Grid Dynamics Q1 2025 Earnings Report

Grid Dynamics EPS Results

• Actual EPS: $0.11
• Consensus EPS: $0.09
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.10

Grid Dynamics Revenue Results

• Actual Revenue: $100.42 million
• Expected Revenue: $98.19 million
• Beat/Miss: Beat by +$2.22 million
• YoY Revenue Growth: +25.80%

Grid Dynamics Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 4:30PM ET

Grid Dynamics (NASDAQ:GDYN), together with its subsidiaries, provides technology consulting, platform and product engineering, and analytics services in North America, Europe, and internationally. It offers cloud platform and product engineering services, such as architecting, designing, and building scalable and secure cloud-based platforms and business applications; and AI/machine learning and data platform engineering services that build platforms to facilitate batch and streaming data ingestion, quality governance, orchestration, semantic modeling, observability, and analysis at scale. The company provides digital engagement services, including digital ecosystem design and implementation; and supply chain, Internet of Thing, and advanced manufacturing, which focuses on transforming traditional operations into smart and connected ecosystems. It serves customers that operate in the tech, media, telecommunications, retail, consumer packaged goods, manufacturing, and finance industries. The company was formerly known as ChaSerg Technology Acquisition Corp. and changed its name to Grid Dynamics Holdings, Inc. Grid Dynamics Holdings, Inc. was founded in 2006 and is headquartered in San Ramon, California.

Grid Dynamics Q1 2025 Earnings Call Transcript

Presentation

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

Good afternoon, everyone. Welcome to Grid Dynamics First Quarter twenty twenty five Earnings Conference Call. I'm Cary Savas, Director of Branding and Communications. Joining us on the call today are CEO, Leonard Lifshitz CFO, Anil Dorado CTO, Eugene Steinberg and SVP, Americas, Vasily Sizov. Following the prepared remarks, we will open the call to your questions.

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

Please note that today's conference call is being recorded. Statements. This includes our business and 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. During this call, we will discuss certain non GAAP measures of our performance.

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

GAAP to non GAAP financial reconciliations and supplemental financial information are provided in the earnings press release and the eight ks filed with the SEC. You can find all the information I just described in the Investor Relations section of our website. I now turn the call over to Leonard, our CEO.

[Leonard Livschitz, CEO at Grid Dynamics]

Thank you, Carrie. Good afternoon, everyone, and thank you for joining us today. I'm delighted to share that Green Dynamics delivered another strong quarter, exceeding our own outlook and Wall Street expectations on revenue and non GAAP EBITDA. This was our second consecutive quarter of $100,000,000 in quarterly revenue or more. There were many positive trends, several of which I will highlight on the call today.

[Leonard Livschitz, CEO at Grid Dynamics]

I'm sure many of you are interested in knowing how the current macro environment is impacting our company. 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 customer specific trends. In other words, the patterns in the demand from our customers and the resulting monthly billable head count shaped the quarter, with the ongoing tariff issues having minimal impact. Our laser focus on technology and engineer excellence continues to ensure our success with our clients. Furthermore, the hundred million dollar quarterly milestone would not have been possible without the dedication of our global teams.

[Leonard Livschitz, CEO at Grid Dynamics]

I'm deeply grateful for their outstanding efforts and incredibly proud what we have achieved together. Now, let me provide you with some granular commentary around the demand environment. Every year, the first quarter is influenced by a degree of seasonalities as our customers are establishing their yearly spend. Consequently, we typically start off slow in January, as the quarter progresses, business trends improved. Contrary to historic trends, we started January strong in terms of billable positions.

[Leonard Livschitz, CEO at Grid Dynamics]

That said, in February, we witnessed some changing priorities as the start of the year impacted some of clients. In March, we signed several sizable new deals with existing and new customers. These deals span across industry verticals that included automotive, financial and CPG, and these included engagement with AgenTeq AI, cloud migration, and supply chain applications. Also, for the first time in the company's history, three of our top 10 customers are in the financial industry. After setting record levels in late twenty twenty four, the company once again attained its highest ever billable engineering headcount, a leading indicator of future growth.

[Leonard Livschitz, CEO at Grid Dynamics]

Our second quarter outlook reflects these trends. I'm pleased to share that our acquisitions are performing well. As I mentioned previously, with both acquisitions, we are anticipating realizing synergies more quickly than with any of our past acquisitions, and I am happy to report that we are well on track in delivering against the goal. Argentina based mobile computing, acquired in October of last year, enhanced our follow the sun capabilities. In the first quarter, we enhanced our sales team and talent acquisition teams to support the incremental demand.

[Leonard Livschitz, CEO at Grid Dynamics]

Additionally, in the quarter, we successfully integrated engineering teams to support our enterprise accounts based out of The United States. UK based Juxed, 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 acquiring Juxed, several global banks based in The U. S.

[Leonard Livschitz, CEO at Grid Dynamics]

Have expressed interest in working with Grid Dynamics. In the first quarter, we initiated several new projects across multiple global banks. We expect the customer to continue ramping their business throughout 2025. Coming to AI. Our AI initiatives continue to gain significant tractions across our customer base, with our pipeline of opportunities growing steadily quarter over quarter.

