Good day, thank you for standing by. Welcome to the EPAM Systems first quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Straube, Head of Investor Relations. Please go ahead. Thank you, operator. Good morning, everyone. By now you should have received your copy of the earnings release for the company's first quarter 2023 results. If you have not, a copy is available on epam.com in the investor section. With me on today's call are Arkadiy Dobkin, CEO and President, and Jason Peterson, Chief Financial Officer. I'd like to remind those listening that some of the comments made on today's call may contain forward-looking statements. These statements are subject to risk and uncertainties as described in the company's earnings release and SEC filings. All references to reported results that are non-GAAP measures have been reconciled to the comparable GAAP measure and are available in our quarterly earnings materials located in the investor section of our website. With that said, I'll now turn the call over to Ark. Thank you, David. Thank you for joining us today. 3 months ago, we shared some details of what we're thinking about 2023 and how we saw the main factors and trends driving our performance during the year. As you will recall, we anticipated some level of market slowdown in general demand, but we're not certain of the impact level of the slowdown in our own portfolio yet. We also saw that some of our customers were mitigating the risks of exposure due to the war in Ukraine and were showing signs of managing those risks by diversifying work streams to some other partners. With the understanding of all of that, we were proactively investing in building scalable quality delivery locations outside of our traditional comfort zone to consistently deliver comparable engineering quality across all of our growing global delivery markets. We also shared that we were expecting to continuously optimize operations across our global delivery locations to bring the cost structure back to our traditional metrics in near and medium time frame. Despite a number of the EPAM specific challenges, we believed that the market for our services continues to be strong, and our proposition remains extremely relevant. We were broadly expecting a general uplift in demand going into the second half of 2023. Today, three months later, we understand that with the visibility we had in prior quarters, we underestimated the breadth of the macroeconomic slowdown and the depth of the impact, specifically in the transformational sector of the IT services market. As you know, we always stated that our customers are almost exclusively Global 2000 enterprises, leading global platform companies and venture backed emerging tech firms who rely on EPAM to design, engineer, and deploy exactly life scale transformational and digital engineering programs. Helping them to grow and to differentiate themselves based on technology advanced solutions. Our work largely support their disruptive business model, accelerates growth, and specifically targets new product data and cloud platform development and modernization programs. Such work was and is in our focus area and represents a very significant share of our revenue, especially in comparison with most of other companies within the global IT services segment. Exactly that type of work was largely responsible for our significantly stronger growth rates during the last few decades. Unfortunately, it is exactly those programs are all currently showing visible signs of weakness. Instead, during the last three months, it become very clear that the economic environment is more focused than it has been for decades on cost optimization, which for now benefiting more traditional outsourcing firms with strong cost takeout offerings. We understand this is likely a continuing story as the markets adjust to the new economic conditions and the investment climate changes. It means that with all global and regional impact on demand and the headwinds associated with the war, we must accept the picture for EPAM is more complex and nuanced, and yes, visibly changed today from what we shared with you just three months ago. Before we go into what we're doing to address the immediate challenges and to share some of our more tactical priorities and efforts, I want to restate our view on our mid and long-term positioning in future beyond 2023 growth perspective. Let me start with something we all know well. Technology change and its disruption of traditional business models was the main growth driver during the last decades. During those decades, we saw only three relatively short recessional periods for the technology sector. There is simple evidence that those companies who invested in their digital transformation during the slow periods and those who adapted to newTech and applied new business models realized by the tech faster versus those who just focused on straight cost cutting become the new leaders in their markets. For us, each of those short downturns led to resurgence in demand for our unique breed of services, consequently, to our historical growth rates of 20%+ and on very consistent and long-term basis. We believe that nothing changed from that trend, and we are in the middle of another term where we about to adopt a new wave of technology impact. This is why we believe that the current situation is temporary, and that in line with the past, we will see a similar comeback pattern, pushing companies we strive to lead for accelerated investments in new and disruptive complex solution based on rapid adoption of new advanced technologies. With that, we also believe that we will continue to benefit from our traditional capabilities and our delivery track record. That give us the confidence that we are fundamentally better positioned for future accelerated growth than most of other market players. Those critical EPAM pillars includes, first, our continuous focus on differentiated product and platform development versus more traditional outsourcing BPO and package implementation deals, and our engineering DNA built over decades. Those make us the best partner to learn, understand, and implement new solutions utilizing the next generation technologies. Yes, we don't do want to share it with you in anticipation of the likely question that with the public adoption of generative AI and widespread use of large language models or LLMs, we already have dozen active use cases across a global network of practitioners in all our verticals and