Greetings and welcome to the EPAM Systems Third Quarter 2014 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lilya Chernova. Thank you. You may begin.

Thank you and good morning, everyone. By now you should have received your copy of the earnings release for the company’s third quarter 2014 results. If you have not a copy is available on our website at epam.com. The speakers on 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 thanks to everyone on the call for your time today. Over the past quarters, we have accelerated on EPAM aggressive strategy to help customers run digital [ph]. In fact, we were focusing very strongly on how we’re to address the growing clients’ needs triggered by new digitally destructive business model they have to implement to stay competitive. To achieve that, we’ll continue to invest in critical for our digital skills and technology capabilities as well as very specific industries per se [ph]. This has been made possible by unique combination of investments we made and continue making both organically and inorganically since our IPO in 2012. In the third quarter, the momentum continued. EPAM had a very possible third quarter result as we delivered it through and creating of 182.8 million doors or 7.5% growth year over year and 10% growth over our Q2 results. Partially, it attributes to our three previous acquisition which we are further integrating into EPAM during the last month when they turn in their first full quarter with EPAM. While on acquisitions, I would mention that just last week, we closed another important deal for us that formed this strong service design capabilities called Great Fridays. We’ll talk more about it later today. At the same time, you already might believe that our growth is a very organic nature, which we carefully complemented additional specific skills and capabilities by adding very selectively to our strong core, skills and software product engineers. In result, our overall growth during the last couple of years were driven by growing customer demand and now increasingly have the set of skills, capabilities, experiences and our overall abilities to engage and deliver complete software solution. And we do believe our customers recognize this unique value which have…

Thank you, Ark, and good morning everyone. I’m going to spend a few minutes taking you through the third quarter results then I’ll talk more about our fourth quarter and full year outlook. As usual, the whole details of our results can be found in our press release and the quarterly fact sheet located on the investor section of our website. As detailed in our press release, the third quarter revenues grew 37.5% over last year and 10.3% sequentially to $192.8 million above the top end of our guidance. North America remains our largest segment representing 50.7% of our revenue, up 35.8% year-over-year and 13% sequentially. Europe was up 42% year-over-year and 5.5% sequentially now representing 37.5% of revenue. CIS was up 1% year-over-year and 2.7% sequentially representing only 7.9% of revenue. Looking at service lines, we’ve experienced no significant change in our revenue mix. Software development and application testing services continue to our largest service offering, representing approximately 69% and 20% of revenue respectively. Our top 20 accounts came in at 55.3% of revenue, growing 31.8%. While all our other clients below top 20 grew 46.6% year-over-year. Each of our verticals grew year-over-year and sequentially led by Travel and Consumer and the other vertical. Travel and Consumer increased 52.1% from prior year and 18% sequentially representing 22.2% of our Q3 revenues, the large sequential growth was related to completion of some key milestone for several large accounts and the quick ramp up for a new opportunity that started in Q2. The other vertical grew 61% year-over-year and 15% sequentially primarily due to the GGA [ph] acquisition and represent 13% of Q3 revenues. GAAP income from operations increased 7.9% year-over-year to represent 11.3% of revenue. Included in our operating results in a GAAP basis are stock-based compensation expenses, amortization of…

Thank you. We will now be conducting a question-and-answer session. (Operator instructions) Our first question comes from the line of Moshe Katri with Cowen and Company. Please proceed with your question. Moshe Katri – Cowen and Company: Hey, thanks, good morning. Can you talk a bit about gross and operating margin trends in the quarter, the pluses and minuses that kind of shows us what happened year-over-year in terms of comps?

Hi, Moshe. It’s Anthony here. Any particular trend that you’re looking at in specific or just – Moshe Katri – Cowen and Company: So I think your margins were down year-over-year, so I wanted to kind of understand what happened there and then the same thing for operating margins, GAAP and then adjusted. Thanks.

