EPAM Reports Results for Fourth Quarter and Full Year 2024

Fourth Quarter 2024

    --  Revenues of $1.248 billion, up 7.9% year-over-year
    --  GAAP Income from Operations was 10.9% of revenues and Non-GAAP Income
        from Operations was 16.7% of revenues
    --  GAAP Diluted EPS of $1.80, an increase of 8.4%, and Non-GAAP Diluted EPS
        of $2.84, an increase of 3.3% on a year-over-year basis

Full Year 2024

    --  Revenues of $4.728 billion, up 0.8% year-over-year
    --  GAAP Income from Operations was 11.5% of revenues and Non-GAAP Income
        from Operations was 16.5% of revenues
    --  GAAP Diluted EPS of $7.84, an increase of 11.0%, and Non-GAAP Diluted
        EPS of $10.86, an increase of 2.5% on a year-over-year basis

NEWTOWN, Pa., Feb. 20, 2025 /PRNewswire/ -- EPAM Systems, Inc. (NYSE: EPAM), a leading digital transformation services and product engineering company, today announced results for its fourth quarter and full year ended December 31, 2024.

"After navigating a dynamic year, we are pleased to report a strong fourth quarter. We continued to build sequential momentum, and saw a return to year-over-year organic growth, while we simultaneously accelerated our global strategy with the acquisitions of NEORIS and First Derivative," said Arkadiy Dobkin, CEO & President, EPAM. "As we look ahead, we believe 2025 will be a year of transition, as clients balance their cost focus with the need to accelerate their transformational and GenAI journeys. We see a strong need to continue to invest in our talent, advanced technological and consulting capabilities, and the integration of recent acquisitions to best position ourselves to capture market share once demand returns to more normalized levels."

Fourth Quarter 2024 Highlights

    --  Revenues increased to $1.248 billion, a year-over-year increase of $91.1
        million, or 7.9%. On an organic constant currency basis, revenues grew
        1.0% compared to the fourth quarter of 2023;
    --  GAAP income from operations was $136.5 million, an increase of $14.0
        million, or 11.4%, compared to $122.5 million in the fourth quarter of
        2023;
    --  Non-GAAP income from operations was $208.2 million, an increase of $7.8
        million, or 3.9%, compared to $200.4 million in the fourth quarter of
        2023;
    --  Diluted earnings per share ("EPS") on a GAAP basis was $1.80, an
        increase of $0.14, or 8.4%, compared to $1.66 in the fourth quarter of
        2023;
    --  Non-GAAP diluted EPS was $2.84, an increase of $0.09, or 3.3%, compared
        to $2.75 in the fourth quarter of 2023;
    --  Completed the acquisition of NEORIS creating a competitive offering for
        clients across Latin America and in Spanish- and Portuguese-speaking
        countries, while broadening EPAM's global and nearshore delivery
        capabilities across Latin America and Europe; and
    --  Completed the acquisition of First Derivative strengthening EPAM's
        financial services consulting and delivery capabilities in North
        America, Europe and APAC and expanding our client portfolio in financial
        services.

Full Year 2024 Highlights

    --  Revenues increased to $4.728 billion, a year-over-year increase of $37.4
        million, or 0.8%. On an organic constant currency basis, revenues
        declined 1.7% year-over-year;
    --  We recorded a benefit of $68.8 million for research & development
        government incentives in Poland. Specifically, $23.5 million of the
        benefit related to activities performed during 2023 and $45.3 million of
        the benefit related to activities performed during the full year of
        2024. This benefit was included as a reduction to our Cost of revenues. 
        The impact of this benefit on net income was partially offset as the
        incentives drove a higher effective tax rate for both GAAP and non-GAAP
        results. We expect the incentive will be recurring with benefits
        recognized continuing in the future;
    --  GAAP income from operations was $544.6 million, an increase of $43.3
        million, or 8.6%, compared to $501.2 million in 2023. GAAP income from
        operations benefited from the recognition of $68.8 million of incentives
        related to research and development activities performed in Poland and
        was negatively impacted by $31.3 million of costs incurred in connection
        with the Company's Cost Optimization Programs;
    --  Non-GAAP income from operations was $779.2 million, an increase of $14.1
        million, or 1.8%, compared to $765.1 million in 2023. Non-GAAP income
        from operations benefited from the recognition of $45.3 million of
        incentives related to research and development activities performed in
        Poland in 2024;
    --  Diluted EPS on a GAAP basis was $7.84, an increase of $0.78, or 11.0%,
        compared to $7.06 in 2023. EPS on a GAAP basis was positively impacted
        by the recognition of the Polish incentives, which increased income from
        operations. However, this benefit was partially offset by an increase to
        the effective tax rate; and
    --  Non-GAAP diluted EPS was $10.86, an increase of $0.27, or 2.5%, compared
        to $10.59 in 2023. EPS on a non-GAAP basis was positively impacted by
        the recognition of the Polish incentives for activities performed during
        the full year of 2024, which increased income from operations. However,
        this benefit was partially offset by an increase to the effective tax
        rate.

