EPAM Systems, Inc. (EPAM) Q4 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the EPAM Systems Fourth Quarter and Full Year 2014 Results Conference Call. [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. 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 fourth quarter and full year 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 good morning, everyone. Thanks for joining us today. I am pleased to report that while the fourth quarter showed some challenges, primarily with the currency volatility in several of our markets and the continuing conflict in the Ukraine, it proved to be another strong quarter for EPAM. So despite of all that, we closed with revenue of USD 202.2 million, above consensus and at top end of guidance, it's 28% over prior year and 5% above last quarter. While I would note that this was the first quarter for us with over $200 million in revenue and we were very proud of that, I still would like to highlight the fact that if you look at our results in constant-currency basis, year-over-year growth would have been close to 37%, and sequentially Q4 would show 9% growth. Clearly, Russian rubles were the primary challenge but we also had exposure related to the euros, pounds, Canadian dollars and Swiss francs. For the full 2014, we are finishing at the top end of our guidance at USD 730 million, which is 31% over previous year. At the same time, please note that for those last 12 months we lost approximately $15 million in revenue, making our constant currency growth at 34.2% for the full year. Anthony will provide more detail into the financial results and more clarity around the currency situation and impact on the full P&L. At this moment, I would like to share some highlights to 2014, which was a very different year than we expected 12 months ago when we tried to predict our future. For the first time in our history, we've had to deal not with high-tech or general financial crises as we experienced in 2000 and 2001 and then in 2008 and 2009. But with the large scale political and not only political crisis in Northern countries for EPAM has thousand of talented people and important operational infrastructure. This wasn't something we or anybody around us anticipated when we prepared ourselves for 2014. As a result, during this year, we had to make many adjustment to our original plans, and act very much in real time, to be able to continuously deliver while addressing many unusual challenges. Today, 12 months later, we can say that 2014 was actually another year of growth and strategic exploration at EPAM that was very much in line with the growth we communicated since our IPO day, which actually happened almost exactly 3 years ago. During this year, we proved that many of our efforts and investment from prior year indeed brings the company to the next level. We expanded our industry solution focus into a new segment, life science and health care, and very -- we are very excited about prospectives we see in this area, and how we can reapply the experience we accumulated to this new [indiscernible] vertical. We significantly increased our presence in our targeted markets. You probably remember our goal of 10% of people in North America and Western Europe, now we achieved it. We added China, Hong Kong and Singapore to the EPAM map in order to support global strategic programs for our largest clients, which in turn was triggered by our expanded capabilities in digital strategy, experience design and our ability to be in the new [indiscernible] engagements. Last year, we brought into the company one new important capability service design, and now we should be able to help our customers even more, by finding new and innovative solutions to their most complex business problems, and transform their business to meet the demands of their industry-respective challenges. So let me highlight some most important recognitions which illustrate how our clients, in the whole market, sees EPAM progress into our becoming one of the leading software solution providers. First, we won a good number of top innovation awards across our worldwide client base in 2014, and this is a direct client recognition of our new value. I would like to highlight just one. EPAM won the Most Transformative Branch Experience award in the Citi Mobile Challenge, which was an extraordinary event that brought together more than 3,000 developers and 744 teams from 319 cities, 62 countries and 6 continents. It was a virtual competition hosted by Citi that is designed to accelerate digital banking innovation by bringing together the most talented and creative developers and designers in the world, to create cutting-edge applications for Citi digital working platforms. Our effort resulted in 4 ideas that were all selected for the Citi Mobile Challenge finals. Only 60 from initial 744 were selected for this. Our winning project, Citi Concierge, was delivered by EPAM digital engagement practice, which created a personalized experience for customers at Citi branch and provided analytics for the Citi to optimize branch operations. By the way, I just mentioned EPAM digital engagement practice, which is a reflection of our effort to reorganize EPAM in a way to very closely integrated digital strategy in experienced design capabilities and our traditional strong software engineering skills in complex commerce content, mobile, analytical areas. We are really focused on how to blend it together and bring very much integrated value to our clients. We also [indiscernible] as a independent unit which just loosely complement in capabilities. It is very challenging task, but we do believe we are moving into the right direction and we do believe our clients started to recognize the value too. And our digital engagement practice is just one of the examples of EPAM internal transformation, which focuses on bringing new value to the clients. So in result of all that, Forrester Research, the leading global independent research firm, cited EPAM as a global leader in the product development services space, included EPAM in the list of top 10 largest commerce solutions providers, and recognized EPAM as a Primary Agile Service player. Finally, just before the end of the year, EPAM was ranked #3 on the Forbes 2014 list of America best companies under $1 billion and also scored EPAM as the #1 among technology companies on the list. All of this shows the impact we have had at some of our world's greatest companies via the technology solutions we built, the public equation and digital experience we created and the obstacles we have overcome time and time again on behalf of our clients. I think it's now a good moment to also note that during the past year, we put an effort to defining our true self in continuation of what we started several years back. In 2014, we took the time to look at what really drives us at EPAM, what kind of company we want to be, and how indeed our brand should reflect it. As we stated before, we have been engaged in a year-long process to evolve many elements of our brand. We will be changing how we speak and how we look, and at this point, planning to launch our new brand by the end of Q2. With that, I will turn to Anthony to give more structural information and to provide our guidance for this 2015.

