EPAM Systems (EPAM) 8 Aug 242024 Q2 Earnings call transcript

Good day, and welcome to the Second Quarter 2024 EPAM Systems Earnings Conference Call. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Mike Rowshandel, Head of Investor Relations to begin the conference. Mike, over to you.

Good morning, everyone, and thank you for joining us today.

mentioned, Rowshandel, just Relations. of operator the I'm Head Mike Investor As now, your company's for results. received should second of XXXX By have release copy you the earnings quarter the

in copy call today's Arkadiy Financial Dobkin, and available a Officer. I me President; are not, and Peterson, have section. With you on If epam.com Jason the CEO would Investors on to is Chief like uncertainties contain the as forward-looking earnings SEC that listening on made those to company's comments risks in some subject described of and These the release statements. filings. call remind statements are may today's and

website. With reported that materials said, to earnings are turn now to references all over I been measures in have available non-GAAP located reconciled in Additionally, Ark. will comparable and that GAAP call results our the are the quarterly measures to Investors our the of section

Thank us Good joining Thank today. you you, for morning, Mike. everyone.

would First, complex second continued in and start quarter generally our with came amidst strong our I in which believe our environment. like results, still reflects a our to We adaptability of XXXX performance with second line demand execution off expectations. quarter the

share of some current from business up today. me our to Let QX highlights

the to large through In mentioned the few namely verticals, have work and In Our of from sciences growth strong show of to business we financial some some of second emerging verticals, and signs our very saw before. slight in underlying we improvements quarter, continue services. we in vertical also delivered sequential growth business stabilization. information healthcare continues our strong in the the life clients media, the impact and we where rap-downs

continues do changes. time, and be delays EMEA North as constrained priorities, business a still with clients we of America. own to increase environment, At mix by to programs broad-based see demand and stabilization both clients' same cost-saving signs and visibility significant larger program well clients, are in cautious a the starts our across the of On

provide [indiscernible] are In we outlook improvements delivery XXXX. To mix see are and this for the story our overall, AI, increasing quarters clear, and complex digital engagement driving technology of overall offerings [indiscernible], of engineering with As demand opportunities our of traction we demand notwithstanding the remainder result final data growth currently core next our details our environment, now. consulting transformation as the of agents as parameters that be overall of in will significant net well updated assuming the and a certain in especially of more Jason we X, advanced modest sectors of no year. for current picture, target adjust new we and while to returning continue us. the our through portfolio demand analytics, for see broad the to are it and X our market as optimistic about our we top environment, see current the capabilities in to the

the we the and managing the demand on to on be while environment of partners EPAM meanwhile, of business part the fundamentals continues this in So strong our focused building our ensuring remain choice improve. cycle, that responsibly

believe use their Turning delivery for driving most turn their significant through talent our continue business our In mostly the from of to EPAM a for technologies technical advanced now opportunities complex growth advantage transformation modernization and well, as innovation complex serve considerations capabilities Europe, will continue and to especially toward and clients cost-driven top on leverage efforts. clients back our strategy. challenges. differentiated global the traditional to to our We create this

to a tech strong year. emerging our priority talent and the we the markets region. India track growth investing and enabling largest future lead of becoming We our which delivery are also end hubs to continuously in where location are on by responsibly more recently the our Central talent Asia, experienced remains established Western in delivery across and and is are

built have analytics, and other force, commerce, digital service marketing, key and SAP data horizontal sales excellence of lines. centers We in scaled and vertical

Our while in and enterprise-level in of and unique around will building not many engineering, grade available our in blending is India scale, capabilities growth opportunities the We present primary believe quality with EPAM EPAM strong on people. EPAM focus our most differentiate globe. create this other approach locations India a clients for

Am. also continuing in core Lat expand are We capabilities our engineering to

Argentina. in Mexico In now addition short delivery have and to a Colombia, we hub

In future We and years, the local are will region. In across the including talents continue data, crucial technical developing investing capabilities, we predictive centers AI x-labs debt each of reduction to our client IP ML and new a full-service GenAI-enabled scale new enable assessing these practices network through GenAI delivery in in GenAI for and existing activities. corresponding GenAI building major and across development. and short, are we of

in-market seek means into and much addition, complete in not In to stronger compelling we which includes both that strategies well. alliance locally partner a India manner, Am, presence in particularly we are solutions, able our a to global end more delivery Lat strategic [indiscernible] building capabilities, as offer but evolving also as being differentiated and serve only ecosystem

