Q1 2025 Grid Dynamics Holdings Inc Earnings Call
Good afternoon, everyone welcome to grid dynamics first quarter 2025 earnings conference call I'm, Karen <unk> director of branding and communications at this time all participants are in listen only mode joining.
Cary Savas: Welcome to Grid Dynamics first quarter 2025 earnings conference call. I'm Cary Savas, Director of Branding and Communications. At this time, our participants are in listen only mode.
Cary Savas: Joining us on the call today are CEO Leonard Livschitz, CFO Anil Doradla, CTO Eugene Steinberg, and SVP Americas Vasily Sizov. Following the prepared remarks, we will open the call to your questions. Please note that today's conference call is being recorded.
Speaker Change: Joining us on the call today are CEO letter glad shifts CFO, Neil Dorado, CTO, Eugene Steinberg and SVP Americas. The Sealy says off following the prepared remarks, we will open the call to your questions. Please note that today's conference call is being recorded before we begin I would like to remind everyone that today's.
Cary Savas: 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 SEC.
Speaker Change: Discussion will contain forward looking statements. This includes our business and our 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 SEC.
Cary Savas: During this call, we will discuss certain non-GAAP measures of our performance. Gap to Non-Gap Financial Reconciliations and Supplemental Financial Information are provided in the earnings press release and the 8K filed with the SEC.
Speaker Change: During this call we will discuss certain non-GAAP measures of our performance.
Speaker Change: GAAP to non-GAAP financial reconciliations and supplemental financial information are provided in the earnings press release, and the 8-K filed with the SEC.
Speaker Change: You can find all the information I just described in the Investor Relations section of our website.
Cary Savas: You can find all the information I just described in the Investor Relations section of our website.
Leonard Livschitz: I now turn the call over to Leonard, our CEO. Thank you, Cary. Good afternoon, everyone, and thank you for joining us. I'm delighted to share that Grid Dynamics delivered another strong quarter, exceeding our own outlook and Wall Street expectations on revenue and non-gap income. This was our second consecutive quarter of $100 million in quarterly revenue or more. There are many positive trends, several of which I will highlight on the call.
Speaker Change: I'll now turn the call over to Leonard our CEO.
Leonard: Thank you Gary good afternoon, everyone and thank you for joining us today.
Leonard: I'm delighted to share that greaser networks delivered another strong quarter exceeding our outlook and wall Street expectations on revenue and non-GAAP EBITDA.
Leonard: This was our second consecutive quarter of $100 million in quarterly revenue.
Leonard: There were many positive trends, so which I will highlight on the call today.
Leonard Livschitz: I'm sure many of you are interested in knowing how the current macro environment is impacting While you're all well aware of the risks and uncertainties with the global economy, in the first quarter, our performance was largely driven by customers' expectations.
Leonard: I'm sure. Many of you are interested in knowing how the current macro environment is impacting our company.
Leonard: While you are all well aware of the risks and uncertainties with the global economy in the first quarter outperformance was largely driven by customer specific trends.
Leonard Livschitz: In other words, the patterns in the demand from our customers and the resulting monthly billable headcount shape the quarter, with the ongoing tariff issues having minimal For more information visit www.FEMA.gov Our laser focus on technology and engineer excellence continues to ensure our success with our customers.
Leonard: In other words, the patterns and the demand from our customers and the resulting monthly billable head count shaved the quarter.
Leonard: With the ongoing tariff issues, having minimal impact.
Leonard: Our laser focus on technology and engineering excellence continues to assure our success with our clients.
Leonard Livschitz: Furthermore, the $100 million quarterly milestone would not have been possible without the dedication of our global partners. I'm deeply grateful for the outstanding efforts and incredibly proud of what we have achieved.
Leonard: Furthermore.
Leonard: The $100 million quarterly milestones would not have been possible without the dedication of our global teams.
Leonard: I am deeply grateful for their all of Sydney efforts and incredibly proud what we have achieved together.
Leonard Livschitz: Now, let me provide you with some granular commentary around the demand environment. Every year, the first quarter is influenced by a degree of seasonality as our customers are establishing their yearly. Consequently, we typically start off slow in January, as the quarter progresses, business trends improve. Contrary to historic trends, we started January strong in terms of billable costs. That said, in February, we witnessed some changing priorities as the start of the year impacted some of the climate. In March, we signed several sizable new deals with existing and new companies. These deals span across industry verticals that included automotive, financial, and CPG.
Now, let me provide you with some greenfield commentary around the demand environment.
Leonard: Every year the first quarter is influenced by a degree of seasonality is as our customers are establishing their year at least.
Leonard: Consequently, we typically start off slow in January as the quarter progresses business trends improve.
Leonard: Contrary to historic trends, we started January strong in terms of billable positions.
Leonard: That said in February we did some changing priorities as the start of the year impacted some of their clients.
Leonard: In March we signed several sizable new deals with existing and new customers.
Leonard: These yields spend across industry verticals that included automotive financial and CPG and this included an engagement with a <unk>.
Leonard Livschitz: And these include engagement with agentic AI, cloud migration, and supply chain applications.
Leonard: <unk> migration and supply chain applications also for the first time in the company's history.
Leonard Livschitz: Also, for the first time in the company history, three of our top ten customers are in the financial After setting record levels in late 2024, the company once again attained its highest-ever billable engineering headcount, a leading indicator of future growth. Our second-quarter outlook reflects that. I'm pleased to share that our acquisitions are performing well. As I mentioned previously, with both acquisitions, we're anticipating realizing synergies more quickly than with any of our past acquisitions. And I'm happy to report that we're well on track in delivering against the goal. Argentina-based Mobile Computing, acquired in October of last year, enhanced our follow-the-sun capabilities.
Leonard: Of our top 10 customers are in the financial industry.
Leonard: After setting record levels in late 2024, the company once again obtained its highest ever billable engineering head count a leading indicator of future growth our second quarter outlook reflects these trends.
Leonard: I am pleased to share that our acquisitions are performing well as I mentioned previously with both acquisitions were anticipating realizing synergies more quickly than with any of our past acquisitions and I'm happy to report that we are well on track in delivering against the goal.
Leonard: Argentina based mobile computing acquired in October of last year, and hence our follow the sun capabilities in the first quarter, we only have our sales team and Delta acquisition teams to support the incremental demand.
Leonard Livschitz: In the first quarter, we enhanced our sales team and tell the acquisition teams to support the incremental demand. Additionally, in the quarter, we successfully integrated engineering teams to support our enterprise accounts based out of the United States. UK-based JOXT, which we acquired in September of last year, elevated our industry expertise in banking and financial services. Their focus on risk platforms, structured products, equity derivatives, and financial reporting is highly complementary to our current offerings in financial services. Since equating jocks, several global banks based in the U.S. have expressed interest in working with Grid Dynamics. In the first quarter, we initiated several new projects across multiple global banks.
Leonard: Additionally, in the quarter, we successfully integrate engineering teams to support our enterprise account based out of the United States.
Leonard: UK based <unk>, which we acquired in September of last year elevated in our industry expertise in banking and financial services.
Leonard: Their focus on <unk> platforms structured products.
Derivatives and financial reporting is highly complementary to our current offerings in financial services since acquiring just several global banks based in the U S have expressed interest in working with three dynamics.
Leonard: In the first quarter, we initiated several new projects across multiple global banks.
Leonard Livschitz: We expect the customer to continue ramping their business throughout 2024.
Leonard: We expect that customer to continue ramping their business throughout 2025.
Leonard Livschitz: Come and join us! Our AI initiatives continue to gain significant traction across our customer base, with our pipeline of opportunities growing steadily quarter over quarter. We're seeing a clear shift from proof-of-concept to enterprise-scale implementations that deliver measurable business outcomes.
Leonard: Coming to AI.
Leonard: Our AI initiatives continued to gain significant traction across our customer base with our pipeline of opportunities growing steadily quarter over quarter.
Leonard: We're seeing a clear shift from proof of concept to enterprise scale implementations that deliver measurable business outcomes.
Leonard Livschitz: Our primary focus areas include AI-based search solutions that consistently open doors to new A genetic AI platform being developed for clients in consumer goods and fintech industries, comprehensive knowledge systems for enterprise knowledge management, and AI-enabled productivity tools that enhance software development. These implementations underscore our ability to move clients beyond basic AI applications to sophisticated solutions that deliver substantial business impact in areas ranging from sales enablement to supply chain optimization and development productivity.
Leonard: Our primary focus areas include AI based search solutions than consistently open doors to new accounts.
Leonard: Agenda, AI platform being developed for clients and consumer goods and Fintech industries comprehensive knowledge systems for enterprise knowledge management.
Leonard: AI enabled productivity tools that enhance software development capabilities.
Leonard: This implementations underscore our ability to move clients beyond basic applications to sophisticated solutions that deliver a substantial business impact in areas ranging from sales enablement to supply chain optimization and development productivity.
Leonard Livschitz: Our CTO, Eugene Steinberg, who is on the call today, will provide you more. A key element of our 2025 strategy is to ensure that our investments are aligned to the changing needs of the industry. These investments... will ensure that our technological leadership is maintained. This includes four procedure-driven teams creating innovative artifacts, training engineers for specific flavors of AI implementation, and newer training resources with our great university. I'm happy to report that for 2025, we're maintaining our full year revenue outlook that we provided to you all in February. We expect the second half to be seasonally stronger in comparison to the first half and expect the ramp-up of several deals signed recently to assist us in achieving our For more information visit www.FEMA.gov We acknowledge the ongoing uncertainty related to the macro environment.
Speaker Change: Our CTO Eugene Schneider, who is in our call today, we will provide you more color.
Speaker Change: Key element of our 2025 strategy is to ensure that our investments are aligned to the changing needs of the industry.
Speaker Change: These investments.
Speaker Change: We will ensure that our technological leadership is maintained.
Speaker Change: This includes focused CTO agreement teams, creating innovative artifacts training engineers for specific flavors of AI implementation and newer training resources with our grid universe.
I am happy to report that for 2025, we're maintaining our full year revenue outlook that we provided to you all in February.
Speaker Change: We expect the second half to be she's always stronger in comparison to first half and expect the ramp up of several deals signed recently to assist us in the sheet.
Speaker Change: Rick knowledge than one uncertainty related to the macro environment. We are successfully navigating through the near term volatility and the strengths of our business is reflected in our Q1 results.
Leonard Livschitz: We are successfully navigating through the near-term volatility, and the strength of our business is reflected in our Q1 results. In the quarter. There are several trends. And I want to share some of the notable. Partnership. In the first quarter, partnership influence revenue represented 16% of our total revenue. And we anticipate this contribution to accelerate throughout the remaining quarters of 2020. mirroring our historic. We're experiencing increased traction with all hyperscalers, notably with Google. Our pipeline is robust and includes significant migration and modernization programs, as well as a growing number of data and AI projects. Our signature sponsorship of the Google Next event proved highly successful.
Speaker Change: In the quarter.
Speaker Change: There are several trends.
Speaker Change: And I want to share some of the notable ones.
Speaker Change: Partnerships in the first quarter partnership influenced revenue represented 62%, while our total revenue and we anticipate this contribution to accelerate throughout the remaining quarters of 2025.
Speaker Change: Mirroring our historic trends.
Speaker Change: We're experiencing increased traction with all hyperscale.
Speaker Change: Notably with Google.
Speaker Change: Our pipeline is robust and includes significant migration and modernization programs as well as a growing number of data NDA approaches our signature sponsorship of the Google next event proved highly successful.
Leonard Livschitz: We engaged in several conversations with Google. clients and prospects, which we expect to translate into expanded revenue.