horizontal functional areas that we are actively proceeding with both internally and with our customers. Second, our investments and broad deployment of EPAM Continuum integrated consulting services push strategy and experience even closer with engineering, and together accelerating the value we can bring from investments in data and machine learning and GenAI technologies by advising on what is possible tomorrow and what can be made real today. Third, all our customer engagements and our people are enabled by our own digital platforms, which preparing us much stronger for applying enhanced capabilities of ML and AI and LLMs to drive increased work productivity and knowledge sharing at a new global scale for us. To sum up, in our view, even with complicated macroeconomic headwinds, the market still points toward disruption and demands companies to transform again to address the challenges posed by many emerging technologies, including such as generative AI, which everyone is talking about it today. What is difficult to predict right now is when this comeback will start at full speed. We believe that it will be happening rather sooner than later, in quarters, not in years. Right now, we obviously have an immediate and different challenge. Let us talk about our last quarter and our thinking about the rest of 2023. With all the complexities of current environment, our performance in the first quarter was solid. While that gives us a better start to move further into complex 2023 environment, we have to acknowledge that the combination of conditions we talked already today of general pullback and delays on transformation spend and the new risk concerns taken by our customers has now translated into a revision to our initial revenue expectation for a year. With this new view, we are adjusting visibly our full year revenues and EPS outlook, and during the year, expect to be thinking more about sequential growth metric versus our traditional year-over-year trends. Jason will talk about all relevant details in his section. For now, as long as we are seeing contracted budgets for new build business, we will be adapting a three-pronged approach to navigate the current environment. First, putting all possible efforts to address our current customers' most pressing tactical items, including the mix of engagement models, cost takeouts, and consolidation priorities while protecting our share of wallet and long-term relationships, all possibly leading to lower short-term profitability metrics. Second, winning and quickly growing new business through increased focus on sales and GTM motions and partnerships, especially across those champions who would like to use this slow time to build a competitive advantage. Over the last two, three quarters, our global business field organization and specialized practice teams have focused on developing new offerings, new engagement models, and new ways of working with our customers, and have done so with some success and new momentum in new logo acquisition. Which will still take some time to realize with larger revenue impact down the line, especially in the current economic climate. Third, continuously investing in our strategic priorities, which are staying in line with what we communicated before. Expansion of differentiated consulting agency data ML/AI and cloud capabilities building. Improving our offering by delivering strategy and implementation simultaneously. Expanding our engineering DNA across all strategic global delivery location, all in anticipation of the sharp return on demand for the next generation transformation services. With that, as part of our continuous investment strategy, I want to share some updates on our global delivery expansion programs. During the past quarter, we have made good progress in both maintaining the level of delivery quality in Eastern Central Europe and strengthening such quality in Central and Western Asia, where both years benefited from integrating strong EPAM talent moving to many new locations across the regions. As part of our heritage and our core differentiation, Eastern and Central Europe delivery, and most notably our Ukrainian operation, will continue to be a cornerstone of our proposition while we accelerate our investments in new center of excellence and while we continue to hire across our global footprint for high demand skills. As part of the global delivery strategy, we continue to focus on building our further our two currently fastest-growing regions, India and Latin America. In addition to opening several new locations across those geographies, we are happy to see sizable work streams starting and expanding there. Now, not only from our existing clients, but also with brand new logos who are attracted by advantages demonstrated by EPAM in those regions. It's also important to mention that the configuration of our client footprint in those still relatively new for us geographies now very much represents our traditional client mix with some of our top 10 customers, but also new ones across multiple verticals, from large corporations to technology platforms, firms, and to software product companies. In our view, it's a very good illustration of the quality of the services we are delivering from the region, confirming that continued investments into engineering excellence programs, education, and integrated delivery platforms bring the results we expected to achieve today. Also, with experience of the past few years, we are now able to stand up new locations across EPAM global footprint in months versus years by leveraging all elements of our digital platform ecosystem and strong talent acquisition capabilities. We believe during the next few years, we will be able to build the most geo-balanced delivery talent platform on the market. To conclude, we believe that while we are experiencing and addressing accordingly very specific but still temporary challenges, fundamentally, we are moving in the right direction. Our strategy for future accelerated growth is based on delivering complex business solution driven by advanced disruptive technology and quality engineering. Many of those solutions require unique alignment of consulting and implementation services and are specifically attracted to the client base consisting of leading global enterprises whose markets are driven and disrupted by continuous technological transformation. We do believe that such enterprises will have to come back to significant investments into technology build component to