EPAM Systems, Inc.

Good day, and thank you for standing by. Welcome to EPAM Systems' fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Straube, Head of Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning, everyone. By now, you should have received your copy of the earnings release for the company's fourth quarter and full year 2022 results. If you have not, a copy is available on epam.com in the investor section. With me on today's call are Kati Dobkin, CEO and President, and Jason Peterson, Chief Financial Officer. I'd like to remind those listening that some of our 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 measure 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 Arc.

Thank you, David. Good morning, everyone. Thank you for joining us this morning. 12 months ago, on February 17th, we were looking toward 2022 with optimism. We had just been added to S&P 500, and we expected to grow almost 40% and generate over $5 billion in revenues in this year. Even with some early warnings, the Russian invasion shocked the world one week later and put us on a very different path of priorities. The new reality redefined the meaning of success for us. And we are very grateful today to the tens of thousands of farmers and our customers around the world who mobilized support for people in our business during the past year. Our success in 2022 was defined by new criteria and priorities, many of which We've shared it with you in our regular calls and updates during 2022. Priority one was to do everything possible for the safety of our people in Ukraine. Next, our global mobility mission was immediately repurposed and scaled to support over 10,000 EPAMers who choose to stay with EPAM while relocating to new for them countries and many with their families. In addition, our business continuity strategy was adapted to include an exit of our business from Russia. And throughout the year, our customer focus was further elevated to ensure that even with environment that was anything but normal, our clients continued to get the consistently high quality of delivery and level of service that they would expect under normal business conditions. 2022 was in every way the most disruptive year for EPAM, I remember, and I have a privilege to remember all of them. You might ask why we're considering 2022 a relative success. As a result of our 2022 efforts, in 2023, we have a global delivery footprint, an organization that makes EPAM one of the most geo-diversified IT services companies in the world. and one that now operates in more than 50 countries. When we began 2022, roughly 60% of our delivery was in just three largest locations bordered together. And today, only 30% of our talent is there. While we expect that we'll fall closer to 2025%, concentration by the end of this year is accelerated growth outside. We also didn't lose any significant client during the last 12 months, despite actively running the global delivery location rebalancing program. And in real time, we were continuously developing new capabilities across our major markets. We were also proving that our delivery out of Ukraine can consistently demonstrate productivity and quality very much in line with expectations. And finally, that our new locations, very much in line with the pump productivity and quality engineering standards too why then we use a relative qualifier to the stated success up to date simply the war is in ukraine is not over and we believe that it will be our daily reality for some time to come having accomplished what was extremely difficult transformation and while finding ourselves a much stronger, more capable and effective company than we have been before and with a strong foundation to build upon to the network of our journey, we do realize that it's very much an ongoing process which demands our even higher level preparedness for new and unexpected challenges. Additionally, as I mentioned during our last earnings call, some of our partners and customers have been messaging the expectation for global slowdown in demand and started taking resulting actions to better align their businesses to new environment. While they also expected corresponding slowdown, our reality happened to be more complex than the typical slowdown indicated by others. When we shared our Q3 results in November, we were not yet seeing a detailed picture of what a pump-specific demand environment would become in 2023. Today, what we're experiencing is slightly more than caution related to macroeconomic conditions. The emerging view is specific to both the overall global market conditions and also reflect the client expectation of impact of our mitigation and diversification plans and their corresponding decision-making process during the last year. We now understand that some of our clients didn't expect that we would navigate the past 12 months as well as we did. So at some point, they choose to mitigate the risk associated with our situation in advance and to consider alternative for them new work streams. We believe that while they are now comfortable with our diversified delivery footprint and committed to continue working with us, a number of decisions made two, three quarters before became visible for us just now. Second, due to immediate redistribution of our talent to new locations, our overall cost structure and cost to our customers of our offerings were disrupted at some level. During the high demand environment, site changes were accommodated with relatively ease. But in current slow environment, the new locations and price and mix present a greater challenge, at least while we were fixing the imbalance. Third, there are several key for us verticals, such as software and high tech, for example, which were disproportionately impacted by the current slowdown. And there are also several large clients which were impacted by their own specific circumstances during the last several months, who had to delay previously committed initiatives. And finally, our attention on bringing in net new logos during the last 12 months was deprioritized as we focused on retaining our existing customers and repositioning our global delivery as our key priorities. So because of those IPAM-specific factors, we believe we are now seeing a lower revenue growth outlook at the beginning of 2023 than we historically would expect at this time. Our current view for the year now shows relatively low growth during the first half of the year, with acceleration in growth in the second half of 2023, potentially approaching the high teens in Q4, and with opportunity to come back to our pre-pandemic 20% plus organic growth profile right after that. At this point, we're investing in our customer and partner relationship. and working across our global portfolio to build on our strong engineering differentiators with the value-added services and consulting client data and customer experience. These are long-term programs which we've had underway for several years, and our current positioning as a top-tier partner to our clients and additional credibility we built during the last 12 months should help us to create uplift in demand going into second half of 2023. Today, we continue to stabilize our delivery global platform and develop talent across new geographies. A significant part of those continuous efforts will allow us to restore the balanced cost structure across our major delivery centers. At the same time, while we are fully committed to continuing our investments in our strategic differentiators, we are watching very carefully the balance of those investments to our current and immediately visible demands. Given the necessity of looking at our business both from a long and short-term point of view, we are heavily utilizing our digital platforms, which have been instrumental in guiding our decisions so far and allowing us to monitor our business on a daily basis, and making real-time calibrations when necessary to ensure that we protect our best talent as a key priority while still driving toward our historic growth and profitability levels. On the general slowdown issue, we do believe that in today's technology-dependent world, the real impact of slow demand on the IT services global market most likely should be limited just to several quarters. The pullback will encourage new players to enter the market with new technology-led business solutions and push enterprises to respond with new investment in order to protect their competitive position. which in turn should accelerate growth for EPAM as our proposition is focusing exactly on helping them to bring new strategy and implementation simultaneously in most coordinated and efficient ways. So our goal today is to prepare EPAM exactly for that time and to be able to respond in fact for the next growth and capability challenges. That is why we plan to focus our attention in the next quarters to further stabilize our global operations and to continuously invest into new talent, new capabilities, new offerings, and new markets, and to maintain our strong engineering DNA, but this time as much more globally diversified company than ever in the past. Looking at our results for 2022, we generated over $4,800,000,000 in revenues, reflecting a greater than 28% year-over-year growth. Non-GAAP earnings per share were $10.90, a 20% increase over fiscal 2021. And we also generated $382 million of free cash flow. And one more time, we did all that during the year when we had almost 60% of our talent in regions directly or indirectly impacted by war. And when we were supporting many thousands of farmers and their families during the continuous relocation process. In 2023, we are committed to accelerating our mission of becoming a true value orchestrator for our customers, and we are working every day to stay focused on our customer needs and demands, even while we continue evolving our geographic expansions, our capabilities, and our commercial offerings of a larger, more diversified, and more capable economy. It is a bit strange to talk today again, 12 months later, about grossing 5 billion revenue mark in 2023, as we did back in February 2022. The world took a year of our life, year of our growth. But we all know too well that it's just nothing in comparison to what people in Ukraine might go through today and what is happening on the ground in Turkey as we speak right now. So that is why with all that, what didn't change at all is our confidence that with what we built and continuously building, we would be able to navigate the challenges and come back to our 20% plus organic growth rate with the next several quarters. and to our 10 billion aspiration within the next several years. With that said, let me turn the call over to Jason, who will talk about our Q4 and full year 2022 results and our business outlook for 2023.