Epam Systems Inc (EPAM) 2015 Q4 法說會逐字稿

Greetings and welcome to the EPAM Systems' Fourth Quarter and Full Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now turn the conference over to Ms. Lilya Chernova, Investor Relations. Thank you, Ms. Chernova, you may now begin.

Thank you. Good morning, everyone. By now you should have received your copy of the earnings release for the Company's fourth quarter and full year 2015 results. If you have not, a copy is available in the Investors section on our website at epam.com. The speakers for today's call are Arkadiy Dobkin, CEO and President; and Anthony Conte, Chief Financial Officer.

Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the Company's earnings release and other filings with the SEC. Arkadiy?

Thank you, Lilya, and good morning everyone. Thanks for joining us today. First, I hope our results addressed some immediate concerns about the profitability of EPAM aiding to the recent stream of unexpected news. I am pleased to confirm that we have been able to navigate through our multiple challenges of 2015, including growing the level of SMEs during the last quarter in regards to weaknesses of financial services sector and continuous negative FX impact on reported results in particular.

So let me highlight now the most important facts for 2015. Q4 revenue increased by 29% year over year to $260 million and in constant currency it represents 34.3% growth. More importantly, our organic growth representing 24% increased over last year, which translated into 29% constant currency growth. It was also exciting for us to cross $250 million in Q4 that brings us to a run rate price of symbolic $1 billion annualized revenue mark [to play] this year.

One more data point to mention, that last quarter was our 25th consecutive quarter of over 20% organic year-over-year growth and 16th since our IPO four years ago. I think it's a good reference point for EPAM inclusion into Fortune's 100 fastest growing public companies in 2015, where we were recognized as a fastest growing firm in IT services segment. In result, we are closing the year with $914 million in annual revenue, which is 25.2% growth in USD and 33% in constant currency over our 2014 results.

And while it's obviously disappointing to lose $55 million due to FX headwinds we are going to report our strong organic growth, which represented 23% for the whole year in USD and 31% in constant currency. So at this point before passing to Anthony to provide much more detailed financials on our 2015 results and 2016 guidance, I would like to talk a little bit more on the bigger picture. To remind what was in our focus during the last periods, what our progress to date was and what would be our focus and key efforts in the near future. First of all, three years ago, we decided that we plan to target the specific subset of IT market which was driven by now probably much or are used by still real term as a digital transformation disruption. We plan to benefit from our strong software engineering background built over the years of sharing top software and technology companies and helping them to develop new products and solutions.

We also realized three years ago that to be successful and penetrating that market segment, we would have to reach significant gaps in multiple areas, including specific delivery capabilities and much more advanced account managing practices. Only such players who would have a chance to play in that fast growing market we should potentially reach a site of $80 billion by 2018 according to analyst prediction. Then three years ago we set an internal goal to double our revenue by 2015 and identified a number of specific focused areas to make it happen. The last couple of years were really challenging and eventful years for EPAM and much work the rest of the world, from continued political conflicts and currency headwinds to shits within some of our large customers' results and links to our performance. Especially, I would like to highlight the following facts on EPAM's continuous evolution and EPAM's current state.

Based on our plans we started to build advanced digital strategy and experiences and capabilities about three years ago. And we started to do that with a very strong focus on integrating these capabilities into EPAM's historically mature engineering DNA. We believe that while it would be much more difficult to do that in integrated way, it should bring also some strong competitive advantage for us eventually. The journey is not finished yet. However in 2015 we saw strong repeatable patterns in how we engaged in new deals and how we started to execute them. Our digital engaging practice visibly matured during last year and become a recognizable force among our clients and many new engagements. Strong capabilities such as software design for example started to play more important role in specific situation. And finally, in addition NavigationArts with their strong focus on content technologies strengthened our leadership position in digital solution space. Those changes at EPAM combined with our investments in industry specific competencies as well as data and advanced technology services, allows us to differentiate and expand significantly. First of all, across our fastest growing in 2015 verticals which are travel and consumer and media and entertainment. Those grew 36.5% and 31.5% year over year accordingly. That digital focus allows us to add four out of top 10 global retailers as clients and now we have 15 of top 100. In most cases, we are helping them with a range of digital transformation initiatives and in many cases like (inaudible), Sephora and Mary Kay among others, those initiatives are driving significant revenue acceleration and very strategic in nature. Similarly, we are working with five of top 10 global media companies, including one of the largest Liberty Global and also with Intel in consumer vertical, we work with largest online agency in the world and the largest global hotel chain, for eight years, along with two of the top 5 low cost global airlines.