lead and disrupt further their respectful markets, and they will need partners like EPAM to progress. With that, I would like to pass to Jason to share more details and numbers for Q1 and for our changing outlook for the rest of the year. Thank you, Ark. Good morning, everyone. Before covering our Q1 results, I wanted to remind you that in addition to our customary non-GAAP adjustments, expenditures related to EPAM's management commitment to Ukraine and costs associated with the exit of our Russian operations, business continuity resources, and accelerated employee relocations have been excluded from non-GAAP financial results. We have included additional disclosures specific to these and other related items in our Q1 earnings release. In the first quarter, EPAM delivered solid results. The company generated revenue of $1.21 billion, a year-over-year increase of 3.4% on a reported basis and 4.9% in constant currency terms, reflecting a negative foreign exchange impact of 150 basis points. Additionally, the reduction in Russian customer revenues resulting from our decision to exit the market had a 220 basis point negative impact on revenue growth. Excluding Russia revenues, year-over-year revenue growth would have been 5.6% reported and over 7% on a constant currency basis. Beginning with our industry verticals, Travel and Consumer grew 4.9%, driven by solid growth in travel and hospitality and muted growth in retail. The ongoing exit of Russia operations also impacted growth in this vertical. Absent the impact, growth would have been 6.7%. Financial Services grew 4.1%, with strong growth coming from asset management and insurance services. Excluding Russia customer revenues, growth would have been 12.5%. Business Information and Media delivered 4.2% growth in the quarter. Software and High Tech produced no growth. The lack of growth in the quarter reflected a reduction in revenue from a former top 20 customer we mentioned on our Q4 earnings call, generally slower growth in revenues across a range of customers in the vertical. Life sciences and healthcare declined 10.1%. Growth in the quarter was impacted by the ramp-down of a large transformational program mentioned during our Q4 earnings call. Finally, our emerging verticals delivered strong growth of 14.7%, driven by clients in manufacturing, automotive and energy. From a geographic perspective, America is our largest region, representing 59% of our Q1 revenues, grew 3.4% year-over-year, or 4% in constant currency. EMEA, representing 38% of our Q1 revenues, grew 10% year-over-year or 13.3% in constant currency. CEE, representing 1% of our Q1 revenues, contracted 68.8% year-over-year or 70.8% in constant currency. Revenue in the quarter was impacted by our decision to exit our Russian operations and the resulting ramp down of services to Russia customers. Finally, APAC declined 9.4% year-over-year or 6.7% in constant currency terms, and now represents 2% of our revenues. Revenue in the quarter was impacted primarily by the ramp down of work at a financial services client. In Q1, revenues from our top 20 clients grew 5.3% year-over-year, while revenues from clients outside our top 20 grew 2.3%. Moving down the income statement. Our GAAP gross margin for the quarter was 29.3% compared to 33.4% in Q1 of last year. Non-GAAP gross margin for the quarter was 31.5% compared to 33.3% for the same quarter last year. Gross margin in Q1 2023 reflects a negative impact of lower utilization and some year-over-year compression in account margins. GAAP SG&A was 17.5% of revenues compared to 20.3% in Q1 of last year. Non-GAAP SG&A came in at 15.3% of revenues compared to 15.6% in the same period last year. Both GAAP and non-GAAP SG&A expense in Q1 2023 include $9.5 million in severance related expense incurred as the company works to better align its cost structure with the current demand environment. GAAP income from operations was $120 million, or 9.9% of revenue in the quarter, compared to $129 million, or 11% of revenue in Q1 of last year. non-GAAP income from operations was $178 million, or 14.7% of revenue in the quarter, compared to $189 million, or 16.1% of revenue in Q1 of last year. Our GAAP effective tax rate for the quarter came in at 19.6% versus our Q1 guide of 18%, primarily due to lower excess tax benefits related to stock-based compensation. Our non-GAAP effective tax rate, which excludes excess tax benefit, was 22.9%. Diluted earnings per share on a GAAP basis was $1.73. Our non-GAAP diluted EPS was $2.47, reflecting a $0.02 decrease compared to the same quarter in 2022. In Q1, there were approximately 59.3 million diluted shares outstanding. Turning to cash flow and our balance sheet. Cash flow from operations for Q1 was a positive $87 million, compared to a negative $52 million in the same quarter of 2022. Q1 2022 cash flow was negatively impacted by an increase in DSO and the payment of a higher level of company-wide variable compensation based on our 2021 performance. Free cash flow was $79 million, compared to a negative free cash flow of $75 million in the same quarter last year. We ended the quarter with over $1.7 billion in cash and cash equivalents. At the end of Q1, DSO was 69 days and compares to 70 days for Q4 2022 and 69 days for the same quarter last year. Looking ahead, we expect DSO will remain steady throughout 2023. Moving on to a few operational metrics. We ended Q1 with more than 51,100 consultants, designers, engineers, trainers, and architects. Production headcount declined 7.1% compared to Q1 2022. The net decrease in headcount is a result of the reduction in Russia-based headcount, a lower level of hiring across the organization, and a largely completed program designed to produce modest levels of encouraged attrition. Our total headcount for the quarter was more than 57,450 employees. Utilization was 74.9% compared to 78.4% in Q1 of last year and 73.6% in Q4 2022. Now let's turn to our business outlook. We are beginning to see the results of our focus on generating demand from new programs and customers. However, we are also seeing a continuation in the uneven demand environment that began in Q4 2022. The global economic environment has not yet stabilized sufficiently to support client confidence. The demand environment continues to be characterized by slower decision making, caution around spending and program ramp downs due to uncertainty in certain client end markets. As a result, our overall level of demand is not improving sufficiently to support