Q1 2024 Grid Dynamics Holdings Inc Earnings Call
Good afternoon, everyone. Welcome to Grid Dynamics' first quarter 2024 earnings conference call. I'm Carrie Savas, Director of Branding and Communications.
At this time, our participants are in listen-only mode. Joining us on the call today are CEO Leonard Lipships and CFO Aeneal Durabla. Following their prepared remarks, we will open the call to your questions.
Please note that today's conference is being recorded. Before we begin, I would like to remind everyone that today's discussion will contain forward-looking statements.
this includes our business in a financial outlook and the answers to some of your questions such statements are subject to the risks and uncertainty as described in the company's earnings release and other filings with the c c
during this call we will discuss certain non- GAAP measures of our performance gap to non- GAAP financial reconciliations and supplemental financial information are provided in the earnings press release and the eight k filed with the f c
You can find all the information I just described in the investor relations section of our website.
I now turn the call over to Leonard, our CEO .
Thank you, Kerry. Good afternoon, everyone, and thank you for joining us today.
As you have seen from our published results, Green Dynamics' first quarter revenues were above our guidance range, and we exceeded Wall Street expectations, both in revenue and ungap EBITDA.
It was not a quarter of solid execution.
Our results clearly show that our focus is steadily paying off and we continue to move forward our stated goals of revenue growth and profitability.
During the first quarter, we witnessed improving demand trends across the majority of our customers.
While the demand environment is not back to support growth level that we are in digital transformation into CFC, science point out to the right direction.
Customers are increasingly willing to engage with us on their crucial and time-sensitive programs and share their outlooks and roadmaps.
In the first quarter, we witnessed a significant milestone.
We've reached the highest number of billable engineers in the company's history.
This also reflected in the revenue outlook for the second quarter.
During the first quarter, we also secured two multi-million dollar deals within the price customers.
One of them, a market leader and especially retail vertical, and the other one is an insurance vertical, a key focus area of our Gigacube strategy.
We continue to make progress in our joint go-to-market efforts without partners.
Partnership's contribution is an all-time high.
And it has increased by more than 20% in comparison to the fourth quarter of 2023.
We continue to be very positive on our partnerships and expect continued contribution.
I'm also happy to announce that we were recognized by the Averis Group as a leader in its inaugural Google Cloud Services Specialists.
which is PIC matrix assessment report.
This achievement validate our capabilities as a specialist in Google Cloud Services, an area of expertise for several years.
This is a clear recognition of the differentiated capabilities we offer our clients to drive their digital transformation agenda.
In the course of time, I'm confident that more independent third parties will recognize our strengths across other capabilities and service offerings.
Coming to air.
Customers are increasingly incorporated AI in their projects and requirements.
Additionally, some of our customer-generated projects have become meaningful engagements.
In a large financial institution, our GNI project has been successfully completed and we expect that platform to go live in the second quarter.
At the same time, we're not only using AI technologies with the clients, but also within our internal systems.
Last week, we soft launch our website that incorporates AI features.
Our users visiting Green Dynamics website will now be able to use natural language queries to find company related information.
This includes Greenland's capability, work with perform at our clients, case studies, and honors.
Now let me make some more detailed comments about the demand environment.
For many, our reported results in commentary over the past couple of quarters might be more positive than many well peers.
Yeah.
Our users visiting green the Nymex website will now be equal.
There are some key reasons for that, and in my opinion, that it makes great dynamics unique across the IT industry. First, in the current economic cycle, spending is under heightened scrutiny.
To use natural language queries to find company related information.
This includes <unk> capability World would perform at our clients key studies.
This in turn has resulted in many clients consolidating their IT partners and tightly coupling their investors with corporate performance goals.
Now, let me make some more detailed comments about the demand environment.
For me, our reported results and commentary over the past couple of quarters, Matthew I'm more positive than many of our peers.
Regenerating strengths and reputation for technology leadership, engineering progress, and delivery excellence positions us as a trust department, often leading us to gain business at the expense of the competition.
There are some key reasons for that and in my opinion that is makes green dynamics unique across the.
In the.
Firstly in the current economic cycle spending is under heightened scrutiny.
As an example,
In 2024, at 2 of the Fortune 1000 retailers, Greenland was selected as one of the two partners for all digital engineering programs.
This in turn has resulted in many clients consolidating very cheap.
And thankfully probably their investors with corporate performance goals Green.
Additionally, as a large Fortune 500 Telecom company, after a million of dozens of assistance suppliers, they choose grid dynamics for all their customer-facing applications.
Great strengths and reputation for technology leadership engineered promise and delivery excellence positions us as a trusted partner over leaving us to gain business at the expense of the company.
One of the key applications that we are rolling out at scale includes a mobile app for new customer self installations and provisioning.
As an example in.
In 2020 for a tour of the Fortune 1000 retailers <unk> was selected as one of the two partners or all digital engineering programs. Additionally, a large fortune 500 Telecom company after nobody knew data with suppliers they choose read them earnings for all of the.
Second, now rapidly evolving world a company's ability to adapt and integrate new technologies define its relevance and competitive pitch.
With a relentless progression of disruptive technologies, business must innovate or risk obsolescence.
Moreover, in that landscape marked by rising capital costs, the efficiency and speed on which innovative solutions are brought to the market are crucial.
Customer facing applications one of the key application that we're rolling out that scale. It puts a mobile app for new customer self installations and provisioning.
Greenland has been at the forefront of helping enterprises scale their operations through numerous technological advancements over the past two decades.
Second and now rapidly evolving world of company's ability to adapt and integrate new technologies.
The deep knowledge and robust capabilities position us not just to adapt to the change, but to drive it forward.
Define its relevance and competitive pitch with the relentless progression of disruptive technologies business, my Muscovy or risk obsolescence.
As an example, at a large financial institution that I mentioned before, the AI assistant for financial advisors that we implemented is poised to dramatically enhance both customer experience and the efficiency of financial advice.
And let's give martin by rising capital cost the efficiency and speed in which innovative solutions approach to the market.
Sure.
<unk> has been at the forefront, helping enterprises scale their operations through numerous technological advancements over the past two decades.
We anticipated that this capability when industrialized could save the wealth management industry billions of dollars.
The deep knowledge and robust capabilities position us not just to adapt to the change but to drive it forward.
Notably, this financial institution from one of the few selected partners after vendor consolidation exercise in 2023, further underscoring our pivotal role in their crucial and strategic
As an example is a large financial institution that I mentioned before they are system for financial advisors, and we implemented is poised to dramatically enhance both customer experience and the efficiency of financially driven.
Now come into the second floor.
Positive trends that I highlighted regarding the first quarter extend into the second.
We anticipate that this capability with industrial life.
Our customer activity is picking up. Engineering Billable Hethgown continues to grow. Customers have heightened AI interests.
Could save the wealth management industry billions of dollars.
Notably this financial institution from one of the few selected partners after vendor consolidation exercise in 2023 further underscoring our pivotal role and there are crucial and strategic.
We believe these factors formulate the basis for our continued positive outlook as we look into the second quarter and remainder of 2024.
Now coming to the second quarter.
On CDOFARN, GridLaps, our internal innovation center, completed multiple projects and initiatives. Our researchers and architects are engaged across the spectrum innovation that include AI, data, machine learning,
Positive trends that I highlighted regarding the first quarter extend into the second.
Our customer activity is picking up.
Engineering billable head count continues to grow.
Customer.
Interest.
and commerce solutions.
Speaker Change: We believe this.
Like previous quarters, our architects and CTO team were instrumental in opening new accounts with new clients. As a reminder, great dynamics AI engagements are based on more than seven years of internal research and successful implementation.
Speaker Change: Factors formulate the basis for our continued positive outlook as we look into the second quarter and remainder of 2020.
Our CTO front.
Speaker Change: Grid labs, our internal innovation center completed multiple projects and initiatives our resources and architects are engaged across the spectrum of innovation that include AI.