Well, the operating margins, again, we continue to put money into the business. We’re working on a variety of investments. The top line growth is coming in ahead of where we expected both from an organic and from an acquisition perspective, so we’ve been having to continue to spend into the business in a variety of areas to continue to shore up the infrastructure to make sure we can continue to support the growth that we’re seeing on the top line. That’s had some impact on the operating margins and kept them pretty much flat to Q2 and a little bit down from last year. And it’s a lot of the same areas where we’ve talked in the past, bringing in some domain expertise, focusing on the sales function. I mean we just continue to spend in those particular areas and that’s keeping the operating margins where they are. Gross margins, they are down about 0.4%. It’s a little bit lower due to heavier vacations in the July and August cycle, so that’s going to cause a little bit of a drop in the gross margin combined with some additional wage inflation that we saw in our midyear raises. There’s really nothing more than those two components playing on the gross margin component. Moshe Katri – Cowen and Company: Okay. And then was there any FX contribution to the margins as well?

A little bit. There was a small impact at the gross margin level. And at the bottom line net income level, it was a little bit over $1 million of positive impacts once you factor in the negative revenue impact offset by obviously a positive pick up on the expense side. So it’s about $1 million on the bottom line. Moshe Katri – Cowen and Company: Okay. And then final question. I saw a spike in the contribution from a top client. I think you’re at 14%. Can you talk a bit about that? Just remind us, are we working with various different departments within that client and what are you doing there?

Yes, Moshe, we’re working with multiple groups, in fact, of this account in multiple geographies. It’s actually very much global accounts and coming fast not just Europe and not just to North America but to also now Asia, China, Singapore including. And again, it’s very, very diverse effort for us right now. Moshe Katri – Cowen and Company: Understood, thank you.

Our next question comes from the line of Steve Milunovich with UBS. Please proceed with your question. Steve Milunovich – UBS: Thank you, good morning. So your fourth quarter revenue guidance obviously suggests a deceleration into the high 20s in revenue growth. Is there anything in particular driving that? Is that conservatism or I know on the fourth quarter sometimes you have some significant swing factors?

Yes, for the last couple of years we’ve had some revenue issue, yes. A little bit a surprise to us and usually it was coming from CIS region. With everything that was happening in this quarter, the world [ph], as you know, during this year we don’t expect any jumps in Q4. And on top of this, as you know, the ruble and majority of our revenue coming in local currencies for us definitely getting weaker and weaker. And just on total shares revenue, if you take into account foreign exchange, it’s a big amount kind of going down. So that’s why Q4 looks as it looks. If you take out, for example, CIS revenue, then our gross increase will be practically in line with what you saw previously as well. Steve Milunovich – UBS: Okay. Anthony, given the ruble then hits you at the revenue line, but are you likely to see a positive to the EPS line as you did this quarter?

Yes, there will definitely be some positive impacts on the bottom line as things swing. But we look at things in group currencies as well, so we have to really see where everybody goes in the fourth quarter and see how that falls out. But, yes, it should in theory give us a little bit of an uplift on the EPS number.

But please don’t – do remember that our cost in rubles only in Russia. So it’s not like embarking [ph] for example anything [ph] in Belarus or Ukraine. So it’s only Russia based.

And I would say that our estimate, our EPS estimate includes that potential impact. So we’ve based that into both the top line revenue numbers and the EPS numbers. We’ve already adjusted based on where we’re seeing the ruble go. Steve Milunovich – UBS: Understood. And can you bring us up-to-date in terms of your clients’ view of the situation in Ukraine, whether that’s having any impact on your pipeline and so forth?

Quite a few or a majority of the clients you actually driven by what’s happening kind of in the media and probably you see that media is pretty – look, relatively quiet if you compare this with what we saw six months or kind of nine months ago, eight months ago. So I think people kind of working in assumption that it would be settled and that’s what we’re seeing as well. With some escalations climbing kind of up and down, situation definitely much more stable than we were seeing this – in the middle of the summer, for example, or at the beginning of spring. So I think most of the client actually pretty accurate and pretty normal moderate comp [ph]. Steve Milunovich – UBS: And then finally, who are you competing against in new client deals? Is it Luxoft primarily or is it more the larger service companies?

We don’t compete much with Luxoft. We maybe compete from time to time in financial sector but even there like with exception of shared accounts, we don’t see each other much. The second besides financial sectors, you know that we have a little bit different strategy and we mostly focus on kind of digital change. And we’re competing with people like Sapient or some specific companies focusing on eCommerce and digital marketing type of applications. We also compete in big accounts with major players including IBM and Infosys and Cognizant and others as well and some special focused division [ph] for them. Steve Milunovich – UBS: Okay, thank you.