our initial revenue outlook. As highlighted during our Q4 earnings call, our operations in Ukraine have not been materially impacted and our teams remain highly focused on maintaining uninterrupted production. Our guidance assumes that we will continue to be able to deliver from our Ukraine delivery centers at productivity levels at or somewhat lower than those achieved in 2022. Consistent with previous cycles, we will continue to thoughtfully calibrate our expense levels while investing in our capabilities and focusing on the preservation of our talent in preparation for a return of demand. We expect headcount will continue to decline somewhat in Q2 due to limited hiring and more typical attrition, and we will limit hiring in the second half until we see improving demand. We expect utilization in the mid-seventies throughout the remainder of the year. As a reminder, the exit of our Russian operations and the reduction in Russia customer revenues produces a tougher year-over-year revenue comparison primarily in the first half of 2023. Moving to our full-year outlook. We now expect revenue will be in the range of $4.95 billion-$5 billion, reflecting a year-over-year growth rate of approximately 3%. On an organic constant currency basis, excluding the impact of the exit from Russia, we expect revenue growth to be just over 3%, both at the midpoint of the range. We're currently expecting sequential growth in both Q3 and Q4. We no longer expect to be able to generate double-digit year-over-year growth in either quarter. We expect GAAP income from operations to continue to be in the range of 11.5%-12.5% and non-GAAP income from operations to continue to be in the range of 15.5%-16.5%. We expect our GAAP effective tax rate to continue to be approximately 21%. Our non-GAAP effective tax rate, which excludes excess tax benefits related to stock-based compensation, will also continue to be 23%. Earnings per share, we expect that GAAP diluted EPS will now be in the range of $8.11-$8.31 for the full year, and non-GAAP diluted EPS will now be in the range of $10.60-$10.80 for the full year. We now expect weighted average share count of 59.4 million fully diluted shares outstanding. Now moving to our Q2 2023 outlook. We expect revenues to be in the range of $1.195 billion-$1.205 billion, producing a year-over-year growth rate of less than 1%. On an organic constant currency basis, excluding the impact of the exit from Russia, we expect revenue growth to also be less than 1%, both at the midpoint of the range. For the second quarter, we expect GAAP income from operations to be in the range of 10%-11% and non-GAAP income from operations to be in the range of 14%-15%. We expect our GAAP effective tax rate to be approximately 20% and our non-GAAP effective tax rate, which excludes excess tax benefits related to stock-based compensation, to be approximately 23%. For earnings per share, we expect GAAP diluted EPS to be in the range of $1.82-$1.90 for the quarter, and non-GAAP diluted EPS to be in the range of $2.38-$2.46 for the quarter. We expect a weighted average share count of 59.4 million diluted shares outstanding. Finally, a few key assumptions that support our GAAP to non-GAAP measurements in the second quarter and remainder of the year. Stock-based compensation expense is expected to be approximately $33 million for Q2 and $38 million for each of the remaining quarters. Amortization of intangibles is expected to be approximately $6 million for each of the remaining quarters. The impact of foreign exchange is expected to be negligible for the remainder of the year. Tax effect of non-GAAP adjustments is expected to be around $9.5 million for Q2 and $9 million for each of the remaining quarters. We expect excess tax benefits to be around $6 million for Q2, $4 million for Q3, and $2 million for Q4. In addition to these customary GAAP to non-GAAP adjustments, and consistent with the prior quarter in 2022, we expect to have ongoing non-GAAP adjustments in 2023, resulting from Russia's invasion of Ukraine. Please see our Q1 earnings release for a detailed reconciliation of our GAAP to non-GAAP guidance. Finally, one more assumption outside of our GAAP to non-GAAP items. With our significant cash position, we are generating a healthy level of interest income. We'd expected an elevated level of interest income relative to past years when we developed our original full-year guidance. However, due to the larger positive impact on EPS in 2023, we are updating our assumptions regarding interest income and making them explicit. For the remainder of the year, we expect interest income to be $8 million for Q2 and $7 million for each of the remaining quarters. Lastly, I'd like to thank our employees for their continued dedication and focus on our customers. Operator, let's open the call for questions. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. The first question will come from James Faucette with Morgan Stanley. Your line is open. Great. Thank you very much. Appreciate all the color and detail so far this morning. It sounds like most of your revision and view for the rest of the year is attributable to macroeconomic environment. Just wondering if you can kind of give more detail on the underlying assumptions there. I know back in the previous quarter, you had talked about that there was some engagement and re-engagement that you needed to do with clients. I'm just wondering how that has gone and if that engagement and those kinds of conversations are impacting your outlook at all right now. Good morning, everybody. I think you're asking if, because we were highlighting last quarter kind of two parallel trends. One of them concerns coming from clients because of special conditions we are working, and second was a general slowdown in the economy. What is the main driver here? I think, definitely both of them were playing a role in our previous estimations. I think, at this point, we definitely see the economy driving the behavior of the clients and the biggest impact on our kind of guidance and forecasting what's happening. On top of this, if you remember, our previous guidance call was at the beginning of February, and already in the beginning of March, we were already hearing news from the banking sector, from North America first, then very quickly from Europe as well. All of this were translated to increased caution as client, which was very visible specifically on the transformational programs, as I mentioned. I think at this point, we believe