Grid Dynamics(GDYN) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Overview Q2 2025 Financial Performance Highlights 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 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] - The AI and Data practice is growing almost three times faster than the company's overall organic business[5] - The company is aligning every aspect of its business with an 'AI-first' approach, responding to customer demand for AI-native partners[5] Business Performance by Vertical Revenue Contribution and Growth 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] - Growth in Finance and CPG/Manufacturing verticals was partly attributed to contributions from 2024 acquisitions[3] Financial Highlights (GAAP & Non-GAAP) Second Quarter 2025 Key Metrics 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 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 Third Quarter 2025 Guidance 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 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 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] - 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] Non-GAAP Financial Measures Explanation and Rationale 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] - 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][17][29] - 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] Forward-Looking Statements & Risk Factors 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][20][21] - Readers are cautioned not to place undue reliance on forward-looking statements and are encouraged to review risk factors detailed in SEC filings[22] Corporate Information Conference Call and Webcast 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] - Webcast and replay access is available via the Investor Relations section of Grid Dynamics' website[10][11] Investor Relations Contact For investor relations inquiries, contact investorrelations@griddynamics.com - Investor Relations contact email: investorrelations@griddynamics.com[23] Condensed Consolidated Financial Statements Condensed Consolidated Statements of Income/(Loss) and Comprehensive Income/(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 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 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 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% |