Q4 2023 Grid Dynamics Holdings Inc Earnings Call

Speaker: which is a strong testament to our differentiation in a year where customers were more selective about our business model and Digital Programming. With respect to the CTO office, our scientists and architects are heavily engaged with clients across the spectrum of innovative solutions, including AI, to drive meaningful business outcomes. To that end, we released several new functional accelerators across industry verticals, which have resulted in greater engagements across both new and existing customers, supply chain manufacturing, pharmaceutical, and financial services, which is an area of focus with our GigaCube initiatives. The ability to offer unique and differentiated offerings has resulted in accelerated acceptance across a wide range of industries. To support the strong demand for AI skills, we established a comprehensive AI training program. I'm happy to report that over 25% of our engineers are trained in generative AI; our AI curriculum is rigorous and is segmented across three tracks, ranging from introductory AI to more advanced topics. It may take up to several quarters to complete the entire curriculum, on the macro front.

Which is a strong testament to our differentiation in a year, where customers were more selective towards business.

The digital providers with respect to the CTO office, our scientists and architects are heavily engaged with clients across the spectrum of innovative solutions, including AI to drive meaningful business outcomes.

To that end, we released several new functional accelerators across industry verticals, which have resulted in greater engagements across both new and existing customers and.

In supply chain manufacturing pharmaceutical and financial services, which is area of focus with our giga coupon initiatives the ability.

Two offer unique and differentiated offerings has resulted in accelerated acceptance across a wide range of customers.

To support the strong demand for skills, we established comprehensive AI training programs.

Happy to our important than over 25% of our engineers are trained in Germany right.

A curriculum this rigorous and as <expletive> mentioned that closely tracks are ranging from introductory AG to more advanced topics. It may take up to several quarters to complete the entire group.

On the macro front.

Speaker: I'm happy to report that the demand environment is improving, and the demand trends are directionally consistent with my commentary over the last couple of quarters. While we're yet to get back to normal in terms of levels of growth, we're moving in the right direction. In many ways, the sequential growth with our first quarter revenue guidance reflects our central focus. We'll also see positive trends with our four company-specific facts. First, we see customers either choosing to maintain their current level of spending or moderately improve with increases in investment. Well, we witnessed a similar trend last quarter.

I am happy to report that the demand environment is improving.

Demand trends are directionally consistent with my commentary over the last couple of quarters, while we're yet to get back to normalized levels of growth. We are moving in the right direction in many ways the sequential growth with our first quarter revenue guidance reflects our sentiment.

We also assumed a positive trends without for company specific factors.

We see customers either choosing to maintain their current level of spending or water to improve with increases in the west.

But we witnessed a similar trend last quarter. The fact that the customers demonstrated more stability is an important step in getting back to historical normalized levels.

Speaker: The fact that customers demonstrate more stability is an important step in getting back to historically normalized levels. This is reflected in the steady rise in unbillable headcount trends from our existing lows. Second, drops in revenue across some or all large existing customers are moderate. To put it in perspective, in 2023, the considerable revenue headwinds we faced were limited to a handful of existing customers. We anticipate this trend will diminish in 2024.

This is reflected in the steady rise in our billable head count trends from our existing loans.

Second drops in revenue grow some of our large existing customers are moderating to put it in perspective in 2023. The considerable revenue headwinds we faced were limited to a handful of existing customers.

We anticipate this trend will diminish in 2020 for.

Speaker: This bodes well for the company's growth in 2024. Third, our partnership-driven revenues are growing steadily. In 2023, roughly 13% of our revenues came from partners.

This bodes well for the company's growth in 2024.

Third our partnership driven revenues are growing steadily in 2023, roughly 13% of our revenues came from partnerships the accelerated investment into partnership programs a couple of years ago.

Speaker: They accelerated the investment into partnership programs a couple of years ago, and I'm bullish on expanding and monetizing more partnership opportunities in 2024 and beyond.

I am bullish on expanding and monetizing more partnership opportunities in 2024 and beyond.

And final report.

Speaker: Our New Logo Momentum. In 2023, we invested in a broader, industry-specific, creative, dedicated sales team to pursue new logos and opportunities. We expect this to continue to be an important component of our growth in 2020. Our follow-the-sun strategy has been successful with our clients. Today, we serve our customers from 18 countries, and our global footprint fully aligns with our customer needs. Now I'll come into the first order of quantity.

Our new logo momentum in 2023, we accelerated investment in the broader industry specific created dedicated sales team to pursue new logos and opportunities. We expect this to continue to be an important component of our growth in 2020.

I'll follow the <unk> strategy has been successful with our clients today, we serve our customers from 18 countries and our global footprint fully aligns with our customer needs.

Now coming to the first quarter of 2021.

Speaker: We're almost two months into the quarter, and the characteristics that I shared with you today... apply to the extent to the first quarter. Our billboard headcount continues to grow, our air activity is robust, and the headwinds from a handful of clients continue to diminish. We believe underlying trends are moving in the right direction. As we enter 2024, our city organization is highly focused on expanding our capabilities, highlighted in our GeoCube strategies. This includes building new R&D innovations, accelerators, and AI solutions. During the fourth quarter, we made good progress with the approval of concepts and customer pricing related to artificial intelligence. An internal R&D innovation lab, which we call GridLabs, has generated several functional accelerators and AI-related architectures.

We're almost two months into the quarter and the commentary that I shared with you today.

Extend to the first quarter too.

Our billable head count continues to grow our activity is robust and the headwinds from a handful of clients continued to diminish.

We believe underlying trends are moving into.

And to the right direction.

As we enter 2024 hour city organization is highly focused on expanding our capabilities related and now Youtube strategies. This includes building new R&D innovations accelerators NAA solutions.

During the fourth quarter, we made good progress with our broad concepts and customer pricing related to institutional intelligence.

Total R&D innovation lab, which we called <unk> labs has generated considerable function solar and air related architects to date, Aaas and infused across breakfast as an industry.

Speaker: Today, AI is infused across practices and industries, as well as customers representing over 80% of our revenues are engaged with Grid Dynamics on AI initiatives, and more than 50% of our new engagements have an AI component. These include industry verticals beyond which we have historically been small, such as supply chain and manufacturing, financial services, and pharmaceuticals. Some of our new AI innovations include pricing applications, Internet of Things Analytics, visual quality control, and industrial vision, and large language.

As well as customers representing over 80% of our revenues are engaged with great dynamics on AI initiatives and more than 50% of our new engagements MAA.

These include industry verticals beyond which we've historically been strong such as supply chain and manufacturing financial services and pharmaceutical.

Some of our new AI innovations include pricing applications.

Internet of thing analytics.

Visual quality control and industrial vision launch languish models.

Speaker: As a reminder, Grid Dynamics AI Engagements are based on more than seven years of internal research and successful implementation. With our journey of AI offering, we partner with customers to employ large models in a variety of applications, including trunk-guided image generation. Product Design and Visualization, Knowledge Retrieval, Wealth Management, and Customer Representation. In the first quarter, there were several notable trends, and I want to share with you some of them. Mortimer Madden, In the fourth quarter, we signed five new and debris customers. This brings the number of new enterprise loaders in 2023 to 331.

As a reminder, <unk> engagements are based on more than seven years of internal research and successful implementations with our Jeremy rare ultra we partner with customers to employ.

Large models in a variety of applications.

This include Trump guided mid generation product design, and visualization knowledge to achieve wealth management and customer support.

In the first quarter there were several notable trends and I want to share with you some of them.

Lora momentum.

In the fourth quarter, we signed five new enterprise customers.

This brings the number of new enterprise logos in 'twenty, two 'twenty three to 33 ones.

Speaker: This is a record number of new logos for us and is a testament to our reputation for large global integration. On the new enterprise customers we signed in the quarter, one is the largest omni-channel specialty retailer, one is a large insurance company, and one is a software company focused on revenue management for the healthcare industry. Dealer locations. Our Follow the Sun strategy continues to be a guiding principle in enabling our clients to be served in an uninterrupted fashion around the clock. I'm proud of our ability to serve our customers across 18 countries spanning across North America, Europe, and India. I'm happy to report that we're opening an office in Bengal. This brings the total number of Indian offices to three.

This is a record a record number of new logos for US and is a testament to our reputation with large global enterprise on.

The new enterprise customers, we signed in the quarter. One is the largest omnichannel specialty retailer one is a large insurance company and one is a software company and focus on revenue management for the healthcare industry.

Delaware location support.

Our following the sound strategy continues to be guiding principle, and enabling our clients to be served in an uninterrupted fashion around the globe.

I am proud of our ability to serve our customers across 18 countries spending across North America, Europe and India.

In India.

