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EPAM Systems, Inc.: EPAM Systems Reports Results for Second Quarter 2014

2014-08-05 00:23:00
Ticker Giełda ISIC Kraj Miasto
EPAM XNYS U.S.A. Newtown (PA)






Second quarter revenues up 31% year-over-year and 9% sequentially



Newtown, PA - August 4, 2014 - EPAM Systems, Inc. (NYSE: EPAM), a leading

provider of complex software engineering solutions and a leader in Central and

Eastern European IT services delivery, today announced results for the quarter

ended June 30, 2014.



Second Quarter 2014 Highlights



?         Revenues increased to $174.7 million, up 31.2% year-over-year and

8.9% sequentially;

?         Non-GAAP income from operations was $28.9 million, an increase of $7.1

million or 32.7% from $21.8 million in the second quarter of 2013;

?         Non-GAAP quarterly diluted EPS was $0.53, up 32.5% from $0.40 in the

second quarter of 2013;

?         GAAP income from operations was $18.5 million, an increase of $0.9

million, or 5.4%, from $17.5 million in the second quarter of 2013;

?         Quarterly diluted earnings per share (EPS) on a GAAP basis was $0.30,

up 3.4% from $0.29 in the second quarter of 2013.





EPAM generated cash from operations of $15.4 million in the second quarter of

2014 and $31.6 million on a year-to-date basis. At June 30, 2014, cash and cash

equivalents were $175.1 million.



Reconciliations of non-GAAP financial measures to operating results and diluted

EPS are included at the end of this release.



Corporate Highlights



?         EPAM delivery headcount crossed the 10,000 employee mark.

?         EPAM was named as one of Top 50 on CRN's 2014 Solution Provider 500

(SP500) list by The Channel Company's CRN. The list ranks the top revenue-

generating technology integrators in the U.S. and Canada whose forward-thinking

approach to the channel has helped them evolve and thrive in today's cloud and

services-driven IT era.

?         EPAM was named as one of 20 most promising solution providers in

Travel & Hospitality 2014, published by CIO Review magazine in its special

edition.

?         EPAM, together with industry leaders CIO magazine and The CMO Club,

released a new study looking at the challenges CIOs and CMOs are facing in

pursuing omnichannel strategies.





Full Year and Third Quarter 2014 Outlook





"I am very pleased to report another very solid quarter, despite all the geo-

political turmoil in Eastern Europe over the last six months.  Our strong focus

on the high growth portion of global software services market and continued

delivery of high quality solutions to our clients allowed us to over-perform the

original organic forecast as well as the general market." said Arkadiy Dobkin,

CEO and President of EPAM. "Combined with several relatively small but important

acquisitions our top-line grew over 30% this quarter setting a good base for

achieving our annual and longer-term strategic goals."





For the full year 2014, based on current conditions and including the impact of

all acquisitions, EPAM expects year-over-year revenue growth to be 28% to 30%.

Non-GAAP net income growth for 2014 is expected to be in the range of 26% to

28% year-over-year, with an effective tax rate of 20%. The full year weighted

average share count is expected to be just over 50 million diluted shares

outstanding.





For the third quarter of 2014, EPAM expects revenues between $188 million and

$190 million, representing a growth rate of 34% to 36% over third quarter 2013

revenues. Third quarter of 2014 non-GAAP diluted EPS is expected to be in the

range of $0.53 to $0.55, based on an estimated second quarter weighted average

shares of 50.3 million. GAAP diluted EPS is expected to be the in the range of

$0.25 to $0.27.



Conference Call Information



EPAM will host a conference call to discuss its second quarter results on

Tuesday, August 5, 2014 at 8:00 a.m. Eastern Time. The live conference call can

be accessed by dialing 1-877-407-0784 (international) or 1-201-689-8560

(domestic).

A telephonic replay will also be available approximately one hour after the call

and can be accessed by dialing 1-877-870-5176 (international) or 1-858-384-5517

(domestic). The passcode for the replay is 13587206. The telephonic replay will

be available until August 19, 2014.

