EPAM Systems, Inc. (EPAM) Q2 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Quarter 2 2013 EPAM Systems Incorporated Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Anthony Conte, Vice President of Finance. Please proceed, sir.

Thank you, operator, and good morning, everyone. By now, you should have received the copy of the earnings release for the company's second quarter results. If you have not, a copy is available on our website at www.epam.com, together with our supplemental data sheet. The speakers we have on today's call are Arkadiy Dobkin, CEO and President; and Ilya Cantor, 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. I would now like to turn the call over to Arkadiy Dobkin. Please go ahead, Arkadiy.

Thank you, Anthony, and welcome, everyone. I'm happy to report that EPAM's second quarter performance was strong and at the top end of the guidance for the quarter. Revenue was $133.2 million, representing an increase of 28.3% year-over-year and 7.2% sequentially. Non-GAAP operating margin was 16.3% or 110 basis point sequential improvement and seasonal target range. Market demand for our services continues to be strong. We saw growth across all geographies and segments. Services and financial vertical were up 54% on continued strength in investment banking, mostly in Europe. IT and technology increased by 36% on positive momentum in several key accounts and continued demand for innovation and expertise in emerging technologies. We have seen important growth in our travel and consumer vertical, especially in North America. This was driven by both organic efforts and synergies related to the acquisition we made in 2012. This was our second fastest-growing vertical in North America with 52% growth. It also brought one of our new top 10 clients to the company. North America was up 35% year-over-year, benefiting from growth in U.S. IT and technology clients as well as from recent acquisition synergies. Europe continued to show strength with 33% growth. Much of this was coming from the financial services sector. CIS was down 1%, and this requires a short explanation. You might remember from our call at the same time last year that we had one operating recognition in the second quarter of 2012 related to the project in Ukraine sponsored by World Bank. Excluding this one-off nonrecurring revenue, CIS would have been 35% on a year-over-year basis. Today, CIS represents still 12% of total revenue. Our billable headcount increased by 15% to 8,900 engineers. While we have slightly increased utilization versus last quarter, we continue to carefully manage the large enough branch with now global delivery optimization to make sure they are fully capable to engage experienced and trusted professionals into new production activities. This also allows us to have enough time in specific situations to prepare our delivery personnel for new, sometimes challenging, opportunities require advanced technical skills and strong industry knowledge. In addition to closing one of the branches, we are working on improving our talent acquisition and talent management organizations across all locations, which is one of our corporate priorities. While mentioning [indiscernible], I would like to share that as we stated in our previous calls, we continue to focus on our client operations, sales and marketing capabilities. Here in Q2, we brought to the company new senior talent in that area, both in North America and Europe. We also just hired new global head of markets. And in addition to the inclusion of the proximity to a number of strategic clients, we expanded EPAM's presence in several new locations across North America and Western Europe. Finally, additional investments were addressed in our ultimate goal of continuously improving software engineering skills and developing other key emerging competencies using EPAM. During the second quarter, we have brought on board a new CEO [ph] to lead our investments in developing continuous specific engineering processes and, two, specialized application frameworks in a number of other software assets critical to differentiate ourselves from some solutions both in the value and in quality within our competitive market. Also, we deployed the EPAM [indiscernible] quality which makes our delivery environment even more sophisticated and agile, with faster deployment and real-time cloud was taken. Most importantly, it's given every one of our engineers the ability to understand how to work in cloud environment and translate this knowledge to the current and future client initiatives with ability to improve time-to-market cycles. We also brought strong, experienced leadership to our Big Data Competency Center while drafting several senior technologists to our U.S. company. We have deployed over 100 people and upgraded almost the entire internal system portfolio. This is also significant for our multimillion investments this year, including critical licenses and internal label. While we already have one of the best in the market internal applications and tools, which allow us to ensure control and reliability across all project life cycle stages, we are now focused on developing a highly social and collaborative environment, robust analytics and reporting and very efficient and tightly integrated into our system and scale custom relationship management optionality. Our recent acquisitions continue to perform in line with our expectations. Our Canadian business is strong with retail and telecom making significant progress. Our newly created digital strategy and experienced design solution process based on the Empathy Lab acquisition at the end of last year is successful by multiple measures. Major account acquisitions and demand from existing EPAM accounts are strong and creating new synergistic opportunities amongst our solution units. In most of these situations, the combination of local relationships and technical expertise, together with our group global delivery platform, is demonstrating an obvious win for us and for our clients. Our pipeline and visibility continue to be stable and predictable. These allow us to invest in the business, invest in bench strength and improve how we run our operations. We also continue to feel good about our leading position in complex software engineering services and solutions segment of the general IT services market, which contributes to our ability to continue growing above the industry average. I think it would be appropriate to mention at this point a couple of industry-specific conditions. First of all, in June, we were ranked #6 in the Forbes 2013 list of America's Fastest-Growing Tech Companies. This is prestigious for the company to achieve as we were ranked just behind some of the most well-known tech companies like LinkedIn, Facebook and Apple and a set of many other very well-recognized global technology brands. It's a tough list to get in. We're competing with other eligible [indiscernible] suppliers. So we were very proud of this recognition in general and also by the fact that we are one of the only 2 companies from IT services industry included in the Forbes Fast Tech 25. Second one, the results from the CT [ph] second quarter 2013 CIO survey were issued where 250 CIOs were questioned. These IT services were either gaining or losing share of the IT spend in dollars with the organization. In conclusion, we were -- EPAM and Cognizant were key the global share gainers. Likewise, this is a very respectable company to keep. It also reaffirms the fact that EPAM continues to gain market share on the strength of our differentiated service offering and expertise in emerging technology solutions. Now I will turn it over to Ilya, who will discuss financial performance in more details.