Cash Flow and Other Metrics

    --  Cash provided by operating activities was $130.3 million in the fourth
        quarter of 2024, a decrease from $171.4 million in the fourth quarter of
        2023; and was $559.2 million in 2024, a decrease from $562.6 million in
        2023;
    --  The Company repurchased 53 thousand shares of its common stock for $13.0
        million during the fourth quarter of 2024 under its share repurchase
        program. During the year ended December 31, 2024, the Company
        repurchased 1,854 thousand shares of its common stock for $398.0 million
        under its share repurchase programs. As of December 31, 2024, the
        Company had $437.0 million remaining under its share repurchase
        authorization;
    --  Cash, cash equivalents and restricted cash totaled $1.290 billion as of
        December 31, 2024, a decrease of $752.7 million, or 36.8%, from $2.043
        billion as of December 31, 2023 largely the result of payments for the
        acquisitions of NEORIS and First Derivative; and
    --  Total headcount was approximately 61,200 as of December 31, 2024.
        Included in this number were approximately 55,100 delivery
        professionals, an increase of 16.3% from December 31, 2023.

2025 Outlook - Full Year and First Quarter

Full Year

EPAM expects the following for the full year:

    --  The Company expects the year-over-year revenue growth rate to be in the
        range of 10.0% to 14.0% for 2025. The Company expects the year-over-year
        revenue growth rate on an organic constant currency basis to be in the
        range of 1.0% to 5.0%;
    --  For the full year, EPAM expects GAAP income from operations to be in the
        range of 9.0% to 10.0% of revenues and non-GAAP income from operations
        to be in the range of 14.5% to 15.5% of revenues;
    --  The Company expects its GAAP effective tax rate and its non-GAAP
        effective tax rate to both be approximately 24.0%; and
    --  EPAM expects GAAP diluted EPS will be in the range of $6.78 to $7.08 for
        the year, and non-GAAP diluted EPS will be in the range of $10.45 to
        $10.75 for the year. The Company expects weighted average diluted shares
        outstanding for the year of 58.1 million.

First Quarter

EPAM expects the following for the first quarter:

    --  The Company expects revenues will be in the range of $1.275 billion to
        $1.290 billion for the first quarter reflecting a year-over-year
        increase of 10.0% at the midpoint of the range. The Company expects
        year-over-year revenue growth on an organic constant currency basis to
        be approximately flat at the midpoint of the range;
    --  For the first quarter, EPAM expects GAAP income from operations to be in
        the range of 6.5% to 7.5% of revenues and non-GAAP income from
        operations to be in the range of 12.5% to 13.5% of revenues;
    --  The Company expects its GAAP effective tax rate to be approximately 19%
        and its non-GAAP effective tax rate to be approximately 24%; and
    --  EPAM expects GAAP diluted EPS will be in the range of $1.27 to $1.37 for
        the quarter, and non-GAAP diluted EPS will be in the range of $2.22 to
        $2.32 for the quarter. The Company expects weighted average diluted
        shares outstanding for the quarter of 57.7 million.