it general slowdown is more critical than any trends. Got it. Thank you for that, Ark. Then, you know, I guess from the ramp downs and softness, any sense of how much of that? It sounds like you feel like that is probably broad-based, but any clarity on those ramp downs and how much of that may be idiosyncratic to EPAM given delivery challenges? It sounds like you think it's more really macro driven. I just wanna make sure I understand that. Yeah. That's exactly what I'm saying. Clearly after our previous call, some new things were happening. In our view, all of them were driven by client caution based on the economy. Great. Thanks for that, Ark. Please stand by for our next question. Our next question comes from Darrin Peller with Wolfe Research. Your line is now open. Hey, thanks, guys. If we could help just by maybe dissecting a little bit more around the demand environment versus what you're seeing that's more specific to some of the regions you're in now, some of the newer regions. What I mean by that is really just whether or not there's been anything that is tougher to execute from some of the new regions you've moved into post Russia, post Ukraine, or is that really not a factor and instead it's really just demand and at the end of the day, you have all the talent you need executing the way you should. Then I guess a quick follow-on related to that is just pricing dynamics to pass through. What's the latest on, you know, the wage environment in those newer regions and how you're executing on that and, you know, your ability to pass through on pricing around that? I think that's what we were trying to bring, kind of the color during this morning, each which we were doing. There is definitely like when the economy acting like this, clients, definitely reacting on this accordingly, and the cost and pricing and discounts all come into the play. This is part of the life right now. It's started several quarters ago, and we were talking about it, but it's become very visible specifically today. That's exactly what we try to highlight, that we're executing kind of with multiple, with multiple approaches. One of them, yes, we do something which, not necessarily our traditional approach. We're trying to put ourselves in client shoes. We're trying to understand what we can do and help in short term, tactically changing some models and focusing on ensuring that we maintain a relationship with the client and continuously serving them. That's a big portion of what's happening today. That's answer to your question. At the same time, there are still transformational deals still happening, not at all at the level it was like 12 months ago. We're focusing on this, and we continuously do this. We have to innovate in the future, as you mentioned, but definitely cost pressures here. No, no real challenges in terms of delivery or the ability to add headcount or to get work done. As Ark said, you know, it's really an issue of kind of the uncertain macro environment and, you know, clearly more uncertain than we expected by the time we kind of get to summer. We think that's having an impact on customers' investment decisions. From a wage standpoint, we did do our promo campaign here in Q2. As we talked about, you know, we clearly were seeing wage inflation over the last year, but I think you're gonna see a more muted wage inflation environment, through the remainder of the year. Yeah. Just the pricing environment is, you know, clearly, not one that is super supportive of price increases. We're finding, you know, both clients are cautious in terms of spend and in terms of rates. Even certain new engagements, you know, are requiring that we sort of sharpen our pencils a little bit. Just a very quick follow-up. You guys have always done a good job of having more visibility than most, and you try to take that into account in guidance being conservative at oftentimes. I mean, you know, how do we feel about it now? I know you probably, given the macro uncertainty, wanted to take as much of a stab at being conservative as possible in this case. Is that fair or? Listen, we so-- we understand, what you're asking, but I think we reflect on exactly what we're seeing right now. Unfortunately, last quarter, we were seeing this differently. Understood. The stability right now is very different, like, this is pretty new environment. I don't think we can compare this with second quarter of 2020. It was different reaction of the clients, much more sharpened. Right now it's different. Yeah, that's what we're seeing. I think everybody need to think about quarter by quarter adjustments right now. Yeah. Also what will be the next quarter? Okay. Understood. Thanks, Ark. Thanks, Jason. Please stand by for our next question. The next question comes from Bryan Bergin with TD Cowen. Your line is open. Hi, guys. Good morning. Thank you for taking the questions. First one is to follow up on budget behavior. I'm curious if you're seeing clients cut and outright cancel programs or if this is more so deferral and delay of spend, so more like a wait and see approach. I'm trying to understand if there is potential pent up recovery that could actually form later this year or if the potential budget dollars are more or less out for 2023. I think we also try to indicate how we're thinking about it. Based on the, what we saw in our previous life, based on what we think happening with technology right now. We mentioned that we're thinking in terms of quarters, but that's a question how many quarters, 2, 3, 4 quarters, not in terms of years when the market will restore. That's our belief, and we're making mistakes as everybody else. In this case, still the same, quarters versus years. Yeah. We saw those couple of ramp downs that we talked about, which one in the healthcare space and one in the tech space. Those were largely, or not largely, they were very much sort of economy based, a client making a decision just based on kind of how they were looking at their future in revenues and profits. What we're seeing today is more kind of, let's say a trimming or adjustment to spend, which is generally, you know, a contraction. Bryan, it's not people saying, "Hey, look, I'm not gonna do any more work." It's just people sort of, you know, reducing their spend. As Ark said, eventually we think that people return to a need to make the investments to make their businesses competitive and successful in the future. It's definitely a combination across all of this. When somebody telling you that