EPAM Systems, Inc.

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Penn System's first quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. After this speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press the star, then the one key on your touch-tone telephone. Please be advised that today's conference is being recorded. If you recall opera systems, please press star, then zero. I would now like to end the conference over to your speaker host, David Straube, Head of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. By now, you should have received your copy of the earnings release for the company's first quarter 2022 results. If you have not, a copy is available on epam.com in the Investor section. With me on today's call are Akati Dobkin, CEO and President of and Jason Peterson, Chief Financial Officer. I'd like to remind those listening that some of the comments made on today's call may contain forward-looking statements. These statements are subject to risk and uncertainties as described in the company's earnings release and SEC filings. Additionally, all references to reported results that are non-GAAP measures have been reconciled to the comparable GAAP measures and are available in our quarterly earnings material located in the investor section of our website. With that said, I'll now turn the call over to Ark.

Thank you, David. Good morning, everyone. Thank you for joining us today. During our previous earnings call, I finished my remarks with assurance that the level of maturity that EPAM had reached over the last few years, along with our ability to operate and manage our performance during the difficult times in 2014 and 15 in Ukraine and 2020 and 21 in Belarus, allows us to say that we were well prepared to address the potential challenges of 2022 by leveraging our broad global reach and deep regional insight, and by applying our strong engineering DNA. And most importantly, our never-ending entrepreneurial spirit to continue making the future real for our clients, our employees, and our global and local communities, while keeping everybody as safe as possible. We were wrong. We didn't expect the war. By any measurement, the quarter has been unlike any other quarter in our history. Russian invasion of Ukraine has changed the world and impacted tens of millions of people, including tens of thousands of our employees, their families, friends, neighbors in Ukraine and around the world. What we thought was unimaginable when we reported our queue for earnings on February 17th. All changed a week later. Now, let me repeat a simple statement. IPAM as a company fully stands with Ukraine. During the last months, since the beginning of the war that was started by the Russian government, our absolute top priority has been and continues to be the safety and well-being of our employees and their families in Ukraine. Today, our employees in the region and around the globe continue to support each other, donating time and resources to help their colleagues in Ukraine. Additionally, the company has provided significant financial and logistical support to help move our Ukrainian employees and their families to safe areas inside and outside of Ukraine. As we have previously announced, IPAM has committed $100 million in assistance to help with a broad range of needs for our people and their close ones. Along with financial assistance, there has been an outpouring of support from a great number of clients and partners responding with gestures and different types of aids. Thinking more broadly about the people of Ukraine, we established the Ukraine Assistance Fund to support charitable aid organizations that provide direct relief to those in vulnerable situations across Ukraine. This fund is a separate from and in addition to the 100 million humanitarian commitment previously mentioned. And despite the very challenging and sometimes unimaginable conditions on the ground in Ukraine, Our Ukrainian colleagues have been resilient and dedicated to their work and customer responsibilities, continuing to produce and to deliver results. The PAMS management team, together with our clients, are extremely impressed and grateful for those incredible efforts, and we see today increased interest from our customers to continue directing work to Ukraine. I personally want to thank each and everyone on our Ukrainian team. However, where we got it wrong, we were also somehow right about our level of readiness to address unknown. Because today, despite the broad and disruptive nature of the events unfolding daily, we find ourselves to be better prepared than we imagined just three months ago. Our investments in hardening our operational and logistical platforms, teams, and processes have enabled us to respond quickly in establishing framework for continuing phased recovery procedures. Let us try to illustrate it in a bit more structured way by presenting several stages of our current journey, or at least the way we are currently thinking about things. First, in addition to preserving the safety of our Ukrainian and their families while helping to move many thousands of people from east to west, inside the country and abroad, Our initial focus during the last few months has been on maintaining our customer relationship and continues to deliver on important initiatives despite the war and interrelated geopolitical challenges. Those efforts we define for ourselves as a phase one, a period of safety and stabilization of our operations, with very little attention to anything beyond that. Under the current conditions, we believe this phase is largely completed and we will call it out as a notable success. With Jason, we will illustrate in more details the specific numbers for our Q1 results and our guidance for Q2 shortly. So, while we are managing through the humanitarian crisis