Thank you, Ark. Good morning, everyone. I want to spend a few minutes taking you through the fourth quarter and full-year results, then I'll talk more about our 2015 outlook. As usual, the full details of our results can be found in our press release and on the quarterly fact sheet located in the Investors section of our website. As Ark mentioned, Q4 was another great milestone for EPAM as we had our first quarter of revenue over $200 million. Fourth quarter revenues grew 28.3% over last year and about 5% sequentially to $202.2 million. This was at the top end of our guidance and with a full year, we ended at $730 million, which was 31.5% growth over prior year. The currency situation was clearly a big issue for revenue in this quarter, led by the precipitous decline in the Russian ruble and lesser declines in another key currencies. During the quarter, we lost over $13 million in currency versus last year alone and almost $8 million sequentially. On a constant-currency basis, we grew 36.7% over Q4 last year and 9% sequentially. For the full year, we lost approximately $15 million, making our constant-currency growth 34.2% for the full year. Based on our Q4 currency breakdown, we're still over 60% of our revenue base in U.S. dollars. The great British pound and the euro account for approximately 18%, Canadian dollar is 7%, Swiss franc's at 5% and the Russian ruble is down to only 5%. The remaining 5% is spread across a number of different currencies, none of which account for more than 1% individually. North America remains our largest segment, representing 50.4% of our full-year revenue, up 30.4% year-over-year. Europe was up 42.3% year-over-year now representing 39% of revenue. CIS, given all the troubles, was actually down 15% year-over-year, representing only 7.6% of revenue. Our top 20 accounts came in at 55% of revenue growing 29%, while all other clients grew 35% year-over-year. Turning to the expenses. We completed the quarter with over 11,800 IT professionals, an increase of approximately 27% compared to 2013. Approximately 7% of this growth was from acquisitions, bringing the organic headcount growth to about 20%. Currency generated some benefits to the cost of revenue in the quarter, when compared to prior year and the quarter. There's approximately $9 million of benefit versus prior year and $5 million versus prior quarter. In the interest of providing a full currency picture, the allocation of our currencies across our expense base is roughly 65% in U.S. dollar; 9% was ruble-based; 8% in the Hungarian forint; and 5% was in the great British pound. The remainder are insignificant. Utilization for the quarter was at 77.7%, about 3% higher than Q3. This was primarily due to the heavy vacation months of July and August, and brings the utilization back to levels consistent with the first half of 2014. For the full year, 2014 average utilization ended around 77%. GAAP income from operations increased 3.5% year-over-year to represent 11.9% of revenue in the quarter. For the full year, it increased 12.7% and represents 11.8% of revenue. Our operating results on a GAAP basis include stock-based compensation expenses, amortization of purchased intangibles, acquisition-related costs and certain other onetime items that we exclude from our non-GAAP measures. Stock-based compensation expense for the fourth quarter increased 141% over prior year, an 87% on a full-year basis. This is mainly related to the stock grants that are issued as part of the acquisitions throughout the year. During the quarter, we had several other onetime events. Due to continued macroeconomic issues in Russia and the pressure that it placed on our customer base there, we had a $2 million goodwill balance that we -- that was related to the 2006 