With our generative AI offering, we partner with customers to employ large language models and prompt guided image generation to the applications in product design, visualization, knowledge retriever.
Data machine learning.
And Commerce solutions.
Like previous quarters, all architectures of the future of team were instrumental in winning new accounts with new clients.
wealth management and customer service.
In liquid water, there were several trends and I want to share with you some of the notable ones.
Speaker Change: As a reminder, green dynamics AI engagements are based on more than seven years of internal research and successful implementation.
Look at my men.
Building up on our success in 2023, in the first quarter, we signed five large new enterprise customers.
Speaker Change: But our generative AI offering with partner with customers to employ large language models and prompt guidance image generation left vacations.
The new enterprise customers was signed in a quarter. One is the leading North American pet company.
Private design visualization knowledge retrieval.
One is an American high-end sport apparel, an accessory company. One is a global consumer goods company focused on personal care and health products, an energy manufacturing and service company, and one is a large amount international confectionery manufacturer.
Speaker Change: Wealth management and customer service.
Speaker Change: In the quarter, there were solid trends and I wanted to share with you some of the notable.
Speaker Change: One moment.
Speaker Change: Building up on our success in 2023, and the first quarter, we signed five large new enterprise customers.
I believe each of these logos have the potential to become large top accounts, and I'm looking forward to seeing these initiatives to scale.
Speaker Change: Oh.
Speaker Change: The new enterprise customers were signed in the quarter. One is a leading north American that company one as an American high end sports apparel and accessory company. One is a global consumer goods company focused on personal care and health products and energy manufacturing and service company and one is a large one.
Deliveral location support.
Grid dynamics follow the sound strategy, provides the framework of scaling our global locations.
India, one of the key locations, has been growing in rapid pace and is in top three countries and in the terms of the headcount.
Speaker Change: International confectionery manufacture.
Speaker Change: I believe each of these logos have the potential to become large top accounts and I'm looking forward to assume these initiatives to scale.
Last quarter, I highlighted the opening of the third office in India. This location in Bencalor is quickly becoming popular with our clients. In the first quarter, we have multiple visits from our U.S.-based plans across all our key offshore locations.
Speaker Change: Deliberate location simple.
Green dynamics, followed the sound strategy provides the framework.
We continue to attract high quality talent out of universities, and our activities with internships, hackathons, and dynamic talks are painful.
Speaker Change: Scaling our global locations.
Speaker Change: India one of the key locations has been growing at a rapid pace and is in the top three countries and in terms of the head count.
Additionally, we brought on an industry veteran to lead our India operations, and with his addition, I'm confident of many positive things happening in India.
Speaker Change: Last quarter I highlighted in the opening of the third office you need at this location in Bangalore is quickly becoming popular with all clients in the first quarter with multiple visits from our U S based plans across all of our key offshore locations.
In Europe , Poland continues to be our anchor point.
And in Latin America, Mexico remains the key location to support our clients seeking near-shore capabilities.
We continue to attract high quality talent out of universities and our activities with internships hackathon and dynamic talks are paying them.
European business.
Our European business is steadily diversifying beyond traditional areas of strengths such as retail and CPG.
Speaker Change: Additionally were brought on in the industry veteran to lead our India operations and with his addition, I'm confident of many positive things happening.
Additionally, the pipeline of the business is more distributed with plans spread over mainland Europe .
Speaker Change: In Europe.
Speaker Change: <unk> continues to be our anchor point.
For a global auto parts company, we're rolling out their composable commerce modernization platform across several brands within Europe , supporting them by establishing a multi-location global team structure.
Speaker Change: And then Latin America, Mexico remains the key locations to support our clients she can nearshore capabilities.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Our European business is steadily diversifying beyond.
In Q1, we successfully delivered an ASG initiative for a large clean energy company.
Speaker Change: Additional areas of strength, such as retail and CPG.
At many clients, GenAI continues to be a door open.
Speaker Change: Additionally, the pipeline of the business.
Speaker Change: Or mainland Europe.
Additionally, several of our customers have transitioned from exploratory and proof of concepts to commercial build-outs.
Speaker Change: Before I global auto parts company, we're rolling out their account possible commerce modernization platform across several brands within Europe supporting them by establishing a multilocation global team structure and.
For example, as a leading legal and tech service company, we're building a flagship platform for their new markets.
For a global international medical device company, we continue working on multiple initiatives to improve self-efficiency.
Speaker Change: In Q1, we successfully delivered and is G initiative for a large clean energy company and.
And many clients Gen II continues to be a door opener.
Partnerships. In 2023, partnerships contributed to 13% of our overall revenue and would aim to increase that share to at least 16% in 2020.
Speaker Change: Additionally, several of our customers, who have transitioned from exploratory and proof of concepts to commercial build outs for.
Speaker Change: For example, as a leading lethal and Tech service company, we're building a flagship platform for their new markets.
Partnerships with hyper-scales and leading software vendors is a key part of our gigacube strategy.
Speaker Change: For our global International <unk>.
In the first quarter, we made progress with our go-to-market efforts with our partners and upgraded our status with the major hyperskish
Speaker Change: Medical device company.
Speaker Change: We continue working on multiple initiatives to improve sales efficiency.
At AWS, we achieved the AWS World Architecture Partner Status. The program enables great dynamics to provide its client with an audit of their platform architecture, ensuring they are configured correctly in accordance with the best practices.
Speaker Change: Partnerships in 2023 partnerships contributed to 13% of our overall revenue and we aim to increase that share to at least 16% in 2020.
Speaker Change: Partnerships with Hyperscale and leading software vendors is a key part well give you a huge stretch.
With NVIDIA, we're exploring GoTo Market Initiatives for the first time.
Speaker Change: In the first quarter, we made progress with our go to market efforts with our partners and upgraded our status with a major hyperscale.
During the quarter, grid dynamics delivered some notable projects.
For a leading global technology company, we created a test automation toolkit that improved the efficiency and effectiveness of the testing processes.
Speaker Change: And AWS, we achieved either way as well architecture partners sets. The program enables green dynamics to provide its clients with an audit of their platform architecture, ensuring there are configured correctly in accordance with the best practices.
Featuring collection of independent modules, each with unified interface, the client was able to streamline the testing process and enjoyed greater visibility into testing outcomes.
Speaker Change: Within video, we're exploring go to market initiatives for the first day.
This project enabled the client issue resolutions
During the quarter Green dynamics delivered some notable projects for a leading global technology company, we created a desktop automation tool kit that improve the efficiency and effectiveness of the testing process heaters.
taken from days down to minutes.
leading to faster time to market and ultimately enhancing the quality of the final product.
Speaker Change: Insurance collection of an independent module.
For a leading Internet and Cloud Company, we streamline the release preparation process for high-priority apps in its app store.
Speaker Change: Each with a unified interface the client was able to streamline the testing process and they enjoy greater visibility into testing outcomes.
We develop tools that enable the client to submit releases that foster better communication between the partners.
Speaker Change: This project enable.
Speaker Change: Client issue resolution.
Speaker Change: Taken from days down to minutes.
These tools help accelerate the app release process, which enable the client to better predict release timing, monitor updates, and improve the overall user experience.
Speaker Change: Leading to faster time to market and ultimately enhancing the quality of the final product.
Speaker Change: For a leading internet and cloud company, we streamlined the release preparation process for high priority apps and its epsilon.
For a major CPG brand, we implemented an Omnichannel warehouse automation platform.
This platform unifies several software interfaces which dramatically lowers the cost of integrating new distribution centers in the client network, while also supporting the unique fulfillment requirements of wholesale, retail, and digital channels.
Speaker Change: We develop tools that enable the client to submit the releases that foster better communication between them.
Speaker Change: Yes.
Speaker Change: These tools help accelerate the app release process, which enabled the client to better predict release timing monitor update and improve the overall user experience.
