EPAM Systems, Inc.

Rebecca, and I'll be your conference operator today. At this time, I would like to welcome everyone to the EPAM reports results for third quarter 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Mike Rochandle, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today on our third quarter 2025 earnings announcement. As the operator just mentioned, I'm Mike Rochandle, Head of Investor Relations. We hope you've had an opportunity to review our earnings release we issued earlier today. If you have not, copies are available on epam.com in the investor section. With me on today's call are Balash Faish, CEO and President, and Jason Peterson, Chief Financial Officer. I would 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 gap measures and are available in our quarterly earnings materials located in the investor section of our website. With that said, I will now turn the call over to FB.

Thank you, Mike, and good morning, everyone. It's a pleasure to be here with you on my very first earnings call as a CEO. And please just call me FB, as Hungarian names are notoriously difficult to pronounce. And why FB? Because in my native language, filming name comes first. This quarterly call arrived faster than even my standard double espresso shot in the morning. And that's really the theme for the day. Things have been moving quickly since we spoke last, and today we have positive news to share. Our third quarter results came in better than expected, marking another quarter of broad outperformance and strong delivery execution. We continue to benefit from AI and AI-native-led demand or thesis that data and modern cloud architecture are critical for AI adoption and auto-realization is broadly being confirmed by what we are seeing. Our clients are prioritizing their AI build-outs, turning to EPAM to help them accelerate their investments and innovation in AI. The unique combination of our deeply rooted engineering DNA and our globally recognized best-in-class AI-native expertise continues to differentiate our offerings and help us further expand wallet share within our existing client portfolio and targeted new logo segments. At the same time, we are more focused than ever on upgrading our engineering skills advantage and investing for the future with new advanced AI playbooks and accelerators. Serving as client zero for AI adoption, we believe innovation starts from inside, which is why in parallel, we continue to relentlessly push our AI literacy and AI adoption rates. Looking at our progress year to date, more than 90% of ePamers have completed their mandatory AI literacy education, and approximately 95% of our engineers have completed foundational AI education. Additionally, our internal business processes are increasingly benefiting from AI-driven efficiencies. As you can see with the recent launch of EPAM AI Run Transform, which includes next-generation AI-managed services and EPAM Agenting QA, we are programmatically expanding new offerings and highly specialized capabilities, often in conjunction with our clients and strategic partners to help clients transform themselves into AI-native organizations. Our efforts are being recognized by our partners, as well as industry analysts, such as IDC Marketscape, who have positioned EPAM as a leader across experience engineering, custom build, and AI consultancy capabilities. Further, Glassdoor ranked EPAM number seven on their 2025 best-led companies list, along with Forbes, who recognized EPAM as one of the world's best employers, for first time being recognized across both. We will dive into the details a bit later in the call, but first I would like to provide a quick update from my early days as a CEO and my recently completed work tool. Over the past quarter, I met in person with many senior client executives, ecosystem partners, and of course, many, many EPAMers from all around the world. I experienced firsthand the high level of optimism and appetite for EPAM-proven quality of execution across our global, deeply specialized talent base. I am pleased with our continued and growing ability to assure higher levels of performance across a much more globally diversified footprint than ever before. But our work is not done. AI presents a permanent sea change in our industry and across our clients' businesses, driving the need for investment in modernization, data and cloud foundations, and critical AI native skills. EPAM is positioned to lead both the foundational and the transformational programs demanded by AI as clients need support from trusted partners who can reliably deliver through the need to simultaneously balance costs and productivity with an increasing need to reinvest, innovate, and keep pace with change. In line with Amara's law, we believe that as productivity grows and as costs to develop software declines, complexity will significantly accelerate, pushing the bleeding edge and resetting the boundaries of what is possible and triggering a flywheel effect of demand for EPAM's unique breed of capabilities and global scale. We believe that as complexity rises, so does enterprise risk, raising the importance of highly