Thank you, Ark, and good morning, everyone. I'm going to spend a few minutes taking you through the details of the second quarter results, and then I will talk about our outlook for the third quarter of 2013 and our guidance for the year. As usual, the full details of our results can be found in our press release and the quarterly fact sheet located on the Investors section of our website. As detailed in our press release, our second quarter revenues grew 28.3% over last year to $133.2 million and 7.2% sequentially, at the top end of our guidance, while non-GAAP net income grew by 13.5% to $19.2 million compared to last year and 16.5% sequentially. Revenue in constant currency grew 28.6% year-over-year and 8% sequentially. Non-GAAP earnings per share were also at the top end of our guidance with $0.40 per share for the quarter compared to $0.37 per share in the year ago quarter. Looking at revenue by service lines, Software Development continues to be by far the largest service offering, growing 30% year-over-year to $90.3 million and representing 68% of total revenue. Testing also grew 30% over last year and now represents almost 20% of revenue. Maintenance, Support and Infrastructure services together grew 18.8% to 10.6% of revenue. As we grow, we continue to diversify and broaden our customer base. While our top 20 accounts had solid growth in the quarter of 18.7%, the rest of the client base increased by 46% over last year. At the same time, we continue to strengthen our relationships with our top accounts. Barclay's, where we had a solid relationship over the years, remains our largest account and now represents 10% of revenue in the quarter. Our customer loyalty remained strong with 93.7% of revenues coming from customers who have been with us for at least 1 year and 78.3% of revenues coming from those who have been with us for 2 years. Excluding stock compensation and acquisition-related costs, SG&A was 19.3% of revenue as compared to 18.8% last year and 20.3% in the preceding quarter. The increase over last year is primarily due to the investments we continue to make in order to support the rapid growth and expansion of the business. Non-GAAP income from operations was $21.8 million for the second quarter, representing a 14.3% gain over the second quarter of the previous year. For the second quarter of 2013, non-GAAP operating margin was 16.3%, up 110 basis points from the preceding quarter but down from 18.4% a year ago due again to the investments needed to support our growth. As discussed before, our target non-GAAP operating margin range is 16% to 18% on a full year basis. Diluted share count for the quarter has increased by 1.6 million shares to 48 million from the same quarter last year mainly due to equity grants to employees and acquisition considerations. Turning to the balance sheet, we ended the quarter with $107.5 million in cash. Cash provided by operating activities during the quarter was $8 million. Unbilled revenue was $57.7 million at June 30 compared to $33.4 million at December 31, which follows the normal seasonal pattern. In July, we subsequently billed $26 million of the $57.7 million unbilled. Net cash of $7.5 million was used in investing activities during the quarter, down $5.2 million from the second quarter of 2012 primarily as a result of a Thoughtcorp acquisition. Net cash provided by financing activities was $4.6 million, primarily due to the funds received in connection with employee stock option exercises. Accounts receivable were $82.8 million at the end of Q2, up 5% from year end, and we finished the quarter with a DSO of 59 days. IT professional headcount increased 15% over last year to support 28.3% revenue growth. Our ability to leverage headcount to drive revenue growth is primarily due to 2 things: one, a favorable pricing environment; and two, as Ark mentioned, slightly improved utilization. We ended the quarter with 8,900 engineers. Our effective tax rate was below guidance by about 100 basis points, up 19% compared to 16.2% in the prior year quarter. The increase over last year was due to the impact of acquisitions made in 2012 in North America. Turning to our guidance for Q3 and the balance of the year. We are seeing a healthy demand in our environment from existing accounts, and we see solid business development activity in pipeline. Therefore, we continue to feel confident in the outlook we have provided to you last quarter. As such, for the full year, we are reiterating our prior guidance of revenue growth of 23% to 25% year-over-year. On a full year basis, we continue to expect non-GAAP net income growth to be in the range of 12% to 15% with a tax rate of approximately 20%. For the third quarter of 2013, we expect revenues between $135 million and $137 million, representing growth of 23% to 25% over the third quarter of 2012. The non-GAAP diluted earnings per share are expected to be in the range of $0.41 to $0.42 based on a weighted average of 48.7 million diluted shares and a 20% tax rate. All guidance excludes any nonoperating currency gains and losses. With that, I would like to turn the call back to the operator to open it up for Q&A.

