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EPAM Systems Reports Record Results for Fourth Quarter and Full Year 2012


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Copyright © Thomson Reuters 2013. All rights reserved.
2013-02-28 02:17:27 -

* Fourth Quarter revenues up 14% sequentially and 32% year-over-year
  * Annual revenues of $433.8 million, up 30% year-over-year
  * Double digit growth in profitability achieved in both fourth quarter and
    full year 2012
  * 2013 revenues expected to increase by 23% to 25%
Newtown, PA - February 27, 2013 - EPAM Systems, Inc. (NYSE: EPAM), a leading
provider of complex software engineering solutions and a leader in Central and
Eastern European IT services delivery, today announced record results for its
fourth quarter and full year ended December 31, 2012.

Arkadiy Dobkin, CEO and President commented, "Our strong fourth quarter and full
year 2012 results demonstrate the competitiveness of our business proposition.
By combining our core strengths in software engineering with 
our strong expertise in a number of emerging technologies and our fast developing domain knowledge, EPAM is differentiated as a provider of high quality, complex technology and business solutions to meet the rapidly-changing needs of global clients.  Consequently, we reported significant year-over-year revenue growth across our three geographic regions and most of our key vertical markets in both the fourth quarter and full year 2012. Profitability was in line with our guidance, as we continued to post double- digit year-on-year improvement in both the fourth quarter and full year 2012, while investing in people and infrastructure that will drive future growth. At the end of the fourth quarter, we completed an important strategic transaction with the acquisition of Empathy Lab, a digital strategy and multi-channel experience design firm that significantly strengthens our position as a global provider of end-to-end digital services and multi-channel eCommerce solutions. The integration of Empathy Lab is currently underway, and we are working together on business development initiatives to drive revenue synergies." Fourth Quarter 2012 Highlights * Revenues increased to a record $125.5 million, up 32.0% year-on-year  and 14.0% sequentially * GAAP income from operations was $18.7 million, an increase of 20.9% compared to $15.4 million in the fourth quarter of 2011 * Non-GAAP income from operations was $20.6 million, an increase of $4.2 million or 26.0%, from $16.3 million in the fourth quarter of 2011 * Quarterly diluted earnings per share (EPS) on a GAAP basis was $0.32, up from  $0.29 in the year-ago quarter * Non-GAAP quarterly diluted EPS was $0.37, up 23% from $0.30 in the year-ago quarter EPAM generated cash from operations of $35.8 million in the fourth quarter of 2012, an increase of $9.4 million generated over the fourth quarter of 2011. Reconciliations of non-GAAP financial measures to operating results and diluted EPS are included at the end of this release. Full Year 2012 Highlights * Revenues increased 29.7% to a record $433.8 million, up from $334.5 million reported in 2011 * GAAP income from operations for 2012 was $66.0 million, an increase of 20.0% over 2011 * Non-GAAP income from operations was $74.9 million compared to $60.9 million in 2011 * Diluted EPS on a GAAP basis was $1.17, compared to $0.63 in the previous year * Non-GAAP diluted EPS was $1.42, compared to $1.19 in 2011 * Net headcount for IT professionals increased 21.9% to 8,495 as of December 31, 2012, from 6,968 as of December 31, 2011 For full year 2012, EPAM generated operating cash flow of $48.5 million.  As of December 31, 2012 EPAM had cash and cash equivalents of $118.1 million. Full Year and First Quarter 2013 Outlook "Based on our visibility and the market conditions we see for our service offerings, we are confident that our growth momentum will continue in 2013 and beyond. To support this expansion, we will continue to invest in the development of technical competencies that are critical to our success and to build our on- site presence to better support complex solution delivery requirements. Additionally, we will evaluate organic opportunities as well as acquisitions to expand our scope of services, complement existing technical expertise, and add new vertical markets," concluded Mr. Dobkin. Based on current conditions, EPAM expects year-over-year revenue growth in the range of 23% to 25%. Non-GAAP net income growth for 2013 is expected to be in the range of 12% to 15% year-over-year, with an increase in the effective tax rate to approximately 20%. For the first quarter of 2013, EPAM expects revenue between $122 million and $125 million, representing a growth rate of 29% to 31% over first quarter 2012 revenue, which includes results from two acquisitions made in 2012 that were not in the comparable period.  