[Executive Summary & Q2 2025 Overview](index=1&type=section&id=Executive%20Summary%20%26%20Q2%202025%20Overview) [Q2 2025 Financial Performance Highlights](index=1&type=section&id=Q2%202025%20Financial%20Performance%20Highlights) Grid Dynamics achieved record Q2 **2025** revenues of **$101.1 million**, with GAAP net income of **$5.3 million** and increased Non-GAAP EBITDA Q2 2025 Financial Performance Highlights | Metric | Q2 2025 | Q2 2024 | YoY Change | Sequential Change | | :----------------------- | :---------- | :---------- | :--------- | :---------------- | | Total Revenues | **$101.1 M** | **$83.0 M** | **+21.7%** | Flat | | GAAP Net Income | **$5.3 M** | **-$0.8 M** | N/A | N/A | | GAAP EPS (Diluted) | **$0.06** | **-$0.01** | N/A | N/A | | Non-GAAP Net Income | **$8.3 M** | **$8.5 M** | **-2.4%** | N/A | | Non-GAAP EPS (Diluted) | **$0.10** | **$0.11** | **-9.1%** | N/A | | Non-GAAP EBITDA | **$12.7 M** | **$11.7 M** | **+8.5%** | N/A | [CEO Commentary & Strategic Focus](index=1&type=section&id=CEO%20Commentary%20%26%20Strategic%20Focus) CEO highlighted record Q2 revenue, driven by an **'AI-first'** approach, with AI and Data practice growing **three times faster** and contributing **23%** of H1 **2025** organic revenue - Grid Dynamics' AI and Data practice accounted for **23%** of total organic revenue in the first half of **2025**[5](index=5&type=chunk) - The AI and Data practice is growing almost **three times faster** than the company's overall organic business[5](index=5&type=chunk) - The company is aligning every aspect of its business with an **'AI-first'** approach, responding to customer demand for AI-native partners[5](index=5&type=chunk) [Business Performance by Vertical](index=1&type=section&id=Business%20Performance%20by%20Vertical) [Revenue Contribution and Growth](index=1&type=section&id=Revenue%20Contribution%20and%20Growth) Retail was the largest vertical at **29.2%** of Q2 **2025** revenues, while Finance **doubled** YoY, becoming the second-largest Q2 2025 Revenue Contribution by Vertical | Vertical | % of Total Revenues (Q2 2025) | YoY Growth (Q2 2025) | | :------------------ | :---------------------------- | :------------------- | | Retail | **29.2%** | N/A | | Finance | **25.1%** | **Doubled** | | Technology, Media and Telecom | **24.9%** | **+8.4%** | | CPG/Manufacturing | **10.5%** | **+7.7%** | | Healthcare and Pharma | **2.5%** | N/A | | Other | **7.8%** | N/A | - The Finance vertical **doubled** revenues year-over-year for the fourth consecutive quarter, becoming the second-largest vertical[3](index=3&type=chunk) - Growth in Finance and CPG/Manufacturing verticals was partly attributed to contributions from **2024** acquisitions[3](index=3&type=chunk) [Financial Highlights (GAAP & Non-GAAP)](index=1&type=section&id=Financial%20Highlights%20(GAAP%20%26%20Non-GAAP)) [Second Quarter 2025 Key Metrics](index=1&type=section&id=Second%20Quarter%202025%20Key%20Metrics) Q2 **2025** revenues rose **21.7%** YoY to **$101.1 million**, with GAAP net income of **$5.3 million** marking a significant turnaround Q2 2025 Financial Performance (GAAP vs. Non-GAAP) | Metric | Q2 2025 (GAAP) | Q2 2024 (GAAP) | Q2 2025 (Non-GAAP) | Q2 2024 (Non-GAAP) | | :---------------------- | :------------- | :------------- | :----------------- | :----------------- | | Total Revenues | **$101.1 M** | **$83.0 M** | **$101.1 M** | **$83.0 M** | | Gross Profit | **$34.5 M** (**34.1%**) | **$29.6 M** (**35.6%**) | **$35.1 M** (**34.7%**) | **$30.1 M** (**36.2%**) | | Net Income/(Loss) | **$5.3 M** | **-$0.8 M** | **$8.3 M** | **$8.5 M** | | EPS (Diluted) | **$0.06** | **-$0.01** | **$0.10** | **$0.11** | | EBITDA | N/A | N/A | **$12.7 M** | **$11.7 M** | [Cash Flow and Other Operational Metrics](index=2&type=section&id=Cash%20Flow%20and%20Other%20Operational%20Metrics) H1 **2025** operating cash flow increased to **$23.7 million**, with **$336.8 million** cash and **5,013** total headcount by June **30**, **2025** Key Cash Flow and Operational Metrics | Metric | H1 2025 | H1 2024 | YoY Change | | :----------------------------------- | :----------- | :----------- | :--------- | | Cash provided by operating activities | **$23.7 M** | **$13.9 M** | **+70.5%** | | Cash and cash equivalents (as of period end) | **$336.8 M** (Jun **30**, **2025**) | **$334.7 M** (Dec **31**, **2024**) | **+0.6%** | | Total Headcount (as of period end) | **5,013** (Jun **30**, **2025**) | **3,961** (Jun **30**, **2024**) | **+26.5%** | [Financial Outlook](index=2&type=section&id=Financial%20Outlook) [Third Quarter 2025 Guidance](index=2&type=section&id=Third%20Quarter%202025%20Guidance) Q3 **2025** revenues are projected between **$103 million** and **$105 million**, with Non-GAAP EBITDA of **$12 million** to **$13 million** Q3 2025 Financial Guidance | Metric | Q3 2025 Outlook | | :-------------- | :-------------- | | Revenues | **$103 - $105 M** | | Non-GAAP EBITDA | **$12 - $13 M** | | Basic Share Count | **84 - 85 M** | | Diluted Share Count | **87 - 89 M** | [Full Year 2025 Guidance](index=2&type=section&id=Full%20Year%202025%20Guidance) Full-year **2025** revenues are expected to be **$415 million** to **$435 million**, representing **18.4%** to **24.1%** YoY growth Full Year 2025 Revenue Guidance | Metric | FY 2025 Outlook | | :-------------- | :-------------- | | Revenues | **$415 - $435 M** | | YoY Growth | **18.4% - 24.1%** | [About Grid Dynamics](index=2&type=section&id=About%20Grid%20Dynamics) Grid Dynamics is a leading provider of technology consulting, engineering, AI, and digital engagement services, distinguished by **8 years** of **enterprise AI leadership** - Grid Dynamics specializes in technology consulting, platform and product engineering, AI, and digital engagement services[12](index=12&type=chunk) - A key differentiator is **8 years** of experience and **leadership in enterprise AI**, backed by expertise in data and ML platform engineering, cloud, IoT, and digital engagement[12](index=12&type=chunk) [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) [Explanation and Rationale](index=2&type=section&id=Explanation%20and%20Rationale) Non-GAAP measures supplement GAAP results, offering insights into **core operating performance** by excluding non-core items like stock-based compensation, but have **limitations** - Non-GAAP measures are used by management to evaluate **core operating performance**, make **strategic decisions**, and inform **compensation decisions**[16](index=16&type=chunk) - Non-GAAP measures exclude items like stock-based compensation, transaction and transformation-related costs, geographic reorganization expenses, and restructuring costs to provide a **clearer view of operational performance**[7](index=7&type=chunk)[17](index=17&type=chunk)[29](index=29&type=chunk) - The company emphasizes that non-GAAP measures have **limitations** and should be considered in **conjunction with, not as a substitute for, GAAP financial information**[18](index=18&type=chunk) [Forward-Looking Statements & Risk Factors](index=3&type=section&id=Forward-Looking%20Statements%20%26%20Risk%20Factors) Forward-looking statements are subject to risks including industry evolution, growth management, client dependence, macroeconomic conditions, competition, talent retention, technological adaptation, AI, security, and regulatory risks - Forward-looking statements are subject to risks including industry evolution, growth management, client/industry dependence, macroeconomic conditions, competition, talent retention, technological adaptation, AI-related issues, security breaches, and acquisition/regulatory risks[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - Readers are cautioned not to place **undue reliance** on forward-looking statements and are encouraged to review risk factors detailed in **SEC filings**[22](index=22&type=chunk) [Corporate Information](index=2&type=section&id=Corporate%20Information) [Conference Call and Webcast](index=2&type=section&id=Conference%20Call%20and%20Webcast) A video conference call was held on **July 31, 2025**, to discuss Q2 results, with webcast and replay available on the **Investor Relations section** - A video conference call was held on **July 31, 2025**, at **4:30 p.m. ET** to discuss Q2 financial results[10](index=10&type=chunk) - Webcast and replay access is available via the **Investor Relations section** of Grid Dynamics' website[10](index=10&type=chunk)[11](index=11&type=chunk) [Investor Relations Contact](index=4&type=section&id=Investor%20Relations%20Contact) For investor relations inquiries, contact **investorrelations@griddynamics.com** - **Investor Relations contact email**: **investorrelations@griddynamics.com**[23](index=23&type=chunk) [Condensed Consolidated Financial Statements](index=5&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%2F(Loss)%20and%20Comprehensive%20Income%2F(Loss)) Q2 **2025** net income reached **$5.273 million**, a significant improvement from a prior-year loss, with revenues at **$101.095 million** Condensed Consolidated Statements of Income/(Loss) (Unaudited, in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | **$101,095** | **$83,037** | **$201,510** | **$162,854** | | Cost of revenues | **$66,592** | **$53,474** | **$130,010** | **$105,626** | | Gross profit | **$34,503** | **$29,563** | **$71,500** | **$57,228** | | Total