges. We believe this traditional EPAM advantage will continue to serve our clients well, especially as they turn from mostly cost-driven considerations back to our driving growth and innovation through the use of advanced technologies for their complex transformation and modernization efforts. We are also continuously investing in our more recently established delivery hubs across Western Central Asia, which are emerging talent markets and where we are enabling strong and experienced tech talent to responsibly lead our future growth in the region.

Jason Peterson: so

Speaker Change: Turning now to our Global Delivery Strategy.

Jason Peterson: In Europe , our differentiated capabilities continue to create significant opportunities for our clients to leverage the top talent on their most complex business and technical challenges.

Jason Peterson: We believe this traditional EPAM advantage will continue to serve our clients well, especially as they turn from mostly cost-driven considerations back toward driving growth and innovation through the use of advanced technologies for their complex transformation and modernization efforts.

Unknown Executive: We are also continuously investing in our more recently established delivery hubs across Western and Central Asia, which are emerging talent markets and where we are enabling strong and experienced tech talent to responsibly lead our future growth in the region. In each of these geographies, we are investing in our existing and new technical capabilities, including crucial for the future AI data, ML, and predictive AI, and in corresponding IP development. In short, we are building full-service Gen-AI delivery practices through a network of Gen-AI X labs across major data centers to enable and scale Gen-AI-enabled client production.

Arkadiy Dobkin: We are also continuously investing in our more recently established delivery hubs across Western and Central Asia, which are emerging talent markets and where we are enabling strong and experienced tech talent to responsibly lead our future growth in the region. India remains a priority and is on track to become our largest delivery location by the end of the year.

Jason Peterson: We are also continuously investing in our more recently established delivery hubs across Western and Central Asia, which are emerging talent markets and where we are enabling strong and experienced tech talent to responsibly lead our future growth in the region.

Arkadiy Dobkin: In this context, we will be able to develop a new technology for our clients to be able to develop a new technology for our clients. We have built skills centers of excellence in data and analytics, digital marketing, commerce, Salesforce, SAP, and other key horizontal and vertical service lines. Our primary focus is on building a scale EPAM-grade quality engineering, while blending in with many unique enterprise-level capabilities present in India and not available in most of other EPAM locations around the globe.

Jason Peterson: India remains a priority and is on track to becoming our largest delivery location by the end of the year.

Arkadiy Dobkin: We have built scaled centers of excellence in data and analytics, digital marketing, commerce, Salesforce, SIP, and other key horizontal and vertical service lines. Our primary focus is on building at scale EPAM-grade quality engineering, while blending in with many unique enterprise-level capabilities present in India and not available in most of the other EPAM locations around the globe. We believe this approach will differentiate EPAM-India for our clients and create strong growth opportunities for them. We also continue to expand our core engineering capabilities in LATAM. In addition to Mexico and Colombia, we now have a third delivery hub in Argentina.

Jason Peterson: We have built scaled centers of excellence in data and analytics, digital marketing, commerce, Salesforce, SIP, and other key horizontal and vertical service lines.

Jason Peterson: Our primary focus is on building at scale EPAM-grade quality engineering, while blending in with many unique enterprise-level capabilities present in India and not available in most of other EPAM locations around the globe.

Arkadiy Dobkin: We believe this approach will differentiate EPAM India for our clients and create strong growth opportunities for our people. We also continue to expand our core engineering capabilities in Latam. In addition to Mexico and Colombia, we now have a so delivery hub in Argentina. We will continue a session in developing a new local talent across the region. In each of these years, we are investing in our existing and new technical capabilities, including crucial for the future GNI data, ML, and predictive AI, and corresponding IP development.

Jason Peterson: We believe this approach will differentiate EPAM-India for our clients and create strong growth opportunities for our people.

Jason Peterson: We also continue to expand our core engineering capabilities in LATAM. In addition to Mexico and Colombia, we now have a soft delivery hub in Argentina.

Arkadiy Dobkin: We will continue assessing and developing new local talent across the region. In each of these GEOs, we are investing in our existing and new technical capabilities, including crucial for the future AI data, ML, and predictive AI, and in corresponding IP development. In short, we are building full-service Gen-AI delivery practices through a network of Gen-AI X labs across major dev centers to enable and scale Gen-AI-enabled client production. In addition, both in India and LATAM, we are evolving into a strategy that includes not only differentiated delivery capabilities but also being able to offer compelling in-market presence and solutions, particularly as we seek to serve our global coal alliance in a more complete and strategic manner, which means building locally a much stronger partner ecosystem as well.

Jason Peterson: We will continue assessing and developing new local talent across the region.

Jason Peterson: In each of these Geos, we are investing in our existing and new technical capabilities, including crucial for the future Gen-AI data, ML, and predictive AI, and in corresponding IP development.

Arkadiy Dobkin: In short, we are building full service GNI delivery practices through a network of GNI-X labs across major deaf centers to enable and scale GNI-enable client production activities. In addition, both in India and Latam, we are evolving into strategies that include not only differentiated delivery capabilities but also being able to offer compelling in-market presence and solutions, particularly as we seek to serve our global clients in more complete and strategic manner, which means building locally a much stronger partner ecosystem as well. Finally, in all our locations, and specifically in our major client markets, we continue to focus on our client engaging programs and to improve our consulting and domain industry capabilities across our service offerings.

Jason Peterson: In short, we are building full-service GenAI delivery practices through a network of GenAIx labs across major dev centers to enable and scale GenAI-enabled client production activities.

Jason Peterson: In addition, both in India and LATAM, we are evolving into a strategy that includes not only differentiated delivery capabilities, but also being able to offer compelling in-market presence and solutions.

Jason Peterson: Particularly, as we seek to serve our global alliance in a more complete and strategic manner.

Jason Peterson: which means building locally a much stronger partner ecosystem as well.

Arkadiy Dobkin: Finally, in all our locations, and specifically in our major client markets, we continue to focus on our client engagement programs and improve our consulting and domain industry capabilities across our services. Now, let's get a bit more details on our GNI approach.

Jason Peterson: Finally, in all our locations, and specifically in our major client markets, we continue to focus on our client engagement programs and to improve our consulting and domain industry capabilities across our service offerings.

Arkadiy Dobkin: Now, let's turn in a bit more details for our general approach. For the last decade and despite the world challenges during the last several years, we are continuously a recognized leader in advanced technology, digital engineering and complex data transformation programs. This naturally extends to EPAM being regarded to the company, who understands the complexities of AI transformation, something we are doing for ourselves, our partners and our clients for some time now. Today, I would like to highlight our up-to-date progress in the area and how EPAM is helping clients pragmatically initiate and then move use cases beyond pilots into production deployments.

Jason Peterson: Now let's turn in a bit more details on our GNI approach.

Arkadiy Dobkin: For the last decade, and despite all challenges during the last several years, we have continuously been a recognized leader in advanced technology, digital engineering, and complex data transformation processes. This naturally extends to EPAM being regarded as a company that understands the complexities of AI transformation, something we have been doing for ourselves, our partners, and our clients for some time. Today, I would like to highlight our progress in that area and how EPAM is helping clients pragmatically initiate and then move use cases beyond pilots into production.

Jason Peterson: For the last decade, and despite all challenges during the last several years, we are continuously a recognized leader in advanced technology, digital engineering, and complex data transformation programs.

Jason Peterson: This naturally extends to EPAM being regarded as a company who understands the complexities of air transformation, something we are doing for ourselves, our partners, and our clients for some time now.

Jason Peterson: Today, I would like to highlight our up-to-date progress in that area and how EPAM is helping clients pragmatically initiate and then move use cases beyond pilots into production deployments.

Arkadiy Dobkin: Our current approach to AI transformation is three-dimensional. Dimension one, EPAM internal transformation, engineering, enablement investments. We set an ambition goal for our self-taught skill and actively train an absolute majority of the company on the usage of DNA and fundamentals and to do so both responsibly and with the palm level technical depth. A dedicated program was established to execute this and today with the help of our educational platforms, internal specialized tools and our global mentor in community close to 100 percent of the partners have gone through training and applying AI in their daily work activities.

Jason Peterson: Our current approach to AI transformation is three-dimensional.

Arkadiy Dobkin: Dimension One, EPAM Internal Transformation, and GNI Enablement Invest. We set an ambitious goal for ourselves to upskill and effectively train an absolute majority of the company on the fundamental usage of JNIF fundamentally, and to do so both responsibly and with EPAM-level technical depth. A dedicated program was established to execute this, and today, with the help of our educational platforms, internal specialized tools, and our global mentoring community, close to 100% of EPAMers have gone through training and are applying AI in their daily work activities.

Jason Peterson: Dimension One, EPAM Internal Transformation, and GNI Enablement Investments.

Jason Peterson: We set an ambition goal for ourselves to upskill and effectively train an absolute majority of the company on the usage of GNI fundamentals.

Jason Peterson: and to do so both responsibly and with EPAM-level technical depth.

Jason Peterson: A dedicated program was established to execute this, and today, with the help of our educational platforms, internal specialized tools, and our global mentoring community, close to 100% of epamers have gone through training and are applying AI in their daily work activities.

Arkadiy Dobkin: While most of the companies are announcing similar programs, we believe that during the last 24 months, our early and highly focused efforts across a broad range of EPAMers allow us to better understand future opportunities and to invest in differentiated IP and accelerators around GNI-enabled engineering and solutions. Our combination of training, IP, and open source-style internal initiatives have now become drivers of scaling our advanced Gen-AI practitioner communities across all EPAM organizational units in practice.

Unknown Executive: While most of the companies are announcing similar programs, we believe that during the last 24 months, our AI client project today has evolved from exploratory pilots and proof-of-concept late last year to now, EPAM being selected by clients as a primary AI partner with involvement in hundreds of Gen AI-led engagements. For Unity, the world-leading platform of gaming tools for creators to build and grow real-time games, apps, and experiences across multiple We help build Unity Muse.

Arkadiy Dobkin: While most of the companies are known as its similar programs, we believe that during the last 24 months, our early and highly focused efforts across a broad range of e-pammers allow us to better understand future opportunities and to invest in differentiated IP and accelerators around DNA enabled engineering and consolidation. Our combination of training, IP and open source style internal initiatives have now become drivers of scaling our advanced GNII practitioner communities across all the palm organizational unit and practices.

Jason Peterson: While most of the companies are announcing similar programs, we believe that during the last 24 months,

Jason Peterson: Our early and highly focused efforts across a broad range of EPAMers allow us to better understand future opportunities and to invest in differentiated IP and accelerators around GNI-enabled engineering and solutions.

Jason Peterson: Our combination of training, IP, and open source style internal initiatives have now become drivers of scaling our advanced GNI practitioner communities across all EPAM organizational units and practices.

Arkadiy Dobkin: We assume that well over 10 percent of the palmers are now advanced GNII technical practitioners. Well, over a thousand are becoming strong internally champions with ability to lead GNII enabled business solutions. We believe all that have enabled our dimension to client transformation opportunities. Our AI client project today have evolved from exploratory pilots and proof of concept late last year to now upon being selected by clients as a primary AI partner with involvement into hundreds of GNII-led engagements.

Arkadiy Dobkin: We assume that well over 10% of EPAMers are now advanced JNI technical practitioners, while over a thousand are becoming strong internal AI champions with the ability to lead JNI-enabled business solutions. We believe all that has enabled our dimension too.

Jason Peterson: We assume that well over 10% of EPAMers are now advanced GNI technical practitioners, while over a thousand are becoming strong internal AI champions with the ability to lead GNI-enabled business solutions.

Arkadiy Dobkin: Client Transformation Report. Our AI client project today has evolved from exploratory pilots and proof-of-concept late last year to now, EPAM being selected by clients as a primary AI partner with involvement in hundreds of Gen AI-led engagements. We are helping to change the full value chain of SDLC from one side and enabling implementation of real-gen AI-driven business use cases from another. Let me briefly highlight just a few IP invoices.

Jason Peterson: We believe all that have enabled our dimension too.

Speaker Change: Client Transformation Opportunities.

Jason Peterson: Our AI client projects today have evolved from exploratory pilots and proof-of-concept late last year to now upon being selected by clients as a primary AI partner with involvement into hundreds of Gen-AI-led engagements.

Arkadiy Dobkin: We are helping to change the full value chain of a GLC from one side and enabling implementation of real GNI-driven business use cases from another. Let me briefly highlight just a few IP investments. E-PAM dial is a unified GNI orchestration platform, helping enterprises, species, experimentation, innovation efforts to implement real business use cases, and GNII enabled solutions by connecting interminionful workflow and load balancing, a set of public and proprietary LLMs and SLMs together with different type of internal external data sources, AI native applications and customer dons.

Jason Peterson: We are helping to change the full value chain of SDLC from one side and enabling implementation of real-gen AI-driven business use cases from another.

Jason Peterson: Let me briefly highlight just a few IP investments.

Arkadiy Dobkin: EPAM Dial is a unified GNI orchestration platform, helping enterprises speed the experimentation and innovation efforts to implement real business use cases and GNI-enabled solutions by connecting to meaningful workflow and load balancing the set of public and proprietary LLMs and SLMs together with different types of internal and external data sources, AI native applications, and customers. EPAM AI Run is a Gen AI-powered delivery framework that accelerates the entire software EPAM IELITA is a comprehensive collaboration platform for teams that streamlines the development, accessibility, and management of large-language model assets, including prompts, templates, and agents.

Speaker Change: EPAMdial is a unified GNA orchestration platform.

Jason Peterson: Helping Enterprises.

Jason Peterson: Speed the Experimentation and Innovation Efforts to Implement Real Business Use Cases and Generate Enabled Solutions by Connecting Intermediate Workflow and Load Balancing to a Set of Public and Proprietary LLMs and SLMs.

Jason Peterson: together with different types of internal and external data sources, AI-native applications, and custom add-ons.

Arkadiy Dobkin: E-PAM AI run is a GNI-powered delivery framework that accelerates the entire software development life cycle and helps clients recognize the ROI of the AI investments by improving time-to-market speed after 30%. EPAM ILETA, a comprehensive collaboration platform for teams that streamline the development, accessibility and management of large-language model assets including prompts, templates and agents Now, if you specific examples for the clients, which evaporate across completely different user environments For Unity, the world-leading platform of gaming tools, for creators to build and grow real-time games, apps, and experiences across multiple platforms, we help build Unity Muse.

Speaker Change: EPAM AI Run is a Gen AI-powered delivery framework that accelerates the entire software development lifecycle and helps clients recognize ROI of their AI investments by improving time-to-market speed up to 30%.

Speaker Change: EPAM IELITA, a comprehensive collaboration platform for teams that streamline the development, accessibility, and management of large-language model assets, including prompts, templates, and agents.

Arkadiy Dobkin: A few specific examples for the clients, which operate across completely different user environments. For Unity, the world-leading platform of gaming tools for creators to build and grow real-time games, apps, and experiences across multiple platforms, we helped build Unity Mute.

Speaker Change: Now a few specific examples for the clients, which operate across completely different user environments.

Speaker Change: For Unity, the world-leading platform of gaming tools for creators to build and grow real-time games, apps, and experiences across multiple platforms. We help build Unity Muse.

Arkadiy Dobkin: From a multi-cloud migration to Microsoft Azure to adding JNI capabilities to make game creation faster and easier for over a million developers by using natural language prompts to generate sprites, textures, and animations, and also providing chat-based assistance and troubleshooting, as well as the ability to create behavior trees. For Xalius, a leader in healthcare system purpose-built solutions and industry-leading AI, we helped to develop a next-generation AI platform on AWS, enhancing DragonFly, Xalius' flagship product.

Arkadiy Dobkin: From a multi-cloud migration to Microsoft Azure, to adding generic capabilities to make game creation faster and easier for over a million developers, by using natural-language prompts to generate sprites, textures and animations, and also providing chat-based assistance and troubleshooting, as well as ability to use and create behavior trees. For Xalias, a leader in healthcare system purpose-built solutions and industry-leading AI, we help to develop a new generation AI platform on AWS and Hansen Dragonfly, Xalias flagship product.

Speaker Change: From a multi-cloud migration to Microsoft Azure, to adding GNI capabilities to make game creation faster and easier for over a million developers.

Speaker Change: by using natural language prompts to generate sprites, textures, and animations, and also providing chat-based assistance and troubleshooting, as well as the ability to easily create behavior trees.

Unknown Executive: For Xalius, a leader in healthcare system purpose-built solutions and industry-leading AI, we helped to develop a next-generation AI platform on AWS, enhancing DragonFly, Xalius' flagship product. Finally, all that, in turn, allows us to enable Dimension 3 for AI transformation, Extended Plasma.

