Demand Inflection in Second Half 2024
Q: What gives you confidence in demand improving in H2 2024?
A: Management observed increased client activities in Q4 and ongoing conversations, indicating that delays in decision-making are becoming harder to sustain as companies need to address growing debt. They believe these activities will materialize into projects, supporting an inflection in demand in the second half.

Margin Outlook and Investments
Q: What costs and investments are impacting margins in 2024?
A: They are returning to a more typical variable compensation structure and proceeding with salary increases in Q2 to retain talent amid low voluntary attrition. Significant investments in AI and demand generation programs are expected to deliver returns. They anticipate lower gross margins in the first half but expect a significant improvement in the second half, aiming to return to typical profitability by year-end.

Headcount Changes and Geographic Mix
Q: How do headcount reductions and geographic shifts affect growth?
A: Adjustments in headcount across geographies were made in 2023 due to contingencies related to Ukraine. While headcount declined in most regions, growth continues in India and Latin America, which is expected to pressure revenue per headcount, contributing to the 1% to 4% growth guidance. They are prepared to ramp up hiring when necessary.

Larger Clients and Industry Verticals
Q: Are ramp downs with larger clients as expected, and what's the outlook?
A: The expected ramp down in Q1 is proceeding as planned and is reflected in the Q1 guidance. Demand is stabilizing, with strong traction in life sciences and energy. They anticipate returning to sequential growth in several industry verticals in Q1, with broader demand across customers.

Ability to Scale Hiring
Q: How quickly can you adjust staffing to meet demand increases?
A: They maintain flexibility to scale hiring within a quarter, keeping investments in training, especially for junior levels. They are confident in their ability to respond to demand due to ongoing investments and available talent in the market.

Seasonality and Demand Outlook
Q: How will seasonality and changing footprint affect demand and capacity?
A: Q2 typically has fewer billable days, while Q3 is strong with significant sequential growth. They note an improving demand environment with more client conversations and larger deal opportunities. However, seasonality may cause Q1 to Q2 to be flat or slightly down; improved demand is needed to overcome seasonal impacts.

Competitive Landscape and Client Return
Q: Are clients that reduced spending returning, and why?
A: Some clients who cut spending due to risk perceptions from the Ukraine war are returning, now comfortable with EPAM's execution and diversified delivery from locations like India and Latin America. In some cases, dissatisfaction with competitors is prompting reengagement with EPAM, positively affecting 2024.

Generative AI Capabilities
Q: What Gen AI capabilities are clients most excited about?
A: Clients are experimenting with Gen AI for customer-facing capabilities and new insights, particularly enhancing interfaces and data access. While currently in pilot phases, more sophisticated applications are expected over the next 12 months.