In addition, we implemented a wholesale order platform that lowers the cost of serving new wholesale clients.
Speaker Change: For a major a CPG brand, we implemented an omnichannel warehouse automation platform. This platform unifies several software interfaces, which dramatically lowers the cost of integrating new distribution centers and their client network, while also supporting the unique.
Both of these platforms are expected to be expanded to multiple geographies in upcoming months.
For a global automotive manufacturer, we began a project aimed at improving interactions with dealers.
Through the use of micro front-end and AI-enable personalized experiences, this project will enable dealers to deliver more comprehensive sales and services to their end customers.
Speaker Change: Fulfillment requirements of wholesale retail and digital channels.
Speaker Change: And then.
Speaker Change: We implemented a wholesale order platform that lowers the cost of serving new wholesale clients.
Speaker Change: All of these platforms are expected to be expanded to multiple geographies in the upcoming months.
With that, let me turn the call over to Anil, we'll discuss QR results and more details. Anil.
Speaker Change: We're a global automotive manufacturer, we began a project aimed at improving and directions with dealers.
Thanks Leonard. Good afternoon, everyone. Our first quarter revenue of 79.8 million was ahead of our guidance range of 77 million to 79 million and exceeded Wall Street expectations.
Speaker Change: Through the use of micro front ends and AI enabled personalized experiences. This project will enable us to deliver more comprehensive sales and services to their end customers.
On a sequential basis, our revenue grew 2.2% and remains flat on a year-of-year basis. While we witness growth from multiple customers across every industry vertical, our finance, and other verticals were the strongest, both on a year-of-year basis and sequential growth basis.
Speaker Change: With that let me turn the call over to Neil who will discuss Q1 results in more detail and ill.
During the first quarter, a retail and TNT were the two largest verticals at 30.9% and 30.1% of our revenues respectively.
Neil: Thanks Lynn good afternoon, everyone. Our first quarter revenue was $79 8 million was ahead of our guidance range of 77 million to $79 million and exceeded wall Street expectations on.
Our retail vertical remained flat on a sequential basis and decrease by 3% on an ear-of-year basis. On a sequential basis, we witness growth from specialty retail.
Neil: On a sequential basis revenue grew two 2% and remained flat on a year.
Neil: Year over year basis, while we witness growth from multiple customers across every industry vertical our finance and other verticals are the strongest both on a year over year basis and sequential growth basis.
TMT remained flat on a sequential basis and decreased by 10.4% on a year-of-year basis.
Coming to our largest customer in our TMT vertical, it grew both on a sequential and year-over-year basis.
Neil: During the first quarter, our ATM and TNT, where are the two largest verticals that 39% and 31% of our revenues respectively.
Here are the details of the revenue mix of other verticals. Our CPD and manufacturing represented 12% of our revenue in the first quarter, a decrease of 1.2% on a sequential basis and 24.4% on a year-over-year basis.
Neil: <unk> vertical remained flat on a sequential basis and decreased by 3% on a year over year basis on a sequential basis, we witnessed growth from specialty retail.
On a sequential basis, our largest CPG customer grew in the quarter, and this was offset by decreased at other customers. The financial vertical represented 12.8% of revenue, an increase of 23.7% on a sequential basis, and 57.2% on a year-over-year basis.
Neil: TMT remained flat on a sequential basis and decreased by 10, 4% on a year over year basis.
Neil: Coming to our largest customer and our TMT vertical grew both on a sequential and year over year basis.
Neil: Here are the details on revenue mix or other verticals are CPG and manufacturing represented 12% of our revenue in the first quarter a decrease of one 2% on a sequential basis and 24, 4% on a year over year basis.
During the quarter, we witness growth across most of our customers that range from financial, technology, banking, and insurance.
Our newly disaggregated healthcare and pharma represented 3.8% of our revenue showed decline of 10.5% on a sequential basis and 4.5% decrease on a year-over basis.
Neil: On a sequential basis, our largest CPG customers grew in the quarter and this was offset by decrease in other customers.
Neil: Our financial vertical represented 12, 8% of revenue.
Neil: An increase of 23.
And finally, the other vertical represented 10.4% of our first quarter revenue and was up 4.5% on a sequential basis and 50.1% on a year-of-year basis.
Neil: On a sequential basis, and 57, 2% on a year over year basis.
Neil: During the quarter, we witnessed growth across most of our customers that mainstream financial technology banking and insurance.
The sequential role was driven by strength across multiple customers, some of them in the clean energy and legal space.
Neil: Our newly disaggregated healthcare and pharma represented three 8% of our revenues showed a.
We ended the first quarter with a total headcount of 3,892, down from 3,920 employees in the fourth quarter of 2023 and up from 3,744 in the first quarter of 2023.
Neil: Decline of 10, 5% on a sequential basis at four 5% decrease on a year over year basis.
Neil: And finally, the other vertical represented 10, 4% of our first quarter revenue was up four 5% on a sequential basis and 51% on a year over year basis.
In comparison to the fourth quarter, we exited our first quarter with a higher billable head count due to improving demand.
Neil: Sequential growth was driven by strength across multiple customers some of them in the clean energy and lease of space.
At the end of the first quarter of 2024, our total US headcount was 332 or 8.5% of our company's total headcount versus 8.1% in the year-go quarter. Our non-US headcount located in Europe , Americas, and India's was 3,560 or 91.5%.
Neil: We ended the first quarter with a total headcount of 3892 down from 3920 installation in the fourth quarter.
Neil: Of 2020 trained and up from 3744 in the first quarter of 2023.
In the first quarter, revenues from our top five and top 10 customers were 39.6% and 55.3% respectively versus 40.8% and 60.4% in the same period year ago, respectively.
Neil: In comparison to the fourth quarter, we exited our first quarter, but the higher billable head count due to improving demand.
Neil: At the end of the first quarter of 2024.
Neil: Our total U S encompassed 332 or eight 5% of our company's total head count versus eight 1% in the year ago quarter or.
During the first quarter, we had a total of 210 customers down from 218 in the fourth quarter of 2023 and 220 in the year-go quarter.
Neil: Our non U S headcount located in Europe, Americas, and Indias, plus 3561 91, 5%.
During the quarter, we added several customers, some of which Leonard referred to in his prepared remarks. The quarterly declined in the number of customers was primarily driven by our continued efforts to rationalize their portfolio of non-strategic customers.
Neil: In the first quarter revenues from our top site and top 10 customers were 39, 6% and 55, 3%, respectively versus 48% and 64% in the same period.
Moving to the income statement,
Neil: Year ago, respectively.
Our gap growth profit during the quarter was 27.7 million or 34.7% compared to 28.1 million or 36% in the fourth quarter of 2023 and down from 28.6 million or 35.7% in the year of the year of a quarter.
Neil: During the first quarter, we had a total of 210 customers down from 218 in the fourth quarter of 2023 and 220 in the year ago quarter.
Neil: During the quarter, we added several customers.
Neil: Some of which Leonard referred to in his prepared remarks, the quantity decline in the number of customers was primarily driven by our continued efforts to rationalize our portfolio of non strategic customers.
On a non-gap basis, our gross profit was 28.1 million or 35.3%, down from 28.6 million or 36.6% in the fourth quarter of 2023 and down from 29 million or 36.3% in the year of the quarter.
Neil: Moving to the income statement, our GAAP gross profit during the quarter was $27 7 million or 34, 7% compared to $28 1 million or 36% in the fourth quarter of 2023 and down from $28 6 million or 35, 7% in the year ago.
The decrease in gross margin as a percentage on a sequential basis was driven by a combination of first quarter seasonal increase in employer-related costs and an FX headwinds.
Neil: Warner.
Neil: On a non-GAAP basis, our gross profit was $28 1 million or 35, 3% down from $28 6 million or 36, 6% in the fourth quarter of 2023 and down from $29 million or 36, 3% in the year ago quarter.