Thank you.

Our next question comes from the line of David Grossman with Stifel. Please proceed with your question. David Grossman – Stifel Nicolaus: Thank you, good morning. I may have missed a couple of the quick data points, so if I could just start there. Could you just review what the organic growth was both year-over-year and sequentially?

Sure. How are you, David? It’s Anthony here. Q3 organic was around 27% and sequentially, we were coming in at about 6% organic. David Grossman – Stifel Nicolaus: Okay, great. And I think you did mention utilization, Anthony. I missed it. What was it in the quarter?

74%. David Grossman – Stifel Nicolaus: Okay. And is that pretty much consistent with the first half?

No, it’s down. Q3 is a heavy vacation cycle, so July and August a lot of people are out, so utilization dropped. It is consistent with where we were Q3 of last year given last December. David Grossman – Stifel Nicolaus: Right, got it. And then, I wonder if I could go back to a question that was asked a little bit earlier. It looks like the growth in your top client was pretty robust and maybe this is a manifestation of just a couple of other clients. But when you look at the top five and the top – most of that growth came from that one client, is there some attrition in some of the top five or the top 10 that’s really masking that so that the others are actually in fact growing much faster or is that just the way the quarter rolled out where one client pretty much accounted for the vast majority of the growth?

Well, a lot of the – I mean, when we did the acquisition of Jointech, that brought revenue from that same large client. So what you have is the first full quarter of revenue from Jointech. And so that’s why you’re seeing the pop in that one client for this particular quarter. David Grossman – Stifel Nicolaus: Okay, got it. And then in terms of – I think Arkadiy talked about how important the digital marketing and commerce segment is to you. Can you help us size just how big that is within EPAM when you include the recent acquisition of Great Fridays?

Great Fridays is a small, very specialized acquisition, so I don’t think it’s embarking anything [ph] in numbers. But the sizing of this, it’s very difficult calculation because it depends what you’re counting in [ph]. And commerce, it’s a broad term. So what I can say that it’s probably very – it is a very fast growing market and if you talking about strictly eCommerce implementation of things like Hybris or ATG, then it’s tens and tens of millions. If you’re looking at this broad and include in digital strategy part of the business and mobile extensions and analytics and actually of course it’s including like logistical piece for retail, then it will be for us in hundreds of millions already. David Grossman – Stifel Nicolaus: Okay. And then just finally, with the recent acquisition activity and just bundling everything together, Anthony, can you give us a sense for what the stock-based comp and the amortization should look like going forward?

Absolutely. The stock-based comps – and we haven’t finalized the purchase accounting and everything for Great Fridays, as we disclosed last week, but there are some estimate in my numbers related to that one. But I would expect Q4 stock compensation to be approximately $7.6 million. And from an amortization of intangibles, it should be about $2.8 million is what I’m currently estimating. David Grossman – Stifel Nicolaus: Okay. And that’s just the partial quarter, right, for Great Fridays?

Correct. Yes, it will only be two months for the Great Fridays piece. David Grossman – Stifel Nicolaus: Okay, great.

So then I would say if you want a more kind of a full quarter view, probably be about $7.8 million on the stock comp full quarter view and add maybe another 200 [ph] to amortization of intangibles, so about $3 million. David Grossman – Stifel Nicolaus: Okay, great. Thank you.

Yes.

(Operator instructions) Our next question comes from the line of Ashwin Shirvaikar with Citi. Please proceed with your question. Ashwin Shirvaikar – Citigroup: Thank you. Good morning, Ark; good morning, Anthony.

Good morning.

Good morning. Ashwin Shirvaikar – Citigroup: So good quarter here. I guess there’s not much doubt in my mind about the demand profile you guys are seeing and our checks show the same thing. My question is more on the people side, the supply side of the equation. Could you talk a little bit about your headcount growth strategy? Some of the areas you’re moving into requires slightly different kind of talent potentially, where are you finding that talent, is it challenging, things like that, could you address those types of questions?

