Greetings and welcome to the EPAM Systems First Quarter 2016 Earnings 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 like to turn the conference over to your host Ms. Lilya Chernova, Investor Relations for EPAM Systems. 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 first quarter 2016 results. If you have not, the copy is available in the Investors section on our Web site 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 everyone for joining us today. We've had a strong quarter and a solid start for 2016 with Q1 revenue of $264 million. This represents 32% year-over-year growth and 34.5% constant currency growth and puts us well on our quest to achieving our financial performance goals for 2016. In addition, it's important to know that our organic growth for the quarter was 24% and 26% in constant currency. Our quarterly results are above guidance and we do believe are driven by our ability to address strong demand for new advanced technologies and digital services across all our key markets. During our call last quarter, and then during the Investor Day when many of you joined us in New York City, referred the main market drivers and our key challenges and the ways we are addressing or plan to addressing those. So today while Anthony will provide a detailed update on our financial performance, I would like just to summarize one more time the main trends in client demands and how we are shaping our services to take advantage of significant opportunities that we see in the market for the firms like EPAM. So let's start from markets, customer spend in new clients. First of all and very simply, we see continuous emphasis from existing and prospective customers on partners who can help them delivering differentiated business solutions, which allow better competing in their respective markets. It doesn't mean competing just with the traditional or historical competitors. But in many cases with new type of technology-driven players, sometimes very well established like Googles of the world and sometimes with completely unknown just yesterday startups. In many cases this need for differentiated product is driven by [life] [ph] digital transformation programs, but in many cases as well the…

Thank you, Ark and good morning everyone. We turned in a strong performance in the first quarter and our key highlight is still revenue growth. Revenue closed at $264.5 million, 32.2% over first quarter of last year and 1.6% over Q4 2015. As a reminder, Q1 is typically our slowest quarter from a sequential growth perspective due to CIS holidays in January, short month of February and the beginning of a new budget season for most customers, causing a slow ramp-up in Q1. Currency still remains a part of our story. We saw about $4.5 million of year-over-year headwinds, making our constant currency growth rate 34.5%. Organically, revenue grew year-over-year 24.2% and 26.5% in constant currency. Growth remains very well distributed across all verticals with all verticals turning in over 25% growth year-over-year. Geographically, North America grew 45% and 29% organically; Europe was up 19% and APAC up 14%. We are encouraged by the return of double-digit growth in CIS, which has struggled the past several years and currently represents only 3.4% of revenue. It has grown 15% over Q1 2015 and 36% in constant currency. Turning now to profitability, GAAP income from operations increased 32.9% year-over-year to represent 11.5% of revenue in the quarter. Our non-GAAP income from operations for the quarter, after all adjustments, increased 28.6% over prior year to $3 million, representing 16.3% of revenue. Our effective tax rate for the quarter came in at 21%. And for the quarter, we generated $0.72 of non-GAAP EPS, $0.02 above the top end of our guidance and $0.45 of GAAP EPS, based on approximately 52.9 million diluted shares outstanding. I want to take some time to dive a bit deeper into our non-GAAP net income and EPS figures. As many of you know and have discussed with me in…

Thank you. [Operator Instructions] Our first question comes from the line of Jason Kupferberg with Jefferies. Please proceed with your questions.

Good morning, guys. I wanted to ask some question about the seven new digital engagements that you mentioned in the prepared remarks. It sounded like at least some number of those could become sizable. Wanted to get a sense of whether these engagements are with new or existing clients and could some of these end up creating a new top 10 client for you guys?

Those seven engagements we mentioned this is all new clients. So are they willing to translate to really large relationship, it's too early to say. But, as I mentioned, couple of them definitely have the potential. No, these engagements are not impacting our top 10.

Not yet, okay. Understood. And then, just on the pricing front, I know you'd mentioned that there is some pricing pressure, just given macro conditions around the world, but have you changed any of the pricing expectations that are baked into your full year guidance, because from what I recall, I think you've taken a little bit less pricing expectation for 2016 versus what your actual experience had been in the last couple of years?

