Thank you for your patience. My name is Bella, and I will be your conference operator today. I would like to welcome everyone to the EPAM Third Quarter 2024 Earnings Conference Call. I will now hand the call over to Mike Rowshandel, Head of Investor Relations. Please continue.

Good morning, everyone, and thank you for joining us today. As the operator just mentioned, I'm Mike Rowshandel, Head of Investor Relations. By now, you should have received your copy of the earnings release for the company’s third quarter 2024 results. If you have not, a copy is available on epam.com in the Investors section. With me on today’s call are Arkadiy Dobkin, 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 risks 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 Investors section of our website. With that said, I will now turn the call over to Ark.

Thank you, Mike. Good morning, everyone. Thank you for joining us today. I’m pleased to share that our third quarter results came in better than expected, reflecting our strong execution, core differentiations, and continued value and relevance across our global portfolio of clients. Further, we have been busy since its forecast, signing two large acquisitions announced on Friday of last week. We closed NEORIS, which is the most significant addition in our history. From a strategic perspective, the acquisition of NEORIS does three things for us. Number one, it gives us an entry point into attractive new markets in Latin America and parts of Europe. Number two, accelerates net new growth opportunities with our joint clients and brings significant new logos to our clients' portfolio. And number three, creates a powerful and unified NEORIS delivery platform in the region, which we believe will be highly regarded across the Latin American and Spanish and Portuguese speaking world in general while strengthening our services with local and near-shore value propositions. We will be talking more about it a bit later today, but first, let me share some key highlights across our business. During Q3, we delivered revenue growth both year-over-year and sequentially. We saw broad improvements in client engagement across all our verticals and geographies, which we believe demonstrates what we hope to be a more stable overall market outlook. The level of our performance in Q3 was driven by increased client trust and our now much more globally diversified capabilities and in our ability to continuously execute with a high level of quality. That triggered a better-than-expected client willingness to increase their budget share results. Key verticals to call out include life sciences and healthcare, emerging markets, and notably financial services and software and biotech, which both returned to sequential growth this quarter. In addition, we are seeing further signs of stabilization within business information and media and consumer goods, retail, and travel while clients still continue to navigate mixed dynamics in their own end markets. Today, we are encouraged to see firstly a more positive demand sentiment in both our existing portfolio and newly acquired clients in comparison with 90 days ago. Secondly, we are very pleased with our ability to maintain our reputation as a go-to partner for technology-led optimization and transformation programs while continuously expanding our unique offerings in product and platform engineering services and advanced data cloud capabilities. To summarize, we remain optimistic about certain sectors of our target market and about our broader portfolio to return to higher levels of growth over the coming quarters. We are continuing to strategically invest in references capabilities and capture increased market share as global demand returns in full. However, currently, we do still see broad caution and some delayed decision-making with a focus on cost optimization. With all of that, we are staying very close to our clients and adapting ourselves to meet their most critical needs as they continue to assess their investment appetite, prioritize transformational efforts, and address their own end market conditions. Our global delivery strategy is focused on becoming the most diversified company in our industry from a global talent perspective, enabling us to support our global clients and their new transformative business models realization. We believe we are successfully executing this strategy by investing both organically and through acquisitions, into building new advanced capabilities. Currently, we focus on four major global delivery hubs. In Europe, we continue to remain highly differentiated in helping our clients address their most complex business and technological challenges. Our core engineering DNA remains strong. As you can see from our better-than-expected Q3 results, we continue to deliver this high quality across existing clients as well as the new logos from our European delivery hub operating in more than a dozen countries, including our largest in Ukraine. In India, we are very pleased with our level of growth based on demand for differentiating services. Our investment since 2015 is paying off now. Today, we see robust growth in the country, and just this year, we added over 2,000 professionals and expect India to reach 10,000 people by early 2025. In Latin America, we are following a similar process as India, investing in building for the future since 2015 as well. As mentioned, on November 1, we completed the acquisition of NEORIS. This acquisition represents a significant milestone for our company and will scale up our global capabilities with local leadership and expertise. With NEORIS, we immediately doubled our delivery footprint to approximately 7,500 people, expanding our presence in Mexico, Colombia, Argentina, and Brazil and also in Spain and Portugal. Additionally, NEORIS brings strong capabilities across many of our key verticals including application development, cloud migration, and automation. NEORIS is recognized in Latin America as a market leader in SAP, enhancing our core enterprise platforms value proposition. Finally, they bring strong local capabilities in manufacturing and telecommunications globally. In Western Central Asia, we’re building a relatively new delivery hub. Today, we have nearly 7,000 people in the region representing all our major global technology practices. We have a healthy mix of strong senior talent along with a junior energetic young population eager for new opportunities and growth. Now, let’s turn to an important target that remains top of mind for many: Gen AI. Last quarter, we talked about how our AI transformation approach is multi-dimensional. One is internally focused and represents what we do for ourselves, transforming our generation talent using our skill-based organization tools and methodologies. In this category, everything related to our efficiency and productivity advances in back office and internal processes. Dimension two centers around client transformation opportunities and Gen AI-enabled client solutions, which encompasses our Gen AI platforms and methodologies. Lastly, dimension three is all about our partner ecosystem network, helping us enable life transformation of Gen AI-driven programs when required preparation is in place for success. These dimensions are interconnected, and we continue to make solid progress across all three. However, today, we would like to focus on the combination of dimensions two and three to illustrate how our efforts drive client engagements and pragmatic value. Throughout 2024, EPAM has seen strong arrangements with most of our clients across the full spectrum of Gen AI initiatives. Such programs often include business consulting services and our approach to holistic business redesign and optimization, along with the implementation of our Gen AI interactive assistance across all our major verticals. With our top 100 clients, we are engaged with about 70% on different types of Gen AI initiatives. Looking at the size and maturity perspective, we saw a doubling of Stage 1 early-stage projects compared to last year, demonstrating our ability to help clients start their journey and quickly move to Stage 2 midsized AI projects with defined outcomes. These engagements are characterized by a clear road map and defined top and bottom line outcomes. Stage 3 involves readiness for broader Gen AI and AI-enabled transformations, characterized by multimillion-dollar programs that combine our data factory construct with new Gen AI capabilities. Our most transformative work this year involved establishing large-scale AI ecosystems or factories within client organizations. These comprehensive enterprise-level solutions manage the entire product life cycle. This year, we've been engaged in several of these sizable programs, anticipating substantial growth in 2025. Now, let me share a few client examples. One recent example is a collaboration with Record, a global manufacturer of health and nutrition products. This program is a large multiyear data transformation initiative, covering the full life cycle from data foundation to governance and the construction of a responsible AI framework. Another notable project with the International Monetary Fund resulted in the development of StatGPT, a platform allowing users to access global economic and financial data using natural language. We recently delivered StatGPT 2.0, significantly improving global data access for users. Finally, we are pleased with our stronger-than-expected Q3 results. Our core differentiation remains evident. We continue to deliver value, quality, and excellence for our clients. We are successfully executing our global growth strategy while expanding our market and capabilities. We believe EPAM is well-positioned to capture rebound in market demand and share. Let me now turn the call over to Jason for additional details on our Q3 results and outlook.

