Epam Systems, Inc. (NYSE:EPAM)

Our premium research note from our New High Blog from 3/2/2012:

Recent IPO. Has not traded much higher then its offering price. Referencing its IPO prospectus the company has grown its EPS at an above average clip. The company is a leading global provider of IT services. Company is capitalizing on an increasing trend where companies are outsourcing their IT needs. If the company can continue its current growth track we believe the stock can attain a trailing PE of 25 which would equate to a near term price target of $25.

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Fourth Quarter 2011 Results

• Quarterly revenues increased to a record $95.1 million, up 34.4% compared to the year-ago quarter and 10.1% sequentially
• Quarterly diluted earnings per share (EPS) on a GAAP basis was $0.29, compared to $0.27 in the year-ago quarter
• Quarterly, Non-GAAP diluted EPS was $0.30, compared to $0.31 in the year-ago quarter
• Net headcount for IT professionals increased 30.2% to 6,968 as of December 31, 2011, from 5,350 as of December 31, 2010

Arkadiy Dobkin, CEO and President of EPAM Systems said, “We are pleased to have completed our initial public offering in February, and are excited to share our results with you for our first quarter as a public company. I would like to thank our entire staff, business partners and everyone who helped make our IPO a success.”

“Despite the global macroeconomic uncertainty, 2011 was a very successful year for EPAM as we delivered strong growth across our targeted services areas, verticals and geographies. First, we benefited from an increased reliance on offshore outsourcing in Europe, where we remain well- positioned to capitalize on this rapidly growing trend. At the same time we have been successfully converting from a highly specialized software engineering shop that served mostly global leading ISVs, into one of the preferred vendors in key and rapidly growing vertical segments. In today’s challenging environment of yet another massive technology conversion, companies are in search for reliable partners with strong engineering heritage and proven hands-on expertise in such emerging trends as social enterprise and enterprise mobility, and cloud and big data. Clients are expecting to receive real help and guidance in delivering complex solutions and services cost-effectively by utilizing a global delivery model but with quality they expected in the past only from local specialized vendors and professional services divisions of leading software product vendors.”

EPAM generated cash from operations of $26.3m in the fourth quarter of 2011, an increase of $7.6m generated over the fourth quarter of 2010. As of December 31, 2011 EPAM had cash and cash equivalents of $88.8 million and $30.0 million of available borrowings under a revolving line of credit, which expires on October 15, 2013. Currently, the Company has no outstanding borrowings under its revolver.

First Quarter and Full Year 2012 Outlook 

EPAM is providing the following guidance:

• First quarter 2012 Revenue of between $92 million and $94 million, representing a growth rate of 26% to 29% over 2011 revenue.
• First quarter 2012 non-GAAP diluted EPS is expected to be in the range of $0.28 to $0.30. These non-GAAP diluted EPS estimates are based on 2012 fiscal year weighted average of 46.3 million diluted shares.
• Full year 2012 Revenue expected to be between $411 million and $418 million, representing a growth rate of 23% to 25% over 2011 revenue.
• On a full year basis, we expect non-GAAP net income growth to be in the range of 10% - 12% with a tax rate of approximately 17%.