Speaker Change: For Xalius, a leader in healthcare system purpose-built solutions and industry-leading AI, we helped to develop a next-generation AI platform on AWS, enhancing DragonFly, Xalius' flagship product.

Arkadiy Dobkin: The platform provides real-time data and predictive analytics to nurses, case managers, physician advisors, utilization management, and revenue cycle leaders across 500 hospitals and health systems with more than 500 players connected. Finally, for the IMF, as part of the modernization of their data platform, we built StartGPT, which is an SDMX-driven gen-AI application for statistical organizations allowing their users, economists, and statisticians to query, transform, analyze, visualize, and interpret statistical data using a natural language interface via a proprietary talk-to-you-data framework powered by an EPAM dial and an EPAM QuantHub accelerator. Initial results showed a 50% increase in research productivity and a 35% increase in research accuracy.

Arkadiy Dobkin: The platform provides real-time data and predictive analytics to nurses, case managers, physician advisors, utilization management and revenue cycle leaders, across 500 hospitals and health systems with more than 500 players connections. Finally, for the IMA as a part of modernization of the data platform, we build that GPT, which is a DMX-driven genAI application for statistical organizations allowing the users, economists and statisticians to query, transform, analyze visualized and interpret statistical data using a natural language interface where proprietary talk-to-you-data framework powered by E-PAM dial and E-PAM quant-half accelerators.

Speaker Change: the platform provide real-timem data and predic analytics to nurses case manr physician advisers withutilization management and revenue cycle leaders across five hundred hospitals and fell systems with mo than five con requires connections

Speaker Change: finally because i is a part of modernization of their data platform

Speaker Change: We built StartGPT, which is an SDMX-driven general application for statistical organizations relying on their users, economists, and statisticians to query, transform, analyze, visualize, and interpret data.

Speaker Change: statistical data using initial languagage interface by proprietary took to the data framework powered by pandal in pump one half acceitgenerators

Arkadiy Dobkin: Initial results showed a 50% increase in research productivity and 35% increase in research accuracy. In overall, we are seeing a significant rise of genAI-led engagements across every vertical and a very broad set of use cases. And this is now driving transformation in both front and customer experiences as well as significant backwaters and processes related use cases. Finally, all that in turn allowed us to enable Dimension 3 for AI transformation, extended platform network.

Speaker Change: Initial results showed a 50% increase in research productivity and 35% increase in research accuracy.

Arkadiy Dobkin: Overall, we are seeing a significant rise of GNI-led engagements across every vertical and a very broad set of use cases. And this is now driving transformation in both front and customer experiences as well as significant back office and process-related use cases. Finally, all that, in turn, allows us to enable Dimension 3 for AI transformation: Extended Partners.

Speaker Change: In overall, we are seeing a significant rise of Gen-AI lab engagements across every vertical and a very broad set of use cases.

Speaker Change: And this is now driving transformation in both front-end customer experiences as well as significant back-office and process-related use cases.

Speaker Change: Finally, all that in turn allows us to enable Dimension 3 for AI transformation, Extended Platinum Network.

Arkadiy Dobkin: First of all, because they saw that we were very practical in our approach. Our technology in the AI Transformation Program is much larger and more complex today than when we started just a few quarters ago, and encompasses both consulting and engineering services, as well as a broader range of partners. With more than 150 strategic partners, we are accelerating modernization, adjusting cloud-native architecture, and leveraging AI and advanced analytics, particularly when our clients' projects have a high degree of technical and business complexity.

Arkadiy Dobkin: First of all, because they saw that we are very practical in our approach. Our technology and AI transformation program are much larger and more complex today than where we started just a few quarters ago. And in compasses, both consulting engineering services as well as the broader range of partnerships. With more than 150 strategic partners, we are accelerating modernization, adapting cloud native architecture and leveraging AI and advanced analytics. Particularly when our clients project have a high degree of technical and business complexity.

Speaker Change: First of all, because they saw that we are very practical in our approach.

Speaker Change: Our Technology in Air Transformation Program

Speaker Change: are much larger and more complex today than where we started just a few quarters ago.

Speaker Change: and encompasses both consulting and engineering services, as well as a broader range of partnerships.

Unknown Executive: With more than 150 strategic partners, we are accelerating modernization, adjusting cloud-native architecture, and leveraging AI and advanced analytics. Google Cloud Talent Development Partners of the Year Award, recognized for our commitment to training, upskilling, and reskilling our team, cloud, and AI skills. It's easy to assume the next question, what is the revenue impact of this program? With that, I would like to pass to Jason to provide additional details on our results in Q2 and our future performance.

Speaker Change: With more than 150 strategic partners, we are accelerating modernization, adapting cloud-native architecture, and leveraging AI and advanced analytics.

Speaker Change: particular when our clients' project a high degree of technical and business complexity

Arkadiy Dobkin: We are our partners' partner of choice for making cooperative engagement real. In fact, just very recently, we've been named Partner of the Year by several of our cloud data and digital partners, including Databricks Disruption Partner of the Year, recognized for the industry-leading design and implementation of GNI-powered conversational interfaces, state-of-the-art machine learning, and large-language model framework.

Arkadiy Dobkin: We are our partners' partner of choice for making co-pressed engagement real. In fact, just very recently, we've been named Partner of the Year by several of our cloud data and digital partners, including Databricks Description Partner of the Year. Recognize for the industry leading design and implementation of DNA Powered Conversational Interfaces state of the art, machine learning and large language model frameworks. By the way, as elite level partner, we are one of only five companies with dedicated data brick center of excellence.

Speaker Change: We are our partner's partner of choice for making cooperative engagement real.

Speaker Change: In fact, just very recently we've been named Partner of the Year by several of our cloud data and digital partners, including Databricks Disruption Partner of the Year.

Speaker Change: Recognized for the industry-leading design and implementation of GNI-powered conversational interfaces, state-of-the-art machine learning, and large-language model frameworks.

Arkadiy Dobkin: By the way, as an elite-level partner, we are one of only five companies with a dedicated Databricks center of excellence. Google Cloud Talent Development Partner of the Year Award, recognized for our commitment to training, upskilling, and reskilling our team, cloud, and AI skills. Microsoft Gaming Partner of the Year, recognized for pushing the boundaries of creativity and technology. Mark and Commerce Tools, recognized for delivery a best-in-class modern commerce experience for our clients. It's easy to assume the next question. What is the revenue impact of this program? I guess the answer is probably predictable as well.

Speaker Change: By the way, as an elite level partner, we are one of only five companies with a dedicated Databricks Center of Excellence.

Arkadiy Dobkin: Google Cloud Talent Development Partners of the Year, they were recognized for commitment to training, upskilling and rescuing our team, cloud and AI skills. Microsoft Gaming Partner of the Year, recognized for the push and the boundaries of creativity and technology. Mark and Commerce Tools, recognized for delivery best in class modern commerce experience for our class.

Speaker Change: Google Cloud Talent Development Partner of the Year Award recognized for our commitment to training, upskilling, and reskilling our team, cloud, and AI skills.

Speaker Change: Microsoft Gaming Partner of the Year recognized for pushing the boundaries of creativity and technology.

Speaker Change: Mark and Commerce Tools, recognized for delivery best-in-class modern commerce experience for our clients.

Arkadiy Dobkin: It is easy to assume the next question. What is the revenue impact of these programs? I guess the answer is probably predictable as well. We are still in all the days of the AI wave. But at the same time, we are very optimistic about the accelerating pipeline opportunities coming from our elite transformation. And what that can bring downstream for us is a highly trusted and relevant partner. We remain focused expanding our efforts to drive demand.

Speaker Change: It's easy to assume the next question. What is the revenue impact of these programs?

Arkadiy Dobkin: We are still in the early days of the AI wave, but at the same time, we are very optimistic about the accelerating pipeline opportunities coming from AI-led transformation, and what that can bring downstream for us is a highly trusted and valid part. We remain focused, expanding our efforts to drive demand, remaining relevant to our clients and what they need, and proactively expanding our global market share. We also remain committed to managing our delivery footprint, expanding to cost-efficient locations, and generally optimizing our ways of working so we can continue to provide premium service at attractive value to our global clients.

Speaker Change: I guess the answer is probably predictable as well. We are still in the early days of the AI wave.

Speaker Change: but at the same time we are very optimistic about the accelerate pipeline opportunities coming from transformation and what that can bring downstream for us is a c trust itt weveest partner

Speaker Change: we remain focused expandingin our efforts to drive demand

Arkadiy Dobkin: Remaining relevant to our clients and what they need and actively expanding our global market share. We also remain committed to managing our delivery food print, expanding to cost efficient locations and generally optimizing our ways of working. So we can continue to provide premium service at attractive value to our global client base. I firmly believe that palm continues to be well positioned to capture rebounding market demand driven by lockdown pressures for legacy modernization, but needs for advanced customer centric solution and by significant interest on how to apply GNI engineering like capabilities to build new platform and solutions.

Speaker Change: Remaining relevant to our clients and what they need, and proactively expanding our global market share.

Speaker Change: We also remain committed to managing our delivery footprint, expanding to cost-efficient locations, and generally optimizing our ways of working so we can continue to provide premium service at attractive value to our global client base.

Arkadiy Dobkin: I firmly believe EPAM continues to be well-positioned to capture rebounding market demand, driven by long-term pressures for legacy modernization, but needs for advanced customer-centric solutions, and by significant interest in understanding how to apply Gen-AI and Gen-LI capabilities to build new platforms and solutions. With this, I would like to pass to Jason to provide additional details on our results in Q2 and our future performance.

Speaker Change: I firmly believe EPAM continues to be well-positioned to capture rebounding market demand, driven by long-term pressures for legacy modernization, but needs for advanced customer-centric solutions, and by significant interest to understand how to apply Gen-AI and Gen-LI capabilities to build new platforms and solutions.

Jason Peterson: With this, I would like to ask Jason to provide additional details on how it results in Q2 and our future performance.

Speaker Change: isthis i would like to quest adjacent to provide additional details on our results in q two and our future performance

Jason Peterson: Thank you, Ark, and good morning, everyone. In the second quarter, EPAM generated revenue of $1.147 billion, a year-over-year decrease of 2% on a reported basis, or 1.7% in constant currency terms, reflecting a negative foreign exchange impact of 30 basis points. Due to our exit from the Russian market, we no longer generate revenue from Russian clients. The impact of this exit had an approximate 50 basis point negative impact on year-over-year revenue growth.

Jason Peterson: Thank you, Ark, and good morning, everyone. In the second quarter, EPM generated revenue of 1.147 billion a year of a year decrease of 2% on a reported basis or 1.7% in constant currency terms reflecting a negative foreign exchange impact of 30 basis points due to our exit from the Russian market. We no longer generate revenue from Russian clients. The impact of this exit had an approximate 50 basis point negative impact on year of a year, rather than a growth. Excluding Russia revenues, year-of-year revenue for reported and constant currency would have decreased by 1.5% and 1.2% respectively.

Speaker Change: thank you ark and good morning everyone in the second quarter m generated revenue of one point one four seven billion the yearover-year decrease of two percent on a reported basis

Speaker Change: or 1.7% in constant currency terms, reflecting a negative foreign exchange impact of 30 basis points. Due to our exit from the Russian market, we no longer generate revenue from Russian clients. The impact of this exit had an approximate 50 basis point negative impact on year-over-year revenue growth.

Jason Peterson: Excluding Russia, year-over-year revenue for reported and constant currency would have decreased by 1.5% and 1.2%, respectively. Moving to our vertical performance, Life Sciences and Healthcare delivered very strong year-over-year growth of 22.4%. Grossman The quarter was driven by clients in both life sciences and health care. Consumer goods, retail, and travel decreased 7.7% on a year-of-year basis, largely due to declines in retail, partially offset by solid growth in travel. Financial services decreased 5.6% year-over-year, driven by softness in asset management, banking, and payments.

Speaker Change: Excluding Russia revenues, year-over-year revenue for reported and constant currency would have decreased by 1.5% and 1.2% respectively.

Jason Peterson: Moving to our vertical performance, life sciences in healthcare delivered very strong year-of-year growth of 22.4%. Growth in the quarter was driven by clients in both life sciences and healthcare. Consumer goods, retail and travel decreased 7.7% on a year-of-year basis, largely due to declines in retail. Personally, I'll set by solid growth in travel. Financial services decreased 5.6% year-of-year, driven by softness and asset management, banking, and payments. In the quarter, the vertical delivered slight sequential growth, indicating stabilizing demand. Software and high tech contract 3.7% year-of-year. Business Information Media declined 12.6% compared to Q2 2023. Revenue in the quarter was substantially impacted by the previously discussed ramp down of a top 20 client.

Speaker Change: Moving to our vertical performance, Life Sciences and Healthcare delivered very strong year-over-year growth of 22.4%.

Speaker Change: Growth in the quarter was driven by clients in both life sciences and health care. Consumer goods, retail, and travel decreased 7.7% on a year-over-year basis, largely due to declines in retail, partially offset by solid growth in travel.

Speaker Change: Financial services decreased 5.6% year-over-year, driven by softness in asset management, banking, and payments.

Jason: In the quarter, the vertical delivered slight sequential growth, indicating stabilizing demand. However, business information and media declined 12.6% compared to Q2 2023. Revenue in the quarter was substantially impacted by the previously discussed ramp-down of a top 20 client. And finally, our emerging verticals delivered solid year-over-year growth of 10.6%, driven by clients in energy and telecom.

Speaker Change: In the quarter, the vertical delivered slight sequential growth, indicating stabilizing demand.

Jason Peterson: In the quarter, the vertical delivered slight sequential growth, indicating stabilizing demand. Software and high tech contracted 3.7% year over year, and business information media declined 12.6% compared to Q2 2023.

Jason Peterson: Revenue in the quarter was substantially impacted by the previously discussed ramp-down of a top 20 client. Finally, our emerging verticals delivered solid year-over-year growth of 10.6%, driven by clients in energy and telecom. From a geographic perspective, America's largest region, representing 60% of our Q2 revenues, grew 1.8% year-over-year on a reported basis and 2% in constant currency terms.

Speaker Change: Software and high-tech contract 3.7% year-over-year.

Speaker Change: Business Information and Media declined 12.6% compared to Q2 2023.

Speaker Change: Revenue in the quarter was substantially impacted by the previously discussed ramp down of a top 20 client.

Jason Peterson: And finally, our emerging verticals delivered solid year-of-year growth of 10.6%. Ameya representing 38% of her Q2 revenues contracted 6% year-of-year in a 5.6% in constant currency. And finally, APEC declined 0.6% year-of-year or 0.2% in constant currency terms. It now represents 2% of our revenues. In Q2, revenues from our top 20 clients declined 3.7% year-of-year, while revenues from clients outside are top 20 to climb 1.1%. The relatively stronger performance of this latter group was driven by both new client and inorganic revenue contributions.

Speaker Change: And finally, our emerging verticals delivered solid year-over-year growth of 10.6%, driven by clients in energy and telecom. From a geographic perspective, America's largest region, representing 60% of our Q2 revenues, grew 1.8% year-over-year on a reported basis, and 2% in constant currency terms.

Jason: From a geographic perspective, America is our largest region, representing 60% of our Q2 revenues. America grew 1.8% year-over-year on a reported basis and 2% in constant currency terms. Moving down the income statement, our GAAP gross margin for the quarter was 29.3% compared to 30.9% in Q2 of last year. Non-GAAP gross margin for the quarter was 30.8% compared to 32.6% for the same quarter last year. Relative to Q2 2023, gross margin in Q2 2024 was negatively impacted by the strengthening of currencies associated with certain delivery locations, as well as the impact of compensation increases, including those resulting from our recent promotion campaign, which we were not able to offset through prices.

Jason Peterson: AMEA, representing 38% of our Q2 revenues, contracted 6% year-over-year and 5.6% in constant currency terms, and finally, APAC declined 0.6% year over year or 0.2% in constant currency terms, and now represents 2% of our revenue. In Q2, revenues from our top 20 clients declined 3.7% year for year, while revenues from clients outside our top 20 declined 1.1%. The relatively stronger performance of this latter group was driven by both new client and inorganic revenue contributions.

Speaker Change: Amaya, representing 38% of our Q2 revenues, contracted 6% year-over-year and a 5.6% in constant currency.

Speaker Change: And finally, APAC declined 0.6% year-over-year, or 0.2% in constant currency terms, and now represents 2% of our revenues.