Turning to financial services, which continue to be our top vertical by revenue, we're seeing a further diversification of services revenue, a significant growth driven through digital transformation initiatives. In 2015, we added four significant financial services clients and we continue to expand our digital engagement efforts. For example, our focus on wealth management has helped our customers [re-imagine] their role in an extremely competitive arena of financial services and to successfully defend their market share against new entrants. With our growing ability to lead the transformation by providing end to end capabilities from aviation to services and user experience and global engineering, we are able to grow our digital platforms like I mentioned already wealth management, as a more productized service and to do so simultaneously in multiple geographies. Digital engagement for financial services, expand today globally with team supporting customer programs in the US, Switzerland, UK, Nordic, APAC, and now in Middle East. In 2015, we also took on the challenge of driving industry change with continued investment in trading platforms and the introduction of Blockchain hedge accounting and other specific solutions. While the overall growth of financial services was only 15%, it will eliminate an impact of Russian market, the growth will be up to 23% and in constant currency 27% over 2014 numbers. To complete our vertical stories, let me spend a couple of minutes on our oldest focus area, software and hi-tech and in our most recent industry entrance life sciences and healthcare. Software and hi-tech continues to be an important component of our client portfolio. While we are enjoying the work in the segment for many years, it's also critical for us to stay on top of technology trends as well as experience firsthand the most advanced processes and methodologies related to delivery of the most complex and advanced solutions. We're glad that we continue to have a very healthy growth rate of 22.2% in this segment, which allowed us to keep our engineering skills very much up to date and bring those back to many remaining engagements across our vertical portfolios.

Finally, about our smallest today but fastest growing vertical life science and healthcare. While we provided services in this area in the past, our most strategic entrance happened just in 2014 when we acquired core industry expertise [and] key accounts. During 2015, we put our initial focus on expanding into a few existing accounts. While it's still too early to make a final conclusion, we've already seen the first results of (inaudible). In addition, combining industry subject matter expertise with our advanced digital and data capabilities allowed us to win several new very interesting clients in this market. A good example of our success would be Human Longevity, Inc, a company with a mission to create the world's largest and most comprehensive database of whole genome. In addition, HLI business also includes Genomic-powered Clinical Research program, which uses whole genome sequence analysis, advanced clinical imaging and innovative machine learning along with a curated personal health information to deliver the most complete picture of individual health. When you have a unique combination of capabilities with understanding both science and advanced technologies, allowed us to learn such an opportunity which in turn became our fastest growing account in 2015 across this vertical. In Q4 our growth for the portfolio was over 45% and today we are involved in providing services to six of the top 10 global life sciences companies and to five of the top 10 largest healthcare vendors, which create very interesting for opportunity to penetrate. Now I think it also would be helpful to take a closer look at our client base beyond the vertical boundaries, because while in general the number of top brands in each vertical sector is important, it doesn't provide a comprehensive picture about the level of diversification, penetration and about expansion opportunity we potentially should be able to realize with those accounts.

So let us talk a bit about that. First of all, we do believe we have pretty healthy client concentration ratios with our top clients, representing 14.2% of our revenue, top 5 is 32.6%, top 20, 54.3% and top 50, 70%. In results with such balance, for example, our lowest one of 2014 top 10 clients, you know TriZetto was acquired by Cognizant, didn't really affect our growth numbers. By the end of 2015, among our accounts is annual revenue of $1 million, we had about 50 accounts representing largest 2000 global companies with 25 of them, we had revenue under $3 million annually, 7 of them, we provided between $3 million and $5 million services, with four between $5 million and $10 million and with another four, between $10 million and $20 million. Finally, we had six such clients with revenue between $20 million and $50 million per year and as you know just one was above $100 million. We do believe that majority of those accounts should be able to provide for us [lending] opportunities to expand. We expect natural shifting of the current budgets towards new digital and data platforms which should allow such expansion even results in expanding clients' current IT budgets. As we've seen this happening in among growing number of our other clients. For example, today in 20 of our top 25 accounts, there is at least one significant digital transformation program ongoing and in five of our top 10 accounts, the digital platform work representing significant proportion in total revenue. We expect such services to grow over 2016 and take on even more work around digital products and platform engineering and integration across existing client base. We'd like to state also that while we do believe we have significant opportunity across our existing client base, we continue to bring new [logos] and expect them to support and existed to the ratio of about 10% of next year revenue to be growth from new clients.