acquisition of Vested Development, Inc. Based on those problems, that goodwill balance became impaired and we had to write that off in Q4. Additionally, as we've mentioned in the past quarters, we've had some troubles related to a contractor in Minsk that was working on the construction of a new building. Additional analysis identified another $1.5 million worth of materials and services that required a write-off in the quarter. Lastly, we had a $1.9 million fair value adjustment related to the GGA acquisition, tied to their contingent consideration, which was able to be resolved at the end of the year as well. Our non-GAAP income from operations for the quarter, after all those adjustments, increased 32% over prior year to $36.2 million, representing 17.9% of revenue. For the full year, it increased 34.1% to $123.1 million or 16.9% of revenue, both within our guidance range of 16% to 18%. None of the onetime items resulted in any tax benefits to the company and therefore, they have the effect of bringing down my GAAP pretax income, thereby increasing my overall tax rate for the quarter to 25.1% and 19.9% for the full year. We do anticipate that our cash tax rate will remain consistent with past years and be somewhere in the mid-teens. However, we're still finalizing our 2014 tax returns. For the quarter, we generated $0.62 of non-GAAP EPS, also above the top end of our guidance, and $0.37 of GAAP EPS based on approximately 50.3 million shares diluted outstanding. Now turning to our balance sheet. We finished the quarter with approximately $220 million of cash, up $29 million from September 30 and $51 million from December 31. During the fourth quarter, operating activities generated approximately $49 million of cash. Unbilled revenues were at $56 million as of December 31, a decrease of about $15 million compared to Q3. Accounts receivable were at $124 million at the end of Q4, and DSO ended the quarter at approximately 57 days. Now turning to our guidance for 2015. Based on the current conditions, EPAM expects the year-over-year revenue growth to be 21% to 23%. Non-GAAP net income growth for 2015 is expected to be in the range of 20% to 22%, year-over-year, with an effective tax rate of approximately 20%. The full year weighted average share count is expected to be approximately 51 million diluted shares outstanding. For the first quarter of 2015, EPAM expects revenues between $196 million and $198 million, representing a growth rate of 22% to 23% over the first quarter of 2014. First quarter 2015 non-GAAP diluted EPS is expected to be in the range of $0.54 to $0.55, based on an estimated first quarter 2015 weighted average share count of 50.7 million. GAAP diluted EPS is expected to be in the range of $0.34 to $0.35. Since currency is such a theme these days, I did want to provide a bit of clarity around our assumptions for the 2015 forecast. When building the forecast, we used the average 2015 year-to-date rates and assumed they remained consistent throughout the year. We do not attempt to forecast currency movements throughout the year so our forecast is subject to additional swings in key currencies. At this point, we are assuming revenue in U.S. dollars will remain just above the 60% of total, with pound and euro increasing slightly and ruble dropping to under 5% and all other will remain consistent. On the expense side, we anticipate the U.S. dollar concentration to drop slightly as we open new development centers outside of Eastern Europe and have a broader global base of IT professionals paid in their local currencies. Having said that, we still expect to have over 60% of our expense base denominated in U.S. dollars. With that, I would now like to turn the call back over to the operator and open up for Q&A. Operator?