Non-gat evita
During the first quarter that excluded stock-based compensation,
depreciation and amortization, restructuring, and expenses related to the geographic reorganization, transaction and other related cost was 10.3 million or 12.9% of sales versus 10.7 million, of 13.7% of sales in the 4 quarter of 2023.
Neil: The decrease in gross margin as a percentage on a sequential basis was driven by a combination of first quarter seasonal increase in employee related costs and FX headwinds.
and down from 10.8 million or 13.5% in the year old quarter.
The decline in non-gap EBITA was largely due to decrease in gross margins.
Neil: non-GAAP EBITDA during the first quarter and excluded stock based compensation depreciation and amortization restructuring and expenses related to the geographic reorganization transaction and other related cost was $10 2 million or 12, 9% of sales versus $10 7 million or 13, 7%.
Our gap net loss in the first quarter was 3.9 million or a loss of 5 cents.
based on basic share count of 6.2 million shares compared to the fourth quarter income of 2.9 million
or four cents based on a basic share count of 75.7 million, and a loss of 8 million or 11 cents per share based on 74.5 million basic shares in the year.
Neil: Sales in the fourth quarter of 2023 and down from $10 8 million or 13, 5% in the year or acquired.
Neil: The decline in non-GAAP EBITDA was largely due to increase in gross margins.
above water. The year-of-year decrease in gap net loss was largely due to lower levels of stock-based compensation and decrease in provision of income tax is partially offset by depreciation and amortization.
Neil: Our GAAP net loss in the first quarter was $3 9 million or a loss of <unk> <unk>.
Neil: Based on basic share count of $76 2 million shares compared to the fourth quarter income of $2 9 million or <unk> based on a basic share count of $75 7 million and a loss of $8 million or 11 cents per share based on $74 5 million basic shares.
On a Nodgap basis, in the first quarter, our Nodgap net income was 5.2 million or 7 cents per share based on 78.4 million diluted shares compared to the fourth quarter, non-gap net income of 5.7 million or 7 cents per share based on 78 million diluted shares, and 6.5 million or 8 cents per share based on 77 million shares in the year ago quarter.
Neil: In the ear.
Neil: Quarter and year on year decrease in GAAP net loss was largely due to lower levels of stock based compensation and decrease in provision of income taxes, partially offset by depreciation and amortization.
On March 31, 2024, our cash and cash equivalents total $249.4 million down from $257.2 million in the fourth quarter of 2023.
Neil: On a non-GAAP basis in the first quarter. Our non-GAAP net income was $5 2 million or <unk> <unk> per share based on $78 4 million diluted shares compared to the fourth quarter non-GAAP net income of $5 7 million or <unk> <unk> per share based on 78 million diluted shares and $6 5 million or <unk> <unk> per share based on <unk>.
Coming to our second quarter guidance, we expect revenues to be in the range of 80 million to 82 million. We expect our non-gap EBITA in the second quarter to be in the range of 10.5 million to 11.5 million.
Neil: 77 million shares in the year ago quarter.
Neil: On March 31, 2024, our cash and cash equivalents totaled $249 $4 million down from $257 2 million in the fourth quarter of 2023.
Neil: Turning to our second quarter guidance, we expect revenues to be in the range of 80 million took $82 million.
Neil: We expect our non-GAAP EBITDA in the second quarter to be in the range of $10 5 million to 11 5 billion.
Neil: For the second quarter of 2024, we expect our basic share count to be in the range of $77 million to $78 million and our diluted share count to be in the range of $79 million to $80 million.
Hello everyone. As we go through the Q&A session of this call, I will first announce your name. At that point, please unmute your mic and turn on your camera.
Speaker Change: I'll close my prepared remarks, we're now ready to take questions.
Our first question today comes from Puneit Jane of J.P. Morgan.
Speaker Change: Yeah.
Speaker Change: [music].
The line is open. Go ahead, please.
Hi, thanks for taking my question. A really nice set of results here. So let me ask what drove the upside relative to the guidance. You grew sequentially in first quarter.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Hello, everyone and as we go through the Q&A session of this call I will first announce your name at that point. Please on mute your mic and turn on your camera.
and then expect growth in the second quarter as well. What drove those positive trends given many data points suggested continues sluggishness in the spending environment in this industry?
Speaker Change: Our first question today comes from Puneet Jain.
Puneet Jain: Of J P. Morgan.
Speaker Change: Puneet.
Puneet Jain: Your line is open.
Good to having you on a call.
Puneet Jain: Thanks.
Puneet Jain: Hi, Thanks for taking my question.
It didn't come as a surprise to us. As you recall, at the end of the report last time when we talked about the results of 2023, kind of hinted that the continued growth is going to happen.
puneet: Really nice sector presents here.
Puneet Jain: So let me ask what drove the upside relative to that guidance you grew sequentially in first quarter, and then expect growth in the second quarter as well what drove those positive terms given many many data points, suggesting continued sluggishness in the spending environment in this industry.
I'm still bullish not only on guidance for Q2, but subsequent growth as we go forward, we'll be happy.
to discuss some of those subtleties. But ultimately, what great dynamics really sees is that despite continuous scrutiny around the budgets from the major global companies, there is a demand
Speaker Change: Thank you puneet.
Puneet Jain: Good to having you on our call well.
Puneet Jain: It didn't come to Supreme is a surprise to us as you recall at the end of the reported last time, we were talking about the results of 2023, I kind of hinted that the continued growth.
for institutionalize the additional technology spendings.
Puneet Jain: Going to happen so.
puneet: So bullish not only on the guidance for Q2, but subsequent growth as we go forward, we'd be happy to cause some of those subtle but ultimately.
So if you look at the last 18 month, a lot of companies clamped down all the spendings.
Now we see the opening comes to basically innovate and generate more competitive advantages by stepping up into the unique area relates to the
puneet: Great.
puneet: Sure.
puneet: She is that despite continued scrutiny around the budget from the major.
puneet: Global companies there is a demand.
puneet: For institutional wise, the additional technology spending.
data management,
Machine learning, obviously some.
AI modules, but more important, this whole comprehensive question, how to tight the business value with a predictable nature of the digital side of the business.
puneet: So if you look at the last 18 months.
puneet: Other companies, who have done all of the spread.
puneet: Now we see the opening comes to.
puneet: Basically innovate and <unk>.
So that's why we see kind of notable examples of the clients who started with us in 2023, or even more stable clients who've been with us for longer time.
puneet: Generally more competitive advantages by stepping up into the unique area relates to the <unk>.
puneet: Data management.
now have projection of the budgets.
puneet: Machine learning obviously.
for extended period of time and green dynamics part of the journey.
Speaker Change: Yeah modules, but more important this whole comprehensive question how to tight.
The other thing which we mentioned in remarks that we see that some of the reduction of the preferred suppliers start playing some dividends, degree dynamics, staying on the kind of a cutting edge of work with the clients relentlessly pushing the proposals of tight technology and business goals.
Speaker Change: The business value with a predictable measure.
puneet: The digital side of the business. So that's why we see.
puneet: No.
puneet: Examples of the clients, who started with us in 2023 or even more stable clients who've been with us for longer time now have projection of the budget.
And again, they're paying out because we are being awarded with a longer-term business to come.
puneet: For extended period of time, and bringing that part of the journey. The other thing, which we mentioned in our remarks that we see that some of the reduction of the preferred suppliers start playing some dividends degrees than <unk> seen on that.
And please, building up on your comments on where did all the website come. I think the way we could characterize this
When we met you guys in late February , we have a certain outlook.
puneet: And a cutting edge of work with our clients relentlessly pushing.
And as the time evolved and as the business evolved, we see improvements across. So while, you know, I would say that we saw it more widespread relative to what our expectations were. Obviously, that has showed up in the results.
puneet: Pushing the proposals.
puneet: Business schools.
puneet: And again, there are paying off because we are being awarded.
puneet: Longer term business too.
puneet: Right.
puneet: And for me.
puneet: On your comment on where all the upside come heightening the weight.