Speaker Change: We engaged in several conversations with Google cloud.
Speaker Change: Clients and prospects, which we expect to translate into expanded revenues.
Leonard Livschitz: Number two, European business, we successfully completed B2C multi-brand digital commerce platforming for the European brands of a major global automotive partner. We successfully launched a Gente Code Review and Elaboration Services as well as a Conversation AI as a part of the major internal development productivity initiative at the Large Investment Bank. and the leading global HR solution provider. We are evaluating readiness to democratize data for business-driven AI initiatives. At a leading meal preparation company, we continue to modernize their operational systems, including the customer service platform and security solutions, in collaboration with one of their high-profile partners.
Speaker Change: Number two European business, we successfully completed B to C. Multi brand digital Commerce Rep look for me for the European brands of a major global automotive parts distributor with successful launched agenda code review.
Speaker Change: Operations services as well as the conversation AI as a part of the major internal development productivity initiatives at the large investment bank.
Speaker Change: As a leading global HR solution provider.
Speaker Change: We are evaluating readiness to democratize data for business driven AI initiatives.
Speaker Change: As a leading meal preparation company, we continue to modernize their operational systems, including the customer service platform and security solutions in collaboration with one of the Hyperscale.
Number three.
Leonard Livschitz: Number three. in the expansion. India is one of the top locations and it continues to attract talent as our other European locations. especially. N.A.I. generate data. cloud, and cybersecurity. India serves many of our key enterprise customers across technology, CPG, retail, healthcare, and financial services. India has now emerged as the hub for multi-agent, multi-modal platform engineering, as demonstrated by recent wins. One of them with a leading multinational beverage company. The other one is a well-known leader in the FinTech industry.
Speaker Change: India expense.
Speaker Change: India is one of the top locations and it continues to attract talent.
Speaker Change: Our other European locations.
Especially.
Speaker Change: NII <unk>.
Speaker Change: <unk> data.
Speaker Change: Cloud.
Speaker Change: Cyber security.
Speaker Change: India serves many of our key enterprise customers across technology, CPG retail healthcare and financial services industry, India has now emerged as the hub for multi agent multimodal platform engineering as demonstrated by our recent.
Speaker Change: Wins.
Speaker Change: One of them with a leading multinational beverage company the other.
Speaker Change: One is a well known leader in the Fintech industry.
Leonard Livschitz: As part of our global initiative, India has upskilled a majority of its engineers and delivery leaders in AI-assisted accelerated delivery with expertise across the entire value chain of agentic digital platform engineering and enterprise Number four, internship. Our internship program gained strong momentum in the first quarter. We had a solid performance across all our operating regions. Our internship program typically lasts 6 months and trains interns in solving real-world problems. In the first quarter, out of 11,000 applications received, we selected several hundred gifted individuals. Additionally, many of the interns graduating from our training were placed in billable rolls at the college.
Speaker Change: As part of our Global initiative, India has obscured a majority of its engineers and deliver leaders and the AI assistant delivery with expertise across the entire value chain, our agenda digital platform engineering at enterprise scale.
Speaker Change: Number four internship or endure ship program gained strong momentum in the first quarter, we had a solid performance across all operating regions in.
Speaker Change: Our internship program typically the last six months and training drones and solving real world problems in the first quarter Auto 11000 application received we selected several 100 gifted individuals.
Speaker Change: Additionally, many of the endurance, graduating from our training were placed into billable roles at declines.
Vasily Sizov: Now, let me turn over the call to Vasily, who will talk about notable projects during the Thank you, Leonard. I am excited to share some key highlights from the quarter that showcase the impact of our work. First, for a leading global technology company, Grid Dynamics developed a project intelligence tool that automatically consolidates information from various sources into a centralized platform. This tool streamlines project execution by providing a single intuitive dashboard with real-time consolidated insights. Designed to support over a hundred of internal teams, the tool enables faster issue resolution, accelerates time-to-market, and enhances overall product quality.
Speaker Change: Now, let me turn over the call to our Sealy, who will talk about notable projects during the quarter.
Sealy: Thank you Matt.
Sealy: I am excited to share some key highlights from the quarter that showcase the impact of our work.
Sealy: First for a leading global technology company, Great dynamics developed project intelligence till that automatically consolidates information from various sources into a centralized platform.
Sealy: This tool streamlines project execution by providing a single intuitive dashboard with real time consolidated team size.
Sealy: Designed to support over 100 of internal teams the tool enables faster issue resolution accelerates time to market and enhances overall product quality.
Sealy: For a leading luxury retail growth great dynamics transform their search experience by implementing Google versus AI search.
Vasily Sizov: For a leading luxury retail group, Grid Dynamics transformed their search experience by implementing Google Vertex AI Search. This innovative solution delivered immediate and significant improvements across key business metrics. Conversion rates increased by 9%, click-through rates by 21%, orders by 3%, and revenue per visit by 9%. Based on these impressive results, we anticipate significant interest in this solution from other clients within our portfolio.
Sealy: This innovative solution delivered immediate and significant improvements across key business metrics.
Sealy: Conversion rates increased by 9% click through rates by 21% orders by 3% and revenue per visit by 9%.
Sealy: Based on these impressive results, we anticipate significant interest in this solution from other clients within our portfolio.
Sealy: For a leading payments technology company, we modernized costly legacy banking integration system by transforming it into a cloud native micro services platform on Microsoft Asia.
Vasily Sizov: For a leading payments technology company, we modernized a costly legacy banking integration system by transforming it into a cloud-native microservices platform on Microsoft Azure. This modern architecture significantly reduces the total cost of ownership while delivering the scalability and resiliency demanded by today's banks. With this new platform, continuous deployment pipelines now push new features to production without downtime, enabling the business to keep pace with evolving market demands and regulatory requirements. Additionally, we estimate that our solution reduced the integration cycle duration by 90%. Therefore, dramatically accelerating customer onboarding and driving faster revenue generation.
Sealy: This modern architecture significantly reduces the total cost of foreigners ship, while delivering the scalability and resiliency demanded by today's backs.
Sealy: With this new platform continuous deployment pipelines now push new features to production without downtime.
Sealy: Enabling the business to keep pace with evolving market demands and regulatory requirements.
Sealy: Additionally, we estimate that our solution reduced integration cycle duration by 90%.
Sealy: Therefore dramatically accelerating customer onboarding and driving faster revenue generation.
Sealy: Or another clients.
Vasily Sizov: For another client, a leading U.S. specialty retailer with over 2,000 stores, we partnered to build a cutting-edge generative AI platform. Specifically, we developed a retrieval-augmented generation pipeline powered by Google Verdex AI. That solution analyzes prior clicks, surveys, and local inventory to recommend the ideal product and bundled offer. We estimate that this platform will drive up to a 10% increase in user engagement and up to a 3% boost in revenue.
Sealy: You asked specialty retailer with over 2000 stores, we partner to build a cutting edge January AI platform.
Sealy: Specifically, we developed a retrieval augment the generation pipeline powered by Google verdict AI.
Sealy: That solution analyzes prior clinics surveys and local inventory to recommend the IDL product have bundled offers.
Sealy: We estimate that this platform will drive up to 10% increase in user engagement and <unk> at 3% boost in revenues.
Eugene Steinberg: Now, let me turn this call over to our Chief Technology Officer, Eugene Steinberg. Eugene? Thank you, Vasily. Good afternoon, everyone. I'm honored to join this call as Grid Dynamics' new Chief Technology Officer. I've been with Grid Dynamics since its founding. and helped establish our unique engineering culture and technology practice. I had the privilege to work with some of our best engineers to develop innovative solutions in the cloud, commerce platforms, AI and machine learning for Fortune 1000 clients. As Rajiv transitions to lead our APEC expansion, I am excited to build upon his foundation and drive our technology strategy forward.
Speaker Change: Now, let me turn this call over to our Chief Technology Officer, James Timer, Hey, Jim.
James Timer: Thank you Leslie.
James Timer: Good afternoon, everyone.
Speaker Change: I am honored to join this call as good dynamics, New Chief Technology Officer.
Speaker Change: I've been with <unk> dynamics since its founding.
Speaker Change: And helped establish our unique <unk> culture and technology practices.
Speaker Change: I had the privilege to work with some of our best engineers to develop innovative solutions in the cloud Columbus platforms, AI and machine learning for Fortune 1000 clients.
Speaker Change: As rajeev transitions to lead our <unk> expansion I am excited to build upon this foundation and drive our technologists strategy forward.
Speaker Change: Let me outline five strategic priorities that will guide our technology.
Eugene Steinberg: Let me outline five strategic priorities that will guide our technology direction. First, Industry Diversification. While maintaining our strength in retail and CMT, we are developing AI and data engineering solutions for manufacturing, pharmaceuticals, fintech, and insurance. We are leveraging our strong horizontal technology capabilities and industry expertise to address specific client challenges and expand into new business domains.
Speaker Change: Sure.
Speaker Change: Industry diversification.
While maintaining our strength in retail and TMT.
Speaker Change: Developing AI and data engineering solutions for manufacturing Pharmaceuticals, Inc.
Speaker Change: And insurance.
Speaker Change: We are leveraging our strong horizontal technology capabilities and industry expertise to address specific client challenges and expand into new business domains.
Speaker Change: Second.
Eugene Steinberg: Amplify our offerings with AI. We are implementing our AI as a Spy strategy. infusing AI capabilities throughout our service portfolio and engineering practice. Our engineering-led approach delivers end-to-end AI-powered business solutions. Rather than Fragmented Experience Our GridU learning platform provides AI training for all engineering disciplines. enabling every team member to leverage AI in their work.
Speaker Change: Amplify our offerings with Yang.
Speaker Change: We're implementing our AI is a spice pathogen.
Speaker Change: Infusing AI capabilities throughout our service portfolio and engineering practices.
Our engineering led approach delivers end to end AI powered business solutions.
Speaker Change: The fragmented experiences.
Speaker Change: Our grid you learning platform provides AI training for all engineering disciplines.
Enabling every team member to leverage and their work.
Speaker Change: So <unk>.
Eugene Steinberg: So Operational excellence through AI. We are applying our AI expertise internally with our in-house agentic AI platform. that drives efficiency while showcasing our capabilities to our customers. This initiative has yielded productivity gains across multiple business functions in talent management, knowledge management, project management, and sales. It also helps to train engineers in the agentic AI and demonstrates our AI competence.
Speaker Change: Operational excellence through EA.
Speaker Change: We are applying our expertise internally with our in house agenda AI platform the <unk>.
Speaker Change: Right.
Speaker Change: Currency, while showcasing our capabilities to our customers.
Speaker Change: This initiative has yielded productivity gains across multiple business functions and talent management knowledge management project management and sales.
Speaker Change: It also helps to train engineers.
Speaker Change: In the agenda.
Speaker Change: And demonstrates our EA com business.
Eugene Steinberg: Fourth Stratonim Technical Leadership Our CTO Mentorship Program expands our ranks of project and account starts. technical leaders who identify opportunities and grow client engagement.
Speaker Change: Fourth.
Speaker Change: <unk> technical leadership.
Speaker Change: Our CTO our membership program expense our ranks of project under common starters.
Technical leaders, who identify opportunities and grow client engagements.
Eugene Steinberg: Our global talent network across 19 countries gives us access to exceptional emerging talent that we nurture through focused development programs. Fifth, Sotheby's. Our technology point of view broadcasting and dynamic talks program establishes Grid Dynamics as a technology partner of China. These initiatives generate quality leads and partnership opportunities.