[indiscernible] and all markets, service our effects. engagement industry major capabilities client locations, in client our specifically we and improve programs focus on to in our across Finally, continue our to consulting our

bit more in Now our details approach. a on GenAI let's turn

would highlight years, how to and initiate and we the transformation continuously transformation, the recognized for extends AI technology, complexities our decade data progress advanced in area despite helping now. Today, into pilots naturally understands several last of leader This up-to-date to for deployments. production and something that clients EPAM last company in are the regarded cases being is all during clients beyond doing move use engineering our pragmatically and EPAM are the a we digital who partners then complete to challenges programs. ourselves, our I and time some like For

with of internal and A of fundamentals on our and global ourselves help usage do to train to to AI dimensional/ and company goal is upskill today, responsibly established effectively of We approach and absolute community, one, ambition gone Dimension so internal the have and GenAI to platforms, transformation majority investments. with EPAMers to specialized GenAI of dedicated current debt. X an the EPAM Our transformation our through both enablement an their set for the technical in EPAM work daily tools program applying maintaining activities. and educational close training XXX% execute level And was AI the this. the

engineering efforts invest differentiated the months, IP of broad companies most XX similar better that of EPAMers a and highly believe to opportunities range enabled allow accelerators around across during understand last us While in have early programs, we announced our focused and and to the solution. future GenAI

training over source EPAMers style have all advanced EPAM unit our initiatives of and practitioner practitioners, over We business that open internal solutions. We of are dimension believe drivers now organizational our are GenAI to enabled become of enabled assume practices. Our well while XX% all internal technical generic IP now combination strong that Champions AI transformation X,XXX GenAI lead opportunities. becoming have scaling with across communities client and to advanced ability

today involvement led project from EPAM being last evolved proof-of-concept have with client a of exploratory engagements. clients AI hundreds late and pilots selected partner GenAI year primary as into AI Our by to now

enabling full value implementation side another. chain of We one are the HDLC from to helping and cases business of use change real GenAI-driven from

prompts, data real development speed and a applications and EliteA, streamline to solutions and DIAL is helping efforts set GenAI a into AI IP briefly AI/Run the framework clients to model different load comprehensive unified and of EPAM platform internal, cycle LLMs and type enabled the external entire implement use teams templates ROI and investments. time assets, sources, development, helps AI meaningful together speed highlight by up customer GenAI market collaboration software innovation investments business to for delivery SLMs of power accelerates orchestration dots. EPAM recognize few Let agents. life just language and experimentation large the management a a workflow EPAM accessibility by of balancing of and is XX%. me public the cases that enterprises a connecting improving GenAI and that including with platform proprietary native

across examples clients, Now a operate few user specific which different for completely the environments.

Unity develop GenAI textures of easier platform real-time for language to and for to purpose-built platform revenue tools either and a troubleshooting, [indiscernible] more and Microsoft faster to industry-leading analytics multiple Xsolis create X management data and grow provides real-time gaming well managers, connections. health leaders migration utilization platform advisers, Azure as build The prompts with behavior ability AI capabilities and creators apps animations cycle [indiscernible], From multi-cloud experiences to new the Unity, help build use. [indiscernible]. Xsolis, flagship and physician the XXX to to help nurses, and than and For as across assistance platforms. will leader generation make across We world-leading care games XXX hospitals case million enhancing using systems by health and predictive natural to creation generate aid developers AI, in game product. Dragonfly, in AWS on and also to providing chat-based a solutions system a

the EPAM for [indiscernible] data application visualize quality driven interpret statistical EPAM Initial talk research data and powered increase research in QuantHub DIAL proprietary to statistical for organizations, of economists which results of a built in and we platform, via accelerators. accuracy. using a to their a transform, showed modernization productivity and relying GenAI increase as Finally, natural data and statisticians XX% the XX% part is SDMX StatGPT, framework analyze, users, language by interface

very rise and of broad across customer significant every of GenAI as cases. use this are now as cases. well and we significant And experiences is set in process-related overall, use driving vertical a seeing And engagements both front-end transformation a back-office

Dimension Finally, to all [indiscernible] that us enable allow network. for transformation, turn in AI X extended

that our all, are we saw because of in very First we practical approach.

and started few than services architecture when than complexity. program clients AI encompasses today larger of we broader particularly consulting projects range adopting analytics, degree more we're technical just well business partners, and much a a as Our and engineering both AI and our and complex quarters cloud strategic technology partnerships. With of a transformation and as native ago, more are accelerating and high modernization, advanced have XXX leveraging where

corporate of choice partners are We our for real. engagement making partner

of and just named Data Year, been Partner implementation conversational Microsoft for Partner of interfaces, Brief X to of cloud level cloud power and the upskilling Partner boundaries only are the skills. of the of Year Development training, and [indiscernible] companies assume of the by the disruption GenAI In and [indiscernible] partners, question, I center Google elite partner, AI team, the very data brick design Cloud way, including creativity large framework. By reskilling for programs? and these Talent we've Year well. what fact, and predictable guess our state-of-the-art [indiscernible] the modern recognized language we recently, learning the of for to several as the best-in-class model the tools is recognized industry-leading our with excellence. data digital impact X as is commerce experience of clients. It's answer revenue for technology. probably Year delivery next of our easy recognized award pushing commitment Gaming for Partner of our and recognized the machine

in days highly same downstream transformation pipeline still the are wave. opportunities we a share. But they at partner. We accelerating can is and our what on are efforts demand. us of about and valid to the clients AI trusted that the need global Remaining We very market and bring drive relevant proactively early for what from and AI-led optimistic coming focused time, to our remain expanding our expanding

to optimizing can our value service of global premium our to We so to our generally client expanding provide managing committed attractive locations delivery we to working, also remain footprint, and at base. cost-efficient continue ways