[Operator Instructions] Our first question comes from the line of Moshe Katri with Cowen and Company.

Just to be clear, Anthony, looking at your calendar year 2015 guidance, are you factoring any FX headwinds in those numbers or should we kind of consider these more in the line of constant-currency revenue growth guidance?

What we did for our forecast is we used the average rates over Jan and Feb and built that into it and assumed that stayed constant. So that is what we've used and any movements off of that average will impact our forecast.

Okay, understood. And then, and if -- let's say, we're not looking at the FX headwinds or in the FX volatility, should we assume that this preliminary guidance is going to be to what we've done in the past, which is, we're starting the year pretty conservatively and then assuming that if all the assumptions are correct, the numbers will gradually move higher throughout the year?

It's hard to say. I mean, obviously, there's a lot of uncertainties with the currency potential. And given where things are going from a -- just a macroeconomic picture in the CIS region, so there's number of variables into that. So this is kind of our view as we sit here today.

All right. And then follow-up question, your assumptions for organic growth for 2015?

Well, organic growth is -- it's an interesting picture because we're seeing drops in the CIS region, so it's hard to break that apart. Plus, the acquisitions have been fully integrated at this point so we're actually -- it's difficult to pull apart things like GGA and Jointech, which are now cross-selling between accounts and have become essentially business units within the EPAM infrastructure. Having said that, we're going to see organically a pretty significant drop in our Russia business, both due to the severe currency drop and the macroeconomic situation, which is pulling back from there. But North America and Europe are continuing to grow over 20% in first quarter and will be in the mid-20s for the full year organically. At least that's our view sitting here today.

Our next question comes from the line of Steven Milunovich with UBS.

This is Peter Christiansen in for Steve Milunovich. Anthony, can you talk about the expectations for FX savings to the operating margin? And also, with the new depreciation expense going forward, do you anticipate still having that 17% -- 16% to 17% non-GAAP operating margin in '15?

The answer to the last question, yes. The operating margin range of 16% to 18% is still our goal for 2015, so we expect to stay in that range. And I'm sorry, Peter, I'm not sure I fully understood the first part of the question.

So assuming that there will be some operating savings with the currency impact and in addition to a lower depreciation charge going forward, as a result of the recent write-down, can you quantify what that saving could be? And I'm assuming that you're going to reinvest that back into the business throughout the year?

I assume you are -- the write-down you're speaking to is the Russia goodwill impairment, correct?

Correct.

Yes. That, actually, does not get depreciated at all. So goodwill from an accounting perspective does not get depreciated throughout the year, it gets assessed on an annual basis for impairment. If there's no impairment, the balance stays, if there's an impairment, you take the write-down. So there's really no change to our depreciation because of that write-down. It's a onetime event, will not impact anything going forward. And as far as savings from currency, the short answer is most likely. If we have savings and benefits we will continue to use those to invest in the business and keep our operating margin in that 16% to 18% range.

That's very helpful. And then, in the beginning of last year, you were predicting 21% to 23%. It looks like on a constant-currency basis, organic growth was somewhere in the high 20s. Can you talk about what really drove that outperformance this year, any specific verticals would be helpful?

I think it's very much in line with what we've said in during previous calls, like the top line revenue we're growing a lot by financial services but also -- but retail vertical. Plus we added life science and health care, and life science was performing well, too. So -- but probably, the better look would be not specific vertical but what type of work we do, and then that's again, back to our continuous message on mixing digital strategy and experienced design together with our engineering skills and building this new type of systems of engagement. We've won a number of programs during the 2014 which we couldn't even, like, consider that we will be doing, like, in 2012 or even 2013, based on new kind of integration of skills and that was actually driving additional work around these programs as well. I think that probably would be the shortest answer to your question.

That's helpful. And then lastly for me, in terms of the currency impact on your cost base, particularly your Russian operation, how have you factored in wage inflation? Is there a potential that you could begin dollar index -- using dollar index to compensate your Russian-based employees?

So we're clearly looking at the market situation, labor market situation and right now, we don't see a necessity to do this. And I don't think market reacting in this way to index it to the dollars. But again, we'll be looking at the situation and see what we have to do to be competitive on the labor market.

