Grid Dynamics(US:GDYN)2025-02-27 21:43Financial 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].