EPAM Systems, Inc. reports 25.6% EBITDA growth in 2020 and 15.9% Revenue growth
02/18/2021 • About EPAM Systems, Inc. (
$EPAM) • By InTwits
EPAM Systems, Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EPAM Systems, Inc. is a fast growth stock: 2020 revenue growth was 15.9%, 5 year revenue CAGR was 23.8% at 2020 ROIC 19.4%
- EBITDA Margin is expanding: 19.4% in 2020 vs. 17.9% in 2019 vs. 13.5% in 2016
- EPAM Systems, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.7%. At the same time it's in pair with industry average of 3.5%
- CAPEX is quite volatile: $69m in 2020, $99m in 2019, $38m in 2018, $30m in 2017, $29m in 2016
- The company has highly profitable business model: ROIC is 19.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 15.9%. Revenue growth showed slowdown in 20Q4 - it was 14.3% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.5 pp from 17.9% to 19.4% in 2020. EBITDA Margin grew at 1.6 pp per annum in 2016-2020.
Gross Margin showed almost no change in 2020. Gross Margin declined at -0.46 pp per annum in 2016-2020. SG&A as a % of Revenue decreased slightly on 1.7 pp from 19.9% to 18.2% in 2020. SG&A as a % of Revenue declined at -1.2 pp per annum in the last 5 years.
Net Income margin increased slightly on 0.92 pp from 11.4% to 12.3% in 2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 2.6% in 2020. The company's CAPEX/Revenue increased slightly on 0.53 pp from 2.1% in 2017 to 2.6% in 2020. It's average CAPEX/Revenue for the last three years was 3.0%.
Return on investment
The company operates at good ROIC (19.4%) and ROE (18.3%). ROIC decreased slightly on 0.77 pp from 20.2% to 19.4% in 2020. ROE showed almost no change in 2020. During the last 5 years ROIC topped in 2018 at 21.2% and was declining since that time.
Leverage (Debt)
Debt level is -2.0x Net Debt / EBITDA and 0.5x Debt / EBITDA. Debt increased slightly on 1.1% while cash surged on 41.2%.
EPAM Systems, Inc. has no short term refinancing risk: cash is higher than short term debt (2,176.0%).
Valuation and dividends
EPAM Systems, Inc.'s trades at EV/EBITDA 37.5x and P/E 62.3x.
Management team
EPAM Systems, Inc.'s CEO Arkadiy Dobkin has spent 18 years with the company. Jason Peterson is a EPAM Systems, Inc.'s CFO. Jason Peterson has spent 3 years at the company.
Financial and operational results
FY ended 12/31/2020
EPAM Systems, Inc. ($EPAM) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,160 | 1,450 | 1,843 | 2,294 | 2,659 | 15.9% |
| Gross Profit | 423 | 529 | 656 | 806 | 927 | 15.1% |
| SG&A | 265 | 325 | 374 | 457 | 485 | 6.0% |
| EBITDA | 157 | 202 | 282 | 411 | 516 | 25.6% |
| EBIT | 134 | 173 | 246 | | | |
| Tax | 27 | 102 | 10 | | | |
| Net Income | 99 | 73 | 240 | 261 | 327 | 25.3% |
