EPAM Systems, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 17, 2016

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Exhibit 99.1
EPAM Reports Results for Fourth Quarter and Full Year 2015

Fourth Quarter revenue increased 28.7% year-over-year and 10.3% sequentially
Annual revenues of $914.1 million, up 25.2% year-over-year
Non-GAAP net income grew more than 31.3% for the fourth quarter year-over-year and 28.2% for the full year
Newtown, PA - February 18, 2016 - EPAM Systems, Inc. (NYSE: EPAM), a leading global provider of product development and software engineering solutions, today announced results for its fourth quarter and year ended December 31, 2015.
“We are very pleased that, despite market uncertainties and FX challenges, our investments in new digital capabilities, along with our ability to successfully integrate them with our traditionally strong software engineering skills, allowed us to reach our 16th consecutive quarter of over 20% year-over-year organic revenue growth,” said Arkadiy Dobkin, CEO and President of EPAM. “As we look to 2016, our continued investments should position us better to benefit from higher-growth market opportunities around the world.”
Fourth Quarter 2015 Highlights
•
Revenues increased to a record $260.3 million, up 28.7% year-over-year, and 10.3% sequentially;
•
In constant currency, revenue was up 34.3% year over year and 11.7% sequentially;
•
GAAP income from operations was $31.8 million, an increase of 32.3% compared to $24.0 million in the fourth quarter of 2014;
•
Non-GAAP income from operations was $46.9 million, an increase of $10.7 million, or 29.6%, from $36.2 million in the fourth quarter of 2014;
•
Quarterly diluted earnings per share (EPS) on a GAAP basis was $0.52, increase from $0.37 in the in the fourth quarter of 2014;
•
Non-GAAP quarterly diluted EPS was $0.78 up 25.8% from $0.62 in the fourth quarter of 2014.

Full Year 2015 Highlights
•
Revenues increased 25.2% to a record $914.1 million, up from $730.0 million in 2014;
•
In constant currency, revenue was up 32.8% year over year;
•
GAAP income from operations for 2015 was $106.0 million, an increase of 23.0% over 2014;
•
Non-GAAP income from operations was $158.7 million, an increase of 28.9% compared to $123.1 million in 2014;
•
Diluted EPS on a GAAP basis was $1.62, compared to $1.40 in the previous year;
•
Non-GAAP diluted EPS was $2.73, compared to $2.22 in 2014.
Cash Flow from Operations
•
Cash from operations was $76.4 million for the year 2015, down 27.2% from $104.9 million in 2014, and was $11.8 million in the fourth quarter of 2015, down from $48.7 million in the fourth quarter of 2014;
•
As of December 31, 2015, cash and cash equivalents totaled $199.4 million.





Other Metrics
•
As of December 31, 2015, total headcount was 18,354, an increase of 30.1% from 14,109 at December 31, 2014;
•
Total production headcount increased 36.0% to 16,078 in 2015 from 11,824 in 2014;
•
Utilization was at 74.9% in 2015, a 2.3% decrease from 77.2% in 2014.

2016 Outlook - Full Year and First Quarter
Based on current conditions, EPAM expects:
•
Year-over-year revenue growth to be at least 26% after 3% currency headwinds, meaning constant currency growth of 29%;
•
Non-GAAP net income growth for 2016 is expected to be at least 20% year-over-year, with an effective tax rate of approximately 21%;
•
The full year weighted average share count is expected to be just approximately 53.6 million diluted shares outstanding and the full year non-GAAP diluted EPS will be at least $3.20;
•
The full year GAAP diluted EPS will be at least $2.05;
•
Revenues at least $258 million for the first quarter of 2016, representing a growth rate of at least 29% over first quarter 2015 revenues. This includes 3% anticipated currency headwinds, meaning constant currency growth of at least 31%;
•
First quarter 2016 non-GAAP diluted EPS is expected to be at least $0.70 based on an estimated first quarter 2016 weighted average of 53.0 million diluted shares;
•
First quarter 2016 GAAP diluted EPS to be at least $0.43.

Conference Call Information
EPAM will host a conference call to discuss results on Thursday, February 18, 2016 at 8:00 a.m. Eastern Time. The live conference call can be accessed by dialing 1-877-407-0784 (domestic) or 1-201-689-8560 (international). A telephonic replay will also be available approximately one hour after the call and can be accessed by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international). The passcode for the replay is 13629306. The telephonic replay will be available until March 3, 2016. Interested investors and other parties may also listen to a webcast of the conference call by logging onto the Investor Relations section of the Company’s website at http://investors.epam.com.
About EPAM Systems
Established in 1993, EPAM Systems, Inc. (NYSE: EPAM) is recognized as a leader in software product development by independent research agencies. Headquartered in the United States, EPAM serves clients worldwide utilizing its award-winning global delivery platform and its locations in over 26 countries across North America, Europe, Asia and Australia. EPAM was ranked #6 in America's 25 Fastest-Growing Tech Companies, and #3 in America's Best Small Companies lists by Forbes Magazine.
For more information, please visit http://www.epam.com.