To finish my highlights for 2015, would like to say that last year was also a year of significant expansion of our delivery capabilities geographically, making our delivery platform more balanced and diversified across the globe and across the time zones. We, at the end of 2015, had the largest in overall global footprint resources in 25 countries and with over 16,000 delivery professionals worldwide.

We grew in China with people and with new global client iterations as well, had development centers in Guadalajara and Prague and what was a significant event for us, we came to India with the acquisition of Alliance Global Services at the very end of last year. And today, we can report really the direct clients, which have large and distributed teams across Europe and India. Looking forward to 2016, we are seeing strong level of demand from both current and prospective customers.

While site demand continues in our core engineering and advanced technology services, as mentioned before, we are experiencing stronger shift towards services required, combined digital product and platform engineering and integration capabilities. We do believe EPAM is in good position to take advantage in this type of shifts and this type of demands by investing and continuously investing in a range of integrated services, including customer experience and digital platform, data analytics and cloud and service designs. We also as many others believe that deeper understanding of IoT platforms related data analytics services would become much more important in near future, which is another area of continuous investment for us in 2016. The combination of our solutions and our vertical focus should position us well this year to take advantage of our shift in services market.

With that, I will turn to Anthony to provide more details on our financial results and 2016 guidance.

Thank you, Ark, and good morning, everyone, and good morning everyone. I will spend a few minutes taking into the fourth quarter and full year 2015 results, then I'll talk more about our outlook for 2016. Let me start by saying that we are pleased with our overall results for the fourth quarter and full year 2015. Our business is well positioned for growth but with the current instability in the marketplace, there still remains some uncertainty. But as Ark mentioned, we have sustained over 20% organic growth for every quarter since IPO continuing to prove that the fundamentals of EPAM are strong. Q4 was another solid quarter of revenue closing at $260 million, 28.7% over last year and 10.3% over prior quarter. This includes the impact of Alliance Global and NavigationArts, which contributed slightly over $10 million, resulting in organic revenue of $250 million, and organic growth of 24% year-over-year and 7.6% sequentially. Currency continues to be a big piece of our story, as headwinds have continued compressing our organic Q4 revenue by about 6%, meaning in constant currency terms, we would have grown 29% over Q4 2014 and 6% sequentially. For the full year of 2015, we closed at $940 million of reported revenue, 25% over last year after 8% currency headwinds meaning constant currency growth was 33%, organically we ended just over $900 million or 23% growth but in constant currency it would have been 31%.

North America, our largest geography represents 53% of our full-year revenues and was up 40% from Q4 and 32% year-over-year, with constant currency growth of 43% and 35% respectively. Europe was up 24% year-over-year and 23% in Q4, representing 39% of full year revenue. In constant currency terms, EU would have been up 32% year-over-year and 28% in Q4, reflecting the impact of both the euro and sterling volatility over the past year. For APAC, we saw 26% growth year-over-year and 30% in constant currency. CIS was down 23% for the year and 16% compared to Q4, 2014 and now represents under 5% of revenue in Q4. In constant currency terms, the region would have seen about 9% growth for the quarter and 11% for the year.

Our customer concentration numbers for Q4 remains fairly consistent with past quarters, and for the full year, our top 20 accounts grew 23% year-over-year and 30% in constant currency, representing 54% of revenue. All other clients outside of our top 20 grew 28% year-over-year and 39% in constant currency. From our IPO date to today, we have managed to reduce the revenue concentration of our Top 20 accounts from 60% down to 54% while maintaining consistent mid 20% growth. Turning to our expenses, we completed the year with over 18,000 employees, an increase of about 30% compared to 2014 including about 1,200 employees from Alliance Globe. Currency generated some benefits to the cost of revenue in the quarter when compared to prior year. There was approximately 7% constant currency benefit versus Q4 2014 and the allocation of our currencies across our expense base remained fairly consistent. Utilization for the quarter was at 77%, up 30% from Q3 and the full year ended at 75%.