Conference Call Information

EPAM will host a conference call to discuss results on Thursday, February 20, 2025 at 8:00 a.m. EST. The conference call will be available live on the EPAM website at https://investors.epam.com. Please visit the website at least 15 minutes prior to the call to register for the event. For those who cannot access the live webcast, a replay will be available in the Investor Relations section of the website.

About EPAM Systems

Since 1993, EPAM Systems, Inc. (NYSE: EPAM) has used its software engineering expertise to become a leading global provider of digital engineering, cloud and AI-enabled transformation services, and a leading business and experience consulting partner for global enterprises and ambitious startups. We address our clients' transformation challenges by focusing EPAM Continuum's integrated strategy, experience and technology consulting with our 30+ years of engineering execution to speed our clients' time to market and drive greater value from their innovations and digital investments.

We leverage AI and GenAI to deliver transformative solutions that accelerate our clients' digital innovation and enhance their competitive edge. Through platforms like EPAM AI/RUN(TM) and initiatives like DIALX Lab, we integrate advanced AI technologies into tailored business strategies, driving significant industry impact and fostering continuous innovation.

We deliver globally but engage locally with our expert teams of consultants, architects, designers and engineers, making the future real for our clients, our partners, and our people around the world. We believe the right solutions are the ones that improve people's lives and fuel competitive advantage for our clients across diverse industries. Our thinking comes to life in the experiences, products and platforms we design and bring to market.

Added to the S&P 500 and the Forbes Global 2000 in 2021 and recognized by Glassdoor and Newsweek as Most Loved Workplace, our multidisciplinary teams serve customers across six continents. We are proud to be among the top 15 companies in Information Technology Services in the Fortune 1000 and to be recognized as a leader in the IDC MarketScapes for Worldwide Experience Build Services, Worldwide Experience Design Services and Worldwide Software Engineering Services.

Learn more at www.epam.com?follow us on LinkedIn.

Non-GAAP Financial Measures

EPAM supplements results reported in accordance with United States generally accepted accounting principles, 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, communicate 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. 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 expenses, acquisition-related costs including amortization of acquired intangible assets, impairment of assets, expenses associated with EPAM's humanitarian commitment to its professionals in Ukraine, unbilled business continuity resources resulting from Russia's invasion of Ukraine, costs associated with the geographic repositioning of EPAM employees based outside of Ukraine impacted by the war and geopolitical instability in the region, employee separation costs incurred in connection with restructuring programs including the Company's exit from Russia, certain other one-time charges and benefits, changes in fair value of contingent consideration, foreign exchange gains and losses, excess tax benefits related to stock-based compensation, and the related effect on income taxes of the pre-tax adjustments. Management also compares revenues on an "organic constant currency basis," which is a non-GAAP financial measure. This measure excludes the effect of acquisitions by removing revenues from an acquired company in the twelve months after completing an acquisition, the decision to exit from Russia by removing revenues from clients located in Russia in both the current period and prior period of comparison, and foreign currency exchange rate fluctuations by translating current period revenues into U.S. dollars at the weighted average exchange rates of the prior period of comparison. Because EPAM's reported non-GAAP financial measures are not calculated in accordance with GAAP, these measures are not comparable to GAAP and may not 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 the information in EPAM's consolidated financial statements, which are prepared in accordance with GAAP.

Forward-Looking Statements

This press release includes estimates and 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. Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our business and operations. These statements may include words such as "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. Those future events and trends may relate to, among other things, developments relating to the war in Ukraine and escalation of the war in the surrounding region, political and civil unrest or military action in the geographies where we conduct business and operate, difficult conditions in global capital markets, foreign exchange markets and the broader economy, and the effect that these events may have on customer demand and our revenues, operations, access to capital, and profitability. Other factors that could cause actual results to differ materially from those expressed or implied include general economic conditions, the risk factors discussed in the Company's most recent Annual Report on Form 10-K and the factors discussed in the Company's Quarterly Reports on Form 10-Q, particularly under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" and other filings with the Securities and Exchange Commission. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made based on information currently available to us. 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.