operating expenses | **$34,626** | **$29,523** | **$73,660** | **$62,730** | | Net income/(loss) | **$5,273** | **$(817)** | **$8,185** | **$(4,765)** | | Basic EPS | **$0.06** | **$(0.01)** | **$0.10** | **$(0.06)** | | Diluted EPS | **$0.06** | **$(0.01)** | **$0.09** | **$(0.06)** | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to **$608.907 million** by June **30**, **2025**, with **$336.752 million** in cash and **$532.214 million** in stockholders' equity Condensed Consolidated Balance Sheets (Unaudited, in thousands) | Asset/Liability/Equity | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------- | :------------------ | :---------------------- | | Cash and cash equivalents | **$336,752** | **$334,655** | | Total current assets | **$433,019** | **$423,304** | | Total assets | **$608,907** | **$592,192** | | Total current liabilities | **$58,723** | **$55,544** | | Total liabilities | **$76,693** | **$74,363** | | Total stockholders' equity | **$532,214** | **$517,829** | [Reconciliation of Non-GAAP Information](index=7&type=section&id=Reconciliation%20of%20Non-GAAP%20Information) Reconciliation tables detail adjustments from GAAP to Non-GAAP measures, resulting in higher Non-GAAP gross profit, EBITDA, and net income Non-GAAP Gross Profit Reconciliation (Unaudited, in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | | GAAP gross profit | **$34,503** | **$29,563** | | Stock-based compensation | **$564** | **$510** | | Non-GAAP gross profit | **$35,067** | **$30,073** | Non-GAAP EBITDA Reconciliation (Unaudited, in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | GAAP net income/(loss) | **$5,273** | **$(817)** | | Depreciation and amortization | **$4,900** | **$3,241** | | Provision for income taxes | **$2,028** | **$3,522** | | Stock-based compensation | **$6,717** | **$7,491** | | Transaction and transformation-related costs | **$323** | **$213** | | Geographic reorganization | **$467** | **$445** | | Restructuring costs | **$461** | **$304** | | Interest and other income, net | **$(7,424)** | **$(2,665)** | | Non-GAAP EBITDA | **$12,745** | **$11,734** | Non-GAAP Net Income Reconciliation (Unaudited, in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | GAAP net income/(loss) | **$5,273** | **$(817)** | | Stock-based compensation | **$6,717** | **$7,491** | | Transaction and transformation-related costs | **$323** | **$213** | | Geographic reorganization | **$467** | **$445** | | Restructuring costs | **$461** | **$304** | | Other (income)/expense, net | **$(4,357)** | **$(21)** | | Tax impact of non-GAAP adjustments | **$(591)** | **$878** | | Non-GAAP net income | **$8,293** | **$8,493** | | Non-GAAP diluted EPS | **$0.10** | **$0.11** | [Revenue by Verticals](index=9&type=section&id=Revenue%20by%20Verticals) Retail is the largest revenue contributor, with Finance showing significant growth from **15.1%** in Q2 **2024** to **25.1%** in Q2 **2025** Revenue by Verticals (Unaudited, in thousands, except percentages) | Vertical | Q2 2025 Revenue | Q2 2025 % | Q2 2024 Revenue | Q2 2024 % | | :-------------------------- | :-------------- | :-------- | :-------------- | :-------- | | Retail | **$29,557** | **29.2%** | **$26,779** | **32.2%** | | Finance | **$25,386** | **25.1%** | **$12,566** | **15.1%** | | Technology, Media and Telecom | **$25,188** | **24.9%** | **$23,228** | **28.0%** | | CPG/Manufacturing | **$10,604** | **10.5%** | **$9,843** | **11.9%** | | Healthcare and Pharma | **$2,556** | **2.5%** | **$3,158** | **3.8%** | | Other | **$7,804** | **7.8%** | **$7,463** | **9.0%** | | Total | **$101,095** | **100.0%** | **$83,037** | **100.0%** |

Group 1: Earnings Performance - Grid Dynamics reported quarterly earnings of $0.11 per share, exceeding the Zacks Consensus Estimate of $0.09 per share, and up from $0.07 per share a year ago, representing an earnings surprise of 22.22% [1] - The company posted revenues of $100.42 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.29%, compared to year-ago revenues of $79.82 million [2] - Over the last four quarters, Grid Dynamics has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Group 2: Stock Performance and Outlook - Grid Dynamics shares have declined approximately 36.3% since the beginning of the year, while the S&P 500 has decreased by 5.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is $0.11 on revenues of $100.7 million, and for the current fiscal year, it is $0.44 on revenues of $415.82 million [7] Group 3: Industry Context - The Computers - IT Services industry, to which Grid Dynamics belongs, is currently ranked in the bottom 34% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Amdocs, another company in the same industry, is expected to report quarterly earnings of $1.71 per share, reflecting a year-over-year change of +9.6%, with revenues projected at $1.12 billion, down 9.8% from the previous year [9]