Also, Peter, one correction. You'd mentioned organic growth in the high 20s. It was actually, organic growth was more around 25% in 2014.

Excluding currency?

On I'm sorry, you said constant currency? Sorry, I missed that piece. But, then you're correct.

Constant currency.

Our next question comes the line of Jason Kupferberg with Jefferies.

Just another one on FX to kind of put a fine point on it. So can you just lay out for us exactly what the headwind is assumed? Just -- I know you're holding kind of the 2015 year-to-date rate constant. So does that -- where does that leave us? Is that somewhere in the neighborhood of like an 8% FX headwind that's baked into the 21% to 23%?

It's actually more around 6% headwind that we're seeing across all the various currencies.

Okay, that's helpful. And then how does it net out at the EPS line, just, given some of the associated cost benefits, is it still a headwind on EPS?

Yes. It is a slight headwind on EPS or -- yes, on EPS depending on where share count ends up, obviously. But yes, it's a slight headwind still on EPS.

Okay, understood. And then, just if we look at the quarterly cadence of what you're expecting in terms of margins and expenses, I mean, at least relative to what the Street was modeling the Q1 EPS is lower, but, obviously the full year looks just fine. So is there any inordinate amount of expense, timing related in Q1, for example or how should we be thinking about quarterly progression of margins?

Yes. We had the same issue last year with the consensus. It kind of straight lines it a little bit more than our true trend. Q1 for us is a little bit of a squeezed quarter because revenue is typically flat-to-down, and we also put in place all our promotions and wage increases. So you end up with a little bit of a compression in Q1, that then, as customers really budget and revenue starts to grow throughout the year, you see the expansion again. So Q1's always a little bit of a squeeze. We had the same issue last year with consensus.

Plus we see holidays in Eastern Europe.

Right, yes. We have the orthodox holidays in Eastern Europe and that just brings revenue down, plus a lot of budget cycles are slow to pick up until Feb, March.

Right. Okay. And then just last one for me. If we just think about Ukraine specifically, and -- Ark, I know you spend lot of time in the region in general, can you just give us sort of the latest bird's-eye view on what is happening with the operations across Europe, half a dozen or so developments in the country? I know that none of them are especially close to where the bulk of the military conflicts have been occurring, but have you had to move any folks around, among those Ukraine centers or outside of Ukraine to Belarus or elsewhere?

Yes, we didn't run special programs to relocate people on purpose from Ukraine to like Eastern Europe to Central Eastern Europe or any other locations. But we have internally, what we call mobility program, when people who would like to be relocated apply. And probably, inside of this program it was slightly higher number of people than usual. But based on the, kind of, day-to-day situation it's pretty normal, again, in line with what we have communicated during the last quarters. So yes, there is -- there are concerns and we don't know what could happen. There are still, but again, operations right now as usual and there is some movement of people, but again, it's not like in dramatically high numbers than before.

Our next question comes from the line of Mayank Tandon with Needham & Company. Mayank Tandon - Needham & Company, LLC, Research Division: Anthony, as we look at the revenue growth for fiscal '15, could you help us break it down between headcount growth utilization and any pricing increments you're expecting in '15?

Sure. Headcount growth in '15 that we are assuming is going to be fairly in line with what we were looking at this past year, probably somewhere in the 20% range as far as growing organic headcount, could be a little bit lighter than that. And as far as bill rates, we're seeing a pretty consistent trend. We've always talked about 7%, 8% bill rates, it's coming in roughly around that same range. We're still, obviously, getting actuals in from our customers and seeing where things are going to fall in but that's what we're assuming at this point, is something that is with past years. Mayank Tandon - Needham & Company, LLC, Research Division: Okay. So that would imply utilization basically remains flattish with where you've finished '14?

