Revenue of $79.8 million and GAAP Net Loss
of $3.9 million
Grid Dynamics Holdings, Inc. (Nasdaq: GDYN) (“Grid Dynamics” or
“Company”), a leader in enterprise-level digital transformation,
today announced results for the first quarter ended March 31,
2024.
We are very pleased to report the first quarter 2024 revenues of
$79.8 million that was higher than our outlook range of $77.0
million to $79.0 million that we provided in February 2024. Our
Retail and Technology, Media and Telecom (“TMT”) verticals were the
two largest verticals during the first quarter of 2024 with 30.9%
and 30.1% of our revenues, respectively. Our Finance vertical,
representing 12.8% of our first quarter revenues, grew 24% on a
sequential basis and 57.2% on a year-over-year basis. Strength in
the financial vertical was from multiple customers, ranging from
finance technology, banking and insurance. In the first quarter we
continued to diversify our industry mix and disaggregated
Healthcare and Pharma as a separate industry. During the three
months ended March 31, 2024, our Healthcare and Pharma vertical
represented 3.8% of our first quarter revenues.
“It was another quarter of solid execution. Our results clearly
show that our focus is paying off as we move towards our stated
goals. In the first quarter, we witnessed a significant milestone
as we reached the highest number of billable engineers in the
company’s history, and this is also reflected in a revenue outlook
for the second quarter. We were recognized by the Everest group as
a leader in its Google Cloud Services Specialists report. This is a
clear recognition of the differentiated capabilities that we offer
our clients to drive their digital transformation agenda.
“In the current economic cycle, spending is under heightened
scrutiny. Our strength and reputation for technology leadership,
engineering prowess, and delivery excellence positions us as a
trusted partner, often leading us to gain business at the expense
of our competition. As an example, in 2024, at two of Fortune 1000
retailers, Grid Dynamics was selected as one of the two partners
for all digital engineering programs. Additionally, at a large
Fortune 500 Telecom company, after evaluating dozens of existing
suppliers, they choose Grid Dynamics for all their customer facing
applications.
“While the current economic uncertainties cannot be overlooked,
we are highly focused on execution and wallet share at our new and
existing customers. Our capabilities, history of solving complex
business problems with technology, and our track record of making
positive impacts to our customer’s business positions us well. Our
future looks bright, and I look forward to sharing all the exciting
things in the next earnings call,” said Leonard Livschitz, CEO.
First Quarter of 2024 Financial
Highlights
- Total revenues were $79.8 million, an increase of 2.2% on a
sequential basis and flat on a year-over-year basis.
- GAAP gross profit was $27.7 million or 34.7% of revenues in the
first quarter of 2024, compared to GAAP gross profit of $28.6
million or 35.7% of revenues in the first quarter of 2023. Non-GAAP
gross profit was $28.1 million or 35.3% of revenues in the first
quarter of 2024, compared to Non-GAAP gross profit of $29.0 million
or 36.3% of revenues in the first quarter of 2023.
- GAAP net loss attributable to common stockholders was $3.9
million, or $(0.05) per share, based on 76.2 million basic
weighted-average common shares outstanding in the first quarter of
2024, compared to GAAP net loss of $8.0 million, or $(0.11) per
share, based on 74.5 million basic weighted-average common shares
outstanding in the first quarter of 2023. Non-GAAP net income was
$5.2 million, or $0.07 per diluted share, based on 78.4 million
diluted weighted-average common shares outstanding in the first
quarter of 2024, compared to Non-GAAP net income of $6.5 million,
or $0.08 per diluted share, based on 77.1 million diluted
weighted-average common shares outstanding in the first quarter of
2023.
- Non-GAAP EBITDA (earnings before interest, taxes, depreciation,
amortization, other income and expenses, fair value adjustments,
stock-based compensation, transaction and transformation-related
costs, restructuring costs as well as geographic reorganization
expenses), a non-GAAP metric, was $10.3 million in the first
quarter of 2024 compared to Non-GAAP EBITDA of $10.8 million in the
first quarter of 2023.
See “Non-GAAP Financial Measures” and “Reconciliation of
Non-GAAP Information” below for a discussion of our non-GAAP
measures.
Cash Flow and Other
Metrics
- Cash provided by operating activities was $3.2 million for the
three months ended March 31, 2024, compared to $11.7 million for
the three months ended March 31, 2023.
- Cash and cash equivalents totaled $249.4 million as of March
31, 2024, compared to $257.2 million as of December 31, 2023.
- Total headcount was 3,892 as of March 31, 2024, compared with
3,744 employees as of March 31, 2023.