Speaker Change: Our global talent that work across 19 countries gives us access to exceptional emerging talent, that's been nurtured through focused development programs.
Speaker Change: Steve thought leadership.
Speaker Change: Our technology point of view broadcasting and dynamic Tox program established good dynamics as the technology partner of choice.
Speaker Change: These initiatives generate quality leads and partnership opportunities.
Eugene Steinberg: What sets Grid Dynamics apart is our engineering-led approach and eight years of experience in ML and AI development. We've been building advanced analytics and ML solutions since 2017. giving us deeper expertise and proven methodologies for implementing AI at enterprises.
Speaker Change: What Saturday dynamics apart is our engineering led approach.
Speaker Change: Eight years of experience in ml and AI development.
Speaker Change: We have been building advanced analytics in the mail solutions since 2017.
Speaker Change: Given us deeper expertise and proven methodologies for implementing <unk> at the enterprise SKU.
Speaker Change: We are seeing strong momentum in several key areas.
Eugene Steinberg: We are seeing strong momentum in several key areas. AI-based search solutions remain a key entry point for new clients. We expand those relationships into broader engagements, including commerce platforms, front-end modernization, data engineering, and catalog enrichment.
Speaker Change: AI based search solutions remained a key entry points for new plants.
Speaker Change: We expect those relationships into broader engagements, including <unk> platforms from 10 modernization data engineering and catalog and reach.
Speaker Change: Agenda care platforms represent a major growth area.
Eugene Steinberg: Adjentic AI platforms represent a major growth area. We are partnering with enterprises in consumer goods and payment industries to develop platforms for creating and deploying AI agents. These systems drive operational improvements and enhance customer experience.
Speaker Change: We are partnering with enterprises in consumer goods and payment industries to develop platforms for creating and deploying ta agents.
Speaker Change: These systems drive operational improvements and enhanced customer experience.
Speaker Change: Enterprise agenda AI solutions are seeing substantial demand.
Eugene Steinberg: Enterprise Agents AI solutions are seeing substantial demand. For example, we recently launched an agentic AI system for leading specialty retailers. This system coaches self-associates through AI-powered role-playing. to provide product and services knowledge and salesmanship training and improve customer interaction. EIA-enabled development tools accelerate software delivery through custom tools for legacy systems modernization and end-to-end quality engineering. These engagements often expand into broader digital transformation initiatives.
Speaker Change: For example, we recently launched <unk> system for a leading specialty retailer.
Speaker Change: This system coach's sales associates through AI powered tools Blaine.
Speaker Change: To provide products and services knowledge and salesmanship training and.
Speaker Change: <unk> customer interactions.
Speaker Change: AI enabled development tools accelerators software delivery is through custom tools for legacy systems modernization and end to end quality engineering.
Speaker Change: These engagements often expand into broader digital transformation initiatives.
Speaker Change: I am committed to furthering our spirit of innovation and technical excellence, while expanding our capabilities in the year and Thats from engineering to deliver measurable impact for clients.
Eugene Steinberg: I am committed to furthering our spirit of innovation and technical excellence while expanding our capabilities in AI and platform engineering to deliver measurable impact for Thank you.
Speaker Change: Thank you and let me turn come back to a new who will talk about financials.
Anil Doradla: And let me come back to Anil, who will talk about finance. Good afternoon, everyone. Our first quarter results exceeded our expectations both on revenue and non-GAAP EBITDA. We recorded revenues of $100.4 million, slightly ahead of our guidance range of $98 million to $100 million. On an year-over-year basis, this represents a growth of 25.8%. Excluding the impact of our recent acquisitions, the year-over-year growth was 10.1%. Both on a quarter-over-quarter and year-over-year basis, there were roughly 38 BIPs and 26 BIPs of FX-related headwinds respectively. Our non-GAP EBITDA came in at $14.6 million, outperforming our guidance range of $12.9 to $13.9 billion.
Speaker Change: Good afternoon, everyone. Our first quarter results exceeded our expectations, both on revenue and non-GAAP EBITDA.
Speaker Change: We recorded revenues of $100 4 million slightly ahead of our guidance range of $98 million $100 million on a year over year basis. This represents a growth of 25, 8%.
Speaker Change: Excluding the impact of our recent acquisitions the year over year growth was 10, 1%.
Speaker Change: Bolt on a quarter over quarter and year over year basis, roughly 38.
Speaker Change: 2016.
Speaker Change: <unk> related headwinds respectively.
Speaker Change: Our non-GAAP EBIT came in at $14 6 million outperforming our guidance range of $12 nine to $13 9 million.
Anil Doradla: In the first quarter, we benefited from timing of revenue recognition with some of our fixed price contracts in line with project milestone completion.
Speaker Change: In the first quarter, we benefited from timing of revenue recognition, which some of our fixed price contracts in line with project milestone completions.
Anil Doradla: Looking at performance of our verticals. Retail remained our largest vertical, accounting for 31.4% of total revenues in the quarter. Revenues in this vertical grew 28% on a year-over-year, with a slight decline of 3.7% on a sequential The year-over-year growth was primarily driven by strong demand from our specialty retail customers, along with contributions from new client engagement. Finance contributed 24.9% of total revenues for the first quarter of 2025. and became the second largest. Finance continued its strong performance with revenues increasing 7.9% sequentially and 144.3% year-over-year. The strong year-over-year growth was largely driven by a combination of our recent acquisitions.
Speaker Change: Looking at performance of our verticals.
Speaker Change: Retail remained our largest vertical accounting for 31, 4% of total revenues in the quarter.
Speaker Change: Revenues in this vertical grew 28% on a year over year.
Speaker Change: Slight decline of three 7% on a sequential basis.
Speaker Change: Year over year growth was primarily driven by strong demand from our specialty retail customers along with contributions from new client engagements.
Speaker Change: Finance contributed 24, 9% of total revenues for the first quarter of 2025.
Speaker Change: And became the second largest vertical.
Speaker Change: <unk> continued its strong performance with revenues, increasing seven 9% sequentially and 144, 3% year over year.
Speaker Change: The strong year over year growth was largely driven by a combination of our recent acquisitions.
Anil Doradla: that added global banking customers, along with strengths from our fintech and insurance TMT accounted for 23.5% of revenues in the first quarter and remained flat compared to the fourth quarter of 2024. On an year-over-year basis, TMT declined by 1.8%.
Speaker Change: That added global banking customers, along with strength from our Fintech and insurance customers.
Speaker Change: TMT accounted for 22, 5% of revenues in the first quarter and remained flat compared to the fourth quarter of 2024.
Speaker Change: On a year over year basis, TMT declined by one 8%.
Anil Doradla: Turning to the remain verticals, CPG and manufacturing represented 10.7% of our revenues in the first quarter. It remained relatively flat on a sequential basis, but grew 12.7% year-over-year basis. The year-over-year growth was primarily from our recent acquisitions. other vertical contributed 7.1% of total revenues remain flat sequentially. and declined 15.1% compared to the same quarter of 2024. The year-over-year decrease primarily came from customers tied to the hospitality industry.
Speaker Change: Turning to the remaining verticals CPG and manufacturing represented 10, 7% of our revenues in the first quarter. It remained relatively flat on a sequential basis, but grew 12, 7% year over year basis, the year over year growth was primarily from our recent acquisition.
Speaker Change: Other vertical contributed seven 1% of total revenues remained flat sequentially.
Speaker Change: And declined 15, 1% compared to the same quarter of 2020 for the year over year decrease primarily came from customers tied to the hospitality industry.
Anil Doradla: And finally, Healthcare and Pharma made up 2.4% of our revenues for the quarter. We ended the first quarter with a total headcount of 4,926, up from 4,730 employees in the fourth quarter of 2024, and up from 3,892 in the first quarter of 2024. At the end of the first quarter of 2025, our total U.S. headcount was 354, or 7.2 percent of the company's total headcount, versus 8.5 percent in the year-ago quarter. Our non-U.S. headcount, located in Europe, Americas, and India, was 4,572, or 92.8 percent. In the first quarter, revenues from our top five and top ten customers were 35.6% and 56.6% respectively versus 39.6% and 55.3% in the same period a year ago respectively.
Speaker Change: And finally healthcare and pharma made up two 4% of our revenues for the quarter.
Speaker Change: We ended the first quarter with a total head count at 4926 up from 4730 employees in the fourth quarter of 2024.
Speaker Change: And up from 3892 in the first quarter of 2024.
Speaker Change: At the end of the first quarter of 2025.
Speaker Change: Our total head count was 354 or seven 2% of the Companys total headcount versus eight 5% in the year ago quarter, our non U S headcount located in Europe, Americas, and India was 4570 to 92, 8%.
Speaker Change: In the first quarter revenues from our top five and top 10 customers were 35, 6% and 56, 6%, respectively versus 39, 6% and 55, 3% in the same period a year ago, respectively.
Anil Doradla: During the first quarter, we had a total of 204 customers, down from 211 in the fourth quarter of 2025, and 210 in the year-ago quarter. The year over year decline in the number of customers is primarily driven by our continued efforts to rationalize a portfolio of non-strategic Moving to the income statement, our GAAP gross profit during the quarter was $37 million, or 36.8%, compared to $37 million, or 36.9%, in the fourth quarter of 2024, and $27.7 million, or 34.7%, in the year-ago quarter. On a non-GAAP basis, our gross profit was $37.6 million, or 37.4% compared to $37.6 million, or 37.5% in the fourth quarter of 2024, and up from $28.1 million, or 35.3% in the a year ago quarter.
Speaker Change: During the first quarter, we had a total of 204 customers down from 211 in the fourth quarter of 2025 and 210 in the year ago quarter.
Speaker Change: The year over year decline in the number of customers was primarily driven by our continued efforts to rationalize our portfolio of non strategic customers.
Speaker Change: Moving to the income statement, our GAAP gross profit during the quarter was $37 million or 36, 8% compared to 37 million or 36, 9% in the fourth quarter of 2024, and $27 7 million or 34, 7% in the year ago quarter.
Speaker Change: On a non-GAAP basis, our gross profit was $37 6 million or 37, 4% compared to $37 6 million or 37, 5% the fourth quarter of 2024 and up from $28 1 million or 35, 3% in the year ago quarter.
Anil Doradla: non-gap EBITDA during the first quarter that excluded interest income expenses. Provision for income taxes, depreciation amortization, stock-based compensation, restructuring, expenses related to the geographic reorganization, and transaction and other related costs. 14.6 million or 14.5 percent of revenues down from 15.6 million or 15.6 percent of revenues in the fourth quarter of 2024 and up from 10.3 million or 12.9 percent in the year-ago quarter. The increase on a year-over-year basis was largely due to higher revenues, partially offset by increase in operating... Our GAAP net income in the first quarter was $2.9 million, or $0.03 per share, based on a diluted share count of 87.8 million shares, compared to the fourth quarter net income of $4.5 million, or $0.05 per share, based on a diluted share count of 83.8 million, and a net loss of $3.9 million, or $0.05 per share, based on 76.2 million diluted shares in the year-over-year are sequential decrease in gap net income due to higher levels of operating costs, including stock-based competition.
Speaker Change: non-GAAP EBITDA during the first quarter that excluded interest income and expenses.
Speaker Change: Provision for income taxes, depreciation amortization stock based compensation restructuring.
Speaker Change: Expenses related to the geographic reorganization in transaction and other related costs.
Speaker Change: $14 6 million or 14, 5% of revenues down from $15 6 million or 15, 6% of revenues in the fourth quarter of 2024 and up from $10 3 million or 12, 9% in the year ago quarter.
