Yahoo Finance EPAM Systems (EPAM) Q1 Earnings Beat Estimates, Sales Match
EPAM Systems EPAM reported mixed first-quarter 2023 results. The company’s first-quarter non-GAAP earnings of $2.47 per share beat the Zacks Consensus Estimate of $2.34. The figure declined by 0.8% year over year.
Revenues were $1.21 billion, which matched the consensus mark, reflecting a year-over-year increase of 3.4%. On a constant-currency (cc) basis, top line was up 7%.
Digital transformation, a focus on customer engagement and product development remained key catalysts. The company continued to benefit from growth across multiple industry verticals and all geographies except for the Central and Eastern Europe (CEE) region.
EPAM’s first-quarter performance in the CEE was hurt by massive business disruptions caused by the Russia-Ukraine war. In February 2022, the company announced the discontinuation of its services in Russia in support of Ukraine. The decision to exit the Russian market favorably impacted total first-quarter revenues by 2.2%.
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 4.2% year over year to $202.4 million and accounted for 16.7% of the company’s revenues.
Financial Services jumped 4.1% on a year-over-year basis to $270.7 million and accounted for 22.4% of revenues.
While Software & Hi-Tech was down 0.2% to $189.2 million, Travel & Consumer grew 4.9% to $278.3 million. Software & Hi-Tech and Travel & Consumer accounted for 15.6% and 23% of revenues, respectively.
Life Science & Healthcare fell by 10.1% year over year to $111.2 million and accounted for 9.2% of revenues. The Emerging segment improved by 14.7% year over year to $159.1 million and contributed 13.1% to revenues.
Geography-wise, EPAM generated 58.6% of the total revenues from the Americas, up 3.4% year over year. Revenues from the EMEA, contributing 38.3% to total revenues, jumped 10% year over year.
The Asia Pacific declined 9.4% year over year, while accounting for 2.2% of revenues. The CEE, representing 0.9% of revenues, plunged 68.8% year over year.
The total headcount was approximately 57,450 as of Mar 31, 2023.
EPAM’s non-GAAP gross profit dropped 2.5% to $380.9 million, while the gross margin contracted 180 basis points (bps) to 31.5%. The non-GAAP operating income decreased 5.5% year over year to $178.3 million. The non-GAAP operating margin contracted by 140 bps to 14.7%.
Balance Sheet and Cash Flow
As of Mar 31, 2023, EPAM had cash, cash equivalents and restricted cash of $1.75 billion, up from $1.68 billion as of Dec 31, 2022.
As of Mar 31, 2023, the long-term debt was $28.3 million, up from $27.7 million as of Dec 31, 2022.
In the first quarter, EPAM generated operating and free cash flows of $87.3 million and $79.4 million, respectively.
Guidance
EPAM provided guidance for the second quarter of 2023. The company estimates reporting revenues between $1.195 billion and $1.205 billion, suggesting year-over-year growth of 0.5% at the midpoint in the second quarter.
EPAM expects foreign currency translation to have a negative impact of 0.8%. On a cc basis, it projects revenue growth of 0.5%. The company forecasts that the exit from the Russian market is likely to have a positive impact of approximately 0.9% on second-quarter revenues.
Management projects the non-GAAP operating margin in the 14-15% range. Non-GAAP earnings are expected in the range of $2.38-$2.46 per share.
For 2023, the company projects revenues in the range of $4.950-$5.250 billion, suggesting growth of 3% at the midpoint. This includes a minimal unfavorable impact of foreign currency translation on revenues. EPAM expects the exit from the Russian market to favorably impact 2023 revenues by approximately 1.2%.
EPAM sets non-GAAP earnings guidance in the $10.60-$10.80 per share range. The company forecasts its non-GAAP operating margin guidance between 15.5% and 16.5% for 2023.
Zacks Rank & Key Picks
Epam Systems carries a Zacks Rank #3 (Hold). Shares of EPAM have dropped 21.8% over the past year.
Some better-ranked stocks from the broader Computer and Technology sector are Meta Platforms META, Momo MOMO and ServiceNow NOW. While Meta Platforms and Momo sport a Zacks Rank #1 (Strong Buy), ServiceNow carries a Zacks Rank #2 at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Meta Platforms' second-quarter 2023 earnings has been revised 14% upward to $2.79 per share over the past seven days. For 2023, earnings estimates have moved north by 12.1% to $11.76 in the past seven days.
META’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, missing twice, the average surprise being 15.5%. Shares of the company have gained 14.6% in the past year.
The Zacks Consensus Estimate for Momo’s first-quarter 2023 earnings has been revised southward from 36 cents to 32 cents per share over the past 30 days. For 2023, earnings estimates have moved down by 3 cents to $1.55 in the past 30 days.
MOMO's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 31.9%. Shares of the company have gained 59.4% in the past year.
The Zacks Consensus Estimate for ServiceNow’s second-quarter 2023 earnings has been revised northward by 12 cents to $2.04 per share over the past seven days. For 2023, earnings estimates have moved up by 32 cents to $9.54 in the past seven days.
NOW's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 10.4%. Shares of the company have inched down 5.8% in the past year.
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