Yes. I mean, we finished out '14 at 77% so we expect utilization to remain right around that range, 77%, maybe 78%, but it's not going to get much higher than that. Mayank Tandon - Needham & Company, LLC, Research Division: Okay. And then I wanted to get some color on your expectations for wage inflation in '15 and also, what are you seeing on the employee-attrition front in your various geographies?

So in general, we're expecting similar numbers historically. But clearly, wage inflation right now is a big factor of again, currency rates exchanges. So we are working on this and we -- like with the previous equations, we're looking what the trend's going to be. So at this point, we expect similar numbers like previous years.

So my model includes consistent figures of past years. Mayank Tandon - Needham & Company, LLC, Research Division: Which would be high-single digits, is that in the ballpark?

Yes.

Correct. For both of them.

Right. Mayank Tandon - Needham & Company, LLC, Research Division: Okay. All for attrition and for rate inflation. Got it. And then one last question, just your comments around competition. Any new players out there you're seeing, what have your win rates been like, lately? Any change at the margin that you're seeing on the competitive side would be helpful.

You see, the market is so big and there are so many players that I don't think any specific 1 player will change the situation. And as we said before, in different segments of our markets, we compete with different players. So far we didn't see any significant changes, like maybe, the most interesting is still consolidation around like, Sapient become part of the agency right now together with the same [indiscernible] and that might be interesting impact on the some part of market we targeted -- targeting right now. So, but in general, I think we see very consistent [indiscernible] and competition.

Our next question comes from the line of Ashwin Shirvaikar with Citi.

One question I had was, 2014, obviously, a year of transition, you took a lot of different steps to diversify and so on. You mentioned preparing for the next phase. How should the financial model look like in the next couple of years in terms of your ability to sustain a low 20s -- low- to mid-20s topline growth, the 16% to 18% margin, the ability to win maybe, larger contracts, things like that?

When you're asking how financial model should look like, what do you mean?

I mean, will it be, one, now that you've made some of these investments, maybe if you go after larger contract, does that affect maybe your ability to grow faster? Is there a price to be paid in terms of operating profitability?

Yes. I think we -- and it's very difficult to see over the -- and see what kind of impact will be happening with the next year. We're looking still like -- as today, we're giving guidance for the next year and we're looking to the market, because we clearly would like to, first of all, create a value to the clients, that would give us this growth which we hope in a 20-plus percentage. And how specifically it would impact our margins in longer, longer term, we don't know. Because, like what we're doing right now is something unusual for us, we're bringing in very different capabilities and really trying to integrate them and harmonize it across the company, which sometimes putting us in an unexpected kind of ground. That's why I don't think I can give you any more data than we're sharing right now. I think we hope that with these new capabilities and this like -- you're absolutely right, 2014 was a very interesting year for us when we brought different capabilities. But some of them, still, like when we -- when, for example, Anthony mentioned fully integrated, they kind of fully -- at good extent, integrated from the approaching clients. From integration and putting the team together, which is harmonized teams working to one goal and working very effectively together is still a lot of work. And as you understand, like some of these acquisition were done in the second part of the year, it's still a lot of work to be invested. And we're learning -- we're practically learning on the job how to do it better. And from this point of view, it's not stopped so it will be continued this year, and we still have a number of gaps in capabilities which we're going to bridge through additional small acquisitions or potentially through via organic growth. So I know I'm kind of giving you fuzzy answer but that's how we operate in many respects, because market is moving so fast that we trying to catch it up and be in line with demands, and the demand's changing.

No, understood. And that's still pretty good color. One question about GGA, you mentioned the fair value adjustment, are there any more details? Is this -- and you did say it's behind you but I guess, the question's around the management team and the capabilities that came with GGA, do you still have those? I just want to make sure.

Yes, just -- I'll give you some color on the fair value adjustment. What it basically is, is it's tied to the earnout that we had at GGA. So as we closed the year out, their earnout ended on December 31. And they did better than we initially anticipated earlier in the year, and that $1.9 million is meant to reflect the incremental earnout that we will be giving them based on their final performance.

