Grid Dynamics(US:GDYN)2024-05-02 20:32PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q1 2024 financial statements detail total assets of $435.3 million, a net loss of $3.9 million, and flat revenues of $79.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $249,437 | $257,227 | | Accounts receivable, net | $53,039 | $49,824 | | Goodwill | $53,868 | $53,868 | | Total assets | $435,261 | $435,165 | | Liabilities & Equity | | | | Total current liabilities | $43,120 | $42,223 | | Total liabilities | $52,450 | $52,258 | | Total stockholders' equity | $382,811 | $382,907 | | Total liabilities and stockholders' equity | $435,261 | $435,165 | Condensed Consolidated Statements of Loss (in thousands) | Account | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Revenues | $79,817 | $80,080 | | Gross profit | $27,665 | $28,575 | | Loss from operations | $(5,542) | $(5,992) | | Net loss | $(3,948) | $(7,970) | | Diluted loss per share | $(0.05) | $(0.11) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,240 | $11,674 | | Net cash used in investing activities | $(3,936) | $(1,589) | | Net cash used in financing activities | $(6,998) | $(8,941) | | Net (decrease)/increase in cash and cash equivalents | $(7,790) | $1,639 | Revenue by Vertical (in thousands) | Vertical | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Retail | $24,629 | $25,396 | | Technology, Media and Telecom | $24,033 | $26,811 | | Finance | $10,243 | $6,515 | | CPG/Manufacturing | $9,559 | $12,646 | | Healthcare and Pharma | $3,009 | $3,152 | | Other | $8,344 | $5,560 | | Total Revenues | $79,817 | $80,080 | - The company completed the acquisition of NextSphere Technologies for $25.2 million and Mutual Mobile for $16.1 million to enhance technical capabilities and expand its global footprint3637 - Total stock-based compensation expense was $11.3 million for Q1 2024, a decrease from $13.3 million in Q1 2023, with $7.9 million allocated to General and Administrative expenses76 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports flat Q1 2024 revenue of $79.8 million, a reduced net loss of $3.9 million, and strong liquidity with $249.4 million in cash Q1 2024 Financial Highlights (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenues | $79,817 | $80,080 | | Gross profit | $27,665 | $28,575 | | Loss from operations | $(5,542) | $(5,992) | | Net loss | $(3,948) | $(7,970) | | Non-GAAP EBITDA | $10,292 | $10,832 | | Non-GAAP net income | $5,238 | $6,523 | - The company ceased operations in the Russian Federation and liquidated its subsidiary as of May 2023, continuing to monitor the impact of the Ukraine conflict98100 Customer Concentration by Revenue | Customer Group | % of Revenue Q1 2024 | % of Revenue Q1 2023 | | :--- | :--- | :--- | | Top one customer | 16.7% | 13.9% | | Top five customers | 39.6% | 40.8% | | Top ten customers | 55.3% | 60.4% | - Revenue from Finance and Other verticals grew over 50% year-over-year, offset by declines in TMT (-10.4%) and CPG/Manufacturing (-24.4%)118119120 - General and administrative expenses decreased to $21.5 million in Q1 2024 from $24.7 million in Q1 2023, primarily due to lower stock-based compensation129 - Net cash from operating activities decreased to $3.2 million in Q1 2024 from $11.7 million in Q1 2023, due to timing of payments149 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk stems from foreign currency fluctuations, with 39.1% of Q1 2024 costs in non-USD currencies, mainly Polish zloty and Mexican peso - In Q1 2024, 39.1% of combined costs were non-USD denominated, an increase from 34.9% in Q1 2023157 Foreign Currency Sensitivity Analysis (Q1 2024) | Currency Fluctuation vs. USD | Impact on Income from Operations | | :--- | :--- | | 10% decrease in Polish zloty | $1.3 million increase | | 10% increase in Polish zloty | $1.5 million decrease | | 10% decrease in Mexican peso | $0.4 million increase | | 10% increase in Mexican peso | $0.4 million decrease | - The company does not currently hedge foreign currency exposure but may evaluate future hedging strategies160 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2024161 - No material changes occurred in the company's internal control over financial reporting during Q1 2024162 PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings and is unaware of any contemplated against it - The company is not currently a party to any material legal proceeding165 Risk Factors The company faces significant risks including client concentration, geopolitical impacts, intense competition, talent retention, cybersecurity threats, AI adoption, and regulatory compliance - The company's revenues are highly dependent on a limited number of clients, with the top ten clients accounting for 55.3% of Q1 2024 revenue175 - The military action in Ukraine continues to disrupt service delivery, impair financial transactions, and cause work shifts181182 - The company faces intense competition from global consulting firms and IT service providers, many with greater resources189190 - Failure to attract and retain highly skilled IT professionals in a competitive market could significantly harm the business193 - Social, ethical, and regulatory issues concerning Artificial Intelligence (AI) may lead to reputational harm, liability, or increased R&D costs197198 - Security breaches and system failures could expose the company to liability, litigation, and reputational damage from unauthorized data access199201 - Acquisitions may be difficult to integrate, divert management attention, and fail to achieve strategic goals, potentially exposing the company to unforeseen liabilities254256 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None320 Default Upon Senior Securities The company reported no defaults upon senior securities - None323 Mine Safety Disclosures Not applicable, the company reported no mine safety disclosures - None324 Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2024 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2024325 Exhibits The report includes filed exhibits such as CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL data files - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and various XBRL documents328