| Stock Based Compensation | 44 | 52 | 59 | | | |
Balance Sheet
|
|---|
| Cash | 362 | 583 | 771 | 937 | 1,322 | 41.2% |
| Accounts Receivable | 200 | 266 | 298 | | | |
| Accounts Payable | 3 | 6 | 7 | | | |
| Short Term Debt | 0 | 0 | 0 | 58 | 61 | 5.6% |
| Long Term Debt | 25 | 25 | 25 | 206 | 206 | -0.1% |
Cash flow
|
|---|
| Capex | 29 | 30 | 38 | 99 | 69 | -30.7% |
| Acquisitions | 6 | 7 | 74 | | | |
Ratios
|
|---|
| Revenue growth | 26.9% | 25.0% | 27.1% | 24.5% | 15.9% | |
| EBITDA growth | 27.3% | 28.3% | 40.1% | 45.5% | 25.6% | |
|
|---|
| Gross Margin | 36.5% | 36.5% | 35.6% | 35.1% | 34.9% | -0.3% |
| EBITDA Margin | 13.5% | 13.9% | 15.3% | 17.9% | 19.4% | 1.5% |
| EBIT Margin | 11.5% | 11.9% | 13.3% | | |
| SG&A, % of revenue | 22.8% | 22.4% | 20.3% | 19.9% | 18.2% | -1.7% |
| SBC, % of revenue | 3.8% | 3.6% | 3.2% | | |
| Net Income Margin | 8.6% | 5.0% | 13.0% | 11.4% | 12.3% | 0.9% |
| CAPEX, % of revenue | 2.5% | 2.1% | 2.0% | 4.3% | 2.6% | -1.7% |
|
|---|
| ROIC | 18.2% | 18.9% | 21.2% | 20.2% | 19.4% | -0.8% |
| ROE | 14.2% | 8.3% | 21.5% | 18.3% | 18.3% | 0.0% |
| Net Debt/EBITDA | -2.1x | -2.8x | -2.6x | -1.6x | -2.0x | -0.4x |
People
|
|---|
| Insider ownership | 3.8% | 3.8% | 3.8% | | | |
| Employees | 22,383 | 25,962 | 30,200 | | | |
| Revenue/Employee, th. $ | 52 | 56 | 61 | | | |
EPAM Systems, Inc. ($EPAM) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 651 | 632 | 652 | 723 | | 24.9% | 14.6% | 10.9% | 14.3% |
| EBITDA | 121 | 118 | 131 | 184 | | 37.7% | 19.1% | 21.9% | 59.6% |
| Net Income | 86 | 67 | 89 | 86 | | 40.8% | 13.4% | 33.5% | 14.8% |
Balance Sheet
|
|---|
| Cash | 916 | 994 | 1,161 | 1,322 | | 20.2% | 27.8% | 36.1% | 41.2% |
| Short Term Debt | 60 | 61 | 61 | 61 | | 50.8% | 25.8% | 18.8% | 5.6% |
| Long Term Debt | 214 | 207 | 209 | 206 | | 40.2% | 12.9% | 16.8% | -0.1% |
Ratios
|
|---|
| Gross Margin | 34.9% | 33.7% | 35.1% | 35.6% | | 1.1% | -1.8% | -0.7% | 0.4% |
| EBITDA Margin | 18.6% | 18.6% | 20.0% | 25.4% | | 1.7% | 0.7% | 1.8% | 7.2% |
| Net Income Margin | 13.1% | 10.5% | 13.7% | 11.8% | | 1.5% | -0.1% | 2.3% | 0.0% |
Peers in IT Consulting & Other Services
Below we provide EPAM Systems, Inc. benchmarking against other companies in IT Consulting & Other Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CLPS Incorporation ($CLPS) | - | 8.1% | 56.0% | 32.7% | 37.7% |
| Endava plc ($DAVA) | - | 38.1% | 36.5% | 32.3% | 21.9% |
| Switch, Inc. ($SWCH) | - | 18.8% | 7.3% | 13.9% | 10.7% |
| Perficient, Inc. ($PRFT) | - | -0.4% | 2.7% | 13.5% | 8.2% |
| Research Solutions Inc/CA ($RSSS) | - | -25.1% | 8.8% | 2.8% | 7.9% |
| |
|---|
| Median (14 companies) | 8.3% | 3.9% | 3.6% | 5.4% | 0.6% |
|---|