Okay. So, okay, that's basically it. The Minsk building charge, and you mentioned this in the past, but I just want to make sure, does that affect operations in any way? I mean, presumably, the building was being constructed to house -- I mean to have employees in there. So is this affecting delivery, I mean, are there alternatives that you're working towards?

No. I mean, it doesn't affect delivery. I mean, before we started construction, we would rent space throughout Minsk. And really, what it has meant is we've had to continue to rent various facilities throughout Minsk to house our folks and the delay means that we just have a delay in being able to benefit from having our own building and putting everybody in 1 place. But it doesn't really affect operations at all.

So what's the outlook now? Are you still proceeding with the construction?

Yes. We have a target date of June to try and complete the building and move our folks in probably over the summer, if all goes according to plan.

Okay. And my last question is on the headcount. U.S. investment, Europe your target was 10%. You hit it. What's the next goal?

So it's still going to grow with, again, with the change in type of services which we provide and we still -- we're still going to grow. Right now, we kind of trying to understand exactly what areas it would be and also because potentially, we will be sealing the gaps with some small M&A transactions, which again might happen, might not. We probably will look in during the next couple of years to increase it by another 2%, 3%.

Our next question comes from the line of David Grossman with Stifel. Jyhhaw Liu - Stifel, Nicolaus & Company, Incorporated, Research Division: This is Irvin Liu calling in for David Grossman. Most of my questions have already been asked so just a modeling question. For 2015, could you walk us through the non-GAAP adjustments that's assuming guidance?

Sure. So the only non-GAAP adjustments that we really, actually, forecast are going to be a little bit of FX, P&L FX which we have modeled at about $2.5 million right now, which is really a very rough estimate but we wanted to put something as a placeholder. And stock compensation is estimated to be around $31 million for the year. Jyhhaw Liu - Stifel, Nicolaus & Company, Incorporated, Research Division: Got it. And what about amortization?

Amortization. Yes, I forgot amortization of intangibles, should be about $5.8 million. Jyhhaw Liu - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And what about the drop off in D&A expense for the fourth quarter? How should we think about that going forward?

Sorry drop off in -- I'm sorry, I didn't hear. Drop off in what expense? Jyhhaw Liu - Stifel, Nicolaus & Company, Incorporated, Research Division: D&A. Depreciation and amortization.

Depreciation and amortization. Yes, I'm sorry, it's primarily related to some amortization that really just came to conclusion in the third quarter. So it was fully amortized in Q3 and we didn't have anything else ramping up at that point, so we saw a drop in overall amortization. Non-acquisition amortization dropped.

Our next question comes from the line of Alex Veytsman with Monness, Crespi. Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc., Research Division: Just to follow-up on an earlier question, as your efforts continue to shift the labor force from Ukraine to Poland, Hungary, and given the wage differential between those markets, between Ukraine and [indiscernible] countries, are you baking -- are you baking in any bottom line impact from that into your 2015 guidance?

First of all, we didn't say that we shifting from Ukraine to Poland and Hungary. We're still growing in Ukraine. That's why I'm not sure that I -- we didn't say that we're doing anything specific to shift people from Ukraine. Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc., Research Division: But are you growing the Polish and Hungarian markets? I mean are you...

Yes. We're growing, like, Hungarian market grows practically like we grew during the last couple of years. Poland growing faster, but it's much, much smaller -- smaller base. Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc., Research Division: Got it. So...

So, clearly, we are taking this in account when we model in because we have different growth perspective for different countries and we have model based on this, so it's counted in the model based on what we see today. Again, if you look -- but it's practically adjusted on quarterly, if not even monthly, basis based on the necessity for staffing for specific opportunities, specific engagement and also some external factors. Because, while I'm saying that Ukraine's still growing, clearly, like 12 months ago, we were thinking that Ukraine would be growing faster than it's happened during the 2014. So it's very much adjustable but right now, it's based on the current plans for the year. Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc., Research Division: Okay, makes sense. And then I think at some point you cited that Ukraine's labor force is around maybe 28%, 29% of the labor force kind of in that range, and then Russia is maybe kind of about half of that 14%, 15%. Can you update us on those numbers, are those numbers still intact?