Yes. At this point, we are having the same assumptions as last time in projecting our numbers.

Okay. And then just last for me, on the margin front, I think we're 16.3% on the non-GAAP operating margins for the quarter. Obviously, it's still within your range, but kind of the lower part of your range. Do you think this will be a trough level for the year? Were there any factors that impacted that metric a bit and do you expect it to pick up a little bit during the balance of 2016?

Yes. We always expect to see some up tick as we move through the year. You remember Q1 is our tightest quarter on margins, revenue is usually not sequentially up very much from Q4. Utilization, as you probably can see in the fact sheet, did drop a little bit versus Q1 of last year and versus Q4, mainly due to -- we have a short February, we have holidays in January. So, we always feel our margins squeeze in Q1 and this year it was about 0.4% a little bit more of a squeeze, but nothing dramatic that we're concerned about. We will see up tick as we move through the year.

Okay. Sounds good. We will see you guys next week. Thank you.

Great. Take care.

Thank you. Our next question comes from the line of Ashwin Shirvaikar with Citigroup. Please proceed with your question.

Hi guys, good morning. Good job on the top line growth. Anthony, I appreciate the incremental explanations on balance sheet and cash flow. One thing I wanted to confirm on 2Q guidance is, the 2Q guidance for EPS does already exclude the tax effect. Does it not? So that would be roughly $0.06?

Correct. Yes. It's looking like $0.06, $0.07 of the impact in Q2, so it's already baked into my guidance number.

Okay. So, when I look at that versus the consensus that's out there, that did not have that impact, you're basically guiding inline-ish. Got it?

Inline-ish, yes, exactly.

Yes. Okay. So, question on this client concentration. I know from time-to-time we do get a lot of questions about your top two clients and how they're doing, particularly being financial services focused. Could you dive in deeper to the extent possible into sort of the growth potential of those?

Well, first off, top two are no longer financial services. I mean UBS remains our top, but Barclays is actually not number two any longer. So they've kind of stayed level as other people have grown around them. So that has changed. As far as outlook around financial services, we don't really have any new information to share with you. It's a consistent story with what we shared last time. I know that the market, there has been a lot of news around financial services, but at this point we're not seeing it. We're not hearing it. We're not only feeling it within our numbers. So we remain --

Ashwin, I would say that we have three other large banks, which became clients during the last 18, 24 months and we've grown with all of them at this point. So basically we're starting from pretty low point, but at this specific time all of them are growing fast.

Yes. I guess the question where it comes from is really particularly in financial services, there is sort of an expectation of, let's call it same-store sales not being where -- you are you starting from a low base. So that's good. But pricing pressure, things like that that you can feel, maybe more acutely, vender consolidation, any incremental commentary on that might help.

I don't think we can add additional colors on what you are asking. So at this point we continue to grow in this sector. I think for significant portion of what we do there it's driven by this digital type of engagements, which we see very good level of demand. So, again, we clearly cannot guarantee that any hiccups are not going to happen in the future, but at this point we cannot share the same sentiments as some other players.

Okay. Understood. Last real quick question. Anthony, cash flow expectation for FY 2016, I might have missed that, could you provide the range or number?

Cash flow from operations, it's consistent with what I shared at the last call. Basically, I'm expecting cash flow from operations to be at the levels it was at in 2014. We took a little bit of a dip last year, down to about $75 million. I expect to get it up over $100 million for fiscal 2016.

Got it. Thank you very much.

Thank you. Our next question comes from the line of David Grossman with Stifel. Please proceed with your question.

Thanks. Just two quick questions. First, just on the mechanics of the adjustments, Anthony, as you get to the new methodology on the stock comp or on the non-GAAP adjustments. Should we just really take the 21% and closely apply it to the entire adjustment?