Speaker Change: The increase on a year over year basis was largely due to higher revenues, partially offset by increase in operating expenses.
Speaker Change: Our GAAP net income in the first quarter was $2 9 million or <unk> <unk> per share based on a diluted share count of $87 8 million shares compared to the fourth quarter net income of $4 5 million or <unk> <unk> per share based on a diluted share count of 83 eight.
Speaker Change: $8 million and a net loss of $3 9 million or five cents per share based on 76 2 million diluted shares in the ear low quarter or so.
Speaker Change: When shall decrease in GAAP net income was due to higher levels of operating costs, including stock based compensation.
Anil Doradla: On a non-GAAP basis, in the first quarter, our non-GAAP net income was $10 million, or $0.11 per share based on 87.8 million diluted shares, compared to the fourth quarter non-GAAP net income of $10.3 million, or $0.12 per share based on 83.8 million diluted shares, and $7.6 million, or $0.10 per share based on 78.4 million diluted shares in the year ago. On March 31st, 2025, our cash and cash equivalents totaled $325.5 million, down from $334.7 million on December 31st, 2025.
Speaker Change: On a non-GAAP basis in the first quarter, our non-GAAP net income was $10 million or <unk> 11 per share based on $87 8 million diluted shares compared to the fourth quarter non-GAAP net income of $10 3 million or 12 cents per share based on ADT 8 million diluted shares and $7 six.
Speaker Change: Our <unk> per share based on 78 4 million diluted shares in the year ago quarter.
Speaker Change: On March 31, 2020, our cash and cash equivalents totaled 325.
Speaker Change: $5 million down from $3 $34 7 million on December 31, 2020.
Anil Doradla: Coming to the second quarter guidance, we expect revenues to be in the range of 100 to 102 million. We expect our recent acquisitions contributing roughly 12% of the revenues. We expect second quarter non-GAAP EBITDA to be in the range of 12.5 million to 13.5. For Q2 2025, we expect our basic share count to be in the range of 84 to 85 million, and our diluted share count to be in the range of 88 to 89.
Speaker Change: Coming to the second quarter guidance, we expect revenues to be in the range of $100 million to $102 million, we expect our recent acquisitions contributing roughly 12% of their revenues.
Speaker Change: Second quarter non-GAAP EBITDA to be in the range of $12 5 million to $13 5 million.
Speaker Change: Our Q2 2025, we expect our basic share count to be in the range of $84 million to $85 million and our diluted share count to be in the range of $88 million to $89 million.
Anil Doradla: For 2025, we are maintaining our full year revenue outlook of $415 to $435 million that we provided in February. The revenue outlook represents a growth of 18.4% to 24.1% on the year-over-year basis. At the midpoint of $425 million, we expect our 2025 revenues to grow by 21.2% on a year-over-year That concludes my prepared remarks.
Speaker Change: For 2025, we are maintaining our full year revenue outlook of $415 million to $435 million that we provided in February.
Speaker Change: The revenue outlook represents a growth of 18, 4% to 24, 1% on a year over year basis.
Speaker Change: At the midpoint of $425 million, we expect our 2025 revenues to grow by 21, 2% on a year over year basis.
Speaker Change: That concludes my prepared remarks, we're now ready to take questions.
Cary Savas: We are now ready to take questions. Thank you, Anil. As we go into the Q&A session of this call, I will first announce your name.
Speaker Change: Hello.
Speaker Change: Thank you Aneel as we go into the Q&A session of this call I will first announce your name at that point, please limit yourself and turn on your cap.
Cary Savas: At that point, please unmute yourself and turn on your camera.
Speaker Change: The first question comes from Bryan Bergin with TD Cowen.
Brian Bergin: The first question comes from Brian Bergin of TD Cowan. Thank you.
Speaker Change: Alright, thanks, guys.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Hey, Brian why.
Speaker Change: Whenever you try digging in more on client behavior.
Speaker Change: If we can dig in as far as client activity through the month I know you had some of that commentary, but then into April can you go into more detail as it relates to the pace of client decision, making and then just on the margin kind of that deferral cancellation question. Obviously, you guys are firm the outlook for the year. So it sounds good but if you could give more detail on that behavior will be helpful.
Leonard Livschitz: All right, I'll answer the first part and I'll have Anil to comment on that margin. So... As I mentioned about the clients in general, we are just finished April. So we're going to have data for three months of the Q1 and some. for more information about April as well. Obviously, it's a very fluid situation, but right now we haven't seen any. major impact with the recent economic political activities. Our clients obviously exhibit some cautious in terms of the long-term projections. But in general, the projects, especially the project of strategic importance for our clients. continue uninterrupted, saying that we don't know what's going to be happening soon with additional impacts.
Speaker Change: Alright, I'll answer the first part and I'll have.
Speaker Change: Yields are coming on that margin so.
Speaker Change: Okay.
Speaker Change: As I mentioned about the claims in general.
Speaker Change: Sure.
Speaker Change: We are just finished April so we can have those data for three months of Q1 and some more information in April as well.
Speaker Change: Obviously, it's a very fluid situation, but right now we haven't seen and India.
Speaker Change: The major impact.
Speaker Change: Economic and political activities.
Speaker Change: Our clients obviously exhibits.
Speaker Change: Some cautious in terms of the long term projections.
Speaker Change: But in general the price.
Speaker Change: <unk> specialty approach.
Speaker Change: Strategic importance for our clients.
Speaker Change: Interrupted.
Speaker Change: We're going to go ahead, we have.
Speaker Change: Have been soon.
Speaker Change: Additional impacts, but I would tell you that.
Leonard Livschitz: But I tell you that my personal conversation with the leadership of the clients and my executive team conversation with other executives of our clients, pretty stable in public. So that's pretty much the best way I can do.
Speaker Change: My personal gut resilient with the leadership of the clients and my.
Steven: Steven conversation with other executives of our clients.
Steven: Pretty stable outlook, so thats pretty much the best way I can do I am sure Youll have some follow up questions.
Anil Doradla: I'm sure you'll have some follow-up questions, but let's, Anil, to address the questions. So, Brian, you said some deferrals. So can you, I'm trying to understand, are you talking about... Can you just go through that? Yeah, sure. I didn't mean kind of like deferred expenses. I was talking more so about project deferrals or anything like that, which it doesn't sound like you're experiencing, which is good.
Steven: On yield.
Steven: So Brian you said some deferrals. So can you I'm trying to understand are you talking about.
Steven: Okay.
Steven: Can you can you just go through that.
Steven: Yes, yes.
Speaker Change: Yes, sure I didn't mean kind of like deferred expenses I was talking more so about project deferrals or anything like that which it doesn't sound like you're experiencing which is good maybe though I will follow up Leonard a little bit on the on the guidance for the year. So just based on what you do see for 2025 and the growth guidance mid point that you have.
Leonard Livschitz: Maybe though I will follow up, Leonard, a little bit on the guidance for the year. So just based on what you do see for 2025 and the growth guidance midpoint that you have, how much of that work is in hand, so to speak, so contractually committed? You mentioned some of these deals you've signed that will ramp. How do you, can you just talk to that dynamic as far as contractually committed versus pipeline conversion that you may need to get still? Yeah, I mean, you know our business dynamics well. Contractual committing only works if there is a, you know, a more stable business, right?
Speaker Change: How much of that work is in hand, so to speak so contractually committed you mentioned some of these deals you've signed that will ramp.
Speaker Change: Can you just talk to that dynamic as far as contractually committed versus pipeline conversion that you may need to get scale.
Speaker Change: Yes, I mean, you know our business dynamics will contractually community only awards if there is a.
Speaker Change: The more stable business right. So obviously, all the budgets, which we're talking about they are.
Leonard Livschitz: So, obviously, all the budgets which we are talking about, they are being committed, right? So, there is a longer term arrangement on the deliverables. We seldom do a few months projects anymore. It's not like five, ten years ago. So, all the programs, especially on the platforming, on implementation of the AI technologies, on moving forward with, you know, various cloud solutions, you know, recently, agentic AI is a little bit different, but they're all part of the longer term plan and the plan comes from the business decisions. Again, the business decisions have been made for 2025. And that really resulted in a good January.
Speaker Change: <unk> been committed.
Speaker Change: There is there is a longer term arrangement on the deliverables.
Speaker Change: We sell them to a few months' projects anymore, because that was like 510 years ago. So all the programs, especially on the re platforming on implementation of the AI technologies on moving forward with.
Speaker Change: Cloud solutions reached.
Speaker Change: Recently agenda, guys, a little bit different but.
Speaker Change: They're all part of the longer term plan and the plan comes from the business decisions again.
Speaker Change: Business decisions.
Speaker Change: Has been made for 2025.
Speaker Change: And that resulted in a good.
Speaker Change: January.
Leonard Livschitz: And seasonally, good January. When we see a little bit of February, it's kind of a reaction to some of our clients, as you know. Some of the retail CPG-related clients, they have their adjustments, because most of them, the fiscal year starts in February. But overall, the ramp-up, which we expected in March, continues into April. would plan to me as well.
Speaker Change: And seasonally with January.
Speaker Change: Olivia.
Speaker Change: February February reaction to some of our clients as you know some of that.
Speaker Change: Retail CPG related clients, they hazard pay adjustments because most of them the fiscal year's doses.
Speaker Change: But overall the ramp up which we expected.
Speaker Change: March continues into April.
Speaker Change: Yeah.
Speaker Change: Plan to me as well so as far as annual guidance right I think.
Leonard Livschitz: So as far as annual guidance, right, I think there are a couple of important points I have to mention. Look, we haven't been in a guidance world for a full year for a very long time. And you guys have been asking us, so when are we gonna build the country? So we shared the confidence in our guidance with a high level of conservatism when we did it a quarter ago. That conservatism still presents, but maybe not to the same level of conservatism as a quarter ago. So we have still a pretty good run in terms of understanding how we're going to arrive with the numbers.
Speaker Change: There are a couple of important ones I have to mention.
Speaker Change: Having been in the guidance world for full year for a very long time.
Speaker Change: And you guys have been asking is so when are we going to build the confidence so.
Speaker Change: We shared the confidence in our guidance.
Speaker Change: With a higher level of conservatism, when we did a quarter ago.
Speaker Change: That concern is still presents but maybe not to the same level of conservative as a quarter ago. So we haven't still.
Speaker Change: Good Ron in terms of understanding how are we going to arise with the numbers and I'm talking about the business. We're not just observing today, but we know not just in the pipeline, but an execution stage right.
Leonard Livschitz: And I'm talking about the business we're not just observing today, but we know not just in a pipeline, but an execution stage, right? When we'll see a little bit more dynamics between May and July, it will give us a little bit more factual assessment where we're going to be. The confidence is there, but ultimately, we're not reading on the coffee grounds. We're just based on what the world is and where we are. So we're not really naive in terms of what's going on around us. It's just been a little bit smaller, more nimble, more technology focused on the customer revenue creation.
Speaker Change: When we will see a little bit more dynamics between May and July it will give us a little bit more.
Speaker Change: Factual assessment, where we are going to be.
The covenant is there.
Speaker Change: Ultimately, we're not reading on the coffee growth base.
Speaker Change: Based on what the World is and where we are so we're not really value in terms of what's going on around US is just we delivered smaller more nimble more technology focused on the customer revenue creation, where maybe a little bit more confidence than some others.
Leonard Livschitz: We have maybe a little bit more confidence than some of us. Okay, okay, that's clear. That's helpful as it relates to the initial outlook you gave. Understand that.
Speaker Change: Okay. Okay. That's clear that's helpful. As it relates to the initial outlook you gave understand that.