I am happy to report that we are opening an office in Bangalore.

This brings the total number of Indian offices to three.

Which includes hydro red and Chennai.

Speaker: Our clients have successfully engaged with Grid Dynamics in leveraging our presence and expansion in India. In Europe, we continue to expand our footprint in Poland and Romania. In Poland, our growth is increasingly driven by partnerships with client localization. With respect to our recent acquisitions, we complete all the engineering integration by the end of Q1.

Our clients have successfully engage with great dynamics in leveraging our presence in expansion in India.

In Europe, we continue to expand our footprint in Poland and Romania.

In Poland, our grasp is aggressively do it by partnerships with our clients local centers with respect to our recent acquisitions, we completed all the engineering integration by the end of Q1.

The European business.

Speaker: Europe continues to be strategic to all growth. In 2023, our revenue from Europe will be roughly 20% of our total revenue with customers across industries. During the quarter, we made good progress in expanding our footprint across industry verticals with our existing and new European clients. To highlight some notable achievements during the quarter, let me point out that, with a leader in legal index services, we're partnering to use GNI technology and build a global data platform to accelerate their ability to serve their customers with reviews and publishing of content. For a large UK-based retailer, we signed a multi-year contract to modernize their e-commerce platform.

Europe continues to be strategic door growth in 2023, our revenue from Europe was roughly 20% of our total revenue with customers across industry verticals. During the quarter remained good progress in expanding our footprint across industry verticals with our existing in European glass.

To highlight some notable achievements during the quarter let.

Let me point out that it was a leader in legal index services, we're partnering to use Gen AI technology and build a global data platform to accelerate their duty to serve their customers with reviews and publishing of countries and a large U K based retailer, we signed a multiyear contract.

To modernize their e-commerce, but.

Speaker: At a global counterpart company, we expect to roll out their composable commerce modernization platform across other brands within Europe. We're a large medical device company. We're launching initiatives in data engineering and generative AI, the goal of which is to enhance the efficiency of sales reporting processes.

A global Autopart company, we expect to rollout their composite will conference modernization platform across other brands within Europe for.

For a large medical device company, we are launching initiatives and data engineering and charity of yet.

The goal is to enhance the efficiency of sales reporting process.

Speaker: And finally, at a large clean energy company, we're enhancing their sustainable ESG industry for the show. As I highlighted before, partnerships are increasingly playing an important role in our growth and our long-term plan for becoming a billion-dollar company. Let me remind you, in 2023, partnerships contributed to 13% of our overall revenue. Again, this is impressive given that we embarked on this strategy in 2021. And within a short period of two years, we have achieved such impressive results.

And finally at the large clean energy company, we're enhancing their sustainable ESG initiatives.

Partnerships.

As I highlighted before partnerships are increasingly playing an important role in our growth and our long term blip towards becoming a billion dollar company.

Let me remind you in 2023 partnerships contributed to 13% of all overall revenue.

Again this is impressive given that we embarked on this strategy in 2021 and within a short period of three years, we have achieved such impressive results.

Speaker: Not only with our partners, AI is becoming a core element of our joint go-to-market strategy. Looking forward to 2024, we have strong momentum with hyperscalers and linear digital commerce companies, as well as other specialists in their brands.

Notably with our partners AI is becoming a core element of our joint go to market strategy looking forward to 2024, we have strong momentum with Hyperscale and linear digital commerce.

<unk> companies as well as other specialists will per providers, our focus is to capture greater wallet share.

Speaker: Our focus is to capture greater volume. Dear Humanition, With GigaCube, we continue to make good progress. As you know, GigaCube is our strategic blueprint that lays out a framework for a company toward a billion dollars in revenue. We've operationalized Geocube via four key areas.

<unk> initiatives.

With Giga Q, we continued to make good progress as you know we review with our strategic Blueprint then lays out a framework for our company toward a $1 billion in revenue.

Operationalize the give you four key areas knowledge management partnerships, new vertical focus and winning larger deals and each of these fronts. We made progress both in the Q4 and our full 2023 with our knowledge management efforts, we have a catalog of over 100 important delivery key stat.

Speaker: Knowledge Management, Partnerships, New Vertical Focus, and Winning Larger, And each of these fronts have made progress, both in Q4 and a full 2021. With our knowledge management efforts, we have cataloged over 100 important delivery case studies that are being used across pre-sales, sales, and delivery organizations. This is important.

They are being used at gross pre sales sales and delivery organizations. This is important.

Speaker: We explain the proliferation of our learnings from each project and program to ensure that the whole company benefits. During the quarter, Grid Dynamics deals with some normal projects. For a leading global technology company, Grid Dynamics enhanced the recommendation engine, one of the largest online streaming services. We are successfully implementing cutting-edge machine learning heuristic techniques to enhance the quality of the data used by the recommendation engine.

I explained the proliferation of our learnings from each project and program to ensure that the whole company benefits from it.

During the quarter <unk> going to do with some normal projects.

For a leading global technology company dynamics enhanced the recommendation engine one of the largest online streaming services. We are successfully implementing cutting edge machine learning heuristic techniques to enhance the quality of the data use better coordination ancient.

Speaker: Our engagement covered engineering and machine learning processes, including model engineering, evaluation, deployment, and post-production efficacy monitoring. This resulted in significant improvements in the relevancy of recommendations and the system's capability to self-adjust and reopen. For one of the largest auto part distribution retail, Grid Dynamics has been actively engaged in the modernization of the product catalog, which enables search and browse functionality. Our solution uses generative AI to correct for..., generate descriptions, correct categorization, enhance attributes, and highlight discrepancies in the Bryan Bergin model.

Our engagement covers and drilling machine learning process, including Mato engineered evaluation deployment and postproduction efficacy monitor this resulted in significant improvements in the relevance of our recommendations and the systems capability to sell to adjust in real time.

For one of the largest autopart distribution retail company three dynamics has been actively engaged in the modernization of the protocol, we should enable a search and browse functionality.

Our solution user journey II to correct pro images generate distributions correct categorization. It may have attributes and highlight discrepancies in our broader digits.

Speaker: As a result, this client expects to improve customer conversion through user experiences, leading to an increase in sales across both B2B and B2C channels. For a multinational financial service provider, Grid Dynamics led a cybersecurity program to onboard over 400 custom-built applications to a SailPoint IdentityIQ platform. The solution enables our client with a full life cycle of identity and access management, ensuring proper duty separation to meet the latest security compliance standards. We expect to expand this project during the next phase and onboard another over 1,000 applications to this platform. For a global automotive manufacturer, Grid Dynamics developed a cloud-native platform that enables an intuitive end-to-end user experience and promotes in-house financing to car shoppers, which is expected to increase vehicle sales through the digital. With that, let me turn the call to Anil, who will discuss Q4 results in more detail.

As a result, this client expects to improve customer conversion and user experiences leading to increase in sales across both <unk> and <unk> channels.

For a multinational financial service provider Green dynamics leaves us cyber security program to onboard over 400 custom build application to Sailpoint identity IQ platform. This solution enables our clients with their full lifecycle of identity and access management.

Turing proper duty separation to meet the latest security and compliance standards, we expect to expand this project during the next phase.

And board another over 1000 applications to this platform.

For a global automotive manufacturer Green dynamic develop a cloud native E Commerce platform based on robust micro services architecture.

This platform enables an intuitive and to end user experience and promote in house financing to car shoppers, which anticipates to increase that vehicle sales through the digital channel.

With that let me turn the call to our new we'll discuss Q4 results in more details.

Anil Kumar Doradla: Thanks Leonard. Good afternoon, everyone. Our four-quarter revenue of $78.1 million was slightly ahead of our guidance range of $76 million to $78 million and exceeded Wall Street expectations. On a sequential basis, our revenue grew 0.8% and was down 3.1% on a year-over-year basis. Relative to last quarter, we saw greater stabilization across the majority of our, During the fourth quarter, retail, our largest vertical representing 31.5% of our revenue, 7.0%license plates increased by 7.4% on a sequential basis and by 4.2% on a year-over-year basis. On a sequential basis, the decline was largely from specialty retail offset by strength in home improvement.

Thanks, Nick.

Afternoon, everyone. Our fourth quarter revenue of $78 1 billion was slightly ahead of our guidance range of 76 million to $78 million and exceeded wall Street expectations.

On a sequential basis, our revenue grew.

8%.

<unk> was down three 1% on a year over year basis.

Relative to last quarter, we saw greater standardization across the majority of our accounts.

During the fourth quarter retail our largest vertical representing 31, 5% of our revenues decreased by seven 4% on a sequential basis.

And by four 2% on a year over year basis.

On a sequential basis, the decline was largely from specialty retail.