Speaker Change: In Q2, revenues from our top 20 clients declined 3.7% year-over-year, while revenues from clients outside our top 20 declined 1.1%. The relatively stronger performance of this latter group was driven by both new client and inorganic revenue contributions.

Jason Peterson: Moving down the income statement, our GAAP gross margin for the quarter was 29.3% compared to 30.9% in Q2 of last year. Non-GAAP gross margin for the quarter was 30.8% compared to 32.6% for the same quarter last year. Relative to Q2 2023, gross margin in Q2 2024 was negatively impacted by the strengthening of currencies associated with certain delivery locations, as well as the impact of compensation increases, including those resulting from our recent promotion campaign, which we were not able to offset through prices. The negative impact of foreign exchange and compensation increases exceeded the benefit of improved utilization.

Jason Peterson: Moving down the income statement, our gap growth margins for the quarter was 29.3% compared to 30.9% in Q2 last year. Young gap growth margins for the quarter was 30.8% compared to 32.6% for the same quarter last year. Relative to Q2 2023, gross margin in Q2 2024 was negatively impacted by the strengthening of currencies associated with certain delivery locations, as well as the impact of compensation increases, including those resulting from our recent promotion campaign, which we were not able to offset through pricing.

Speaker Change: Moving down the income statement, our gap gross margin for the quarter was 29.3% compared to 30.9%.

Speaker Change: Q2 of last year. Non-GAP gross margin for the quarter was 30.8% compared to 32.6% for the same quarter last year.

Speaker Change: Relative to Q2 2023, gross margin in Q2 2024 was negatively impacted by the strengthening of currencies associated with certain delivery locations, as well as the impact of compensation increases, including those resulting from our recent promotion campaign, which we were not able to offset through pricing.

Jason Peterson: The negative impact of foreign exchange and compensation increases exceeded the benefit of improved utilization. Gap SGNA was 16.9% of revenue compared to 16.7% in Q2 last year. Non-gap SGNA in Q2 2024 came in at 14.3% of revenue compared to 14.8% in the same period last year. SGNA improvement in the quarter is the result of our ongoing focus on managing our cost base and increased efficiency and our spend. Gap income from operations was 121 million or 10.5% of revenue in the quarter compared to 144 million or 12.3% of revenue in Q2 last year.

Speaker Change: The negative impact of foreign exchange and compensation increases exceeded the benefit of improved utilization.

Jason: GAAP SG&A was 16.9% of revenue compared to 16.7% in the Q2 of last year. Non-GAAP SG&A in Q2 2024 came in at 14.3% of revenue compared to 14.8% in the same period last year, and our non-GAAP effective tax rate was 24.3%. Diluted earnings per share on a GAAP basis was $1.70. Our non-GAAP diluted EPS was $2.45. EPS was positively impacted by a Serbian government investment incentive received and recognized in the quarter, which improved Q2 diluted EPS by 6 cents. combined with the last few days of the quarter falling on a week.

Jason Peterson: Gap SG&A was 16.9% of revenue compared to 16.7% in the Q2 of last year. Non-Gap SG&A in Q2 2024 came in at 14.3% of revenue compared to 14.8% in the same period last year. SG&A improvement in the quarter is the result of our ongoing focus on managing our cost base and increased efficiency in our spend.

Speaker Change: GAAP SG&A was 16.9% of revenue compared to 16.7% in the Q2 of last year. non-GAAP SG&A in Q2 2024 came in at 14.3% of revenue compared to 14.8% in the same period last year.

Speaker Change: Past G&A improvement in the quarter is the result of our ongoing focus on managing our cost base and increased efficiency in our spend.

Jason Peterson: Gap income from operations was $121 million, or 10.5% of revenue in the quarter, compared to $144 million, or 12.3% of revenue in Q2 of last year. Non-gap income from operations was $175 million, or 15.2% of revenue in the quarter, compared to $191 million, or 16.3% of revenue in Q2 of last year. Our gap effective tax rate for the quarter came in at 26.3%, and our non-gap effective tax rate was 24.3%.

Speaker Change: Gap income from operations was $121 million, or 10.5% of revenue in the quarter, compared to $144 million, or 12.3% of revenue in Q2 of last year.

Jason Peterson: Non-gap income from operations was 175 million or 15.2% of revenue in the quarter compared to 191 million or 16.3% of revenue in Q2 of last year. Our gap effective tax rate for the quarter came in at 26.3% and our non-gap effective tax rate was 24.3%.

Speaker Change: non-GAAP income from operations was $175 million, or 15.2% of revenue in the quarter, compared to $191 million, or 16.3% of revenue in Q2 of last year.

Speaker Change: Our gap effective tax rate for the quarter came in at 26.3%, and our non-gap effective tax rate was 24.3%.

Jason Peterson: Diluted earnings per share on a GAAP basis was $1.70. Our non-GAAP diluted EPS was $2.45, compared to $2.64 in Q2 of last year, reflecting a 19 percent decrease year over year. EPS was positively impacted by a Serbian government investment incentive received and recognized in the quarter, which improved Q2 diluted EPS by 6 cents. Though the benefit from this incentive was contemplated in full, your guidance communicated during our Q1 earnings call. At that time, we had expected to receive the incentive and recognize the benefit in Q3.

Jason Peterson: Diluted earnings per share on a gap basis was at $1.70. Our non-gap diluted EPS was $2.45 compared to $2.64 in Q2 of last year, reflecting a 19-cent decrease year-over-year. EPS was positively impacted by a Serbian government investment incentive received and recognized in the quarter, which improved Q2 diluted EPS by six cents. Although the benefit from this incentive was contemplated in full-year guidance communicated during our Q1 earnings call, at that time we had expected to receive the incentive and recognize the benefit in Q3. In Q2, there were approximately 58.1 million diluted shares outstanding.

Speaker Change: Diluted Earnings Per Share on a Gap Basis was $1.70. Our Non-Gap Diluted EPS was $2.45.

Speaker Change: compared to $2.64 in Q2 of last year, reflecting a 19 cent decrease year over year. EPS was positively impacted by a Serbian government investment incentive received and recognized in the quarter, which improved Q2 diluted EPS by six cents.

Speaker Change: Although the benefit from this incentive was contemplated in full, your guidance communicated during our Q1 earnings call. At that time, we had expected to receive the incentive and recognize the benefit in Q3. In Q2, there were approximately 58.1 million delivered shares outstanding.

Jason Peterson: In Q2, there were approximately 58.1 million delivered shares outstanding. Turning to our cash flow and balance sheet, cash flow from operations for QT was $57 million compared to $89 million in the same quarter of 2023. Free cash flow was $52 million, compared to free cash flow of $82 million in the same quarter last year. At the end of Q2, DSO was 76 days, which compares to 73 days for Q1 2024 and 71 days for the same quarter last year. The uptick in DSO reflects an increase in the time some clients are taking in the review and approval of payments, combined with the last few days of the quarter falling on a week.

Jason Peterson: Turning to our cash flow and balance sheet, cash flow from operations for Q2 was 57 million compared to 89 million in the same quarter of 2023. Free cash flow was 52 million compared to free cash flow of 82 million in the same quarter of last year, here. At the end of Q2, DSO was 76 days, and compares to 73 days for Q1, 2020, and 71 days for the same quarter last year. The uptick in DSO reflects an increase in the time some clients are taking in the review and approval of payments, combined with the last few days the quarter following an awakened.

Speaker Change: According to our cash flow and balance sheet, cash flow from operations for QT was $57 million compared to $89 million in the same quarter of 2023. Free cash flow was $52 million compared to free cash flow of $82 million in the same quarter of last year.

Speaker Change: At the end of Q2, DSO was 76 days and compares to 73 days for Q1 2024 and 71 days for the same quarter last year. The uptick in DSO reflects an increase in the time some clients are taking in the review and approval of payments, combined with the last few days of the quarter falling on a weekend.

Jason Peterson: Share repurchases in the second quarter were approximately 1.16 million shares for $214 million at an average price of $184.97 per share. In June 2024, EPAM completed the share repurchase program authorized on February 13, 2023. Over a period of 16 months, 2.24 million shares were repurchased at an average share price of $222.90. On August 1, 2024, the Board of Directors approved a new share repurchase program with authorization to purchase up to another $500 million of EPAM common stock over a term of 24 months. We ended the quarter with approximately $1.8 billion in cash and cash equivalents.

Jason Peterson: Share repurchases in the second quarter were approximately 1.16 million shares for 214 million, at an average price of $184.97 per share. In June 2024, EPAM completed the share repurchase program on February 13, 2023. Over a period of 16 months, 2.24 million shares were repurchased at an average share price of $222.90.

Speaker Change: Share repurchases in the second quarter were approximately 1.16 million shares for $214 million at an average price of $184.97 per share.

Speaker Change: In June 2024, EPAM completed the share repurchase program authorized on February 13, 2023. Over a period of 16 months, 2.24 million shares were repurchased at an average share price of $222.90.

Jason Peterson: On August 1, 2024, the board of directors approved a new share repurchase program with authorization to purchase up to another 500 million of EPAM common stock over a term of 24 months. We ended the quarter with approximately 1.8 billion in cash and cash equivalent. Moving on to few operational metrics, we ended Q2 with more than 47,000 consultants, designers, engineers, and architects, but decline of 4.8% compared to Q2, 2023.

Speaker Change: On August 1, 2024, the Board of Directors approved a new share repurchase program with authorization to purchase up to another $500 million of EPAM common stock over a term of 24 months.

Speaker Change: We ended the quarter with approximately $1.8 billion in cash and cash equivalents.

Jason Peterson: Moving on to a few operational metrics, we ended Q2 with more than 47,000 consultants, designers, engineers, and architects, a decline of 4.8% compared to Q2 2023. Sequentially, production headcount remained unchanged as the company reduced headcount in certain on-site locations while continuing to hire in India. Our total headcount for the quarter was more than 52,650 employees.

Speaker Change: Moving on to a few operational metrics, we ended Q2 with more than 47,000 consultants, designers, engineers, and architects, a decline of 4.8% compared to Q2 2023.

Jason Peterson: Sequentially production headgown remained unchanged, as the company reduced headgown in certain on-site locations while continuing to hire in India. Our total headcount for the quarter was more than 52,650 employees. Utilization was 77.5% compared to 75.1% in Q2 last year, and 76.8% in Q1, 2024.

Speaker Change: Sequentially, production headcount remained unchanged as the company reduced headcount in certain on-site locations while continuing to hire in India.

Operator: Our total headcount for the quarter was more than 52,650 employees. We're experiencing growth in certain verticals, and our non-GAAP effective tax rate is expected to be approximately 24%, and non-GAAP diluted EPS is expected to be in the range of $2.65 to $2.73 for the quarter. We expect a weighted average share count of 57.4 million diluted shares outstanding. Tax effective Non-Gap Adjustments are expected to be around $13 million for each of the remaining quarters. Severance, driven by our cost optimization program, is expected to be around $10 million for each of the remaining quarters.

Speaker Change: Our total headcount for the quarter was more than 52,650 employees.

Jason Peterson: However, on-site utilization remains below targeted levels, and the company will continue to take actions to optimize on-site resource levels to improve utilization.

Speaker Change: Utilization was 77.5% compared to 75.1% in Q2 of last year and 76.8% in Q1 2024.

Jason Peterson: Utilization was 77.5% compared to 75.1% in Q2 of last year and 76.8% in Q1 2024. However, onsite utilization remains below targeted levels, and the company will continue to take actions to optimize onsite resource levels to improve utilization. Now let's turn to our business outlook. Although client demand has stabilized, we continue to see very little improvement in the near-term demand environment. We're experiencing growth in certain verticals, seeing relatively high levels of new logo activity and working with clients to bring Gen AI programs into production.

Speaker Change: However, on-site utilization remains below targeted levels, and the company will continue to take actions to optimize on-site resource levels to improve utilization.

Jason Peterson: Now, let's turn to our business outlook. Although client demand has stabilized, we continue to see very little improvement in the near-term demand environment. We are experiencing growth in certain verticals, seeing relatively high levels of new logo activity and working with clients to bring GNII programs into production. We are also beginning to see some constructive improvement in client discussions with regards to future programs. But decision-making continues to be relatively cautious, as some clients continue to have challenges with their own end markets, and revenue generated by individual new logo accounts is on average less than that generated in prior years. Although we believe clients are beginning to more actively engage around new initiatives, our guidance assumes macroeconomics stability with no improvement in the aggregate demand environment for the remainder of the year.

Speaker Change: Now let's turn to our business outlook. Although client demand has stabilized, we continue to see very little improvement in the near-term demand environment. We are experiencing growth in certain verticals, seeing relatively high levels of new logo activity, and working with clients to bring Gen-AI programs into production.

Speaker Change: We are also beginning to see some constructive improvement in client discussions with regards to future programs.

Jason Peterson: We're also beginning to see some constructive improvement in client discussions with regard to future programs, but decision-making continues to be relatively cautious, as some clients continue to have challenges with their own end markets, and revenue generated by individual new logo accounts is, on average, less than that generated in prior years. Although we believe clients are beginning to more actively engage around new initiatives, our guidance assumes macroeconomic stability with no improvement in the aggregate demand environment for the remainder of the year. We are hopeful that a change in the tone of client conversations will result in an improved demand environment in 2025.

Speaker Change: But decision making continues to be relatively cautious, as some clients continue to have challenges with their own end markets, and revenue generated by individual new logo accounts is on average less than that generated in prior years.

Speaker Change: Although we believe clients are beginning to more actively engage around new initiatives, our guidance assumes macroeconomic stability with no improvement in the aggregate demand environment for the remainder of the year. We are hopeful that change in the tone of client conversations will result in an improved demand environment in 2025.

Jason Peterson: We are hopeful that change in the tone of client conversations will result in an improved demand environment in 2025. For the remainder of 2024, we are expecting a slight increase in Q3 revenue relative to Q2 driven by greater build days in the quarter substantially offset by higher vacation levels. We are expecting a modest sequential decline in Q4 revenues driven largely by some of the seasonal factors mentioned previously. We are maintaining our focus on demand generation and we'll continue to prioritize revenue growth for the remainder of 2024.

Jason Peterson: For the remainder of 2024, we are expecting a slight increase in Q3 revenue relative to Q2, driven by greater billable days in the quarter, substantially offset by higher vacation levels. We are expecting a modest sequential decline in Q4 revenues, driven largely by some of the seasonal factors mentioned previously. We're maintaining our focus on demand generation and will continue to prioritize revenue growth for the remainder of 2024. At the same time, we are taking steps to improve cost efficiency and on-site utilization, and now expect to operate at a higher level of profitability this fiscal year. Finally, our operations in Ukraine continue to run at high levels of utilization, a testament to our team's dedication and focus on maintaining uninterrupted quality of delivery.

Speaker Change: For the remainder of 2024, we are expecting a slight increase in Q3 revenue relative to Q2, driven by greater bill days in the quarter, substantially offset by higher vacation levels. We are expecting a modest sequential decline in Q4 revenues, driven largely by some of the seasonal factors mentioned previously.

Speaker Change: We are maintaining our focus on demand generation and will continue to prioritize revenue growth for the remainder of 2024. At the same time, we are taking steps to improve cost efficiency and on-site utilization and now expect to operate at a higher level of profitability in the fiscal year.

Jason Peterson: At the same time, we are taking steps to improve cost efficiency and on-site utilization and now expect to operate at a higher level of profitability in the fiscal year. Finally, our operations in Ukraine continue to run at high levels of utilization. The testament to our team's dedication and focus on maintaining uninterrupted quality of delivery. Our guidance assumes that we will continue to be able to deliver from our Ukraine delivery centers at productivity levels similar to levels achieved in 2023.

Speaker Change: Finally, our operations in Ukraine continue to run at high levels of utilization, a testament to our team's dedication and focus on maintaining uninterrupted quality of delivery.

Jason Peterson: Our guidance assumes that we will continue to be able to deliver from our Ukraine delivery centers at productivity levels similar to levels achieved in 2023. Moving to our full-year outlook, revenue is now expected to be in the range of $4.590 to $4.625 billion, a negative growth rate of 1.8% at the midpoint of the range. The impact of war and changing growth is expected to have a positive impact of approximately 10 basis points.

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

Jason Peterson: Moving to our full-year outlook, revenue is now expected to be in the range of 4.590 to 4.625 billion, a negative growth rate of 1.8% and the midpoint of the range. The impact of foreign exchange and growth is expected to have a positive impact of approximately 10 basis points. At this time, we expect approximately 1% of revenue contribution from already completed acquisitions. We expect gap income operations to now be in the range of 10.5% to 11% and non-gap income operations to now be in the range of 15.5% to 16%.