Yeah, no, it's great. Like it's just, like I was just curious because
puneet: We could characterize as when we mentioned dies in late February we have a certain outlook and asked me.
the upside or the positive trends seem different from many other companies that have reported in this results. Let me ask longer term, like so beyond this year, we get a lot of questions from investors about AI headbends, like that AI creates opportunities to be more productive in coding efforts.
puneet: Time involved and ask.
puneet: The business evolve we see.
puneet: Proven set cross so while yes.
puneet: No I would say that we signed more widespread relative to what our expectations were.
puneet: Obviously that has shown up in the results.
How should you think about new normal growth for the sector given increasing AI adoption?
Speaker Change: Yeah no.
Speaker Change: It's great.
Speaker Change: Just like I was just curious because.
Well, obviously, this question comes back every time we discuss not only with investors, but more notably with the clients, right? At this moment, the choice of the models, platforms, co-pilots,
Speaker Change: The upside of the positive trends seen different from many other companies that got to put it in this results. Let me ask longer term like beyond this year, we get lots of questions from investors about AI had been electric AI creates opportunities to be more productive and coding efforts.
still remain in very broad.
And as we have been engaging in a, as you know, well, Green Dynamics and open source solutions, together with the more traditional models, we explore multiple venues.
Speaker Change: How should we think about new normal approval for the sector given infusing AI adoption.
Speaker Change: Well, obviously this question comes back.
Speaker Change: Every time, we discuss not only with investors, but more notably with the clients right.
We work with the clients who understand and appreciate Microsoft's tech.
Speaker Change: So at this moment.
or for that matter, you know, the AWS, we obviously very tight with a partnership with Google in multiple fronts. But even the others, like for example, you know, the meta version of the open source.
Speaker Change: The choice of the models platforms Copilots still remain at very broad.
Speaker Change: As we have been engaging in a as you know well agreement that makes sense.
Speaker Change: Open source solutions together with the more traditional models, we explore multiple venues.
product like Lama. We apply our general broader knowledge
Speaker Change: We work with our clients, who understand and appreciate it.
of what we believe is a right for the customer, including their own capabilities, their own models.
Speaker Change: Microsoft.
Speaker Change: Or for that matter.
Speaker Change: AWS.
the trainability of those models, the specialization of the means, and basically verticalize the proposals
Speaker Change: <unk>.
Speaker Change: Obviously very tight.
Speaker Change: The partnership with Google with multiple fronts, but even the others right.
where we test those models and expand.
across the technical capabilities on a horizontal slice. So it's a disruptive world. And one of the good things for Green Dynamics, if you look at our 18 years of history, we strive in a disruption time.
Speaker Change: For example.
Speaker Change: Meta version of the corporate stores.
Speaker Change: Like a lot, but we apply our general broader knowledge.
Speaker Change: Of what we believe is the right for the customer including their own.
This is where we're talking about not just peers, we're talking about this world of innovation. Everybody talks about it, but when it comes to the clients, they don't want to just clarity. They want to ROIs.
Speaker Change: Yeah.
Speaker Change: Theyre all models.
Speaker Change: <unk> ability of those models the specialization of the mains and basically verticalizing the proposals, where we test those models of expense across the technical capabilities on the Horizontals. So.
And that goes way beyond the white papers and hypotheses. You need to work with them diligently to see how their attempts to build the systems actually convert into the proven results, because the variances are still large.
Speaker Change: It's disruptive world.
Speaker Change: And one of the good thing for Green dynamics should we look at our 18 years of history.
Speaker Change: We strive with a disruption.
Speaker Change: This is where.
Speaker Change: We're talking about I'm just peers, we're talking about this.
So I would believe that we are at the forefront of those innovations, not mentioning the partnership. We have the key players, not only the hyperscale, but actually the leaders in the AI space including the hardware.
Speaker Change: World of innovation.
Speaker Change: Everybody talks about it but when it comes to the clients. They just don't want to just clarity.
Speaker Change: Rosh.
Speaker Change: And then it goes way beyond the white papers and hypothesis you need to work with them diligently to see how their attempts to building systems actually conversion.
Thank you.
Thank you, Phineet. Thank you.
Thank you, Panit.
The next question goes to Myunk Tandem at Needham. Myunk, the line is open. Please go ahead.
Speaker Change: <unk> results because the variances are still leverage so I would believe that.
Great. Hi, Leonard. Ionel. How are you?
Speaker Change: We've.
Speaker Change: They are at the forefront of Nielsen of issues I've mentioned.
Let me start with the question on the guidance. So if I take the top end of the guidance, it assumes a nice acceleration sequentially,
Speaker Change: We have with it.
Speaker Change: Not only the hyperscale is but actually leaders in there.
Speaker Change: Yeah.
Speaker Change: Space, including the hardware.
Just building off that, should we expect further acceleration in the back half? I know you're not giving formal guidance, but just maybe anecdotally or qualitatively, any color on what you're hearing from clients. Is this sustained acceleration or are you still sort of in this uneven climate where it's a little bit hard to predict?
Speaker Change: You.
Speaker Change: Thank you Tony Thank you.
Puneet Jain: Thank you puneet.
Speaker Change: The next question goes to my young tandem at Needham My off the line is open. Please go ahead.
Needham: Great I'm honored and how are you.
So Mike, let me give the official answer and Leonard will jump into more qualitative. Look, we do one quarter at a time, right? In Leonard's prepared remarks,
Speaker Change: Yeah.
Needham: Let me start with the question on the guidance. So I don't know if I take the top end of the guidance, but it seems a nice acceleration sequentially.
Speaker Change: No not that.
He made some comments, right? And again, if you look at the trends over the last couple of quarters, it's very consistent what we're doing.
Speaker Change: We expect further.
Speaker Change: The acceleration in the back half.
Speaker Change: We're not giving formal guidance, but just maybe anecdotally or qualitatively any color on what you're hearing from clients is a sustained acceleration or are we still hold up in this uneven climate, where it's a little bit hard to predict.
I don't want to say anything beyond our guidance in Q2, but fair to say we are positive for 2024. But Leonard, I'll let you talk about maybe a little bit more. So, as always, the weight is on my shoulders.
Mike: So Mike.
Mike: Thank you.
Mike: The official answer in a letter that will jump into more qualitative, but with one quarter at a time right and left Leonard prepared remarks, he made some comments right.
Let me tell you this, we continue to hire and expand. The headcount you see right now doesn't fully reflect the growth because we were able to optimize
Mike: And again, if you look at the trends over the last couple of quarters, it's very inconsistent what we're doing I don't want to say anything beyond.
the headcount toward gearing toward knee demand. So if you look at the number of billable headcon, which is constantly growing and growing week after week,
Mike: Our guidance in Q2, but fair to say we are positive for 2020 for the Leonard I'll, Let you talk about maybe a little bit more.
New results of April , right? So it looks good. We are basically applying
Leonard: As always the way it is on my shoulder.
Mike: No.
Leonard: Let me tell you. This we've continued to hire and expand the head count you see right now.
some of the productivity tools
internally to make sure we can reach to a broader audience
Speaker Change: To fully reflect the growth because we were able to.
of engineers to reach the goals internal capabilities. And that includes all three main facets, the internship program, Greene University, and GridLap. So on a supply side, we're fully prepared for growth. On a demand side,
Mike: Optimize.
Mike: The head count toward gearing towards need demand. So if you look at the number of billable has gone which is constantly growing week after week.
Mike: New results of April grades so looks good.
Look,
Mike: We are basically.
I'm bullish beyond you too. That's very clear.
Mike: Okay.
Mike: Okay.