Thank you, Ark, and good morning, everyone. In the third quarter, EPAM generated revenue of $1.168 billion, a year-over-year increase of 1.3% on a reported basis or 0.9% in constant currency terms, reflecting a positive foreign exchange impact of 40 basis points. Excluding the impact of our exit from Russia, year-over-year revenue for reported in constant currency would have increased by 1.5% and 1.1%, respectively. Along with the revenue growth, EPAM also delivered solid operating performance and profitability. The company recognized a benefit from a Polish government incentive program, which further improved profitability in the quarter. In Q3, we recognized $52 million in benefits from this program, which reduced cost of revenues and improved gross margin and IFO by 450 basis points. While the Polish R&D incentive is reflected as a benefit to operating expense for GAAP reporting purposes, the effective tax rate during the quarter was negatively affected by the accounting related to the receipt of the incentive. The Q3 GAAP effective tax rate was 28.1%, while the non-GAAP effective tax rate was 24.1%. Diluted earnings per share on a GAAP basis was $2.37 and non-GAAP diluted EPS was $3.12, reflecting a $0.39 year-over-year increase, positively impacted by the Polish R&D incentive. In terms of vertical performance, Financial Services increased 3.3% year-over-year, driven by improved demand from clients across fintech and banking sectors, as well as strength in the insurance sector. Life sciences and healthcare grew 14.6% year-over-year, while Consumer Goods, Retail, and Travel decreased by 4.5%. Software and Hi-tech grew by 2.1%, and Business Information and Media declined by 9%. Overall, we are seeing ongoing signs of stabilization, and we expect some degree of demand stability emerging in our European geography. Moving forward, we anticipate a revenue range of $4.685 billion to $4.695 billion for the full year, effectively flat year-over-year. The guidance reflects organic revenue improvement in the second half of the fiscal year and a $54 million contribution from NEORIS for the months of November and December. For Q4, we expect revenue to be in the range of $1.205 billion to $1.215 billion, representing a year-over-year increase of 4.6%. Similar to our full year outlook, this reflects the contribution from NEORIS. Our goal is to maintain a strong performance while being mindful of wage inflation and the pricing environment. Thank you.