in Ukraine, we are also working with our customers to address their concerns and request to reposition projects and teams to different geographies. which is very much guided by the business continuity plans we had previously established with our clients, including multiple relocation alternatives for our employees. In April, we also made the decision to exit our operations in Russia, which is a step with the market and the broader global response to the actions of the Russian government. We are fully committed to our talent in Russia who share our values and our positions. And for most of our employees in the region, we are offering multiple location alternatives to allow them to remain with the company and advance their careers at EPAM. This statement brings us to what we consider to be a phase two, which is our activities to accelerate the diversification or rebalancing, if you will, of our global locations and continued growth of our delivery capabilities. We have already begun the second phase. which closely overlaps with the phase one. This acceleration includes rapidly scaling already existing delivery locations in India, Latin America, and Central Asia, as well as establishing several newly created delivery hubs and expanding many existing across Europe. This expansion supports active repositioning of our current employees and simultaneously creates opportunity to develop the local talent market in those hub locations. This will allow us to maintain the experience delivery talent we currently have while also establishing new delivery footprints and allowing for significant increases in local hiring and better facilitating future growth in those locations. At this point, we can report that this development is in play already and we're seeing early success. We will continue to update you on our progress on those efforts throughout the year. I would also point out that in large part, this diversification program was well underway even during the past several years. Before COVID, our allocation to the talent from Ukraine, Belarus, and Russia was close to 70% of our total production capacity. By the end of 2021, it was less than 60%. And we believe by the end of 2022, we will manage to reduce the allocation of our production staff in the region to about 30%. Additionally, we have a strong intention to maintain and potentially grow our talent pool in Ukraine, which we believe will continue to be a significant IT talent market post-war. While the size and scale of this disruption has been very significant, and while we still should expect some very much unexpected things to happen, I think it's important to bring context that the rest of our business and customer portfolio continue to operate in a business as usual manner. The longer-term demand trends that have driven growth in our business before remain very much intact. We believe these trends combined with our unique offerings enabled by our differentiated engineering DNA and market positioning will place us on the path to our familiar organic revenue growth profile sooner rather than later. And this brings us to what we call phase three, the period to focus on driving demand. This phase is also underway and will occur in parallel with two phases we described above. What this means is that we are focusing on revenue growth for new and existing customers and starting to operate in type of new normal environment for us. We believe that this new normal should elevate us back to sequential revenue growth during the second half of 2022. After that, we believe we will be able to enter phase four of our recovery plan, which will be time to focus on profitability with the objective to return to profit levels consistent with the farm's historical target ranges. It's for sure an important area of attention on our agenda already today, but we plan to have a stronger focus on profitability as well as on improving rate structures and optimizing performance of our new delivery locations throughout the second half of 2022. to show visible performance improvements, while this phase will likely carry on into 2023. I think it's very much understandable that all the phases I just outlined are not sequential, and while many elements of these efforts are overlapping in time, they also are very much interrelated and bring high levels of operational complexity into our day-to-day activities. At the same time, it's also important to underscore that the first two phases are already very much underway, and the next two phases are just getting started, and that all phases will continue to be present in our life for some time. To summarize, while the cause of this disruption is beyond our control, today we are responding at a scale and a pace to put our best effort together to contain as much as possible the impact of this war within 2022. Our new strategy is not really new, but an acceleration of our previously stated strategy. Adapt, grow, and deliver value across a broader, more engaged ecosystem of people, customers, and partners. Based on our engineering heritage, tightly integrated with the innovation and transformational consulting capabilities we were developing over the last years, we will return to industry-leading growth and a more in-line profitability model, while still challenging ourselves in doubling the company's 2021 revenue in three years' time, as we have done previously three times since our IPO in 2012. I am confident we will execute through this unimaginable challenge and emerge as a more diverse, more resilient, and more relevant department. I hope you will be able to join our Investor and Analyst Day event on May 19 in Boston, where we will share more insights in our plans and goals. Now, let me turn the call over to Jason, who will talk about our Q1 results and additional perspective as we look at Q2 and beyond.