Financial Outlook
- The Company expects revenue in the second quarter of 2024 to be
in the range of $80.0 million to $82.0 million.
- Non-GAAP EBITDA in the second quarter of 2024 is expected to be
between $10.5 million and $11.5 million.
- For the second quarter of 2024, we expect our basic share count
to be in the 77.0 - 78.0 million range and diluted share count to
be in the 79.0 - 80.0 million range.
Grid Dynamics is not able, at this time, to provide GAAP targets
for net income/(loss) for the second quarter of 2024 because of the
difficulty of estimating certain items excluded from Non-GAAP
EBITDA that cannot be reasonably predicted, such as interest
income, taxes, other income/(expenses), fair-value adjustments,
geographic reorganization expenses, restructuring expenses,
transaction-related costs and charges related to stock-based
compensation expense. The effect of these excluded items may be
significant.
Conference Call and
Webcast
Grid Dynamics will host a video conference call at 4:30 p.m. ET
on Thursday, May 2, 2024 to discuss its first quarter financial
results. Investors and other interested parties can access the call
in the following ways: A webcast of the video conference call can
be accessed on the Investor Relations section of the Company's
website at https://ir.griddynamics.com/.
A replay will also be available after the call at
https://ir.griddynamics.com/ with the passcode $Q1@2024.
About Grid Dynamics
Grid Dynamics (Nasdaq: GDYN) is a digital-native technology
services provider that accelerates growth and bolsters competitive
advantage for Fortune 1000 companies. Grid Dynamics provides a
range of digital transformation consulting and implementation
services that includes artificial intelligence, big data,
analytics, search, cloud and DevOps. Grid Dynamics achieves high
speed-to-market, quality, and efficiency by using technology
accelerators, an agile delivery culture, and its pool of global
engineering talent. Founded in 2006, Grid Dynamics is headquartered
in Silicon Valley with offices across the globe, including the
U.S., Europe, the U.K., India, Mexico and Jamaica.
To learn more about Grid Dynamics, please visit
www.griddynamics.com. Follow us on Facebook and LinkedIn.
Non-GAAP Financial
Measures
To supplement the financial measures presented in Grid Dynamics
press release in accordance with generally accepted accounting
principles in the United States (“GAAP”), the Company also presents
Non-GAAP measures of financial performance.
A “non-GAAP financial measure” refers to a numerical measure of
Grid Dynamics historical or future financial performance or
financial position that is included in (or excluded from) the most
directly comparable measure calculated and presented in accordance
with GAAP. Grid Dynamics provides certain non-GAAP measures as
additional information relating to its operating results as a
complement to results provided in accordance with GAAP. The
non-GAAP financial information presented herein should be
considered in conjunction with, and not as a substitute for or
superior to, the financial information presented in accordance with
GAAP and should not be considered a measure of liquidity and
profitability.
Grid Dynamics has included these non-GAAP financial measures
because they are financial measures used by Grid Dynamics’
management to evaluate Grid Dynamics’ core operating performance
and trends, to make strategic decisions regarding the allocation of
capital and new investments and are among the factors analyzed in
making performance-based compensation decisions for key
personnel.
Grid Dynamics believes the use of non-GAAP financial measures,
as a supplement to GAAP measures, is useful to investors in that
they eliminate items that are either not part of core operations or
do not require a cash outlay, such as stock-based compensation
expense. Grid Dynamics believes these non-GAAP measures provide
investors and other users of its financial information consistency
and comparability with its past financial performance and
facilitate period to period comparisons of operations. Grid
Dynamics believes these non-GAAP measures are useful in evaluating
its operating performance compared to that of other companies in
its industry, as they generally eliminate the effects of certain
items that may vary for different companies for reasons unrelated
to overall operating performance.
There are significant limitations associated with the use of
non-GAAP financial measures. Further, these measures may differ
from the non-GAAP information, even where similarly titled, used by
other companies and therefore should not be used to compare our
performance to that of other companies. Grid Dynamics compensates
for these limitations by providing investors and other users of its
financial information a reconciliation of non-GAAP measures to the
related GAAP financial measures. Grid Dynamics encourages investors
and others to review its financial information in its entirety, not
to rely on any single financial measure, and to view its non-GAAP
measures in conjunction with GAAP financial measures. Please see
the reconciliation of non-GAAP financial measures to the most
directly comparable GAAP measures attached to this release.