market positioned well to with demand, [indiscernible] I build significant and GenAI legacy firmly capabilities be advanced believe and GenAI to apply to driven new customer-centric by in solution by for for platform capture modernization how [indiscernible] on interest EPAM to needs rebound solutions. pressures and continues

pass to Jason QX on details additional provide to like our would I this, in and our to performance. results With future

growth. Russian morning, on you, X% impact had everyone. no Russian revenue billion, Ark, of longer a we an $X.XXX second year-over-year The clients. point approximate and EPAM generate this [indiscernible] basis the year-over-year revenue quarter, of negative market, Thank good impact of decrease generated revenue exit from In XX on

respectively. Excluding for reported revenue decreased X.X% have and by currency revenues, X.X%, constant Russia and would year-over-year

performance. vertical our to Moving

Life growth basis, softness goods, in X.X% declines solid the slight in sequential the demand. Life clients of a driven year-over-year the in was quarter, Healthcare indicating delivered retail asset very strong offset decreased year-over-year by the quarter delivered XX.X%. in retail, vertical Sciences & payments. In in driven travel. & Services Healthcare. and partially Growth Sciences banking X.X% due to management, largely decreased travel by both Consumer by stabilizing growth, and Financial year-over-year, growth on

contracted of down from substantially Software and impacted top our revenues in hi-tech client. our a largest constant revenues. on and growth in clients energy of outside information X.X% currency client by revenue XX constant of year-over-year, And our and revenues, discussed inorganic declined new driven from geographic the region, QX, while currency. telecom. From now Business was our And X% represents XX.X% emerging QX X.X% and XX to terms. or X% in X.X% declined of perspective, EMEA verticals QX was year-over-year our X.X% stronger this grew declined and constant by delivered and solid QX revenues, X.X%. top contract clients both declined clients relatively our in compared currency previously latter terms representing The year-over-year. revenues group top media representing performance ramp finally, XX% by a contributions. In year-over-year basis quarter X.X% the XX% in finally, X.X% XXXX. the of and X% APAC Americas, to year-over-year Revenue driven year-over-year XX.X% reported of our XX

income down Moving statement. the

well or in SG&A is to Non-GAAP $XXX our in in and QX the year. the XX.X% of or revenue of to as of in were improvement ongoing margin managing in in XX.X% of in impacted operations the million the our gross QX last increases, negatively XX.X% to to The the was we compared and compensation to impact locations XXXX, of quarter GAAP compensation delivery QX promotion gross which to exceeded was of benefit compared from negative including the campaign, in year. XXXX revenue or million of base of Non-GAAP year. XX.X% pricing. the revenue QX increases exchange able from QX Non-GAAP compared revenue of XX.X% SG&A resulting Relative focus same the margin utilization. GAAP XX.X% through compared quarter certain currencies of income cost GAAP offset gross by last impact of XXXX was period or $XXX as result was last was last with foreign in in efficiency strengthening improved XX.X% of to XX.X% not revenue compared spend. $XXX the those XX.X% QX associated quarter year. year. of from of came at for on QX was million $XXX recent compared same of last to quarter our revenue XX.X% in margin increased quarter the year. SG&A quarter Our million XX.X% the in operations for income XX.X% our last for

basis tax effective in the GAAP came and effective a rate earnings tax Our Diluted XX.X%, at per for share non-GAAP quarter $X.XX. our GAAP rate was XX.X%. was on

there In expected approximately earnings were contemplated in compared was guidance the to EPS had quarter, non-GAAP received that $X.XX, year Serbian incentive EPS the the our call. during which investment this receive was from and in diluted $X.XX diluted year-over-year. positively shares QX, benefit a was incentive in QX time, $X.XX reflecting QX. by outstanding. the QX Our by we decrease recognize incentive year, government although million and a diluted $X.XX to benefit in EPS full of QX communicated impacted improved the At last recognized XX.X

per cash same was the days weekend. Share in the XX $XXX.X. XXXX. Turning average quarter to the increase an completed XX and same an share. XX, review flow XXX compares to last million uptick shares combined year. in were Cash flow are of approximately in quarter of At some to with DSO the second the flow in repurchased XXXX. from program share on price at repurchase XX quarter for authorized June of reflects clients days the repurchases shares operations XX of period $XX falling million the quarter was last X.XX few months, days days The the quarter price for Free of QX cash $XXX.XX was the in to and a million share and In XXXX end for balance same XXXX, million at compared DSO of time million $XX February cash sheet. EPAM X.XX of were last average QX, of a payments, year. QX Over approval on an the flow in and $XX taking $XX million million free compared our for

repurchase X, months. million XXXX, to authorization of share approximately a another a approved August new cash EPAM over On billion to and cash We Directors of ended the XX program in up common stock of $XXX Board term purchase the with quarter with $X.X equivalents.

decline on-site continuing than a XX,XXX consultants, company of a reduced Moving India. few count on while to more and engineers production locations, compared unchanged with QX certain in count X.X% ended to to the XXXX. architects, We head remained metrics. in Sequentially, head QX as designers, hire operational