[Operator Instructions] Your first question comes from the line of Moshe Katri of Cowen.

Ilya and Arkadiy, can you talk a bit about your pipeline, especially a look at your visibility for the next 6 to 12 months. Maybe in the context -- in this context, you can talk about new client wins for the quarter, the number of new client wins, which verticals and then which regions.

I think our visibility very similar to what we saw in the past. So we usually can project for the next 12 months around 80% of our revenue. So it's very similar right now for the next quarter. Again, we -- we're talking about like we provided guidance already. So this was a number. It was the number. So during the last quarter, we probably brought around 12, 15 new clients, some of them potentially big, some of them more kind of on discretionary side. We don't exactly how it would be developed yet, but it's -- again, it's very, very usual. I don't think we see any differences as we were like communicating in the previous calls in comparison with the previous periods. In regards to locations or geographies, it's also distributed pretty normally for us, basically proportionally to our main focus verticals. I would say that we have also interesting opportunities still with clients which we working -- opportunities which we're working together with our recently acquired companies. Not necessary for existing clients but exactly on the synergies between what these companies were doing before and what we're doing together right now.

Right. Just 2 small ones here. Just to supplement the spreadsheet that you have on your website, I didn't see the numbers for top 1 client for the quarter. There -- you have top 5 and top 10. And then maybe kind of talk a bit about the FX losses that you had during the quarter.

Our top one client is now Barclays, and it has been Barclays. They've just reached 10%. And what's the second part of your question, Moshe?

FX losses for the quarter?

FX losses. We had some sort of regular translation remeasurement losses that we included in the P&L of about, I want to say, $160,000. The actual economic currency losses that impact margins were actually around $200,000 or $300,000 because we remain relatively naturally hedged. As far as impact on the top line year-over-year, FX impact was a negative $850,000 or so. Sequential was about negative $900,000 or so.

The next question comes from the line of Steve Milunovich of UBS.

Can you make some more detailed comments on the pricing and wage rate environment, please?

So on the pricing, as we mentioned in the script, we see a relatively favorable pricing environment. And this is consistent with the last 2 or 3 years. We are able to leverage the skill set that we provide our clients and the sophistication of our solutions to warrant relatively good price increases. So that remains strong. As far as the wage inflation, the year is not yet done. We have typically one promotion cycle, one defined promotion cycle at the beginning of the year and one smaller cycle, midyear. Those are in line with our expectations so far. But again, the year is not over yet.

The next question comes from the line of Ashwin Shirvaikar of Citibank.

Good quarter. I guess my first question is with regards to sales productivity. Could you comment on how that initiative is progressing?

So by sales productivity, you mean what exactly?

So you have traditionally, obviously, grown the most through word of mouth and so on. But more recently, you have both hired and 2 acquisitions got a larger sales force. How is the integration of that sales force progressing? How are you -- are you -- are they able to bring larger contracts to you? How you're managing that? If you could comment on it.