Hi, good morning. Thank you. It’s good to hear the broad improvement here that you noted in client behavior over the last three months. Are there particular areas leading that recovery that you’re most optimistic about and any color you can share on early 2025 budget discussions?

Yes. Clearly, we’re seeing improvement in financial services, which shows up in our Q3 results. Clients in that sector need to start investing again, along with continued improvement in hi-tech. We're also seeing good investment in life sciences and healthcare, but it might be a bit premature to comment on specific budgets for 2025. However, we are seeing more constructive conversations with clients.

Can you talk a bit about revenue per head, what you’re seeing there and your outlook for Q4 along with any hiring trends in the European region that might help with revenue?

Yes, we have seen increases in headcount in Q3 and expect further increases in Q4, which is a positive leading indicator. We're beginning to see hiring improve globally, not just in India or Latin America, but also in Eastern Europe and Western Asia.

Thank you.

Operator, we will take the next question.

Congrats on the progress here. Can you discuss the guidance for the fourth quarter compared to the third quarter, which was better than expected?

Yes, Q3 has significant seasonal impacts moving into Q4. Factors like vacations and holidays lead to expected sequential growth. Despite our stronger Q3 results, the Q4 outlook is strong for the standalone business, especially post-NEORIS.

I wanted to follow up on the R&D incentives from Poland. Is this an amount that we should think will flow into the model from here on out? Are there other jurisdictions providing similar opportunities?

We expect to have a similar level of benefit from Poland next year. Additionally, we are exploring incentives in other geographies as we expand into more expensive regions.

Our approach for acquisition hasn't changed. We expect smaller acquisitions with specific capabilities rather than the same level of impact we saw with NEORIS.

Have you seen meaningful evidence of recovery in Eastern and Central Europe in your customer conversations?

We have begun to see some recovery in demand from Eastern Europe, particularly as clients stabilize and diversify their teams.

There are positive changes in general, with more transformational programs being activated and a quicker realization compared to several quarters ago.

Could you talk about underlying profitability improvements, either sequentially or year-over-year, when excluding the Polish benefit?

We have improved utilization and reduced SG&A as a percentage of revenue, both positive signs. While price improvements have been limited, we're working on improving our operational efficiency.

Could you discuss plans for integrating acquisitions and driving synergies along with margin profiles?

Our focus is on revenue opportunities with NEORIS, actively pursuing engagements to meet client needs. We expect both NEORIS and First Derivative to contribute lower profitability than EPAM standalone.

Can you comment on margins from a structural perspective with the diversified global delivery footprint?

The margin profiles of our various delivery regions are more similar than perceived. However, increasing seniority in our workforce positively impacts profitability in the long run.

Can you clarify how much of the improvement is macro demand-related versus clients being more comfortable with the new delivery platform?

It's difficult to quantify; geopolitical factors play a significant role. Clients are returning due to challenges experienced with other vendors, along with increasing investment focus on technology.

We expect to see organic growth return in 2025 and believe our diversified delivery will be advantageous in the demand recovery.

Can you update us on employee productivity, especially in Latin America with NEORIS, and how is productivity in India?

It's too early to provide specific numbers, but our productivity in engineering is similar now to what we see across our centers. We're confident in continuing to enhance that aspect. In summary, we’ve achieved strong Q3 results and are optimistic about Q4. EPAM is well-positioned to capture future market demand rebounds.

Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.