Our total XX.X% XX,XXX the last employees. XX.X% to for was more XX.X% than and year in Utilization of quarter XXXX. compared QX count QX head was in

will improve remains to the to company on-site take targeted below utilization. However, resource and on-site optimize levels actions utilization to continue levels

Now let's outlook. turn to our business

stabilized, improvement demand has see very client Although in demand near-term continue environment. the we little to

are verticals with levels and programs relatively production. working bring clients logo high of into activity new growth to seeing in We experiencing certain GenAI

We are future that challenges average their have client less in regards generated end also decision-making to continues and constructive generated clients logo new cautious beginning revenue to in But on to discussions is own improvement than by see to with accounts as with be individual prior some programs. continue years. markets relatively some

the to beginning environment Although demand we new aggregate year. the stability actively with no our initiatives, the in believe of macroeconomic guidance engage more clients are for around improvement assumes remainder

that XXXX. improved conversations are will of result in in demand change client in We tone an hopeful the environment

vacation higher levels. of in expecting greater slight relative offset quarter, increase by driven QX, a are For in XXXX, build-outs we QX by to the revenue substantially remainder the

decline some the revenues, We previously. of largely factors a seasonal mentioned expecting by are QX in driven modest sequential

revenue our to the profitability of and higher generation level time, improve for a the year. At remainder on-site now in We same we to on utilization operate are we'll of and efficiency to prioritize focus demand fiscal XXXX. steps taking maintaining continue growth and cost are at expect the

in a delivery. Finally, dedication continue to to Ukraine uninterrupted team's of utilization, maintaining quality focus of run and our at testament our operations levels high on

XXXX. Our delivery achieved from guidance Ukraine levels to assumes continue that productivity our deliver be similar will the to in centers levels at we able to

expected Moving growth The to $X.XXX range negative the a the is now X.X% Revenue to our in range. At full we of be impact of the year is to of approximately midpoint contribution time, acquisitions. basis to billion, approximately this a points. already expect $X.XXX of expected X% rate of impact at outlook. rate revenue XX growth of foreign exchange positive have from completed

expect now We to and now to operations income be GAAP income of XX% XX%. be range the of non-GAAP in XX.X% in the range to operations XX.X% from to

We expect be tax to now XX%. our rate effective GAAP

effective excludes related excess non-GAAP be to Our tax continue rate, stock-based to benefits compensation will tax XX%. which

earnings $X.XX and share, in outstanding. share For million diluted we now will the the per expect range now year. diluted to now in be of $XX.XX of for expect fully shares count GAAP be We to full XX.X diluted weighted EPS the will full for range the $XX.XX $X.XX the EPS average year. non-GAAP of

to QX our Moving XXXX outlook.

expect We to flat of expect midpoint X.X% a revenue of range. year-over-year currency the the we year-over-year. to producing constant billion, billion decline a be of the And be on to $X.XXX revenue range basis, in QX at $X.XXX

to XX% For the the XX% range operations GAAP and from the range income we XX% income to to quarter, be third XX%. in to operations of of be from expect non-GAAP in

approximately to non-GAAP tax effective rate expect our XX% approximately We effective XX%. and be rate GAAP to tax be our

the be $X.XX range to share, in diluted $X.XX and range the $X.XX diluted to to $X.XX the quarter the non-GAAP for quarter. EPS for we to of earnings in GAAP per EPS be For expect of

count share expect outstanding. shares We million diluted average of XX.X a weighted

$XX remainder intangibles each Stock-based for that expected the support GAAP remaining quarters. the be of of our to to a year. quarters. measurements of is impact $XX effective to each of non-GAAP next be The million around quarters. assumptions Amortization of each key Finally, expected loss for exchange expected expense to non-GAAP adjustments for for be X to compensation for each of few Tax approximately be the foreign approximately is expected million a the $X remaining million the remaining is million the quarters. $X of is

expect of around $X to We around million $XX quarters. for each expected by program remaining driven quarters. be of excess the tax Severance for is each our the optimization million to cost be remaining benefits

GAAP to each of outside for items, assumption Finally, our of position, are interest approximately the level significant income expecting we million be cash quarters. generating are remaining $XX a one to non-GAAP more and interest with our of now income healthy and other

While EPAM capitalize to cycle efficiently, we run work to will we a way of this positioning demand demand, on lower through our more the normalized continue environment. company

call to clients for their continued Lastly, thanks Operator, serving up our results on and dedication all questions. for open focus for our driving employees my EPAM. and let's the

[Operator the Instructions] of Nolan Your of first from William line Blair. Maggie question comes

wanted utilization dynamics dig the into to the on-site and between I and offshore.

what So is workforce running utilization too your view percentage you're weakness higher first off of considered all, some this on from than quarter? the that offset sustainable range here? of because of to not offshore is site to then on-site as historical And on what far be you