                                                           
            
         EPAM SYSTEMS, INC. AND SUBSIDIARIES


                                                            
            
         CONSOLIDATED STATEMENTS OF INCOME


                                                                       
       
              (Unaudited)


                                                          
            
         (In thousands, except per share data)




                                                                                                                                  Three Months Ended                    Year Ended December 31,
                                                                                                                     December 31,


                                                                                                                     2024               2023               2024        2023



     
              Revenues                                                                                      $1,248,351         $1,157,257         $4,727,940  $4,690,540



     
              Operating expenses:



     Cost of revenues (exclusive of depreciation and amortization)                                               868,314            797,633          3,277,497   3,256,514



     Selling, general and administrative expenses                                                                216,969            213,972            816,300     815,065



     Depreciation and amortization expense                                                                        26,556             23,158             89,559      91,800



     Loss on sale of business                                                                                          -                                         25,922



     
              Income from operations                                                                           136,512            122,494            544,584     501,239



     Interest and other income, net                                                                                6,451             13,962             46,876      51,124



     Foreign exchange loss                                                                                       (5,632)           (9,053)           (7,048)   (15,778)



     
              Income before provision for income taxes                                                         137,331            127,403            584,412     536,585



     Provision for income taxes                                                                                   34,032             29,849            129,879     119,502



     
              Net income                                                                                      $103,299            $97,554           $454,533    $417,083





     
              Net income per share:



     Basic                                                                                                         $1.82              $1.69              $7.93       $7.21



     Diluted                                                                                                       $1.80              $1.66              $7.84       $7.06



     
              Shares used in calculation of net income per share:



     Basic                                                                                                        56,818             57,767             57,288      57,829



     Diluted                                                                                                      57,435             58,913             57,983      59,085


                                                                              
              
                EPAM SYSTEMS, INC. AND SUBSIDIARIES


                                                                                  
              
                CONSOLIDATED BALANCE SHEETS


                                                                                          
              
                (Unaudited)


                                                                               
              
                (In thousands, except par value)




                                                                                                                                                                                 As of        As of

                                                                                                                                                                              December 31, December 31,

                                                                                                                                                                                      2024          2023



     
                Assets



     Current assets



     Cash and cash equivalents                                                                                                                                                 $1,286,267    $2,036,235



     Trade receivables and contract assets, net of allowance of $5,612 and $11,864, respectively                                                                                1,002,175       897,032



     Short-term investments                                                                                                                                                         1,690        60,739



     Prepaid and other current assets                                                                                                                                             136,116        97,355



     Total current assets                                                                                                                                                       2,426,248     3,091,361



     Property and equipment, net                                                                                                                                                  207,667       235,053



     Operating lease right-of-use assets, net                                                                                                                                     128,244       134,898



     Intangible assets, net                                                                                                                                                       436,418        71,118



     Goodwill                                                                                                                                                                   1,181,575       562,459



     Deferred tax assets                                                                                                                                                          269,799       197,901



     Other noncurrent assets                                                                                                                                                      100,522        59,575



     
                Total assets                                                                                                                                                 $4,750,473    $4,352,365





     
                Liabilities



     Current liabilities



     Accounts payable                                                                                                                                                             $44,702       $31,992



     Accrued compensation and benefits expenses                                                                                                                                   484,952       412,747



     Accrued expenses and other current liabilities                                                                                                                               201,356       124,823



     Income taxes payable, current                                                                                                                                                 50,395        38,812



     Operating lease liabilities, current                                                                                                                                          39,634        36,558



     Total current liabilities                                                                                                                                                    821,039       644,932



     Long-term debt                                                                                                                                                                25,194        26,126



     Operating lease liabilities, noncurrent                                                                                                                                       98,426       109,261



     Deferred tax liabilities, noncurrent                                                                                                                                          92,362         8,744



     Other noncurrent liabilities                                                                                                                                                  82,301        91,832



     
                Total liabilities                                                                                                                                             1,119,322       880,895



     
                Commitments and contingencies



     
                Equity



     Stockholders' equity


      Common stock, $0.001 par value; 160,000 authorized; 56,869 shares issued and outstanding at December 31, 2024, and 57,787 shares issued and outstanding at December 31,
       2023                                                                                                                                                                             57            58