Forward-Looking
Statements
This communication contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 that are not
historical facts, and involve risks and uncertainties that could
cause actual results of Grid Dynamics to differ materially from
those expected and projected. These forward-looking statements can
be identified by the use of forward-looking terminology, including
the words “believes,” “estimates,” “anticipates,” “expects,”
“intends,” “plans,” “may,” “will,” “potential,” “projects,”
“predicts,” “continue,” or “should,” or, in each case, their
negative or other variations or comparable terminology. These
forward-looking statements include, without limitation, the
quotations of management, the section titled “Financial Outlook,”
and statements concerning Grid Dynamics’s expectations with respect
to future performance, particularly in light of the macroeconomic
environment and the Russian invasion of Ukraine, as well as its
GigaCube strategy.
These forward-looking statements involve significant risks and
uncertainties that could cause the actual results to differ
materially from the expected results. Most of these factors are
outside Grid Dynamics’s control and are difficult to predict.
Factors that may cause such differences include, but are not
limited to: (i) Grid Dynamics has a relatively short operating
history and operates in a rapidly evolving industry, which makes it
difficult to evaluate future prospects and may increase the risk
that it will not continue to be successful and may adversely impact
our stock price; (ii) Grid Dynamics may be unable to effectively
manage its growth or achieve anticipated growth, particularly as it
expands into new geographies, which could place significant strain
on Grid Dynamics’ management personnel, systems and resources;
(iii) Grid Dynamics’ revenues are highly dependent on a limited
number of clients and industries that are affected by seasonal
trends, and any decrease in demand for outsourced services in these
industries may reduce Grid Dynamics’ revenues and adversely affect
Grid Dynamics’ business, financial condition and results of
operations; (iv) macroeconomic conditions, inflationary pressures,
and the geopolitical climate, including the Russian invasion of
Ukraine, have and may continue to materially adversely affect our
stock price, business operations, overall financial performance and
growth prospects; (v) Grid Dynamics’ revenues are highly dependent
on clients primarily located in the United States, and any economic
downturn in the United States or in other parts of the world,
including Europe or disruptions in the credit markets may have a
material adverse effect on Grid Dynamics’ business, financial
condition and results of operations; (vi) Grid Dynamics faces
intense and increasing competition; (vii) Grid Dynamics’ failure to
successfully attract, hire, develop, motivate and retain highly
skilled personnel could materially adversely affect Grid Dynamics’
business, financial condition and results of operations; (viii)
failure to adapt to rapidly changing technologies, methodologies
and evolving industry standards may have a material adverse effect
on Grid Dynamics’ business, financial condition and results of
operations; (ix) failure to successfully deliver contracted
services or causing disruptions to clients’ businesses may have a
material adverse effect on Grid Dynamics’ reputation, business,
financial condition and results of operations; (x) risks and costs
related to acquiring and integrating other companies; and (xi)
other risks and uncertainties indicated in Grid Dynamics filings
with the SEC.
Grid Dynamics cautions that the foregoing list of factors is not
exclusive. Grid Dynamics cautions readers not to place undue
reliance upon any forward-looking statements, which speak only as
of the date made. Grid Dynamics does not undertake or accept any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements to reflect any change
in its expectations or any change in events, conditions or
circumstances on which any such statement is based. Further
information about factors that could materially affect Grid
Dynamics, including its results of operations and financial
condition, is set forth under the “Risk Factors” section of the
Company’s quarterly report on Form 10-Q filed May 2, 2024 and in
other periodic filings Grid Dynamics makes with the SEC.