The traditionally percentage think struggling our we I'm that we standpoint, utilization to a utilization is what area somewhat right from Yes. actually it I be a I but from remember but at we find think -- it's healthy. ourselves total head would in. is, definitely the continues the And exactly to that quite on-site offshore than lower challenged now feel -- run count and

and generation in that to lower actions, through somewhat contributing working for the at to referred on also And growth as again, the see probably address demand are offshore levels of that's continue I revenue to we my so prepared continue more somewhat to and incrementally pull-through to site. India And is some year, of and it run demand remainder where remarks. taking also utilization something demand for for more we

other some take number to already the the to you then third improvement progress on And it. you And levers here you're in there you related, the those just and primarily on fuel quarter gave? related the Are actions Got that, increased that is that optimism seen margin building to that have want pulling? somewhat utilization? in that outlook,

No, absolutely.

reset And so optimization of our the cost for growth. we expectations revenue focus has after been on sort

we've efficient working corporate and been utilization. We've So on functions SG&A. more in been

is a the we little take saw underway, of and And that in so that to probably beginning intended show yes, benefit bit to are the up in we in actions QX. even it profitability

Your next question Bryan TD from comes the Bergin line from Cowen. of

on that in you demand in I the clients, this overall hear you demand as particularly accounts. dig over half the the the I the complex year? to the well in saw just top you environment. top to how progression wanted on the last top see X XX X months and as exit performing you as second

the think opticality despite for before. of declining, client of which the stable now. I trend, and basically reason continuation and is of X, So we want decline right [indiscernible] saw of less which is declines we a And the [indiscernible], even environment top more this this the kind -- getting

before. general, commented stable. pretty like in It exactly we but is -- it's So

the we Yes. one is And is that business European and which X top about clients, client. in media a past, talked that information this the

the can just far on mix GenAI and programs as And helpful. quantification work a are on maybe the of the these related any that the GenAI That's right. the of moving All front, POCs Okay. bit of little really progression of just dig in on some into more as production? size then rough you

and very trying -- of [indiscernible]. that we're So [indiscernible] pretty we're when is, our much understand it some to is how it's especially thinking challenging,

and [indiscernible], we kind GenAI and our some of have understanding for why and so internal that's related influence on So so on. revenue fewer projects

stuff, This to So starting from pure [indiscernible] of a of lot is low already this of type dollars. happen. small millions

to case. we when the hit of from as dozens At and already very competition. to difficult is same for go some apple view, apple XX we again, in influence to started our well. in numbers -- [indiscernible] to this And So it's compare point time,

during if POC, -- months revenue. think technical that last It they much realize [indiscernible] So is to and much ROI showstoppers about the different the get which from requires and portion trend this. of were general to [indiscernible] think coming actually during that are small and to even real progression very the there actually excitement, very more X, And the talking investments benefit potential is you ago. Still, data which we modernization a not back and about that's a companies it, go [indiscernible]. it's it's then when some I because debt, of X confirmation [indiscernible] to quarter one program, of our the

Your next Darrin Wolfe comes question from Peller of the line Research. from

of almost flat we minute to on guide, expected touch type revenue exactly from much the of embed the dollars for looks just looking Could pretty at through year. I end is flat And it math, know the a trying of like sequential the or any or exactly going upside second you're inflection. the not

flows seasonality lately. tougher -- Just I budget have know like things there's also some typically in QX, been although

a less minute in as we've the to what IT as that services back and maybe much as overall address idiosyncratic seeing expectations trying think quarter touch more where really really for environment, terms can just of maybe and on and do seeing more go you to current a you're per your much then basis on But just clients needs spend the that bit you related little -- macro been more a companies possible. to demand

on So doing slower while, a especially is a the demand what think anything you level more holds just for the you macro today, can resonating where comment that's most? the at if you're

Yes.

the I'll maybe I'll harder Ark So and technical, start guess, questions. more answer the leave just I to with

you'd in mutation QX have to builders. QX, from more a so higher And

course, a will seasonal factors. in in on And based you improvement, see or get revenues levels type what you is you so But a should levels on then what of in usually, call be just question depend modest see. but we kind the type a And somewhat furlough some little of see improvement QX, [indiscernible] we -- vacation lower to then, bit see. of what you of see should QX, would even vacation activity you higher of technical going it

due is impact there significant generally, somewhat a to just seasonality. So

that some we're is a you factors. of modeling employees to kind unless, that's [indiscernible]. QX a is, or as from we to so of And type that seasonal on we're again, some flush generally see then again, improvement at vacations up based decline what of And degree, time level very budget the able QX modest this said, influence

you bit where overall talk we're seeing? little Ark, want to about or do demand a

equipment line much our the very think quarter. I last with in

mentioned we as -- that time in we we -- So think project current the last don't we can situation. market we don't

than great good value, So status are if were giving converting not looking decided That's the range much happen but can expectation where that and it's competitive with answer very now. our the broader of about what it, [indiscernible]. There production as if kind well. our are And similar. didn't business, it's our a projects news, client. I again, big the of for of for, I conversations to you modernization ago, you is modernization And now much necessarily as we for today narrowing confirmed. of [indiscernible] really production again, bring GenAI, think which are play news, but lot very But it's There not and it's type noise was improving, -- we I'm on for the the but... quarter There not just quo revenue one-off not [indiscernible] no right keeping don't around well the and saying we're systems. focusing, what expectation reflection of play in a talk. actually in

and we're to beginning that's and some to change conversations that say, an in to see better sort add appear kind let's Again, the Europe, just would of picture. there. we're working looking area where are opportunities of, change we [indiscernible] the I

sort I fee we'll thing committed continuing for fee reflection to other what and you continues around fixed business. a more go a monthly needs kind think deliver with do respond fee, explore up, to and we're fixed what of of work customer in and model to to of to a fixed win to more trying a that's or we're our of clients have which The see

