Flat Revenue Outlook
Q: Will revenues remain flat through year-end?
A: Management expects revenues to remain flat from the second quarter through the end of the year. They anticipate a modest improvement in Q3 due to seasonal factors, but potential declines in Q4 because of higher vacation levels and possible furloughs. They are not projecting any upside in their outlook and note that no improvement in demand is anticipated. "

Margin Improvement Efforts
Q: What's driving the improvement in margin outlook?
A: The company is focusing on cost optimization after resetting revenue growth expectations. They've become more efficient in corporate functions and SG&A and are working on utilization. Actions are already underway and are showing benefits, with profitability improving in Q2. "

Impact of India Headcount Shift
Q: How is the India expansion affecting the business?
A: India is projected to account for just over 20% of headcount by year-end, slightly higher than previously expected. This has led to modest pressure on average bill rates, impacting revenue outlook for the second half. The shift is not changing the type of work but is influencing the average bill rate due to the lower pricing in India. "

Demand in Top Accounts
Q: How is demand progressing in top accounts?
A: Despite declines in the top five clients, the situation is stabilizing. The decline is a continuation of previous trends, particularly with a European business information and media client. Overall, demand from top clients is described as "pretty stable." "

GenAI Work Progression
Q: What's the status of GenAI-related projects?
A: GenAI-related work is progressing, but it's challenging to quantify. The company has dozens of projects in the low millions of dollars range, but GenAI still represents a very small portion of revenue. Companies realize that to benefit from GenAI, significant investments in data modernization are required, which can be a showstopper for progression. "

Shift to Fixed-Price Contracts
Q: Why is there a shift to fixed-price contracts?
A: The percentage of fixed-price contracts is increasing, reflecting efforts to address clients' needs more proactively. Clients are seeking commitments on delivering programs for a fixed amount of money or monthly fee. This shift allows for more flexibility and potential improvements in profitability compared to time-and-materials contracts. "

Guidance and Pipeline Confidence
Q: How are you ensuring you achieve your outlook?
A: The company is being prudent with its guidance, not expecting improvement in demand. The full-year outlook considers potential reductions in demand due to clients' cost-cutting efforts. Management feels confident given the downside risks and notes that any upside would come from lighter furloughs or budget openness. "

Utilization Rates On-site vs. Offshore
Q: How are utilization rates affecting growth?
A: Offshore utilization is healthy, while on-site utilization is lower than traditional levels, posing a challenge. There's increased demand for offshore, particularly in India, which may be contributing to revenue growth constraints for the remainder of the year. Efforts are underway to address on-site utilization through demand generation and other actions. "

Hiring Plans Amid Utilization Concerns
Q: Will you continue hiring despite utilization levels?
A: The company plans to continue hiring, including in offshore locations like India and Latin America. While they are working on AI productivity improvements, hiring remains necessary to meet demand and adjust the workforce pyramid, introducing more juniors to improve profitability and competitiveness. "

M&A Strategy Remains Active
Q: Is larger-scale M&A still on the table?
A: Larger-scale M&A is still under consideration. The company continues to explore opportunities of different sizes. The share buyback is not a determining factor; they are open to adjusting if significant M&A opportunities arise, maintaining a bias towards acquisitions. "

DSO Increase and Working Capital
Q: Why did Days Sales Outstanding increase?
A: The increase in DSO to 76 days was due to the last days of the quarter falling on a weekend, with significant cash coming in afterward. The shift towards more fixed-fee contracts is also impacting DSO due to changes in invoicing. Management expects DSO to stabilize around 74 days in the second half of the year. "

Life Sciences Growth
Q: What's driving growth in Life Sciences?
A: The Life Sciences & Healthcare segment is experiencing positive growth, with a high concentration of data programs that are in demand. The combination of industry expertise, consultancy, and data program capabilities benefits the company, fulfilling previous expectations in this area. "

Global Delivery Footprint Expansion
Q: What's the plan for your global delivery footprint?
A: The company aims to be more diversified and become the most balanced global company. The exact proportion of delivery locations will depend on market recovery and demand for modernization and technical debt projects. As the market improves, demand is expected to return to all regions. "

Talent Acquisition in India
Q: How do you attract talent in India?
A: EPAM differentiates itself as an engineering-focused company, competing with software tech firms rather than traditional services companies. This image helps attract talent seeking high-end engineering roles. Being newer in India allows them to approach talent acquisition differently, and they are growing strongly in the region. "

Headwind from India on Revenue
Q: How does India impact revenue growth?
A: The headwind from the shift to India is estimated at about 2% on revenue this year, slightly higher than previously guided. For next year, the headwind might be greater than 2%, due to higher billable headcount in India and lower billable on-site, leading to a modestly lower average bill rate. "

Lost Clients Impact
Q: What's the impact of lost clients?
A: One client exiting due to M&A will be fully offset by year-end, impacting revenue by over $10 million per quarter. Another client is gradually reducing demand, partially due to concerns about the Ukrainian footprint and internal shifts. This decline is expected to continue for the next couple of quarters. "