advanced engineering proven enterprise-grade quality execution. While we have seen the flashy white coding video shorts and headlines, in our view, the absolute need for true engineering expertise, risk management, fault tolerance, and reliability are overlooked and underestimated. Now, let's turn to some Q3 highlights. In Q3, we delivered another quarter of double-digit revenue growth. including very strong year-over-year organic constant currency revenue growth of 7.1%, which exceeded our expectations set a quarter ago. This marks our fourth consecutive quarter of positive year-over-year organic constant currency growth, reflecting a steady build of improvement and strong execution in our core business as we continue to ramp our AI-native services. Our broad-based growth momentum carried forward in Q3 with five out of six verticals growing year-over-year. Notable standouts included emerging verticals, financial services, and software and high tech. We also saw solid improvement in life sciences and healthcare, along with consumer goods, retail and travel, while business information and media remained steady. Geographically, all three regions delivered strong year-over-year growth. We continue to add net organic headcount across key locations such as India, Central Eastern Europe, and South America, with increases partially offset by ongoing optimization in select pockets that we have discussed previously. Now, turning to demand environment. AI continues to trigger incremental demand and is driving positives in our pipeline globally. The maturity of our top 100 clients remains highly engaged in AI-native initiatives. Clients engage EPAM to build out their data platforms and modernize their cloud, often redirecting work from other partners who successfully sold advanced capability but failed to deliver it. Overall, we continue to see improvement in the demand environment as we're seeing a continued upshift in investment towards everything that supports AI adoption and its deployment to production. This is where reputation for trusted quality and execution remains a significant competitive advantage and the key enabler for us to continue to maintain our pricing integrity. We gain traction with our ongoing client-centric initiatives, while at the same time continuously strengthening and optimizing our global delivery footprint, which is enabling us to better meet market demand. When you look across the AI project lifecycle, from proof of concepts to medium-sized use cases and the large-scale project in production, we're seeing a continued shift in the volume of project towards medium and large-sized projects. Many making use of our own IPs, such as Dial, AI Run, and other components, both open source and proprietary. Of the hundreds of individual AI-native projects we had active in Q3, between 60% to 70% have expanded into larger programs from the origination as proof of concepts, illustrating our ability to scale and deliver AI-native solutions in production. We are also seeing positive signs at the top of the funnel, enabling us to replenish our pipeline or some projects come to a natural close. Our hard work and continuous effort To further position EPAM as a leader in AI native services is serving us well, as our pure AI native revenues continues to grow nicely with a third consecutive quarter of double-digit sequential growth. And of course, as we have discussed before, the foundational services necessary to make AI work are a core fundamental to our business. In both our data and cloud practices, we saw outsized growth in Q3 compared to the rest of the business. which is incremental and highly connected to the momentum we are seeing with our pure AI native revenues. Now turning to our AI-run transform and agent QA announcements. First, a couple of core beliefs to frame our evolving AI approach. Number one, AI is not just a technology. It's a transformative force that is already redefining how enterprises innovate, operate, and create value in the future. And in this context, advanced engineering, bleeding edge, AI technology, and toolsets only with deep knowledge across the software development industry and new product lifecycle are the core competencies that will drive the most tangible AI outcomes. This will become even more evident as we see further rise of AI in the global and regional lineups of players in both Western markets and broadly across APEC, LATAM, and Middle East. Number two. We believe in building AI responsibly with trust, transparency, governance, and measurable outcomes at the core. AI must deliver real outcomes with proper traceability and risk management. Number three, we believe we are creating a new AI native engineering profile or North Star when it comes to talent development strategy, embedding AI, intelligence, and orchestration of agents directly into the development process. Over time, this role becomes the architect of AI native products and experiences, augmented by agents to expand the scope of what teams can achieve in the future. And finally, AI investments are an intense race. Our approach is to invest in accelerators, tooling, and people who help us