EPAM Systems, Inc.

Good day, everyone. My name is Kahe Alani, and I'll be your conference operator today. At this time, I would like to welcome you to the EPAM's fourth quarter and full year 2025 earnings release 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'd like to ask a question during this time, and if you have joined via the webinar, please use the raise hand icon now, which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Mike Reschandle, Head of Investor Relations.

Good morning, everyone, and thank you for joining us today on our fourth quarter and full year 2025 earnings call. As the operator just mentioned, I'm Mike Reschandle, 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 Faesh, 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 GAAP 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 all, and I look forward to seeing many of you again in just a few weeks at our Investor Day in Boston. Today, we are pleased to share another quarter of strong results as we close out a very successful 2025 and continue to execute our long-term growth strategy, further positioning ourselves to win in the AI-native era. We are confident of our unique differentiation and look forward to building on the momentum we created throughout 2025. At the start of last year, we noted that for us it was going to be a year of transition. In fact, today marks my second earnings call and my very first year-end report, underscoring the fast pace at which we continue to operate and adapt to conditions both externally and operationally here at EPAM. As we look ahead to 2026, we see a year of AI momentum marked by our clients' ongoing shift in spending towards AI investments and strategic deployments. Importantly, we are expected to build on our growing momentum in AI native services supported by our AI foundational services that enable clients to scale AI across their enterprises. These offerings are becoming a more substantial piece of our total services mix, illustrating our ability to capture higher value and more strategic opportunities as AI investments accelerate across the market. Let me share why we believe EPAM is positioned to win this new AI native services category. While we are seeing measurable productivity gains at scale, we are also seeing complexity dramatically increase at a faster pace than we have seen in prior cycles. Clients are facing growing pressure to continue to invest in AI, and that means platform modernization, data and cloud foundations, security, and critical AI native upscaling. As a result, AI presents a favorable opportunity for EPAM within the build versus buy value proposition. EPAM continues to be positioned in this sweet spot as we believe we are entering an age of building. With our internal AI-native engineering transformation nearly complete, we are now shifting to develop more verticalized AI-native business offerings and consultancies. This positions us to deliver AI strategy and execution to clients simultaneously, helping them build their own AI-native businesses and platforms. Before getting into details, I would like to quickly reflect on a few themes from the past year which highlight our differentiated position and underpin our confidence as we continue to grow our revenue and improve our bottom line trajectory over the long term. First, they believe we have clearly demonstrated and will continue to demonstrate that we position to win in the AI native engineering category. Our advantage comes from our highly differentiated engineering and AI native talent, along with the tooling and workflows that enable us to deliver production-grade AI at scale. Notably, in Q4, we generated more than $105 million in pure AI native revenues, where we continue to see solid momentum and strong sequential growth. As a reminder, our AI-native revenues are defined across two groupings. Number one, AI-native IP, products, platforms, and solutions, where AI was the core of the solution versus simple work accelerated by the use of AI tools. And number two, AI-led transformation initiative across the entire enterprise. Importantly, our definition excludes all the AI foundational services, along with any AI-assisted work performed by EPM employees within the software delivery lifecycle. Looking ahead, we continue to see robust demand for our AI native services and expect to scale these revenues in excess of $600 million in 2026. Second, our developers' and builders' DNA, forged by over 30 years of experience in custom software product and platform engineering, prepare us incredibly well for this new super cycle. To stay ahead of the curve, we expanded our three-year AI readiness mandate to keep pace with advancing technology, new agentic delivery, and new commercial models that help us meet our clients where they are to enable their unique AI journeys. Even under extreme geopolitical and macroeconomic adversaries, our business model and brand of very high quality and execution have persisted and today give us a leading edge on AI strategy and delivery at scale. Third, we are supercharging our client zero mentality by extending AI capabilities