Yes, sure. Yes, I know like when we were talking last year it was where some concerns about our speed incurring [ph] and we had many questions on [ph] some of this and usually our answer was that in 2012 we built a pretty significant range last Thomson Reuters kind of impact and we didn’t need to hire as many people as before, proportionate to the growth rates. And that exactly was kind of the reason why our – had increased [ph] down a little bit in the past year. I think this year we actually – we’re up to speed. And the current company [ph] still mostly in the same regions where we did before in Eastern Europe and Hungary. We’re also starting to grow much faster and aggressively in Poland. We just recently opened development center in Bulgaria, so we will be growing there. As you know, China now in the map and it’s still kind of in a lot of integration efforts happening and we kind of learning a lot. But it would be growth area for the next year for us at least and we’re planning for this. So I think the picture didn’t change much from the last years. When you’re asking if it’s easy or hard, yes, it’s not easy and I also was commenting all the time that the talented people in demand all was replaced [ph] from San Francisco to New York to London and to Minsk, Belarus. So from this point of view, no, not much changes. But we’re working as we did and that big portion part of our investments come into relationship within newer cities across all Former Soviet Union and our development centers both in Hungary and Poland and so for internal trainings as well. So I don’t think I told you something new, but that’s what it is. Ashwin Shirvaikar – Citigroup: Okay. No, it’s good to get the update. One question I did have as I look at some of the metrics you provided, Russia seemed to pop up in terms of headcount increase. I’m not sure that’s Russia itself or is there a lumping maybe a few countries, is it Russia and –

No, this is mostly GGA. GGA had a couple of thousand people in Russia and you see basically in part of this. Ashwin Shirvaikar – Citigroup: Okay, got it, got it. The other question that I had was with regards to – as you get deeper into digital marketing and areas like that, are you seeing maybe an increased volatility of the projects that – lower visibility of projects or do you still have the historical level of visibility into your revenues?

I do believe in general on the level of company. We have very, very similar visibility as we did in the past. There are definitely changes because the digital driven projects, we starting sometimes relatively small on this pilot. But we trying to carefully select opportunities where we have kind of upside and repeated business. And so far we have proved that it could bring us significant tens of millions business over the next several years. This client was started small and then expanded in different areas, different branch, different channels as well. So I think it’s working well. But there are some projects, small ones as well which we getting in with completely organized because we would like to test ourselves and test new technologies and be able to have good friendzone [ph] experience before we applying this to big opportunities. But it is very much in line with our history of working with sometimes small startup and independents like these small software product companies where we try to understand what’s happening in technology and kind of emerging trends. So there is not much new, it’s just a little bit different sector for us. Ashwin Shirvaikar – Citigroup: Got it, understood. Thank you, guys. Good quarter. And Ark, I have to say congratulations on being named to the Forbes All-Star list.

Thank you, Ashwin. Ashwin Shirvaikar – Citigroup: Yes, okay.

(Operator instructions) Our next question comes from the line of Mayank Tandon with Needham & Company. Please proceed with your question. Mayank Tandon – Needham & Company: Thank you. Good morning. Anthony, I don’t know if you talked about pricing trends. If you could just touch on how much of the growth is coming from pricing, I know you had a lot of increases last year, almost double-digit. Maybe give us some perspective on that. And also, Ark, I wanted to ask you about the sales productivity, I know you’ve invested aggressively in sales. Maybe just give us some sense of the trends there and how do you expect to position yourself for ‘15 on that front as well. Do we expect more investments or do you feel like you’ve done as much as you can now or you want to start to see it pay off before you start to invest more aggressively on the sales front?

Hi, Mayank. It’s Anthony. I’ll tackle the first one and let Ark jump in. As far as pricing trends, there’s really no difference at this stage of the year. I mean we’re still looking at kind of that 6%, 7%, 8% blended price increases that we’ve talked about through most of the year. Most of that pricing will happen. As we move into the new year, we’ll get a better picture on where pricing is going for 2015 in Q1. But at this stage, we’re not seeing any change from what we see in the balance of this year.