we will delay for 1 quarter, we will start next quarter, and then next quarter they're saying we have to delay it for another quarter, and when this happens for several, then okay, that's not a consolation, but it's definitely not allowing us to count on this. Okay. That's helpful. Okay. just shifting over to margin here. Can you just talk about any update around your thoughts on structural margin as the business does recover and then near-term levers to balance profitability and the global diversification efforts? I'm just trying to get a sense on how you're expecting gross margin really to trend forward. Yeah. I think with the updated guidance is that, you know, we're probably thinking that utilization is gonna remain more in the mid-70s rather than the high-70s in the second half. However, we do have characteristics in the second half, which generally the higher bill dates in Q3, the Social Security caps and a little bit of trend up in utilization. I am expecting that gross margin will be maybe somewhere around the 33% for the second half. SG&A and other areas of, you know, variable expense, we're definitely working to control. SG&A will likely be below 15% as a percentage of revenue. What we're looking to do is still run the business at sort of close to 16% for the full year. What that means is the second half will probably be closer to our, you know, the top end of our traditional 16%-17% range. Okay, thank you. Please stand by for the next question. The next question comes from David Grossman with Stifel. Your line is now open. Thank you. Good morning. I wonder if I could just go back to a question that was asked a little bit earlier. If I look at your guidance for the year and just take the midpoint of about, you know, $5 billion, it looks like you are you know, kind of guiding to sequential increases in revenue in the back half of the year. You know, I think, Ark, you said you're guiding to what you see. Does that imply that you have some visibility on backlog or new ramps that give you confidence, you know, that revenue growth will, you know, kind of accelerate sequentially in the back half of the year. I think we're seeing programs which starting to show up in conversations. Based on this, we think for moderate increase in demand. Especially like if you think about how much technology potentially changing as we speak, a lot of experimentation starting, and we're seeing a lot of conversation across practically all industry components. That's, that's how we're get right now for the H2. Yeah. That it will be moderate increase. Yeah. Despite, you know, obviously the guidance for Q2 and some of the growth figures you see in the top 20 and the below top 20s, we are seeing a significant amount of new logo activity. There's a fair number of wins, a lot of new MSAs being signed. The challenge right now, David, is that most of those new programs are relatively small, they're not contributing to the same extent, revenue growth as they might have in past years. We are sort of hopeful that they'll grow over time. Just a quick comment on the growth rates that we saw with the top 20 and the below top 20 is with the movement of clients between those cohorts, and particularly the 2 clients we've talked about in technology and healthcare. When they move from the top 20 to out of the top 20, it tends to distort the growth rates, particularly in the below top 20. That's why we're seeing a somewhat lower level of growth outside our top 20 clients. Got it. Yeah, just to go back to, you know, your comments, you know, I guess 90 days ago when you know, I think you talked about, you know, a client that shifted a workloads to another vendor, and you just, you know, really didn't get notification, I guess, until late last year. Have you seen any other major clients shift workloads to other vendors, you know, over the course of the last 90 days, or any activity that would suggest that's still a possibility this year? I don't think we saw during the last 90 days, specifically this, we saw more delays and more delays in decisions and delays with the status of programs which we were promising. At the same time, there is a pretty big consolidation efforts across the industry. specifically consolidation efforts based on the pricing and cost cuts and cost kind of savings. it could be impact across the portfolio in this, in this area for sure. just to be clear, This is the whole part of the pressure, and that's exactly what we try to... I tried to explain this morning that when transformational programs on hold, cost become in the way and driver, and we all know it. There is redistribution of the budgets in the results. Again, that's why we show you these numbers which we show. On another side, it's critically important, and that's what we believe that with the number of quarters, the situation will be changing. We, many times we are seeing how this redistribution of work were coming back, because then you need like actually to deliver and deliver with the quality and deliver on new technologies. This is changing. We unfortunately have to share our projections right now as is exactly because of this, because of cost situation and many decisions which clients are making right now. All right. I think I got it. Thanks very much for that, Ark. Please stand- Thank you. Please stand by for our next question. The next question comes from Maggie Nolan with William Blair. Your line is now open. Thank you. Jason, you started to get into this a little bit, but you've mentioned in past quarters that new client additions were kind of a big focus area for the sales force for 2023 after, you know, focusing more on delivery in 2022. Is that still an area that you're really focused on investing into for 2023, or is that sort of changing alongside the demand environment? No, that continues to be a really significant focus of the company, right? In addition to maintaining the existing relationships and growing in existing accounts, you know, there's a huge focus on new logo activity. Just the only challenge right now, in past years, you might have initiated a new relationship and seen millions of dollars of revenue in the first quarter, and maybe over $10 million in the second or third. Right now, just, you know, people are more cautious about their budget so that the relationships are starting with kind of smaller projects. I think over the period of quarters may take into 2024, I think a number of those new relationships are gonna produce growth, and I think it will