deliver reliable outcomes on the promise of AI. We do not sell foundation AI in a silo. Instead, we use our expertise and advanced IP to sell and deliver with AI, packed with proven quality and execution that guarantees outcome and value realization. This is true across our entire IP portfolio and is shaping into a structural blueprint we are calling AI run. AI run transform represent or unified AI strategy that harmonizes or go to market notions with better activation across strategy and consulting, frameworks and methodologies, talent and advanced tool sets. We have two key offerings, AI innovation business transformation and AI native engineering transformation. The first offering is focused on optimized expand run across AI industry solutions, AI horizontal solutions and AI product design and experience. The second offering is focused on mastering the SDLC, advancing the agentic delivery lifecycle known as ADLC, and preparing for product development lifecycle known as PDLC. This encompasses AI native delivery, AI-driven modernization, and PDLC agentic solutions. We will be talking more about these offerings in the quarters to come. Or AI-run blueprints and compasses or AI frameworks and include our AI 360, AI Factory, AI-run SDLC, and AI adoption and education frameworks, which are agnostic and provide critical flexibility, which help EPAM deliver more enterprise-grade AI solutions at scale for our clients. Or AI-run talent, houses, or verticalized industry teams, ontologies, and accelerators. which includes strategic advisory data models, process modeling, and solution build with partners. Most importantly, this is the scaffolding we are using to define the forward skills of the future and the paths for upskilling people and organizations. And finally, our AI-run tools combines our best-in-breed IP assets such as ePanDial and AI Run Platform with our strong AI data and cloud ecosystem partner solutions and many available today on our partner marketplaces. You may have seen we also recently announced one of these tools, Agenti QA, which bridges the gap between automated and manual testing, enabling clients to move faster by reducing lead times and costs. What's impressive is that our agentic QA is shown to be 10x more efficient than manual testing, driving a 50% reduction in manual efforts and a 30% reduction in testing costs, covering 90% of the manual checks performed on standard releases while ensuring a high degree of quality and precision. Now turning to some client examples to illustrate some of our progress. This past quarter, we announced several collaborations with both new and existing clients, which illustrate not only evolution of our client proposition, but also how EPAM is able to systematically address innovative needs while offering real value. A few notable examples. Agenting customer service breakthroughs are real with Einz und Eins, a major provider for telecommunications, cloud, and internet services in Germany. By deploying EPAM's AI-run transformed Blueprint and leveraging Microsoft Azure, this client launched AI voice agents that handle over 100,000 calls weekly, with the first agents going live under three months into production. Two, our collaboration with Hugo Boss and our Empathy Lab studio is reimagining what it means to be a sports fan in the age of spatial computing. This innovation is shaping the next generation of motorsport fandom and lifting the bar how luxury fashion, sport, and technology intersects. We are blending our deep expertise in groundbreaking user experiences with gaming, fan engagement, advanced data, and analytics, and working with our clients to help package the 2025 Stevie Award winning solution for the AI native age. Three. Finally, we are putting EPAM and Neoris together in a way that goes beyond simple synergies. For a UK headquartered global biopharmaceutical company, EPAM, with the addition of Neoris, recently became a global strategy supplier across a broad range of transformation pillars. A key joint win for us is in helping the client to build out a modern data and AS center of excellence, which spans across multiple programs in new locations, including Iberoamerica. The close or operating momentum is strong. We are pleased with our performance throughout the year and continue to work on improving profitability. We are confident in the upward trajectory we have been working hard to build and sustain over the past several quarters and feel good about our Q4 positioning, which has improved over the past 90 days. We are focused on what's right in front of us and finishing 2025 strong, which we believe should set up a solid foundation to build upon in 2026 as we continue to work on expanding our organic constant currency growth rate. We are prioritizing client-centric disciplined execution while bringing a new level intentionality on building verticalized and differentiated horizontal go-to-market offerings. Looking ahead, We see our investments in upskilling, differentiated AI playbooks, IP partnerships, and new lines of services, such as agentic business process outsourcing, helping us to further capture new demand. Jason, over to you.