Speaker Change: Moving to our full-year outlook. Revenue is now expected to be in the range of $4.590 to $4.625 billion, a negative growth rate of 1.8% and the midpoint of the range.

Speaker Change: The impact of foreign exchange on growth is expected to have a positive impact of approximately 10 basis points.

Jason Peterson: At this time, we expect approximately 1% of revenue contribution from the already completed acquisition. We expect gap income operations to now be in the range of 10.5% to 11%, and non-GAAP income from operations to now be in the range of 15.5 to 16%. We expect our gap-effective tax rate to now be 21 percent. Our non-gap-effective tax rate, which excludes excess tax benefits related to stock-based compensation, will continue to be 24 percent. For earnings per share, we expect the gap to loaded EPS will now be in the range of $7.18 to $7.38 for the full year, and non-GAAP diluted EPS will now be in the range of $10.20 to $10.40 for the full year.

Speaker Change: At this time we expect approximately 1% of revenue contribution from already completed acquisitions.

Speaker Change: We expect gap income operations to now be in the range of 10.5% to 11%.

Speaker Change: and non-GAAP income from operations to now be in the range of 15.5 to 16 percent.

Jason Peterson: We expect a gap effect of tax rate to now be 21% or non-gap effect of tax rate which excludes excess tax benefits related to stock-based compensation will continue to be 24%. For earnings per share, we expect the gap deluded EPS will now be in the range of $7.18 to $7.38 for the full year and non-gap deluded EPS will now be in the range of $10.20 to $10.40 for the full year. We now expect weighted average share count of 57.9 million fully deluded shares outstanding.

Speaker Change: We expect our GAAP-effective tax rate to now be 21%, our non-GAAP-effective tax rate, which excludes excess tax benefits related to stock-based compensation, will continue to be 24%.

Speaker Change: For earnings per share, we expect the GAAP-diluted EPS will now be in the range of $7.18 to $7.38 for the full year.

Speaker Change: and non-GAAP diluted EPS will now be in the range of $10.20 to $10.40 for the full year. We now expect a weighted average share count of 57.9 million fully diluted shares outstanding.

Jason Peterson: We now expect a weighted average share count of 57.9 million fully diluted shares outstanding. Moving to our Q3 2024 outlook, we expect revenue to be in the range of 1.145 to 1.155 billion, producing a year over year decline of 0.2% at the midpoint of the range. And on a constant currency basis, we expect Q3 revenue to be flat year over year.

Jason Peterson: For the third quarter, we expect GAAP income from operations to be in the range of 10% to 11%, and non-GAAP income from operations to be in the range of 16 to 17%. We expect our gap effective tax rate to be approximately 24%, and our non-GAAP effective tax rate to be approximately 24%. For earnings per share, we expect gap alluded EPS to be in the range of $1.75 to $1.83 for the quarter, and non-GAAP diluted EPS to be in the range of $2.65 to $2.73 for the quarter.

Jason Peterson: Moving to our Q3 2024 outlook, we expect revenues to be in the range of 1.145 to 1.155 billion, producing a year-to-year decline of 0.2% at the midpoint of the range and on a constant currency basis, we expect Q3 revenues to be flat year-to-year. For the third quarter, we expect gap income from operations to be in the range of 10% to 11% and non-gap income from operations to be in the range of 16% to 17%.

Speaker Change: Moving to our Q3 2024 Outlook, we expect revenue to be in the range of $1.145 million.

Speaker Change: to $1.155 billion, producing a year-over-year decline of 0.2% at the midpoint of the range. And on a constant currency basis, we expect Q3 revenue to be flat year-over-year.

Speaker Change: For the third quarter, we expect gap income from operations to be in the range of 10% to 11%, and non-gap income from operations to be in the range of 16% to 17%.

Jason Peterson: We expect our gap effect of tax rate to be approximately 24% and our non-gap effect of tax rate to be approximately 24%. For earnings per share, we expect the gap deluded EPS to be in the range of $1.75 to $1.83 for the quarter. And non-gap deluded EPS to be in the range of $2.65 to $2.73 for the quarter. We expect a weighted average share count of 57.4 million deluded shares outstanding.

Speaker Change: We expect our gap effective tax rate to be approximately 24%.

Speaker Change: and our non-GAAP effective tax rate to be approximately 24%.

Speaker Change: earurnnings per share we expect gampsolut epps to be the range of and seventy-five cents to one doll and eighty-three cents for the quarter

Speaker Change: and non-GAAP diluted EPS to be in the range of $2.65 to $2.73 for the quarter. We expect a weighted average share count of 57.4 million diluted shares outstanding.

Jason Peterson: We expect a weighted average share count of 57.4 million diluted shares outstanding. Finally, a few key assumptions that support our gap to non-gap measurements for the remainder of the year. Stock-based compensation expense is expected to be approximately $45 million for each of the next two quarters, and amortization of intangibles is expected to be approximately $6 million for each of the remaining quarters. The impact of foreign exchange is expected to be a $1 million loss for each of the remaining quarters.

Jason Peterson: Finally, a few key assumptions that support our gap to non-gap measurements for the remainder of the year. Stock-based compensation expense is expected to be approximately 45 million for each of the next two quarters. Emerization of intangibles is expected to be approximately 6 million for each of the remaining quarters. The impact of foreign exchange is expected to be a $1 million loss for each of the remaining quarters. Tax effect of non-gap adjustments is expected to be around 13 million for each of the remaining quarters. We expect excess tax benefits to be around 1 million for each of the remaining quarters. Severance driven by our cost optimization program is expected to be around 10 million for each of the remaining quarters.

Speaker Change: Finally, a few key assumptions that support our gap to non-gap measurements for the remainder of the year. Stock-based compensation expense is expected to be approximately $45 million for each of the next two quarters.

Speaker Change: Amortization of intangibles is expected to be approximately 6 million for each of the remaining quarters. The impact of foreign exchange is expected to be a $1 million loss for each of the remaining quarters.

Jason Peterson: Tax Effective Non-Gap Adjustments are expected to be around $13 million for each of the remaining quarters. We expect excess tax benefits to be around $1 million for each of the remaining quarters. Severance driven by our cost optimization program is expected to be around $10 million for each of the remaining quarters. Finally, one more assumption outside of our gap to non-gap items: with our significant cash position, we are generating a healthy level of interest income and are now expecting interest and other income to be approximately $13 million for each of the remaining quarters.

Speaker Change: Tax Effective Non-Gap Adjustments is expected to be around $13 million for each of the remaining quarters.

Speaker Change: We expect excess tax benefits to be around $1 million for each of the remaining quarters.

Speaker Change: Severance Driven Buyer Cost Optimization Program is expected to be around $10 million for each of the remaining quarters.

Operator: Finally, one more assumption outside of our gap to non-gap items: with our significant cash position, we are generating a healthy level of interest income and are now expecting interest and other income to be approximately $13 million for each of the remaining quarters. Lastly, my continued thanks to all our employees for their dedication and focus on serving our clients and driving results for EPAM.

Jason Peterson: Finally, one more assumption outside of our gap to non-gap items with our significant cash position. We are generating a healthy level of interest income and are now expecting interest in other income to be approximately 13 million for each of the remaining quarters. While we work our way through the cycle of load demand, we will continue to run an EPM efficiently, positioning the company to capitalize on a more normalized demand environment.

Speaker Change: Finally, one more assumption outside of our gap to non-gap items. With our significant cash position, we are generating a healthy level of interest income and are now expecting interest and other income to be approximately $13 million for each of the remaining quarters.

Jason Peterson: While we work our way through this cycle of lower demand, we will continue to run EPAM efficiently, positioning the company to capitalize on a more normalized demand environment. Lastly, my continued thanks to all our employees for their dedication and focus on serving our clients and driving results for EPAM. Operator, let's open the call to questions.

Speaker Change: While we work our way through this cycle of lower demand, we will continue to run EPAM efficiently, positioning the company to capitalize on a more normalized demand environment.

Jason Peterson: Lastly, my continued thanks to all our employees for their dedication and focus on serving our clients and driving results for EPAM.

Speaker Change: Lastly, my continued thanks to all our employees for their dedication and focus on serving our clients and driving results for EPAM. Operator, let's open the call up for questions.

Operator: Operator, let's open the call for questions. If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. We ask that you limit your questions to one and one follow up so we are able to take as many questions as possible.

Operator: If you wish to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced. We ask that you limit your questions to one and one follow-up so we are able to take as many questions as possible. Your first question comes from the line of Maggie Nolan on William Blair. Your line is open.

Speaker Change: If you wish to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced.

Operator: We ask that you limit your questions to one and one follow-up so we are able to take as many questions as possible.

Speaker Change: We ask that you limit your questions to one and one follow-up, so we are able to take as many questions as possible.

Jason Peterson: Your first question comes in line with Maggie Nolan of William Blair. Your line is open. Thank you. I wanted to dig into the utilization and the dynamics between onsite and offshore. First of all, what percentage of the workforce is considered to be onsite this quarter and then is offshore utilization running higher than what you view is sustainable to offset some of that weakness on onsite because you're not too far off from your historical range here.

Speaker Change: Your first question comes from the line of Maggie Nolan of William Blair. Your line is open.

Maggie Nolan: Thank you. I wanted to dig into the utilization and the dynamics between onsite and offshore. So first of all, what percentage of the workforce is considered to be offshore?

Jason Peterson: Yeah, I think we feel that the offshore utilization is actually quite healthy and I'm struggling right now to remember exactly what our onsite percentage is but from a total headcount but from the utilization standpoint, it's definitely lower than we would traditionally run at. And it continues to be the area that I think we find ourselves somewhat challenged in and so it probably is also contributing somewhat to revenue growth for the remainder of the year where we continue to see more demand for offshore and incrementally more demand for India.

Maggie Nolan: Thank you. I wanted to dig into the utilization and the dynamics between on-site and off-shore

Maggie Nolan: so first of all what percentage of the workforce is considered to be on site this quarter and then is offshore utilization running higher than what you view is sustainable to to offset some of that weakkmiss on on site because you're not too our offerfrom your historical range here

Jason Peterson: Yeah, I think we feel that the offshore utilization is actually quite healthy, and I'm struggling right now to remember exactly what our on-site percentage is from a total headcount, but from a utilization standpoint, it's definitely lower than we would traditionally run at, and it continues to be the area that I think we find ourselves somewhat challenged in, and so it probably is also contributing somewhat to revenue growth for the remainder of the year, where we continue to see more demand for offshore and incrementally more demand for India, and again, continue to run at somewhat lower levels of utilization on-site, and that's something that we are working to address both through demand generation and also through taking some actions, as I referred to, in my prepare for March...

Speaker Change: Yeah, I think we feel that the offshore utilization is actually quite healthy.

Speaker Change: and i'm struggling right now to remember exactly what are onsite percentagees but from from a total headcountst but from the utilization standpoint it'sdefinitely lower than we would pecientally run at

Speaker Change: And it continues to be the area that I think we find ourselves somewhat challenged in, and so it probably is also contributing somewhat.

Speaker Change: to revenue growth for the remainder of the year where we continue to see more demand for offshore and incrementally more demand for India.

Jason Peterson: And again, continue to run at somewhat lower levels of utilization onsite and that's something we are working to address both through demand generation and also through taking this action since I referred to in my in my paper marks.

Speaker Change: And again, continue to run at somewhat lower levels of utilization on site. And that's something that we are working to address both through demand generation and also through taking some actions as I referred to in my prepared remarks.

Maggie Nolan: All right, and then somewhat related, just building on that, the improvement in the margin outlook, is that primarily related to those actions that you want to take on utilization? Are there other levers you're pulling? And have you already seen some progress here in the third quarter to fuel that optimism in the increased number that you gave? No, absolutely. And so the focus has been

Jason Peterson: All right, and then somewhat related just building on that the improvement in the margin outlook is that primarily related to those actions that you want to take on utilization or the other levers you're pulling and have you already seen some progress here in the third quarter to fuel that optimism and the increased number that you gave. No, absolutely, and so the focus has been on sort of cost optimization after we you know, we set our expectations for for revenue growth so we've been more efficient in corporate functions in SNA.

Speaker Change: And then somewhat related, just building on that, the improvement in the margin outlook.

Speaker Change: Is that primarily related to those actions that you want to take on utilization? Are there other levers you're pulling? And have you already seen some progress here in the third quarter to fuel that optimism in the increased number that you gave?

Jason Peterson: No, absolutely. And so the focus has been on sort of cost optimization after we set our expectations for revenue growth. So we've been more efficient in corporate functions and SG&A. We've been working on utilization. And so, yeah, the actions that we intended to take are underway. And, you know, it is beginning to show up probably even in a little bit of the benefit that we saw in profitability in Q2.

Speaker Change: No, absolutely. And so the focus has been on sort of cost optimization after we, you know, we set our expectations for revenue growth.

Jason Peterson: We've been working on utilization and so yeah, the actions that we intended to take are underway and you know, it is beginning to show up probably even in a little bit of the benefit that we saw in profitability and Q2. Thanks Jason.

Speaker Change: So we've been more efficient in corporate functions in SG&A. We've been working on utilization. And so, yeah, the actions that we intended to take are underway. And, you know, it is beginning to show up probably even in a little bit of the benefit that we saw in profitability in Q2.

Operator: Your next question comes from the line of Brian Bergin from TDCon. Your line is open.

Operator: Your next question comes from the line of Brian Bergin from TD Con. Your line is open.

Arkadiy Dobkin: Your next question comes line of Brian Bergen from TDCon your line is open. Hi guys, good morning. Thank you. I hear you on the overall complex demand environment. I wanted to dig in on the demand progression and the top accounts that you saw over the last three months as well as just how you see the top clients particularly the top five to 10 performing in the second half in it. And as you exit this year.

Jason Peterson: Got it. Thanks, Jason.

Speaker Change: and

Speaker Change: Your next question comes from the line of Brian Bergin from TDCon. Your line is open.

Bryan Bergin: Hi Guys. Good morning. Thank you. I heard you on the overall complex demand environment. I wanted to drill in on the demand progression in the top accounts that you saw over the last three months, as well as just how you see the top clients, particularly, you know, the top five to 10, performing in the second half and as you exit this year.

Brian Bergin: higu goodmorning thank you i hear on the overall complex demand environment i wanted to dig on the mand progression in the top accounts that yes saw over the last three months as well as just how you see the top clients particularly that you know the top five to ten performing in the second half and as you exit this year

Arkadiy Dobkin: So I think despite the apparent decline for the top five, there is only one. We have a client which is declining, and this is basically a continuation of the trend which we saw before. And even this client declined kind of... Get in, get in the lead, and get a more stable environment right now. So, but in general, it's exactly like we commented before. It is pretty stable.

Arkadiy Dobkin: So I think despite of the up to quality of the client for the top five, there is only one. Client, which is declining, and this is basically continuation of the trend which we saw before. And even this client decline kind of getting less and getting more stable is what happened right now. So, but in general, it's exactly like we commented before. It is pretty stable. Yeah, and not talked by a client. And this is the one that we talked about in the past, which is a European business information immediate client.

Speaker Change: so i think er in pite of the obicar of decl for the duou five the isreason you want

Bryan Bergin: Lightning, which is declining, and this is basically a continuation of the trend which we saw before. And even this client decline kind of...

Speaker Change: This is basically a continuation of the trend which we saw before, and even this client declined.

Speaker Change: get and get less and

Speaker Change: This is more stable environment right now. But in general, it's exactly like we commented before. It is pretty stable. Yeah, and our top five clients is the one that we talked about in the past, which is the European Business Information and Media client.

Arkadiy Dobkin: And our top five clients are the one that we've talked about in the past, which is a European business information and media client.

Bryan Bergin: Okay, that's helpful. And on the Gen AI front, can you dig in a little bit more on the progression of Gen AI-related work as far as maybe any rough quantification on the size of some of these programs and the mix of really the POCs that are moving into production? So.

Arkadiy Dobkin: Okay, that's helpful. And that is on the Genai front. Can you dig in a little bit more on the progression of Genai related work as far as just maybe any rough quantification on the size of some of these programs and the mix of really the POCs that are moving into production. So, it is a pretty challenging, especially when we think that we're trying to understand how some of our colleagues 25 is and it's very much around the world.