You could do that roughly, David. I mean unfortunately not all of the adjustments get a tax benefit. So the way I've calculated this is actually going in and reflecting the true tax deduction that we get. And it does change and it has changed over the years. I think the net benefit for the current year was actually more like 22%, 23% benefit off the adjustments. And as you go back to history, it will change and as it goes forward, we're hoping to get more and more benefit. So I'll have to update you as we move forward. But I gave you -- for the full year, it's about $12.6 million is the benefit for the full year, and it should be about $2.5 million to $2.7 million per quarter of tax effect through 2016.

Okay. Thanks. And has there been any change to the stock comp for the year with any acquisition realization comp?

The stock comp charge will fluctuate, because we do have liability treatment for a few of the acquisitions, plus this year's grant included some cash settled RSUs which also have a liability treatment. So there will be a little bit of volatility, but that was baked into my stock comp guidance. So we've made some estimations on where the stock price will go and how that would be reflected. So if you use the guidance I gave you for stock comp at the beginning of the year, we're still holding to that guidance.

And is that about $53 million this year, that sounds all right?

It was $55 million, was about $14 million per quarter for Q2, Q3 and Q4. We saw a little bit of a break in Q1. It came in about $1.6 million lower than we expected in Q1, primarily because of where the stock price went in the mark-to-market. I'm not changing my forward look, simply because I want to maintain some of that in there for future volatility. I'm optimistic on our stock price obviously. So I want to keep the $14 million per quarter going out. So it will probably still be $53 million to $55 million is where I put it right now.

Got it. Then just -- I know you addressed this a moment ago in your prepared remarks about the unbilled. Is the vast majority -- because obviously the billed receivables came down quite a bit sequentially. But the unbilled went up, so you are basically flat in total. Is there some dynamic -- is that just merely the cut-off to the quarter and the amount of T&M that you carry forward into the month of April or let's say there are some other dynamic in the March quarter that drove that increase?

Well, the T&M is definitely a piece of it. It did spike -- if you look, my DSO did spike a little bit. There are a couple kind of longer payment cycles in some of our customers at the beginning of the year that are dragging out and are pushing -- kind of pushed on my unbilleds and my AR for the quarter. We're working to actively bring those down. So really, I am not overly concerned, but we've kind of re-addressed our efforts around collections within the finance there to manage that DSO back down and take care of these couple of issues that have caused the spike in this quarter.

Got it. Does any of this have to do -- it seems they coincide with the acquisition of Alliance. Are their billing cycles and collection cycles different than your own?

No, Alliance really didn't have too much of an impact, it was relatively small compared to our AR and unbilled. So it was really just some longer payment cycles kind of as I discussed last time when I was trying to get kind of our hands around that and manage those payment cycles down a little bit and then a couple of just clients who had some administrative delays and caused a little bit of a drag on my unbilled this quarter.

Okay. Got it. And then just one for you Arkadiy, if you could maybe just speak a little bit to -- now that you do a have bigger infrastructure in India, with the Alliance acquisition, are you seeing any shifts in terms of current sourcing of -- content out of India for the EPAM client base, any thoughts you have on that and how that's evolving?

Well it's still very early. It's kind of practically only one quarter in play. At the same time, we've several engagements where EPAM India is starting to serve EPAM clients. So there is already preparations, there are opportunities in pre-sales state right now. So, it's started to happen in, as we expected, but again it's very, very volatile to mention. But the reason why we brought India to EPAM map was -- we very clearly indicated that global clients need different type of services in different time zones and this is starting to benefit us.

Very good. Thank you.

Thank you. Our next question comes from the line of Steve Milunovich with UBS. Please proceed with your question.

This is Ben in for Steve this morning. Thanks for taking my question. I just wondered if you could make kind of a general comment on what you're seeing from the more traditional IT vendors trying to move into higher level digital offerings, just how much success they are having? Thanks.