Yes, we increased sales capacity, and we mentioned during today -- talk already that we invested in this area. So at the same time, on the big picture, the proportion of contribution of new deal, probably very, very similar to what we said in the past. In absolute numbers, it's clearly growing approximately 30% in comparison. So -- and it require new number of people. So I mentioned also that the sales force which we inherited through some acquisitions is actually working pretty productively. In some cases, it's a very solution-oriented sales force, which is opening for us doors for new big accounts and we are leveraging our global delivery capability to expand there. It's not necessarily related to bringing like very large deals right away. On another side, we have examples like this. We mentioned that -- already that we have one of the accounts which we started 12 months ago come in to be one of the top 10 accounts this year. So I think it's improving, and it's improving with our expectations. But there is not yet any dramatical changes, and we're not expecting such.

Okay. No, that's useful. Just to clarify, are these salespeople generally quota-carrying salespeople? And if they are, how are they doing versus that quota?

Yes, this is like there is a number of people who have quarterly targets. And on average, they're doing well. So I don't know on what level of details you'd like us to comment right now, so -- but...

Sure. I mean...

Ashwin, Ashwin, this is Ilya.

Yes.

I mean, so far, as you've seen, our year has stacked up pretty much in line, slightly above our expectations and what we guided to at the beginning of the year. So the targets are likewise relative to that cadence. There has been some good wins to where some things are a little bit higher than others, and it all kind of averages out to be relatively similar to how we perform against our guidance.

You -- Ashwin, you can see this through some kind of indirect numbers when the proportion of the top 5 and 10 clients is decreasing, which means that we're bringing more revenue on the bottom line, which is potentially growing. But as we always say, again we have a big number of accounts in $5 million range, which is still growing. So it's very difficult to kind of draw the line what's coming from -- what contributed significantly from new accounts or existing accounts right now. And to be actually focusing on growing existing accounts very, very seriously as well.

Right, okay. My last question really is with regards to M&A. You've made those -- these 2 acquisitions, Thoughtcorp, Empathy. Both seem to be going well. You do have a very strong balance sheet here and cash generation. Any thoughts on M&A pipeline either from a strategic perspective or from just from an opportunistic perspective?

So we're clearly looking at this from strategic perspective, but we are not declining when opportunistically something that's interesting come in. That's all I could say. And there -- we are always open for new opportunities there, and we're constantly working on this. But that's a -- I don't think we can comment anything more than that right now.

The next question comes from the line of Mayank Tandon of Needham. Mayank Tandon - Needham & Company, LLC, Research Division: Ark and Ilya, I wanted to get a sense from you if you could give us some color on the penetration level within your, say, top 20, top 30 clients. Where are you in terms of their budget? I'm trying to get a handle on how much you can grow with these clients. And then also, if you could just talk generically about your win rate versus your competition in the market and how that's been trending in the last, say, 6 to 12 months.

So the first question, as I mentioned, we do have the potential with our top 20 or even probably 40 clients. So usually, our portion of the budget there are relatively small in comparison to some big players which we compete in. Like if you think about financial services, large players have $100 million, $150 million budgets with some of the largest world banks where we have right now, like, in tens of millions. So -- and this would be true practically for all our -- not all but majority of our top 20 clients. So it's a big potential there. So and the second question was?

Win rate. Mayank Tandon - Needham & Company, LLC, Research Division: Well, on your win rates, how that's been trending.

You ask how we compare versus our competitors. Here, I have difficulties to comment because I don't know exactly statistics, how it's working for competitors. Mayank Tandon - Needham & Company, LLC, Research Division: Well, let me ask you this. Have you seen a change in the competitive landscape at all in terms of who you're baking off against when you're in the market for these deals?

Okay, that's easier to answer. I think it's very consistent for us for the last couple of years depending on specific vertical and geography. We've seen different type of competitors, but it's very consistent for -- again for the last couple of years. Mayank Tandon - Needham & Company, LLC, Research Division: Just one more follow-up. I wanted to get a sense from you if the regulatory side of health care and financial services is an opportunity. Many of your peers have been talking about that as a key growth driver for the next, say, 12 to 18 months. Are you investing in those areas? Should we count on that as being also a growth engine for you?

We're looking at this, and we're doing some specific efforts to benefit from this. But how it would work, we will see like in next few years because this is also a very competitive area where a lot of people are focusing on. So we, including ourself in it, too. So like, for example, we're bidding right now for one of the largest deals probably in financial services, but it's a very big competition there and many hundreds of million dollars. So what happened with this, who knows?