     Additional paid-in capital                                                                                                                                                 1,190,222     1,008,766



     Retained earnings                                                                                                                                                          2,555,796     2,501,107



     Accumulated other comprehensive loss                                                                                                                                       (116,864)     (39,040)



     Total EPAM Systems, Inc. stockholders' equity                                                                                                                              3,629,211     3,470,891



     Noncontrolling interest in consolidated subsidiaries                                                                                                                           1,940           579



     
                Total equity                                                                                                                                                  3,631,151     3,471,470



     
                Total liabilities and equity                                                                                                                                 $4,750,473    $4,352,365


                                                              
              
                EPAM SYSTEMS, INC. AND SUBSIDIARIES


                                     
              
                Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures


                                                                          
              
                (Unaudited)


                                                     
              
                (In thousands, except percent and per share amounts)





     Reconciliation of revenue growth as reported on a GAAP basis to revenue growth/(decline) on an organic constant currency basis is presented in the table below:




                                                                                                                                                                        Three Months Ended                Year Ended
                                                                                                                                                             December 31, 2024             December 31, 2024



     
                Revenue growth as reported                                                                                                                                        7.9 %                     0.8 %



     Foreign exchange rates impact                                                                                                                                                  0.4 %                   (0.1) %



     Inorganic revenue growth                                                                                                                                                     (7.3) %                   (2.7) %



     Impact of exit from Russia                                                                                                                                                       - %                    0.3 %



     
                Revenue growth/(decline) on an organic constant currency basis                                                                                                    1.0 %                   (1.7) %



     Reconciliation of various income statement amounts from GAAP to non-GAAP for the three months and years ended December 31, 2024 and 2023:




                                                                                               Three Months Ended December 31, 2024                                    Year Ended December 31, 2024


                                                                         GAAP                                Adjustments                        Non-GAAP       GAAP                      Adjustments     Non-GAAP


      Cost of revenues (exclusive of
       depreciation and amortization)(1)                             $868,314                                   $(22,040)                        $846,274  $3,277,497                         $(59,821)   $3,217,676


      Selling, general and administrative
       expenses(2)                                                   $216,969                                   $(37,637)                        $179,332    $816,300                        $(145,329)     $670,971


      Income from operations(3)                                      $136,512                                     $71,675                         $208,187    $544,584                          $234,625      $779,209



     Operating margin                                                 10.9 %                                      5.8 %                          16.7 %     11.5 %                            5.0 %       16.5 %



     Net income(4)                                                  $103,299                                     $60,066                         $163,365    $454,533                          $175,430      $629,963


      Diluted earnings per share                                        $1.80                                                                       $2.84       $7.84                                         $10.86


                                                  Three Months Ended December 31, 2023                        Year Ended December 31, 2023


                                             GAAP               Adjustments            Non-GAAP       GAAP                      Adjustments     Non-GAAP


      Cost of revenues (exclusive of
       depreciation and amortization)(1) $797,633                  $(22,183)            $775,450  $3,256,514                         $(89,464)   $3,167,050


      Selling, general and
       administrative expenses(2)        $213,972                  $(49,747)            $164,225    $815,065                        $(125,768)     $689,297


      Income from operations(3)          $122,494                    $77,939             $200,433    $501,239                          $263,871      $765,110



     Operating margin                     10.6 %                     6.7 %              17.3 %     10.7 %                            5.6 %       16.3 %



     Net income(4)                       $97,554                    $64,211             $161,765    $417,083                          $208,555      $625,638


      Diluted earnings per share            $1.66                                          $2.75       $7.06                                         $10.59



     Items (1) through (4) above are detailed in the following table with the specific cross-reference noted in the appropriate item.


