Grid Dynamics(US:GDYN)2024-10-31 20:38Revenue Growth and Performance - Record quarterly revenues of $87.4 million, up 12.9% year-over-year[101] - Revenues for the three months ended September 30, 2024 increased by 12.9% to $87.4 million compared to $77.4 million in the prior-year period[116] - Revenues for the nine months ended September 30, 2024 grew 6.6% to $250.3 million compared to $234.8 million in the prior-year period[116] - Retail vertical contributed 34.1% of total revenues in the third quarter of 2024, with revenues increasing 12.4% to $29.8 million compared to $26.5 million in the prior-year period[118] - Finance vertical revenues almost doubled, reaching $14.2 million and $37.0 million for the three and nine months ended September 30, 2024, respectively, compared to $7.3 million and $20.6 million in the prior-year periods[121] Profitability and Margins - GAAP gross profit margins improved to 37.4% in Q3 2024, up 1.0% from the prior year[101] - Gross profit increased 16.3% to $32.7 million in the third quarter of 2024 and 5.8% to $90.0 million for the nine-month period[127] - Net income of $4.3 million in Q3 2024, compared to $0.7 million in 2023[101] - Net income for the three months ended September 30, 2024 was $4.3 million, compared to $0.7 million in the prior-year period[115] - Net loss for the nine months ended September 30, 2024 was $0.5 million, compared to a net loss of $4.7 million in the prior-year period[116] - Non-GAAP EBITDA of $14.8 million, or 16.9% of revenues, compared to $10.7 million, or 13.9% of revenues, in Q3 2023[102] - Non-GAAP EBITDA for Q3 2024 was $14.8 million, up from $10.7 million in Q3 2023, and $36.8 million for the nine months ended September 30, 2024, compared to $33.6 million in the same period of 2023[143] - Non-GAAP net income for Q3 2024 was $8.1 million, up from $5.9 million in Q3 2023, and $19.4 million for the nine months ended September 30, 2024, compared to $19.4 million in the same period of 2023[145] - Non-GAAP diluted EPS for Q3 2024 was $0.10, up from $0.08 in Q3 2023, and $0.25 for the nine months ended September 30, 2024, compared to $0.25 in the same period of 2023[145] Expenses and Costs - Cost of revenues increased 11.0% to $54.7 million in the third quarter of 2024 and 7.0% to $160.3 million for the nine-month period[126] - Engineering, research, and development expenses grew 30.7% to $4.4 million in the third quarter of 2024 and 19.0% to $12.9 million for the nine-month period[129] - Sales and marketing expenses increased 11.2% to $6.8 million in the third quarter of 2024 and 20.7% to $21.4 million for the nine-month period[131] - General and administrative expenses increased by 4.6% to $19.3 million in Q3 2024 compared to $18.5 million in the prior year period, but decreased by 3.2% to $59.0 million for the nine months ended September 30, 2024, primarily due to lower stock-based compensation expenses[133] Cash Flow and Financial Position - Operating cash inflows reached $9.2 million, with $39.5 million invested in the acquisition of JUXT[102] - Cash and cash equivalents decreased to $231.3 million as of September 30, 2024, from $257.2 million at December 31, 2023, with $38.7 million held outside the United States[148] - The company has a $30.0 million revolving credit facility with JPMorgan Chase Bank, N.A., with no debt outstanding as of September 30, 2024[147] - Net cash provided by operating activities decreased by $10.4 million to $23.1 million in the nine months ended September 30, 2024, compared to $33.5 million in the same period of 2023[150] - Net cash used in investing activities increased to $41.3 million in the nine months ended September 30, 2024, primarily due to the $32.1 million acquisition of JUXT and a 50% increase in capital expenditures to $9.1 million[151] - Net cash used in financing activities decreased by $6.7 million to $7.8 million in the nine months ended September 30, 2024, compared to $14.5 million in the same period of 2023[152] Customer and Employee Metrics - Top one customer accounted for 17.1% of revenues in Q3 2024, up from 14.3% in Q3 2023[114] - Top five customers accounted for 39.8% of revenues in Q3 2024, up from 36.8% in Q3 2023[114] - Total number of customers decreased from 265 in 2023 to 229 in 2024[112] - Total employees increased to 4,298 as of September 2024, up from 3,823 in 2023[109] Foreign Currency Exposure - Approximately 43.0% of Grid Dynamics' $85.3 million combined cost of revenues and operating expenses were denominated in non-U.S. dollar currencies in Q3 2024, up from 38.0% in Q3 2023[158] - A 10% decrease in the value of the Polish zloty against the U.S. dollar would increase Grid Dynamics' income from operations by $1.5 million in Q3 2024, while a 10% increase would decrease it by $1.8 million[158] - A 10% decrease in the value of the Mexican peso against the U.S. dollar would increase Grid Dynamics' income from operations by $0.3 million in Q3 2024, while a 10% increase would decrease it by $0.4 million[159] - Approximately 41.2% of Grid Dynamics' $253.7 million combined cost of revenues and operating expenses were denominated in non-U.S. dollar currencies in the nine months ended September 30, 2024, up from 38.0% in the same period of 2023[161] - A 10% decrease in the value of the Polish zloty against the U.S. dollar would increase Grid Dynamics' income from operations by $4.0 million in the nine months ended September 30, 2024, while a 10% increase would decrease it by $4.9 million[161] - A 10% decrease in the value of the Mexican peso against the U.S. dollar would increase Grid Dynamics' income from operations by $1.0 million in the nine months ended September 30, 2024, while a 10% increase would decrease it by $1.2 million[162] - Grid Dynamics does not currently hedge its foreign currency exposure but may evaluate new hedging strategies in future periods[165] Other Income and Tax Provisions - Other income reached $3.5 million in Q3 2024 and $8.7 million for the nine months ended September 30, 2024, driven by gains from money market funds and increased fair value of marketable equity securities[135] - Provision for income tax decreased to $1.3 million in Q3 2024 from $2.6 million in Q3 2023, and to $5.8 million for the nine months ended September 30, 2024 from $8.0 million in the same period of 2023, mainly due to Section 162(m) compensation deduction limitations and foreign inclusion adjustments[137] Operational Changes - Grid Dynamics ceased operations in Russia and liquidated its former subsidiary as of May 2023[105]