Speaker Change: okay that's awful and thenthat is got on the gen ai front canyou dig a little bitmore on the progression of genai related work as far as just maybe any rough quantification on the size of some of these programs and the mix of really the p o c s that are moving into production

Arkadiy Dobkin: So, it is pretty challenging, especially when you're thinking that... We're trying to understand how some of our colleagues, 25 of them, and it's very much all over the map. So that's why, for I want you an internal understanding and progression with a kind of pure, generic, related practice and some influence on this pure type of stuff.

Speaker Change: So, it is pretty challenging, especially when you're thinking that...

Speaker Change: We're trying to understand how...

Speaker Change: and some of our

Speaker Change: Alex quantified this and it's very much all around the map. So that's why.

Arkadiy Dobkin: So, that's why our even internal understanding and progression with a kind of pure Genai related practice and some influence, gravy and so on and so on. So, from this pure type of stuff, there's a lot of smoke you see now, approaching high, hundreds of thousands or more millions of dollars. This is already starting to happen. So, and this is dozens in our case. And again, it's very difficult to compare Apple to Apple when we hear some numbers from computer.

Speaker Change: or

Speaker Change: or even internal.

Speaker Change: Understanding and Progression. We have kind of pure GNI-related projects and some influence, revenue, and so on and so on.

Arkadiy Dobkin: There's a lot of small POC now approaching. Hi, and Research Founders for more millions of dollars; this is already starting to happen. So, and this is dozens in our case. And again, it's very difficult to compare Apple to Apple when we're hearing some numbers wrong. At the same time, from the influence point of view, it started to go to tens of millions and was approaching hundreds of millions as well. So, very different even from... 6ix9ine

Speaker Change: this fewer type ofcar a lot of small you see our approation

unknown: Transcription by CastingWords With millions of dollars, this is already starting to happen.

Speaker Change: hundreds of thousands or

Speaker Change: More millions of dollars, this is already starting to happen.

Speaker Change: so this is dozenens in our case and again it's very difficult to compare whole tple when we hear some numbers grow

Arkadiy Dobkin: At the same time, from influence point of view, it started to go already to 10 cents, approaching Congress minutes as well. So, very different even from six, nine months ago. Okay, understood. Thank you. Still, still, if you think about it, it's a very small portion of our area. And I think the general trend that when during the PUC, there is a confirmation, the potential, potential ROI and excitement. Then, it's coming back to the technical debt, which we were talking about.

Speaker Change: computation at the same time from influence point inter view is started to to go reallyready to tance some oper congress units as well

Speaker Change: so very different even from

Speaker Change: six, nine months ago.

Bryan Bergin: Okay, I understand. Thank you.

Arkadiy Dobkin: Still, still, if you think about it, it's a very small portion of our revenue. And I think the general trend is that when during the POC, there is confirmation of potential potential ROI and excitement, then it's coming back to the technical debt, which we were talking about, during the last quarter, and companies realize that to actually get the benefit of this, it's required really, really in the Westman and look at some data from the New Zealand program, which is much... Bigger and require much more effort, and that's actually one of the showstoppers to real progression because they are not ready yet.

Speaker Change: ok i understood thank you

Speaker Change: Still, if you think about it, it's a very small...

unknown: portion of our revenue. And I think the general trend is that when during the POC, there is a because they're not really.

Speaker Change: portion of our revenue and i think general peri when un if you see there is a

Speaker Change: Confirmations of Potential ROI and

Speaker Change: Excitement, then it's coming back to the technical debt which we were talking about.

Arkadiy Dobkin: During the last quarter, some companies realize that to actually get the benefit of this is required really investments and go to some data, modernization programs, which is much bigger and require much more wealth. And that's actually one of the strong stickers to real progress, because they're not radios. Got it.

Speaker Change: You have a lot of quarters and companies realize that to actually get the benefit of this it's required really Investments and go to some data modernization programs, which is much

Unknown Executive: Thank you.

Speaker Change: bigger and require much more effort. And that's actually one of the shortstoppers to real progression.

Speaker Change: because they're not reallyar

Operator: Your next question comes from Darrin Peller from Wolf Research. Your line is open.

Bryan Bergin: Got it. Thank you.

Darrin Peller: You had a next question, positive line of Durham Pellet from Wolf Research. Your line is open. Hey guys, thanks.

Speaker Change: Got it. Thank you.

Speaker Change: Your next question comes to the line from Darrin Peller from Wolf Research. Your line is open.

Operator: Your next question comes from the line of Darrin Peller from Wolf Research. Your line is open.

Jason Peterson: Can we just touch for a minute on the sequential map? Looking at the guide, it looks like the dollars of revenue expected is pretty much exactly flat or almost exactly flat, going from second to the end of the year. And I know you're, you're trying not to invent any type of upside or flexion, just I know there's also some seasonality typically keep for although things like budget flush have been tougher lately, but maybe just touch on that for a minute in terms of your expectations on a perfect quarter basis and then really just go back to the overall demand environment where you're seeing climb spend, what you think you can do that maybe must a little bit less related to the macro and more, you know, more videos and credit because we've been seeing more, more IT services companies trying to really address current needs as much as possible. So anything more you can just comment on where the demand is today, especially if the macro holds at a slower level for a while, what, what you think you're doing that's resonating the most.

Darrin Peller: Hey guys, thanks. Can we just touch for a minute on the sequential math? Looking at the guide, it looks like the dollars of revenue expected is pretty much exactly flat, or almost exactly flat, going from second through the end of the year.

Darrin Peller: Hey guys, thanks. Can we just touch for a minute on the sequential map? Looking at the guide, it looks like the dollars of revenue expected are pretty much exactly flat, or almost exactly flat, going from second through the end of the year. And I know you're trying not to embed any type of upside or inflection, just I know there's also some seasonality, typically Q4, although things like budget flush have been tougher lately, but maybe just touch on that for a minute in terms of your expectations on a per-quarter basis, and then really just go back to the overall demand environment where you're seeing clients spend what you think you can do that maybe must be a little bit less So anything more, you can just comment on where the demand is today, especially if the macro holds at a slower level for a while, and what you think you're doing that's responding the most.

Speaker Change: and I know you're you're trying not to invent any type of upside or inflection just I know there's also some seasonality

Speaker Change: Typically Q4, although.

Speaker Change: things like budget flush toughorly le but maybe just touch on that fir in terms of your expectcasations on a per quarter basis and then really just go back to the what we're all demand environment where you're seeing client spend

Speaker Change: What you think you can do that maybe must a little bit less related to the macro and more

Speaker Change: more issyncratic as where we'vebeen seeing moreand more at services companies trying to really address current needs as much as possible so anything more you can just comment on where the demand is today especially of the macro holds at a slower level for a while what what you think you're doing that's resonating the most

Darrin Peller: Yes, I'll just start with a more technical question, I guess, and I'll leave Arv to answer maybe the harder questions. And so from Q2 to Q3, you'd have higher vacation and more bill days. And so you get a, you know, you should see a somewhat modest improvement, but you should see some improvement in revenues just based on what you all kinds of technical or seasonal factors.

Jason Peterson: Yeah, Paul. This is Charlie.

Jason Peterson: Yes, I'll just start with a more technical question, I guess, and I'll leave Arv to answer maybe the harder questions. And so, from Q2 to Q3, you'd have higher vacation and more bill days. And so you get a somewhat modest improvement, but you should see some improvement in revenues just based on what you know about all kinds of technical or seasonal factors. And then in Q4, it'll depend on what type of vacation levels we see, but usually you would see even a little bit higher levels of vacation in Q4, lower bill days, and then, of course, the question is going to be what type of furlough activity we see. So, you know, generally, there is a somewhat Unknown Executive: Puneet Jain, Moshe Katri, Arvind Ramnani, Ashwin Shirvaikar, Margaret

Jason Peterson: Yeah, phone is starting with the more tactical, I guess, and I'll leave our answer maybe the harder questions. And so from a Q2 to Q3, you'd have higher vacation in more buildings and so you get a, you know, you should see a somewhat modest improvement, but it should see some improvement in revenues just based on what you all kind of technical or seasonal factors. And then in Q4, you know, it'll depend on what type of vacation levels we see, but usually you would see even a little bit higher levels of vacation in Q4 lower buildings.

Speaker Change: yes how to start with a more tactnical like ess andi'll leave our tans wer may the harder questions

Speaker Change: And so from a Q2 to Q3, you'd have higher vacation and more bill days, and so you get a, you know, you should see a somewhat modest improvement, but you should see some improvement in revenues just based on what you, all kind of technical or seasonal factors.

Speaker Change: and then in q four you know it will depend on what type of vacation levels we see but usually you can see even a little bit higher levels of vacation in q four lower buildingsdays and then of course the question is going to be what type of furlow activity we see so you know generally there is a you know as somewhat ment

Jason Peterson: And then, of course, the question is going to be what type of furlough activity we see. So, you know, generally there is that, you know, with somewhat, somewhat significant impact just due to seasonality. And so that's kind of what we're, we're modeling at this time is, again, it's generally a very modest improvement up from Q2 to Q3 based on seasonal factors. And then some degree at decline, unless, as you said, we see some type of budget flush or, again, we're able to influence the level of vacations that employees take.

Speaker Change: somewhat significant impact just due to seasonality and so that's kind of what we we're modeling at this time is again it said generally a very modest improvement up from communic q three based on seasonal factors

Speaker Change: and then some degree at decline andunless as you say we see some type of budget flaw or again ' able toinfluence the level of vacations that employeees day argum ent of v ro andor where we're seeing i soon p

Arkadiy Dobkin: Are you going to talk about the best overall demand or what we're seeing? I think our clients very much in line with last quarter. So, we, as we mentioned last time that we don't want, we don't think we can project the market in an incurrence situation. So, I think it's very much similar. And if what I go, our projection range was much broader than today, in just saying that our expectation of good news, we're not confirmed.

Jason Peterson: very much in line with the last quarter. We, as we mentioned last time that we don't want, we don't think we can, Project, Edelbert, the market, in the current situation. So I think it's very much similar.

Speaker Change: Our comments are very much in line with the last quarter.

Speaker Change: so

Speaker Change: We, as we mentioned last time, that we don't want, we don't think we can...

unknown: Project, in the current situation. So I think our expectation of good news. Unplugged, revenue as well. But keeping the status quo on production systems. We're focusing, improving, and again.

Speaker Change: project

Speaker Change: the market

Arkadiy Dobkin: And if I go, our production range was wide. Broad as in today, in just saying that our expectation of good news was not confirmed. And our expectation for the good news, actually. He does a good one as well, with Darwin, and it's a reflection of the Typhus Projects, I colleague, Travis Cummings, Mike Gidsworth, Ross Nicol, Yvonne McKinzie, Jason E. Titor, Brett Krauss, Eileen Westbrook, Bob Crombie, Brett Ghan, Kristina Al, X There are conversations about it, but it's not turning into real things. There is a lot of noise around GNI, which is not converting to big revenue as well.

Speaker Change: In current situation, so I think it's very much similar, and if what I go...

Arkadiy Dobkin: And our expectation for the good news actually didn't happen as well. So, we're narrowing an inter-inflation of the type of projects in play right now. There is no big modernization that the reconversation is about it, but it's not an integral thing. There are a lot of noise around GNI, which not can be added to be gravy due as well. But... So, around the business, keeping the status quo or production systems, that's what we focus in, improving, and again, looking for kind of one of modernization playing where we can really bring the value but it's very competitive and again not necessary.

Speaker Change: Our projection range was much smaller.

Speaker Change: broader than today in just saying that

Speaker Change: Our expectation of good news.

Speaker Change: didn't happen as well. So we are narrowing and it's a reflection of the...

Speaker Change: cy with projectsinplic

Speaker Change: There is no big modernization.

Speaker Change: the reconversation surabout it but it's not to an inter al think there are a lot of noise around gener ai we should not conof that to be grual

Arkadiy Dobkin: But, Ramsey Business, keeping the status quo on production systems. That's what we're doing. We're focusing, improving, and again.

Speaker Change: Revenue as well, but

Speaker Change: run the business

Speaker Change: Keeping the status quo on production systems.

Speaker Change: That's all.

Speaker Change: we focus in improven and again

Darrin Peller: Thank you. Thank you. Thank you. I know one.

unknown: I know of one.

Speaker Change: we kcan for

Speaker Change: and of one open continusation plane where we can really br the ume but it's very competitors and again not necessary

Speaker Change: This is it for the client side.

Arkadiy Dobkin: So, I'm so would you, well, I think I'm slow but I don't know about it. I've just had that we're working to change the trajectory in Europe and we are beginning to see some better conversations opportunities kind of appear there again. So, that's an area where we're looking to sort of let's say change the picture and the other thing I think you see in our fixed fee which continues to go up, we're continuing to sort of explore and work with clients to have more of a committed kind of model around local deliver for a fixed fee or a fixed monthly fee and that's a reflection of what we're trying to do to respond to customer needs and win more business.

Speaker Change: yeah i don't know if i'm use you

Jason Peterson: And I would just add that we're working on it.

Speaker Change: I would just add that we're working to change the trajectory in Europe and we are beginning to see some better conversations and opportunities kind of appear there again.

Speaker Change: You know, so that's an area where we're looking to sort of, let's say, change the picture.

Speaker Change: and the other thing i think you see in our fixed fee which continues to go up we're continuing to a sort of expplloor work but clients to have more of that

Speaker Change: Committed kind of model around what we'll deliver for a fixed fee or a fixed monthly fee. And that's a reflection of what we're trying to do to respond to customer needs and win more business.

Darrin Peller: Thanks. Actually, one quick one just on hiring. I mean, do you anticipate needing, if utilization stays in these ranges, do you anticipate needing to hire more? Or, I mean, maybe AI or other types of efficiencies can help maintain. You know, there's certainly some programs where we are.

Jason Peterson: Okay, thanks. So, one quick one just on hiring is just on, I mean, do you anticipate if utilization stays in these ranges, do you anticipate needing to hire more or maybe AI or other types of efficiencies can help maintain? You know, there's certainly some programs where we're clearly working to include AI productivity improvements but now we would continue to hire and I think we'll continue to hiring the types of geographies we've been talking about which is more kind of offshore and certainly with someone who can help talk to the inland America. Got it.

Speaker Change: Okay.

Speaker Change: Thanks. Actually, one quick one just on hiring is just on, I mean, do you anticipate if utilization stays in these ranges, do you anticipate needing to hire more or, I mean, maybe AI or other types of efficiencies can help maintain?

unknown: You know, there's certainly some programs where we're clearly working to include AI productivity improvements, but no, we would continue to hire, and I think you'll continue to see hiring in the types of geographies we've been talking about, which is more of a kind of offshore, certainly with somewhat important folks in Latin America.

Unknown Executive: Thanks. I appreciate it. Thank you.

unknown: You know, there's certainly some programs where we're

Jason Peterson: You know, there's certainly some programs where we're clearly working to include AI productivity improvements, but no, we would continue to hire. And I think you'll continue to see hiring in the types of geographies we've been talking about, which is more of a kind of offshore, certainly with somewhat important folks in Latin America.

Speaker Change: you know there'are certainly some programs where we're clearly working to include ai productivity improvements but now we would continue to her and i think 'll contin to hiring in thetypes ofgeographies ve been talking about which is more kind of offshore and certain with someone or to in latinamerica

Speaker Change: got it thanks as brush it

Operator: Your next question comes from the line of Jim Schneider from Goldman Sachs. Your line is open. Good morning. Thanks.

Arkadiy Dobkin: Your next question comes from line of Jim Schneider from Goldman Sachs. Your line is open. Good morning. Thanks for taking my question. First of all, on the discretion and demand environment, it's not surprising you hear the couple of constraints given what the environment is out there. But what are your clients telling you about the conditions under which they would start to release more spending or be more aggressive with new projects in 2025?

Speaker Change: and union

Speaker Change: Your next question comes from the line of Jim Schneider from Goldman Sachs. Your line is open.

unknown: Good morning. Thanks for asking.

Jim Schneider: Good morning, thanks for taking my question. First of all, on the discretionary demand environment, it's not surprising to hear the constraints given what the environment is out there. But what are your clients telling you about the conditions under which they would start to release more spending or be more aggressive with new projects in 2025? Is that tied to macro? Is that tied to more certainty around their AI strategy or other priorities they have internally in terms of IT spending?