Interested investors and other parties may also listen to a webcast of the

conference call by logging onto the Investor Relations section of the Company's

website at http://investors.epam.com





About EPAM Systems



Established in 1993, EPAM Systems, Inc. (NYSE: EPAM), is recognized as a leader

in software product development by independent research agencies. Headquartered

in the United States, EPAM employs approximately 10,500 IT professionals and

serves clients worldwide utilizing its award-winning Central and Eastern

European global delivery platform and its locations in 17 countries throughout

North America, Europe, and Asia. EPAM was ranked by Forbes as #6 among America's

25 Fastest-Growing Tech Companies and #2 among the Fast-Growing Tech Stars.



For more information, please visit http://www.epam.com





Non-GAAP Financial Measures



EPAM supplements results reported in accordance with generally accepted

accounting principles in the United States, referred to as GAAP, with non-GAAP

financial measures. Management believes these measures help illustrate

underlying trends in EPAM's business and uses the measures to establish budgets

and operational goals, communicated internally and externally, for managing

EPAM's business and evaluating its performance. Management also believes these

measures help investors compare EPAM's operating performance with its results in

prior periods and compare EPAM and similar companies. EPAM anticipates that it

will continue to report both GAAP and certain non-GAAP financial measures in its

financial results, including non-GAAP results that exclude stock-based

compensation expense, write-off and recovery, amortization of purchased

intangible assets, goodwill impairment, legal settlement, foreign exchange gains

and losses, and acquisition-related costs. However, because EPAM's reported non-

GAAP financial measures are not calculated according to GAAP, these measures are

not comparable to GAAP and may not necessarily be comparable to similarly

described non-GAAP measures reported by other companies within EPAM's industry.

Consequently, EPAM's non-GAAP financial measures should not be evaluated in

isolation or supplant comparable GAAP measures, but, rather, should be

considered together with its consolidated financial statements, which are

prepared according to GAAP.



Forward-Looking Statements



This press release includes statements which may constitute forward-looking

statements made pursuant to the safe harbor provisions of the Private Securities

Litigation Reform Act of 1995, the accuracy of which are necessarily subject to

risks, uncertainties, and assumptions as to future events that may not prove to

be accurate. Factors that could cause actual results to differ materially from

those expressed or implied include general economic conditions and the factors

discussed in our most recent Annual Report on Form 10-K and other filings with

the Securities and Exchange Commission. EPAM undertakes no obligation to update

or revise any forward-looking statements, whether as a result of new

information, future events, or otherwise, except as may be required under

applicable securities law.



Contact:

EPAM Systems, Inc.

Anthony J. Conte, Chief Financial Officer

Phone: +1-267-759-9000 x64588

Fax: +1-267-759-8989

investor_relations@epam.com



EPAM SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(US Dollars in thousands, except share and per share data)