GAAP income from operations increased 32% year-over-year to represent 12.2% of revenue in the quarter. Stock-based compensation expense for the fourth quarter increased 54% over prior year mainly driven by the significant increase in the average closing price of the stock. Additionally, 38% of the total Q4 charge and 23% of the increase is related to the acquisitions. Our non-GAAP income from operations for the quarter after adjustments increased 30% over prior year to $47 million, representing 18% of revenue. For the full year, non-GAAP income from operations was up 29% to $158.7 million or 17.4% of revenue. Our effective tax rate for the quarter and full year came in at 20.4%. For the quarter, we generated $0.78 of non-GAAP EPS and $0.52 of GAAP EPS based on approximately 53 million shares diluted outstanding.

For the full year, we generated $2.73 of non-GAAP EPS, $0.07 above guidance and 23% above 2014. GAAP EPS was $1.62, 16% above 2014 based on 52 million weighted shares diluted outstanding. Our balance sheet remains strong. We finished the quarter with approximately $199 million of cash plus $30 million in time deposit accounts. During the fourth quarter, operating activities generated approximately $11 million of cash and for full year, we had $76 million of operating cash flows. Unbilled revenues were at $96 million at December 31. Accounts receivable were $175 million and DSL ended the quarter at approximately 53 days.

And now for our guidance, for the full year 2016 revenue growth will be at least 26% after factoring in about 3% estimated currency headwinds, meaning constant currency growth will be 29%. Organic revenue is becoming harder to separate due to the full integration of NavigationArts and we anticipate once Alliance Global is fully integrated during Q2 2016, a clear separation will be very difficult. However, our initial plan does include the impact of both 2015 acquisitions and excluding them, organic constant currency growth would be at least 23%. Since currency will remain a theme in financial results for 2016, our assumptions are that the currency mix will remain materially similar to 2015 for both revenue and expense. For Q1 2016, revenue will be at least $258 million or 29% growth after 3% currency headwinds, meaning constant currency growth will be at least 31%.

Organic revenue will be at least 23% in constant currency. Adjusted income from operations for the full year will remain in our guidance range of 16% to 18%. Stock compensation expense is expected to be around $55 million with $13 million in Q1 and $14 million in Q2 through Q4. Amortization of intangibles will be about $6.5 million or about $1.6 million per quarter. GAAP EPS will be at least $0.43 in Q1 and at least $2.05 for the full year. Non-GAAP EPS will be at least $0.70 in Q1 and at least $3.20 for the full year. With that, I would now like to turn the call back over to the operator and open up for Q&A. Operator?

Thank you. We'll now be conducting a question and answer session. (Operator Instructions) David Grossman, Stifel.

Thank you and good morning. Anthony, I wonder if you can just touch a little bit on the cash flows, they look like they were down in the quarter and down year-over-year. And I'm wondering is that a function of perhaps the acquisitions or maybe it's just timing in the quarter?

Yes, sure. Hi, David. It is primarily a timing issue. We are seeing just some extended terms from a lot of our clients. People are pushing for it longer, 60, 90-day payment terms, so you see a little bit of a bump up in my overall DSO. It pushed some of our end of year receivables into January. We actually collected about $35 million in January alone. As far as cash flows outside of AR, if you noticed our tax payments, if you look at cash flow, tax payments are going up [by] cash tax rate as we have more people sitting in the US, UK, I'm seeing higher cash tax going out the doors that also impacted my cash flow when you look at it year-over-year. ABS does impact my cash flow, but that's not within the operating cash flow, that's really down within the investing section.

And so if you can give us a few of the parameters for modeling 2016 free cash flow in terms of what you expect for CapEx, cash tax or any other working capital items that may affect the difference between net income and cash flow?