Now, when I gave a guidance in favor that is going to be a
Mike: Some of the productivity tools internally to make sure we can reach to a broader audience of engineers to reach the goals internal capabilities and that includes all three main facets to endure ship program Green University and grid. So on a on a supply side reform.
the record quarter
That kind of fills in a range. So without speaking, you may have some conclusions where we're going to be. Again, we're only in the first month, so we are comfortable without guidance.
And if we go further, I believe we will crush the market from our capabilities.
Mike: Prepared foods on the demand side.
Mike: Look.
Mike: I am bullish beyond Q2, that's very clear now when I gave a guidance in February is that it's going to be.
Now, whether we're going to crush the market from the numbers, that would have a little tell. But, you know, some people were questioning why I was not smiling last couple of quarters. Now you got my smile. So that's probably the best indication where our technology capability geared to our business.
Mike: The record quarter.
Mike: But kind of feels an array. So without speaking you got some conclusions where are we going to be again, we're all in the first month. So we are comfortable with our guidance, Brian and if.
That's very helpful. Thank you for that. Then I have a quick follow-up. I wanted to ask you about margins. If I look at gross margins, this is probably the lowest that we've seen it, at least in recent history. Could you sort of square that with where utilization is, pricing conversations? You know, what's driving that? And if demand does start to improve, should we expect margins to follow suit. Thank you.
Mike: If we go further I believe we will.
Mike: Crush the market from our capabilities now, whether we get a crushed the market from the numbers.
Mike: The Atwood dive a little tell but you know some people were questioning why was not smiling last couple of quarters now you've got my smile. So that's probably the best indication, where our technology can keep a good a good geared to our business.
So coming to your second part, the answer is yes, right? There's leverage in the model.
Now, without going through all the numbers and finer details, there are many moving parts to it. There's an FX impact also, as we have some of these costs that was a headwin. And, you know, you know over the last 12 months what is going on across the industry, right? Across our evolution. That has had some impacts, and you're seeing that. And more importantly, Q1 tends to be seasonally a quarter where you have, you know, some some of the payroll related issues, employee related taxes hit us. So every year you see that, obviously, you know, with the revenue trends being the way they are, you see a little bit more, I would say,
Speaker Change: That's very helpful. Thank you for that and then I have a quick follow up on <unk> I wanted to ask you about margins. If I look at gross margins. This is probably the lowest that we've seen it at least in recent history.
Speaker Change: You sort of square that with where utilization is pricing conversations what's driving that and if demand does start to improve should we expect margins to follow suit so coming to your.
Speaker Change: The second part of the answer is yes, there is leverage in the model now.
Speaker Change: Without going through all the numbers and finer details there are many moving parts to it there's an FX impact also.
Speaker Change: As we have some of these costs.
Speaker Change: That was a headwind.
Speaker Change: And Oh, you know over the last 12 months.
a little bit more on the margin front pressures in Q1. But again, as the year evolves, and you can see this even with our guidance, you know, we will move in the right direction. Again, from a long term, our model has not changed, but we'll just have to work through it over the next couple of corners.
Speaker Change: What is it.
Speaker Change: Going on across the industry right.
Speaker Change: Across our evolution that has had some impacts and youre seeing that and more importantly, Q1 tends to be seasonally.
Speaker Change: Warner where you have some of the payroll related issues employee related taxes hit us.
Do you want more details or you're okay with answers? So, you know, if you do one more detail, the thing is, Central Europe is more expensive than Eastern Europe . Everybody knows it's not, it's a well-known secret. So as we grew all position in Poland and other countries around the region, obviously there was a penalty associated with the incremental cost.
Speaker Change: So you mean every year you see that obviously with the revenue trends being the way they are you'll see a little bit more.
Speaker Change: I would say a little bit more on the margin front pressures in Q1, but again as the year evolves and you can see this even with our guidance.
Speaker Change: Moving the right direction again from a long term our model has not changed but we will just have to work through it over the next couple of quarters.
We added the variance in Mexico, we had a
Speaker Change: Do you Wanna more details of our European women.
inflated past the situation, but the key resolution for our business, obviously, with the growth
Speaker Change: So.
Speaker Change: If you do one more big data the thing is central Europe is more expensive than everybody knows it's not it's a well known too as we grew our position in Poland and other.
where we deliver our marginalities
evidently improving. But there is another thing is, we're actually striving right now for a significant improvement of the marginality in Europe as well. Now, we have a broader country with a more stable workforce
Speaker Change: Countries around the region, obviously, there was a penalty associated with the incremental cost.
Speaker Change: The variance in.
Sadly now, the war in Ukraine continues to ravage, but we are reducing our dependency and, you know, it will continue to invest into the more what they call stable territories. So I would say that a seasonality which Anil told you about.
Speaker Change: The.
Speaker Change: Mexico, where you were headed.
Speaker Change: Completed pass the situation, but the key resolution for our business, obviously with the growth.
Speaker Change: Where we believe our emerging knowledge.
Speaker Change: Evidently improving but there is another thing is we're actually striving.
and reflects our current status quo, I believe, in Q2 we will see some pick up.
Speaker Change: Driving right now for a significant improvement over the March north.
Speaker Change: Europe as well now we have a broader country, we're more stable workforce.
But also, to me, this 2040 model, even though it seems quite remote right now, the revenue will need to demonstrate our catch up on the margin, not adversely planned. We're not intending to buy the business.
Speaker Change: Suddenly now the war in Ukraine confused too.
Speaker Change: Rubbish, but we are reducing our defenses.
Speaker Change: You will continue to invest into the more what I'd call stable territories. So I would say that our seasonality of which and you told you about.
because technology is so critical, then the value, what we do, has to propagate to the results, right? So as revenue grows, I see the margin improvements. The other part of this, not only in the margin on the Ibitra side, we have not lowered our technology investment.
Speaker Change: It reflects the current status quo I believe in Q2, we'll see some pick.
Speaker Change: Got it.
Speaker Change: Okay, but also to me this 2040 model, even though it seems quite remote right now.
Speaker Change: The revenue will need to demonstrate our catch up on the margin not.
which again, it's a trade-off. You need to persevere the flatness, which was quite long. So we're bullish, but the numbers will tell you the true story.
Speaker Change: Adversely planted we're not intending to buy the business.
Speaker Change: Because technology is so critical then.
Perfect. Very helpful. Thank you so much. Great job on the quarter. Thank you, Mike.
Speaker Change: The value would do has to propagate through the results right. So as revenue grows I assume the margin improvements.
Thank you, Mayak.
The next question comes from Brian Bergen of Cohen. Brian , the line is open. Please go ahead.
Speaker Change: The other part of this and not only in a marginal EBITDA sorry.
Speaker Change: No we have not lowered our technologies last week, which again.
Hey, thanks. Good afternoon. Zach Aesman on for Brian . Our first question on demand, are you comfortable that historic large clients that have caused pressure in the recent past are at least stable here, offering that foundation for growth reacceleration as new enterprise logos won over the next last 12 months continue to scale?
Speaker Change: There's a trade off you need to pursue here of the flatness, which was quite well so far we're bullish but the numbers will tell you the true story.
Speaker Change: Perfect very helpful. Thank you so much good job on the quarter. Thank you Mike.
Speaker Change: Thank you Mike.
Speaker Change: The next question comes from Bryan Bergin of Cowen.
for now
All right, let me take the first part. I think I knew we'll go to this point. There's no evidence today of any large cost in the declining with green dynamics.
Bryan C. Bergin: Brian The line is open. Please go ahead.
Bryan C. Bergin: Thanks, Good afternoon, Xactly hasn't been on for Brian first question on demand are you comfortable that historic large clients that have caused pressure in the recent past or at least stable here offering that foundation for growth Reacceleration as new enterprise logos one over the next to last 12 months continued to scale.
We're in April , we kind of understand the trend of this year. Not going to work in our
things do happen, but it's stable to positive. So we continue to generate the new enterprise clients.