Leonard Livschitz: One more for you, just as it relates to hiring, so nice to see the record billable employee base. Talk about your hiring intentions here in 2Q and maybe for the balance of the year. How are you thinking about that versus balancing utilization and bench optimization? Well, look, the hiring machine, as you know, with Grid Dynamics is pretty consistent. We've been blessed not to go through a lot of rationalization up and down, depending on the flavor of the day. So we've been very consistent with the internship program, with the Grid Dynamics University, with Grid Dynamics Labs, with rotational technology, with expansion on technology.
Speaker Change: One more for you just as it relates to hiring so nice to see the record billable employee base.
Speaker Change: What about your hiring intentions here in Q2, it makes the balance of the year. How are you thinking about that versus balancing utilization in bench optimization.
Speaker Change: Okay.
Speaker Change: Hiring machine as you know with great dynamics.
Speaker Change: Pretty consistent.
Speaker Change: We have been blessed enough to go through a lot of.
Speaker Change: Rationalization up and down depending on the flavor of the day, so where we're at.
Speaker Change: Been very consistent with the internship program.
Speaker Change: Greater than average University with <unk> labs, with rotational technologies with expansion on technology, So the technical talent.
Leonard Livschitz: So the technical talent is harder to acquire, but tend to stand longer if the projects are there. So obviously, region to region depend. There's no secret, there's certain regions you need to put a little bit more effort to build that stability. But in terms of expanding the hiring, it's never been a big issue with us. It's just relevance of technical skills. And what we do, Brian, many times more now, we really don't depend on the market capability from hiring of the specialty talent, but internal kind of polishing and honing the skills as they present, because as you know, dynamics of the technology stacks change quite fluidly.
Speaker Change: Harder to acquire but tend to stay longer projects out of that right. So obviously the region to region demand.
Speaker Change: There is no. There's no secret there are certain regions you need to put a little bit more effort to build that stability, but in terms of expanding the hiring.
Speaker Change: It's never been a big issue with us.
Speaker Change: <unk> relevance of technical skills, and we do Brian.
Speaker Change: Its more now we really don't demand will depend on that.
Speaker Change: Market capability from hiring of the specialty talent.
But in general kind of polishing and holding the skills as they presented because as you know dynamics of the technology change.
Speaker Change: Change quite smoothly.
Leonard Livschitz: So that helps us to kind of stay strong on the streamline of hiring. Okay, okay, makes sense. Thank you for all the detail. Of course. Thank you, Brian.
Speaker Change: That helps us to kind of stay strong or the streamline of hard.
Speaker Change: Okay. Okay makes sense. Thank you for all the detail.
Brian: Thank you Brian.
Speaker Change: Thank you Brian and the next question comes from Puneet Jain of Jpmorgan could you. Please turn on the camera.
Puneet Jain: And the next question comes from Puneet Jain of J.P. Morgan. Puneet, please turn on your camera and unmute yourself. Hey, thanks for taking my question and a very nice quarter. So I understand like the macro environment, like it's uncertain, but are you seeing any change in your client behavior, maybe especially like in the retail vertical, TMT vertical, Apple being the largest customer there? Are you seeing that clients could be prioritizing more cost-cutting deals instead of revenue generating? Any change that you have seen in last one month was there in Q1.
Brian: It yourself. Thank you.
Brian: Hey, Thanks for taking my question and very nice quarter.
Brian: So I understand like the macro environment uncertain, but are you seeing any change in your client behavior may be.
Brian: Ask me like embedding vertical TMT vertical Appleton largest customer.
Brian: Are you seeing that clients could be prioritizing more cost cutting deals instead of revenue.
Brian: Any change that you have seen in last one month.
Brian: In Q1.
Leonard Livschitz: I'm going to answer your question in generic, but I will have Vasily to talk about Apple. It's his baby been from the day we started their account. So I had a pretty substantial client tour in the past three, four weeks myself. Plus, we've been a pretty substantial contributor to Google Next, the nice booth. And we met many clients there as well, not just specifically related to individual projects. So we can have a pretty good assessment where we are. So first of all. Our client base is not really China-dependent. I think it's very important for the industry to understand that...
Brian: I'm going to answer your question engineering, but it will have the silly to talk about Apple as whose babies.
Brian: From the day, we started the cones so.
Brian: So that I have.
Brian: <unk> substantial client tour and the best.
Brian: Three or four weeks myself plus we've been a.
Brian: Substantial contributor to Google next there was a nice boost.
Brian: Many clients there as well not just specifically related to individual projects. So we can have a pretty good assessment, where we are so first of all.
Brian: Our client base is not really China dependent.
Brian: It's very important for the <unk>.
Brian: Industry to understand that.
Leonard Livschitz: dependency on labor in China is much lesser than it used to be. But in our class, we ask this question specifically. It's usually a bicycle list. Again, this is not my field of expertise. That's what they tell me. Now, the other country is also a bit more questionable. But we're not feeding Amazon and Steinstein with some kind of very, very low end products. So we're pretty stable there. Again, the supply, the logistics, we all know we're in the news, the amount of the containers is lowering. So what does it mean? We certainly believe that we need to be very careful in terms of understanding the business.
Brian: Dependency on a labor in China is much lesser than it used to be but as our clients. We ask this question specifically, Sir usually high single list.
Brian: This is not by fueled our corporate team that's what they do.
Brian: Now the other correct.
Brian: The country is also a bit more questionable, but who are not.
Brian: Feeding Amazon and we're starting to see.
Brian: With some kind of a very low low end products. So we are pretty stable there again.
Brian: The supply the logistics, we all know we're in the news.
Brian: <unk>.
Brian: The containers is lowering so what does it mean.
Brian: We certainly believe that we need to be very careful in terms of understanding of the business, but as of today may 1st.
Leonard Livschitz: But as of today, May 1st. We're good.
Vasily Sizov: Now, Apple is a bit interesting story, which is, again, it's quite good for us. And you see the announcements and all this good stuff.
Brian: Apple is a bit interesting story, which is again is.
Brian: Great.
Brian: Good for us and we can see the announcements and all these good stuff, but I don't want us yogurt Thunder from <unk>. So please listen yes sure.
Vasily Sizov: But I don't want to steal the thunder from Vasily, so please, Vasily. Yes, sure. So talking about Apple, I mean, without, I'll say, disclosing much detail, I would say that we've historically been working on the part of business which is more related to online services and things which are less dependent on the supply chain side of things. Therefore, it's, as one of the, I would say, probably fastest growing profit centers, I would say it's going to be less effective. That's our expectation, at least. And so far, as of today, we haven't heard anything related to any expected slowdowns.
Brian: Talking about Apple.
Brian: Without I'll say disclosing much detail I would say that we.
Brian: We have historically been working on the part of business, which is more related to.
Brian: Online services, and things, which are less dependence on the supply chain side of things.
Brian: Therefore.
Brian: As one of the I would say probably fastest growing profit centers I would say.
Brian: It's going to be less effective.
Brian: Our expectation please.
Brian: And so far as of today, we haven't heard Hap.
Brian: Anything related to any expected slowdown so that's the fact.
Vasily Sizov: So that's the kind of...
Brian: Okay.
Puneet Jain: Thank you very much, that was very helpful. And then it seems like on the delivery side, like the rest of the world, which I'm assuming most of it is India, grew nicely in the quarter, like added like 100 plus employees on a sequential basis. And with Rajiv also focusing more on India delivery from here on. How should we think about your India as a delivery center? Like, can it ramp? Like, how large can it become? Can it become like the largest location for you over next year?
Brian: Very helpful and then it seems like on delivery.
Speaker Change: But as the chairman said, making most of India.
Speaker Change: India grew nicely in the quarter added.
Speaker Change: Hum.
Speaker Change: The consolidated.
Speaker Change: Rajiv also focusing more on India delivery from Hereon.
Speaker Change: How should we think about India as a deliberately.
Speaker Change: Like how long can it become can it become like the largest location for you over yet.
Speaker Change: Okay.
Leonard Livschitz: Well, so for people who don't know who Rajiv is. Rajiv Sharma was our CTO for a while. Now we have our first and only first CTO of the company, Eugene Steinberg, who took the role. And he came back to the role many years later. He's more mature and definitely positions in a technology capability as a leader, not just a scientist. And you guys know Eugene well. So there are a couple of reasons why Rajiv is going to be in India. But it's not delivery.
Speaker Change: Well so for people, who don't know who rajiv so.
Speaker Change: Rajiv Sharma was.
Speaker Change: CTO for a while now we have a first and only first CTO of the company Eugene Steinberg, who took the role and he came back to the drop many years later is more mature and definitely.
Speaker Change: <unk>.
Speaker Change: And as technology capabilities.
Speaker Change: Leader not just the scientists.
Speaker Change: You guys know achieved well so there.
Speaker Change: There are couple of reasons why Rajiv is going to be but it is not delivery. So so the number one priority is.
Leonard Livschitz: So the number one priority is scaling technical talent in the region. I mean, he is a fantastic technology spiritual leader of not just the global world, but specifically in India. And many people look upon him with the greatest level of respect. And that's one reason which we need to scale technology capabilities, because we are truly following the Sun strategy. I would not deviate it from one region to another, whether it's Latam, India, Europe, or whatever we're going to end up in next, because if we're not the same, there's no Grid Dynamics DNA. So we continue to push hard with many facets to grow India with an equal level of technology capabilities.
Speaker Change: Scaling technical talent in our reach.
Speaker Change: He is a fantastic technology spiritual leader of not just the global world, but specifically in India and many people Ruger upon him with the greatest level of respect and Thats, one region, which we need to scale technology.
Speaker Change: Capabilities, because we are truly followed the sound strategy I would not deviated.
Speaker Change: From one region to another words, Tommy Europe, or wherever we're going to end up being mix. Because if you are not the same as don't worry dynamics DNA. So we continue to push hard with many facets to grow India.
Speaker Change: With an equal level of technology capabilities, and we have three locations right, So Bangalore Hyderabad Tonight.
Leonard Livschitz: And we have three locations, right? So the Bengal or Hyderabad, Chennai, you know very well that they're not the same. But for the size of Grid Dynamics, we have enough brilliance to tap it. So that's just number one priority. Number two priority, obviously, we have a large number of GCC. And GCCs are very critical for our business because many decision-making processes happening right now in India. So Rajiv was instrumental in working there. And it's easier when you're home-based in Bangalore. We have a nice office there. And then sit in Jersey and go back and forth.
Speaker Change: Well, they're all the same but for the size of <unk>, we all know brilliance to Capex. So that's number one.
Speaker Change: Number two priority, obviously, we have a large number of gcc's.
Speaker Change: And <unk> are very critical for our business because many of the decision making process is heavily right now need do so energy was instrumental in working there and it's easier when you're homebase in Bangalore, we have a nice orders there and then sit in Jersey and going back in force had made a lot of sense and third one.
Leonard Livschitz: It made a lot of sense. And third one, he's really a managing director of APEC. So I just don't want people to think it's just a glorified title because we are expanding our business relationship with other countries in the region, particularly more near-term Singapore. So it's a very fundamental thing. I trust Vadim, he's a very good friend. So the delivery remains as a global organization and Vadim Kozyrkov is there. By the way, very likely you will hear from him next time. As you notice, I'm trying to rotate the executives and there's a size of the table, it's only right now.
Speaker Change: He is really a managing director of APAC.
Speaker Change: I just don't want people figures as a glorified titled because we are expanding our business relationship with other countries in the region, particularly more near term Singapore. So.
Speaker Change: Very fundamental thing I trust reduced he is a very good friend so the delivery remains as a global organization and redeem because recoveries there recently.