Jim Schneider: goodmorning thanks for taking my question first of allon the discussion and demand environment it's not surprising hear that constraints given what the environment is out there but what are your clients telling you about the conditions under which they would start to release more spending or be more aggressive with new projects in two thousand and twenty five is that tied to macro is that tied to more certainty rather a i strategy or or other prioritiesies they have internally termsof spending

Arkadiy Dobkin: Is that tied to macro? Is that tied to more certainty around their AI strategy or other priorities they have internally in terms of IT spending? So, we do believe that the majority of the kind of decision making is part related right now. Because as soon as the kind of situation would be a little bit better, I think investment in general data infrastructure and cloud infrastructure which was delayed will be triggered because everybody understands the impact of January. And without fixing first list, it would be very difficult to move forward. So, I think macro is closing right now.

Arkadiy Dobkin: We do believe that.

Speaker Change: So, we do believe that...

Arkadiy Dobkin: The majority of the decision-making is PAC-related because as soon as the..., kind of situation would be a little bit.

Speaker Change: Majority of the decision making is PAC related right now.

unknown: kind of situation would be a little bit.

Speaker Change: because as soon as the

unknown: Better, I think, investment is... General Data Infrastructure and Cloud Infrastructure, which were delayed, will be triggered because everybody understands the impact of JNI. And without fixing this first, it would be very difficult. So I think Mark is holding it right.

Arkadiy Dobkin: Better, I think, investment is... General Data Infrastructure and Cloud Infrastructure, which were delayed, will be triggered because everybody understands the impact of JNI. And without fixing this first, it would be very difficult. So I think Mark is holding it right.

Speaker Change: The current situation would be a little bit...

Speaker Change: better i think investment is

Speaker Change: General Data Infrastructure and Cloud Infrastructure, which was delayed, will be triggered because everybody understands the impact of JNI. And without fixing first this, it would be very difficult to move forward.

Speaker Change: So, I think Mark is closing right now.

Jim Schneider: And then maybe just in terms of the margins, obviously delivering good growth and operating margin leverage in the core, that was good to see. Was that mostly driven by the mix of headcount shifting to India, or are there other factors there besides the SG&A line? And then, I guess, going into 2025, as we exit this year, what kind of further growth margin leverage do you expect to deliver or is sustainable from here?

Jason Peterson: Thank you. And then maybe just in terms of the margins, obviously delivered good growth and operating margin leverage in the core. That was good to see. Was that mostly driven by the mix of headcount shifting to India or other factors there besides the ESG nail line? And then I guess going into 25 as we exit this year. What kind of further growth margin leverage do you expect to deliver or is sustainable from here?

Speaker Change: thank you and then maybe just in terms of the margins obviously delivered good growth operating margin leverage in the core that was going to see

Speaker Change: was that mostly driven by the mix of headcount shifting to india or there areother factors there besides the sd aline and then i guess going into twenty five as we exited this year what kind of further growth marg leverage do you expect to deliver or sustainable from here

unknown: Yes, we're continuing to work on utilization, and the improvement in Q2 was probably a combination of efficiency with SG&A and, you know, continued focus on improving utilization. I think what we talked about over the last couple of quarters is that we continue to have an opportunity because we've got a fairly heavy pyramid still, including in India, and so what we need to do is make sure that we're introducing, you know, more juniors into the mix, which generally has a broader sort of pyramid improves profitability overall and also can allow you to be a little bit sharper with pricing.

Jason Peterson: Yes, we're continuing to work on utilization, and the improvement in Q2 was probably a combination of efficiency with SG&A and, you know, continued focus on improving utilization. I think what we talked about over the last couple of quarters is that we continue to have an opportunity because we've got a fairly heavy pyramid still, including in India, and so what we need to do is make sure that we're introducing, you know, more juniors into the mix, which generally has a broader sort of pyramid improves profitability overall and also can allow you to be a little bit sharper with price. But the Q2 improvement in profitability was not driven by a shift in India. Again, it was more kind of these operational efficiency factors that we're continuing to work on throughout the remainder of

Jason Peterson: So we're continuing to work on utilization and to the improvement in Q2 with probably a combination of efficiency with SGNA and continuing to focus on improving utilization. I think what we talked about over the last couple of quarters is that we continue to have an opportunity because we've got a fairly heavy pyramid fill including in India. And so what we need to do is make sure that we're introducing more juniors into the mix which generally has a broader sort of pyramid improves profitability overall.

Speaker Change: Yes, we're continuing to work on utilization and to the improvement in

Speaker Change: q two was probably a combination of efficiency with sda and continued focus on improudving utilization

Speaker Change: I think what, you know, we talked about over the last couple quarters is that we continue to have an opportunity because we've got a fairly heavy pyramid still, including in India. And so what we need to do is make sure that we're introducing, you know, more juniors into the mix.

Speaker Change: which generally has a broader sort of pyramid improves profitability overall also can allow you to be a little bit sharper with pricing.

Jason Peterson: Also can allow you to be a little bit sharper with pricing. But the Q2 improvement of profitability was not driven by a shift in India. Again, it was more of these operational kind of efficiency factors that we're continuing to work on throughout the remainder of the year. And in terms of the forward improvement there? The forward improvement, again, is the work that we're doing on utilization and improvement reducing the bench and ongoing efficiency in SGNA. So again, it's just a focus on certain areas of our operations that we think we can see some further sort of reduction in spend certainly as a percentage of revenue.

unknown: But the Q2 improvement in profitability was not driven by a shift in India. Again, it was more of these operational efficiency factors that we're continuing to work on throughout the remainder of the year.

Unknown Executive: Thank you.

Speaker Change: But the Q2 improvement of profitability was not driven by a shift in India. Again, it was more kind of these operational kind of efficiency factors that we're continuing to work on throughout the remainder of the year.

Speaker Change: russian

Jason Peterson: For improvement, again, it's the work that we're doing on utilization improvement, reducing the bench, and ongoing efficiency in SG&A. So again, it's just a focus on certain areas of our operations.

Speaker Change: And in terms of the forward improvement there?

Speaker Change: Thank you.

Speaker Change: pretty

Speaker Change: For improvement, again, it's the work that we're doing on utilization improvement, reducing the bench, and ongoing efficiency in SG&A. So again, it's just a focus on certain areas of our operations.

Jason Peterson: Spending certainly is a percentage of revenue.

Speaker Change: that we think we can see some further sort of reduction spend certainly as a percentage of revenue

Speaker Change: Thank you.

Operator: Your next question comes from Jonathan Lee from Guggenheim Securities. Your line is open.

Jason Peterson: Your next question comes line of Jonathan Lee from the Guggenheim Securities. Your line is open. Great. Thanks for taking our question. I want to get a better sense of how India is progressing. Can you help unpack the types of volumes you're seeing there? And whether expanded presence has had any sort of influence on new types of demand or types of contract structures being utilized especially to think about the revenue and margin dynamics that are contemplating the outlook?

Speaker Change: bottomat

Speaker Change: Your next question comes from Jonathan Lee from Guggenheim Securities. Your line is open.

Jonathan Lee: Great, thanks for taking our questions. I want to get a better sense of how India is progressing. Can you help unpack the type of volumes you're seeing there, and whether expanded presence has had any sort of influence on new types of demand or types of contract structures being utilized, especially as we think about the revenue and margin dynamics that are contemplated in the outlook?

Jonathan Lee: Great, thanks for taking our questions. I want to get a better sense of how EDA is progressing.

Speaker Change: you help unpack the type of volumes you're seeing there and whether expanded presence has had any sort of influence on new types ofdemand or types of contract structures being utilizes really think about the reven margin dynamics they are contempl in the outlook

Jason Peterson: Yeah, so I'll let Ark talk a little bit more about the type of work or progress. But what I would say, from the last time we spoke with you, Jonathan, is that India is likely to make up a somewhat, a very slightly greater percentage of headcount by the end of the year. So last time Ark and I were talking about something approaching 20%; we now think that India will be slightly above 20% by the end of the year.

Arkadiy Dobkin: Yeah, so I'll let our talk a little bit more about either the type of work or progress. What I would say is that from the last time we spoke with you, Jonathan, is that India is likely to make up a very slightly greater percentage of headcount by the end of the year. So last time, Mark and I were talking about something approaching 20%. We now think that India will be slightly above 20% by the end of the year.

Speaker Change: Yeah, so I'll let Ark talk a little bit more about either the type of work or progress.

Arkadiy Dobkin: In what you are seeing is a modest pressure on average bill rates as a result. And that probably is also sort of shaping how we look at the second half. So it's not super significant, but I think last time, sometimes we would utter the word 19.5%. And right now we think that India is going to count for just over 20% of our headcount by the end of the year. So we continue to see a modest gradual shift there.

Jonathan Lee: What I would say is that from the last time we spoke with you, Jonathan, is that India is likely to make up a somewhat, a very slightly greater percentage of headcount by the end of the year.

Jonathan Lee: Last time, Ark and I were talking about something approaching 20%. We now think that Indy will be slightly above 20% by the end of the year. And what you are seeing is a modest...

Jason Peterson: And what you are seeing is a modest percentage of headcount by the end of the year, with pressure on average bill rates as a result. And that probably is also sort of shaping how we look at the second half. So it's not super significant.

Jonathan Lee: you know, pressure on average bill rates as a result. And that probably is also sort of shaping how we look at the second half. So it's not

Jason Peterson: But you know, I think last time, sometimes we would utter the word 19.5%. And right now, we think that India is going to account for just over 20% of our headcount by the end of the year. So we continue to see a modest gradual shift there, while at the same time, we are seeing, you know, improved utilization in our other areas of operation in Europe and Western Central Asia. So it's not as if all the demand is shifting to India, but we are seeing, you know, an ongoing kind of implementation in India.

Jonathan Lee: Super significant, but you know, I think last time sometimes we would utter the word 19.5 percent.

Jonathan Lee: And right now we think that India is going to count for just over 20% of our headcount by the end of the year. So we continue to see a modest gradual shift there.

Arkadiy Dobkin: While at the same time, we are seeing, you know, improved utilization in our other areas of operation in the European and Western Central Asia. So it's not as if all the demand is shifting to India, but we are seeing, you know, ongoing kind of implement in India. The hard ones are going to work.

Speaker Change: while at the same time we are seeing improved utilization in our other areas of operation in europe and western cental asia so it's not as if all the demand shifing the ind but we are seeing you know ongoing kind of implement in in india hman's worker

Arkadiy Dobkin: The type of work, like, I think that's what we said already. We consider this to be the, There is a Pricing Pressure. So, this is definitely a very objective kind of component. At the same time, the type of work which we do is not changing much from location to location.

Arkadiy Dobkin: The type of work, like I think that's what we said earlier today. We are considering, like, the risk between India, there is a price and pressure. So this is definitely a very objective kind of components. At the same time, the time will work, which we are doing, non-changing much from location to location. And.., as we said before, EPAM has a kind of reputation for more complex quality engineering solutions and as we said, we built it actually in the very strong data engineering kind of basic.

Speaker Change: The type of work, like, I think that's what we shared already today.

unknown: We consider this like this to be India.

Speaker Change: We consider, like, there is a shift in India.

unknown: Price and Pressure: what's happening for us simultaneously?

Speaker Change: There is a...

Speaker Change: pressure

Speaker Change: So, this is definitely a very objective.

Speaker Change: kind of comeones at the same time the type of work which we do not change in much prlocation to our case

Arkadiy Dobkin: As we said before, EPAM has a reputation for more complex... Quality Engineering Solutions. And as we said, we build it actually on a very strong data engineering competency. We bring in like, Everything that we do around, Did they die?

Jonathan Lee: and

Jonathan Lee: As we said before, the pump has a kind of reputation for more complex

Speaker Change: Quality Engineering Solutions, and as we said, we're building actually in India very strong data engineering competency. We're bringing like...

Arkadiy Dobkin: We are bringing like everything what we do around GENERI, productivity improvement, quality engineering solutions, and we decided we built it actually in the very strong data engineering kind of basic. We are bringing like everything what we do around GENERI, productivity improvement, quality engineering solutions, we built it in digital engagement practice, so it's very much in line with the Rode PAM, and the type of work is again very very similar. So from overall perspective, it's also a different profile of our great engineering because when we started to move work there, we have to bring much more proportionally experienced teams there and only after this, we will be able to scale to the different teams.

Speaker Change: everyition which we do around

Arkadiy Dobkin: Productivity Improvement for DLC; we're building a digital engagement practice, so it's very much in line with the Road to EPAM. And the type of work is, again, very, very similar. So from an overall perspective, it's also, We have to bring much more proportionally experienced teams there, and only after this will we be able to scale to the different pyramids, which is happening for us simultaneously. Movement of the World, Rebuilding the Pyramid, still investing in quality to be exactly in line with client expectations because they expect from EPAM, independently from location, a similar type of service.

Speaker Change: to thei

Speaker Change: Productivity Improvement for DLC, we're building digital engagement practice, so it's very much in line with the road to EPAM.

Speaker Change: And the type of work is, again, very, very similar.

Arkadiy Dobkin: And that's what's happening for us simultaneously. Some movement of the work, we built it in the pyramid and still in the West, in order to be exactly in line with my expectation because they expect from EPAM in different locations, similar type of sharing.

Speaker Change: so from a perspective conalso

Speaker Change: We are creating different profile of our grid in India because when we started to move work there, we have to bring much more proportionally experienced teams there. And only after this, we will be able to scale to the different pyramids. And that's...

Speaker Change: What's happening for us simultaneously? Some...

Speaker Change: Movement of the Work, Rebuilding the Pyramid, and still investing in quality to be exactly in line with client expectations because they expect from EPAM.

Speaker Change: independently from location, similar type of service.

Jonathan Lee: Thanks for the detail there. Can you unpack your comments on the last...

Jason Peterson: Thanks for the detail there. Can you unpack your comments on the lack of improvement? I want to understand what that means for deals that have been signed, but perhaps not yet launched or ramped, and how much to go get or pipeline conversion is still required to achieve here. I'll look at both the high end and the low end. Yeah, so the last time we guided Jonathan, we did talk about still expecting a very modest improvement in demand, and what we're now saying is, we don't see that improvement in demand.

Speaker Change: thanks so the detail there can you unpack your comments on the lack ofimprovement conseplly of the outlook i want to understand you know what that means for deals that have been signed but perhaps not yet launched a ramp

Jason Peterson: I want to understand, you know, what that means, deals that have been signed but perhaps not yet launched or ramped up. Yeah, how much go get or pipe? is required to achieve your outlook at both the high end. Yeah, since the last time we got it, Jonathan, we have.

unknown: Transcription by Trans-Expert at Fiverr.com

Speaker Change: And, you know, how much go-get or pipeline conversion is still required to achieve your outlook at both the high-end and the low-end?

Jason Peterson: Yeah, so the last time we guided Jonathan, we did talk about still expecting a very modest improvement in demand. And what we're now saying is, you know, we don't see that improvement in demand.

Speaker Change: and thewit

Speaker Change: Yeah, since the last time we guided Jonathan, we did talk about

Speaker Change: still expecting a very modest improvement in demand. And what we're now saying is we don't see that improvement in demand. And so.

Jason Peterson: And so we try to be quite prudent with our guide, clearly within this quarter, and clearly how we set the full year guide, which obviously is how we're thinking about Q4. You know, it does very much particularly be take the full guide of 4590 to 4625, it does encompass, you know, even things like some potential reductions in demand due to cost reduction efforts that clients are that type of thing. And so I think we feel pretty confident that again, we have a little bit of sort of downside is client can continue to be sort of cost sensitive, and then the upside probably would be a little bit more in the lighter furloughs, maybe just a little bit of kind of budget openness and the remainder of the year and again, our ability to probably influence the level of vacation taken by employees to again give us a little bit more capacity and Q4.

Speaker Change: we've trying to be quite frprudent with our guide clearly within this quarter and clearly how we set the fullyear guide which obviously is how we're thinking about q four

Jason Peterson: And so, you know, we try to be quite prudent with our guide clearly within this quarter and clearly how we set the full-year guide, which obviously is how we're thinking about Q4. You know, it does very much, particularly if you take the full guide of 4590 to 4625; it does encompass, you know, even things like some potential reductions in demand due to cost reduction efforts at clients or that type of thing.

Speaker Change: You know, it does very much, particularly if you take the whole guide of 4590 to 4625, it does encompass, you know, even things like some potential, uh,

Jason Peterson: And so I think we feel pretty confident that, again, we have a little bit of sort of downside as clients continue to be sort of cost-sensitive. And then the upside probably would be a little bit more in the, you know, lighter furloughs, maybe just a little bit of kind of budget openness in the remainder of the year and, again, our ability to probably influence the level of vacation taken by employees to, again, give us a little bit more capacity in Q4.