[Leonard Livschitz, CEO at Grid Dynamics]

We are seeing a clear shift from proof of concept to enterprise scale implementations that deliver measurable business outcomes. Our primary focus areas include AI based search solutions that consistently open doors to new accounts. A Jentic 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 capabilities. These implementations underscore our ability to move clients beyond basic AI applications to sophisticated solutions that deliver substantial business impact in area ranging from sales enablement to supply chain optimization and development productivity. Our CTO, Eugene Steinberg, who is on the call today, will provide you more color.

[Leonard Livschitz, CEO at Grid Dynamics]

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 focused CTO driven teams creating innovative artifacts, training engineers for specific flavors of AI implementation, and newer training resources with university. I am happy to report that for 2025, we are 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 first half and expect the ramp up of several deals signed recently to assist us in achieving our outlook.

[Leonard Livschitz, CEO at Grid Dynamics]

We acknowledge the ongoing uncertainty related to the macro environment. 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 ones. Partnerships. 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 2025, mirroring our historic trends.

[Leonard Livschitz, CEO at Grid Dynamics]

We are 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. We engaged in several conversations with Google, clients, and prospects, which we expect to translate into expanded revenues. Number two, European business.

[Leonard Livschitz, CEO at Grid Dynamics]

We successfully completed B2C multi brand digital commerce replatforming for the European brands of a major global automotive part distributor. We successfully launched Agenty 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. At a 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 the hyperscalers. Number three, India expansion.

[Leonard Livschitz, CEO at Grid Dynamics]

India is one of the top locations and it continues to attract talent as our other European locations, especially in AI, Gen AI data, cloud and cybersecurity. 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, 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. 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 AgenTeq digital platform engineering at enterprise scale.

[Leonard Livschitz, CEO at Grid Dynamics]

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 six months and train interns in solving real world problems. In the first quarter, out of 11,000 applications received, we selected several hundred gifted individuals.

[Leonard Livschitz, CEO at Grid Dynamics]

Additionally, many of the interns graduating from our training were placed in billable roles at the clients. Now let me turn over the call to Vasily, who will talk about notable projects during the quarter.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

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.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

For a leading luxury retail group, Grid Dynamics transform 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. 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.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

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. For another client, a leading US 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 Vertex AI.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

That solution analyzes prior clicks, surveys, and local inventory to recommend the ideal product and bundled offers. We estimate that this platform will drive up to a 10% increase in user engagement and up to a 3% boost in revenues. Now let me turn this call over to our chief technology officer Eugene Steinberg. Eugene?

[Eugene Steinberg, Chief Technology Officer at Grid Dynamics]

Thank you, Vasily. Good afternoon, everyone. I'm honored to join this call as Grid Dynamics' new chief technology I've been with Grid Dynamics since its founding and helped establish our unique engineering culture and technology practices. 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 Southern clients. As Rajiv transitions to lead our APAC expansion, I'm excited to build upon his foundation and drive our technology strategy forward.

[Eugene Steinberg, Chief Technology Officer at Grid Dynamics]

Let me outline five strategic priorities that will guide our technology direction. First, industry diversification. While maintaining our strength in retail and TMT, 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. Second, amplify our offerings with AI.

[Eugene Steinberg, Chief Technology Officer at Grid Dynamics]

We are implementing our AI as a Spice strategy, infusing AI capabilities throughout our service portfolio and engineering practices. Our engineering led approach delivers end to end AI powered business solutions rather than fragmented experiences. Our GridU learning platform provides AI training for all engineering disciplines, enabling every team member to leverage AI in their work. Third, operational excellence through AI. We are applying our AI expertise internally with our in house Agenetic AI platform that drives efficiency while showcasing our capabilities to our customers.

[Eugene Steinberg, Chief Technology Officer at Grid Dynamics]

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 competency. Fourth, strengthening tactic technical leadership. Our CTO mentorship program expands our ranks of project and account starters, technical leaders who identify opportunities and grow client engagements. Our global talent network across 19 countries gives us access to exceptional emerging talent that we nurture through focused development programs.

[Eugene Steinberg, Chief Technology Officer at Grid Dynamics]

Fifth, thought leadership. Our technology point of view broadcasting and dynamic talks program established Grid Dynamics as the technology partner of choice. These initiatives generate quality leads and partnership opportunities. What B 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 02/2017, giving us deeper expertise and proven methodologies for ex implementing AI at enterprise scale.

[Eugene Steinberg, Chief Technology Officer at Grid Dynamics]

We are seeing strong momentum in several key areas. AI based search solutions remain a key entry points for new clients. We expand those relationships into broader engagements, including commerce platforms, front end modernization, data engineering and catalog enrichment. Adjunctika 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.

[Eugene Steinberg, Chief Technology Officer at Grid Dynamics]

These systems drive operational improvements and enhance customer experience. Enterprise Agenic AI solutions are seeing substantial demand. For example, we recently launched an Agenic AI system for leading specialty retailer. This system coaches sales associates through AI powered role playing to provide product and services knowledge and salesmanship training and improve customer interactions. AI enabled development tools accelerates software deliveries through custom tools for legacy systems modernization and end to end quality engineering.