Speaker Change: Very likely you will hear from him next diamond as Youll notice I try to repeat the executives and the size of the table in front of me.
Leonard Livschitz: There used to be two, now we have two tables, it's four. Right, and I just want you guys to understand it's not 25th, it's not gonna be 25th event for Anil and Leonard. We have a really great team and the company. So Vadim is in health, he has a great leadership person in India, we trust him more publicly. So he will continue to do his work and the growth is gonna be very consistent because again, we're not offering India as a low-cost alternative to other regions. We are basically working to complement local decision making in India.
Speaker Change: So just to get to about we have two payable orders for right.
Speaker Change: I just wanted you guys to understand is not 2014.
Speaker Change: It's got a good in 2015.
Speaker Change: Event for <unk>.
Speaker Change: That letter.
Speaker Change: A really great team in the company, so we're dealing with and help.
Great leadership, a person in the India. We trust you wholeheartedly. So he will continue to do his work and the growth.
Speaker Change: It is going to be very consistent because again, we're not India.
Speaker Change: Low cost alternative to other regions.
Speaker Change: Basically working to complement local decision making.
Leonard Livschitz: So very seldom would we have just Indian team or just European team or just a town team because we're trying to build this McKinsey management idea. But for GCCs locally, it makes sense to have more talented people in India. So it's not a staffing, it's growth. Will it become the number one country in the world? Absolutely it will. I mean, on a country basis, who can compete? There are only two populous countries in the world and we're not in China today. So the answer is absolutely yes. Now, on the regional level, I mentioned many times we're going to do the balance work because it depends on the customer base.
Speaker Change: So very sell them when we have just India and team are just European team or just to dumb team because we're trying to build this mackenzie.
Speaker Change: Managements idea, but for Gcc's local it makes sense to have more talented people lending there. So it's not assessing its growth, but it has become the number one country in the world.
Speaker Change: Absolutely.
Speaker Change: Yes.
Speaker Change: On a country basis, who can compete.
Speaker Change: There are only two populous countries in the world and we're not in China today. So the answer is absolutely yes now.
Speaker Change: On the regional level.
Speaker Change: Mentioned, many times, we're going to do the balance work because it depends on the customer base, but the growth in India.
Leonard Livschitz: But the growth in India, not absolute numbers, but percentage numbers, is greatly driven by scaling technology capability. Sorry, it's a long answer, but I just wanted to use the whole overview of what we do in AIDS.
Speaker Change: Not absolute numbers, but percentage numbers is greatly driven by scaling technology capabilities.
Speaker Change: Sorry, it's a long answer, but I just wanted to use.
Speaker Change: The whole overview of what are we doing.
Puneet Jain: It's okay, if I can quickly squeeze in another one, like follow up to Brian's question on the guidance. So it seems like the guidance implies like slight growth, like zero to 2% sequential growth in second quarter, followed by quite nice ramp in second half, we calculated 4% to 9% on the average sequential basis in second half.
Speaker Change: Okay, and if I can quickly squeeze in another one like a follow up to Brian's question on the guidance. It seems like the guidance implies like flight.
Speaker Change: Data.
Speaker Change: Sequential growth in second quarter, followed by quite nice ramp in second half.
Speaker Change: 49%.
Speaker Change: Sequential basis.
Speaker Change: The second half.
Leonard Livschitz: So what drives this visibility on second half ramp, like which type of customers existing new, which vertical regions will drive that high growth in second half of this year?
Speaker Change: Tides visibility on second half.
Speaker Change: Type of thing.
Speaker Change: Existing new vertical.
Speaker Change: Tie that high growth in second half.
Leonard Livschitz: So do you want to get the financial answer or business answer? That's your choice. Which way? I'll have both.
Speaker Change: So again.
Speaker Change: Financial answer our business.
Speaker Change: That's your choice.
Speaker Change: Right.
Speaker Change: I'll have Bob.
Speaker Change: Right.
Anil Doradla: All right, so we'll have your friend to answer first. So then, Anil, please give me the financial answer. So look, let's look at the range that we have, right? 450 to 435. Very simple. You know, I know, what you're trying to do is you're trying to understand the risk, right, to those numbers. Let's start with a very basic math, right? You have 100, 102, that's 203, right? If you look at the first half versus second half, you have three to four percent purely on working days. So if I do not add a single person for the rest of the year, don't add a single client for the rest of the year, that'll give me some tailwind.
Speaker Change: Alright so.
Speaker Change: Brian to answer for our survey.
Speaker Change: Alright, and then finally I'll dwell so look let me put it.
Speaker Change: Let's look at the range that we have a 450 to 430 <unk>.
Speaker Change: It's simple.
Speaker Change: No.
Speaker Change: What you are trying to do is you're trying to understand the risks Craig to those numbers, let's start with a very basic math right. You have to that's right. If you look at the first half versus second half you have 3% to 4% purely on working days. So if I do not add a single person for the rest of the year don't add a single client for the rest of the.
Speaker Change: That will give me some.
Anil Doradla: Now, the second part is if you look at Leonard's commentary, right, he talked about January through March and April. And as we said, you know, we're dealing with some record billable headcount. So if I take that number as I have today and extrapolate even for the second half, then what you'll see is that there's another level of, you know, tailwind, so to speak. And right there, you'll get minimum, your low end of the guidance right there. And then obviously, I'm not taking into account any other things.
Speaker Change: Now the second part is if you look at Linux commentary he talked about in January through March and April and as we said we're dealing with some record.
Speaker Change: Although head count so if I take that number as I have to date and extrapolate even for the second half than what you'll see is that there is another level.
Speaker Change: A tailwind so to speak and right there youll get minimum your low end of the guidance range and then obviously I'm not taking into account any other thing. So there are many other business aspects that have not taken into account in many of the positive things, but I'll pass it onto Leonard will talk a little bit about what is going on there so our guidance.
Anil Doradla: Now, there are many other business aspects that I'm not taking into account and many other positive things.
Leonard Livschitz: But I'll pass it on to Leonard. We'll talk a little bit about what is going on there. So our guidance, you know, we can get to that range by taking some very conservative approaches to the.
Speaker Change: We can get to that range by taking some very conservative.
Speaker Change: As to the numbers.
Leonard Livschitz: All right, so that you heard the financial answer. Now the business answer. We grow on all the fronts. Even in Q1, if you look at Q1 versus Q4, it's a flattish quarter, right? I mean, numbers don't lie, but the dynamics was very interesting. There were a couple of times when there was some resets from February because of their internal challenges, which we're on the way to, you know, recover it from there, and we had a growth. Now, Q2, we do plan quite nice growth in a few accounts, but we also anticipate one or two ramp downs.
Speaker Change: Alright, so you've heard the financial answer now the business Center.
Speaker Change: Growing older fronts.
Speaker Change: Even in Q1, if you look at Q1 versus Q4 <unk>.
Speaker Change: This quarter right now.
Speaker Change: The numbers don't go away, but the dynamics was very interesting a couple of clients.
Speaker Change: And the resets from February because of their internal challenges, which we are in a way to.
Speaker Change: Recovery from there.
Speaker Change: We had a growth.
Speaker Change: Q2, we do plan quite nice growth in a few accounts, Brazil also.
Speaker Change: With regard to Ram.
Leonard Livschitz: It usually happens. Now, by the end of this Q2, We definitely expect a ramp-up. Now, which way it's going to go, is it going to be, again, it's a slower ramp-up or a faster ramp-up? We don't have it right now. We don't anticipate a slowdown in the second hell unless, you know, hell breaks loose and, excuse me, there's some other non-anticipated event. So, we are not really, conservative internally because we continue spending, but we want to be very careful. not to do what sometimes happens. People get excited too much about throwing numbers. Then they have to restart the guidance.
Speaker Change: Usually happens now.
Speaker Change: By the end of the Q2.
Speaker Change: We definitely expect the ramp up now.
Speaker Change: Which way it's going to go on is there going to be again, thats a slower above our fast ramp up we don't have it right now because we don't anticipate a slowdown in the second half unless held breaks loose.
Excuse me there are some other non <unk>.
Speaker Change: Usability.
Speaker Change: We are not really.
Speaker Change: Conservative internally, because we've engineered spending we would want to be very careful.
Speaker Change: Not to do with some time happens it'll get excited too much about throwing numbers then they have to.
Speaker Change: We started the guidance then they have to modify some day.
Leonard Livschitz: Then they have to modify something. But dealing with you guys is not as a significant challenge as internally to disturb the process. So we're bullish on growth. We believe it is happening right now. We're bullish on growth not in traditional retail and CPG, but other segments, which is given us nice diversification.
Speaker Change: Deal with you guys is not as significant challenge as internally to distribute their products. So we're bullish on growth. We believe it is happening right now.
Speaker Change: We're bullish on the growth.
Not just not a traditional retail and CPG, but other segments, which is <unk> <unk>.
Speaker Change: Certification.
Leonard Livschitz: But when it comes to number, Anil is a king. She wants to be something which we will not be looking with excuses later. That's pretty much where we are.
Speaker Change: When it comes to the number.
Speaker Change: King's she wants to be something which we will not be looking with excuses later, that's pretty much where we are.
Leonard Livschitz: That's it. Thank you so much.
Speaker Change: That's great. Thank you so much.
Leonard Livschitz: Thank you, Puneet. Thank you, Pete.
Speaker Change: Thank you Bonnie.
Speaker Change: Thank you.
Mayank Tandon: The next question comes from Mayank Tandon of NEEM. Go ahead, Mayank. Great, thanks. Good to see you guys. Congrats on the quarter. Thanks, Mike. Leonard, I might have missed this. Did you comment on new logos? And if you could just go through that again, if you did, apologize for that. And which verticals did you see the most traction in terms of new plan activity?
Speaker Change: The next question comes from my own tandem of Needham go.
Mike: Go ahead Mike.
Speaker Change: Great. Thanks, Doug good to see you guys congrats on the quarter. Thanks, Mike.
Speaker Change: Leonard I might have missed this did you comment on new logos and if you could just go through that again, if you did I apologize for that and which verticals do you see the most traction and in terms of new plant activity.
Leonard Livschitz: Of course. By the way, guys, next time I'm going to bring CTO, you're not going to ask him about that. So, you know, don't, you know, he feels like an award winner. Yeah, yeah.
Speaker Change: But next time I'm going to bring CTO or we're not going to ask them.
Speaker Change: So.
Speaker Change: Sure.
Speaker Change: Feels like their award.
Speaker Change: Yes, So Mike you ask one question on <unk>. Please.
Leonard Livschitz: So, Mayank, you ask one question on the air, please. I'm soliciting you guys to not only worry about what's going to happen with the tariffs, but also understand what value we're bringing, because there's a lot of really cool stuff. Again, maybe it's going to be better to talk next quarter than you just give me a couple, you know, encouragements that I'll keep the CTO on the call. But I didn't forget your question. So the new orders. So there are two parts of new orders. As you know, Grid Dynamics, and he's been with us for a very long time from the beginning, has a fairly generic strategy, which is called 80-15-5.
Speaker Change: So non Colombia worrying about what's going to happen with Italian but also understand what value, we're bringing because theres a lot of really cool stuff again, maybe it's going to be.
Speaker Change: You bet until next quarter, then users give me a couple of encouragement that I'll keep the CTO of the call, but I didn't forget your question. So.
Speaker Change: The new logos.
Speaker Change: There are two parts of new logos as you know great dynamics.
Speaker Change: And he has been with us for very long time from the beginning.
Speaker Change: Fairly generic strategy, which grew 80 15 five.