Offset by strength in home improvement.

Anil Kumar Doradla: TMT, our second largest vertical, represented 31% of our four-quarter revenues, grew 1.9% on a sequential basis and decreased by 10.9% on a year-over-year basis. On a sequential basis, the growth was largely driven by some of the large technology customers. Here are the details of the revenue mix of other verticals. Our CPG and manufacturing represented 12.4% of our revenue in the fourth quarter, flat on a sequential basis and a decrease of 31.3% on a year-over-year basis. During the quarter, we witnessed stabilization at our largest CPG customer and growth at other customers. In finance, vertical represented 10.6% of revenue, an increase of 13.4% on a sequential basis, and 32.6% on a year-over-year basis.

PMT, our second largest vertical represented 31% of our fourth quarter revenues grew one 9% on a sequential basis and decreased by 10, 9% on a year over year basis on a sequential basis and Brooklyn's maxi driven by some of the large technology S. Mers.

Here are the details of the revenue mix of other verticals.

Our CPG and manufacturing represented 12, 4% of our revenue in the fourth quarter flat on a sequential basis and decrease of 31, 3% on a year over year basis. During the acquired we witnessed stabilization and our largest CPG customer and growth at <unk>.

The finance vertical represented 10, 6% of revenue an increase of 13, 4% on a sequential basis and 32, 6% on a year over year basis.

Anil Kumar Doradla: The growth in the quarter came from a combination of financial technology customers and users. And finally, the other segment represented 14.5% of our fourth quarter revenue and was up 11.5% on a sequential basis. sequential growth was driven by strength across multiple customers, some of them in healthcare and restaurants. We exited the fourth quarter with a total headcount of 3,920 versus 3,823 employees in the third quarter of 2023 and up from 3,798 in the fourth quarter of 2022. At the end of the fourth quarter of 2023, our U.S. headcount was 331 or 8.4% of the company's total headcount. This remained on the same level compared to the third quarter of 2023 and slightly decreased from 8.9% in the year-ago quarter. Our non-US headcount located in Europe, America, and India was 3,589, or 91%.

Growth in the quarter came from a combination of financial technology customers and use all of those.

And finally in the other segment represented 14, 5% our fourth quarter revenue and was up 11, 5% on a sequential basis and.

Sequential growth was driven by strength across multiple customers some of them in the healthcare and restaurant industries.

We exited the fourth quarter with a total headcount of 3920 versus 3823 employees in the third quarter of 2023.

And up from 3798 in the fourth quarter of 2022.

At the end of the fourth quarter of 2023, our U S headcount was 331 or eight 4% of the Companys total head count. This remained on the same level compared to the third quarter of 2023 and slightly decreased from eight 9% in the year ago corner.

Our non U S headcount located in Europe, Americas, and India was 3589 or 91, 6%.

Anil Kumar Doradla: In the fourth quarter, revenues from our top 5 and top 10 customers were 39.7% and 55.3% risk payers, versus 43.2% and 60.4% in the same period eight years ago. We witness continuous diversification and greater contribution from our recently-acquired businesses. During the fourth quarter, we had a total of 218 customers, down from 224 in the third quarter of 2023, flat in the earlobe, and declines were largely from our commercial customers, offset by growth in our enterprise. Moving to the income statement, our GAAP gross profit during the quarter was $28.1 million, or 36%, and remained flat compared to $28.2 million, or 36.4%, in the third quarter of 2023 and down from $32.3 million, or 40.1%, in the year-ago quarter.

In the fourth quarter revenues from our top five and top 10 customers were 39, 7% and 55, 3%, respectively versus 43, 2% and 64% in the same period a year ago.

With respectively.

We witnessed continuous diversification and greater contribution from our recently acquired loans.

During the fourth quarter, we had a total of 218 customers down from $2 24 in the third quarter of 2023 and flat in the year ago quarter and declines were largely from our commercial customers offset by growth in our enterprise customers.

Moving to the income statement, our GAAP gross profit during the quarter was $28 $1 million or 36% and remained flat compared to $28 2 million or 36, 4% in the third quarter of 2023 and down from $32 3 million or 41%.

In the year ago quarter.

Anil Kumar Doradla: On an on-gap basis, our gross profit was $28.6 million, or 36.6%, versus $28.7 million, or 37% in the third quarter of 2023, and down from $32.7 million, or 40.6% in the year ago, increase in gross margin as a percentage on a year-over-year basis, both on a gap and non-gap basis, which is largely due to a combination of epic segments. Costs associated with expansion into new geographies and other areas, non-GAAP EBITDA during the fourth quarter that excludes the stock-based compensation, appreciation and amortization, restructuring and expenses related to geographic reorganization, transaction and other related costs was $10.7 million or 13.7% of sales versus $10.7 million or 13.9% of sales in the third quarter of 2023 and down from $16.5 million or 20.4% of sales in the year-ago quarter.

On a non-GAAP basis, our gross profit was $28 6 million or 36, 6% versus $28 7 million or 37% in the third quarter of 2023 and down from $32 7 million or 46% in the year low corner.

The decrease in gross margin as a presentation on a year over year basis.

Both on a GAAP and non-GAAP basis was largely due to a combination of FX headwinds costs associated with expansion into new geographies and other investments.

non-GAAP EBIT margin in the fourth quarter that excludes stock based compensation depreciation and amortization restructuring expenses related to geographic reorganization transaction and other related cost was $10 7 million was 13, 7% of sales versus $10 $7 million or $13.

9% of sales in the third quarter of 2023 and down from $16 5 million or 24% of sales in the interval corner.

The year over year decline in non-GAAP EBITDA as a percentage was largely due to a combination of declining gross margins increase in operating expenses related to acquisitions and investments into our sales organization.

Our GAAP net income in the fourth quarter totaled $2 9 million or <unk> based on basic share count was 75 7 million shares compared to the third quarter income of $7 million.

Anil Kumar Doradla: The year-over-year decline in non-GAAP EBITDA as a percentage was largely due to a combination of declining gross margins, an increase in operating expenses related to acquisitions, and investments in our sales earnings. Our cabinet income in the fourth quarter totaled $2.9 million, or $0.04 based on a basic share count of 75.7 million shares compared to the third quarter income of 0.7 million or $0.01 based on a basic share count of 75.5 million and a loss of $6.7 million or $0.09 per share based on 74 million basic shares in the year-ago quarter.

<unk> based on a basic share count of $75 5 million and a loss of $6 7 million or nine cents per share based on 74 million basic shares in the year ago quarter.

The year over year increase in GAAP net income was largely due to lower levels of stock based compensation and significant decrease in geographic reorganization costs.

On a non-GAAP basis in the fourth quarter, our non-GAAP net income was $5 7 million or seven cents per share based on 78 million diluted shares compared to the third quarter non-GAAP net income of $5 9 million or <unk> <unk> per share based on $77 3 million diluted shares.

Anil Kumar Doradla: The year-over-year increase in GAAP net income was largely due to lower levels of stock-based compensation and a significant decrease in geographic reorganization. On a non-gap basis, in the fourth quarter, our non-gap net income was $5.7 million, or $0.07 per share based on 78 million diluted shares, compared to the third quarter non-gap net income of $5.9 million, or $0.08 per diluted share based on 77.3 million diluted shares and $10.5 million, or $0.14 per diluted share based on 76.5 million diluted shares in Coming to the first part of guidance, we expect revenues to be in the range of $77 million to $79 million.

<unk> and $10 5 million or <unk> 14 cents per diluted share based on $76 5 million diluted shares in the year ago quarter.

On December 31, 2023, our cash and cash equivalents totaled $257 2 million up from $253 7 million in the third quarter of 2023.

Coming to the first quarter guidance, we expect revenues to be in the range of 77 million to $79 million, we expect our non-GAAP EBITDA in the first quarter to be in the range up.

$9 5 million to $10 5 million.

For Q1, 2024, we expect our basic share count to be in the 76, 5% to $77 $5 million range.

And our diluted share count to be in the 78, 5% to $79 $5 million range.

That concludes my prepared remarks, we are ready to take questions.

[music].

Thank you Anthony.

As we go to the Q&A session of this call I will first that announced their name at that point. Please on the inkjet itself and turned out a camera.

Anil Kumar Doradla: We expect our non-GAAP EBITDA in the first quarter to be in the range of 9.5 million to 10.5 million. For Q1 2024, we expect our basic share count to be in the 76.5 to 77.5 million range, and our diluted share count to be in the 78.5 to 79.5 million range. That concludes my prepared remarks. Bin, we are ready to take questions. Drone and Titled by Jeff Jane, Thank you, Anil. As we go to the Q&A session of this call, I will first announce your name. At that point, please unmute yourself and turn on your camera.