[Eugene Steinberg, Chief Technology Officer at Grid Dynamics]

These engagements often expand into broader digital transformation initiatives. 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 clients. Thank you. And let me turn come back to Anil who will talk about financials.

[Anil Doradla, CFO at Grid Dynamics]

Good afternoon, everyone. Our first quarter results exceeded our expectations both on revenue and non GAAP EBITDA. We recorded revenues of $100,400,000 slightly ahead of our guidance range of $98,000,000 to $100,000,000 On a 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 bps and 26 bps of FX related headwinds, respectively.

[Anil Doradla, CFO at Grid Dynamics]

Our non GAAP EBITDA came in at $14,600,000 outperforming our guidance range of $12,900,000 to $13,900,000 In the first quarter, we benefited from timing of revenue recognition with some of our fixed price contracts in line with project milestone completions. 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 basis. The year over year growth was primarily driven by strong demand from our specialty retail customers, along with contributions from new client engagements. Finance contributed 24.9 of total revenues for the first quarter of twenty twenty five and became the second largest vertical.

[Anil Doradla, CFO at Grid Dynamics]

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 that added global banking customers along with strength from our FinTech and insurance customers. TMT accounted for 23.5% of revenues in the first quarter and remained flat compared to the fourth quarter of twenty twenty four. On an year over year basis, TMT declined by 1.8%. Turning to the remaining verticals, CPG and manufacturing represented 10.7% of our revenues in the first quarter.

[Anil Doradla, CFO at Grid Dynamics]

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. Other vertical contributed 7.1% of total revenues, remained 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. And finally, healthcare and pharma made up 2.4% of our revenues for the quarter.

[Anil Doradla, CFO at Grid Dynamics]

We ended the first quarter with a total headcount of 4,926, up from 4,730 employees in the fourth quarter of twenty twenty four and up from 3,892 in the first quarter of twenty twenty four. At the end of the first quarter of twenty twenty five, our total U. S. Headcount was three fifty four or 7.2% of the company's total headcount versus 8.5% in the year ago quarter. Our non U.

[Anil Doradla, CFO at Grid Dynamics]

S. Headcount located in Europe, Americas and India was 4,572 or 92.8%. In the first quarter, revenues from our top five and top 10 customers were 35.656.6% respectively versus 39.655.3% in the same period a year ago respectively. During the first quarter, we had a total of two zero four customers, down from two eleven in the fourth quarter of twenty twenty five and two ten in the year ago quarter. The year over year decline in the number of customers was primarily driven by our continued efforts to rationalize our portfolio of nonstrategic customers.

[Anil Doradla, CFO at Grid Dynamics]

Moving to the income statement, our GAAP gross profit during the quarter was $37,000,000 or 36.8% compared to $37,000,000 or 36.9% in the fourth quarter of twenty twenty four and $27,700,000 or 34.7% in the year ago quarter. On a non GAAP basis, our gross profit was 37,600,000.0 or 37.4% compared to $37,600,000 or 37.5% in the fourth quarter of twenty twenty four and up from $28,100,000 or 35.3% in the year ago quarter. Non GAAP EBITDA during the first quarter that excluded interest income and expenses, provision for income taxes, depreciation and amortization, stock based compensation, restructuring, expenses related to the geographic reorganization and transaction and other related costs was $14,600,000 or 14.5% of revenues, down from $15,600,000 or 15.6% of revenues in the fourth quarter of twenty twenty four and up from $10,300,000 or 12.9% 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 expenses. Our GAAP net income in the first quarter was $2,900,000 or $03 per share based on a diluted share count of 87,800,000.0 shares compared to the fourth quarter net income of $4,500,000 or $05 per share based on a diluted share count of $83,800,000 and a net loss of $3,900,000 or $05 per share based on 76,200,000.0 diluted shares in the year ago quarter.

[Anil Doradla, CFO at Grid Dynamics]

Our sequential decrease in GAAP net income was due to higher levels of operating costs, including stock based compensation. On a non GAAP basis, in the first quarter, our non GAAP net income was $10,000,000 or $0.11 per share based on 87,800,000.0 diluted shares compared to the fourth quarter non GAAP net income of $10,300,000 or $0.12 per share based on 83,800,000.0 diluted shares and $7,600,000 or $0.10 per share based on 78,400,000.0 diluted shares in the year ago quarter. On 03/31/2025, our cash and cash equivalents totaled $325,500,000 down from $334,700,000 on 12/31/2024. Coming to the second quarter guidance, we expect revenues to be in the range of 100,000,000 to $102,000,000 We expect our recent acquisitions contributing roughly 12% of the revenues. We expect second quarter non GAAP EBITDA to be in the range of $12,500,000 to $13,500,000 For Q2 twenty twenty five, we expect our basic share count to be in the range of 84,000,000 to $85,000,000 and our diluted share count to be in the range of 88,000,000 to 89,000,000 For 2025, we are maintaining our full year revenue outlook of $415,000,000 to $435,000,000 that we provided in February.

[Anil Doradla, CFO at Grid Dynamics]

The revenue outlook represents a growth of 18.4% to 24.1% on a year over year basis. At the midpoint of $425,000,000 we expect our 2025 revenues to grow by 21.2% on a year over year basis. That concludes my prepared remarks. We are now ready to take questions.