Financial Data and Key Metrics Changes - The company reported revenues of $100.4 million for Q1 2025, representing a year-over-year growth of 25.8% and slightly exceeding guidance [33] - Non-GAAP EBITDA for the quarter was $14.6 million, outperforming guidance and reflecting strong revenue recognition timing [33] - GAAP net income was $2.9 million, a decrease from the previous quarter due to higher operating costs [39] Business Line Data and Key Metrics Changes - Retail accounted for 31.4% of total revenues, growing 28% year-over-year but declining 3.7% sequentially [34] - Finance became the second largest vertical, contributing 24.9% of total revenues with a year-over-year growth of 144.3% driven by recent acquisitions [34] - TMT represented 23.5% of revenues, remaining flat sequentially and declining 1.8% year-over-year [35] Market Data and Key Metrics Changes - The company experienced a strong demand environment, particularly in the financial sector, with three of the top ten customers now in finance [7] - Partnerships contributed 16% of total revenue in Q1, with expectations for acceleration throughout 2025 [14] - The company noted increased traction with hyperscalers, particularly Google, leading to significant migration and modernization programs [15] Company Strategy and Development Direction - The company aims to align investments with changing industry needs, focusing on technological leadership and innovative solutions [13] - AI initiatives are a key focus, with a growing pipeline of opportunities and a shift towards enterprise-scale implementations [11] - The strategy includes expanding capabilities in AI and platform engineering to deliver measurable client impact [29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic uncertainties but expressed confidence in navigating near-term volatility [14] - The outlook for Q2 2025 anticipates revenues between $100 million and $102 million, with a full-year revenue outlook maintained at $415 million to $435 million [40][41] - Management highlighted a strong billable engineering headcount as a leading indicator of future growth [8] Other Important Information - The company successfully integrated engineering teams from recent acquisitions to support enterprise accounts [10] - The internship program gained momentum, with several hundred interns placed in billable roles [20] - The company is expanding its presence in India, which is expected to become a significant delivery hub [79] Q&A Session Summary Question: Can you provide insights on client behavior and decision-making pace? - Management noted no major impacts from recent economic activities, with strategic projects continuing uninterrupted [47][48] Question: What is the guidance for the year based on current contracts? - Management indicated that contractually committed projects are stable, with a good ramp-up expected in the coming months [50][51] Question: How is the hiring strategy evolving? - The company has maintained a consistent hiring approach, focusing on internal skill development rather than market dependency [54][56] Question: Are there any changes in client behavior, particularly in retail? - Management reported stable client relationships, with no significant slowdowns expected, especially in online services [62][67] Question: What drives the visibility for growth in the second half of the year? - Management highlighted a combination of existing client ramp-ups and new client acquisitions as key growth drivers [81][88]

Company Overview - Grid Dynamics is a technology consulting, platform & product engineering, AI, and digital engagement services provider for Fortune 1000 corporations[8] - The company has a global presence with 4,900 employees across 19 countries[6] - The company's Q1 2025 revenue was $100.4 million, with expectations of $100.0 million to $102.0 million for Q2 2025[11] - The company's Q1 2025 GAAP EPS was $0.03, and non-GAAP EPS was $0.11[11] Financial Performance - Q1 2025 revenues reached $100.4 million, marking a 25.8% year-over-year increase[65] - GAAP gross profit for Q1 2025 was $37.0 million, representing 36.8% of revenues[65] - Non-GAAP gross profit for Q1 2025 was $37.6 million, or 37.4% of revenues[65] - Non-GAAP EBITDA for Q1 2025 was $14.6 million, which is 14.5% of revenue[65] Strategic Initiatives - The company employs an "85-10-5" approach to revenue growth, emphasizing organic growth from mature clients (85%), emerging clients (10%), and new logos (5%)[44] - Partner influenced revenues increased from less than 1% to 18% over the past 3 years[48] - The company aims to reach $1 billion in annual revenue through its GigaCube strategic initiative, focusing on geo scalability, innovation, and industry expansion[49]