begin to show up in our numbers. At the same time, I think I talked with some of you kind of face-to-face. We got a little bit of a two steps forward, one step back scenario where we are having, you know, some of the larger clients not discontinue a relationship or shift work to another vendor. What they are doing is they're trimming their budgets. While we get some of these, you know, incremental revenues from new clients, we also have these offsets that are coming from larger clients that are looking to sort of trim their spend. That's kind of the behavior that we see in Q2 and was more pronounced than we had expected when we guided in our way in February. Okay. Can you comment on how much of a priority M&A is right now or share repurchase? M&A continues to be a priority. As always, we wanna make certain that we're, you know, acquiring assets that we think can be integrated successfully and will help us sort of drive and evolve our business. We have active discussions going on today. I can't comment what we're gonna close and when, but, you know, certainly we've got some active conversations occurring and, you know, you likely would see something in the future. From a share buyback standpoint, you know, we did initiate our program in Q1. It was modest, less than $10 million, bought back, I think 30,000 shares. I would expect that we would, you know, continue to move forward with participation, although we don't have a predetermined level, for Q2, but expect to be active in terms of share buybacks in the quarter. On M&A, I would add that, it's pretty much same approach we have before. We're looking for things which is longer term, more strategic, and there is no any specific efforts to make situation better for the short term. It's all about longer term and what will be happening in a year or two is a benefit. Okay. Thanks, Ark. Thanks, Jason. Please stand by for our next question. The next question comes from Ramsey El-Assal with Barclays. Your line is now open. Hi. Thanks for taking my question. This morning, I wanted to ask about some comments you made about clients obviously shifting to more kind of cost takeout-focused work. How much of an internal pivot is required for you to address and meet that shifting demand? Do you have to reskill or invest? Does it take time to get there, or is it just a matter of you have the skills on hand, you just have to sort of change, you know, the orientation a little bit in terms of kind of getting there with your clients? We do believe we have it. Again, as you know, as we communicated, it's not a primary focus of our services lines. At the same time, we have the skills. We were building consulting organization. We have people who understand what to do in this area. From technology skills, in some situations, we have definitely capabilities to apply this for cost out engagements. We're putting our efforts around it. I don't think it's about specific reskilling or anything else. It's still, even with this effort, it's relatively a small portion of what we're doing in general, and there is no goal to repurpose company for this type of engagements. This is much more tactical effort for us for the those quarters which we believe this type of trend will be happening before the market will come back. We still invest in very specific area for the future growth. Okay. Could you also provide a little more color on the pipeline right now? Has there been a shift to any particular type of deal, large versus small? Is it more new logo versus expansion? Are there easier, you know, is there a path of least resistance there? How is the composition of the pipeline evolving? I mean, there are still, you know, a handful of large deals that are out there that we expect to generate revenues in the second half that are significant, you know, mainframe to cloud type engagements that will have significant revenues. I think we talked about this in the last conference call as well, which is that, you know, most of the new work that we're seeing is generally smaller in size. There are relatively fewer clients who are kicking off large scale transformation programs at this time. They're looking for kind of near term, return on their investment. They're looking for modifications, updates, to existing platforms rather than sort of creating new platforms. Again, it's back to the, you know, the, let's say, the instability in the macroeconomic view. As long as people aren't certain whether the bottom's gonna be in Q3 or Q4 or Q1 of 2024, it just makes it, you know, more difficult for people to make investments in larger scale transformation programs. Got it. Thanks so much. Please stand by for the next question. The next question comes from Ashwin Shirvaikar with Citi. Your line is now open. Thank you. Good morning, folks. Ark, I appreciated the thoughtful comments at the top of the call. First question though is to Jason. Is the idea, Jason, to hold the line on operating margins? Because we kind of mentioned quarter-to-quarter variability and the need to be flexible, based on revenues. You know, not having visibility into revenues. Is that the idea that you will hold the line on margins? Yeah. you know, our focus continues to be on a return to stronger demand over some period of time, as Ark talked about, whether that's 2 or 3 or 4 quarters. to make sure that we're making investments in the business that will allow us to, you know, continue to advance our capabilities and be successful in the market. At the same time, we are being very careful in terms of spending, really addressing, you know, discretionary costs, you know, controlling anything that's more variable in nature. Ashwin, trying to drive the business at least to the, you know, to an around a 16% or maybe slightly below that range. Trying to maintain profitability throughout the year at 16%. What you'll find then is that the second half will have stronger profitability just 'cause there are characteristics that make gross margin stronger. With, you know, continued focus on SG&A efficiency, I expect that SG&A will go below 15%. Again, it'll be a focus on the longer term, so we don't wanna do anything that hinders ourselves to return to growth. At the same time, we wanna be careful about our discretionary spending. Understand. As it sort of relates to, you know, the portfolio of services and your delivery, do your clients, particularly the older, more... the more tenured clients, do they all understand at this point that you have a more diversified delivery than