Our first question comes from the lie of backend loaded from William Blair.

Your line is open.

Hi, Thank you I.

Appreciate the update but isn't that sounds really solid so congrats.

I know you only guide one quarter at a time, but at this point in the year I'm wondering if there's any visibility anything you can share with us either quantitatively or qualitatively about how the second quarter is coming together and beyond if there's anything to comment there.

Thank you.

Thank you for your question.

Maggie Nolan: Our first question comes from the line of Maggie Nolan from William Blair. Maggie, your line is open. Hi, thank you. Appreciate the update. The business sounds really solid, so congrats. I know you only guide one quarter at a time.

It's interesting just starting to ramp up <unk> 23 talk about six months going forward.

Right.

You've probably extends the tone of conversation that we are.

A bit on the rebound and we do sound optimistic I would say that without going into all the details because the environment is still a bigger rent.

Speaker: But at this point in the year, I'm wondering if there's any visibility, anything you can share with us either quantitatively or qualitatively about how the second quarter is coming together and beyond if there's anything to comment on there. Thank you for your question. Well, it's interesting to start the wrap-up for 2023 and talk about six months going forward, but you've probably sensed the tone of the conversation that we are a bit on the rebound, and we do sound optimistic. I would say that, without going into all the details, because the environment is still a bit of a mess, I would say that I expect Q2 to be our new high watermark in terms of our revenue position. It doesn't sound like much today, but if you look at the last 12 months, I think we're kind of getting ourselves back to shape to the normal age group.

Complex.

I would say that the I.

I expect Q2 to be a new high watermark in terms of.

Revenue position.

That's all the time now.

It doesn't sound a lot today, but if you look at the last 12 months I think we're kind of.

Getting <unk> back to shape to the normal growth.

Okay, Great and then you know.

Great to see that new logo commentary the additions that you've had.

I'm curious what we can expect from those in terms of the revenue ramp and the margin contribution as we see those accounts ramping.

Yeah.

So.

As you know our model, but probably that's a little bit of beta, but right now it's 85 by grade.

Speaker: Okay, great. And then, you know, great to see that new logo commentary, the additions that you've made. I'm curious what we can expect from those in terms of the revenue ramp and the margin contribution as we see those accounts ramping up. The, as you know, our model, probably it's a little bit beat up by now, it's 85.5, right. But this 5% is turning out to be a little bit more predictable, and to some extent, the tent as well. So the larger logos which we took upon in Now, the last quarter, the quarter after. They are ultimately a bit more defined in terms of the project base, rather than pro-culture.

This 5%.

Just turning to be a little bit more.

Predictable.

And some extent dependent as well so the larger logos, which we grow column in.

Now last quarter.

But the quarter after.

Theyre all deliberately.

Or a bit more defined in terms of the broad based broad.

Other than <unk>.

<unk> got to be so.

They are a little bit better anticipation of the ramp up of their loans same bet.

Again that gives me.

The confidence or some of the.

Speaker: So we have a little bit better anticipation of the ramp-up of the low, saying that, again, that gives me confidence for some of the upstream for the company, but I also see a return to positive momentum at our existing level. I think the question on the new Enterprise Lord of the Wings in late 2023 and what we already have, 2024 combined with some of the friends with the larger existing customers could use that level of opportunity. Thank you.

Upstream for the company, but also I should.

A return back to the positive momentum.

Existing logos, so I think they are.

Question on the new enterprise logo the winnings.

Our late 2023 and would we really would have actually grown it.

44, combined with them.

Some of the trends with our larger existing customers.

Use that level of uptick.

Thank you.

Thank you Megan.

Great. Thanks, maybe a quick question next.

Next question question comes from Ryan <unk> from Citi.

Speaker: Thank you, Major. Thank Maggie for your question. The next question comes from Ryan Plotter from Citi. Ryan, please go ahead.

Please go ahead.

Hey, Thanks for taking the question.

Good quarter here.

I wanted to start on head count it was good to see head count growing sequentially on an organic basis in the quarter.

Speaker: Hey, thanks for my question and a good quarter here. I want to start with headcount. It was good to see headcount growing sequentially on an organic basis in the quarter. But can you help reconcile the ladder of sequential growth and the 1Q outlook versus this headcount growth? Is it a trivium, or is it a sign that you see a demand recovery coming later in the year? And then also, any call you can give in terms of where you're growing headcount the fastest, whether it be India or any other geos? Oh, a lot of questions in one, getting demanding, right? So let me start with the last, because it kind of rolls back, right?

Can you help reconcile the flattish sequential growth in the <unk> outlook.

Headcount growth because of <unk>.

<unk> signed or do you see a demand recovery coming later in the year and then also any color you can give in terms of where you are growing I got the password sputter, India or any other geos.

Paul it's below questions, even one youre getting demanding right now.

You thought it was the last because it's kind of rolls back right. So.

This will leave in our press release, we indicated a bit of a shift in terms of the diversification, we see more on the <unk>.

Speaker: So you can see from even our press release. We indicated a bit of a shift in terms of diversification. We see more in the rate of growth in, what I call, non-retail verticals or non-retail customer verticals. But it doesn't mean we're moving away from B2C. It's all B2B business, but the skills and capabilities and the more traditional skill sets, Data Management, and Cloud Migration. The Bespoke Tooling Partnerships mentioned that, combined with the new applications related to the AI technologies, and that's a separate point of discussion, everybody's asking that, right? This gives us a bit more of an upswing on FinTech, Pharma, we see more in the TMTL tech segment, so that gives us a bit more of a, I would say, continuation of the growth, so and again, those sectors are a The headcount growth versus the flatness outlook is a sign of demand that will come later in the year. So, this is about reading in the tea leaves, right?

Rate of growth.

What I'd say non retail verticals or non retail customer verticals.

It doesn't mean, we're moving away from <unk> towards <unk> business, but.

The skill and.

Capabilities in a more traditional skill sets.

And.

Data management.

The migrations.

The bespoke tooling partnerships mentioned that.

Combined with our new developed applications related to the AI technologies, and that's a separate point of discussion <unk> right.

Use us a bit more upswing.

<unk> pharma will see more in the TMT.

Thanks segment, so that gives us a bit more of a I would say continuation of the growth. So.

And again those sectors, a little bit less volatile.

Even though the economy has not been stable in the first part of your question I believe you wanted to know specifically acknowledged can you just give me a little bit more.

Thanks Scott.

Head count growth.

First is the flattish outlook sequential weight on the right side of.

Demand that would come later in the air right right. So so.

But reading on tea leaves right.

Speaker: So the growth of the headcount happens in India. That's one area, as we mentioned again, is picking up. I think that our customer base has grown with an understanding of our versatility in following the sun's rays. What it means is that, you know, Grid Dynamics provides the same quality level of services whether we're in Europe, in Latin America, or in India. And, you know, access to talent in India is quite, you know, larger than the market, but, you know, everybody is there. So you see the little bit of tick part of it that it's a little bit longer time to bring talent to India, so we need to start building the pipeline there.

So the growth of <unk>.

That's one area as we mentioned again is picking up.

I think.

Our customer base has grown with understanding our Roe.

Versatility of the following.

Following this on strategy.

What it means it means that you know green dynamics.

Always the same quality level.

Services, whether were in Europe and.

Latin America remained here and there.

Access to tell them in India is a quiet.

Larger from the market, but everybody is there so you see the little bit of uptick part of it that it's a little bit longer.

<unk> to bring the tailwind in India, So we need to start building the pipelines there.

Speaker: You know, not saying we're going to reshuffle some of the people in Europe, there are many activities there, but that's where the growth comes in, and it just requires a bit more, you know, the capable people and also notice we talked about our presentation about rigorous training, right? So I mentioned that it sometimes takes up to a quarter to bring the talent up to speed with the new tools and capabilities, specifically in the AI and malware sectors. So it's an investment of the, I would say, rounding out the people and building the pipeline of capable technical execution folks. I got it.

You know not seen where we're gonna reshuffle some of the people in Europe. There is there are many activities there, but that's where the growth come in and it just requires a bit more.

The capable people I'd also noticed we talked about our presentation about rigorous training right. So.

So that it takes some days after quarter to bring the talent to up to speed with the new tools and capabilities specifically in that area in <unk>. So it's an investment.

Speaker: And I agree, and it was good to see the sales momentum continue in the quarter. But as the demand environment stabilizes in your existing client base, should we foresee any changes to your sales strategy in 2024? Do we have to shift more sales or work more on a kind of expansion with clients versus hunting new logos, or are you able to continue to balance both efforts? Well, that's one of the areas which you again notice from our conversations was the point of investment in 2020. It's a bit, it's a bit uh...