Leonard Livschitz: ADA is a stable business with the growth of the matured accounts of the revenue. 15% something were acquired from the previous calendar year, roughly, and 5% in new logos, like brand new logos. So on the brand new logos in Q1, it was a very minimal financial impact, which is usually the case. If you look at the ramp up, if we don't get a lot of contribution by Q3, then this 5% is going to be very difficult. But we did see the numbers, but they're small. Now, what did very well for us is those 15%. So some of the key logos we acquired last year are giving us really nice ramp up in Q1 and going into Q2 as well.
Speaker Change: A&D and sustainable business with the growth of the mature accounts of the revenue, 15% something we acquired from the previous calendar year also within 5% of yours like brand new logos.
Speaker Change: On a brand new logos in Q1, it was a very minimal financial impact, which is usually it is the case if you look at the ramp up.
Speaker Change: Don't get a lot of contribution by Q3, then this 5% is going to be very difficult. So.
Speaker Change: We did see in the numbers.
Speaker Change: They're small.
Speaker Change: We did very well for us as those 15% so some of them.
Speaker Change: Key logos, we acquired last year are giving us really nice ramp up in Q1 and going into Q2 as well.
Leonard Livschitz: And the reason being is, we're much more diversified in the verticals. And it's not just the verticals. When we talk about the fintech, we talk about technology. When we talk about CPGs, now we start talking about manufacturing. We didn't forget even the healthcare, because some of the payment systems in your acquired account, they're directly tied to the medical field, health insurances. When we take insurance business, which we were very muted because it was not a huge revenue, now we're picking up in health insurance payment, logistics and all this stuff. So the business are becoming more compounded.
Speaker Change: And the reason being is we're much more diversified in our verticals.
Speaker Change: And it's not just the verticals with regard to the <unk>.
Speaker Change: Fintech withdraw but technology when we're talking about Cpg's now will start talking about manufacturing.
Speaker Change: We didn't forget.
Speaker Change: Even the healthcare because some of the payment systems. The new acquired accounts there are directly tied.
Speaker Change: Tied to the.
Speaker Change: Medical field health Insurances, where we're taking insurance business, which we were very muted because it was not a huge revenue now, we're peaking oven health insurance payment logistics and all of this out so the business are becoming more compounded.
Leonard Livschitz: Farmers. Still small, but the number of accounts growing. And why? Because again, we're applying the same algorithms in our, you know, the AI accelerators, which we put in place. So the short answer for your question, we got a good uplift from the account from their last year, especially second half of last year. And it's just an initial stage of the logos, which we're working with is a brand new logos in 2020.
Speaker Change: Farmer.
Speaker Change: Still small, but the number of gallons grow either why because again, we're applying the same algorithms.
Speaker Change: The Ias accelerators, which we have put in place so.
Speaker Change: The short answer for your question, we've got a good uplift from the accounts from their last last year, especially the second half of last year.
Speaker Change: It's just an initial stage of the logos, which were working on was a brand new logos in 2020.
Anil Doradla: And let me add one thing to that, Mayank. You see, the definition of our logo edition, when we come, are significant enterprises. So we, in the quarter, we did add, we did add logos, but internally, we don't want to, each time we have a logo, we're just not going to come out and talk about it. We, Leonard makes his comments, and we, these are significant enterprise logos. So in the quarter, we had, and we did not believe that it elevated the talk, but there were additions. And when there's a big logo and a big enterprise, we just started.
Speaker Change: And let me add one thing to that bankruptcy. The definition of our logo addition, let me come are significant enterprises, so well in the quarter. We did it we did add those but internally we don't want to <unk>. We have a logo. We're just not going to come out and talk about a week later, Tom makes us comments on Whitney These are significant.
Speaker Change: <unk> enterprise logos, so in the quarter we had.
Speaker Change: And we did not believe that.
Speaker Change: It is elevated to tough, but they were an issue.
There is a big logos for the Big Enterprise. We just started will also be a little bit careful because you guys. As we do we don't like them for months that mortality rate. So I don't want to go through that all we had this great guys and they're fantastic business and they are <unk>.
Leonard Livschitz: We also be a little bit careful because, you know, you guys, as we do, we don't like inferred mortality, right? So I don't want to go through that, oh, we had these great guys and their fantastic business, and they have, you know, $50 billion revenue and then something, and we're silent two quarters later. So now we have a pleasure and a choice to be selected what we call new business acquisition. So I'd rather have this 80-15-5 continue. Of course, there's addition on the top of the acquisition, all the stuff, but this, I'm pretty satisfied with this rate of growth of innovative clients, which we acquired from 2020.
Speaker Change: $1 billion revenue or something and we're excited and two quarters. Later, so now we have to azure in a choice to be selectively will recall new business acquisition. So I'd rather have this 80 15 five continue of course. There is addition on the top of the acquisition of this stuff, but this.
Speaker Change: I'm pretty satisfied with this rate of growth of innovative clients, which we acquired from 2024.
Mayank Tandon: That's a very helpful color. Thank you so much for that.
Speaker Change: That's very helpful color. Thank you so much for that.
Anil Doradla: I have one quick follow-up for you, Anil, around margins. How should we think about the cadence of growth margins? What are the puts and takes? And the same question for EBITDA margins. Your guidance implies a downtick in the second quarter, but any perspective you can share for the full year? I know you haven't given formal guidance on EBITDA margins for the year, I believe, but any thoughts around how that will trend would be helpful. Yeah, sure. Let's talk about the Q1 to Q2, right? Now, as I said in my prepared remarks, we benefited from the timing of some of my fixed price contracts, right?
Speaker Change: One quick follow up for you on El around margins.
Speaker Change: How should we think about the cadence of gross margins where are the puts and takes and the same question for our EBITDA margin guidance implies a downtick in the second quarter, but any perspective, you can share for the full year I know you haven't given formal guidance on EBITDA margins for the year I believe but any thoughts around how that will trend would be helpful.
Speaker Change: Let's talk about the.
Speaker Change: The Q1 to Q2 right.
Speaker Change: Now as I said in my prepared remarks, we benefited from the timing of some of them like fixed price contracts right. So as you can see Q1 was what 37, 4%, which is kind of flattish over Q4, and historically <unk> always seen as we go from <unk> compression right now if you look at that moment.
Anil Doradla: So as you can see, Q1 was, what, 37.4%, which is kind of flattish over Q4. And historically, you always see, as we go from Q4 to Q1, there's compression, right? Now, if you look at that moment, there were, you know, 100 plus bips and over-margin movement because of that particular thing. That is one thing. Now, as we go from Q1 to Q2, this year, we don't have an uplift on the number of days. So it's kind of flattish. You know, again, year to year, it might depend on that. The other thing is that we are making investments as we speak right now.
Speaker Change: Our 100, plus bips and over margin movement because of that particular team.
Speaker Change: That is one.
Speaker Change: One thing now as we go from Q1 to Q2 this.
Speaker Change: This year, we don't have a little uplift on the number of days, so it's kind of flattish year to year it might depend on that.
Speaker Change: The other thing is that we are making investments as we speak right now there's a lot of stuff going on on AI.
Anil Doradla: You know, there's a lot of stuff going on on AI. There's a lot of work going on on AI scaling and training. So there's some investments that we are working on. And that has an impact on some of the columns and topics. And as you can see, business is picking up. So there's a question about, you know, the bench has to adjust to the upcoming demand. So there's a little bit of that also going there. So when you put all those things together, yes, you're right. We see a little bit of this, but a large portion of it is a little bit of a timing and it would have been more, the cadence would have been normal if some of these things didn't play out.
Speaker Change: A lot of work going on on AI scaling and training.
Speaker Change: So there are some investments that we are.
Speaker Change: We're working on.
Speaker Change: And.
Speaker Change: That has an impact on some of the Cogs and Opex and as you can see business is picking up so there's question about <unk>.
Speaker Change: The bench has still and just to the upcoming demand. So there's a little bit of that also going there. So when you put all those things together, yes, youre right, we see a little bit of this but.
Speaker Change: A large portion of it is little bit of a timing and would have been more.
Speaker Change: Cadence would have been normal lift some of these things in play out now as I look into the full year right last year, we did about 15% EBITDA margins for the full year look the way you have to look at the businesses the margin profile should improve as we go.
Anil Doradla: Now, as I look into the full year, right? Last year, we did about 15% EBITDA margins for the full year. Look, the way you have to look at the business is the margin profile should improve as we go quarter to quarter. The only question is, what do I need to do to support the growth? What do I need to do to support the investments? That's the only question that we debate. But as you progress in the course of the year, yes, you should see margin. Right.
Speaker Change: Quarter to quarter.
Speaker Change: The only question is what is what do I need to do to support the growth and what do I need to do to support the investment Thats. The only question that.
Speaker Change: We debate, but as we progress in the course of the year, Yes, you should see margin expansion.
Speaker Change: Right.
Leonard Livschitz: So I also want to give you again a business answer. So it's usually it's Anil's domain, right? What really, Puneet asked the question, how quickly we're gonna ramp up India, right? There is another fact, obviously, from the war which started more than three years ago. We are having a bit excessive number of countries. to really clamp down on operating costs beyond the technology. We're not gonna slow down technology, right? This is no way. This is our key, and we wanna rule the world in our business. We're not gonna slow down investment into quality engineering, operational excellence on the delivery management, and all this good stuff.
Speaker Change: I also want to give you again, an business sensors, so generally its yields domain right.
Speaker Change: What drew you to ask the question of how quickly we're going to run book.
Speaker Change: Sure.
Speaker Change: There is another effect obviously from the.
Speaker Change: The more we started more than three years ago, we are having a bit.
Speaker Change: Assessing a number of countries.
Speaker Change: To really clamp down on operating costs beyond the technology, we're not going to slow down technology. This is Norway.
Speaker Change: This is our key and we want to rule the world and our business, we're not going to slow down investment into college engineering operational excellence on a delivery management and oldest good stuff. However, we anticipate the scaling of the key locations versus not just Indian and Linda was a great investment.
Leonard Livschitz: However, we anticipate the scaling of the key locations, which is not just Indiana, I mean, Latam was a great investment into Argentina. And we would like to think the way how we plan the conversions on a successful locations as we grow will actually give us meaningful impact. This is on a back-end stuff. On the front-end stuff, we continue to push hard on from the two, five, 10 to 10, basically five, 10 to 20 strategy, which means we wanna build the client's five to $20 million annual revenue as a core, at least 5 million. That successful implementation is actually picking up a bit too, because it's not about client concentration, it's a client meaningful work.
Speaker Change: Argentina, and we would like to see.
Speaker Change: I think the way, how we blend and conversions on the successful locations as we grow we will actually give us meaningful impact this is arne.
Speaker Change: Backend stuff on the front end stuff.
Speaker Change: We're continuing to push hard on that.
Speaker Change: From the two 510 to 10, basically 520th strategy, which means we want to build of the clients $5 million to $20 million annual revenue is our core at least $5 million that successful implementation is actually picking up a bit too because it's not about client.
Filtration is a client meaningful work and <unk>.
Leonard Livschitz: And operational efficiency, not just a margin, but the operational efficiency is driven by the depth of the relationship. We see that picking up too. So, those are kind of three elements, which we kind of look from the business perspective to increase.
Speaker Change: Operational efficiency.
Speaker Change: The margin, but the operational efficiencies driven by the depth of the relationships, we see that picking up so those are kind of three elements, which we kind of look from the business perspective to increase when it comes to the variation quarter to quarter or annual will tell you that when it comes in C stores in next quarters, you'll find another convincing story so.