Yes, and in regards to our kind of sales marketing field [ph] operation, so yes, we’re investing a lot and we have onboard new people. And we’re also slowly doing exactly what we were planning to do and what we already talked about since IPO change and profile with the company and awaiting profile and kind of follow brand for this digital market and eCommerce type of profile. So working more and able to get in the doors not only to IT people or IT budget, but now business budget and to marketing budget. This is all happening. If you’re asking [indiscernible] that now we will see very clearly [indiscernible] last month, that’s probably would be much more conservative. I think it’s kind of non-stop effort. And we do that we’re very much in the beginning of this effort still and we still need to elevate profiling even high and we should be able to do it with good number of successes and that’s what I was trying to explain and kind of illustrate this morning actually. But no, we’re not stopping this. It’s continuous and I think it would be continuing for a long time. Mayank Tandon – Needham & Company: Okay. And I appreciate the color. And then I just wanted to ask you on the M&A strategy. I know you’ve done a few acquisitions, but as you look ahead in terms of balancing areas that you want to acquire, and is it more delivery expansion, to diversify or are there other capabilities, verticals or services that you want to enter into just based on demand from your clients. Maybe just give us some perspective on that as well, please.

It’s more on the second part of what you mentioned. And you see, we don’t have the strategy kind of to build EPAM through acquisitions. We don’t have any type of robust strategy and we never had. And if you look at our historical kind of speed of acquisitions, we did two write-off type PUR [ph], relatively small but very specific one from the point of building much stronger front operation for EPAM in Canada and another was important for us to the fourth kind of new digital strategy capability acquisition. And then given the 2013, we didn’t do any because we didn’t find anything interesting from this point of view. And it seems like we did many of them in 2014 and yes, we did. But again most of them, pretty small from revenue perspective, but very specific on the skill set or industry-focus or kind of like Great Fridays, expand and extend in what we’re already starting to do and what seemed really important for us. So again, that’s going to be our strategy in the future, though. I’m not saying that is isn’t something much, much strategically good for EPAM, but that’s not a focus for us. We’re kind of looking for opportunities to improve our muscles and different parts of our organization and to put it on voices [ph] of our software engineering skill set, we should be able to last [indiscernible] as we’re repeating all the time. Mayank Tandon – Needham & Company: Right. Thank you. And then last question for me is on the hiring front. In terms of the hiring numbers, I think you had mid-20s growth the last couple of quarters. Obviously, that’s queued by acquisitions. Could you give us what your organic increase in headcount was and also maybe comment on the attrition trend that you’re seeing your various markets – employee attrition.

I think actually Anthony mentioned very precisely exactly organic growth in headcount and the growth including acquisition.

Yes.

I think it was 26 and 17.

19 actually. I think I’ve misspoken my script. It’s actually 19 is organic.

Okay.

And 26 in total. Mayank Tandon – Needham & Company: Okay. Then on the attrition side, any changes that you’ve noticed in your various markets?

No, it’s still in the low teens. Mayank Tandon – Needham & Company: Great. Good job, guys. Thank you.

Thank you.

Thank you, Alex.

Our next question comes from the line of Alex Bateman [ph] with Mona Christy [ph]. Please proceed with your question. Alex Bateman – Mona Christy: Yes. Hi, guys. I just wanted to ask you if you’re seeing any impact from the sanctions. They’re still of course very much present in Russia. And also, given the overall and a western sentiment there, if that’s impacting your role as a U.S.-based company.

Nothing impacting us a U.S.-based company. So from the sanction point of view, there is no any direct impact. But as I mentioned, probably sanction did some impact on Russian economy and affects situation in Russia and that’s clearly making some impact. And again, negative and positive simultaneously. And I think Anthony was kind of addressing this already. But there is no any direct impact. There is no sanctions in EPAM doing business anywhere. So zero on this. And again, just general economic impact. Alex Bateman – Mona Christy: Got, got it. And I think your number of employees in Russia stood around 1,200, 1,300, I mean do you intend to decrease it longer term? I mean I guess kind of where are you now and kind of what are the plans for the next year or two as far as labor location if any?

No, there is no specific labor relocation trends. So there is clearly very specific actions where we grow in and how fast. And Russia wasn’t growing or practically was flat from headcount point of view. But again, there is no relocation strategy. I think we would be able to bring in projects there. And again, the increase in Russia happened this year mostly due to acquisition of GGA. Alex Bateman – Mona Christy: Got it. Thank you.

Mr. Dobkin, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Thank you and thank you everybody for joining us today. I hope we addressed your questions, and looking forward to talk again in three months. Thank you everybody.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.