Let me think on this small idea, and this is probably what you are asking about, competition growing from not our head-to-head traditional competitors. So and if answering this question broadly then, yes, we're seeing competition coming from all possible corners, like people who didn't participate in this more complicated deals, after some acquisitions and investments trying to play there. But again, at this level of digitalization, I would say that the market is so big and the demand is so big, and quality requirements is pretty high for delivering this that I don't think we can say that the market drastically changed for us. Specifically a lot of this -- in many cases approach is okay. We bring in like this agency type of capabilities to traditional system integrators -- integration company or bring in like some type of technology to traditional agency and trying to compete for the complex deals, which require not just creativity, but very, very strong engineering components. And from this point of view, at least how we feel, we still have advantage and it's very difficult to do it through couple acquisitions. We are bringing creative together with generally IT services, not software development services, not software engineering services. So everybody trying to play there and everybody moving in this direction. But, again, don't think it's important market yet.

Okay. And then one more question on financial services. Relatively speaking, how much growth is coming from kind of the new digital initiatives versus legacy work and compliance as well?

So, as we mentioned, it is a significant growth, but we do not provide any split and specific number. So I don't think I can answer precisely to the question. Specifically and this is very difficult to answer precisely, because it's some type of engagement, which is triggering other type of engagements and the separation line is very wide. Some companies very clearly separating this. It's interesting to know how it's happening. But we're not ready yet for that.

Okay. Great. Thanks guys.

Thank you. Our next question comes from the line of Anil Doradla with William Blair. Please proceed with your question.

Hey, guys. Hi, Arkadiy and Anthony. Couple of questions. Arkadiy, you talked about Alliance, why you acquired them, locations, the diversifications and all that stuff. Can you chat a little bit and tell us how that integration is coming by and how do you plan to position Alliance from a kind of the quality work and the nature of work in the bigger context of EPAM?

Yes. That's what I chatted already about. I don't simply go into position EPAM India very differently from EPAM in general. There are some specific areas of expertise, like we mentioned when we announced the deal about very strong test capabilities and specifically test automation capabilities. Clearly that's improving our competence in this area. But in general, also we were sharing that we were looking for kind of company which would be in line with type of services EPAM provided. And from this point of view, we are not going to separate it too much from the type of work again. Would separation could be? Yes, there is convenience from time zone, from locations, and again, couple of specialization areas, but it would be very much integrated part of EPAM global delivery.

Now in the past Arkadiy, you've talked about converging the billing rates of Alliance with EPAM. What is your latest thoughts on that? Do you feel comfortable seeing Alliance billing rates pretty much in line with EPAM?

That's still clearly we are talking about three months, four months working together, it is too early. So you understand that it's impossible to change rates for existing clients. And we're working together on changing kind of these assumptions and bringing different capabilities together, but I don't think it's going to be so up within one or two or three quarters.

Very good. And Anthony you talked about a lot of work that you're doing on the DSOs front, you gave a very good explanation of the puts and takes. But when we step back and look at the big picture, 12 months from now, 24 months from now, are we talking about a new norm at these levels or are we talking about the trend which is going to be downward moving or slightly upward moving, how should we be looking at a kind of big picture over the next couple of years?

Well, absolutely, the Q1 numbers are not going to be a new trend. The Q1 numbers are too high as we have a couple specific instances that are dragging my DSO in Q1 up, higher than I want it to be. I think that I'm still targeting as kind of a new norm to keep my AR DSO kind of in the mid 50s, call it 55-ish. And from a long-term perspective, on the unbilled DSO, I'd like to get that down to kind of the mid 80s is where I'd like to see it. So right now we closed at 94 DSO. That's much too high. But we are definitely seeing a new norm in the function of kind of extended terms where our customers are pushing us for longer payment cycles, as we become a bigger part of their expense budgets and working through their procurement channels, they're pushing us a lot more on that, where they haven't in the past. So basically, it's becoming more of a balancing act for myself, which is why we are putting more efforts around kind of collection processes and finance processes to manage that, to make sure it stays in line, but we can also make sure we work with our customers accordingly.

Great. And congrats on the continued execution.

Thank you. Our next question comes from the line of James Friedman with Susquehanna International Group. Please proceed with your question.