If you notice, we did reduce a bit of those smaller clients in the commercial side because there is a dichotony goes on, survival of the fittest. So some of the small guys are
Speaker Change: Mhm.
Speaker Change: Let me take the first part I think Neil will go.
Speaker Change: There is no evidence today of any large customer declining with degrees in it.
actually struggling with their innovation and funding.
Speaker Change: We're in April we kind of understand the trends.
But nevertheless, we expanded
Speaker Change: Knock on wood.
the market too. So if you look at our growth
Speaker Change: Things do happen, but.
Speaker Change:
It goes not just traditionally with the CPG and retail, but it's also expanding quite a bit into the fintech.
Speaker Change: Stable to positive.
Speaker Change: We continue to generate the new enterprise clients. We have you noticed we did.
Speaker Change: Reduce it.
part of the BASO we are gaining momentum in a life science supply chain. We got our first
Speaker Change: Those smaller clients on the commercial side because.
Speaker Change: There is a dichotomy goes on survival in the fitness with some of this.
Speaker Change: We'll get your actual struggling with their innovation funding, but nevertheless, we extend that.
good step into the insurance business. And it happens on a stable to positive foundation about major lead clients.
Speaker Change: Market too. So if you look at our growth it goes not just traditionally.
Speaker Change: Chi.
So, Zach, building upon that, I'll just reiterate it slightly different. Your observation is astute and right on.
Speaker Change: And retail, but it's also expanding quite a bit into the fintech part of the five are gaining momentum in the.
If you look at our second quarter guidance, we're reverting to year of your growth right after that trend is reversed after a couple of quarters. And the underlying trends point that out very well both in terms of existing and new ones. New clients were always good for us, right?
Speaker Change: Life Science supply chain.
Speaker Change: We Gotta go first.
Speaker Change: Stepping into the insurance business and.
Speaker Change: It happens on a stable to positive.
Speaker Change: Fondation <unk> major lead clients.
The existing clients move the needle for us and that is changing now.
Speaker Change: So that building upon that I'll just reiterate it.
Speaker Change: A different your observation is astute and write off.
Yep.
Very helpful. And then the follow-up on Gen AI, obviously interest here continues to swell. We've also heard anecdotes that it has impacted the pace of client decision-making as customers try to figure out what to do with the technology.
Speaker Change: If you look at our second quarter guidance, we're reverting to year over year growth rate after.
Speaker Change: That trend has reversed after a couple of quarters.
Speaker Change: And the underlying.
Speaker Change: Yes.
If you're seeing this, what do you think needs to happen for this trend to loosen up?
Speaker Change: Trends.
Speaker Change: That's all very well both in terms of existing and new ones new clients were always compressed right.
The very loaded question. I can get you entertained with having distinguished CFO answering. It's fun for me to watch.
Speaker Change: Existing clients move the needle for us and that is changing now.
Speaker Change: Okay.
Speaker Change: Very helpful and a follow up on Gen. AI, obviously interest here continues to swell. We've also heard anecdotes that it has impacted the pace of client decision, making as customers try to figure out what to do with what's the technology.
I mentioned in the first remarks when we talked to that grid dynamics goes very broad.
And the
The benefits
Speaker Change: If you're seeing that's why do you think needs to happen for this trend to loosen up.
sometimes are not trivial from the purely, you know,
Speaker Change: Okay.
Speaker Change: It's a very loaded question I can get you in 13 with everything.
direct savings. So we have one of a very large legal customer and when they're doing a lot of you know simplification of the work. That will tell how good the savings will be. We implemented a big portion of the work with a
Speaker Change: Distinguished before that's right [laughter] one.
Speaker Change: One fermenter watch.
Speaker Change: So.
Speaker Change: I mentioned in the first remarks, when we talk with two needs that Green dynamics goes very broad.
Speaker Change: And the.
with the financial wealth management plan. But they're enterprise type of solution. When it comes to purely, you know, journey of AI,
Speaker Change: The benefits.
Speaker Change: Sometimes are not trivial from the purely.
It's almost an ignogical right now which projects will
Speaker Change: Direct savings. So we have one of the very large legal customer and what they're doing a lot of you know.
combine some of the work from the communication part, right? So there are many things Rheedemics has done in the past, you know, we did natural language files, so vector search, we're doing all kind of features now enabled by AI. So I would say that to be very precise,
Speaker Change: Simplification of the work I will tell how good the savings would be we had implemented a big portion of the work with them.
Speaker Change: With the.
Speaker Change: Financial wealth management plan, but their enterprise.
Speaker Change: Type of a solution when it comes to <unk>.
The scale of the results with the models being more solidified with the BISpo custom solutions are becoming more evident. But if you use the generic model without proper understanding of the weights, that people may not see all the results right away.
Speaker Change: You're already right.
Speaker Change: It's almost anecdotal right now which projects will come.
Speaker Change: Combined some of the work from the from.
Speaker Change: From the communications Mark right. So there are many things <unk> done in the past.
Speaker Change: We did natural language box with Vectra search for doing all kinds of features now enabled by AI. So I would say that to be very precise.
It's very helpful. Thanks. Of course.
Thank you. Thank you. Our next question comes from Josh Sigler at Cancer Fitzgerald. Josh, the line is open. Please proceed.
Speaker Change: Uh huh.
Speaker Change: Keith.
Speaker Change: The result was the models become more solidified with the bespoke custom solutions are becoming more evident, but if you use a generic model without proper understanding of the ways that people may not feel the results right away.
Yeah, hi guys, thanks for taking my question today. I appreciate it. First and foremost, you know, congratulations on the strong results here. Was wondering if you could dive a little bit deeper into any geographies that you're particularly excited about as you've progressed through the year from a demand perspective.
Speaker Change: That's very helpful. Thanks.
Well, as a demand.
Speaker Change: Of course.
Speaker Change: Yeah.
U.S. market remains to be the most critical for us, so there's no question about it.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Josh <unk> at Cantor Fitzgerald, Josh.
If you look even at centers or gravitas,
Speaker Change: Josh Your line is open. Please proceed yes.
We are actually scaling our
Josh: Yeah, Hi, guys. Thanks for taking my question today I appreciate it.
some technical competent centers beyond the area. We zeroed in Dallas for a while. We're getting our office and capabilities in Atlanta area.
Josh: First and foremost congratulations on the strong results here was wondering if you can dive a little bit deeper into new geographies that you're particularly excited about as you progress through the year from a demand perspective.
Josh: Mhm.
We are very slowly present in Jersey, Boston expansion, and of course, in Midewest,
Speaker Change: Well that's the demand.
Speaker Change: U S market remains to be the most critical for us. So there's no question about it if you look even at centers of gravity to us.
as well as not only the California but also Arizona following the trend of the expansion of some of our clients as well as the trend of the you know stacks on the software side driven by the major hardware companies. So it's it's a
Speaker Change: We are actually scaling out.
Speaker Change: Some technical competence centers beyond the Bay area, we zeroed in on Dallas for a while we're getting our office and capabilities.
Speaker Change: Glenn to area.
Speaker Change: We are very strong with presence in Jersey.
It's a revolutionizer technology in US where we are strong. So that's very clear. Saying that Europe is starting to pay some dividends,
Speaker Change: Boston expansion and of course, you know Midwest.
Speaker Change: As well as not only the.
It's a bit below my ambitions yet.
Speaker Change: California, but also Ah resona following the trend.
in terms of the growth in Europe , but we see that the traction in Europe and the first winds come outside of our traditional retail sense. And I'm not talking about small deals. I'm talking about consistent growth. And we see that pickup in manufacturing, we see the pickup in growing into approaching automotive industrial.
Speaker Change: Expansion of some of our clients.
Speaker Change: Well as a trend.
Speaker Change: On the software side driven by the major hardware companies. So it's.