First quarter 2013 non-GAAP diluted EPS is expected to be in the range of $0.32 to $0.34 based on an estimated first quarter 2013 weighted average of 47.6 million diluted shares. Conference Call Information EPAM will hold a conference call to discuss its fourth quarter and full year 2012 results at 8:00 a.m. Eastern time, on Thursday, February 28, 2013. A live webcast of the call may be accessed over the Internet from EPAM's Investor Relations website at investors.epam.com. Participants should follow the instructions provided on the website to download and install the necessary audio applications. The conference call also is available by dialing 1-877-407-0784 (domestic) or 1-201-689-8560 (international) and entering passcode 409154. Participants should ask for the EPAM Systems fourth quarter and full year 2012 conference call. A replay of the live conference call will be available approximately one hour after the call. The replay will be available on EPAM's website or by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international) and entering the replay passcode 409154. The telephonic replay will be available until March 10, 2013. About EPAM Systems Established in 1993, EPAM Systems, Inc. (NYSE:EPAM) provides software engineering solutions through its leading Central and Eastern European service delivery platform. Headquartered in the United States, EPAM employs approximately 8,500 IT professionals and serves clients worldwide from its locations in the United States, Canada, UK, Switzerland, Germany, Sweden, Belarus, Hungary, Russia, Ukraine, Kazakhstan and Poland. Non-GAAP Financial Measures EPAM supplements results reported in accordance with principles generally accepted in the United States, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in EPAM's business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing EPAM's business and evaluating its performance. Management also believes these measures help investors compare EPAM's operating performance with its results in prior periods and compare EPAM and similar companies. EPAM anticipates that it will continue to report both GAAP and certain non-GAAP financial measures in its financial results, including non-GAAP results that exclude stock-based compensation expense, write-off and recovery, amortization of purchased intangible assets, goodwill impairment, legal settlement, foreign exchange gains and losses, and M&A costs. However, because EPAM's reported non-GAAP financial measures are not calculated according to GAAP, these measures are not comparable to GAAP and may not necessarily be comparable to similarly described non-GAAP measures reported by other companies within EPAM's industry. Consequently, EPAM's non-GAAP financial measures should not be evaluated in isolation or supplant comparable GAAP measures, but, rather, should be considered together with its consolidated financial statements, which are prepared according to GAAP. Forward-Looking Statements This press release includes statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. EPAM undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law. Contact: EPAM Systems, Inc. Ilya Cantor, Chief Financial Officer Phone: +1-267-759-9000 x64588 Fax: +1-267-759-8989 investor_relations@epam.com EPAM SYSTEMS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME       Three Months Ended   Year Ended       December 31,   December 31, ---------------------------- ---------------------------       2012   2011   2012   2011 -------------- ------------- ------------- -------------       (in thousands, except share and per share data) Revenues $125,538   $95,127   $433,799   $334,528 Operating expenses: Cost of revenues (exclusive of depreciation and     amortization) 77,284      59,388 270,361    205,336 Selling, general and administrative     expenses 26,377      18,510 