  As of

As of December

June 30, 31,

  2014   2013

------------- ------------

Assets



Current assets



Cash and cash equivalents $ 175,075     $ 169,207



Accounts receivable, net of allowance of $2,267 and

$1,800, respectively 108,179   95,431



Unbilled revenues 67,880     43,108



Prepaid and other current assets 16,200     14,355



Employee loans, net of allowance of $0 and $0,

respectively, current 2,240   1,989



Time deposits 1,142     1,188



Restricted cash, current -     298



Deferred tax assets, current 4,123     5,392

------------- ------------

Total current assets 374,839     330,968



Property and equipment, net 54,523     53,315



Restricted cash, long-term 212     225



Employee loans, net of allowance of $0 and $0,

respectively, long-term 4,218   4,401



Intangible assets, net 49,381     13,734



Goodwill 42,547     22,268



Deferred tax assets, long-term 9,382     4,557



Other long-term assets 2,862     3,409

------------- ------------

Total assets $ 537,964     $ 432,877

------------- ------------





Liabilities



Current liabilities



Accounts payable $ 12,500     $ 2,835



Accrued expenses and other liabilities 23,280     20,175



Deferred revenue, current 4,244     4,543



Due to employees 21,006     12,665



Taxes payable 15,050     14,171



Deferred tax liabilities, current 1,563     275

------------- ------------

Total current liabilities 77,643     54,664



Other long-term liabilities 31,892     -



Deferred revenue, long-term 228     533



Taxes payable, long-term 1,228     1,228



Deferred tax liabilities, long-term 326     351

------------- ------------

Total liabilities 111,317     56,776

------------- ------------

Commitments and contingencies



Stockholders' equity



Common stock, $0.001 par value; 160,000,000

authorized; 48,229,347 and 47,569,463 shares issued,

47,514,892 and 46,614,916 shares outstanding at June

30, 2014 and December 31, 2013, respectively 48   46



Additional paid-in capital 212,450     195,585



Retained earnings 223,164     190,986



Treasury stock (6,500 )   (8,684 )



Accumulated other comprehensive loss (2,515 )   (1,832 )

------------- ------------

Total stockholders' equity 426,647     376,101

------------- ------------

Total liabilities and stockholders' equity $ 537,964     $ 432,877

------------- ------------









EPAM SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

(US Dollars in thousands, except share and per share data)





Three Months Ended Six Months Ended

   June 30,    June 30,

--------------------------- --------------------------

  2014     2013     2014     2013

------------- ------------- ------------- ------------

Revenues $ 174,695     $ 133,184     $ 335,079     $ 257,382



Operating expenses:



Cost of revenues

(exclusive of

depreciation and

amortization) 110,102   83,547   212,556   161,484



Selling, general and

administrative expenses 38,671   28,541   71,030   55,624



Depreciation and

amortization expense 5,451   3,854   9,140   7,471



Other operating

expenses, net 1,995   (293 )   2,020   (268 )

------------- ------------- ------------- ------------

Income from operations 18,476     17,535     40,333     33,071



Interest and other

income, net 1,164   769   2,140   1,399



Foreign exchange loss (1,239 )   (869 )   (2,480 )   (1,368 )

------------- ------------- ------------- ------------

Income before provision

for income taxes 18,401   17,435   39,993   33,102



Provision for income

taxes 3,587   3,317   7,815   6,304

------------- ------------- ------------- ------------

Net income $ 14,814     $ 14,118     $ 32,178     $ 26,798

------------- ------------- ------------- ------------

Foreign currency

translation adjustments 2,894   (1,045 )   (683 )   (3,388 )

------------- ------------- ------------- ------------

Comprehensive income $ 17,708     $ 13,073     $ 31,495     $ 23,410

------------- ------------- ------------- ------------





Net income per share:



Basic $ 0.31     $ 0.31     $ 0.69     $ 0.59



Diluted $ 0.30     $ 0.29     $ 0.65     $ 0.56



Shares used in

calculation of net

income per share:



Basic 47,068     45,486     46,933     45,151



Diluted 49,559     47,977     49,384     47,813











EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures

(in thousands, except percent and per share amounts)





  Three Months Ended June 30, 2014   Six Months Ended June 30, 2014

----------------------------------------- ----------------------------------------

  GAAP   Adjustments   Non-GAAP   GAAP   Adjustments   Non-GAAP

------------- ------------- ------------- ------------- ------------- ------------

Cost of revenues

(exclusive of

depreciation and

amortization)(1) $ 110,102   $ (2,525 )   $ 107,577   $ 212,556   $ (3,928 )   $ 208,628



Selling, general

and

administrative

expenses(2) $ 38,671   $ (3,665 )   $ 35,006   $ 71,030   $ (6,051 )   $ 64,979



Income from

operations(3) $ 18,476   $ 10,412   $ 28,888   $ 40,333   $ 14,851   $ 55,184



Operating margin 10.6 %   5.9 %   16.5 %   12.0 %   4.5 %   16.5 %



Net income(4) $ 14,814     $ 11,651     $ 26,465     $ 32,178     $ 17,331     $ 49,509