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

Thank you, Anil. As we go into the Q and A session of this call, I will first announce your name. At that point, please unmute yourself and turn on your camera. The first question comes from Brian Bergen of TD Cowen.

[Bryan Bergin, Managing Director at TD Cowen]

Guys. Good to see you. Thank you.

[Anil Doradla, CFO at Grid Dynamics]

Hey, Brian.

[Anil Doradla, CFO at Grid Dynamics]

I'll kick off.

[Bryan Bergin, Managing Director at TD Cowen]

Why don't we try digging in more on client behavior? If we can dig in as far as clients activity through the month. I know, Leonard, you had some of that commentary, but but then into April, can you go into more details that relates to the pace of client decision making? And then just on the margin, kind of that deferral cancellation question. Obviously, you guys affirm the outlook for the year, so it sounds good.

[Bryan Bergin, Managing Director at TD Cowen]

But if you could give more detail on that behavior, it would be helpful.

[Leonard Livschitz, CEO at Grid Dynamics]

Alright. I'll I'll answer the first part, and I'll have Anil to comment on the margins. So as I mentioned about the the clients in general, you know, we are we just finished April. So we're gonna have data for three months of the q one and some more information about April as well. Obviously, it's a very fluid situation, but right now, we haven't seen any major impact of the recent economic political activities.

[Leonard Livschitz, CEO at Grid Dynamics]

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 gonna be happening soon with additional impacts, but I tell you that with my personal conversation with the leadership of the clients and my executive team conversation with other executive of our clients, pretty stable and confident. Yeah. So that's pretty much the best way I can do.

[Leonard Livschitz, CEO at Grid Dynamics]

I'm sure you'll have some follow-up questions, but let's I'll to address pretty So

[Anil Doradla, CFO at Grid Dynamics]

so, Brian, you said, some deferrals. So can you, I'm trying to understand. Are you talking about, can you can you just go through that?

[Bryan Bergin, Managing Director at TD Cowen]

Yeah. Not

[Bryan Bergin, Managing Director at TD Cowen]

yeah. Sure. I didn't I didn't mean kinda 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 maybe though I will follow-up, Leonard, a little bit on the on the guidance for the year.

[Bryan Bergin, Managing Director at TD Cowen]

So just based on what you do see for 2025 and and the growth guidance midpoint that you have, how much of that work is is 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?

[Leonard Livschitz, CEO at Grid Dynamics]

Yeah. I mean, you know our business dynamics well. Contractually committing only works if there is a, you know, the more stable business. Right? So, obviously, all the budgets which we are talking about, they are being committed.

[Leonard Livschitz, CEO at Grid Dynamics]

Right? So there there is a there is a longer term arrangement on the on the deliverables. We sell them to a few months' projects anymore. It's not, like, five, ten years ago. So all the programs, especially on a plat replatforming, on implementation of the AI technologies, on moving forward with, you know, various cloud solutions, you know, recently, Agendaq AI is a little bit different, but they're all part of the longer term plan.

[Leonard Livschitz, CEO at Grid Dynamics]

And the plan comes from the business decisions. Again, the business decisions have been made for 2025, And that's gonna result in a good January unseasonably good January. We will 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 the adjustments because most of them, the fiscal year starts in February.

[Leonard Livschitz, CEO at Grid Dynamics]

But overall, the ramp up, which we expected in March continues into April and, you know, with plan to May as well. So as far as annual guidance, Brian, I I think there are a couple important points I I have to mention. Look. We haven't been in a 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 confidence?

[Leonard Livschitz, CEO at Grid Dynamics]

So we shared the confidence in our guidance with a high level of conservatism when we did it a quarter ago. That concern is still present, but maybe not to the same level of conservatism as as a quarter ago. So we we have a still, you know, pretty good run-in terms of the understanding how we're gonna arrive with the numbers. And I'm talking about the business we're not just observing today, but we know in the not just in the pipeline, but in execution stage. Right?

[Leonard Livschitz, CEO at Grid Dynamics]

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 gonna be. The confidence there, but, ultimately, we're not reading on, you know, 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 a customer revenue creation, we have maybe a little bit more confidence than some others.

[Bryan Bergin, Managing Director at TD Cowen]

Okay. Okay. That's clear. That that's helpful as as it relates to the initial outlook you gave. Understand that.

[Bryan Bergin, Managing Director at TD Cowen]

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 February and maybe for the balance of the year. How are you thinking about that versus balancing utilization and and bench optimization?

[Leonard Livschitz, CEO at Grid Dynamics]

Well, look. The the hiring machine, as you know, with Grid Dynamics, has been pretty consistent. We've been blessed not to go through a lot of, you know, rationalization up and down depending on the flavor of the day. So we're we're we've been very consistent with the internship program, with the Green Dynamics University, with Green Dynamics Labs, with rotation of technology, with expansion on technology. So the technical talent is harder to acquire but tend to stand longer if the projects are there.

[Leonard Livschitz, CEO at Grid Dynamics]

Right? So, obviously, region to region depend. You know, we there there's no there's no, you know, secret. There are certain regions. You need to put a little bit more effort to build that stability.