Financial Performance - Revenues for the three months ended March 31, 2025, reached $100.4 million, an increase of 25.8% year-over-year from $79.8 million in the same period of 2024[113]. - Gross profit margin improved to 36.8%, up 2.1% compared to the prior year quarter, driven by higher revenues and improved utilization[113]. - Net income for the quarter was $2.9 million, a significant turnaround from a net loss of $3.9 million in the prior-year quarter[113]. - Non-GAAP EBITDA reached $14.6 million, or 14.5% of revenues, compared to $10.3 million, or 12.9% of revenues, in the corresponding period of 2024[113]. - Gross profit for Q1 2025 increased 33.7% to $37.0 million, with gross margins improving to 36.8% from 34.7% in the prior year[132]. - Non-GAAP net income for Q1 2025 was $9.95 million, compared to $7.62 million in the same period of 2024[150]. - Non-GAAP diluted EPS increased to $0.11 in Q1 2025, up from $0.10 in the prior year[150]. Cash Flow and Financing - Operating cash inflows improved by $6.1 million year-over-year, reaching $9.4 million[113]. - Net cash provided by operating activities increased by $6.1 million to $9.4 million for the three months ended March 31, 2025, compared to $3.2 million in the same period of 2024[157]. - Net cash used in financing activities was $15.8 million for the three months ended March 31, 2025, primarily due to tax withholding obligations related to share issuance, which increased by $8.7 million compared to Q1 2024[159]. - Grid Dynamics had cash and cash equivalents of $325.5 million, a decrease from $334.7 million at December 31, 2024[155]. - The company may need to seek additional equity or debt financing if cash resources are insufficient to meet cash requirements[155]. - Net cash used in investing activities was $3.3 million for the three months ended March 31, 2025, showing minimal change from $3.9 million in the same period of 2024[158]. - The revolving credit facility with JPMorgan Chase Bank provides $30.0 million of available borrowing capacity, recently extended to May 30, 2025[152]. - Grid Dynamics did not have any debt outstanding under the revolving credit facility as of March 31, 2025[155]. Customer and Market Dynamics - The top one customer accounted for 14.2% of revenues, while the top five customers accounted for 35.6% of revenues, indicating a slight decrease in revenue concentration compared to the previous year[121]. - The company continues to focus on diversifying its customer base, with a total of 204 customers as of March 31, 2025, down from 210 a year ago[118]. - The Retail vertical generated $31.5 million, accounting for 31.4% of total revenues, with a year-over-year growth of 28.0%[124]. - The Finance vertical's revenues doubled year-over-year to $25.0 million, contributing 24.9% of total revenues, driven by demand from fintech and insurance customers[125]. - The CPG and Manufacturing vertical saw a 12.7% increase in revenues, growing from $9.6 million to $10.8 million[127]. Operational Insights - Engineering, research, and development expenses increased by 48.4% to $6.5 million, reflecting the company's commitment to innovation[122]. - Engineering, research, and development expenses rose 48.4% to $6.5 million, reflecting continued investments in customer delivery operations[134]. - General and administrative expenses increased by 12.8% to $24.3 million, primarily due to costs associated with recent acquisitions[138]. - Other income, net for Q1 2025 was $4.5 million, up from $2.5 million in the prior-year period, driven by revaluation of acquisition-related contingent consideration[140]. Geopolitical and Currency Risks - Grid Dynamics is actively monitoring geopolitical risks, particularly related to the military action in Ukraine, which could impact operations and service delivery[109]. - Approximately 46.1% of Grid Dynamics' $102.5 million combined cost of revenues and total operating expenses were denominated in currencies other than the U.S. dollar for the three months ended March 31, 2025, compared to 39.1% of $85.4 million in the same period of 2024[165]. - A 10% decrease in the value of the Polish zloty against the U.S. dollar would have resulted in a $1.4 million increase in income from operations[168]. - Grid Dynamics expects to adopt and implement new hedging strategies in future periods to manage foreign currency exposure[167].

