EPAM Systems' Strategic Expansion and GenAI Focus for 2024
2024-02-20
EPAM Systems, a global provider of digital platform engineering and software development services, recently conducted its Q4 2023 earnings conference call. The call was attended by key figures including David Straube, the head of investor relations, Arkadiy Dobkin, the CEO and president, and Jason Peterson, the chief financial officer.
During the call, the company deliberated on various aspects concerning its financial performance, strategic objectives, and future prospects. A primary focus for EPAM in 2024 is to enhance its capabilities both geographically and in terms of service offerings. The company aims to streamline delivery quality, optimize cost efficiency, and harness advanced technology and consulting expertise to seize GenAI and AI-driven opportunities in the forthcoming period.
EPAM has been actively repositioning and strengthening its talent delivery platform by expanding operations in India and Latin America. Additionally, preparations are underway for growth in development centers across Europe, Western Asia, and Central Asia. The company is concentrating on aligning engineering competencies and crucial capabilities in cloud, data, and AI across key locations.
India has emerged as the fastest-growing location for EPAM, with aspirations to become the largest location by the close of 2024. Notably, Latin American countries such as Colombia and Mexico have witnessed significant progress as EPAM extends its cloud and data capabilities in these regions.
EPAM has been diligently working on cost optimization strategies to navigate the prevailing economic landscape. The company has been exploring targeted optimization initiatives across local and global delivery sites to enhance short-term utilization and fund initiatives slated for 2023 and 2024.
In terms of their data, machine learning, and predictive AI capabilities, EPAM has been concentrating on foundational engineering and data ML projects. The company has undertaken over 400 GenAI-related projects spanning diverse applications including knowledge management, human capital management, product management, and supply chain optimization.
EPAM introduced DIAL, an enterprise-level orchestration platform, to expedite the development of GenAI-empowered business solutions. These solutions have been deployed across various sectors such as technology, insurance, retail, automotive, life sciences, and business information segments.
In the realm of financial performance, EPAM reported revenues of $4.69 billion in 2023, marking a 2.8% decline year over year. Adjusted income from operations accounted for 16.3% of the revenue. The company's Q4 results showcased sequential revenue growth, surpassing expectations due to heightened client demand and favorable foreign exchange rates.
Looking forward to 2024, EPAM anticipates a GAAP income from operations ranging between 9% to 10%, and a non-GAAP income from operations ranging from 14.5% to 15.5%. The projected GAAP effective tax rate stands at approximately 21%, while the non-GAAP effective tax rate, excluding excess tax benefits linked to stock-based compensation, is estimated at 24%. The anticipated range for GAAP diluted EPS is $7.20 to $7.60, with the non-GAAP diluted EPS expected to fall between $10 and $10.40.
In conclusion, EPAM Systems remains committed to leveraging cutting-edge technology, expanding its global footprint, and harnessing GenAI and AI-driven opportunities to foster growth and deliver value to its clientele throughout 2024.