[Leonard Livschitz, CEO at Grid Dynamics]

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 many times more now, we really don't demand 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 fluid. That helps us to kind of stay strong with the streamline of hiring.

[Bryan Bergin, Managing Director at TD Cowen]

Okay. Okay. Makes sense. Thank you for the all the detail.

[Leonard Livschitz, CEO at Grid Dynamics]

Of course.

[Anil Doradla, CFO at Grid Dynamics]

Thank you, Brian.

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

Thank you, Brian. And the next question comes from Puneet Jain of JPMorgan. Puneet, please turn on your camera and unmute yourself. Thank you.

[Puneet Jain, Associate - Equity Research at JP Morgan]

Hey. Thanks for taking my question and 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.

[Puneet Jain, Associate - Equity Research at JP Morgan]

Are you seeing, like, clients could be prioritizing more cost cutting deals instead of instead of revenue generating? Any change that you have seen in last one month, what is in q one?

[Leonard Livschitz, CEO at Grid Dynamics]

I'm gonna answer your question in generic, but I will have Vasily to talk about Apple. It's his baby binge from the from the day we started the account. So so the 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. There was a nice booth, and we met many clients there as well, not just specifically related to individual projects.

[Leonard Livschitz, CEO at Grid Dynamics]

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, you know, dependency on labor in China is much lesser than it used to be. But in our clients, we ask this question specifically. It's usually high single digits.

[Leonard Livschitz, CEO at Grid Dynamics]

Again, this is not my field of. That's what they're telling me. Now the other, you know, country is also a bit more questionable, but we're not, you know, feeding, you know, Amazon and Stein, you know, Stein with some kind of available end products. So we're pretty stable there. Again, the supply, the logistics, we all know, we're in the news that, you know, amount of the, you know, the containers is is lowering.

[Leonard Livschitz, CEO at Grid Dynamics]

So what does it mean? We we certainly believe that we need to be very careful in terms of understanding the business. But as of today, May 1, we're good. Now Apple is a bit interesting story, which is, again, it's it's quite good for us, and you see the announcements and all this good stuff. But I don't wanna steal this under from, Vasilis.

[Leonard Livschitz, CEO at Grid Dynamics]

So please, Vasilis.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

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 it's going to be less affected. That's our expectation at least.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

And so far as of today, we haven't heard, anything related to any any expected slowdowns. So that's the fact.

[Puneet Jain, Associate - Equity Research at JP Morgan]

Okay. No. That's very helpful. And then it seems like on delivery side, like, rest of the world, which I'm assuming most of it is India, grew nicely in the quarter, like, added, like, hundred plus employees on sequential basis. And with Rajiv also focusing more on India delivery from here on, How should we think about your India at the delivery center?

[Puneet Jain, Associate - Equity Research at JP Morgan]

Like, can it ramp like, how large can it become can it become, like, the largest location for you over next few years?

[Leonard Livschitz, CEO at Grid Dynamics]

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, you know, he came back to the role many years later. He's more mature and definitely positions and a a technology capabilities as a leader, not just a scientist. And you guys know Eugene well. So there are a couple reasons why Rajiv is going to be in India, but it's not delivered.

[Leonard Livschitz, CEO at Grid Dynamics]

So so the number one priority is scaling technical talent in a 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 region which we need to scale technology capabilities because we are truly follow the sound strategy. I would not deviate it from one region to another, whether it's Latam, India, Europe, or whatever we're gonna end up in next. Because if if we're not the same, it's not breed the name of DNA.

[Leonard Livschitz, CEO at Grid Dynamics]

So we we continue to push hard with many facets to grow India with a equal level of technology capabilities, and we have three locations. Right? So whether Bangalore or Hyderabad or Chennai, you know, they're well they're all not the same. But for the size of Grid Dynamics, we have no brilliance to tap it. So that's his number one priority.

[Leonard Livschitz, CEO at Grid Dynamics]

Number two priority, obviously, there are we have a large number of GCCs. And GCCs are very critical for our business because many decision making process is happening right now in India. So Rajeev was instrumental in working there, and it's easier when you are in your home base in Bangalore. We have a nice office there. And then sit in Jersey and going back and forth.

[Leonard Livschitz, CEO at Grid Dynamics]

It made a lot of sense. And third one, he's really managing director of APAC. So I just don't want people think it's just 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 it's a very fundamental thing. I trust Raju.

[Leonard Livschitz, CEO at Grid Dynamics]

He's a very good friend. So the delivery remains as a global organization, and we're doing because Rakove is there. By the way, very likely, you will hear from him next time. As you noticed, I tried to rotate the executives and, you know, there's a size of the table. It's only right now.

[Leonard Livschitz, CEO at Grid Dynamics]

So it used to be two. Now we have two tables. It's four. Right? And I just want you guys to understand it's not twenty fifth's '20 it's gonna be twenty fifth's, you know, event for Anil and Leonard.

[Leonard Livschitz, CEO at Grid Dynamics]

We have a really great team in the company. So Vadim is in hell. He's a great leadership person in India. We trust him more humbly, 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.