Speaker: I would say sometimes it can be ambiguous when the company invests in R&D and sales during the year of Bin Flat, right? But at one point in time, it's beneficial to reach for the resources when they're available in the market, right? So when the market is a bit segmented, you have a broader selection of talent. On the R&D side, it takes more time for people to come up to speed, both on the architecture side, the SME side, you know, materials, industry-specific artifacts, accelerators. So when we talk about sales, it's a combination of sales and technical resales and first level engagement. When it comes to hunting per se, we actually added hunting capability for the first time.

Elizabeth.

<unk> you have a broader selection of the talent one of our Indian style. It takes the.

More time for people to come to speed both on the architecture said SME side, you know pay the materials.

Industry specific artifacts accelerators. So when we talk about sales, it's a combination of self and technical <unk> and the first level of engagement when it comes to their funding per se <unk> hunting capability for the first time.

Speaker: Typically, as a company, we're still relatively small compared with many, many others. So we focused on a diversity of the responsibilities for the same individuals. Right now, we have a dedicated sales force, people in the United States with hunting accounts, but we also doubled down on farming of the new business lines with an existing larger cost.

Typically as a company I've been we're still relatively small to bear with many many others. So we we focused on a diversity of the responsibilities save individuals.

Right now we have dedicated <unk>, particularly in the United States with the hunting account, but we also a double down on.

Wyoming of the new business lines within existing allergic cough, so that's pretty much the <unk>. The <unk> is it a footing, but I think even though it limited sweated. The Marshalls last year I think that gives us a bit more runway that's just.

Speaker: So that's pretty much this. Now the pool is in a pudding, but I think even though we were a little bit sweated in the margins last year, I think that gives us a bit more runway, not just, you know, kicking the can to the second half of the year, talk about 2025, but more immediate targets as early as now. Great, thanks again.

You know.

The cat into the second half of the year to talk about 2025, but more immediate targets as as early as now.

Great Mexican.

Speaker: Thank you. Thank you, Bryan. Next question comes from the line of Zachary Arzonen from TD Common. Zach, please go ahead. Hey, thanks, Zach. It's been on for Bryan Bergin.

Thank you.

Thank you right.

Next question comes from the line the Zakary <unk> from T D column.

Please go ahead.

Hey, Thanks, <unk> for Brian Bergen first question. We had was just on the overall demand backdrop. So good to hear more of the stabilization commentary evidence.

Speaker: The first question we had was just on the overall demand backdrop. So good to hear more of the stabilization commentary evident in the Q1 guide. I was hoping I'd further dig into...

Q1 Guy.

I was hoping it further dig into that.

Speaker: The dynamic that actually changed from three months ago, is it just a higher prevalence of more optimistic client conversations? Or have you seen a change in actual signings or willingness to go ahead with new programs? Just trying to get a better sense of recent client behavior and how that's informing your view into 2Q, which sounds like it's going to be even better than what we're seeing into OneCue. Very good, Derek. Well, you have to feel your big shoes because Bryan won a prize.

The dynamic that I've actually changed from three months ago is it just a higher prevalence of more optimistic client conversations or have you seen a change in an actual signings our willingness to go ahead with new programs just trying to.

Get a better sense of recent client behavior and how that's informing your view into <unk>, which sounds like it's gonna be.

Even better than what we're seeing into one too.

<unk> well <unk> you have to feel big shoes, because Brian one of the most.

Speaker: Talented Analyst. Welcome. The question is about what is really happening in the forefront of our business. And as you know, traditionally, at least from Grid Dynamics' perspective, from our client perspective, there is always what I call a bit of a turnover from projects and business directions between late Q4 and early Q1. That's kind of, I wouldn't call it a pit stop, but it released more than just budgets, a reassessment of their own performance, tuning the business, a lot of disruption happened with AI tools. So, we had to go last year and started making a lot of proposals on how to get viable conversion of their top line with more economical budget leveraging various AI technologies. And again, it's not just that you plug in JetBot, and it gives you more money, right?

<unk> <unk> <unk>.

The the.

The question is about what is really happening in the forefront of our business and.

No traditional visits from Britain amyx restrict from a client perspective.

There's always a when it goes.

You know the the middle of a turnover from the projects and and business directions between the link you for an early Q1.

That's kind of what I would go with a.

Pitstop, but it's released more than just budget reassessment of their performance.

Tuning the business a lot of disruption happened with AI tools.

So we have to go last year.

Making a lot of proposals.

To.

Get viable conversion of their top line.

With more economic buzzer, leveraging various health conscious and again.

Not just you plug in Czech border gives you more money right. So it's a very complex process.

Speaker: So it's a very complex process of using private data and public access tools, various clouds, how Grid Dynamics knows how and an understanding of their business based on previous expertise, even in machine learning, the transition from machine learning to AI. So we see the conversion on a contractual basis. I think that's very important. So not just rewards.

Using private data and public access tools various clouds green dynamics know, how an understanding of their business based upon the previous.

<unk> even in <unk>. So we see that conversion on a contract basis I think that's very important so not just rewards again, we're still in February.

Speaker: Again, we're still in February, and we are not completely out of the spirit of retooling our clients, but the new logos and existing logos on the demand side are contractually driven. So we're not talking just about the proof of concept. Let's run another, you know, one, two, three months of the test.

And we are not completely out of the spirit of retooling of all clients, but the the new logos and existing logos on the demand side are contractually dreaming. So we're not talking just about the poor <unk> run another you know.

123 months of the test what are the initiative to trend down.

Speaker: What are the initiatives to trend upward? This is on a B2C business. On a B2B business, it's a bit different, right? Because there are more people who understand that new technology, first and foremost, needs to bring better results.

This is this is what made me disabuse on it need to be business.

<unk> right because the.

There's no more like people understand that new technology first and foremost need to bring the better results and there are a lot of this is not a trivial because it's a complex of supply chain logistics.

Speaker: And their models are not as trivial because it's a complex of supply chain, logistics, and demand for the various products. So that business is probably going to keep in a little bit more in the later part of this year because they're still more in a steady state of learning and adoption. But because we have both markets, we see an immediate new remuneration as well as potential upside with existing markets. That's helpful. Moving over to margins, we were hoping to dig into the factors that have been weighing more recently. How long are these items expected to be headwinded?

The demand on their various products, so that business, probably gonna keep in a little bit more on that later part of this year, because they're still more in the.

City or state learning, an adoption, but because we have both markets, we see an immediate uranium duration as well as potential upside with existing plants.

That's helpful.

Alright margins, we were hoping to dig into the factors that have been way more recently, how long are these items expect it to be headwinds and what are their controllable levers that great. It can pull to partly until eight including maybe any color on pricing or utilization.

Speaker: And what are the controllable levers that grid can pull to partly insulate it, including maybe any color on pricing or utilization? Sure. So Zach, again, that's a loaded question. There are many moving parts to it, right, from the COGS point of view and the OPICS point of view. I'll let her talk about the pricing, but let me talk about a couple of moving parts as we move through the course of the year. Now, year-over-year, you've seen the difference, right, in our gross margins. Half of it came from FX; the other half of it came from the fact that, you know, we've expanded into some of these new geographies and there's a certain cost structure there. If you look at our OpEx, 2023, as Leonard pointed out, was a year of investment because we are investing in our future.

Sure. So Zack again that doesn't loaded question there many moving parts of the drink from my you know <unk>.

Let's talk about the pricing, but let me talk about a couple of moving parts as we move in the course of the year.

No ear over here, you'll see me a different strength on our gross margins uhm half of it came from mistakes. The other half of it came from the fact that you know we may expanded into some of these new geographies and there's a certain construct your name.

If you look at our <unk> 2023 is Leonard pointed out once a year investment because we are investing into our future.

Speaker: As we move into 2024 and beyond, let me talk about OpEx, and we'll talk about COGS. On the OpEx front, the focus for me internally is to keep the growth rate lower than the revenue growth rate. So you're going to see leverage on that. Now, there will be times when you'll have to invest, but that is my focus. On the COG side, as you can see, we're in all these different geographie

Ask we move in 2024 and beyond and let me talk Biopics and we'll talk about cops on the optics friend B.

August for me internally is to keep the growth rate.

Lower than the revenue growth rate, so you're gonna see leverage on Netflix.

There must be times when you have 10 minutes, but that is my focus right now on.

<unk> <unk> you can see where in all these different geographies uhm, we're scaling and each of these geographies and as we scale into some of these geography some of them minded finding all of the <unk>, you're gonna get some benefits there.