85,868      64,930 Depreciation and amortization     expense 3,208        1,806 10,882        7,538 Goodwill impairment loss     -      -   -          1,697 Other operating expenses, net      13    (4)  682             19 -------------- ------------- ------------- ------------- Income from   operations 18,656   15,427   66,006   55,008 Interest and other   income, net 519           422   1,941        1,422 Foreign exchange loss   (135)    (500)    (2,084)       (3,638) -------------- ------------- ------------- ------------- Income before provision for income   taxes 19,040   15,349   65,863   52,792 Provision for income   taxes 4,041   2,965   11,379   8,439 -------------- ------------- ------------- ------------- Net Income $14,999   $12,384   $54,484   $44,353 -------------- ------------- ------------- ------------- Comprehensive income $15,640   $11,535   $56,977   $43,103 -------------- ------------- ------------- ------------- Accretion of preferred          -             -            -    (17,563) stock Net income allocated to participating          -      (6,941) (3,341)    (15,025) securities Net income available for common 14,999   5,443 51,143   11,765 stockholders Net income per share of common stock:     Basic (common) 0.35   0.32   1.27   0.69 Basic (puttable          -     0.32          -   1.42     common) 0.32   0.29               0.63     Diluted (common)       1.17 Diluted (puttable          -     0.29          -   0.77     common) Shares used in calculation of net income per share of common stock:     Basic (common) 43,294   17,141   40,190   17,094 Basic (puttable          -     18          -   18     common)     Diluted (common) 46,604   20,520   43,821   20,473 Diluted (puttable          -     18          -   18     common) EPAM SYSTEMS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS As of As of December 31,     December 31,   2011   2012 -------------- -----------------------------     (in thousands, except share and per share   data) Assets Current assets   Cash and cash equivalents $118,112   $88,796 Accounts receivable, net of allowance of $2,203 and $2,250, 78,906   59,472   respectively   Unbilled revenues 33,414   24,475   Prepaid and other current assets 12,264   6,436   Time deposits 1,006   -   Restricted cash, current 660   -   Deferred tax assets, current 6,593     4,384 -------------- -----------------------------     Total current assets 250,955   183,563 Property and equipment, net 53,135   35,482 Restricted cash, long-term 467   2,582 Intangible assets, net 16,834   1,251 Goodwill 22,698   8,169 Deferred tax assets, long-term 6,093     1,875 Other long-term assets 632   2,691 -------------- ----------------------------- Total assets $350,814   $235,613 -------------- ----------------------------- Liabilities Current liabilities   Accounts payable $6,095   $2,714   Accrued expenses 19,814   24,782   Deferred revenue 6,369   6,949   Due to employees 12,026   8,234   Taxes payable 14,557   8,712 Deferred tax liabilities, 491   1,736   current -------------- -----------------------------     Total current liabilities 59,352   53,127 Deferred revenue, long-term 1,263   - Taxes payable, long-term 1,228   1,204 Deferred tax liabilities, long- 2,691   283 term -------------- ----------------------------- Total liabilities 64,534   54,614 -------------- ----------------------------- Commitments and contingencies Preferred stock, $.001 par value; 0 and 5,000,000 authorized at December 31, 2012 and December 31, 2011; 0 and 2,054,935 Series A-1 convertible redeemable preferred stock issued and outstanding at December 31, 2012 and December 31, 2011; $.001 par -     85,940 value 0 and 945,114 authorized at December 31, 2012 and December 31, 2011, 0 and 384,804 Series A- 2 convertible redeemable preferred stock issued and outstanding at December 31, 2012 and December 31, 2011 Stockholders' equity Common stock, $.001 par value; 160,000,000 authorized; 45,398,523 and 18,914,616 shares issued, 44,442,494 and 17,158,904 44   17 shares outstanding at December 31, 2012 and December 31, 2011, respectively Preferred stock, $.001 par value; 0 and 290,277 authorized Series A- 3 convertible preferred stock -     - issued and outstanding at December 31, 2012 and December 31, 2011, respectively Additional paid-in capital 166,962   40,020 Retained earnings 128,992   74,508 Treasury stock  (8,697)    (15,972) Accumulated other comprehensive  (1,021)    (3,514) loss -------------- ----------------------------- Total stockholders' equity 286,280   95,059 -------------- ----------------------------- Total liabilities and $350,814   $235,613 stockholders' equity -------------- ----------------------------- EPAM SYSTEMS, INC. AND SUBSIDIARIES Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures (Unaudited) (In thousands, except per share amounts)     Three Months Ended   Year Ended     December 31,   December 31, --------------------------------- ---------------------------------     2012   2012   2012   2012   2012   2012 Non- Non-     GAAP   Adjustments   GAAP   GAAP   Adjustments   GAAP --------- ------------- --------- --------- ------------- --------- Income from operations $18,656   $1,896   $20,552  (a) $66,006   $8,934   $74,940  (a) --------- ------------- --------- --------- ------------- --------- Operating margin 14.9%   1.50%   16.4%   15.2%   2.10%   17.3% --------- ------------- --------- --------- ------------- --------- Net income $14,999   $2,031   $17,030  (b) $54,484   $11,018   $65,502  (b) --------- ------------- --------- --------- ------------- --------- Diluted earnings per   share $0.32       $0.37  (c) $1.17       $1.42  (c) --------- --------- --------- ---------     Three Months Ended   Year Ended     December 31,   December 31, --------------------------------- ---------------------------------     2011   2011   2011   2011   2011   2011 Non- Non-     GAAP   Adjustments   GAAP   GAAP   Adjustments   GAAP Income from operations $15,427   $887   $16,314  (a) $55,008   $5,869   $60,877  (a) --------- ------------- --------- --------- ------------- --------- Operating margin 16.2%   0.9%   17.1%   16.4%   1.8%   18.2% --------- ------------- --------- --------- ------------- --------- Net income $12,384   $1,387   $13,771  (b) $44,353   $9,507   $53,860  (b) --------- ------------- --------- --------- ------------- --------- Diluted earnings per   share $0.29       $0.30  (c) $0.63       $1.19  (c) --------- --------- --------- --------- Notes:       Three Months Ended   Year Ended       December 31,   December 31, ------------------------ -------------------------       2012   2011   2012   2011 ------------ ----------- ------------- ----------- (a) Adjustment to GAAP Income from   operations:     1,896    887   8,934    5,869 Stock-based compensation, of   which: 1,457   712   6,826   2,866 reported in cost of     revenues       323   418    2,809   1,365 reported in sales, general and administrative     expenses    1,134   294    4,017   1,501 Amortization of purchased intangible   assets 313   140   1,024   779   M&A costs 126   35   500   527   One-time charges  -      -     584         -   Goodwill write-off  -      -     -     1,697 (b) Adjustment to GAAP   Net Income:     2,031       1,387    11,018    9,507 Stock-based compensation, of   which: 1,457   712   6,826   2,866 reported in cost of     revenues       323   418    2,809   1,365 reported in sales, general and administrative     expenses    1,134   294    4,017   1,501 Amortization of purchased intangible   assets 313   140   1,024   779   M&A costs 126   35   500   527   One-time charges  -      -     584         -   Goodwill write-off  -      -     -     1,697 Foreign exchange   (gains) and losses 135   500   2,084   3,638 (c) Non-GAAP diluted earnings per share presents non-GAAP net income divided by Non-GAAP weighted average diluted common shares outstanding.  Non-GAAP weighted average diluted common shares outstanding assumes (i) the 2.9 million shares EPAM sold in its February 2012 initial public offering were outstanding as of January 1, 2010, and (ii) the conversion of the outstanding preferred stock into common stock on an as-converted basis. The following table presents the non-GAAP weighted average diluted   common shares outstanding for the periods presented: Three Months       Ended   Year Ended       December 31,   December 31, ----------------- ----------------       2012   2011   2012   2011 -------- -------- -------- ------- Non-GAAP weighted average diluted common   shares outstanding 46,604   45,278   46,123   45,250 This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: EPAM Systems, Inc. via Thomson Reuters ONE [HUG#1681857]


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