across our entire business. We have been pioneers, builders, and change agents in transforming the software delivery lifecycle and advancing the AI maturity model with talent, IP, and the ways of working. Now we are adopting our go-to-market approach for a more AI-centric environment, focusing on industry and verticalized expertise, and innovating engagement and commercial models to adopt new and emerging trends. We are transforming the way we engage with existing and new buyers, expanding our market growth opportunities across all regions and buyers' personas. Our most recent announcement of Empathy Lab expansions demonstrates this AI-native momentum with our proven AI-native agency now expanding to help CMOs across North America become the growth architects for their businesses. We are bringing AI-powered creative talent, accelerators, and innovation frameworks to the business of marketing. We will be sharing much more on this at our upcoming investor day in March. Finally, our strategy is being validated by the market and our partners in significant way that underscores our unique AI native capabilities. With Microsoft, we were thrilled to be named the 2025 Microsoft Innovate with Azure AI Platform Partner of the Year. With AWS, we were recognized as 2025 AWS Global Innovation Partner of the Year. With Google Cloud, we launched seven advanced AI agents on Google Cloud Marketplace. Most recently, we announced a strategic partnership with Cursor to build and scale AI native teams for global enterprises. Beyond Partnerships, or Technical Okumen, is recognized by independent benchmarks. EPAM's AI-run developer agent was recently ranked in the top five on SWE Bench Verified Leaderboard, an industry-leading benchmark designed to evaluate large language models and AI agents on real-world software engineering tasks. Furthermore, Gartner has positioned us as a leader in the emerging market quadrant for generative AI consulting and implementation services, further solidifying or standing as a trusted guide in this complex landscape. Now, let's turn to some Q4 highlights. Our fourth quarter results came in better than expected, marking another quarter of outperformance. In Q4, we delivered double-digit revenue growth, including solid year-over-year organic revenue growth of 5.6%. Our underlining growth momentum remains broadly intact, with five of the six verticals growing year-over-year and four out of the six verticals growing organically. Notable standouts included financial services, emerging verticals, and software and high tech. Across geographies, ML delivered strong year-over-year growth, followed them by the Americas and APEC. We continue to add talent across all key geographies. Now, turning to the demand environment. Overall, the client sentiment remains intact with no material change over the past 90 days. AI continues to trigger both incremental and sustained demand and is driving positives in our pipeline. Based on our current visibility, we expect client budgets to remain relatively intact in 2026 compared to 2025, with a continued shift in spending towards scaled AI deployment. Even with the progression of AI towards larger programs, there is a growing emphasis on ROI and the need for scalable enterprise-grade solutions. While these are larger programs naturally introduce a more mature procurement process, including RFPs and the modest extension of sales cycle, it also represents a larger opportunity for EPAM to deliver even greater value through bigger and more strategic, higher impact initiatives, something we are observing in our sales pipeline today. Now turning to our AI progress. EPAM is uniquely positioned to guide clients through the market towards AI-native transformation. We continue to invest in people, accelerators, and advanced tooling to capitalize on our expanding growth opportunities. As a part of evolution to a pure-play AI-native company, last quarter we launched our AI-run transform playbook and frameworks, along with our AI-native business transformation offering. Together, AI Run for SDS and AI Run Transform are the building blocks for our IP-enabled go-to-market strategy. And I'm pleased to say both are picking up early adoption in 2026. These frameworks and tools support the hundreds of AI-native projects we had active in Q4. In line with last quarter, between 60% to 70% have expanded from initial proof of concept into larger programs, a clear indicator of our ability to scale AI-native solutions into production and convert early wins into more meaningful revenue. Incremental and highly connected to our AI native services is our AI foundational services, which encompasses the critical AI readiness and preparation work for our clients are undertaking. Demand for these services remain quite strong, and the size of this portfolio is already significantly larger than our pure AI native revenue base. Once again, in Q4, we saw outsized growth in both our data and cloud practices compared to the rest of the business. Now turning to some client examples to illustrate the impact we are making. EPAM partnered with EBSCO Information Services to