Speaker: We're scaling in each of these geographies, and as we scale into some of these geographies, some of them identified and follow the same strategy, you're going to get some benefit. But as far as, you know, the focus, again, is obviously going back to customers, but operationally, we also need to reorganize ourselves. You know, we have TNM, we have pods, we have fixed prices, we have, you know, the pyramid. There are so many operational aspects which we can work on. And Leonard, do you want to talk about pricing? We just covered it. I don't want to double down.

But as far as you know B B B focus again is obviously go back to customers, but operationally also reorganize ourselves you know we have T. N M. We have possibly a fixed price. We have you know and apparently there's so many operational aspects, which we can work on.

You Wanna talk about pricing.

Coverage.

Alright, I don't I don't want a double done actually I Wanna walk.

Speaker: Actually, I want to walk you a little bit on a visualization, pricing to Austin, because there are two things actually very well connected with each other. In order for us to get to higher profitability, it's not directly margin related, but it's contract related, right? So parts, fixed bids, delivery, performance associated with a certain major milestone, expanding budgets, signing now longer term budgets. We see that happening.

<unk> visualization ma'am.

The pricing too close to the bank because there are two things actually very well connected with each other and in order to.

Get to the higher profitability <unk>.

It's not directly <unk> related but as a country <unk> related right. So <unk>.

<unk> delivery performance associated with a certain major milestones expanding budget signing now longer term budgets.

We see that happening.

It doesn't mean that individual rates for example are gonna be aggressively moving up the Martha Stewart, let's see uhm demand driven and give me one.

Speaker: It doesn't mean that individual rates, for example, are going to be aggressively moving up. I mean, the market is still, I would say, demand-driven. And the value we're bringing, while we're increasing some of the basic rates..., we're offering more and more of the system I just described, which Anil pointed out, which ultimately brings a better architecture of the team structure. In other words, within the team, our cost benefit is evident to us. But for the customer, it's result-driven. So they're getting better efficiency with understanding their pocketbook spending without constantly going back and forth and looking at each individual rate. In many cases, we gain the trust of the customer sufficiently that they allow us to pick a proper tip formation, and it's getting more and more on the scale. That also helps. So, you know, all the, you know, all the evils, right?

Supplied and the the value, we're bringing with while we are increasing some of the basic rate.

More and more system, which I, just described with which Neil pointed out, which ultimately breathe a better architecture of the team stretch another word within the team out cost benefit.

Is.

Evident to us but for the customer is the result.

So they're getting better efficiency with understanding their pocket book spending without constantly going back and forth and looking at each individual right. In many cases also re gain the trust of the customers sufficiently did they allow us to pick a proper <unk> is getting more and more on this.

Scale that also helps so <unk> you.

<unk> you know all the you know.

Speaker: Moving from Eastern Europe to Central Europe, scalating the number of offices, opening offices in India. That's well understood. But our model of 40-20, no matter how difficult it sounds today with where we are, it's under relentless pursuit. And I see the trend is coming. The numbers can't stay there yet, but judging by the countries we're signing, I'm quite bullish. Thanks for all the color.

All the evils right I'm going from Eastern Europe Central Europe scaling the number of Wallace's open your business in India that is well understood but model of 40 20, no matter how difficult. It sounds today. It was where we are it's under 11th this pursuit and I see.

The trend is coming with the numbers can see there yet, but the judging by the countries, we're sending mm mm quite bush.

Speaker: Thank you. Thank you, Zach. The next question comes from Puneet Jain from JP Morgan. Puneet, your line is open.

Thanks for all the color.

And can I get.

Thank you for that.

Next question comes from <unk> from checking mortgage.

Speaker: Thanks for taking my question. I wanted to ask about GigaCube. It looks like great progress in financial services. The vertical was up nicely.

Your line is open.

Thanks for taking my question well why don't you go ask about <unk> it looks like great <unk>, San Francisco 40 covers up nicely.

Speaker: Can you also share the contribution from other verticals, such as healthcare? And do you plan to share progress like you do in India and Europe as well as smaller verticals on a quarterly or annual basis there? So as you see, the other segment was about 14.5%, right, and that had nice growth. So what you're going to see starting next quarter, we're going to break down the other segment because we're going to have the healthcare part.

Can you also share like the contribution from whenever to cover such as health care.

Do you plan to <unk> like to make an Indian in Europe, as well as smaller 40, <unk> and will be <unk>.

Alright, I'm going to get the feedback so as you see the other segment was about 14 and a half person right and that had a nightclub. So once you're going to see starting from next corner, we're gonna break down the other segment because we're gonna have the health care parks or you know health care life Sciences, that's becoming an increasingly bigger part that has actually been one of them.

Speaker: So you know, healthcare, and life sciences, that's becoming an increasingly bigger part. That has actually been one of the, you know, contributors to our growth. And you know, as we evolve in the course of the year, some of the sectors that you talked about, financial services, I mean, there's a lot of activity going on there, and we're bullish on that.

The you know contributors and in our growth and yeah <unk> involved in the course of the year. Some other sectors that Utah financial services I mean, there's a lot of activity going on there and we we're we're bullish on that.

So can you.

So a formal way in a formal way.

Speaker: I like to have statistical significance. Before I claim the flag at the top of the hill, I can tell you confidently that in the fintech world, our investment is turning to textual material improvement. When we talk about, you know, pharma and healthcare, the number of accounts is growing. But I can't say that we are a dominant player yet.

I'd like to have statistical significance.

Before I a claim the flag at the top of the Hill I can tell you confidence <unk> World investment is turning to the sexual material improvement.

We were talking about you know for my health care, the number of Mcdonalds destroyed.

But I I can't say that we are the dominant player yet we understand the capability to be learning new ways of business.

Speaker: We understand the capability. We're learning new ways of adding business value. You will see that trend. There is the wealth management and insurance part of BFSI, right?

Business value you will see that trend they're.

There are a wealth management and insurance part of a review of a site right you know for a long time, we didn't want to be very large.

Speaker: You know, for a long time, we had one of the very large partners in wealth management. Those segments will grow, too. And why we're growing is because you guys, to some extent, helped us to assess four years ago what it means to be a public company, right? That you need to constantly challenge yourself, not just on growth but on safety, right? How you build a business. So we were very heavy, depending on brick and mortar. So that's a long history we were having, depending on certain brands. Again, it's a history.

<unk> management.

Those segments will grow to and why we will grow as because you guys to some extent help us to assess four years ago with what does it mean to be a public company right you need constantly to challenge yourself not just on the Grove what are the Heche right.

Build the business. So we were very heavier depending on a brick and mortar store. That's a long history, we were having depending on certain branches Guinness history. The Tech is also diversity plan, so, but I would give the more specific material comes into an issue at least two or three quarters.

Speaker: The tech is also diversifying. So, but I would give the more specific material content when I see at least two, three quarters of consistent signing of the new plans. And I think the biggest, right now, division for me is B2C application and B2B application. We will continue to break it down, as Anil said, as we feel that there are statistically significant differences. Got it. Got it.

Consistent signing your.

New plans and I think the biggest right now division for me has been to see application will be to be able to get you.

Will continue to break it down as in you'll set as we feel that there are statistically significant.

Okay perfect now that's very helpful.

Speaker: Now that's very helpful. And let me ask you a second question, like, So now that that macro had been macroeconomically behind you, and you're seeing stabilization and some of the large customers. So some of those like the largest of your large customers, like I think they peaked at somewhere around like 30-35 million, maybe 40 million, like how high the addressable market for those clients is, like how large those customers can get given your current service max. Yeah, you're getting me into trouble all right, you know. There is quite a bit of a ceiling on those clients. Why?

Let me ask <unk> second question like.

So now that the <unk> had been appears to be behind you and you see.

Stabilization and some of the large customers.

So some of those like the lab largest okay large customers like I think they P tech somewhere somewhere around like 30, 35 million, maybe 40 million like.

Like how high.

<unk> those plans like how large those customers can get given your current service next.

So you're giving me into trouble.

Right [laughter].

You know.

There is quite a bit of a ceiling on those clients white.

Speaker: Because we're changing our attire, too, right? Maybe the market cap is still not there, but we're a much more mature company, not just from a performance perspective but from a stable capability perspective and resilience perspective, right? Every client, every large client, they look not just at the supplier capability, but it's, you know, again, hedging against certain unforeseen events, right? So I think they're getting more comfortable with our reach and with our touch, right?

We're changing alright tired too right.

Maybe there's a market cap is still out there, but we're much more mature company that just from performance perspective, but the stable capability perspective resilience perspective, right every client every large clan.

They look not just of the supply of capability.

It's you know hedging against certain unforeseen events right. So.

They're getting more comfortable without reach in there without touch right. So I would say that the ceiling is less driven by our capabilities which are proven.