Sure. From a CapEx perspective, we're forecasting around $19 million, $20 million worth of CapEx and as far as cash taxes go, we're looking at roughly a 20% cash tax rate.

Okay. So no real divergence there (inaudible).

Cash tax rate has actually crept up a couple points over the past couple of years. When we first IPOed and stock option started to vest and get exercised, we saw a larger than normal benefit from stock option exercises as a deduction to our taxes, which has now leveled itself off. And so therefore that is coming down, therefore bringing cash tax rate up a bit. So that is impacting my cash flow.

Right. Okay, on a year-over-year basis, but it looks like it's consistent with your GAAP guidance of [21%], right?

Yes, it's becoming more in line with the effective tax rate.

Right. And then just a question quickly on pricing. Just wondering, is the pricing environment similar to what we experienced or is your expectation 2016 look like 2015. And should we expect get the typical growth in revenue of around 6% similar to what we have gotten historically.

We're actually being a little bit more conservative around pricing for 2016 just based on what we're seeing in the marketplace. It's still a bit early in the year for us to fully whet out what everything is going to settle at, that usually is kind of towards the end of the first quarter. So we're actually looking at more 3% to 4% is what we're building into our models, just because of everything that's happening in the economy these days.

Okay. And just finally then, I know you gave the top customers, I think those with growth rates for the year. Do you have those for the quarter on a constant currency basis through the different categories that you disclosed?

You mean constant currency growth for what, like the top 5, top 10, as such?

Exactly, yes, top clients, top 5, top 10, for the fourth quarter.

I do, give me one second. Okay. For the top five, I have it for the full year, I didn't do it for the actual quarter, I can recalculate those for you, if you need.

Alright.

So, for the year, the top 5 grew 31% in constant currency, top 10 was 30% and top 20 was 27%.

Okay. How about the top client?

Top yes, I mean UBS.

Yes.

36%.

Ashwin Shirvaikar, Citi.

Good morning, guys, and congratulations on the good quarter. I just want to ask about what we see in our (inaudible) is some spotty client-specific response to the current environment, the macro uncertainty and so on in sometimes from our IT budget standpoint it seems to be take the impact on demand, sometimes impact on pricing. Is that what is causing your cash flow terms to move out and is that more of a broad comment or is that a narrow client-specific type of comment?

It's more of a broader comment, historically my payment terms have been kind of 30 to 45 days and most we're seeing within the marketplace is a lot of people are pushing for you know 60 to 90-day payment terms and we're having to move a little bit just to - basically larger clients have extended terms as far as like 45 to 60 days beyond our normal 30-day. That's why you're seeing a little bit of creep on our DSO and a little bit of extension of our collections. But it's just part of the normal marketplace, I'm not talking long, I am talking instead a normal 30 to 45 days we're talking 45 to 60, sometimes up to 90 days.

Okay. And on a client-specific basis. Okay, I understand. This may be more for you guys an impact that you guys are getting larger ex certain clients?

Exactly, and that we're dealing with larger clients, who have in a lot of cases very standard terms if they don't accept anything under say 60 days. that's the trend that we're seeing so I am feeling a little bit of upward pressure on my DSO, as we deal with larger and larger clients, more procurement groups things of that nature.

Got it. Got it. And question Ark, appreciate your commentary on sort of the bigger picture, as you look at how the environment is evolving and you compare that with the product set and the service portfolio that you are bringing to market, do you see that tells a good match or do you see a need for ongoing investments, I know there are normal ongoing investments, but ongoing measurements at a particularly high level in the coming quarters that you have to invest in certain areas?

Ashwin, when you are saying at high level, what do you mean by that?

Well, are we going to - I guess first part of the question was with regards to is there a good match in terms of what you bring into market versus what you're seeing a demand for and if not what sorts of investments will you have to make?

So I think we improve the dimension component of this, but as you mentioned so this is I think kind of common statement, a situation change in the way you might like. If some years ago when you were implementing systems, it was kind of longer term applied for them. Now this customer engagement situation and drive when we took in about mostly consumer oriented systems. So the change is happening too fast. So this level of investment required is very high. So I think while we have kind of seen gaps in some places, we've seen some gaps growing in another ones. Like for example, Internet of Things, which we mentioned today as well in our opinion would change the whole landscape pretty stronger. So it would require - short-term say, it would require lot of investment in our opinion on the way to go.