[Leonard Livschitz, CEO at Grid Dynamics]

We are basically working to complement local decision making in India. So very seldom when we have just Indian team or just European team or digital temp team because we're trying to build this McKinsey, you know, management idea. But for GCC's local, it makes sense to have more talented people in India. So it's not a staffing. It's growth.

[Leonard Livschitz, CEO at Grid Dynamics]

Whether it's become the number one country in the world, absolutely, it will. I mean, it's it's like on the country basis, who can compete? You know, 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 gonna do the balance work because it depends on the on the customer base.

[Leonard Livschitz, CEO at Grid Dynamics]

But the growth in India, not absolute numbers, but percentage numbers, is greatly driven by scaling technology capabilities. Sorry. It's a long answer, but I just wanted to use the whole overview of what we do in India.

[Puneet Jain, Associate - Equity Research at JP Morgan]

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 four to 9% on average sequential basis in second half. So what drives this visibility on second half ramp?

[Puneet Jain, Associate - Equity Research at JP Morgan]

Like, which type of customers existing new, which verticals, regions will drive that high growth in second half of this year?

[Leonard Livschitz, CEO at Grid Dynamics]

Do you wanna get the financial answer or business answer? That's your choice. Which one?

[Puneet Jain, Associate - Equity Research at JP Morgan]

I'll I'll have both.

[Leonard Livschitz, CEO at Grid Dynamics]

No. No. It's not bad. Alright. So we'll have your friend to answer first.

[Leonard Livschitz, CEO at Grid Dynamics]

So then, Anja, please give me the financial answer.

[Anil Doradla, CFO at Grid Dynamics]

So look, Puneet. Let's look at the range that we have. Right? Four fifteen to four thirty five. Very simple.

[Anil Doradla, CFO at Grid Dynamics]

You know, I know you you 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 hundred, hundred two, that's 203. Right?

[Anil Doradla, CFO at Grid Dynamics]

If you look at the first half versus second half, you have three 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 year, that'll give me some, tailwind. 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.

[Anil Doradla, CFO at Grid Dynamics]

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. Now there are many other business aspects that I'm not taking into account and many other positive things, but I'll pass it on to Leonard who'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 numbers.

[Leonard Livschitz, CEO at Grid Dynamics]

Alright. So the you heard the financial answer. Now the business answer. We grow on all the fronts. Even in q one, if you look at q one versus q four, it's it's a flattish quarter.

[Leonard Livschitz, CEO at Grid Dynamics]

Right? I mean, numbers don't don't lie. But the dynamics was very interesting. There were a couple of clients where where there were some resets from February because of their internal challenges to which we're in a way to, you know, recover it from there, and we had a growth. Now q two, we do plan quite nice growth in a few accounts, but we also anticipate more or two ramp downs.

[Leonard Livschitz, CEO at Grid Dynamics]

This usually happens. Now by the end of this q two, we definitely expect the ramp up. Now which way it's gonna go? Is it gonna be, again, a slow ramp up or a faster ramp up? We don't have it right now.

[Leonard Livschitz, CEO at Grid Dynamics]

But we don't anticipate a slowdown in in the second half unless, you know, hell breaks loose. And excuse me, there's some other and and and not anticipate events happen. So we are not really conservative internally because we continue spending, but we wanna be very careful not to do what sometimes happens. People get excited too much about throwing numbers, then they have to, you know, restart the guidance, then they have to modify something. But it's it's dealing with you guys is not as a significant challenge as internally to disturb the process.

[Leonard Livschitz, CEO at Grid Dynamics]

So we're bullish on a on a growth. We believe it it is happening right now. We're bullish on a growth in a not just, you know, not a traditional retail and CPG, but other segments, which is even as nice to diversification. But, you know, when it comes to number, you know, Anil is a king. She wants to be something which we will not be looking with excuses later.

[Leonard Livschitz, CEO at Grid Dynamics]

That's pretty much where we are.

[Puneet Jain, Associate - Equity Research at JP Morgan]

That's fair. Thank you so much.

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

Thank you, Puneet. Thank you. The next question comes from Mayank Tandem of Needham. Go ahead, Mayank.

[Mayank Tandon, Senior Analyst at Needham & Company]

Great. Thanks. Good to see you guys.

[Mayank Tandon, Senior Analyst at Needham & Company]

Congrats on the quarter.

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

Thanks, Mike.

[Mayank Tandon, Senior Analyst at Needham & Company]

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 client activity?

[Leonard Livschitz, CEO at Grid Dynamics]

Of course. By the way, guys, next time, I'm gonna bring CTO. We're not gonna ask him. So, you know, don't don't do you know, he feels like a a warped here. Yeah.

[Leonard Livschitz, CEO at Grid Dynamics]

Yeah.

[Anil Doradla, CFO at Grid Dynamics]

So So, Mike, you ask one question on AI, please.

[Leonard Livschitz, CEO at Grid Dynamics]

I am soliciting you guys to not only worry about what's gonna happen with the tariffs, but also understand what value would bring this. There's a lot of really cool stuff. Again, maybe it's gonna 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 logos.