Leonard Livschitz: When it comes to variation quarter to quarter, and you will tell you 20 convincing stories, the next quarter you'll find another convincing story. So, I'm not terribly worried about it. I just wanna make sure we continue to rate the growth of the business. And we have a net cash generation, which is very critical. We need to be in the business of self-sustainable position. And Anil has been fantastic job on controlling the cost as we continue to expand it.
I'm not terribly worried about it I just want to make sure. We continue to grow the business and we have a net cash generation, which is very critical.
Speaker Change: Need to be in the business of self sustainable position and Aneel has been fantastic job on our on controlling the cost as we continue to expand into the technology works.
Mayank Tandon: Great, thank you so much. Appreciate all the color. Congrats.
Speaker Change: Thank you so much I appreciate all the color and congrats a question later.
Mayank Tandon: You had a question, Mayank. No, no, no. It's okay. Let him go. You can pass it on to the others. They're waiting. Yeah.
Speaker Change: No.
Maggie Nolan: The next question comes from Maggie Nolan of William Blair Go ahead Maggie.
Margaret Nolan: The next question comes from Maggie Nolan of Rolling Blair. Go ahead, Maggie. Hi. Thank you. Well, I'll ask a somewhat engineering question. You've talked a lot about your agentic AI solutions in several of your examples. Are these custom built by grid? To what extent are they're kind of pre built solutions by your partners? And is this a primary driver of your partner revenue growth? Yeah, thank you for the question.
Speaker Change: Hi.
Speaker Change: I'll ask a somewhat engineering question, you've talked a lot about Gary and John take isolation.
Speaker Change: On top of all of your example.
Speaker Change: This custom built by grant to what extent are there.
Speaker Change: Solutions by your partners.
Speaker Change: A primary driver.
Speaker Change: Partner revenue growth.
Speaker Change: Yes. Thank you for the question.
Speaker Change: Hi.
Eugene Steinberg: The Grid Dynamics is mostly working in the mode when we are developing some of the solutions in the kind of from the first principle. And some of the solutions, of course, we are using a lot of the open source components. In some of the cases, we are also... Leveraging cloud native technologies. Pretty rarely we are deploying solutions which are completely kind of black box end-to-end solutions because this is mostly work for the system integrators, mostly engineering companies. So we are building solutions for larger enterprise organizations with unique requirements when it comes to security, when it comes to access to very diverse and very proprietary data.
Speaker Change: Net dynamics is mostly working.
Speaker Change: In the mall and we are developing some of the solutions in that kind of from a first principles.
Speaker Change: And some of the solutions of course, we're using cologuard.
Some points in some of the cases, we are also.
Speaker Change: Leveraging cloud native technologists preaching.
Speaker Change: <unk> and deploying solutions, which are.
Speaker Change: Completely kind of a black box and around solutions. Because this is mostly work for the system integrators have most engineered company.
Speaker Change: So that building financials for.
Speaker Change: Larger enterprise organizations. This unique requirements when it comes to security came on as comps to access prevent any type of course and proprietary data sources.
Eugene Steinberg: When it comes to very specific workflows and official solutions, they're not. And in these cases, we are building custom solutions, building custom agentic platforms, leveraging a lot of open-source components and cloud-native services. which deliver and automate transport. Thank you for that.
Speaker Change: When it comes to very specific workflows and.
Speaker Change: Off the shelf solutions on a few of them.
Speaker Change: And in these cases, we are building.
Speaker Change: And custom solutions.
Speaker Change: Building custom identity platforms, leveraging cost of open source components up native services.
Speaker Change: <unk> embarked on Lantus workflows.
Speaker Change: Thank you for that maybe and now a quick follow up to that are you discussing that Brian fixed price or outcome based pricing models to go along with that.
Leonard Livschitz: Maybe a quick follow up to that. Are you discussing different, you know, fixed price or outcome based pricing models to go along with that with the clients? That's a good, good question, Maggie. And You know, I don't have an exact answer at this stage because these are new things that are moving around, but yes, we are open to everything. My preference is more fixed price because we have more control, but this is as we speak right now, you know, many of these new things are happening, I don't know whether... Hold on, hold on.
Speaker Change: Alright.
Matt: Good good question, Matt again.
Matt: I don't have an exact answer at this stage because these are new things that are moving around but yes, we are open to everything.
Matt: My preference is more fixed price because we have more control, but this is as we speak right now many of these new things are happening I don't know all day.
Vasily Sizov: So, Mayank, I know you have Finneal, he's the wrong guy to ask this question. He's assigning the checks. The guy who really is driving the scale of the fixed bid arrangements, which Anil... really alluded to is Vasily. So let Vasily answer because it's very, very critical to understand it's not just we innovate technology. We're not doing technology for technology. It has to be a good business value proposition for the clients to check on ROI and for us to be able to enjoy the fruits of the partnerships. Please. Sure, sure. Thank you. Yeah, so when we were talking last time, and maybe like a year ago, we were talking about small POCs, like to see how the technology really helps the business.
Matt: So.
Matt: I know you're a fan you his or her own guide to us the scores.
Matt: He is the signing the checks.
Matt: The Guy who really isn't driving the.
Matt: The scale of the fixed business arrangements, which are Neil.
Matt: Really alluded to is wassily so led.
Vasu: Let vasu answer because its very very critical to understand is that as we innovate technology.
Matt: They're not doing technology technology has to be.
Speaker Change: Good business value proposition for the clients to check on the ROI and for us to be able to enjoy the fruits of the partnership's. Please sure sure. Thank you Mike.
Speaker Change: So whether were talking last time, and maybe like a year ago, we were talking about small poc's likes to see how the technology. It really helps the business and those engagements, we're pretty small in size I'll say and.
Vasily Sizov: And those engagements were pretty small in size, I would say, and they were like almost 100% were fixed. So nowadays, there is a good understanding of what the technology can do for the business. Therefore, there are more popular, I would say, fixed capacity type of engagements when we set up the team, which develops the platform, and then there is a roadmap for building business cases on top of that. And of course, the customers are not interested in losing the team which built the platform after the implementation, just to come up with an idea that we need to, oh, we need to get the team together now to build the business cases.
Speaker Change: We are.
Speaker Change: Almost 100% were fixed.
Speaker Change: Nowadays.
Speaker Change: There is a there is a good understanding of the.
Speaker Change: The technology can do for the business. Therefore, there are more popular I would say fixed capacity type of engagements when we set up the team which develops to platform and then there is a roadmap for building business cases on top of that of course the.
Speaker Change: Customers are not interested in losing the team which build the platform. After the implementation just to do to come up with an idea that Oh, we need together as a team together now to build the business cases, so we see nowadays AI drives more of a kind of long term engagements.
Vasily Sizov: So we see nowadays, AI drives more of a kind of long-term engagements, which are linked to specific business impacts. And of course, as Leon said, business cases and financial impact is one of the key decision factors when the customers are making decisions on investment in certain areas. So that's for sure what we have.
Speaker Change: Which are linked to specific business impacts and then of course as I said.
Speaker Change: Business cap business cases, and financial impacts as is.
Speaker Change: He is one of the key deciding factors when the customers are making decision of making decisions on investments in certain areas. So that's for sure surely happens.
Kristina: Thanks Kristina.
Vasily Sizov: Thanks, Vasily.
Leonard Livschitz: If I could just squeeze one in on talent, are you comfortable, just given all the recent hiring, are you comfortable with the balance of junior versus senior talent? Are you trying to rebalance the pyramid and maybe tie that back to your margin commentary? Thanks.
Kristina: I could just squeeze one in on talent are you comfortable just given all the recent hiring are you comfortable with the balance of junior versus senior challenge are you trying to rebalance the pure math and maybe tie that back to your margin commentary. Thanks.
Leonard Livschitz: We're never satisfied with our period. to our historic business. requires a lot of seasoned, experienced people, not just foundation. But this is an inverted pyramid, right? And the inverted pyramid cannot scale as efficiently as a traditional pyramid. So we observed that at the time, we have actually the, you know, two nodal distribution. We have a lot of senior people and quite a few junior guys and we squeeze the middle guys, right? And what Vasily alluded to, when you start building more longer term fixed capacity programs and project them in business, then you create a more normalized distribution.
Kristina: We're never satisfied with opioids.
Kristina: Yes.
Kristina: Our historic business.
Kristina: Requires a lot of seasoned experienced.
Kristina: That's just foundation, but this is an inverted pyramid earned and the inverted pyramid cannot scale as efficient as a traditional theater.
Kristina: No.
Kristina: <unk>.
Kristina: We have observed it at the time, we have actually.
Kristina: Two nodal.
Kristina: Distribution, we have a lot of senior people and quite a few junior guys that we squeezed.
Kristina: The middle guys.
Kristina: <unk>.
Kristina: With Brazil, you alluded you when you start building more longer term fix capacity programs and project within the business. Then you create a more normalized distribution matter of fact, the brightest and the vessel insurance or divest addition to the more junior coupons that are bringing room from the March.
Leonard Livschitz: Matter of fact, the brightest and the best of interns are the best addition to the, you know, more junior people instead of bringing them from the market. So what we start doing is we obviously, from the hiring perspective, focus on the mid-level people. why? Because good mid-level people become more senior people. Senior people, usually you train yourself together with an R&D team. And the junior guys finding in the market, they sometimes don't possess all the skills we need to bring them into the actions right away. So the interns who become part of this fixed capacity pods, they're wonderful because in a very few months, and they're brilliant, remember, using our AI tools, we reach out to thousands now, 10,000 applicants to create this full body of the top-notch intellectually technical interns.
Kristina: So we started doing this.
Kristina: Obviously.
Kristina: From the hiring perspective focus on the mid level.
Kristina: Why because good mid level people will become more senior.
Kristina: Senior people, usually you train yourself together with our R&D team.
Kristina: And the junior guys finding the market there is some dumps.
Kristina: Don't possess all.
Kristina: All the skills, we need to bring them into the actions right away. So the endurance, who become part of this fixed capacity pods.
Kristina: There are wonderful because in a very few months and Theyre really remember.
Kristina: Using our AI tools, we reach out to thousands now done thousands of applicants to create this full body of the top notch.
Kristina: Intellectually technical.
Kristina: In terms, so that process properties.
Leonard Livschitz: So that process propagates.
Leonard Livschitz: Now, I'm not super happy yet for the distribution, but I think it became a little bit more normalized as we speak. Thank you.
Kristina: Not super happy yet.
Kristina: Full distribution, but I think it would be a little bit more normalized as we speak.
Kristina: Okay.
Kristina: Thank you.
Margaret Nolan: Thank you, Maggie.
Kristina: Thank you Manny and thank you ladies.
Cary Savas: Ladies and gentlemen, this concludes the Q&A session for today.
Leonard: Ladies and gentlemen, this concludes the Q&A session for today I will now pass it over to Leonard for closing comments.
Leonard Livschitz: I will now pass it over to Leonard for closing comments. And I have complete confidence in Grid Dynamics' ability to execute with excellence. While we must navigate the uncertainties of the current global economic environment, I'm confident that Grid Dynamics will continue to uphold the qualities that set us apart. We're building strong momentum across our business and I look forward to giving you an update on the next earnings.
Leonard: And I have complete confidence in green dynamics ability to execute with excellence.
Speaker Change: While we must navigate the uncertainties of the current global economic environment I'm confident the grid dynamics will continue to uphold the quote is that set us apart.
Speaker Change: We're building strong momentum across our business and I look forward to giving you an update on the next earnings call. Thank you.
Speaker Change: [music].
Leonard Livschitz: Goodbye.
Speaker Change: Good.