Right, I mean you mentioned, I'm trying to get to a little bit more of a business model question, you had this services versus need for product, need for a software type of a look discussion in the past, as you think of exactly those sorts of things, no more Internet of Things, maybe variable areas like that. Do you see the need for more of a product or a platform type investment is what I'm trying to get at?

So in this terminology it also pretty defines what is a project here, what is the platform, but we definitely have seen broader needs for solution type of platforms, which would help to accelerate startup phases of the projects and also we experienced during the last couple of years when we went through dozens of corners or consumer engagement type of implementations, we're seeing a lot of opportunities for some level of [amortization] through accelerated development. So that would be happening. And yes, I think one of the key advantages we've seen at EPAM that we can actually put relatively complex customer implementations for aggregated platform for this changing environment.

Thank you. Steve Milunovich, UBS.

What kind of head count growth are you thinking about in 2016 and what sort of utilization rate?

Head count should be 20%, 25% and utilization should be around 77%. We always target getting into the 76% to 78% range, so we're kind of modeling right on the middle of the range there.

Okay, and you've obviously got robust guidance and it is a difficult environment, you talk about having 90% type visibility over 12 months. Are you building some buffer into this, are you taking into account the risk of pricing pressure or some companies pulling back some business temporarily? Just kind of wondering your confidence level.

Well, I mean we have a high confidence with the numbers that we've shared with you. But as I mentioned earlier on pricing, we're being a little bit more conservative on our estimates there, just given the current environment. And generally speaking, we're very confident with the numbers that we come out for guidance.

Then I was curious for an update on Google, you talked quite a bit about it at the last Analyst Day, and I thought it was very interesting. Any update in terms of what you're doing for them or how much that business is growing?

It's growing, but what we are doing for them, I don't think we can talk in details. But it's a logistic contract not for EPAM, that's what's the problem there.

It's the second largest account?

Yes

And could be specific in terms of what sort of growth you expect from UBS in 2016?

We don't really share specific client growth expectations.

Jason Kupferberg, Jefferies.

Great growth metrics here. I wanted to talk a little bit about our investment side, which you touched on before, but just to get a little bit more specific there. I mean, if we look at the full guidance for 2016 and the bottom line is growing somewhat slower than the top line, I think maybe a little bit of that as tax and a little bit of that is share count, but it would also seem like the implied operating margin guide is maybe for a little bit of year-over-year decline, I know you're still going to be in the 16% to 18% target range, but you were above the midpoint of that in 2015. So is that a fair conclusion that maybe you're in a kind of lower to middle part of the 16% to 18% as opposed to the upper part, just given some of the investments that you need to make?

Well, our overall guidance has just come into that range. And we do continue to make investments and some of the over performance that you saw in 2015 was having some help from currency, which we don't necessarily back to that into the forecast so that will get that benefit. We forecast relatively neutral on currency benefits and then we have a variety of things that we want to continue to invest into the business to continue to support the growth and that's really all factored into those numbers, that's how we come back to 16% to 18% within the range. We don't really specify where in the range we're going to land.

Right, right. Okay. I know you don't make specific projections on individual clients. But if you look at what you want to segment in as Top 5 or Top 10, do you think the growth rates for those groups in constant currency can be sustained in 2016?

Absolutely, yes. I mean we're very confident. We have a very good client list right now and we definitely feel there's still a lot of opportunity within our client list given the size of the companies and the size of the marketplace, we see a lot of potential for growth.

So the best we can do you kind of can look to historical numbers and these ratios were pretty stable over the last several years. So our assumption is that it would be in line for the next couple of years as well. But as for now, predicting some things would be very difficult and we will see but we also like to - I mentioned today a number of large clients, we have opportunities for growing. So we kind of have pretty stable increase in existing client base to benefit us.

Just lastly on the supply side of the business, any latest statistics you can share in terms of your hit rate on campus offers and just a general commentary on recruiting environment?