                                                                                                                Three Months Ended                     Year Ended

                                                                                                                 December 31,                      December 31,


                                                                                                      2024      2023              2024        2023



     Stock-based compensation expenses                                                            $22,074   $19,228           $80,944     $68,797



     Poland R&D incentives(a)                                                                       (556)                  (23,473)



     Humanitarian support in Ukraine(b)                                                               522     2,955             2,350      11,252



     Unbilled business continuity resources(c)                                                                                           9,415



     
                Total adjustments to GAAP cost of revenues(1)                                    22,040    22,183            59,821      89,464



     Stock-based compensation expenses                                                             22,624    18,966            86,353      78,933



     Cost Optimization charges(d)                                                                   4,837    27,936            31,270      35,052



     Other acquisition-related expenses                                                             7,031       275            15,808       2,723



     Humanitarian support in Ukraine(b)                                                             3,127       836            10,821       6,145



     Geographic repositioning(e)                                                                      (4)      916               849       1,793



     One-time charges                                                                                  22       818               228       1,122



     
                Total adjustments to GAAP selling, general and administrative expenses(2)        37,637    49,747           145,329     125,768



     Amortization of purchased intangible assets                                                   11,998     6,009            29,475      22,717



     Loss on sale of business(f)                                                                                                        25,922



     
                Total adjustments to GAAP income from operations(3)                              71,675    77,939           234,625     263,871



     Foreign exchange loss                                                                          5,632     9,053             7,048      15,778



     Change in fair value of contingent consideration included in Interest and other income, net    1,673     1,000             5,700       2,818



     One-time benefits/(charges) included in Interest and other income, net                       (1,331)      700           (3,143)        700



     Provision for income taxes:



     Tax effect on non-GAAP adjustments                                                          (15,640) (19,755)         (44,522)   (53,815)



     Excess tax benefits related to stock-based compensation                                      (1,943)  (4,726)         (22,448)   (19,829)



     Net discrete benefit from tax planning(g)                                                                              (1,830)      (968)



     
                Total adjustments to GAAP net income(4)                                         $60,066   $64,211          $175,430    $208,555



     (a) We have excluded from non-GAAP results the portion of the benefit from Poland R&D incentives
          related to qualifying activities performed in 2023 as it represents a nonrecurring one-time
          benefit.




     (b) Humanitarian support in Ukraine includes expenses related to EPAM's $100 million humanitarian
          commitment in response to Russia's invasion of Ukraine to support EPAM professionals and their
          families in and displaced from Ukraine. These expenses are incremental to those expenses incurred
          prior to the crisis, clearly separable from normal operations, and not expected to recur once the
          crisis has subsided and operations return to normal.




     (c) Given the uncertainty in the region introduced by Russia's invasion of Ukraine, EPAM has assigned
          delivery professionals in locations outside of the region to ensure the continuity of delivery for
          customers who have substantial delivery exposure to Ukraine or other delivery concerns resulting
          from the invasion. These employees are not billed to clients and operate largely in a standby or
          backup capacity. These expenses are incremental to those expenses incurred prior to the crisis,
          clearly separable from normal operations, and not expected to recur once the crisis has subsided
          and operations return to normal.




     (d) Cost Optimization charges include severance, facilities and contract termination charges incurred
          in connection with the programs initiated in the third quarter of 2023 and second quarter of 2024.
          Consistent with the Company's historical non-GAAP policy, costs incurred in connection with
          formal restructuring initiatives have been excluded from non-GAAP results as these are one-time
          and unusual in nature.




     (e) Geographic repositioning includes expenses associated with the relocation to other countries of
          employees based outside of Ukraine impacted by the war and geopolitical instability in the region,
          and includes the cost of accommodations, travel and food. These expenses are incremental to those
          expenses incurred prior to the crisis, clearly separable from normal operations, and not expected
          to recur once the crisis has subsided and operations return to normal.




     (f) On July 26, 2023, the Company completed the sale of its remaining operations in Russia and recorded
          a loss on sale of approximately $25.9 million during the year ended December 31, 2023, including
          the recognition of the accumulated currency translation loss related to this foreign entity that
          was previously included in Accumulated other comprehensive loss in the financial statements. The
          Company excluded this loss from non-GAAP results as it is one-time and unusual in nature.




     (g) One-time benefit related to the implementation of tax planning to disregard certain foreign
          subsidiaries as separate entities for U.S. income tax purposes. Consistent with the Company's
          historical non-GAAP policy, the benefit related to the implementation of tax planning has been
          excluded from non-GAAP results as it is one-time and unusual in nature.