Schedule 1:
GRID DYNAMICS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF LOSS AND
COMPREHENSIVE LOSS
Unaudited
(In thousands, except per
share data)
Three Months Ended
March 31,
2024
2023
Revenues
$
79,817
$
80,080
Cost of revenues
52,152
51,505
Gross profit
27,665
28,575
Operating expenses
Engineering, research, and development
4,372
4,203
Sales and marketing
7,292
5,634
General and administrative
21,543
24,730
Total operating expenses
33,207
34,567
Loss from operations
(5,542
)
(5,992
)
Other income/(expense), net
2,525
1,682
Loss before income taxes
(3,017
)
(4,310
)
Provision for income taxes
931
3,660
Net loss
$
(3,948
)
$
(7,970
)
Foreign currency translation adjustments,
net of tax
(178
)
495
Comprehensive loss
$
(4,126
)
$
(7,475
)
Loss per share
Basic
$
(0.05
)
$
(0.11
)
Diluted
$
(0.05
)
$
(0.11
)
Weighted average shares
outstanding
Basic
76,151
74,459
Diluted
76,151
74,459
Schedule 2:
GRID DYNAMICS HOLDINGS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
Unaudited
(In thousands, except share
and per share data)
As of
March 31, 2024
December 31,
2023
Assets
Current assets
Cash and cash equivalents
$
249,437
$
257,227
Accounts receivable, net of allowance of
$1,389 and $1,363 as of March 31, 2024 and December 31, 2023,
respectively
53,039
49,824
Unbilled receivables
5,649
3,735
Prepaid income taxes
5,609
3,998
Prepaid expenses and other current
assets
8,768
9,196
Total current assets
322,502
323,980
Property and equipment, net
12,552
11,358
Operating lease right-of-use assets,
net
10,214
10,446
Intangible assets, net
25,531
26,546
Goodwill
53,868
53,868
Deferred tax assets
7,220
6,418
Other noncurrent assets
3,374
2,549
Total assets
$
435,261
$
435,165
Liabilities and equity
Current liabilities
Accounts payable
$
2,935
$
3,621
Accrued compensation and benefits
19,914
19,263
Accrued income taxes
9,895
8,828
Operating lease liabilities, current
4,491
4,235
Accrued expenses and other current
liabilities
5,885
6,276
Total current liabilities
43,120
42,223
Deferred tax liabilities
3,164
3,274
Operating lease liabilities,
noncurrent
6,166
6,761
Total liabilities
52,450
52,258
Stockholders’ equity
Common stock, $0.0001 par value;
110,000,000 shares authorized; 76,521,182 and 75,887,475 issued and
outstanding as of March 31, 2024 and December 31, 2023,
respectively
8
8
Additional paid-in capital
401,541
397,511
Accumulated deficit
(19,834
)
(15,886
)
Accumulated other comprehensive
income/(loss)
1,096
1,274
Total stockholders’ equity
382,811
382,907
Total liabilities and stockholders’
equity
$
435,261
$
435,165
Schedule 3:
GRID DYNAMICS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
Unaudited
(In thousands)
Three Months Ended
March 31,
2024
2023
Cash flows from operating
activities
Net loss
$
(3,948
)
$
(7,970
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
2,914
1,645
Operating lease right-of-use assets
amortization expense
998
650
Bad debt expense
86
20
Deferred income taxes
(912
)
(923
)
Stock based compensation
11,339
13,257
Other (income)/expenses, net
(287
)
23
Changes in assets and liabilities:
Accounts receivable
(3,301
)
(2,613
)
Unbilled receivables
(1,914
)
(921
)
Prepaid income taxes
(1,611
)
(1,639
)
Prepaid expenses and other current
assets
382
(368
)
Accounts payable
(728
)
(691
)
Accrued compensation and benefits
651
6,054
Operating lease liabilities
(1,105
)
(462
)
Accrued income taxes
1,067
3,306
Accrued expenses and other current
liabilities
(391
)
2,306
Net cash provided by operating
activities
3,240
11,674
Cash flows from investing
activities
Purchase of property and equipment
(3,197
)
(1,589
)
Other investing activities, net
(739
)
—
Net cash used in investing
activities
(3,936
)
(1,589
)
Cash flows from financing
activities
Proceeds from exercises of stock
options
571
10
Payments of tax obligations resulted from
net share settlement of vested stock awards
(7,569
)
(8,951
)
Net cash used in financing
activities
(6,998
)
(8,941
)
Effect of exchange rate changes on cash
and cash equivalents
(96
)
495
Net increase/(decrease) in cash and cash
equivalents
(7,790
)
1,639
Cash and cash equivalents, beginning of
period
257,227
256,729
Cash and cash equivalents, end of
period
$
249,437
$
258,368
Supplemental disclosure of cash flow
information:
Cash paid for income taxes
$
2,495
$
2,926
Schedule 4:
GRID DYNAMICS HOLDINGS,
INC.
RECONCILIATION OF NON-GAAP
INFORMATION
Unaudited
(In thousands, except per
share data)
Three Months Ended
March 31,
2024
2023
Revenue
$
79,817
$
80,080
Cost of revenue
52,152
51,505
GAAP gross profit
27,665
28,575
Stock-based compensation
482
460
Non-GAAP gross profit
$
28,147
$
29,035
Three Months Ended
March 31,
2024
2023
GAAP net loss
$
(3,948
)
$
(7,970
)
Adjusted for:
Depreciation and amortization
2,914
1,645
Provision for income taxes
931
3,660
Stock-based compensation
11,339
13,257
Transaction and transformation-related
costs(1)
454
788
Geographic reorganization(2)
501
691
Restructuring costs(3)
626
443
Other (income)/expense, net(4)
(2,525
)
(1,682
)
Non-GAAP EBITDA
$
10,292
$
10,832
__________________________
(1)
Transaction and transformation-related
costs include, when applicable, external deal costs,
transaction-related professional fees, transaction-related
retention bonuses, which are allocated proportionally across cost
of revenue, engineering, research and development, sales and
marketing and general and administrative expenses as well as other
transaction-related costs including integration expenses consisting
of outside professional and consulting services.