before? That it's not, primarily, you know, three Central and Eastern European countries. Does that come up as a factor? I just want to also clarify, from Ark, you know, is there an intent here to get into things like application management and so on more deeply, broaden out the service portfolio in response to what's going on? That's what we doing as we speak. At the same time. Let's from the begin. First of all, absolutely clients understand that we have a different delivery kind of structure today. That's what also I was talking this morning about that we bring in new clients and existing clients come into new geographies which they didn't experience with Wipro before. We have pretty good progress because it's not already like 1 or 2 quarters, it's already almost like 18 months. We have a new clients, which is very typical clients as, which are striving for engineering differentiation and technology services, which come into new locations with us as well, and appreciate the differentiation which we show them. Again, as I mentioned, the direction was taken even before war started for more globalization of our services and investments were done in different regions for some time. First of all in India, very actively in Latin America as well. There are new geo-geographies for us like Central Western Asia, which is benefiting strongly from the talent coming from our traditional, historical locations as well. Which is a little bit more predictable from this point of view for clients too, because some projects moved there because of the talent moving there as well. From this point of view, there is no choice for everybody. Everybody understand direction, that's what we're doing. From the portfolio of the business, definitely we're doing more new things. We experimenting with new stuff. We also were growing over the years application management component as well, but it's still relatively small portion of what we do. It's addition, usually in addition to transformational work, which we're doing. As soon as we're doing big modernization, we're taking on increasing components of application management as well. Still focus on transformation and on transformation program, as I mentioned. What we're seeing right now that they delayed, and we do believe that while Q2 definitely was impacted, I think some of them will start to be realizing in H2, and that's why we believe that it would be some growth there because there are too many programs, and we don't believe that clients will be able to afford to delay them for long. They already delayed them for multiple quarters. I think it's, it'll slowly start in H2. Understood. Thank you for that. Please stand by for the next question. The next question comes from Jason Kupferberg with Bank of America. Your line is open. Good morning, Ark and Jason. This is Tyler DuPont on for Jason. Thanks for taking the question. I know we're cutting off on time, so I'll try to be quick. I think you briefly touched on this, but maybe just to ask it in a different way and just to clarify on my end, if you could spend a bit of time talking about the linearity of the quarter. For example, the last print was in the second week of February, and at that time, you talked about some positive green shoots. Did the demand picture fall off significantly in March, particularly? If so, is that fully attributable to the banking sector crisis? Just any clarity there would be helpful. All right. I think we do believe that the news of the market was impacting a lot of decisions. It's not necessarily impacting just banking or financial services, but most of the other industries put a lot of programs on hold. You can see what's happening, like this announcement of other technology-driven companies during the last couple months. This is all part of the same very kind of sharp reaction of the situation. For specific transformational aspect of the services which we provided. I'm reminded that this is big majority of what we do. Okay, great. Thanks, Ark. I appreciate that. And then just as a follow-up, it seems like, you know, while financials and travel seem to put up pretty solid growth numbers, ex Russia, I was a little bit more surprised to see the life sciences and to a lesser degree, high tech, experience that bit of a slowdown. I was just wondering if you could parse out what you're seeing in those verticals, like how much of that decline, for example, was from the ramp down of those large clients mentioned on the last call, compared to, I guess, as Jason described, more of a trimming of spend across the client base? Yeah. quickly on the life sciences healthcare, it's largely, you know, a significant sort of ramp down. Specifically, you know, they effectively sort of ended a program and have kind of restarted some work, but not specific to that program. There's been a, you know, very significant difference in the revenues we generated last year from that client, from the revenues we expect we'll generate this year. From a high-tech standpoint, again, you've got the one client, but then you also just have a generalized kind of slowdown in spend as I think we all see in the news from the high-tech sector. If you will, this is in some ways could be sometimes accidental or driven by a couple of clients, but in some way it's very logical industries, if you think. Software and high tech, more obvious life science, if you think how much investment was done there during the COVID time and how much over investment was done. With current situation, some things should be redone, and a lot of thinking should be done where investment were put. I think it's a lot of thinking inside the life science industry right now after huge spend during the pandemic or big portion of pandemic. Okay, thank you. Great. Okay. Thank you. At this time, I would now like to turn the call back to Ark for closing remarks. Thank you again for joining us. Yes, it's a unusual period in our kind of life after significant growth and now seeing a little bit different world. Again, I would believe that technology will be driving the future. We didn't talk too much about all this nice conversation about OpenAI, et cetera. We do believe that a lot of engagement, digital ecosystem will have to be rebuilt very, very soon. It will bring clients for competition and those who would like to drive the future will come to us for help as well. Thank you and talk to you in three months. This concludes today's conference call. Thank you for participating. You may now disconnect.