[Leonard Livschitz, CEO at Grid Dynamics]

So there there are two parts of new logos. As you know, Grid Dynamics, and you've been with us for a very long time from the beginning, has a fairly generic strategy, which called eighty fifteen five. 80, it's a stable business with the growth of the matured accounts of the revenue, 15% something we acquired from the previous calendar year roughly, and 5% in new logos, like brand new logos. So the on the brand new logos in q one, it was a very minimal financial impact, which is usually it is the case. If you look at the ramp up, if we don't get a lot of contribution by q three, then this 5% is going to be very difficult.

[Leonard Livschitz, CEO at Grid Dynamics]

So 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 q one and going into q two as well. And the reason being is we're much more diversified in verticals. You know?

[Leonard Livschitz, CEO at Grid Dynamics]

And it's not just the verticals. You know? When we talk about the the fintech, when we talk about technology, when we talk about CPGs, now we start talking about manufacturing, where we we we didn't forget the, you know, even the health care because some of the payment systems, the new acquired accounts, they're directly tied tied to the medical field there, you know, 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 a health insurance payment, logistics, and all this stuff. So the business are becoming more compounded.

[Leonard Livschitz, CEO at Grid Dynamics]

Pharma, still small, but the number of accounts growing. And why? Because, again, we're applying the same algorithms and now, you know, the the AI accelerators which we put in place. So the the short answer for your question, we got a good uplift from the accounts 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 as a brand new logos in 2025.

[Anil Doradla, CFO at Grid Dynamics]

And and let me add one thing to that, Mayank. You see, the definition of our logo initial when we come are significant enterprises. So we in the quarter, we did add. We did add logos, but internally, we don't wanna each time we have a logo, we're just not gonna come on and talk about it. We Leonard makes his comments, and we we these are significant enterprise, logos.

[Anil Doradla, CFO at Grid Dynamics]

So in the quarter, we had, and we did not believe, that it elevated the talk, but there were additions.

[Leonard Livschitz, CEO at Grid Dynamics]

And and when there there is a big logo and a big enterprise, we just started. We'll also be a little bit careful because, you know, you guys, as we do, we don't like infant mortality. Right? So I don't wanna go through that. Oh, we had these great guys, and they're fantastic business, and they have, you know, $50,000,000,000 revenue and then something and we're silent two quarters later.

[Leonard Livschitz, CEO at Grid Dynamics]

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 I'm pretty satisfied with this rate of growth of innovative clients which we acquired from 2024.

[Mayank Tandon, Senior Analyst at Needham & Company]

That's a very helpful color. Thank you so much for that. I have one quick follow-up for you, Anil, around margins. How should we think about the cadence of gross margins? What are the puts and takes?

[Mayank Tandon, Senior Analyst at Needham & Company]

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.

[Anil Doradla, CFO at Grid Dynamics]

So sure. Let's talk about, the, the q one to q two. Right? Now as I said in my prepared remarks, we benefited from, the timing of some of my fixed price, contracts. Right?

[Anil Doradla, CFO at Grid Dynamics]

So as you can see, q one was, what, 37.4%, which is kind of flattish over q four. And, historically, you always see that as we go from q four to q one, there's compression. Right? Now if you look at that moment, there were, you know, hundred plus bps and over margin movement because of that particular thing. That is one one one thing.

[Anil Doradla, CFO at Grid Dynamics]

Now as we go from q one to q two, this year, we don't have a little uplift on the number of days. So it's kind of flattish. You know, again, year to year, it might depend on that. The the other thing is that we are making investments as we speak right now. You know, there's a lot of stuff going on on AI.

[Anil Doradla, CFO at Grid Dynamics]

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 COGS and OpEx. And as you can see, business is picking up. So there's question about, you know, the bench has to adjust to the upcoming demand.

[Anil Doradla, CFO at Grid Dynamics]

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 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. Now as I look into the full year. Right?

[Anil Doradla, CFO at Grid Dynamics]

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 quarter to quarter. The only question is what is what do I need to do to support the growth? What do I need to do to support the investments?

[Anil Doradla, CFO at Grid Dynamics]

That's the only question that we debate. But as we progress in the course of the year, yes, you should see margin expansion.

[Leonard Livschitz, CEO at Grid Dynamics]

Right. So, Mike, I also wanna give you, again, a business answer. So it's really it's on Neil's domain. Right? What real for me to ask the question, how quickly we're gonna ramp up India.

[Leonard Livschitz, CEO at Grid Dynamics]

Right? There is another fact, obviously, from the the war which started more than three years ago. We are heading a bit ex excessive number of countries to really clamp down on operating costs beyond the technology. We're not gonna slow down technology. Right?

[Leonard Livschitz, CEO at Grid Dynamics]

This is no way. This is our key, and we 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. However, we anticipate the scaling of the key locations, which is not just India. I mean, LatAm was a great investment into Argentina.

[Leonard Livschitz, CEO at Grid Dynamics]

And we would like to think the way how we planned 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, you know, we we we continue to push hard on the you know, from the two five ten to 10 you know, basic five ten to 20 strategy, which means we wanna build the clients 5 to $20,000,000 annual revenue as a core, at least 5,000,000. That successful implementation is actually picking up a bit too because it's not about client concentration. It's a client meaningful work.