The next question comes on the line of David Grossman of Stifel. David M. Grossman - Stifel, Nicolaus & Co., Inc., Research Division: I wonder if we could just go back to some of the investments that you're making in the business. And obviously, this has been a fairly big investment year for you. Do you think that we're at some steady state equilibrium, if you will, in terms of spending levels as a percentage of revenue? Or do you think, just based on where we are here midyear, that the growth, even relative to the strong growth of the business, that those investments may need to increase over the next 12 to 18 months?

So I don't think we're looking at this as a percentage of the revenue. So we're more looking at this as what actually should be done to make sure that we can grow in the future. So -- and it's a little bit like try and see, and that's what -- probably will be continuous for us. I don't think we would be looking from just percentage basis investment type. David M. Grossman - Stifel, Nicolaus & Co., Inc., Research Division: So I guess with that said, Ark, do you -- are there any areas -- if we kind of look at the portfolio of investments we've made over the course of the year, where do you feel you've made the most progress? And where are areas, I guess, that you feel you need to step it up even more?

So like investment, for example, in sales organization and marketing or internal sales to assets, so we're doing investment during the last periods and we're doing this right now, some of them starting to bring some returns, some we still need to see. So I cannot like really predict what would be happening exactly during the next 12 months. We're analyzing different areas and changing kind of direction a little bit or keeping it. So very difficult, very difficult to speculate on this topic. David M. Grossman - Stifel, Nicolaus & Co., Inc., Research Division: Okay, fair enough. And just looking at the maintenance business. As always, your maintenance kind of stream as a percentage of your overall mix has been different than the competition. I think obviously, your model is a little bit different. Are you thinking any differently about the maintenance business and how big you want that to be as a percentage of the mix? Are you pretty comfortable with kind of where it is and how it's trending relative to the growth of the overall business?

I think, David, there is like also -- just from understanding of my Internet and support in changing environment, when there is like very difficult questions how cloud, for example, or any new technology trends actually changes the landscape. And what we're seeing with our clients, which is, we do believe, more kind of technology driven, that maintenance and support type of service is changing as well. It's not like regular legacy maintenance and support, it's a maintenance and support of very kind of live systems where deployments could be happening like in daily times or even more often for online marketing or e-commerce systems. And in this case, it's in reality, maintenance and support means something very different from what traditionally were considered. And it's very difficult to separate as well because it's practically nonstop life cycle of development and support of the systems. So we're looking at this differently, and it's even statistically very difficult to separate what's the development of new features and new releases. Again if you're talking about the systems like online booking for travel industry, for example, or it's a traditional maintenance and support. From this point of view, yes, it's a small percentage, but it's mostly probably related to more traditional part. And for this new type of systems, it's very difficult to separate. So it's a little bit a gray area.

[Operator Instructions] The next question comes from the line of Alexander Vengranovich of OTKRITIE Capital.

I want to come back actually to the split of your revenues by vertical. So I see that the banking and financial services vertical is continuing to grow faster than the others. So I'm just wondering whether this trend that's driven by the market is more the client-specific issue for you, so you see more demand from your specific client. And what are actually the drivers of faster growth for financial services industry? And do you continue probably, and do you expect to increase the share of that vertical in your revenue mix?

I think you can look at this a little bit differently because if you look at most of our competitors, financial services would be a very big proportion of their business, sometimes 40%, 50% or even 60%, 70%. And this is a very big number of companies in our competitive landscape. EPAM, based on the history and how it was developed, we started, as we mentioned many times, from strictly software engineering for technology companies. So we're kind of catching up in this area and growing this proportionally to the size of the total market because clearly, financial services still is the #1 champion in global services. So that's why it's growing faster. We become bigger in financial services, recognizing their need for more technology-driven lenders. And we're getting our share. So that's probably the reason why it's growing faster than anything else. And I think we still have some room to grow there.

Yes, okay. And with regards to your revenues, so are you growing more of, let's say, the existing clients or you're adding more of the new accounts to financial services industry?

We have already good growth in several existing large clients, but we added a number of very interesting new clients to the list as well.

The next question comes from the line of John Stirtchen [ph] of JPMorgan.

I had 2 questions. Firstly, just on the sales force. I think you mentioned you hired a new head of marketing during the quarter and also put some new salespeople into various places in Europe and North America. Could you just give us a little background on the kind of people you're recruiting for this -- for these kind of roles? Firstly, are they coming from competitors or are you hiring people with specific vertical expertise? That's going to be the first part of that. Second question I had, more for Ilya, was just on the difference between GAAP and non-GAAP net income this quarter. It was one of the biggest divergences in the past several quarters primarily driven by quite a large stock-based compensation line. Is there any reason it was big this quarter? And is there any guidance you can give on how that might trend for those who often look at the GAAP measure more than the non-GAAP measure?

