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EPAM Systems' (NYSE:EPAM) long streak of robust organic growth continued during the second quarter, led by customers in North America, especially those in the media and entertainment and the life sciences and healthcare sectors. But while the company expects its healthy organic-driven growth to keep going, it does see some worrisome headwinds on the horizon. 

EPAM Systems Inc. results: The raw numbers


Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)


$283.8 million

$217.8 million


Non-GAAP income from operations

$47.6 million

$36.9 million


Non-GAAP earnings per share




YOY = year over year. Data source: EPAM Systems Inc.

What happened with EPAM Systems this quarter? 

Growth was strong across the board:

  • Customers in North America drove second-quarter revenue growth, with sales up 45.9% to $161.1 million followed by a 17.4% increase in sales from customers in the European Union. This more than offset sales declines in CIS and APAC.
  • Revenue grew across all customer bases, led by media and entertainment and the life sciences and healthcare sectors, where revenue surged 46.8% and 78.2%, respectively. Meanwhile, revenue from software and hi-tech, financial services, and travel and consumer were all up more than 20% year over year.
  • Currencies muted revenue growth a bit, with revenue on a constant currency basis up 33.9% compared to 30.3% when accounting for the impact of currencies.
  • The non-GAAP operating margin slipped a bit, dropping from 16.9% in last year's second quarter to 16.8% in the year's second quarter, resulting in lower income growth. Meanwhile, the share count rose by 2.6%, which tamped down earnings growth on a per-share basis.

What management had to say 

As CEO Arkadiy Dobkin said about the results, "We are pleased with our second quarter results, which delivered 30.3% year-over-year revenue growth." That is on pace with its recent history, with the company growing revenue by a 33% compound annual growth rate over the past five years. Furthermore, its organic growth streak is up to 22 consecutive quarters of more than 20% year over year.   

Looking forward 

But while the company anticipates steady growth, Dobkin warned:

As we look at the remainder of 2016, various macro-economic and geo-political challenges could cause some unexpected volatility in the market, but we remain confident that we can achieve our top line growth objectives. Our long-term strategy remains intact and we will continue to focus on delivering the most innovative digital solutions to our customers and investing in our talent, capabilities and global delivery locations.

Despite the near-term concerns, EPAM Systems is reaffirming its full-year outlook. It still projects 26% year-over-year revenue growth after adjusting for a 3% impact from foreign currencies. Meanwhile, it expects adjusted earnings to be at least $2.97 per share.

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