• Revenue: $1.25 billion in Q4, a 7.9% year-over-year increase.
• Organic Revenue Growth: 1% year-over-year in Q4 on a constant currency basis.
• Gross Margin: GAAP gross margin at 30.4%, non-GAAP gross margin at 32.2% for Q4.
• Net Income: GAAP income from operations was $137 million, non-GAAP income from operations was $208 million in Q4.
• Diluted EPS: GAAP EPS of $1.80, non-GAAP EPS of $2.84 in Q4.
• Cash Flow from Operations: $130 million in Q4.
• Free Cash Flow: $115 million in Q4.
• Consultant Headcount: Over 55,100 consultants, a 16.3% increase year-over-year.
• Utilization Rate: 76.2% in Q4.
• Full Year Revenue: $4.728 billion, a 0.8% increase year-over-year.
• Full Year GAAP Income from Operations: $545 million, representing 11.5% of revenue.
• Full Year Non-GAAP Income from Operations: $779 million, representing 16.5% of revenue.
• Full Year Diluted EPS: GAAP EPS of $7.84, non-GAAP EPS of $10.86.
• Full Year Cash Flow from Operations: $559 million.
• Full Year Free Cash Flow: $527 million.

• Warning! GuruFocus has detected 4 Warning Signs with EPAM.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• EPAM Systems Inc (NYSE:EPAM) reported stronger-than-expected Q4 results, with revenues of $1.25 billion, marking a 7.9% year-over-year increase.
• The company returned to organic revenue growth for the first time since Q1 2023, driven by improvements in client sentiment and engagements.
• EPAM Systems Inc (NYSE:EPAM) saw significant traction in its GenAI initiatives, with 75% of its top 100 clients engaged in GenAI projects.
• The company's acquisitions of NEORIS and First Derivative have expanded its global footprint and contributed to revenue growth.
• EPAM Systems Inc (NYSE:EPAM) achieved a milestone in India, now representing its largest single country delivery location with over 10,000 employees, reflecting a 10x growth in 10 years.

Negative Points

• The company faces ongoing pricing pressure, impacting its ability to offset compensation increases with better pricing.
• EPAM Systems Inc (NYSE:EPAM) anticipates running at lower profitability levels in 2025 due to investments in talent retention and GenAI platforms.
• There is broad market sensitivity and caution due to macroeconomic risks and geopolitical uncertainties, affecting client spending behavior.
• The company reported a decline in cash flow from operations in Q4 2024 compared to the same quarter last year, partly due to recent acquisitions.
• EPAM Systems Inc (NYSE:EPAM) expects continued margin pressures due to the necessity to invest in critical skills, talent retention, and integration efforts of recent acquisitions.

Q & A Highlights

Q: Can you elaborate on the expectations embedded in the revenue guidance, both company-specific and from a macro perspective? A: Jason Peterson, CFO, explained that the guidance includes modest growth expectations for recent acquisitions NEORIS and First Derivative. Organic revenue growth is projected between 0% to 4%, with foreign exchange headwinds considered. The company anticipates sequential growth from Q1 to Q2, with substantial program starts expected as the year progresses.

Q: How are you balancing investments in agentic AI and IT with the need to drive cost synergies from recent acquisitions? A: Jason Peterson, CFO, noted that the company is investing in GenAI, which impacts SG&A and gross margin. The focus is on retaining top technical talent, which has led to compensation increases. Arkadiy Dobkin, CEO, emphasized the importance of investing in GenAI to prepare for future demand, despite current pricing challenges.

Q: Is the pricing pressure affecting both new and existing business opportunities? A: Arkadiy Dobkin, CEO, stated that pricing pressure exists across both run-the-business and change-the-business opportunities. The company is seeing a shift towards more engineering-led programs, but pricing remains a challenge until demand normalizes.

Q: Can you provide more details on client spending behavior and new versus existing clients? A: Arkadiy Dobkin, CEO, mentioned that the company is acquiring new clients, some of which quickly reach significant revenue levels. Existing clients are also returning, particularly those who previously reduced engagement due to geopolitical issues. Jason Peterson, CFO, highlighted stronger-than-expected revenue growth in Q4, driven by improved client sentiment.

Q: What is the outlook for profitability, and do you anticipate a return to previous profit levels? A: Jason Peterson, CFO, expects improved profitability in the second half of the year. The company aims to return to a 16% or better profitability level, driven by a more favorable pricing environment and operational efficiencies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.