                                                                  
              
                EPAM SYSTEMS, INC. AND SUBSIDIARIES


                                     
              
                Reconciliations of Guidance Non-GAAP Financial Measures to Comparable GAAP Financial Measures


                                                                              
              
                (Unaudited)




      The below guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. Actual
       results may differ materially from the Company's expectations depending on factors discussed in the Company's filings with the Securities and Exchange Commission.





     Reconciliation of expected revenue growth on a GAAP basis to expected revenue growth on an organic constant currency basis is presented in the table below:




                                                                                                                                                                                 First Quarter 2025                                 Full Year 2025


                                                                                                                                                                                   (at midpoint of
                                                                                                                                                                           range)



     
                Revenue growth                                                                                                                                                            10.0 %                                 10.0% to 14.0%



     Foreign exchange rates impact                                                                                                                                                           1.4 %                                          0.9 %



     Inorganic revenue growth                                                                                                                                                             (11.4) %                                        (9.9) %



     
                Revenue growth on an organic constant currency basis                                                                                                                         - %                                  1.0% to 5.0%



     Reconciliation of expected GAAP to non-GAAP income from operations as a percentage of revenues is presented in the table below:




                                                                                                                                      First Quarter 2025  Full Year 2025



     
                GAAP income from operations as a percentage of revenues                                                                  6.5% to 7.5%  9.0% to 10.0%



     Stock-based compensation expenses                                                                                                            3.9 %           3.7 %



     
                Included in cost of revenues (exclusive of depreciation and amortization)                                                       1.9 %           1.8 %



     
                Included in selling, general and administrative expenses                                                                        2.0 %           1.9 %



     Humanitarian support in Ukraine(b)                                                                                                           0.2 %           0.3 %



     Cost Optimization charges(d)                                                                                                                 0.5 %           0.2 %



     Amortization of acquired intangible assets                                                                                                   1.4 %           1.3 %



     
                Non-GAAP income from operations as a percentage of revenues(h)                                                         12.5% to 13.5% 14.5% to 15.5%



     (h) EPAM has not included the impact of potential future One-time charges including asset impairments, unusual gains and losses, expenses incurred in connection with future cost optimization actions, and Other acquisition-related expenses
      because the Company is unable to predict these amounts with reasonable certainty.



     Reconciliation of expected GAAP to non-GAAP effective tax rate is presented in the table below:




                                                                                                      First Quarter Full Year
                                                                                                           2025         2025



     
                GAAP effective tax rate (approximately)                                                     19 %      24 %



     Excess tax benefits related to stock-based compensation                                                 7.5 %     2.6 %



     Tax effect on non-GAAP adjustments                                                                    (2.5) %   (2.6) %



     
                Non-GAAP effective tax rate (approximately)                                                 24 %      24 %



     Reconciliation of expected GAAP to non-GAAP diluted earnings per share is presented in the table below:




                                                                                                                  First Quarter
                                                                                                                        2025               Full Year 2025



     
                GAAP diluted earnings per share                                                            
     
     $1.27 to $1.37   
       
       $6.78 to $7.08



     Stock-based compensation expenses                                                                                     0.87                      3.33



     
                Included in cost of revenues (exclusive of depreciation and amortization)                                0.42                      1.61



     
                Included in selling, general and administrative expenses                                                 0.45                      1.72



     Humanitarian support in Ukraine(b)                                                                                    0.07                      0.25



     Cost Optimization charges(d)                                                                                          0.10                      0.12



     Amortization of acquired intangible assets                                                                            0.31                      1.17



     Foreign exchange loss                                                                                                 0.02                      0.07



     Provision for income taxes:



          Tax effect on non-GAAP adjustments                                                                             (0.29)                   (1.04)



          Excess tax benefits related to stock-based compensation                                                        (0.13)                   (0.23)



     
                Non-GAAP diluted earnings per share(h)                                                     
     
     $2.22 to $2.32 
       
       $10.45 to $10.75

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SOURCE EPAM Systems, Inc.