Speaker: So I would say that the ceiling is less driven by our capabilities, which are proven, and more about opening up when people are starting to become comfortable with coming back to the gigabit stage. One day, we will be a billion dollar company. So yeah, if you, just from that perspective, I'm not gonna throw numbers of $100 million accounts today. Again, it would be a bit premature, but there's nothing stands between us and having a number of accounts in the 30 to $50 million range now, and then time will tell how much we can go further. You know, having just one account, being so much bigger than everything else, that's another bit of a challenge.

More opening up when people are starting to become comfortable but coming back to the giga if you're stupid.

One day, we are a billion dollar company. So yeah. If you just go with that perspective, I'm gonna throw numbers over 100 million dollar come today again, it would be premature, but there's nothing stands between us and having a number of account which are the cities to 50 million dollar range. It now and then that will do how much.

We can go further.

Just one account mmm being so much bigger than everything else. That's another a bit of a challenge so we've seen others.

Speaker: So we've seen others struggling. So we wanna do not only diversification in the verticals and the skillset but have large, driven partners to be somewhat, you know, diversified as well. Yeah, no, totally agree. Multiple clients that are comparable in size, like I think we totally get it. Like, that's unique.

Struggling so we Wanna do not only diversification on the vertical and the skill set but heading large dreaming partners to be somewhat diversifies as well.

Yeah, not okay I P. Multiple clients that is comparable in size like I think.

Uhm, we totally get it like vaccine.

Speaker: I appreciate the comments. Thank you. Thank you. Thank you, Puneet. Thank you, Puneet. The next question comes from Josh Ziegler from Counterfeit Shares. Please go ahead.

<unk>. Thank you.

Thank you for any.

Thank you.

Next question comes from Josh Taylor from cancers. His shirt. Please go ahead.

Speaker: Hi guys, thanks for taking my question today. It's nice to see the strong KPIs in the quarter and, you know, business stabilization throughout this more difficult macro period. I wanted to touch on partnerships specifically because they seem to be a big contributor over the past year. How are you thinking about how partnerships will contribute as we progress through 2024 with a more positive macroeconomic environment potentially at our tailwind? Thank you. Well, I'm glad you pointed that out. I mean, we tried to repeat the favorite number, 13, long enough for people to memorize. So yeah, it would not have been as exciting if it was 12 or 14.

I got it thanks for taking my question today nice to see the strong keep your eyes on the order and you know business stabilization throughout the more difficult macro period I wanted to touch on a partnership specifically because they seem to be a big contributor over the past year. How are you thinking about how partnerships will contribute as we progress through 2024 with a more positive.

Macro potentially at our tailwind thank you.

Well I'm glad you pointed out of it I mean, we tried to repeat the.

The favorite number 13.

Long enough for people to memorize so yeah.

It wouldn't be a matter of exciting it was 12 40, but anyways the the the factor with a new mentioned up Harry.

Speaker: But anyways, the factor with Anil mentioned of having just a few years behind the belt is not truly about the partnerships per se. I mean, we always have partners, you know. I think there are a couple of fundamental changes happened a couple of years ago. The number one thing we realized is that sitting only on an open source platform is not enough to increase the breadth of the customer relationships. We need to become a bit of an advisory platform on a buy and build as a combination. It's basically a stage of maturity, right? But everything requires investment.

Just a few years behind the bell is not <unk> about the partnerships per se.

I mean, the whole room was that you know I think there are a couple of fundamental changes happened a couple of years ago. The number one is we realized that sitting on the on open source.

Is not enough to increase the breadth of the customer relationships.

I need to become a bit of an advisory on by and billed as a combination.

Stomach area, so basically a seizure maturity right you.

Speaker: So it's not only about hyperscale; it's also about the ability to stitch together multiple sorts of products. So we started with the areas where we have done most of the work, which is commerce. We've made major progress both in Europe and the US, and we're expanding a number of the products we are offering. So that part is very clear. It's not just open source as a company. The other one is going back to hyperscalers, right? Hyperscalers represent a very complex system, right? And you come in, knock on the door, and ask them to give you the clients. Typically, it goes backwards.

Everything's progressing best.

So it is not only <unk>. It's also about the ability to sees multiple sore throat products. So we started with the areas, where we have none most of the work which is commerce.

Mmm major progress as both in Europe, and the U S.

And we are expanding number of the products we are so.

So that part is very clear so it's not just open source of the combination. The other one is going back to Hyperscale right.

Scared was represented a very complex just right and you know you can knock on the door and ask them give me the clients typically it goes backwards you bring the clintons will see right could I help you to report that it goes two ways.

Speaker: You bring the clients, and we'll see, right? I'm happy to report that it goes both ways. When you do it two ways, on top of building the capabilities and contributing to the hyperscalers themselves, then you start getting traction because it's a joint client effort. So not only understanding the systems, but understanding the customer's ability to have us as a partner of choice, not just an integration partner. That just added this number. Now. How big is the number going to be?

When you're doing too is on a toppled building the capabilities and contributed to the Hyperscalers themselves. Then you start getting the attractions because it's enjoyed claim.

So not only understanding the systems, but understanding of the customer the ability to have us as a partner choice. That's just the duration partner that just added this number now.

Biggest number gonna be honestly.

Speaker: We honestly, I can't tell because we're going into new verticals. And again, it's investment. You can't just come with open source and drop all these ideas in the laps of the big decision makers in other verticals. But it's certainly the model which we are expanding at this point. Understood, appreciate that color there.

Honestly I can't tell me cause we're going into new vertical send their cabinets investment.

You can just come with the open source and drop all those ideas on their laps of the big decision maker.

Other verticals, but it certainly is a model, which we are expanding at this point.

Mmm understood I appreciate that color deck, and then Neil real quickly can you give us not Dan How're, you thinking about capital allocation as we progress through the year.

Speaker: And then Anil, real quickly, can you give us an update on how you're thinking about capital allocation as we progress through the year? Well, look, I mean, the focus obviously is M&A internally. And, you know, I know this is a question that comes up very often. At any given point, we're evaluating. Obviously, we will tell you when we actually get something done. But the priority, obviously, is our cash usage going there. Beyond that, it's all about cash generation. It's all about ensuring that we get back to our 40-20 and convert it. As you know, we don't have any debts on our balance sheet.

Well look I mean, the focus obviously is uhm emanate internally and you know I know this is a question that comes up very often.

The you know at any given point you know we're evaluating obviously you know we will tell you when we actually get get something done but the priority. Obviously is you know our cash usage is going there.

Beyond that you know, it's all about cash generation, it's all about ensuring that you know we get back to work 40, 20, and we converted Frank I mean, we as you know we don't have any data on our balance sheet, but it's these are the two elements in terms of how we're looking into our bandage and just to get a little bit of art.

Speaker: But these are the two elements in terms of how we're looking at our balance sheet. And just to get a little bit of a call to our nominees. I know you've been patiently waiting for us. I mean, it's been a long time.

<unk> I know you've been patiently waiting for us I mean, there's been a long time since we've collected enough funds right and I'll catch generation it exists, but it's not.

Speaker: We have collected enough funds, right, and our cash generation... it exists, but it's..., and we completed all the conversions. Again, if you look at the press release and the reporter, we have no lingering issues or necessary investments in any of those acquisitions we have done. It's all integrated, and when I mean integrated, you need to integrate both sales and engineering. Engineering sometimes takes a little bit longer because of the skill set.

<unk> large, but we sit down at a nice problem. So we've completed all the conversions again from the if you look at our press release and report or months. So we have no lingering issues or.

Necessary investments into any of those four and you know acquisitions would've done the total integrated knock on wood by now.

Integrating you need <unk> longer I Miss Joseph So we are exploring deals across all these very close and Geography's again, there was arrange obviously, we're not gonna burn all the money in one swoop, but it.

Speaker: So we are exploring deals across all these verticals and geographies. Again, there is a range. Obviously, we're not going to burn all the money in one swoop, but it has to be more focused on skill development.

Has to be more focused on.

<unk> so.

Speaker: So we're big enough to train people on what we know. Some customer acquisition is obviously good, but we really want to add the skills in the AI revolution part, right? So there are new areas which open up by building those skills. So it's not just about marketing this. We understand what we're good at and what it makes sense for us to come, you know, complement from acquisition. So that's kind of a shift you may see in like six months.

We're big enough to train people in <unk>.

Some customer acquisition, obviously is good but we really want to add the skills and <unk> and they're AI revolution parked right. So they're new areas, which open up my building those skills. So it's not about just the marketing. This we understand we're good at it wouldn't make sense for us to <unk> you know complement for Michael.