Financial Data and Key Metrics Changes - Grid Dynamics reported revenues of $100.4 million for Q1 2025, exceeding guidance and representing a year-over-year growth of 25.8% [32] - Non-GAAP EBITDA for the quarter was $14.6 million, outperforming guidance and reflecting a year-over-year increase from $10.3 million [32][39] - GAAP net income was $2.9 million, a decrease from $4.5 million in the previous quarter, attributed to higher operating costs [39] Business Line Data and Key Metrics Changes - Retail accounted for 31.4% of total revenues, growing 28% year-over-year but declining 3.7% sequentially [33] - Finance became the second largest vertical, contributing 24.9% of total revenues with a year-over-year growth of 144.3% [34] - TMT represented 23.5% of revenues, remaining flat sequentially and declining 1.8% year-over-year [34] Market Data and Key Metrics Changes - Revenues from top five customers accounted for 35.6% of total revenues, down from 39.6% a year ago [37] - The total customer count decreased to 204 from 211 in the previous quarter, driven by efforts to rationalize the customer portfolio [38] Company Strategy and Development Direction - The company aims to align investments with changing industry needs, focusing on technological leadership and AI capabilities [12] - Grid Dynamics is expanding its presence in India, which is becoming a hub for multi-agent and multi-modal platform engineering [16][72] - The strategy includes diversifying into new industries such as manufacturing, pharmaceuticals, and fintech while enhancing AI offerings [24][25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic uncertainties but expressed confidence in the stability of client projects and demand [13][49] - The company maintains its full-year revenue outlook of $415 million to $435 million, expecting stronger performance in the second half of 2025 [12][41] - Management noted that partnerships contributed 16% of total revenue in Q1 and anticipate this to accelerate throughout 2025 [13] Other Important Information - The company successfully integrated engineering teams from recent acquisitions, enhancing capabilities in banking and financial services [9] - AI initiatives are gaining traction, with a growing pipeline of opportunities and a shift towards enterprise-scale implementations [10][29] Q&A Session Summary Question: Client behavior and decision-making pace - Management noted no major impacts from recent economic activities, with strategic projects continuing uninterrupted [48][49] Question: Guidance for 2025 and contractually committed work - Management indicated that business decisions for 2025 have been made, contributing to a strong outlook despite some cautiousness [52][54] Question: Hiring intentions and employee utilization - The company has maintained a consistent hiring strategy, focusing on internal skill development rather than solely relying on market talent [56][58] Question: Changes in client behavior in retail and TMT verticals - Management reported stable client behavior, particularly in online services, with no expected slowdowns from major clients like Apple [62][68] Question: Growth drivers for the second half of 2025 - Management expects growth across various verticals, with a focus on existing and new clients contributing to the anticipated ramp-up [80][89]

Financial Performance - Total revenues for Q1 2025 were $100.4 million, representing a year-over-year growth of 25.8%[7] - GAAP net income for Q1 2025 was $2.9 million, compared to a net loss of $3.9 million in Q1 2024[7] - Non-GAAP EBITDA for Q1 2025 was $14.6 million, up from $10.3 million in Q1 2024[8] - Non-GAAP net income for Q1 2025 was $9,952, up from $7,617 in Q1 2024, reflecting a year-over-year increase of 30.5%[32] - Non-GAAP diluted EPS for Q1 2025 was $0.11, compared to $0.10 in Q1 2024, indicating a 10% increase[32] Revenue Breakdown - The Finance vertical saw a remarkable revenue increase of 144.3% year-over-year, contributing 24.9% of total revenues[3] - Revenue from the Finance vertical surged to $25,028, representing 24.9% of total revenues, compared to $10,243 or 12.8% in Q1 2024[34] - The Retail segment generated $31,521 in revenue, accounting for 31.4% of total revenues, up from 30.9% in Q1 2024[34] - Revenues for Q1 2025 reached $100,415, an increase of 25.9% compared to $79,817 in Q1 2024[29] Cash Flow and Assets - Cash provided by operating activities was $9.4 million for Q1 2025, compared to $3.2 million for Q1 2024[14] - Total current assets as of March 31, 2025, were $421,681, slightly down from $423,304 as of December 31, 2024[27] - Total assets as of March 31, 2025, were $590,899, a slight decrease from $592,192 as of December 31, 2024[27] - Total liabilities decreased to $73,538 as of March 31, 