So I would tell you, well, in a general statement like you saw our attrition rates and wage inflation, which is a little bit lower than traditionally we've had during the last several years, which probably is a function of some situation in Eastern Europe but the general environment is still very difficult and very competitive for any talent acquisition and especially the talent, which we're looking for. So as I repeat practically on each call, really the biggest global problems everybody has and we don't see any simplification here. So basically for our growth right balance between business and actually delivery still remains the main focus I would say.

James Friedman , SIG.

Let me echo my congratulations. I had a couple of questions, first Ark, with your helpful disclosure about the 25 that do $3 million, the 7 - want to ask about the six in the $20million to $50 million range. My question is in that top six, the 6 that do $20 million to $50 million, just below the top one, is there any anticipation that they will break through the $100 million threshold and if so at what term?

I don't think any of them will break to $100 million within the next year or maybe two, but couple of them have a potential for this type of business. And I think even below this top 5, there are clients with such potential as well. But again it's not going to happen this year.

Okay. I also want to ask you, Ark, about your commentary that 10% of the revenue will come from new customers. If I heard that right, could you give us some profile of where you think those will come from either on a vertical basis or on a geographic basis, will it be similar to the current profile in the company?

So it would be pretty much in line with our current vertical focuses. It's also a combination of this, because we're bringing some very interesting [logos] through new sales but some of them came in actually to us through acquisitions and it would be kind of unresponsible to not focusing on them and put the best people to (inaudible). So from this point of view, we expect close to around this percentage to be brought this year, from numbers which we practically started during the previous 12 months. And that's pretty much in line with our historical numbers too. But depreciated this would be like spread or this would be very similar to what we have today.

Got it. And Anthony, just one housekeeping, I thought you were going kind of quick there when you said the unbilled. What was that number again, the unbilled - I don't know if you call unbilled revenue, unbilled receivables for the quarter?

Yes, the unbilled closed at $96 million and the accounts receivable was $175 million.

Okay. Does that $96 million compared to the $13 million in the Q3 or was that $13 million -

No, I mean Q3 unbilled was - I'll call the number offhand, It was $104 million in Q3, so a drop from a $104 million to $96 million.

Okay. I'm sorry, I'm looking at the wrong one. Okay, thank you very much.

Arvind Ramnani, Gordon Haskett.

Yes, I wanted to ask about the nature of work in digital and this is a little bit of a follow-up to the question Ashwin asked. So your digital work, I know it's typically project based and the needs of your clients, each of your clients is pretty unique. But are you getting to a point now where you have a platform or a solution that is targeted to a specific area where you can take work from one client and apply to a group of clients? I guess what I'm trying to get is some of the work that you're doing for your top 5 or top 10 clients, do you have the ability to package some of that expertise and send it to other potential clients?

Yes, it probably will take another discussion to define what is solution product expertise and all that stuff but in a very high level I would say that we're definitely moving forward with a more productized, where productized you need to understand in the [vertical] sense of this all. And I mentioned today on wealth management, we have similar effort and similar kind of reusable assets around our retail corner proposals. We're also working on multiple accelerators around integration efforts. And that was already this year and going to be in the next year a big portion of our investments as well. So it has become very important for us and for the (inaudible) story.

That's helpful, and just a follow-up question. I wanted to get a sense of your medium to longer-term plans for your India operations. Given that India is a lot about scale, do you expect India operations will become a more significant part of your headcount and I guess kind of part two of the same question is, as the revenues from your top 10 accounts are growing, and the average size of your large client is getting larger, is there some need to do lower end work and will you look to kind of send some of the work to a geography like India?

So first of all, I think it would be much more comfortable to tell you kind of an extended answer a little bit later because we need to like to work before we run with new acquisitions and specifically new for us geographies. At the same time, when we were making decision about Alliance Global, we kept very specific clients and very specific profile of the company, and at this point we're pretty much satisfied and didn't see any unexpected but it doesn't mean that we were doing this from the perspective to replicate exactly what large Indian vendors do. So Alliance Global has more technology profile similar to EPAM. So they have very specific expertise in automation tech in which we're already benefitting from and going to benefit more. So from this perspective, we're not looking for expanding dramatically in lower level of work. So I think the [detail] which we were having historically from our clients when we were doing more complex stuff, is still pretty weak and the percentage of more complex work, more digital work, will be changing, there is definitely a shift in client budgets. And I think for our growth we will be focusing still on more high end part of the (inaudible).

