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EPAM Beats Q2 Earnings & Revenue Estimates, Raises Outlook

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EPAM Systems (EPAM - Free Report) reported second-quarter 2021 non-GAAP earnings of $2.05 per share, beating the Zacks Consensus Estimate $1.93. The figure also grew 40.4%, year over year.

Revenues came in at $881.4 million, reflecting a year-over-year increase of 39.4%. The top line also surpassed the consensus mark $862.4 million. On a constant currency (cc) basis, revenues were up 35.9%.

The company is benefiting from growth across all geographies and multiple industry verticals. Digital transformation, focus on customer engagement and product development have been key catalysts.

EPAM Systems, Inc. Price, Consensus and EPS Surprise EPAM Systems, Inc. Price, Consensus and EPS Surprise

EPAM Systems, Inc. price-consensus-eps-surprise-chart | EPAM Systems, Inc. Quote

Quarterly Details

Segment wise, Business Information & Media climbed 12.5% year over year to $157.9 million and accounted for 17.9% of the company’s revenues.

Financial Services jumped 51.5% on a year-over-year basis to $193.9 million and accounted for 22% of revenues.

While Software & Hi-Tech was up 33.2% to $159.2 million, Travel & Consumer grew 59.9% to $171.5 million. Software & Hi-Tech and Travel & Consumer accounted for 18% and 19.5% of revenues, respectively.

Life Science & Healthcare climbed 33.1% year over year to $91.7 million and accounted for 10.4% of revenues. The Emerging segment improved 56.4% year over year to $107.2 million and contributed 12.2% to revenues.

Geographically, EPAM Systems generated 59.8% of total revenues from North America, up 38.1% year on year. Revenues from Europe, contributing 33% to total revenues, jumped 38% year on year.

CIS, representing 4.4% of revenues, surged 70.8% year over year, driven mainly by clients in financial services and materials.

APAC was up 44.4% and accounted for 2.8% of revenues.

Notably, the total headcount was approximately 47,850 as of Jun 30, 2021.

EPAM Systems’ non-GAAP operating income increased 43.5% year over year to $155.2 million. Operating margin expanded 50 basis points (bps) to 17.6%.

Balance Sheet and Cash Flow

As of Mar 31, 2021, EPAM Systems had cash, cash equivalents and restricted cash of $1.29 billion, down from $1.37 billion as of Mar 31, 2021.

As of Jun 30, 2021, long-term debt was $29 million, rose nearly $4 million from $25 million as of Mar 31, 2021.

EPAM Systems generated operating and free cash flows of $68.8 million and $46.2 million, respectively. During the first half of 2021, it generated operating cash flow of $81.6 million and free cash flow of $47.8 million.

Outlook

Citing a stronger demand environment, EPAM raised its full-year outlook. The company now projects revenue growth of at least 37% on a reported basis, which includes a 2% favorable impact of foreign currency translation on revenues. Earlier, management had anticipated a 29% increase.

It raised its non-GAAP earnings guidance range to $8.25-$8.44 per share from the $7.54-$7.76 estimated previously. The company also revised its non-GAAP operating margin guidance range upward to 17-18% from the previous forecast of 16.5-17.5%.

For the third quarter, EPAM Systems estimates revenues between $957 million and $965 million, suggesting year-over-year growth of 47% at the mid-point. The company expects foreign currency translation to have a 1% favorable impact on year-over-year revenue growth during the quarter.

Management projects non-GAAP operating margin in the 17-18% range. Non-GAAP earnings are expected to be in the $2.15-$2.22 per share band.

Zacks Rank & Other Stocks to Consider

EPAM currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader technology sector include Microsoft (MSFT - Free Report) , Cadence Design Systems (CDNS - Free Report) and Texas Instruments (TXN - Free Report) , all carrying a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Microsoft, Cadence Design and Texas Instruments is currently pegged at 11.5%, 11.7% and 9.3%, respectively.