AI hire stays -- more? or just these utilization efficiencies Okay. do you quick mean Actually one on hiring one of I Or you on types do -- anticipate I other if just maybe anticipate can needing is in -- maintain? ranges, help mean, to

now someone we're to continue more hiring There's include uncertainty Latin But which geographies of we've working you'll talking productivity the continue with [indiscernible] And hire. kind of America. where to certainly see been some would is types think improvements. AI I offshore in we to about, programs clearly

Your line of next comes from Sachs. Goldman question Schneider from Jim the

Is First of have or more to they not that spending AI new aggressive or out environment, all, on projects XXXX? telling internally to constraints macro? that the Is under the it's conditions to more certainty you environment discretionary is what what with given of there. your in more demand clients strategy tied the are which priorities to would tied other they hear IT their But surprising in about around start the release terms spending?

triggered be making, And So delayed was kind bit now. [indiscernible] a the cloud the soon impact GenAI. it of little we data would will of it's of would majority better believe related think without right as kind investment infrastructure, [indiscernible]. that everybody be decision of this, which difficult do [indiscernible] is I first Because because very as understands infrastructure, be situation general

[indiscernible] think now. market I So right

guess, Was in of mostly to margin count maybe leverage the quarter. and margins, That to see. And growth just factors obviously mix kind this driven good that shifting as the Or by of the good do then terms India? delivered was to head we in the operating 'XX, then, going is further here? into deliver you of are sustainable exit SG&A leverage from there And other margin year, I besides gross there what line? expect

Yes.

we're probably of to on and in the improving combination and continuing a SG&A on was continued So to utilization. efficiency focus improvement to utilization work with QX

is in opportunity we've I the still quarters pyramid heavy continue have because of got we a to we've about an fairly that over think including India. talked couple last what

Again, And so bit has on India. in a that of what the allow of improves we sure profitability not was shift in overall, more to of need to broader juniors a kind with throughout do pricing. But of sort was is by make you these to efficiency it the into also more little remainder QX pyramid that profitability be driven can generally sharper we're the continuing factors a which the work operational kind year. mix, introducing improvement we're

improvement the of terms forward there? in And

that is reducing doing we're again, and utilization the improvement, on improvement, the in Forward ongoing work SG&A. efficiency bench

certain we further certainly in focus of can that see a sort as it's areas of a reduction again, of spend on operations just So some our think revenue. percentage we

Your next line question of from Lee Jonathan comes Securities. from the Guggenheim

contract new of margin is types the a I India especially better unpack are has revenue expanded sort of get help that to how outlook? structures the type dynamics sense want whether contemplating if being or demand of there any progressing. utilized, of Can had the you think about types you influence you're of volumes on seeing and presence

Yes.

talk What is likely we Ark is somewhat greater head slightly would spoke year. let about more type end Jonathan, a progress. the in little of very a make bit the work that you, the by -- with that last of of from I'll time is to the India So a percentage I say count

talking were a are Ark slightly that is the a approaching what as be And sort at the XX%. by probably last second look time about XX% how So the also think you pressure is now year. We seeing of rates result. modest and India I something And bill of we that on above shaping will average half. end

going word super end think year. it's utter the we would just I we the and India of So by the time, over head XX.X%, last our significant. But is account now, sometimes think that to XX% right for of not count

at areas Asia. and time, the other see improved a Western same operation in utilization while Europe our there. seeing So shift Central gradual of and we to are modest we continue

talk implement seeing So it's want all to we not shifting but India, ongoing as do India. Ark the in are you is kind about of if to demand work?

consider today. I work India, of like, what a shared We that's Type there already like we is pricing into [indiscernible] -- pressure. think

in engineering engagement bring kind time, very We from kind is renewing productivity EPAM to we the location actually [indiscernible] very said, And not occupancy. component. same has this said before, [indiscernible] of a much we're a reputation improvement the GenAI digital So around build we we we a At do work GLC, for strong And for as location. do practice. definitely objective solutions. the we which building of as of more quality it changing type like what everything

the it's work much very is, EPAM So the . type of similar. [indiscernible] again, very, with and line very in

of overall to our [indiscernible] a move only India after much we perspective, there, [indiscernible], from be able So to the the expect we pyramid of to Western exactly line expectations and also different movement because in work when the more different us what's still type we in bring started to it's [indiscernible]. have my there, and they to happening profile EPAM this, [indiscernible] scale creating proportionally location, teams will in work, similar [indiscernible] with be independently of for from that's rebuilding some because from experienced

end? contemplated that the for pipeline but outlook. you improvement end how achieve unpack [indiscernible]? required what signed, the want the still both detail have in lack is not Can and conversion of understand outlook to go there. yet I that for perhaps And or Thanks on the been low comments get high the launched your means to much deals at your