It's approximately like this, right?

Yes. Ukraine, Ukraine's probably in the low 20s now, because as we have grown elsewhere they're representing a low 20s. And Russia, after acquisition with GGA, probably somewhere around mid-teens. Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc., Research Division: Well, okay. So Ukraine -- I mean, like, so it's low 20s now not because you downsized there but because you've increased the base in other markets?

More because we've seen growth in other locations, but they've continued to grow as well so it's just become diversified a bit. I mean, I just wanted to double check that Ukraine number, but I'm pretty sure...

Ukraine is high 20s and...

High 20s.

High 20s and Russia, it's around 14%, 15%.

[Operator Instructions] Our next question comes from the line of Moshe Katri with Cowen and Company.

Yes, just a brief follow up. Can we get an update on where we are in terms of the sales force headcount right now? Are we still continuing to expand that group? And then, maybe looking at the pipeline into 2015, is there anything different compared to last year or a few years ago in terms of the nature of the deals and maybe sizes of the deals?

Yes, there's still -- I've also shared in the past, we're still hiring and -- hiring people for our business development function. Again, that's not a function where we have -- where we're planning to have hundreds of people, so it's still couple dozens people across locations. So -- but we had in and kind of optimizing this operation all the time. So we probably still double this number during the last year and also, don't forget that we inherited some number of people with the small -- with acquisitions, which becoming part of EPAM. So I think the total number was doubled but again, it's all couple of dozens, not hundreds. So from the pipeline point of view, it's gradually changing the type of projects, like, if -- in 2013, it was few of the kind of projects, where we were leading from consultant or digital strategy and in 2014, these number of projects increased, and we see a lot of things where we kind of leading the new commerce or complex web content engagements, which actually drive in additional mobile engagement or analytics engagement and have too many services engagements in those areas. So I think the proportion of this type of deal is increasing, probably in line with increased capabilities to do it and better integration between this new type of skills and traditional engineering skills you have.

And are these larger deal sizes or kind of a lot of them, but maybe smaller?

So there are some of them, which looks smaller initially but, again, trigger in, trigger in more opportunities and more engagement like on the tail of this. So -- and some of them, pretty light. So we have couple very light engagement in this area last year and we see in the number of opportunities right now already.

[Operator Instructions] Our next question is from Steven Milunovich with UBS.

It's Peter again, I just have a quick follow-up. Firstly, I think you guys normally disclose at the end of the year, the number of accounts that you have and give us a sense of where that is for the full year?

Let's see. Accounts, we usually did accounts over $100,000 worth of business and that would be 306 accounts over $100,000 compared to 263 last year.

Okay. And then what was constant-currency growth in the CIS region in the quarter?

Constant-currency growth in the CIS region?

Yes. I'm just trying to get a sense of how the volume was year-over-year irrespective of currency.

I don't think it was given.

Yes, we never really break it up that finite. But if you're talking about, from a revenue perspective, ruble dropped -- let me see what the number is here...

Well, I think we can...

I don't really have it broken down by region. Sorry.

We can come back on this. But I would say the CIS region probably, didn't grow even in constant currency. Because CIS region was clearly hit by 2 factors, currency itself, but actually, the economic situation in the region, not great.

Right. Regions is down on both metrics, yes.

That's why we were pointing out that North America and Eastern Europe -- in European Union region, we're growing in pretty high numbers because Russia and -- or CIS was impacting us on both fronts.

Mr. Dobkin, there are no further questions at this time. I'd like to turn the floor back to you for any closing and final remarks.

Again, thank you very much for joining us today, and we're really glad that we went through this difficult year with results, which we shared, and talk to you in 3 months. Thank you very much.

Thank you. This concludes today's teleconference. You may disconnect your lines. Thank you for your participation. And have a wonderful day.