Hi. I had two questions, I'll just ask them both upfront. The first one is on the trends in the top customers. So when I look at the fact sheet, going back for a while now, it looks like the customers outside of the top 10 are actually growing faster than the rest. So I guess my question is, because you don't actually break that out, I guess you can kind of solve for it mathematically, but what is the growth outside of the top 10 and how sustainable is that? When do you expect some refresh in the top 10 customers? That's the first question. Then on the cash flow, Anthony, I was just wondering if there's any opportunity to go to intra-quarter billing. I know that's tough, but because your explanation in your prepared remarks were about the T&M waterfall each month. So can you accelerate the billing at all to bring down the unbilled DSO? So those are my two about the top 10 trajectory and then the unbilled. Thank you.

So, I mean the top 10 dynamics, Jamie, it's interesting, because quite frankly every year those top 10, one or two move out, one or two move in. So, every year those top 10 is a slightly different mix of customers. And this year, if you look at Q1, you will notice all of my concentrations came down. What that really reflects is, we did two acquisitions last year that brought us some good name, but only a couple of -- actually none of them made it into our top 10. And I think one of them made it into our top 20. So, basically the Alliance acquisition and the NavArts acquisition brought us some good revenue, but most of that fell outside of the top 10 and top 20 accounts. So that's why you see our concentrations gets smaller for top 5 and top 10, but larger outside. So, you have that dynamic going on. Additionally, if you think historically about EPAM, a lot of our growth has always been driven outside of that top 20 as we bring on new customers that are ramping year-over-year. So it's a very balanced growth that we have. Our top accounts continue to grow, our outside grows even faster, because there are typically new logos coming in and doing a faster ramp than say what the top 10 are going to get. So, you have that dynamic all mixed into Q1 this year. Does that kind of address that question, Jamie, before I go to the --?

Yes, it does. Thank you.

So on the second one, as far as billing, it's something I've thought about. I assume you mean intra-month, not intra-quarter. We do monthly billing right now and with T&M, to break it down into multiple bills in one month, quite frankly I think would fall flat with our customers. Most of our customers will actually push us for one single consolidated bill each month for, in a lot of cases, covering most of the projects, except for some of the bigger accounts where you have multiple divisions. So I think if I went to them and said, I need to break it and I am now going to send you two bills a month, that would fall a little bit flat. And I'm not sure would help a whole lot, because it would actually create two separate billing cycles a month, whereas right now we're doing one process and we're getting it out. If we break into two, that could actually create additional problems and probably not keep our customers very happy, because they have to deal with it on their side.

Got it. Thank you for the color.

Sure.

Thank you. Our next question comes from the line of Avishai Kantor with Cowen and Company. Please proceed with your question.

Yes. Hi, good morning. Just one quick question. Can you please talk about your plans for the healthcare vertical in 2016 and beyond, if you can share some details on that?

It's fairly open-ended question. I mean, our plans, is there something specific you like us dive into? I mean, obviously, we're looking to continue to grow and expand in that segment. But, is there some specific area that you wanted to dive into?

I mean, are you looking to grow more into the payer and the service providers' area, which areas will be your focus basically?

So the total size of the life science and healthcare area right now is close to around $100 million. So, a bigger portion of this sitting inside of life science segment with large pharma companies where we have very interesting differentiating expertise around R&D, IT. And what we're trying to do, we're trying to benefit from this expertise, but extend across more general markets and in markets and sales, iterations of pharma companies with our offerings. But also trying to find a good overlay between life sciences and healthcare providers, on both providers and payers sides, like with all growing demand for engagement of patients and engagement of the doctors, which in our belief, creating certain opportunity how to utilize our skills in 4,000 digital engagement platforms, which we build up, working with consumer media and business information companies and have the appliances to this industry segment. So that's what we're trying to do.

My second question, any update on your plans to slowly grow your sales capabilities?

