EPAM Systems (EPAM Quick QuoteEPAM - Free Report) reported third-quarter 2021 non-GAAP earnings of $2.42 per share, beating the Zacks Consensus Estimate $2.22. The figure also grew 46.7%, year over year.

Revenues came in at $988.5 million, reflecting a year-over-year increase of 51.6%. The top line also surpassed the consensus mark $966.3 million. On a constant currency (cc) basis, revenues were up 46.6%. Acquisitions completed in the last 12 months contributed 5% to third-quarter top-line growth.

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

Quarterly Details

Segment wise, Business Information & Media climbed 24%, year over year, to $173 million and accounted for 17.5% of the company’s revenues.

Financial Services jumped 69% on a year-over-year basis to $231 million and accounted for 23.4% of revenues.

While Software & Hi-Tech was up 47% to $174 million, Travel & Consumer grew 79% to $198 million. Software & Hi-Tech and Travel & Consumer accounted for 17.6% and 20% of revenues, respectively.

Life Science & Healthcare climbed 30% year over year to $96 million and accounted for 9.7% of revenues. The Emerging segment improved 62% year over year to $117 million and contributed 11.8% to revenues.

Geographically, EPAM Systems generated 59.8% of the total revenues from North America, up 52% year on year. Revenues from Europe, contributing 32.8% to total revenues, jumped 51% year on year.

CIS, representing 4.6% of revenues, surged 50% year over year, fueled primarily by clients in financial services and materials.

APAC was up 60% and accounted for 2.8% of revenues.

Notably, the total headcount was more than 52,650 as of Sep 30, 2021.

EPAM Systems’ non-GAAP operating income increased 45.7% year over year to $179.6 million. Operating margin contracted 70 basis points (bps) to 18.2%.

Balance Sheet and Cash Flow

As of Sep 30, 2021, EPAM Systems had cash, cash equivalents and restricted cash of $1.27 billion, slightly down from $1.29 billion as of Jun 30, 2021.

As of Sep 30, 2021, long-term debt was $25 million, down from $29 million as of Jun 30, 2021.

During the third quarter, EPAM Systems generated operating and free cash flows of $206.1 million and $184.9 million, respectively. During the first nine months of 2021, it generated operating cash flow of $287.7 million and free cash flow of $232.7 million.

Outlook

Citing a stronger demand environment, EPAM raised its full-year outlook. The company now projects revenue growth of at least 40% on a reported basis, which includes a 2% favorable impact of foreign currency translation on revenues. Earlier, management had anticipated a 37% increase.

EPAM raised the non-GAAP earnings guidance range to $8.72-$8.79 per share from the $8.25-$8.44 estimated previously.  The company reiterated its non-GAAP operating margin guidance range of 17-18%.

For the fourth quarter, EPAM Systems estimates revenues between $1.075 billion and $1.085 billion, suggesting year-over-year growth of 49% at the mid-point. The company expects foreign-currency translation to have minimal 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 $2.44-$2.51 per share band.

Zacks Rank & Stocks to Consider

EPAM currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Applied Materials (AMAT Quick QuoteAMAT - Free Report) , Broadcom (AVGO Quick QuoteAVGO - Free Report) and Perficient (PRFT Quick QuotePRFT - Free Report) , all carrying a Zacks Rank #2 (Buy), 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 Applied Materials, Broadcom and Perficient is currently pegged at 19.4%, 15% and 18%, respectively.