about in demand. still Jonathan, talk time demand expecting in Yes. saying we don't guided, we now very improvement last we modest And improvement the is what that did see we're and a

potential to type year And does guide to set things thinking It prudent to quite at be in cost it like about that clearly, our take efforts encompass we of clients reductions this guide, even particularly or ]. and thing. obviously you try much guide if QX, clearly [ how XXXX very within which of full full we're how the quarter, with the so does [ demand we reduction some due XXXX ] is

be bit pretty more little furloughs, of a the of a of downside I little a think of lighter us employees confident bit again, then upside bit probably in ability And as year. to the continue more taken we we a remainder sort sort of the have the openness in in level of vacation influence the sensitive. And cost clients so to our budget feel just little bit that, little QX. And again, capacity maybe again, kind be of would probably by give to

comes question next of line Barclays. Ramsey from from the Your El-Assal

of Is back and least been any work away at mix your little I ways going from like it contracts sort in been GenAI fixed shift percentage of fixed-price it's It has higher margins guess, And looks price versus implications work? towards to work? up, a What now materials fixed Is are when it's our that time quite it comes related? and than it driving [indiscernible] for is geographic? trending there model. price time a

Yes.

trend probably to So has continue will you're correct that up up it somewhat. and trending been

monthly completion And is we of mix fee. fixed of it's and so of what call a sort percentage a what would

basis. was say in can And address on more to of reflect little estimate. a projects amount fact so a are to with it edge we that we bit the a traditional or probably to for needs work, that's to kind try and a where complex clients' that where does of we're clearly of bleeding We have traditionally this have way of able fixed on [indiscernible] money money do monthly our be clients but amount type it we fixed trying to been difficult sit beginning

I of commit some improvement and are not improvement a from GenAI introduce opportunity GenAI of with period thing of series savings to is probably productivity sort think only other time. you or The productivity seeing a traditional over to

And just profitability materials in that even deliver. can It believe are engagements seeing or flexibility fee, way, do productivity have positive and multi-quarter estimated relative so fixed If how to we've clients. that some deliver over It time. also could time we enter a a with that into negative. can what you improvement go do us be generally, may But with to is to multiyear, can cases, achieve more [indiscernible] in be And you net sort obviously, be more either because the gives opportunity you it we of margins. reflect you improve right? or

a you larger Assuming in follow-up and the M&A. of off guess, given market quarter, types the in the additional plug be share still And looking me is on authorization, table? scale capability you're for Okay. repurchase M&A I into EPAM? gaps, to bring the for tuck-ins to what the assets buybacks might

of table. last all [indiscernible] I think the

have if constantly not. we -- of different to conversations opportunities of much -- actually And insurance the going for it's or acquisitions. but in happen past, back always as is very sizes and So by functions

think must any we of be the that will we So other [indiscernible] it's only we not if a direction condition. It's which aspects executing business.

if So be the if numbers, be will adjusting will [indiscernible] the necessarily. we happening,

Yes.

clearly, something do both. somewhat towards Ark bias off doing would as And our the we'll But certainly not be said, table. So acquisitions. but

Your comes Thind of Surinder Jefferies. line question from next of

footprint. delivery a around Just the question global

target to ahead, to point your look revenues you you'll get footprint? think at if do stable, As you delivery remain was what

When what you say [indiscernible] will do [indiscernible] be mean? stable, you

expectations. commentary call being a on below was bit the utilization about there on-site think little I

in the And so resources for requirement shift of regions. lower-cost there's continued

nearshore I not other Western previous resources Europe much those shifting through to in world. or of think as around commentary of attrition demand some maybe there's parts natural the

So trying the get that at. what was to -- I was

think I differently. me try let slightly to answer

more question right diversified global the of than move of growing past mentioned, diversification we into type company. global be on for XX/X view, of answer as a one, it cost difficult many would That's global of [indiscernible]. the be balanced [indiscernible]. and be will It's also the [indiscernible] the When and and work, it's you in example, all, like, point we the First much exactly this number most it's from direct two. stability ways And much demand. definitely we because -- will from What function proportion probably much now, the of pressure, [indiscernible] say not in to direction. number this, so subject general of a in more

back proximity As pricing technical to progress transformation that because kind debt, program important. The about, real. to soon of the and of of creativity will of cloud and practically important accelerate start data these GenAI will make come as of type come more much engagements less modernization become complexity demand component more region for and will any the much market back will become the and will we're get to which talking fix

the well. influence as would structure it So

will more one, number and exactly [indiscernible]. will again, So be proportion LatAm, it we total, but the in much India proportion be the of diversified

this or [indiscernible]. we quarterly [indiscernible] So

would I I but a India. basis. talent relative delivery do about the to local have talent that or attract They to think that just you're on obviously of then operations hiring, the sense related That's helpful. there all that you realize have how you're when large new And you've well-established in you connections region. universities, others that, XXXX, the of argue out been since to differentiate newer that whereas

