EPAM Systems ( EPAM Quick Quote 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.
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.
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 Quick Quote MSFT - Free Report) , Cadence Design Systems ( CDNS Quick Quote CDNS - Free Report) and Texas Instruments ( TXN Quick Quote 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.