Anil Doradla, William Blair.

A couple of questions. So on the call, we talked about macro in certain ways, you talked about conservative pricing, you talked about some of the accounts receivable and DSOs. But Anthony and Ark, can you specifically talk about - when you talk about some macro weakness, where are you exactly seeing it?

I would like to [joke it's] in our competitors' reports. So in general, like on high level I think for us environment is very similar to previous years. So it might be very slight signs of changes, might be not, it's very difficult for us to identify but again as usual this year I would like to repeat that our size of the company and now with ability to the market not necessarily would be in line with companies which are 10 times bigger than us. So we work in very specific subset of the IT market, which is higher growth. But we're responsible and we see that some clients especially like if you think about FX situation in Europe and for some global companies reporting in dollars but paid in euro type of revenue and paying us in dollars. There are some cases like this, which are very specific and this is like single cases. Anthony would like to add something.

Well, I mean I mean, I had a more general answer. You talked about macro uncertainties and weakness, and really it's everywhere. I mean, just look at the news and just look at what's happening and just overall the world, and so our conservatism is coming from looking at, yes, other reports that have been coming out but also from just reading the news on a regular basis and just looking at what's happening in the world.

Great. So it sounds like there is a degree of conservativeness, you are not really seeing weakness that's how I'm interpreting this?

We've seen like a high level of unpredictability, like even like if you think about with [full year] results, we've seen a very specific FX trend while for the last two years all these assumptions were wrong, and surprising us. So we're seeing the same environment. So from this point of view, it's not like we're worried about something that's happening but level of unpredictability is pretty high.

Okay. Now, the acquisition of Alliance and the mix of that that might have a little dilutive effect on the average revenue per employee. Can you talk about how you look at the Alliance acquisition from a pricing point of view going forward?

Back to my previous answer, I think we need to work first but clearly in longer term plans we would like to bring the pricing closer to EPAM standards. But we will have to kind of watch what's happening and how it would be working. At this point, we're already starting to engage our Indian operation in more broader EPAM client base, kind of trying to understand how it works, how EPAM client acceptance is. And again, we will have much more detailed answer probably in couple of quarters.

Excellent. And finally, if I can squeeze one final in. Your largest customer is undergoing consolidation in terms of its vendor list, IT vendor list. How are you guys positioned, I'm presuming that you guys will come out well, but any color on that?

I think we hope that we will come out well there as you said so, I don't think anything else should be added. So we don't see any specifically dangerous signs in the direction.

Thank you. We have time for one final question. Alex Veytsman, Monness, Crespi, Hardt.

Yes. Hi guys, just a quick question on labor sourcing as we look to 2016, can you give us an idea as to which markets will potentially be improved or rather enhanced in terms of labor sourcing and which markets will decline in terms of the number of delivery professionals?

None of our market will decline. At this point, any market that we are currently in is looking at growth from a labor sourcing perspective. And some of our more traditional markets, Belarus will continue to be one of our fastest growing areas in absolute head count and then some of our smaller and newer locations, if you think about like Poland, Hungary, you look at what we're doing in Mexico. Those guys will grow at probably a faster percentage clip. India now that's part of the deo mix. So that will grow. So very balanced.

So we have specific targets for each market but I don't think we're disclosing this on this level of detail, also from the moment, which we did in the last couple years, I think it's pretty obvious that we do in some diversification from former Soviet Union, more to European Union and now globally to APAC, China, India, will be growing as well. But there is no decline, there is practically no status quo in any of these markets.

Thank you. That does conclude the question and answer session. I would like to turn the conference back over to Mr. Dobkin for any closing comments.

As usual, thank you very much for spending time this morning with us. So it was a good year, so we hope that we will prove that 2016 is going to be a good year too but definitely not going to be easy. I would like to also remind that we are organizing our second Annual Investor Day on March 9 in New York City and if you're interested to see more information about EPAM, more details and some client stories, welcome to join and you can find information on our website or contact directly Lilya. Thank you. Thank you very much.

Thank you, ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines this time and thank you for your participation.