| EPAM Systems, Inc. ($EPAM) | - | 25.0% | 27.1% | 24.5% | 15.9% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Gartner, Inc. ($IT) | 61.3% | 60.1% | 63.1% | 63.5% | 67.2% |
| Teradata Corporation ($TDC) | 51.2% | 47.5% | 47.4% | 50.3% | 55.5% |
| Switch, Inc. ($SWCH) | 47.0% | 47.6% | 44.7% | 47.5% | 45.4% |
| Perficient, Inc. ($PRFT) | 31.1% | 33.3% | 35.8% | 37.4% | 37.8% |
| Cognizant Technology Solutions Corporation ($CTSH) | 39.9% | 38.2% | 39.0% | 36.6% | 35.9% |
| |
|---|
| Median (14 companies) | 28.8% | 28.8% | 29.4% | 35.8% | 32.7% |
|---|
| EPAM Systems, Inc. ($EPAM) | 36.5% | 36.5% | 35.6% | 35.1% | 34.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 37.0% | 28.5% | 39.8% | 44.1% | 47.8% |
| Amdocs Limited ($DOX) | 18.7% | 18.9% | 16.1% | 19.0% | 21.2% |
| Gartner, Inc. ($IT) | 15.0% | 7.1% | 13.0% | 16.2% | 19.8% |
| Accenture plc ($ACN) | 15.9% | 14.8% | 16.3% | 16.7% | 18.7% |
| Cognizant Technology Solutions Corporation ($CTSH) | 19.8% | 19.7% | 20.5% | 19.2% | 17.8% |
| |
|---|
| Median (14 companies) | 6.7% | 6.9% | 7.2% | 13.9% | 11.7% |
|---|
| EPAM Systems, Inc. ($EPAM) | 13.5% | 13.9% | 15.3% | 17.9% | 19.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 90.2% | 106.4% | 67.9% | 66.6% | 67.8% |
| Amdocs Limited ($DOX) | 3.5% | 3.4% | 5.8% | 3.1% | 4.9% |
| ServiceSource International, Inc. ($SREV) | 10.4% | 7.2% | 6.5% | 4.7% | 4.0% |
| Endava plc ($DAVA) | 2.4% | 4.1% | 2.5% | 2.6% | 2.8% |
| Teradata Corporation ($TDC) | 2.3% | 3.6% | 7.1% | 2.8% | 2.4% |
| |
|---|
| Median (14 companies) | 1.1% | 1.4% | 1.5% | 2.0% | 1.7% |
|---|
| EPAM Systems, Inc. ($EPAM) | 2.5% | 2.1% | 2.0% | 4.3% | 2.6% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Accenture plc ($ACN) | 81.3% | 61.7% | 66.1% | 62.1% | 40.7% |
| Cognizant Technology Solutions Corporation ($CTSH) | 21.3% | 21.9% | 23.8% | 20.4% | 17.5% |
| Amdocs Limited ($DOX) | 13.0% | 14.4% | 11.9% | 15.9% | 14.5% |
| Gartner, Inc. ($IT) | 41.0% | -0.2% | 6.9% | 10.8% | 12.7% |
| Endava plc ($DAVA) | - | 36.0% | 29.6% | 26.1% | 9.8% |
| |
|---|
| Median (14 companies) | 7.3% | 4.7% | 6.9% | 9.9% | 7.8% |
|---|
| EPAM Systems, Inc. ($EPAM) | 18.2% | 18.9% | 21.2% | 20.2% | 19.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 4.0x | 3.2x | 3.3x | 4.0x | 4.0x |
| Gartner, Inc. ($IT) | 0.6x | 11.7x | 4.1x | 4.1x | 2.6x |
| Perficient, Inc. ($PRFT) | 0.4x | 1.0x | 1.3x | 1.0x | 1.5x |
| ServiceSource International, Inc. ($SREV) | 156.0x | - | -35.5x | 2.9x | 0.6x |
| Teradata Corporation ($TDC) | -1.1x | -1.5x | -1.3x | 0.9x | 0.5x |
| |
|---|
| Median (12 companies) | 0.3x | 0.6x | 0.8x | 0.3x | -0.1x |
|---|
| EPAM Systems, Inc. ($EPAM) | -2.1x | -2.8x | -2.6x | -1.6x | -2.0x |
