Source The Russian business of the IT developer has been sold, but the new owners have not yet been identified. EPAM Systems Inc. spoke about future plans in Russia and summed up the financial results for the third quarter. There is no clarity about assets in the country, but they cause losses, including those associated with the refusal of customer service and the relocation of employees. Nothing is known about the Saratov office.
Back on September 7, EPAM Systems Inc. entered into an agreement to sell substantially all of its remaining assets in Russia to a third party. The deadline for closing the deal is subject to regulatory approval, the company said in a statement. The deal has not yet been reflected in financial indicators: the company states that “due to significant uncertainty in obtaining the necessary permits” they do not consider it likely to complete the sale by the report date of September 30.
Who exactly is this third party – not specified. Open sources do not yet show a change in the founders or the head of the Russian Epam Systems LLC or Epam Solutions LLC.
At the same time, the main assets in Russia for the first 9 months depreciated by $19.5 million, and the cost of business restructuring amounted to $16.4 million. The report also says that leaving Russia by 4.7% reduced the company's revenue. This influence is expected to remain at the level of 5% until the end of the year.
It is noted that the company has $33.1 million on its accounts in Russian banks for operating expenses, and taking into account receivables, assets are estimated at $42.9 million. At the same time, EPAM does not exclude that a banking crisis or sanctions “may adversely affect the Company's ability to conduct banking operations, which may adversely affect the business and financial condition of the Company.”
ERAM's receivables are not so much worried – it is distributed among companies from various sectors of the economy, although their bankruptcy can also negatively affect financial performance.
Despite the optimism, the company noted that losses on bad debts amounted to $5.7 million, and in the third quarter alone they increased by $2.5 million. According to analysts, this “reflects the deterioration in the creditworthiness of customers in Russia.”<br/
True, in May, EPAM's bad receivables from contracts in Russia, caused by the poor creditworthiness of its clients, amounted to $8.4 million.
Among Russian clients are Renaissance Capital, “ Troika Dialog, Sberbank, Ingosstrakh, Rosgosstrakh, INTAC Insurance, Aviva, AlfaStrakhovanie, S7 Airlines, Aeroflot, Gazprom Neft, Rosneft, Rosenergoatom Concern, Federal Tax Service of Russia and others.
The company's expenses for the relocation of employees from Russia, Ukraine and Belarus in January-September amounted to $37.5 million. It directed another $38.5 million to support employees in Ukraine. In total, $100 million was allocated for these purposes. The impairment loss in Ukraine amounted to $1.3 million. Due to the termination of business in Russia, EPAM incurred $16.9 million in layoffs over the nine months.
Recall that Epam Systems LLC has 18 branches in Russia, including in Samara, Izhevsk, Nizhny Novgorod and Tolyatti. As well as two branches in Saratov, where 650 employees worked. How many of them were fired or relocated is unknown. Earlier it was reported that “a significant number of EPAM employees from Russia and Belarus have already moved to other countries, and the company expects the relocation of even more employees from these countries.”
Reference. EPAM Systems Inc. founded in 1993 in Minsk, is a developer of custom software for various sectors of the economy. The company has offices in 25 countries and provides services to clients in more than 40 countries. In Russia, the company has two legal entities registered – Epam Systems LLC (since 2001, software development) and Epam Solutions LLC (1996, software and computer trade). They have one director – Vasily Agafonov. The revenue of Epam Systems LLC for 2021 increased by 48% and amounted to 28.7 billion rubles, net profit – 117% and 5.5 billion rubles, respectively. Thus, the company's losses during the final withdrawal from Russia may be an order of magnitude higher than the announced $76.3 million.
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