<unk>. So that's kind of a shift you may see you from like six months ago.

Speaker: Great, thank you. I really appreciate the caller and thanks for taking my question. Thanks, y'all.

Great. Thank you I really appreciate the color and thanks for taking my question today.

Speaker: Thank you, Josh. The next question comes from Sam Salvas from Needham; please go ahead. Thanks, Ben. Thanks for taking my questions today, guys. Most of my questions have already been asked, but, you know, are there any AI-related metrics or anything you can share in terms of the number of projects or engagements or logos? Just any colors you can give us to get some kind of sense of the demand you guys are seeing from AI? So the question, Sam, was, what are the AI-related metrics, right? And Leonard is the AI expert.

Josh.

Thank you Josh.

Next question comes from <unk>. Please go ahead.

<unk> <unk> <unk> <unk>.

Most of my questions have been asked but.

Oh is there any way I related Netflix.

Anything you can <unk> the number project.

<unk> is there.

Any color in magenta.

Get some kind of <unk>.

So the question Sandwich, and what are the E I related metrics rate and you know so <unk> expert so but.

Speaker: But I'll tell you that, from my point of view, when I look at the activity, we talk about it at the end. Let's say, in the press release also, we talked about there being a lot of activity going around with both existing and some of our new. What I am very impressed with is that many of our new engagements have some level of AI component to them. So there's a lot of interest. AI is infused across our practices. But if you're talking about when we are going to reveal the standalone revenues and everything, when the time is right, we'll do that. But AI is pretty active across the company. Well, I'm glad that Anil stepped in, because I wasn't sure exactly what you were asking. Sorry about that.

I'll tell you and that's from my point of view when they look at the activity right. We talk about it the analysts say in a press release also we talked about there's a lot of activity going around with both interesting and some of our new what I am very impressed with is that many of our new engagement has some level of <unk> component.

To it.

So there's a lot of interest and you know, where you know ai's infused across or practices, but if you're talking about you know whenever we gonna reveal data standalone revenues and everything when the time is right.

But a I S pretty active across the company as well.

Well I'm I'm glad that Neil stepped in because I wasn't sure exactly what you were asking sorry about that now when I know I can tell you much you live in more color right. So first of all the areas, where we have progressed a lot it's conversation.

Speaker: Now, what I know, I can tell you a little bit more color, right? So first of all, the areas where we have progressed a lot are conversation data, recommendation, catalogs, compliance. We do quite a few of the forum solutions.

It's a recommendation there catalogs compliance we do quite a few of the forum solutions what happened is.

Speaker: What happened is having expertise in a vertical, especially things related to e-commerce, but now it's growing, helps us to tune the proper model, help to get the visual parts, and help us to guide the internal client marketing and business teams to understand the ability to reach your business results.

<unk> and verticals.

Especially things really do e-commerce, but now it's it's growing.

Helps us to to the proper models, how to get the visual arts help us to guide.

No client Martin in your business seems to understand.

The ability to reach your business results.

The number of cases is groin for a very simple reason, they're all sexual.

Speaker: The models change, the conversion rates are changed, the, you know, we can't promise results unless the client understands the reasonable target. So the cataloging, understanding their existing environment, cleaning up their codes, sometimes switching from the old models to the new ones. First, we need to get the code capable of accepting new things.

The motto is change.

Conversion rates are change that you know we've reached <unk> promised resolved unless the client understands the reasonable targets.

So the the cataloguing the you know understanding of their existing environment bleeding up there are codes you know sometimes switching from their old models to the moderators first we need to you know get the code capable of accepting that you've.

Speaker: So we do that conversion to augmentation, and of course, very close work with all the offerings, the AI models on the cloud, as well as the York Commons standalone solutions. So I'm sure we'll do more presentation webinars. You guys can look at our website. We have a ton of demos, but those demos are typically something open for people to look at.

So what do we do that conversion too augmentation and of course very close work with I'll go with brings relief of the the air models on the cloud as well as <unk>. Your <unk> solutions. So I'm sure, we'll do more more of a presentation <unk>.

<unk> you guys can look at our website, we have a ton of Dallas, but those demos typically or something.

<unk> two people to look I had a question why we're one of the press release with certain clients and certain project and mainly because a lot of the work is so cutting edge of the <unk>.

Speaker: I had a question about one of the press releases we did with a certain client and certain project. And mainly because a lot of the work is so cutting-edge as the funds of the customer DNA that we're grateful for the ones who are willing to open up to share. But many more are preferring to maintain the total proprietary approach to their development. Yeah, that's not a good idea, right?

Customer <unk> grateful the ones, who are willing to open for sure, but many more are preferring to maintain the total of proprietary approach to their <unk>.

Yeah right, Okay, Yeah right.

Speaker: Cheadle, Terry there. And then just one quick follow-up from me. The weakness in the retail vertical disorder, is that one larger specialty retail client or is that kind of broad based? So the question, because the volume is not here, your question was, we talked about... How many retail plans do we have? Is that the question? Yeah, but we've missed them at retail. Like, was that one big client?

Are there.

And then just one quick follow up the <unk>.

Ordered.

I've got one large <unk> plan or with that kind of broad based.

Alright.

So the question because.

<unk>. Your question was we we talked about maybe a retail clinic.

That was the question.

Yeah, but <unk>.

Like when it was that one <unk>.

Speaker: Oh, no, it's not a weakness of retail. It's just others growing fast. It's not an absolute dollar situation in general.

To me, it's not a weakness of retail is just others grow fast.

It's not an absolute dollar situation in general I mean, you see the trends, but there's more investment to the modernization, where we are participating is a way I mean, yeah I mentioned the people who work with us know that the brick and mortar business was the dominant part of our business and then.

Speaker: I mean, you see the trends, but there's more investment in the modernization where we are participating in a way. I mean, again, I mentioned the people who work with us know that the brick and mortar business was the dominant part of our business, and then it became brands and CPGs. We are not dismissing this business, but we put eggs in different baskets, right? Many years ago, when we had a market dependency on retail, like three-quarters of our business, people were saying, you know, can you grow and bring the market to 20%? So we're not there at 20, but we're certainly in a much more comfortable position. So we want to grow it numerically as the company grows. But we want to focus on the proper brands which have growth capabilities and also on various platforms related to retail, because platforms also come and go.

When it becomes a branch and you know <unk>, we are not dismissing this business, but we put eggs in different baskets right. So.

Many years ago, when we had market dependent you in retail like three quarters of our business.

<unk> can you brought and bring the the market to 20%.

So we're not there at 20th <unk> certainly much more comfortable position. So we want to grow it numerically as the company grows but we wanted to focus on the proper brass, which have the grilled capabilities and also on various platforms related to retail because pleasant.

Speaker: You're probably aware there's a big reshuffling in the industry going on right now, so we're actively pursuing value-add businesses like home improvement businesses, various products and services, which are growing in the industry, both in the United States and in Europe, but we're a little bit less, you know, excited to go into something we developed six, eight, 10 years ago because that market is a bit diminishing.

<unk>, you're probably aware, there's a big reshuffling of the industry going on right now so we <unk>.

You add.

Businesses like a home improvement businesses.

Various products and services, which are growing in our industry, both in the United States and in Europe, but we are limited glass get all excited to go into something we developed the six 810 years ago, because the market has it been diminishing so.

Speaker: So I think that that's a better scope for what's happening. Thanks. Thank you. Great.

That's a better scope for what's happened.

Okay.

Speaker: Thank you, Seth. Ladies and gentlemen, that will be all of the Q&A session for today. I will now pass the call back to Leonard for his closing comments. Thank you, everybody, for joining us on the call today. We enter 2024 with a marked improvement in sentiment from a year ago. We're focused on our goals of getting back to our long-term model, both from a growth and profitability perspective. The last two months have proven that Grid Dynamics is adept at navigating uncertainty.

Thanks, Sir Thank you Sir.

Thank you Sir.

Ladies and gentlemen that would be all that security section for today.

Now I'll have to call back to Lennar closing comment.

Thank you everybody for joining us on at all today.

<unk> 2024.

<unk>.

And sentiments from a year ago.

Focused on our bowls of getting back to our long term model both for growth and profitability perspective.

<unk> <unk>, that's great dynamics is the depth and navigating uncertainty.

Speaker: Existing customers appreciate our value, and in 2023, we established a record number of new customers. I'm getting more and more bullish, looking forward to seeing you all in the next quarter. Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect.

Existing customers appreciate all of the art and in 2023, we established a record number of new customers.

I'm getting more and more bullish.

I'm looking forward to see you all in the next word.

<unk>.

This concludes today's conference call. Thank you all for participating you mean nowadays connect.

[music].

Mm.