(2)
Geographic reorganization includes
expenses connected with military actions of Russia against Ukraine
and the exit plan announced by the Company and includes travel and
relocation-related expenses of employees from the aforementioned
countries, severance payments, allowances as well as legal and
professional fees related to geographic repositioning in various
locations. These expenses are incremental to those expenses
incurred prior to the crisis, clearly separable from normal
operations, and not expected to recur once the crisis has subsided
and operations return to normal.
(3)
We implemented a restructuring plan during
the first quarter of 2023. Our restructuring costs comprises of
severance charges and respective taxes, and are included in General
and administrative expenses in the Company’s unaudited condensed
consolidated statement of loss and comprehensive loss.
(4)
Other (income)/expense, net consists
primarily of gains and losses on foreign currency transactions,
fair value adjustments, and other miscellaneous non-operating
expenses, potential loss contingencies as well as other income
consists primarily of interest on cash held at banks and returns on
investments in money-market funds.
Three Months Ended
March 31,
2024
2023
GAAP net loss
$
(3,948
)
$
(7,970
)
Adjusted for:
Stock-based compensation
11,339
13,257
Transaction and transformation-related
costs (1)
454
788
Geographic reorganization (2)
501
691
Restructuring costs(3)
626
443
Other (income)/expense, net(4)
(2,525
)
(1,682
)
Tax impact of non-GAAP adjustments(5)
(1,209
)
996
Non-GAAP net income
$
5,238
$
6,523
Number of shares used in the GAAP diluted
EPS
76,151
74,459
GAAP diluted EPS
$
(0.05
)
$
(0.11
)
Number of shares used in the non-GAAP
diluted EPS
78,374
77,129
Non-GAAP diluted EPS
$
0.07
$
0.08
__________________________
(1)
Transaction and transformation-related
costs include, when applicable, external deal costs,
transaction-related professional fees, transaction-related
retention bonuses, which are allocated proportionally across cost
of revenue, engineering, research and development, sales and
marketing and general and administrative expenses as well as other
transaction-related costs including integration expenses consisting
of outside professional and consulting services.
(2)
Geographic reorganization includes
expenses connected with military actions of Russia against Ukraine
and the exit plan announced by the Company and includes travel and
relocation-related expenses of employees from the aforementioned
countries, severance payments, allowances as well as legal and
professional fees related to geographic repositioning in various
locations. These expenses are incremental to those expenses
incurred prior to the crisis, clearly separable from normal
operations, and not expected to recur once the crisis has subsided
and operations return to normal.
(3)
We implemented a restructuring plan during
the first quarter of 2023. Our restructuring costs comprises of
severance charges and respective taxes, and are included in General
and administrative expenses in the Company’s unaudited condensed
consolidated statement of loss and comprehensive loss.
(4)
Other (income)/expense, net consists
primarily of gains and losses on foreign currency transactions,
fair value adjustments, and other miscellaneous non-operating
expenses, potential loss contingencies as well as other income
consists primarily of interest on cash held at banks and returns on
investments in money-market funds.
(5)
Reflects the estimated tax impact of the
non-GAAP adjustments presented in the table.
Schedule 5:
GRID DYNAMICS HOLDINGS,
INC.
REVENUE BY VERTICALS
Unaudited
(In thousands)
Three Months Ended March
31,
2024
% of revenue
2023
% of revenue
Retail
$
24,629
30.9
%
$
25,396
31.7
%
Technology, Media and Telecom
24,033
30.1
%
26,811
33.5
%
Finance
10,243
12.8
%
6,515
8.1
%
CPG/Manufacturing
9,559
12.0
%
12,646
15.8
%
Healthcare and Pharma
3,009
3.8
%
3,152
3.9
%
Other
8,344
10.4
%
5,560
7.0
%
Total
$
79,817
100.0
%
$
80,080
100.0
%
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version on businesswire.com: https://www.businesswire.com/news/home/20240502789838/en/
Grid Dynamics Investor Relations:
investorrelations@griddynamics.com
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