Diluted earnings

per share(5) $ 0.30   $ 0.23   $ 0.53   $ 0.65   $ 0.35   $ 1.00









  Three Months Ended June 30, 2013   Six Months Ended June 30, 2013

--------------------------------------- ----------------------------------------

  GAAP   Adjustments   Non-GAAP   GAAP   Adjustments   Non-GAAP

------------ ------------- ------------ ------------- ------------- ------------

Cost of revenues

(exclusive of

depreciation and

amortization)(1) $ 83,547   $ (1,079 )   $ 82,468   $ 161,484   $ (1,858 )   $ 159,626



Selling, general

and

administrative

expenses(2) $ 28,541   $ (2,781 )   $ 25,760   $ 55,624   $ (4,616 )   $ 51,008



Income from

operations(3) $ 17,535   $ 4,233   $ 21,768   $ 33,071   $ 7,546   $ 40,617



Operating margin 13.2 %   3.1 %   16.3 %   12.8 %   3.0 %   15.8 %



Net income(4) $ 14,118     $ 5,102     $ 19,220     $ 26,798     $ 8,914     $ 35,712



Diluted earnings

per share (5) $ 0.29   $ 0.11   $ 0.40   $ 0.56   $ 0.19   $ 0.75







Notes:





(1) Adjustments to GAAP cost of revenues (exclusive of depreciation and

amortization) were comprised of stock-based compensation expense recorded

in the periods presented.



(2) Adjustments to GAAP selling general and administrative expenses:





Three Months Ended Six Months Ended

   June 30,    June 30,

----------------------- ----------------------

  2014     2013     2014     2013

----------- ----------- ----------- ----------

Stock-based compensation expense $ 3,366     $ 2,771     $ 5,171     $ 4,568



Acquisition-related costs 299     10     880     48

----------- ----------- ----------- ----------

Total adjustments to GAAP

selling, general and

administrative expenses $ 3,665   $ 2,781   $ 6,051   $ 4,616

----------- ----------- ----------- ----------





(3) Adjustments to GAAP income from operations:





Three Months Ended Six Months Ended

   June 30,    June 30,

------------------------ -----------------------

  2014     2013     2014     2013

------------ ----------- ------------ ----------

Stock-based compensation

expense $ 5,891   $ 3,850   $ 9,099   $ 6,426



reported within cost of

revenues 2,525   1,079   3,928   1,858



reported within selling,

general and administrative

expenses 3,366   2,771   5,171   4,568



Acquisition-related costs 299     10     880     48



Amortization of purchased

intangible assets 2,222   704   2,872   1,403



One-time charges 2,000     (331 )   2,000     (331 )

------------ ----------- ------------ ----------

Total adjustments to GAAP

income from operations $ 10,412   $ 4,233   $ 14,851   $ 7,546

------------ ----------- ------------ ----------





(4) Adjustments to GAAP net income:





Three Months Ended Six Months Ended

   June 30,    June 30,

------------------------ -----------------------

  2014     2013     2014     2013

------------ ----------- ------------ ----------

Stock-based compensation

expense $ 5,891   $ 3,850   $ 9,099   $ 6,426



reported within cost of

revenues 2,525   1,079   3,928   1,858



reported within selling,

general and administrative

expenses 3,366   2,771   5,171   4,568



Acquisition-related costs 299     10     880     48



Amortization of purchased

intangible assets 2,222   704   2,872   1,403



One-time charges 2,000     (331 )   2,000     (331 )



Foreign exchange loss 1,239     869     2,480     1,368

------------ ----------- ------------ ----------

Total adjustments to GAAP net

income $ 11,651   $ 5,102   $ 17,331   $ 8,914

------------ ----------- ------------ ----------





(5) There were no adjustments to GAAP average diluted common shares

outstanding during the three and six months ended June 30, 2014 and 2013.











This announcement is distributed by GlobeNewswire on behalf of

GlobeNewswire clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and

other applicable laws; and

(ii) they are solely responsible for the content, accuracy and

originality of the information contained therein.



Source: EPAM Systems, Inc. via GlobeNewswire

[HUG#1846462]





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