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, communicated internally and externally, for managing EPAM’s business and evaluating its performance. Management also believes these measures help investors compare EPAM’s operating performance with its results in prior periods. EPAM anticipates that it will continue to report both GAAP and certain non-GAAP financial measures in its financial results, including non-GAAP results that exclude stock-based compensation expense, write-off and recovery, amortization of purchased intangible assets, goodwill impairment, legal settlement, foreign exchange gains and losses, and acquisition-related costs. Because EPAM’s reported non-GAAP financial measures are not calculated according to 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 according to GAAP.
Forward-Looking Statements
This press release includes statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. EPAM undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

Contact:
EPAM Systems, Inc.
Anthony J. Conte, Chief Financial Officer
Phone: +1-267-759-9000 x64588
Fax: +1-267-759-8989
investor_relations@epam.com





EPAM SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(US Dollars in thousands, except share and per share data)

 
Three Months Ended
December 31,
 
Year Ended
 December 31,
 
2015
 
2014
 
2015
 
2014
Revenues
$
260,253

 
$
202,184

 
$
914,128

 
$
730,027

Operating expenses:
 
 
 
 
 
 
 
Cost of revenues (exclusive of depreciation and amortization)
158,291

 
121,465

 
566,913

 
456,530

Selling, general and administrative expenses
64,414

 
49,761

 
222,759

 
163,666

Depreciation and amortization expense
4,899

 
2,833

 
17,395

 
17,483

Goodwill impairment loss
—

 
2,241

 
—

 
2,241

Other operating expenses/(income), net
884

 
1,869

 
1,094

 
3,924

Income from operations
31,765

 
24,015

 
105,967

 
86,183

Interest and other income, net
1,409

 
1,368

 
4,731

 
4,769

Change in fair value of contingent consideration
—

 
(1,924
)
 
—

 
(1,924
)
Foreign exchange income/(loss)
1,559

 
1,123

 
(4,628
)
 
(2,075
)
Income before provision for income taxes
34,733

 
24,582

 
106,070

 
86,953

Provision for income taxes
7,095

 
6,159

 
21,614

 
17,312

Net income
$
27,638

 
$
18,423

 
$
84,456

 
$
69,641

Foreign currency translation adjustments
(5,699
)
 
(11,308
)
 
(13,096
)
 
(20,251
)
Comprehensive income
$
21,939

 
$
7,115

 
$
71,360

 
$
49,390

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.56

 
$
0.39

 
$
1.73

 
$
1.48

Diluted
$
0.52

 
$
0.37

 
$
1.62

 
$
1.40

Shares used in calculation of net income per share:
 
 
 
 
 
 
 
Basic
49,360

 
47,620

 
48,721

 
47,189

Diluted
52,670

 
50,339

 
51,986

 
49,734





























EPAM SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(US Dollars in thousands, except share and per share data)

 
As of December 31, 2015
 
As of December 31, 2014
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
199,449

 
$
220,534

Time deposits
30,181

 
—

Accounts receivable, net of allowance of $1,729 and $2,181, respectively
174,617

 
124,483

Unbilled revenues
95,808

 
55,851

Prepaid and other current assets
14,344

 
9,289

Employee loans, net of allowance of $0 and $0, respectively, current
2,689

 
2,434

Deferred tax assets, current
11,847

 
2,496

Total current assets
528,935

 
415,087

Property and equipment, net
60,499

 
55,134

Restricted cash, long-term
238

 
156

Employee loans, net of allowance of $0 and $0, respectively, long-term
3,649

 
4,081

Intangible assets, net
46,860

 
47,689

Goodwill
115,930

 
57,417

Deferred tax assets, long-term
18,312

 
11,094

Other long-term assets
4,113

 
3,368

Total assets
$
778,536

 
$
594,026

 
 
 
 
Liabilities
 
 
 
Current liabilities
 
 
 
Accounts payable
$
2,576

 
$
4,641

Accrued expenses and other liabilities
60,384

 
32,203

Deferred revenue, current
3,047

 
3,220

Due to employees
32,067

 
24,518

Taxes payable
29,472

 
24,704

Contingent consideration, current
—

 
35,524

Deferred tax liabilities, current
365

 
603

Total current liabilities
127,911

 
125,413

Long-term debt
35,000

 
—

Deferred tax liabilities, long-term
2,402

 
4,563

Total liabilities
165,313

 
129,976

Commitments and contingencies
 
 
 
Stockholders’ equity
 
 
 
Common stock, $0.001 par value; 160,000,000 authorized; 50,177,044 and 48,748,298 shares issued, 50,166,537 and 48,303,811 shares outstanding at December 31, 2015 and December 31, 2014, respectively
49

 
48

Additional paid-in capital
303,363

 
229,501

Retained earnings
345,054

 
260,598

Treasury stock
(93
)
 
(4,043
)
Accumulated other comprehensive loss
(35,150
)
 
(22,054
)
Total stockholders’ equity
613,223

 
464,050

Total liabilities and stockholders’ equity
$
778,536

 
$
594,026








EPAM SYSTEMS, INC. AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(in thousands, except percent and per share amounts)
(Unaudited)