Speaker Change: reductions in demand due to cost reduction efforts at clients or that type of thing. And so I think we feel pretty confident that, again, we have a little bit of sort of downside as client

Speaker Change: continue to be sort of cost-sensitive, and then the upside probably would be a little bit more in the, you know, lighter furloughs, maybe just a little bit of kind of budget openness in the remainder of the year, and again, our ability to probably influence

Speaker Change: The level of vacation taken by employees to, again, give us a little bit more capacity in Q4.

Operator: Your next question comes from the line of Ramsey LFL from Barclays. Your line is open.

Darrin Peller: You know, next question comes to line of Ramsey, LFL from Boxley, your line is open. Hi, thanks for taking my question. It looks like your percentage of fixed price contracts has been trending up and it's a little higher now than it's been at least going back quite a ways in our model. What is driving that mixed shift sort of away from time and materials work toward fixed price work? Is it geographic?

Speaker Change: Your next question comes from the line of Ramsey LFL from Barclays. Your line is open.

Ramsey El: Hi, thanks for taking my question. It looks like your percentage of fixed price contracts has been trending up, and it's a little higher now than it's been, at least going back quite a ways in our model. What is driving that makeshift sort of away from time and materials work toward fixed price work? Is it geographic?

Darrin Peller: Is it generally I related and I guess are there any implications for margins when it comes to fixed price versus time and materials? Yeah, so you're correct that it has been trending up and probably will continue to trend up somewhat. And so it has a mix of what would be called, you know, percentage of completion and what is sort of a fixed monthly fee. And so it probably does reflect, you know, the fact that we'll begin to, you know, try to address clients needs, you know, in a way that's a little bit on traditional free Pam where we have traditionally been kind of more fleeting edge.

Ramsey LFL: Hi, thanks for taking my question. It looks like your percentage of fixed price contracts has been trending up and it's a little higher now than it's been at least going back quite a ways in our model.

Speaker Change: What is driving that makeshift sort of away from time and materials work toward fixed price work? Is it geographic? Is it AI related? And I guess, are there any implications for margins when it comes to fixed price versus time and materials work?

Jason Peterson: Yeah, so you're correct that it has been trending up and probably will continue to trend up somewhat. And so it's a mix of what would be called, you know, percentage of completion on what is sort of a fixed monthly fee. And so it probably does reflect, you know, the fact that we're beginning to try to address clients' needs in a way that's a little bit more traditional than prepayment, where we have traditionally been kind of more fleeting-edge, complex projects where it is difficult to estimate.

Speaker Change: Yeah, so you're correct that it has been trending up and probably will continue to trend up somewhat. And so it's a mix of what would be called, you know, percentage of completion in what is sort of a fixed monthly fee. And so it probably does reflect, you know,

Speaker Change: the fact that we'll beginning to try to address clients needs

Speaker Change: In a way that's a little bit untraditional for EPAM where we have traditionally been kind of more leading edge.

Darrin Peller: Complex projects where it was difficult to estimate, we clearly have, you know, that type of work, but we are trying to deal with it with our clients and say, we can do this for a fixed amount of money or fixed amount of money on a monthly basis. The other thing I think you are probably seeing is some opportunity with Gen AI to introduce not only the traditional authority to the improvement, the creative improvement with Gen AI and commit to a, you know, a series of savings over a period of time.

Jason Peterson: We clearly have that type of work, but we are trying to be able to sit with our clients and say, we can do this for a fixed amount of money or a fixed amount of money on a monthly basis. The other thing I think you are probably seeing is some opportunity with Gen-AI to introduce not only traditional productivity improvement but productivity improvement with Gen-AI and commit to a series of savings over a period of time. And so you are seeing us also enter into engagements with clients that may be more multi-quarter or, in some cases, even multi-year that do reflect what we believe is a productivity improvement that we can achieve over time. And that could go either way,

Speaker Change: complex projects where it was difficult to estimine we clearly have that type of work but we are trying to

Speaker Change: be able to sit with our clients and say, we can do this for a fixed amount of money, or fixed amount of money on a on a monthly basis.

Speaker Change: The other thing I think you are probably seeing is some opportunity with Gen-AI to introduce not only traditional productivity improvement, but productivity improvement with Gen-AI and commit to a series of savings over a period of time. And so you are seeing us also enter into engagements with clients.

Darrin Peller: And so you are seeing us also entering to engagements with clients that may be more multi-order in some cases in the multi-year that do reflect what we believe is a productivity improvement that we can achieve over time. And that could go either way, right? It can be net positive to margins. If obviously we've been estimated or sort of deliver correlates can be negative. But, you know, generally with fixed fee, you do have the opportunity to improve profitability relative time and materials because it gives you more flexibility and how you deliver. Okay.

Speaker Change: it may be more a multi orarter in some even multiyear that do reflect what we believe a productivity improvement that we can achieve over time and that could go either way right and can be net positive to margins

Jason Peterson: It can be net positive for margins; if obviously we've mis-estimated or sort of delivered poorly, it can be negative, but generally, with a fixed fee, you do have the opportunity to improve profitability relative to time and materials because it just gives you more flexibility in how you deliver.

Speaker Change: If obviously we've mis-estimated or sort of delivered poorly, it can be negative. But, you know, generally with fixed fee, you do have the opportunity to improve profitability relative to time and materials because it just gives you more flexibility in how you deliver.

Ramsey El: Okay, and a follow-up from me on M&A. I guess given the buybacks in the quarter and the additional share of purchase authorization, is larger-scale M&A off the table? Assuming you're still in the market for tuck-ins to plug capability gaps, what types of assets might you be looking to bring into EPAM?

unknown: Okay, and a follow up from me on M&A, I guess given the buybacks in the quarter and the additional share of purchases.

Arkadiy Dobkin: And a follow-up from me on M&A. I guess given the buybacks in the quarter and the additional share of purchases authorization is larger scale M&A off the table, assuming you're still in the market for tuck-ins to flood capability gaps. What types of assets might you be looking to bring into EPM? I think nothing at all of the table. So as always in the past we constantly have conversations and opportunities for different size of acquisitions.

Speaker Change: Okay, and a follow-up from me on M&A, I guess given the buybacks in the quarter and the additional share of purchases,

Speaker Change: Authorization. Is larger scale M&A off the table? Assuming you're still in the market for tuck-ins to plug capability gaps, what types of assets might you be looking to bring into EPAM?

unknown: I think nothing at all is off the table. So, as always, in the past, we constantly have conversations and opportunities for different sides. But buying shares back is actually very much a function of if it's going to happen or not. So it's not a must-have condition; it's a direction which we will be executing only if we think that it's proper with any other aspects.

Arkadiy Dobkin: I think nothing at all is on the table. So, as always, in the past, we constantly have conversations and opportunities for different sides of acquisitions, and But buying shares back is actually very much a function of if it's going to happen or not. So it's not a must-have condition; it's a direction which we will be executing only if we think that it's proper with any other aspects. So when this is happening, we will be adjusting the numbers, if necessary. Yeah, so we'll do both. But you know, clearly, our bias would be towards acquisitions. And as Ark said, you know, doing something somewhat larger is certainly not off the beaten track.

Speaker Change: i think less at all of the table so as always in the past we constantly have conversations at opportunities solion size of

Speaker Change: acquisitions and

Arkadiy Dobkin: But buying shares back is actually a very much function of if it's going to happen or not. So it's not marked condition, it's a direction which will be executed only if we see that in Ropak with any other aspect of the business. So when that's going to be that, but then it will be addressed as a numbers. It's necessary. Yeah, so we'll do both. But, you know, clearly our bias would be towards acquisitions. And as Eric said, you know, doing something somewhat larger is certainly not off the table. Got it.

Speaker Change: But my insurance back is actually very much functions of if it's going to happen or not so

Unknown Executive: Thank you very much.

Speaker Change: it's not mild condition is a direction which will will be executed only if we see have been roboupt vis any other aspects of a

Speaker Change: Thank you.

Ark: Yes, so we'll do both, but clearly our bias would be towards acquisitions, and as Ark said, doing something somewhat larger is certainly not off the tip.

Speaker Change: got it thank you very much

Operator: Your next question comes from the line of Surinder Thind of Jeffreys. Your line is open.

Surinder Thind: Thank you. Your next question comes nine of serendithin of Jeffries. Your line is open. Thank you. Just a question around the global delivery footprint. As you look ahead, if if revenues was to remain stable, at what point do you think you'll get to your target delivery footprints? When you say agree, it will be stable. What do you mean? I think there was commentary on the call about onsite utilization being a little bit below expectations, and so there's continued shift for the requirement of resources in lower cost regions.

Jeffrey: your next question consn of surren defend of jeffrey your line is open

Surinder Thind: Thank you. Just a question around the global delivery footprint. As you look ahead, if revenues were to remain stable, at what point do you think you'll get?

unknown: Thank you. Just a question around the global delivery footprint. As you look ahead,

Jeffrey: Thank you. Just a question around the global delivery footprint. As you look ahead, if revenues was to remain stable, at what point do you think you'll get to your target delivery footprint?

Surinder Thind: When you say the revenue will be stable, what do you mean? Revenue... Assuming... Assuming... Assuming... Assuming... Assuming... Assuming... Assuming... Assuming...

Speaker Change: when when you say you do this stable would do be the tr earown and it's a new matter 't play i can book

Surinder Thind: I think there was commentary on the call about on-site utilization being a little bit below expectations, and so there's continued shift for the requirement of resources in lower cost regions. I think there's previous commentary around, you know, maybe not as much demand in near shore or, you know, Western Europe, shifting some of those resources through natural attrition to other parts of the world. So, that was the... what I was trying to get at.

unknown: Yeah, I think there was commentary on the call about onsite utilization being a little bit below expectations, and so there's continued shift for, you know, maybe not as much demand in near shore or, you know, Western Europe.

Speaker Change: I think there was commentary on the call about on-site utilization being a little bit below expectations, and so there's continued shift for

Speaker Change: The requirement of resources in lower cost regions. I think there's previous commentary around

Surinder Thind: I think there's previous commentary around, you know, maybe not as much demand in New York or Western Europe. Shifting some of those resources through natural nutrition to other parts of the world. So that was what I was trying to get at. I think, let me, let me try to answer lightly differently. First of all, we definitely move into global diversification from this mitigation stability and 24 by 7 on the growing global light.

Speaker Change: You know, maybe not as much demand in Nearshore or, you know, Western Europe , shifting some of those resources through natural attrition to other parts of the world.

Speaker Change: So, that was the...

Speaker Change: what i was trying to get that

Arkadiy Dobkin: Let me, let me try to answer, like you do. First of all, we definitely move into global diversification from risk mitigation, stability, and 24 by 7 on the growing global scale. What? And from this point of view, we will be much more. Unknown Speaker. Thank you. Thank you.

Speaker Change: I think

Speaker Change: Let me try to answer.

Surinder Thind: And from this point of view, we will be much more diversified than in the part and right now it also. As we mentioned, probably would be the most balanced global target company. That's a direct, what exactly proportion of this? It's a much more difficult question to answer because it would be function of general demand. When you say like, for example, New York, Europe is not so much demand. It's in many ways subject of the type of work number one.

Speaker Change: Slightly differently. First of all...

Speaker Change: We definitely move into global diversification from risk mitigation, stability, and 24 by 7 on the growing global client base.

Speaker Change: And from this point of view, we would be much more.

Speaker Change: diversified than in the past and right now it's also.

Arkadiy Dobkin: As we mentioned, probably it would be the most. Well, as globals, that's the direction.

Speaker Change: as we mentioned program be the most

Arkadiy Dobkin: What exactly is the proportion of this? That is a much more difficult question to answer because it would be a function of general demand. When you say, for example, near-shore in Europe is not so much in demand, it's in many... away. Subject of the type of work, number one, and the cost pressure number. As soon as the market starts to come back to kind of fixing the technical debt that we're talking about, that modernization, cloud, and data program will accelerate to make the promise of a GNI transformation much more real, demand will come back for practically any region, and because of the complexity and creativity of this type of engagement, proximity will become much more important, and the pricing component will become less important, so it would influence...

Speaker Change: well as lowill not come

Speaker Change: that's a direction with exactly proportion of this it's much medical cvation to answer because it would be function or general themeth you say liken for example sh europe you not so much in demand in ser in many

Speaker Change: always subjectit to the type of work number one

Surinder Thind: And the question number two, as soon as the market will start to come back to kind of fixing the technical debt which we're talking about. And modernization cloud and data program will accelerate to again, make the promise of a GNI transformation much more real. The demand will come back for practically any reason and because of complexity and creativity of this type of engagements. For activity will become much more important and pricing component will become less important.

unknown: As soon as the market starts to come back to kind of fixing the technical debt that we're talking about, that modernization, cloud, and data program will accelerate again. Again, number one, we will be much more diversified. India and Latvia will be a bigger proportion of the total, but

Speaker Change: and the cost pressure number two.

Speaker Change: the so the market will'll start to come back to kind of sction the testing go j retget about that that theanization flow and d program we'will accelerate to get

Speaker Change: Make the Promise of GEN-AI Transformation

Speaker Change: much marial the demand will come back for practically eduion and because of complexency and commun ency of this type of engagements presxivity will become much more important and

Surinder Thind: So it would influence the structure as well. So again, number one, we will be much more diversified in here and a lot of it will be the proportion of the total, but exactly proportion, we did the fight right now. So what is this yesterday?

Speaker Change: The Pricing Component will become less important, so it would influence...

Arkadiy Dobkin: The structure as well So, Again, number one, we will be much more diversified in India, and Latakia will be a bigger proportion of the total, but exactly proportional to the device right now. So we're working with this quarterly how-to.

Speaker Change: The structure as well.

Speaker Change: So...

Speaker Change: i can number go on will you'will be much medical ified india and mar youwill be dueto proportionalof the personal but exactly proportion we identiffy rightaight now gy so wasions this quarterly how to to brein

unknown: That's helpful. And then related to that, when you think about all of the new talent that you're hiring, how do you differentiate or attract that talent? You are newer to that region. I realize you've been there since 2015, but

Surinder Thind: That's helpful. And then related to that, when you think about all of the new talent that you're hiring, how do you differentiate or attract that talent? In the sense that others obviously have large delivery operations out of India, they have well-established connections to the local universities, or, as I would argue, you are newer to that region. I realize you've been there since 2015, but just on a relative basis.

Unknown Executive: That's helpful. And then related to that, when you think about all of the new talent that you're hiring, how do you differentiate or attract that talent? And in the sense that others obviously have large delivery operations out of India, they have well established connections to the local universities, whereas I would argue you are newer to that region, that just on a relative basis. So, if we're talking about India specifically, I think couple factors need to be taken away.

Speaker Change: That's helpful. And then related to that, when you think about all of the new talent that you're hiring, how do you differentiate or attract that talent

Speaker Change: In the sense that others obviously have large delivery operations out of India, they have well-established connections to the local universities, or as I would argue,

Speaker Change: you are newer to that region i realize you've been there since twothousand and fifteen but just on a relative basis

Arkadiy Dobkin: So we're talking about changes specifically; I think a couple of factors need to be taken into account. We have an image of a different type of services company. We have an image of much more. Quality Engineering, Company, and much closer to what people would think about, software tech companies. And from a talent point of view, we compete with this type of company, the same like with some captives which are trying to build high-end tech offices in India. So the image is there already.

Speaker Change: So if we're talking about changes specifically, I think a couple factors need to be taken into account.

Unknown Executive: We have an image of different type of services company. We have an image of much more quality engineering company and much more close to what people would think about software tech companies. And from some time point to view, we compete with this type of company the same like with some pictures which trying to build the high end tech, which is a skin in India. So, the image is there already. So at the same time, we also kind of underdog in India, which means that we have a opportunity to lay differently and in specific specific parts of the market including like breathing out rain and creep abilities and different type of work.

Speaker Change: We have an image of...

Speaker Change: different type of services company. We have an image of much more.

Speaker Change: what did you renew

Speaker Change: company and much more closer to what people who sent to vo

Speaker Change: software companies and from some time put to you we canpete withresthis type of comebody the same like with some gptures which trying to buildw the high end

Speaker Change: that

Arkadiy Dobkin: So at the same time, we are also kind of the underdog in India, which means that we have the opportunity to play differently and in specific spots of the market, including like breathing out, training capabilities, and different types of work. I think while there are very light companies, it's for us, it's relatively easy for the labor market, for the country. And if you say that we're growing much, much... Like, oh, you see, like, our industry is growing pretty, pretty strong, is that it?