[Leonard Livschitz, CEO at Grid Dynamics]

And operational efficiency, not just the 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. When it comes to variation quarter to quarter, Anil will tell you 20 convincing stories. In next quarter, you'll find another convincing story.

[Leonard Livschitz, CEO at Grid Dynamics]

So the I'm I'm not terribly worried about it. I just wanna make sure we continue to rate grow the business, and we have a net cash generation, which is very critical. We we need to be in the business of self sustainable position. And Anil is doing a fantastic job on on controlling the cost as we continue to expand into the technology world.

[Mayank Tandon, Senior Analyst at Needham & Company]

Great. Thank you so much. Appreciate all the color. Congrats.

[Anil Doradla, CFO at Grid Dynamics]

Question. Wait. No.

[Leonard Livschitz, CEO at Grid Dynamics]

No. It's okay. Let them go. Okay. Pass it

[Mayank Tandon, Senior Analyst at Needham & Company]

on to the others. They're waiting.

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

The next question comes from Maggie Nolan of William Blair. Go ahead, Maggie.

[Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C]

Hi, Maggie. Well, I'll ask a a somewhat engineering question. You talked a lot about your AgenTic AI solutions in several of your examples. Are these custom built by Grid? To what extent are there kind of prebuilt solutions by your partners, and is this a primary driver of your partner revenue growth?

[Executive]

Yeah. Thank you for the question. This Grid Dynamics is mostly working in the mode when we are developing some of the solutions in the kind of from the first principles. 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.

[Executive]

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, engineering company. 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 sources, when it comes to very specific workflows and official solutions do not fit them. And in these cases, we are building custom solutions, like building custom agentic platforms, leveraging a lot of open source components and cloud native services, which deliver and automate those workflows.

[Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C]

Thank you for that. Maybe, Anil, 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?

[Anil Doradla, CFO at Grid Dynamics]

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.

[Anil Doradla, CFO at Grid Dynamics]

I don't know whether

[Leonard Livschitz, CEO at Grid Dynamics]

Hold on.

[Leonard Livschitz, CEO at Grid Dynamics]

Hold on. So, Meg, I know you asked Daniel. He's the wrong guy to ask this question. He's just signing the checks. The guy who really isn't driven the the scale of the fixed bid arrangements, which Anil really alluded to, is Vasily.

[Leonard Livschitz, CEO at Grid Dynamics]

So let Vasily answer because it's very, very critical to understand. It's not just we innovate technology. We do not do 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.

[Leonard Livschitz, CEO at Grid Dynamics]

Sure.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

Thank you, Lauren. 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. And those engagements were pretty small in size, I would say, and they were, like, almost 100% were fixed bid. So nowadays, there is a there is a good understanding of the what the the technology can do for the business.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

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 road map for, building business cases on top of that. And, of course, the customers are not interested in losing the team which build the platform after the implementation just to to to come up with an idea that we need to oh, we need to gather the team together now to build the business cases. 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 business cases and financial impact is is one of the key decision factors when the customers are making decision making decisions on investment in certain areas.

[Vasily Sizov, SVP & Head of Americas at Grid Dynamics]

So that's for sure surely happens.

[Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C]

Thanks, Vasily. 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 talents? Are are you trying to rebalance the pyramid and maybe tie that back to your margin commentary? Thanks.

[Leonard Livschitz, CEO at Grid Dynamics]

We're never satisfied with our pyramids, Megan. You know? Our historic business requires a lot of seasoned experienced people. That's just foundation. But this is inverted pyramid.

[Leonard Livschitz, CEO at Grid Dynamics]

Right? And the inverted pyramid cannot scale as efficient as a traditional pyramid. So we we observed it all 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 the middle guys. Right?

[Leonard Livschitz, CEO at Grid Dynamics]

And what Vasily alluded you, when you start building more longer term fixed capacity programs and project them in business, then you create a more normalized distribution. 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 mid level people. Why? Because good mid level people become more senior people.

[Leonard Livschitz, CEO at Grid Dynamics]

Senior people, usually, you train yourself together with the r and d team. And the junior guys finding, in the market, these sometimes, don't possess the 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 thousands of applicants to create this full body of the top notch intellectually technical, you know, interns. So that that process propagates.

[Leonard Livschitz, CEO at Grid Dynamics]

Now I'm I'm I'm not super happy yet for the full distribution, but I think it became a little bit more normalized as we speak.

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

Ladies

[Cary Savas, Director - Branding and Communications at Grid Dynamics]

and gentlemen, this concludes the Q and A session for today. I will now pass it over to Leonard for closing comments.

[Leonard Livschitz, CEO at Grid Dynamics]

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 call. Thank you.

Participants

Executives

• Cary Savas, Director - Branding and Communications
• Vasily Sizov, SVP & Head of Americas
• Eugene Steinberg, Chief Technology Officer
• Anil Doradla, CFO

Analysts

• Leonard Livschitz, CEO at Grid Dynamics
• Bryan Bergin, Managing Director at TD Cowen
• Puneet Jain, Associate - Equity Research at JP Morgan
• Mayank Tandon, Senior Analyst at Needham & Company
• Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C
• Executive