Speaker Change: It's it's.
part. And outside of these two regions, we have, I would say, the first, I would say,
discussions. It's not tangible yet. But the big part of our growth engagement happened with our clients both the United States and European captive centers in India.
So India has become our revenue growth through the influence of the local innovative technology centers which are part of the global companies. We just announced hiring our head of India as well. So I would say as a brush stroke, that's how I see the demand environment regionally.
Great, that's a really helpful caller, Leonard. I appreciate that. And then I was also curious, you know, I probably ask this far too often, but we'd love to get a better understanding for how you're thinking about M&A. Currently, if there's been any shift in terms of your perspective on inorganic growth since last we talk.
Okay, I know.
Well, you see,
MNA at the end of the day is when we announce we announce and that the proof is in the pudding when we have. If you look at the pipeline, if you look at the activity, it continues to be robust. If I look back at the last call it seven, eight months, and
You know, we did a little bit of analysis, what is going on on our M&A. We would have liked to announce a couple of deals before. We see certain trends, whether it is through, you know, some of non-strategics, you know, who are willing to maybe be a little bit more aggressive. We see in many cases where very, our standards are very high, which means that unless we really feel that there's a strategic fit, capability fit, we're just not going to do it. And more importantly, in the last 12 months, as Leonard pointed out, we did not buy revenues.
So we're not going to be using that as an excuse. We really want to ensure that we get the fit. At this stage, as I said, the pipeline is there. We will announce when we have to announce. But as I said, the proof is in the pudding when the leases come.
Thank you, Josh. Thank you, Josh. Our next question comes from Ryan Potter of Citigroup. The line is open. Go ahead, Ryan.
Hey, thanks for taking my question. You mentioned in your prepared remarks some of the successes you've had with some of your larger enterprise finds in terms of earning Wallachshare.
What do you believe are some of the drivers of this success? It's solely based on your capability that you're continuing to take share or are your clients are also turning to you more because of your more global delivery model with your policy.
Bye-bye.
Oh wow.
You know, it's a bit of both.
We definitely see the turnaround in the customers, as I mentioned earlier in one of those Q&A discussion that our clients need to invest in innovation. So that's kind of a demand driven from them.
But on the other hand is those smaller projects on a technology side, AI, still digital, some of the migration partnerships, enhancing their features, their implementation parts have been proven successfully.
So when it comes to the budgeting innovation, very hard. At the same time,
If nothing else, that's Q1 is for.
Remember in the old time it was a Q4 deal, right? People kind of start defining their budgets in Q4. Now it's happening more in Q1 timeframe.
which is kind of worked with kind of tail of some of the proof of concepts and a smaller innovation project from us because those models and the expansion of the tools related to technology actually works
Very well.
And I would say that at least six or seven clients
they actually created this demand for innovation. And then you have to be in some cases a bit more proactive. In some cases you participate in the Bids, but more important than not, the technical leaders of the clients
Look at us from the history of the recent engagements to understand what we suggest.
So things are converting. And it may not be a very straight answer to the question you asked, but just to summarize it, it's both. Client wants more and we offer more. And that combination helps us to stay on a growth project.
That'll make sense.
And you touched a couple times on the finance vertical. In particular, you saw a pretty strong growth there in the quarter. So I guess you could you comment on some of the drivers of the success you're seeing there? Is it with certain types of clients, certain types of projects, and then the opportunity you've seen that vertical going forward?
size of the growth. And there are, as you know, Greenland and Steel has certain, you know, scope of the
strategic clients, or they're not infinite. So, but they're very formidable.
So, and a few of them, we see that continuous growth and, you know, and actually, to some extent, exponential growth.
Now, we're reaching a, I would say, critical mass.
And why? We're not creating a new fintech models, right? We just work on the projects and we combine the open source capability with a partnership which will continue to expand on their specialized tools.
which based on our internal development allows us to offer the pods.
So the teams of people who are basically driving not just innovation, but given ROI successes,
And that actually turns as a result in a scalable revenue.
So the fintech is by far as the biggest impact, and it will continue for foreseeable future.
The other area which I like, you know, again, it's
It's less evident from the numbers, but it starts creeping up. It's a wolf management and a broader sales.
In the broader sense, because, as you know, the more and more people are kind of putting money into the various investments. And technology drives it automation beyond belief, right? So many, many things go beyond the advisors who have only so much capacity.
So as a whole industry is going through the breakthrough innovation.
It's a little bit early to talk about insurance, or our contribution to insurance, but it's another lack of the growth we see. So, fintech, wealth management, insurance.
All right. Thanks again.
Thank you, Ryan. Thank you.
Hi, the next question is from Maggie Nolan. Maggie, your line is open. Please proceed.
Hi, thank you. You continue to have nice new logo additions. I was curious about the pace of conversion to revenue. Are there any patterns in either delays in the conversion or a pickup in the conversion time for new logos or any bookings across your client base?
So in Q1 it was a pick-up.
You know, every quarter we talk about
trade-offs between acquiring new clients and then potentially maybe tightening the budget with existing
When we have more stable platform of the existing clients, the pickups are more audible because we can actually double down on the work with these guys without firefighting on the existing logo front.
It doesn't mean we reduce an eye on the existing clients. It's just because it's more predictable process. So we have more capabilities on the technology side. We have a better approach, again, with our own AI tools for the hiring, so that we are bringing people on board and train them. It's much faster pace than ever.
and retain, by the way, as well. And we also, so we can scale more, and we also have the reputation, which helps us with some of the new clients
through, obviously, referrals. That's always the big thing. The other one through our marketing, I would say technical marketing. And the third one through our partnerships.
So if you look at the scale, the rate of growth, and of course in each of those channels, it's a bit different propagation.
But the traditional land and expand model going from innovation projects to the scalable business a bit improved, and now some of those projects scale virtually from the get-go.
And at Maggie adding one point, if you recall in Leonard's prepared remarks, he talked about some large deals, right? And some of this was even with new logos that helped us.
Very good.
And then it seemed like to me the theme of the quarter is maybe stabilization and even slight improvement. So I wanted to double click on the CPG in manufacturing vertical to better understand the dynamic there on one of maybe the more of the pain points and whether or not you expect that trend to continue from here.
So, as you know,
Over the last couple of quarters, CPG vertical had a certain cadence of growth driven by some of our larger CPG.
What we are seeing there is, there many moving parts, but the good news is that number one, one of our largest CPG has not only stabilized, but has reverted in growth in the quarter. And obviously that has, you know, aiding to that, we've had a couple of other logos.
How it plays out every 90 days, every vertical, as you know, Maggie depends, right? I mean, but it's fair to say CPG manufacturing like the rest of the industry, things have stabilized and we are more positive.
Yeah, I don't know why it was guys used the word stabilization. I mean, some of the numbers go up and down, but it's a tremendous upside. I mean, the logos was just acquired, for example, from that particular field, they not only go from get-goal, but the task are extremely ambitious. So I think if you look at, for example, Giniufri is a kind of a big mask.
The dynamics.
But I see that this whole spectrum of the CPG clients are expanding. Now, manufacturing, I agree with you.
were not stable yet. So I would actually separate those two things. So CPG
shutting up quite a bit and some of those big industrial guys. Manufacture, I think we have work to do for Q2 and more. So I'm very, very bullish on CPGs and on manufacturing, we have worked.
Very helpful. Thank you. Thank you. Thank you.
Thank you everybody for joining us on today's call. Our first quarter results continue the theme we highlighted in the past.
Steady improvement in our business. While the current economic uncertainties cannot be overlooked, we're highly focused on execution and wallet share at our new and existing customers.
The rise of AI and the paradigm shift in the way enterprises use technology to leapfrog from their current levels requires to work with a competent partner.
Our capabilities, history of solving complex business problems with technology, and our track record of making positive effects to our customers, positions grid dynamics well.
Our future lose bright and I look forward to share all the exciting news in the next earnings call. Thank you.
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