We are growing slowly our self-capabilities. I think our -- again, we talked about it right now, we probably have already big enough group. Last, it's very tightly overlapping with clients' management accounts, management and industry expert groups. So I think we are having good progress on this.

Thank you very much.

Thank you. Our next question comes from the line of Mayank Tandon with Needham & Company. Please proceed with your question.

Thank you. Good morning. Anthony, just going back to the topic about utilization and pricing, could you quantify the utilization in the quarter, and also the pricing improvement you saw? And then, also looking into the guidance for fiscal 2016, how does the revenue break down between headcount growth expectations and the impact of utilization and pricing?

So utilization came in at about 76.7%. So it was a little bit down from Q4 and also down from where we were this time last year, less than 1% down, but still down. Pricing, as we said, we're kind of sticking with -- we guesstimated last time at about 4% to 5% pricing. We're pretty much staying right in that range, we're not seeing anything to indicate it's going to move dramatically off of that estimate. So pricing is remaining where we estimated it last time. And I'm sorry, could you repeat the last half of the question?

So I was just trying to figure out the revenue breakdown between these three variables. I think you already answered the pricing question, but in terms of utilization improvement and headcount growth, how is that going to play into the fiscal 2016 guidance?

Well, I mean, utilization we try and keep in that 76% to 78% band, so I would expect to see it come up a little bit from where it is right now, as we move through the year. And as far as headcount growth, we were still saying headcount was going to grow somewhere in the 20% to 25% range for the year. We haven't really moved off of that guidance.

That's helpful. And then just to segue into the headcount and recruiting topic, which Arkadiy mentioned as one of the challenges for everyone really involved, but what are some of the key markets or geographies that you are scaling in and would you explore other markets where you aren't present today to expand your global footprint, from a delivery perspective?

I think by this point we are already practically in all reasonable markets. Yes, in some of them we have very insignificant footprint in comparison to total EPAM and in comparison specifically to some of the competitors. But we really growing practically across all our development centers. We are still growing in Eastern Europe and we are considering growing in APAC region, specifically because some revenue opportunities there and we need to have much more sizable development pool right in the region. As I mentioned, with the India operation, we have still kind of flown in and seeing how to do it better, but we definitely are planning to grow in this region too. So it's across all regions.

Sure. And then two final questions. One on wage level impact, the timing and if you could quantify it as well, both onsite and offshore. And then how the attrition rates are trending in your business?

Attrition, right now, for Q1, was actually down a little bit, about 8% versus 10% that we saw last year. Wage inflation is looking like it's going to be in that 4% to 5% range as well. Most of that will hit us in Q2. From a timing perspective, that's almost seen a big up tick.

Anthony, is that a blended number? If you could break it down between onsite and offshore, that will be very helpful.

No, we don't typically break down kind of wage inflation between the two locations. We look at it really at a blended rate as well.

Sure. Thank you.

Sure.

Thank you. Our next question comes from the line of Moshe Katri with Sterne Agee. Please proceed with your question.

Good morning. Going back to the questions about top 5 clients, maybe top 10 clients and obviously we've seen a slowdown. Was the deceleration in Barclays and UBS expected? Just to put it in another way, could this actually impact your ability to beat expectations this year, given the fact that you've had a massive -- pretty big deceleration here? Thanks.

Well, actually, I didn't say there was a deceleration in the top accounts. I just said the accounts outside of the top 10 and top 20 are growing at a faster clip. So we're seeing -- we're not seeing any deceleration on our top accounts. UBS is not necessarily decelerating. Barclays is flat, but Barclays has been flat now for two years. So really that's not much of a change. So I don't think we were saying that we are seeing deceleration on our top accounts, I think we're just saying that the accounts outside are growing at just a much faster clip, mainly because there are new customers coming in and they are ramping faster. It's more of a function of size dynamic than whether or not traction is there.

So, should we expect UBS to grow in line what we've seen in Q1 this year or are we going to see again numbers below that in terms of growth? And again, this is a question that we've been getting from investors this morning, was that the slowdown that we're seeing versus the rest of the business was expected or not?