 
Three months ended December 31, 2015
 
Year ended December 31, 2015
 
GAAP
 
Adjustments
 
Non-GAAP
 
GAAP
 
Adjustments
 
Non-GAAP
Cost of revenues (exclusive of depreciation and amortization)(1)
$
158,291

 
$
(3,824
)
 
$
154,467

 
$
566,913

 
$
(13,695
)
 
$
553,218

Selling, general and administrative expenses(2)
$
64,414

 
$
(8,903
)
 
$
55,511

 
$
222,759

 
$
(32,871
)
 
$
189,888

Income from operations(3)
$
31,765

 
$
15,142

 
$
46,907

 
$
105,967

 
$
52,723

 
$
158,690

Operating margin
12.2
%
 
5.8
%
 
18.0
%
 
11.6
%
 
5.8
%
 
17.4
%
Net income(4)
$
27,638

 
$
13,583

 
$
41,221

 
$
84,456

 
$
57,351

 
$
141,807

Diluted earnings per share(5)
$
0.52

 


 
$
0.78

 
$
1.62

 


 
$
2.73



 
Three months ended December 31, 2014
 
Year ended December 31, 2014
 
GAAP
 
Adjustments
 
Non-GAAP
 
GAAP
 
Adjustments
 
Non-GAAP
Cost of revenues (exclusive of depreciation and amortization)(1)
$
121,465

 
$
(2,257
)
 
$
119,208

 
$
456,530

 
$
(8,648
)
 
$
447,882

Selling, general and administrative expenses(2)
$
49,761

 
$
(5,863
)
 
$
43,898

 
$
163,666

 
$
(16,876
)
 
$
146,790

Income from operations(3)
$
24,015

 
$
12,175

 
$
36,190

 
$
86,183

 
$
36,959

 
$
123,142

Operating margin
11.9
%
 
6.0
%
 
17.9
%
 
11.8
%
 
5.1
%
 
16.9
%
Net income(4)
$
18,423

 
$
12,976

 
$
31,399

 
$
69,641

 
$
40,958

 
$
110,599

Diluted earnings per share (5)
$
0.37

 


 
$
0.62

 
$
1.40

 


 
$
2.22


Notes:
(1)
Adjustments to GAAP cost of revenues (exclusive of depreciation and amortization) were comprised of stock-based compensation expense recorded in the periods presented.
(2)
Adjustments to GAAP selling general and administrative expenses:
 
Three Months Ended
December 31,
 
Year Ended
 December 31,
 
2015
 
2014
 
2015
 
2014
Selling, general and administrative expenses - Acquisition related
$
4,705

 
$
3,701

 
$
18,690

 
$
8,829

Selling, general and administrative expenses - All other
3,954

 
2,138

 
13,448

 
7,143

Acquisition-related costs
244

 
24

 
733

 
904

Total adjustments to GAAP selling, general and administrative expenses
$
8,903

 
$
5,863

 
$
32,871

 
$
16,876





(3)
Adjustments to GAAP income from operations:
 
Three Months Ended
 December 31,
 
Year Ended
December 31,
 
2015
 
2014
 
2015
 
2014
Stock-based compensation expense
$
12,483

 
$
8,096

 
$
45,833

 
$
24,620

reported within cost of revenues
3,824

 
2,257

 
13,695

 
8,648

reported within selling, general and administrative expenses - acquisition related
4,705

 
3,701

 
18,690

 
8,829

reported within selling, general and administrative expenses - all other
3,954

 
2,138

 
13,448

 
7,143

Acquisition-related costs
244

 
24

 
733

 
904

Amortization of purchased intangible assets
1,674

 
(31
)
 
5,416

 
5,349

Goodwill impairment loss
—

 
2,241

 
—

 
2,241

One-time charges
741

 
1,845

 
741

 
3,845

Total adjustments to GAAP income from operations
$
15,142

 
$
12,175

 
$
52,723

 
$
36,959


(4)
Adjustments to GAAP net income:
 
Three Months Ended
 December 31,
 
Year Ended
December 31,
 
2015
 
2014
 
2015
 
2014
Stock-based compensation expense
$
12,483

 
$
8,096

 
$
45,833

 
$
24,620

reported within cost of revenues
3,824

 
2,257

 
13,695

 
8,648

reported within selling, general and administrative expenses - acquisition related
4,705

 
3,701

 
18,690

 
8,829

reported within selling, general and administrative expenses - all other
3,954

 
2,138

 
13,448

 
7,143

Acquisition-related costs
244

 
24

 
733

 
904

Amortization of purchased intangible assets
1,674

 
(31
)
 
5,416

 
5,349

Goodwill impairment loss
—

 
2,241

 
—

 
2,241

One-time charges
741

 
1,845

 
741

 
3,845

Change in fair value of contingent consideration
—

 
1,924

 
—

 
1,924

Foreign exchange loss/ (gain)
(1,559
)
 
(1,123
)
 
4,628

 
2,075

Total adjustments to GAAP net income
$
13,583

 
$
12,976

 
$
57,351

 
$
40,958

(5)
There were no adjustments to GAAP average diluted common shares outstanding during the three and year ended December 31, 2015 and 2014.



EPAM Systems, Inc. Reports