Speaker Change: offices in India so

Speaker Change: the eish es allated so at the same time you also pend

unknown: much closer to what people would think about as the underdog in India, which means that we companies. It's for us, it's relatively for the labor market, for the country. Like, oh, you see, like, our industry is growing pretty, pretty strongly, is this?

Speaker Change: other do in india whichach mealss thatwe

Speaker Change: have opportunity to play differently and in specific, specific spots of the market. Including like breathing out, training capabilities and

Unknown Executive: I think while the rubbery logic, companies it's for us it's relatively clear how to differentiate us for the level market, for the kind of one. And if you say that we growing much much more like how you see like our India is growing pretty strongly in this situation. Thank you. Your next question comes from a lot of David Grossman, the line is open. Good morning, thanks. Just a couple of quick follow-ups.

Speaker Change: you can type of work i think while there are very likely

Speaker Change: numberb is forus is relatively

Speaker Change: Learn how to differentiate.

Speaker Change: us

Speaker Change: was a lbel life was a that one

Speaker Change: And if you see that we're growing much, much, much.

Speaker Change: You see, our injury is growing pretty strongly in this situation.

Operator: Your next question comes from David Grossman. Your line is open.

Speaker Change: Thank you.

Speaker Change: Your next question comes from David Grossman. The line is open.

David Grossman: Good morning. Thanks.

David Grossman: Good morning. Thanks. Just a couple of quick follow-ups.

Unknown Executive: If I recall you said the headwind from India, the mid-shifty India, what's going to be about 200 basis points that's here on revenue? Is that still a fair assumption than giving the initial thought on whether or the magnitude of the headwind would be at 2025? Yeah, I would say that you know 2% is generally correct. You know, it probably has gone up slightly for one week guided at the end of the Q1 call.

David Grossman: Just a couple of quick follow-ups. As I recall, you said the headwind from India, the makeshift to India, was going to be about 200 basis points this year on revenue. Is that still a fair assumption? And give any initial thoughts on whether or how the magnitude of the headwind would be in 2025?

David Grossman: As I recall, you said the headwind from India, the makeshift to India, was going to be about 200 basis points this year on revenue. Is that still a fair assumption? And give me initial thoughts on whether or the magnitude of the headwind would be in 2025.

Jason Peterson: Yeah, I would say that, you know, 2% is generally correct. It probably has gone up slightly for when we guided at the end of the Q1 call. And then I would say for next year, my guess is the headwind from India might be greater than 2%. So I guess that's how I'd respond to that.

Speaker Change: Yeah, I would say that, you know, 2% is generally correct. You know, it probably has gone up slightly for when we guided at the end of the Q1 call. And then I would say for next year, my guess is the headwind from India might be greater than 2%.

Unknown Executive: And then I would say for the next year, my guess is the headwind from India might be greater than 2%. So I guess that's how I'd responded that to you. And that's just because of the ramp of headcount. Is that why it's higher in 20 times? Yeah, probably a little bit higher in billable India and a little bit lower in billable on site. And those two things are kind of producing it, you know, but it's probably a modest, modestly lower average bill rate for the company.

David Grossman: And that's just because of the ramp of headcount. Is that why it's higher than 25?

unknown: And that's just because of the ramp of headcount. Is that why it's higher than 25?

Speaker Change: so i just that time ' responded that thing

Speaker Change: And that's just because of the ramp of headcount. Is that why it's higher than 25?

Jason Peterson: Yeah, it's probably a little bit higher in billable India and a little bit lower in billable on-site. And those two things are kind of producing what is probably a modestly lower average bill rate.

Speaker Change: Yeah, probably a little bit higher in billable in India and a little bit lower in billable on site. And those two things are kind of producing what is probably a modestly lower average bill rate for the company.

David Grossman: Got it. And similarly, I know you've talked quite a bit about the lost clients. I think one was M&A and one was something else. And I'm just trying to remember whether you've quantified that headwind this year and next and when we compare against that headwind.

Unknown Executive: Got it. And similarly, I know you've talked quite a bit about the loss client. I think one was M&A and one was something else. And I'm just trying to remember whether you've want to fight that headwind this year and next and when we come out against that headwind. Yeah, so the one that is kind of the M&A-like exit, which is the one I usually refer to, I think we calm out at the end of the year, and it, you know, it was fellow digit revenue, like it was, you know, over $10 million a quarter, so it was a significant number.

Speaker Change: got it and similarly i know you've talked quite a bit about the loss client i think one was seven a and one was something else and

Speaker Change: I'm just trying to remember whether you've quantified that headwind this year and next and when we comp out against that headwind.

Jason Peterson: Yeah, so the one that is kind of the M&A-like exit, which is the one I usually refer to, I think we comped out at the end of the year, and it was double-digit revenue, like it was over $10 million a quarter, so it was a significant number. And then the other one is the one that has been sort of slowly reducing its demand for our services, and that continues to be an ongoing trend, and that was a little bit related to their hesitation around our Ukrainian footprint. And then I think they're also just doing a little bit of work around bringing some positions in-house. But, you know, we still have demand from them again, but just there's been a gradual decline over time. And I think you'll continue to see that for the next.

Speaker Change: Yeah, so the one that is kind of the M&A-like exit, which is the one I usually refer to, I think we comp out at the end of the year.

Speaker Change: And, you know, it was double-digit revenue, like it was, you know, over $10 million a quarter, so it was a significant number. And then the other one is the one that has been, you know, sort of slowly reducing their demand for our services.

Unknown Executive: And then the other one is the one that has been, you know, sort of slowly reducing their demand for our services, and that continues to be ongoing trend, and that was a little bit related to their hesitation around our Ukrainian footprint, and then I think they're also just doing a little bit of work around, you know, bringing some positions in-house, but, you know, we still get half demand from them, but just there's been gradual decline over time, and I think you'll continue to see that for the next couple of years. Got it.

David Grossman: Got it. And just one last thing.

Unknown Executive: And just one last thing, just that on the DSO case, and I know it was up last quarter, and it was up against sequentially. Should we see that, or do that as maybe a macro dynamic that's affecting all your accounts, or is this another way of providing, you know, better terms to remain more competitive, or is it something else going on? Yeah, I would say that on the 76, it was definitely a result of just the last couple of days being on a weekend, and so we saw a significant amount of cash coming out of the funding in two-state, but that was here in Q3, but David, I would say that as we've moved towards more fixed fee, that is having an impact on DSO, because it does kind of impact the invoicing, and I do think that you'll likely see something closer to 74 for the second half of the year, and again, that's due to the shifting and the type of contract that we've been doing. So then I guess with that maybe we're operating to reaffirm.

Unknown Executive: Got one more question.

David Grossman: Just on DSO, Jason, I know it was up last quarter and it was up again sequentially. Should we see that or view that as maybe a macro dynamic that's affecting all your accounts? Or is this another way of providing, you know, better terms to remain more competitive? Or is it something else going on?

unknown: Yeah, I would say that the 76 was definitely a result of just the last couple of days being on the weekend. And so we saw a significant amount of cash come in on the Monday and Tuesday, but that was in Q3. But David, I would say that as we've moved towards a more fixed fee, that is having an impact on DSL because it does kind of impact invoicing. And I do think that you're likely to see something closer to 74 for the second half of the year. And again, that's due to the shift in the type of contracting we've been doing.

Jason Peterson: Yeah, I would say that the 76 was definitely a result of just the last couple of days being on the weekend. And so we saw a significant amount of cash come in on the Monday and Tuesday, but that was in Q3. But David, I would say that as we've moved towards more fixed fees, that is having an impact on DSO because it does kind of impact invoicing. And I do think that you're likely to see something closer to 74 for the second half of the year. And again, that's due to the shift in the type of contracting we've been doing. So then, I guess with that, maybe we are.

Speaker Change: That is having an impact on DSO, because it does kind of impact the invoicing and I do think that you will likely see something closer to 74.

Speaker Change: For the second half of the year and again thats due to the shifting and the type of contract and we've been doing.

Speaker Change: And I guess with that maybe.

Operator: Operator, we have time for one more question.

Speaker Change: Operator, we have time got one more question.

Jason Peterson: These are just a final question comes from the line of Jamie Friedman from Susquehanna. Your line is open. Hi, thanks for squeaking me in here. So with regards to your last answer, Jason, that was really interesting about the fixed price to DSO. I'm just wondering also just related to that is the growth and fixed price related to the generative AI or outcomes-based pricing? That's my first one, and then my second one I'll just ask you upfront is, could you call out what's going on in life science? I know Jason mentioned it's a combination of self-care and life sciences, prepared remarks. It was a featured topic at the analyst day a couple of years ago. It seems like it's working now.

David Grossman: Thank you David.

Operator: The final question comes from the line of Jamie Friedman from Susquehanna. Your line is open.

Operator: The final question comes from the line of Jamie Friedman from Susquehanna. Your line is open.

Speaker Change: The final question comes from the line of Jamie Friedman from Susquehanna. Your line is open.

James Friedman: Hi, thanks for squeaking in here. So with regard to your last answer, Jason, that was real interesting about the fixed price to DSO. I'm just wondering, also just related to that, is the growth in fixed prices related to generative AI or outcomes based pricing?

Jamie Friedman: Hi, Thanks for squeezing me in here.

Jamie Friedman: So.

Jamie Friedman: With regards to your last answer Jason that was really interesting about the fixed price to DSO I'm. Just wondering also just related to that is fixed is.

Speaker Change: Is the growth in fixed price related to the to generative AI or outcomes based pricing. That's my first one.

James Friedman: That's my first one. And then my second one, which I'll just ask him up front is, could you call out what's going on in life science? I know Jason mentioned it's a combination of both healthcare and life sciences prepared remarks. It was a featured topic at analyst day a couple of years ago. It seems like it's working now. So any high-level stuff, first on fixed price, second on life science. Thank you.

Jamie Friedman: And then my second one I'll just ask them upfront is or could you call out what's going on in the life Science I know Jason mentioned, it's a combination of both health care and life science in his prepared remarks. It was a featured topic at the analyst day, a couple of years ago. It seems like it's working now so any high level stuff first on a fixed price second on life science. Thank you.

Arkadiy Dobkin: So any high-level stuff first fixed price second on life science. Thank you. With fixed fee, certainly there's, I would say, some experimentation with fixed fee with productivity to gen AI trends. I don't think that's showing up in the numbers right now, but you know, making it to sort of show up and freeze to fixed fee. I would say more so, you know, again, clients are looking for us to step in and say we can deliver a certain program for a fixed amount of money, or we can deliver a certain story points for fixed amount of money on a monthly basis.

James Friedman: Fixed fee, certainly there's, I would say, some experimentation with sort of a fixed fee with productivity that's Gen-AI driven. I don't think that's showing up in the numbers right now but, you know, may continue to sort of show up in increased fixed fee. I would say more because, you know, again, clients are looking for us to step in and say, we can deliver a certain

Jason Peterson: Fixed fee, certainly there's, I would say, some experimentation with sort of a fixed fee with productivity that's Gen-AI driven. I don't think that's showing up in the numbers right now, but, you know, may continue to sort of show up in increased fixed fees. I would say more so, you know, again, clients are looking for us to step in and say, we can deliver a certain program for a fixed amount of money, or we can deliver a certain number of story points for a fixed amount of money on a monthly basis.

Speaker Change: Fixed fee certainly there is I would say some experimentation with sort of.

Jamie Friedman: With productivity. This gen AI, driven I don't think thats showing up in the numbers right now, but may continue to sort of show up in fixed fee I would say more so again clients are looking for us to step in and say, we can deliver a certain.

Jamie Friedman: Program for a fixed amount of money or we can deliver a certain amount of story points for a fixed amount of money on a monthly basis and again. It is it allows us to be a little bit more competitive.

Jason Peterson: And again, it allows us to be a little bit more competitive. And then we are doing a little bit more business in the Middle East. And that market tends to be more fixed fee oriented as well. And so those would be the two things on that. And then growth in life sciences and healthcare

Arkadiy Dobkin: And again, it allows us to be a little more competitive. And then we are doing a little bit more distance in the middle east, and that market tends to be more fixed fee oriented as well. And so those would be the two things on that. And then growth and life sciences and health care are Yeah, I think we were talking about this, we were talking about building more industry expertise in this area, and in general from our conversation several years back, it was positive growth while it was a couple of things when client situation was actually changing.

Speaker Change: And then we are doing a little bit more business in the middle east and that market tends to be more fixed fee oriented as well and so those would be the two things on that and then growth in life Sciences and healthcare.

Speaker Change:

unknown: Yeah, I think we were talking about it. We were talking about building more industry expertise in this area, and, in general, our Appliance situation was actually changing. Right now, it's pretty positive.

Arkadiy Dobkin: Yeah, I think we were talking about it. We were talking about building more industry expertise in this area, and in general, from our conversation several years ago, it was positive growth while there were a couple of things. The appliance situation was actually changed. Right now, it's pretty positive.

Speaker Change: Yes, I think we went into it get involved.

Speaker Change: Alright.

Speaker Change: Or industry expertise in this area.

Speaker Change: And in.

Speaker Change: In general for Awhile.

Speaker Change: And the recession several years back.

Speaker Change: It was by the two growth while it was a couple of things.

Speaker Change: Our clients' decision was actually changes.

unknown: I think the concentration of data programs in our life science and healthcare business is, I'm curious, very high, which is still in demand today. And again, a combination of industry and data program proportion makers.

Arkadiy Dobkin: I think the concentration of data programs in our life science and healthcare business is, I'm curious, very high, which is still in demand today. And again, a combination of industry, expertise, which we invested in some level of consultancy. And again, Data Program Proportion Makers, and benefit for us. And that's how we look into some other industries, how we can change the trend, similar to what's happening here.

Arkadiy Dobkin: Right now it's pretty positive. I think the concentration of data programs in our life science and healthcare business is actually very high, which is still in demand today, and again, a combination of industry expertise, which we invested in some level consultancy, and again data program proportion making this benefit for us. And that's what have you looking to some other industries, how we can change the trend similar to what happened here.

Speaker Change: Right.

Speaker Change: Three to positive I assume concentration of those data programs.

Unknown Executive: Thank you.

Speaker Change: And so it's kind of business is.

Speaker Change: I'm sure.

Rich: Hi, rich.

Rich: Still in the land today and again be nationals.

Rich: In the state.

Speaker Change: <unk>, which we invested in.

Rich: Low consultancy.

Speaker Change: Got it.

Speaker Change: Data program proportion of maintenance.

Speaker Change: A benefit for us.

Speaker Change: We will look into some other industries, causing a change in trend similar to what happened in the year.

Speaker Change: Thank you.

Speaker Change: Yeah.

Arkadiy Dobkin: So, I'd like to...

Arkadiy Dobkin: So I'd like to thank you. I think time is over, and thank you for joining us today. So I think we're trying to communicate the wild situation as it is right now. We do believe that we found with all focus on climate change in the region, and we have to deny. We have a conversation for the future grows when market come back. So I know we're repeating this each time, but it's actually very much believe in.

Speaker Change: So.

Speaker Change: Yes.

Speaker Change: Okay.

Arkadiy Dobkin: I think it's Oliver M. Perth. As usual, thank you for joining us today. So I think we're trying to communicate that while the situation is as it is right now, we do believe that EPAM, with all its focus on cloud data engineering and investors in AI, we are pretty well positioned for future growth when the market comes back. So I know we repeat this each time, but it's actually, we very much believe it, and we will be ready to come back in the spring. We'll see how many quotas we'll have to...

Speaker Change: I think time was.

Speaker Change: Okay.

Speaker Change: And good for joining us today, so I assume clearly trying to go.

Speaker Change: Well situation as it is right now we're doing it.

Speaker Change: We are all focused on.

Speaker Change: <unk> data engine Union.

Speaker Change: Did that.

Speaker Change: Retail position.

Speaker Change: The future gross margin.

Speaker Change: So I know we repeat in this each time, but it's actually.

Speaker Change: The wait and watch.

Arkadiy Dobkin: And we will be ready for come back in this space. We will see how many quarters we will have to still wait for this. But I guess thank you and let's look into the months. That doesn't feel our comfort for today.

Speaker Change: And we.

Speaker Change: We will be ready for.

Speaker Change: Hello.

unknown: We'll see how many quarters we will have to...

Speaker Change: We will see you will have to still.

Speaker Change: <unk>.

Speaker Change: But again <unk> splits.

Speaker Change: Months.

Speaker Change: Okay.

Speaker Change: That does conclude our conference for today. Thank you for participating you may now disconnect.

Operator: Thank you for participating in men out.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.