Well, I mean, Moshe, we don't provide specific customer guidance. UBS is growing. We're still working with them quite extensively and we're seeing continued traction with that account. To a certain extent, UBS now, given the size of the account has a little bit of a -- lot of bigger numbers. And so we have grown over several years quite aggressively with them. So the trend is to see them continue to grow with us, kind of in line with company expectations. But I don't have specific growth guidance to provide on UBS.

All right. And then, Ark you mentioned three new accounts in financial services that you kind of picked up, and they're ramping. Can we get some more color on that? Are they U.S. based, are they European base et cetera?

I mentioned that it's during the last 24 months we have three potentially large clients, it's a European bank, but some of them with global -- very light global footprint as well.

That's fine. Last question about CIS, can you talk a bit about what's driving some of that growth? Is it new accounts, is this more a function of stabilization of what you're seeing there? Thanks.

I think it went to pretty low base, so it is stabilization from this point of view. I think ruble situation is a little bit helping as well. And between these two it's kind of firm, but it's -- again it's very proportionately small footprint right now. So even one or two mid-sized deals can influence right now the growth in the region. So I wouldn't read too much to this at this point.

Got it. Thank you.

Thank you. Our next question comes from the line of Joseph Foresi with Cantor Fitzgerald. Please proceed with your question.

Hi. I was wondering, would you say that demand is actually accelerated, given the seven new deals that you talked about and are all those clients new to the digital engagements?

You know, like I was pretty often repeating that we're still a small player in this market, even with our practically over $1 billion run rate. And seven -- definitely it's working for us, but I don't think we can justify any statement of acceleration for the whole market with this decision. So that would be my answer. And what was the second question?

Were all the clients new to digital?

Not all of them new -- okay, can you specify more? You are asking, if this clients never did digital projects or all of them kind of coming to us because of digital or shrink?

Yes, and more likely, are they doing -- had they been working with a different provider in digital and moved over to you or they're new to sort of doing digital?

It's a combination of all of this. Some of them moving to us from competitors, some of them with new initiatives, and for some of them it's very new initiative. Some of them have already good experience. So fixed assets and no fixed assets. So, all of the play.

Got it. Okay. And then, regarding Europe in general, maybe you could just talk about your growth expectations for some of your European clients, particularly given some of the macro climate things that we've seen in the news?

I mean, our expectations, we don't really give, again, guidance by region, but we expect kind of all our regions to grow in line with the guidance that we've given. So we don't really provide any specific geographic guidance, but we remain optimistic on Europe, as well as North America.

Okay. And then --

And it's difficult to say that it's more easy to predict what's happening in Europe versus North America right now, especially in North America, as well for U.S. and Canada, and nothing perfect right now anyway.

Got it. Okay. And then, the pricing pressure that was kind of cited earlier in the call, where was that pricing pressure coming from exactly?

I don't think we alluded to any pricing pressure. I think we're just saying we're not seeing price up ticks as we've seen in the past year. So we're still seeing some improvement on our pricing, it is just not as optimistic, because it's partially impacted.

I think I mentioned something between these lines, mostly on the general statement, which you were asking before. There are general concerns, there are potential macroeconomic pressure across Europe and North America and with all things which happen in -- as we know what's happened in Europe and what's -- election campaign in U.S. So it all can put in additional pressure practically on all clients. What we say, despite of all of this, with our focus on specific subset on the market, it's not really impacting us. That was what I wanted to express, so I am sorry if it was confusing.

I got it. So, basically what you're saying is that you're getting the price increases, you're just not getting anything above you would expect, I guess it's probably --

At least mitigation this result, impacting our pricing situation.

Got it. Okay. Thank you.

Thank you. Ladies and gentlemen, we have come to the end of our time allowed for questions this morning. I'll now turn the floor over to Mr. Dobkin for any final remarks.

Thank you everybody for participating today. Again, it was a good quarter in our view, and we're looking forward to talking to you in three months. Thank you very much.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.