EPAM Beats Q1 Earnings & Revenue Estimates, Raises Outlook

EPAM Systems’ EPAM reported first-quarter 2021 non-GAAP earnings of $1.81 per share, beating the Zacks Consensus Estimate $1.68. The figure also grew 19.9% year over year.

Revenues came in at $780.8 million, reflecting a year-over-year increase of 19.9%. The top line also surpassed the consensus mark $765.9 million. On a constant currency (cc) basis, revenues were up 17.8%.

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

Quarterly Details

Segment wise, Business Information & Media, grew 6.5% year over year to $148 million and accounted for 19% of the company’s revenues.

Financial Services increased 28.3% on a year-over-year basis to $169 million and accounted for 21.6% of revenues.

While Software & Hi-Tech was up 20.7% to $147 million, Travel & Consumer grew 16.3% to $139 million. Software & Hi-Tech and Travel & Consumer accounted for 18.8% and 17.8% of revenues, respectively.

Life Science & Healthcare climbed 31% year over year to $91 million and accounted for 11.7% of revenues. The Emerging segment improved 23.6% year over year to $87 million and contributed 11.1% to revenues.

Geographically, EPAM Systems generated 60.2% of total revenues from North America, up 20.6% year on year. Revenues from Europe, contributing 33.3% to total revenues, jumped 16.3% year on year.

CIS, representing 3.8% of revenues, increased 21.2% year over year, driven mainly by clients in financial services and materials.

APAC was up 53.9% and accounted for 2.7% of revenues.

Notably, the total headcount was approximately 43,500 as of Mar 31, 2021.

EPAM Systems’ non-GAAP operating income increased 31.6% year over year to $136.9 million. Operating margin expanded 130 basis points (bps) to 17.5%.

Balance Sheet and Cash Flow

As of Mar 31, 2021, EPAM Systems had cash and cash equivalents of $1.37 billion, up from $1.32 billion as of Dec 31, 2020.

As of Mar 31, 2021, long-term debt was $25 million, flat sequentially.

EPAM Systems generated cash flow from operating activities of $12.8 million compared with the year-ago quarter’s $63.3 million.

Outlook

Citing a stronger demand environment, EPAM raised its full-year outlook. The company now projects revenue growth of at least 29% on a reported basis, which includes a 1% favorable impact of foreign currency translation on revenues. Earlier, management had anticipated a 23% increase.

It raised its non-GAAP earnings guidance range to $7.54-$7.76 per share from the $7.20-$7.41 forecasted previously. However, EPAM reiterated the non-GAAP operating margin guidance of 16.5%-17.5%.

For the second quarter of 2021, EPAM Systems expects revenues between $853 million and $861 million, suggesting year-over-year growth of 35.5% at the mid-point of the range. The company expects foreign currency translation to have a 3% favorable impact on year-over-year revenue growth during the quarter.

Management projects non-GAAP operating margin in the 16.5-17.5% range. Non-GAAP earnings are expected to be in the $1.88-$1.95 per share band.

Zacks Rank and Other Stocks to Consider

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

Other better-ranked stocks in the broader technology sector include Lam Research Corporation LRCX, ASML Holding N.V. ASML and NVIDIA NVDA. While Lam Research and ASML Holding sport a Zacks Rank #1 (Strong Buy), NVIDIA carries a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Lam Research, ASML Holding, and NVIDIA is currently pegged at 32.8%, 29.8% and 15.1%, respectively.

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