enhance software development processes using the AI Run Transform framework. EPAM played a critical role by providing AI guidance, helping to establish governance framework, and building an AI adoption dashboard to measure real-time performance metrics. Through each phase of the rollout, EPAM and EBSCO maintained a strong emphasis on measurable outcomes using the dashboard to track metrics such as velocity, cycle time, code review, lead time, AI impact, and productivity gains. In addition to measurable productivity gains, EBSCO also established a robust foundation for future continuous improvement in the use of AI development tools. Bayer partnered with EPAM to develop an AI-powered pricing tool that optimized pricing strategies across 35 countries. Leveraging machine learning, the tool delivered 20 to 30 million euros in incremental yearly profit, reduced analytics time by 10x, and provided advanced scenario planning capabilities. This collaboration transformed Bayer's pricing processes, enabling smarter data-driven decisions. We are also seeing compounding value of our long-term trusted partnerships with our clients like Zalando, where we are driving impact across data, analytics, AI, and cloud transformation. Our collaboration has yielded three significant outcomes. First, we have developed the pilot for a GenAI-powered styled solution, giving mobile users an interactive, highly personalized shopping experience. Second, leveraging our proprietary MigWiser tool, we rapidly migrated their massive data warehouse platform, which fuels their business intelligence, to Amazon Redshift. Finally, we built a sophisticated machine learning solution that combines automated tagging with intelligent oversight to solve the complex challenge of managing extended producer responsibility compliance. Lastly, we are also incredibly proud to announce a new multi-year partnership with National Geographic Society, where EPAM has been designated as NotGeo's preferred digital transformation partner. This collaboration is about far more than modernization. It's about utilizing innovative technologies to inspire the next generation of explorers and solution seekers. By leveraging our engineering DNA to modernize their nonprofit infrastructure, we are also helping NotGeo to engage global audiences through distinctive experiences that bridge the physical and digital worlds. Our efforts to lead in the age of AI and digital transformation also being consistently recognized by the industry's top analyst firms, validating our strategy and quality of our execution. Throughout 2025, we have been honored to receive several key leadership distinctions. For example, EPAM has been named the top IT vendor in Europe for application services and general satisfaction by Viteline Research for the third consecutive year, which included expanded coverage across categories, ranking first across multiple categories, including application services, general satisfaction, innovation, and service delivery quality. The report highlights EPAM's commitment to delivering high-quality services and innovative solutions. This milestone reflects the trust and partnership of our clients and the dedication of our teams. Gartner recognized EPAM as a leader in the magic quadrant for custom software engineering, a testament to our deep-rooted engineering DNA. Furthermore, Gartner also named us as a leader in the emerging market quadrant for generative AI consulting and implementation services, highlighting our early and impactful entry into this transformative space. Forrester positioned EPAM as a leader in the Forrester way for modern application development services, reinforcement or strength in helping clients to modernize and innovate across their technology stacks. IDC MarketScape acknowledged our end-to-end capabilities by naming us a leader into two critical areas, or third year in the row of recognition, CX Design Services and CX Build Services. These underscores our unique ability to not only envision, but also deliver world-class customer experiences. These recognitions spanning engineering, generative AI, customer experience, and application development affirm our position as a trusted partner for enterprises navigating complex transformations. They reflect the hard work and dedication of our global teams and unwavering commitment to delivering tangible, high-value outcomes for our clients. We see this as a strong validation that our integrated approach from strategy and design to engineering and AI native delivery, it's what the market needs today. To close, our operating momentum exiting 2025 is strong as AI continues to be the net growth driver for our business. We are encouraged by our progress, transforming our company, our go-to-market capabilities and our offerings. EPAM Foundation, we have built over the past several years, diversifying our global delivery model, enabling our entire organization with AI and bringing meaningful solutions to market with our AI-run playbooks and underlining IP positionals to continue delivering sustainable revenue growth while also expanding profitability. Jason, over to you.