EPAM Expands European Footprint with New Austrian Entity

Software engineering solutions and information technology services company EPAM Systems, Inc. EPAM unveiled plans to expand its footprint in Europe with the formation of EPAM Systems Austria GmbH. The new entity will facilitate smoother, closer collaboration of EPAM Systems with key clients in Austria, and other European regions, on crucial initiatives.

The Austrian entity will further EPAM Systems' focus on deepening long-term customer relationships, especially as Austria stands out as a market that highly values an onsite presence between service providers and clients.

Through EPAM Systems Austria GmbH, EPAM will also be able to service clients in over 20 countries located across North America, Europe, Asia and Australia.

EPAM provides complex software engineering solutions and information technology services to clients around the globe. Its clients are primarily Fortune Global 2000 companies in a variety of industries, but its core focus revolves around Independent Software Vendors and technology (which accounts for 22% of total revenue), financial services (28%), business information and media (13%), and travel and hospitality (22%) firms.

Approximately half of its total revenue is generated from North America.

In the first quarter of 2015, five of its largest customers accounted for 36% of total revenue. Just one customer — UBS Group AG UBS — accounted for over 15% of total revenue. EPAM Systems' adjusted earnings per share (including stock-based compensation expense) came in at 32 cents, falling 16% year over year, and missing the Zacks Consensus Estimate by 11 cents.

Despite strong revenue growth, the company's GAAP operating margin declined 220 basis points year over year, driven by a 45% increase in selling, general and administrative expenses. Additionally, operating cash flow generated plunged 58% year over year, driven by higher working capital requirements, including growth in total compensation, and higher tax payments.

EPAM Systems currently has a Zacks Rank #5 (Strong Sell). Other IT services companies that look promising and are worth a look include CyberArk Software, Ltd. CYBR and Wix.com Ltd. WIX, both sporting a Zacks Rank #2 (Buy).

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