2025, from $74,363 as of December 31, 2024[27] Future Projections - The company expects full-year 2025 revenues to be in the range of $415 to $435 million, indicating a year-over-year growth of 18.4% to 24.1%[10] - The second quarter revenue is projected to be between $100 million and $102 million[14] Operational Highlights - Total headcount increased to 4,926 as of March 31, 2025, up from 3,892 a year earlier[14] - The company signed several sizable deals in Q1 2025, including engagements in automotive, financial, and CPG sectors[4] - The partnership business is expected to grow in 2025, with a strong pipeline of migration and modernization efforts[5] Compensation and Expenses - Stock-based compensation increased to $10,743 in Q1 2025 from $11,339 in Q1 2024[32]

Core Viewpoint - Grid Dynamics (GDYN) is anticipated to report a year-over-year increase in earnings and revenues for the quarter ended March 2025, with earnings expected to be $0.09 per share, reflecting a +28.6% change, and revenues projected at $98.29 million, up 23.1% from the previous year [1][3]. Earnings Expectations - The upcoming earnings report is scheduled for May 1, and the stock may rise if the reported numbers exceed expectations, while a miss could lead to a decline [2]. - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate for Grid Dynamics is lower than the consensus estimate, resulting in an Earnings ESP of -11.11%, indicating a bearish outlook from analysts [10]. - The stock currently holds a Zacks Rank of 3, making it challenging to predict a beat on the consensus EPS estimate [11]. Historical Performance - In the last reported quarter, Grid Dynamics exceeded the expected earnings of $0.10 per share by delivering $0.12, resulting in a +20% surprise [12]. - Over the past four quarters, the company has beaten consensus EPS estimates two times [13]. Industry Comparison - Unisys (UIS), another player in the IT Services industry, is expected to report a significant decline in earnings per share of $0.24, reflecting a -700% year-over-year change, with revenues projected at $441 million, down 9.6% from the previous year [17]. - The consensus EPS estimate for Unisys has been revised 260% lower in the last 30 days, resulting in an Earnings ESP of 0.00%, combined with a Zacks Rank of 3, indicating uncertainty in predicting a beat on the consensus EPS estimate [18].

Core Viewpoint - Grid Dynamics (GDYN) is facing challenges due to rising operational costs and stiff competition, but its long-term growth is supported by AI initiatives, strategic partnerships, and acquisitions [1][2][12]. Group 1: Financial Performance - GDYN's shares have decreased by 26.2% in the past month, underperforming the broader Zacks Computer and Technology sector's decline of 7.7% and the Zacks Computers - IT Services industry's drop of 11.1% [1]. - The company reported a 22.6% year-over-year increase in operating expenses in the fourth quarter of 2024, attributed to higher costs in engineering, research, sales and marketing, and general administration [1]. Group 2: Competitive Landscape - GDYN operates in a highly competitive IT consulting and services market, facing competition from established players like Accenture, Wipro Limited, and Infosys, which have also seen declines in their stock prices but have outperformed GDYN [2]. Group 3: Growth Drivers - The company is expanding its customer base and forming strategic partnerships, which are crucial for its long-term growth and market position [3]. - GDYN's AI capabilities are gaining momentum, with a significant expansion of its AI portfolio aimed at Fortune 1000 companies across various industries [4]. - The company has a strong track record of AI success in key industries such as Retail, CPG, Manufacturing, Finance, and TMT, demonstrating its ability to drive innovation and efficiency [5]. Group 4: Strategic Partnerships and Acquisitions - GDYN's expanded partnership with Microsoft now includes OpenAI and GitHub, enhancing its AI capabilities and positioning it as a key player in enterprise AI transformation [6]. - The acquisition of U.K.-based JUXT in the fourth quarter of 2024 has strengthened GDYN's expertise in banking and financial services, attracting interest from U.S.-based global banks [8]. - The acquisition of Argentina-based Mobile Computing in October 2024 has improved GDYN's global delivery capabilities and expertise in digital transformation across various industries [9]. - Strategic partnerships, particularly with hyperscalers, contributed 18% to GDYN's total revenues in 2024, indicating their growing importance [10]. Group 5: Future Outlook - Despite rising operational costs and competition, GDYN is well-positioned for expansion through continued investment in AI and cloud innovation [12].