So the first -- on the first question, it's an easy answer. So it's both. We're hiring people with very strong industry expertise who have experience to manage a very large account and grow very large accounts and work -- have experience in the industry like 5, 10 years. On another side, we bring in some people who have specific expert knowledge in our focused areas. So it's really both.

And on your question about the difference of GAAP and non-GAAP and divergence, there was, in particular, a onetime charge in the stock comp line related to an acceleration of a restricted stock award that we gave as part of the -- one of the 2 acquisitions we made last year. We basically parted ways with one of the senior managers who got the stock award, and, by GAAP, we had to accelerate. And that was about $900,000 worth. In other words, our stock comp would then benefit from not having that piece amortized over the next 2 years. As you probably know, looking at reconciliations, other areas of difference between GAAP and non-GAAP net income is purchase accounting, foreign exchange and other onetime gains or losses. But that was the biggest thing contributing to the uptick in stock-based compensation.

If I could ask one follow-up question on -- now the acquisitions have been with the company for at least a small amount of time, is there anything you can say about how -- well, your confidence that you can maintain a culture that's made the company successful so far while adding on more onshore acquisitions, which obviously come with a different culture and heritage?

Yes, that's an interesting question. It's clearly a challenge for anybody. At the same time, we have a history of kind of doing pretty well there because if you look at the history of our acquisitions, most of the people which came to us have been with the company for a very long time and becoming part of our management team. So when -- the last 2 acquisitions, you're also correct, were a little bit different. It was mostly done with staff in North America. And from another point of view, I think it creates really good opportunities for the employees of these companies to work in global, big companies and kind of integrate and start to work with global delivery. I think it's a mature way to give people much bigger opportunities. So far, we didn't see any real problems in this area.

The next question comes from the line of Moshe Katri of Cowen.

Just I have a follow-up on the 2 acquisitions that you've done last year, Empathy Lab, Thoughtcorp. Maybe you can give us an update on maybe the integration. Maybe you can give us an update on some of the benefits that you've been able to get through your pipeline from those acquisitions. Obviously, Empathy focuses more on digital media and entertainment. Have you seen anything -- obviously, this is kind of the hot area right now in terms of demand. Maybe you can talk about that. And Thoughtcorp is based out of Canada. Maybe you can talk about that, too, in terms of your ability to kind of penetrate that market.

Yes, we mentioned some stuff in our first talk today. And in regards to Canada, we talked about it several times. I think we see confirmation of our regional kind of expectations about synergies between strong on-site presence in the market and our global delivery capabilities. And what's happening exactly confirming all those expectations. We have pretty visible growth in Canadian market today. We have a couple of clients, which one of them already top 10. And we're hoping that during the next 12 months, maybe another one will become pretty large as well. So it's, again, developing based on our expectation pretty much. Also on Empathy Lab's side, we've done this specifically to improve our capabilities in media entertainment and retail space, where you have seen that our technical skills and our ability to deliver complex applications like in some solution expertise and solution leadership to kind of get engaged in big deals from the very beginning. What we've seen after practically only 6 months of working together is that it's not only allows to open new doors and offer much broader total solution to the clients, it's also bringing a lot of benefits to the existing clients where we come in and offer services which they didn't expect it from us before, where we're starting to pull some competitors in the areas which they didn't expect us to play. And it's also this type of expertise which we bring and actually generating additional revenue around it for us. So if -- we're already seeing this confirmation. So we hope like in another 6 to 12 months it would become much, much more visible.

[Operator Instructions] The next question comes from the line of Steve Milunovich of UBS.

I just wondered, I think you were talking about hiring a marketing executive and trying to enhance your branding over time. Can you give us any thoughts there?

We've just hired a person, so let's talk about it next quarter.

And I'd like to turn the call back over to Arkadiy Dobkin, CEO and President, for closing remarks.

Yes, so thank you, everyone, again for joining. We're happy with the quarter results, and we look forward to talking to you next quarter. Probably we'll be able to address your questions better and in more details likely. So some of them which we're trying to defer to the next periods. Thank you again very much.

Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining. Have a very good day.