So we're specifically, factors [indiscernible]. be talking India to need think I couple of about a

of [indiscernible], We India. [indiscernible] And company have like view, more which companies. type from an tech more the to closer in with and have we think services what engineering some image point different same of much high-end type of talent of company, software much compete would some we about [indiscernible] trying with to companies, people a this build

already. there is image the So

So the and training [indiscernible] of India, half of work. lay including time, we at like of different our in [indiscernible], opportunity the which we same of type kind underdog and parts means capabilities also that to differently specific

to relatively if there I India large much, us are it's strongly situation. in for companies, say And labor this is much [indiscernible] see you growing us, that it's [indiscernible] [indiscernible]. like we're it growing how pretty like for -- -- market you the while for differentiate the think

from comes question next Grossman. David line Your the of

of or headwind And the India, shift assumption? mix thoughts be the was to have India -- said XXXX? of -- the year follow-ups. fair Is do be If initial you that headwinds about the couple a basis from on in recall, quick quick on revenue. going you Just a I XXX in points still this would any whether magnitude

is I say It QX when headwind than X% be is from we has guess my that year, call. for greater from might And end gone generally X%. the would up slightly say at would then India correct. guided next probably I of the Yes. the

that's guess how I'd that, I So respond David. to

just ramp why of headcount? the higher of And 'XX? that's Is it's that in because

lower those in on billable modestly X probably the is bill little lower kind Yes, little billable average probably a what company. India in bit of for producing bit a And rate and higher are site. things a

against and quantified this you next that talked one think it. clients, remember trying else. M&A similarly, whether quite know bit I'm the I was when something and and about out year just we loss to you've Got And was comp I one And a that headwind headwind?

Yes.

exit, we at I kind the a [indiscernible] usually like $XX that M&A I of which out the And the is the like it was double-digit of the it to, end So year. quarter. one think was -- is revenue million then over one refer

a just doing time. been positions again, just for a also one to around trend. they're gradual Ukrainian a from other was been couple And we you'll was services them, to little And But continue think number. in-house. sort that And ongoing I of it some have an work then for around significant a our bit I the one that continues has is demand that their to that our see hesitation bringing be still, their but decline reducing there's demand little And quarters. of the think footprint. then bit next related So slowly the of over and

Got it. And just one last thing.

see else know Jason, a Just on maybe to Should this another was terms all I Or accounts? up last affecting the way better as that it there dynamic up quarter, that on? DSO, going something competitive? is and is Or macro sequentially. your it or more providing was remain again do of we that's

David, it does having cash the Monday more again, But for XX days as likely of amount second that's I but due being would year. and the on was would definitely the contracting on and impact kind And of say on the I think in XX of the here the that to coming weekend, of result been we've you're the an moved Tuesday doing. couple that shifting fixed that last significant see saw we've a on invoicing, we Yes. something fee, QX. in DSO to say do of closer the just I so of that that impact and a is because to half towards was a type

guess So then I we're. with that, maybe

The from line comes of Susquehanna. Friedman the Jamie final from question

squeaking here. in me Thanks for

outcomes-based fixed price pricing? one. interesting the my AI just or last with -- fixed Jason, your to to So related the That's to price is first answer, is to generative regard about wondering that just DSO. also that, really was fixed growth in I'm related

in just couple Analyst like years could you going Sciences the my Healthcare a is a out then one, it what's ago. It featured remarks. Life second at call his of on Day I prepared ask Jason Ark, now. And upfront, working and was combination in know mentioned Life it's It it's seems I'll Science? topic of a both

So stuff. any high-level

fixed on Life Science. First, on price second and

fee fixed in right fees, continue I up to fixed certain Fix sort fixed And story for of can points on deliver or to deliver experimentation the say with for of some amount basis. say, show money showing to it with allows there's, fixed again, of clients more fee is numbers may well. program bit now, are but oriented would be think that's a can a Middle that's up East, in in of be little a a a I productivity and bit in a market increased we more GenAI certain as and more competitive. us say, doing so, sort the certainly, us a fee. we that And looking I step again, then monthly would driven. fixed it are it amount business for amount to we -- don't more tends little

the be would those things on so that. X And

Life and in Ark? And Sciences then growth Healthcare,

Yes.

positive pretty talking it client I positive. our growth, a about area. in We of think while we general, conversation in things several was were talking about it's was billion couple it it. now, situation actually And more years Right were changed. back, was expertise this X from when industry

us. programs very in again, of of & Life still combination what happened which actually level I what think other again Healthcare high, of look data data and in And can our to change invested proportion And for trend we similar industries, makes expertise, how industry the concentration we consultancy that's Sciences some in which business how is into this program demand here. benefit today. some we

for us think usual, joining I and today. time as over you is thank

the So communicate while focused I on cloud and do positioned we when trying engineering, future [indiscernible] right situation EPAM markets we think as is that all data it are for GenAI back. come to growth well believe now, we're is

this [indiscernible] will we will very And time, I but We'll So X each we we much for have how believe [indiscernible]. repeated actually we months. for to it's see wait [indiscernible] again, know many be ready But this. still it.

today. That does you our for participating. Thank conference conclude for

may disconnect. You now all