Financial Performance - Grid Dynamics reported record revenues of $350.6 million for the year ended December 31, 2024, representing a 12.0% increase from the previous year[256]. - Gross profit margins remained steady at 36.2% for both 2024 and 2023[256]. - The company reduced its loss from operations to $2.1 million in 2024, down from $5.6 million in 2023[256]. - Net income for 2024 was $4.0 million, marking a significant turnaround after four consecutive years of net losses[256]. - Non-GAAP EBITDA grew 18.6% to $52.5 million for the year ended December 31, 2024[256]. - The cost of revenues increased by $23.8 million, or 11.9%, to $223.6 million in 2024, primarily due to higher headcount to support revenue growth[296]. - Gross profit rose to $127.0 million, an increase of $13.9 million from $113.1 million in 2023, with a stable gross margin of 36.2%[297]. - Engineering, research, and development expenses increased by 24.5% to $18.3 million, reflecting continued investments in customer delivery operations and software development[299]. - Sales and marketing expenses grew by 18.5% to $28.6 million, driven by investments in the sales organization and new sales initiatives[301]. - General and administrative expenses increased by 2.9% to $82.1 million, with a decrease in expenses as a percentage of revenues from 25.5% in 2023 to 23.4% in 2024[304]. - Interest and other income, net rose to $13.2 million from $10.4 million in the prior year, primarily due to income from money market funds and an increase in the fair value of marketable equity securities[306]. - The provision for income taxes was $7.0 million in 2024, compared to $6.6 million in 2023, with the effective tax rate decreasing from 136.5% to 63.4%[308]. - For the year ended December 31, 2024, GAAP net income was $4.041 million, a significant improvement from a net loss of $1.765 million in 2023 and a loss of $29.214 million in 2022[314]. - Non-GAAP net income for 2024 increased to $37.222 million compared to $31.684 million in 2023, and $38.150 million in 2022[317]. - Non-GAAP diluted EPS for 2024 was $0.47, compared to $0.41 in 2023 and $0.53 in 2022[317]. Acquisitions and Growth - The company acquired Mobile Computing S.A. on October 4, 2024, expanding its client portfolio in various industries[257]. - On September 26, 2024, Grid Dynamics acquired JUXT Ltd., enhancing its capabilities in the finance vertical and opening new opportunities in Europe[258]. - The total number of employees increased to 4,730 in 2024, up from 3,920 in 2023, reflecting a growth in workforce[264]. - The Finance vertical saw revenues double to $60.2 million, making it the largest contributor to overall revenue growth for the period[292]. - Retail remained the largest vertical, contributing 32.5% of total revenues, with an 11.1% growth over 2023[289]. Customer and Revenue Concentration - Customer concentration decreased, with the total number of customers dropping from 275 in 2023 to 264 in 2024[268]. - The top one customer accounted for 16.0% of revenues in 2024, compared to 14.4% in 2023, indicating a slight increase in revenue concentration[271]. Cash Flow and Financing - Cash and cash equivalents as of December 31, 2024, were $334.7 million, an increase from $257.2 million at the end of 2023[321]. - Net cash provided by operating activities decreased to $30.198 million in 2024 from $41.093 million in 2023, primarily due to changes in working capital[323]. - Net cash used in investing activities rose to $51.301 million in 2024, driven by payments related to the JUXT and Mobile Computing acquisitions[324]. - The company generated $101.162 million from financing activities in 2024, mainly from a public equity offering[325]. - The company has a revolving credit facility of $30 million, with zero outstanding as of December 31, 2024[319]. - The company is seeking to extend the term of its revolving credit facility, which is set to expire on March 15, 2025[320]. Risks and Legal Considerations - The company faces risks related to intellectual property, including potential unauthorized use and challenges in protecting its rights[199]. - There is uncertainty regarding the scope of intellectual property protection for AI models and software, which may impact the company's operations[199]. - The company may incur significant costs and management distraction from potential intellectual property infringement claims[206]. - Customer contracts often require the company to indemnify clients against potential infringement claims, which could lead to costly litigation[207]. - The company utilizes open source software, which poses risks of non-compliance with licensing terms that could affect sales and create liability[210]. - The company's bylaws limit the forum for stockholder disputes, potentially discouraging legal action[213]. - The price of the company's common stock may be volatile due to various factors, including changes in legal and regulatory frameworks[216]. - The concentration of ownership may lead to significant volatility in the stock price if major stockholders sell large amounts of common stock[221]. - The company has provisions in its certificate of incorporation and bylaws that could delay or prevent hostile takeovers and changes in control[224]. - Delaware law may prohibit stockholders holding 15% or more of the outstanding capital stock from engaging in certain business combinations for a specified period[225]. - The board of directors has the ability to issue preferred stock without stockholder approval, which could dilute the ownership of a hostile acquirer[226]. - The requirement for a special meeting of stockholders to be called only by the board of directors could delay stockholder actions[226]. - The company has a classified board of directors with staggered terms, which could delay changes in board membership[226]. - Advance notice procedures must be complied with for stockholders to nominate candidates or propose matters, potentially deterring unsolicited takeover attempts[226].