Grid Dynamics Holdings Inc (GDYN) (Q1 2024) Earnings Call Transcript Highlights: Surpassing ...
Revenue: Q1 revenue of $79.8 million, surpassing guidance of $77-$79 million.
Gross Margin: GAAP gross profit at 34.7%, non-GAAP at 35.3%.
Net Income: GAAP net loss of $3.9 million, non-GAAP net income of $5.2 million.
Earnings Per Share: GAAP loss of $0.05 per share, non-GAAP earnings of $0.07 per share.
Free Cash Flow: Cash and cash equivalents at $249.4 million.
Customer Metrics: Total of 210 customers, with top 5 and top 10 customers representing 39.6% and 55.3% of revenue, respectively.
Headcount: Total headcount at 3,892, with 332 in the U.S. and 3,560 non-U.S.
Q2 Guidance: Revenue expected between $80 million and $82 million, non-GAAP EBITDA between $10.5 million and $11.5 million.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Grid Dynamics Holdings Inc (NASDAQ:GDYN) reported first quarter revenues that exceeded both guidance and Wall Street expectations.
The company secured two multi-million dollar deals with enterprise customers in key verticals, enhancing its market position.
Grid Dynamics Holdings Inc (NASDAQ:GDYN) was recognized by the Everest Group as a leader in Google Cloud Services, validating its specialized capabilities.
The company continues to expand its global footprint, with significant growth in India and strategic expansions in Europe and Latin America.
Partnerships with major hyperscalers and software vendors have been strengthened, contributing to revenue growth and expanding service offerings.
Negative Points
Despite overall growth, certain industry verticals like retail and TMT saw flat or decreased revenue on a year-over-year basis.
The company experienced a decrease in gross margin percentages due to seasonal increases in employee-related costs and FX headwinds.
GAAP net loss for the quarter was reported, indicating challenges in profitability under standard accounting measures.
A decline in the number of total customers from the previous quarter suggests potential issues in customer retention or acquisition.
The company faces ongoing challenges in the manufacturing vertical, indicating a need for strategic improvements to stabilize and grow this segment.
Q & A Highlights
Q: What drove the upside relative to the guidance, considering the sequential growth in Q1 and expected growth in Q2 despite industry sluggishness? A: Leonard Livschitz, CEO of Grid Dynamics, explained that despite budget scrutiny from major global companies, there is a demand for institutionalized technology spending. Grid Dynamics has seen notable examples of clients who started engagements in 2023 or have been long-term clients now projecting budgets for extended periods and engaging in more strategic technology initiatives.
Q: How should we think about the new normal growth for the sector given increasing AI adoption? A: Leonard Livschitz, CEO, mentioned that the choice of models and platforms for AI remains broad, and Grid Dynamics is exploring multiple avenues with clients to find the best solutions. This includes working with various platforms and open-source solutions to tailor services to client needs, which positions Grid Dynamics at the forefront of innovation in the sector.
Q: Can you provide color on whether we should expect further acceleration in the back half of the year? A: Anil Doradla, CFO, indicated that while the company does not provide guidance beyond Q2, the positive trends observed are expected to continue, suggesting a positive outlook for 2024. Leonard Livschitz, CEO, added that the company is prepared for growth, citing increasing billable headcount and internal productivity tools.
Q: What are the drivers behind the success with larger enterprise clients and increasing wallet share? A: Leonard Livschitz, CEO, stated that the success is due to both demand from clients for innovation and Grid Dynamics' ability to deliver successful technology projects. This combination has helped the company to expand its engagement with existing clients and attract new ones.
Q: What is the current status and future outlook for the CPG and manufacturing verticals? A: Anil Doradla, CFO, noted that one of the largest CPG clients has reverted to growth, and the vertical shows signs of stabilization and cautious optimism. Leonard Livschitz, CEO, added that while manufacturing needs more work, the CPG vertical is expected to see significant growth.
Q: How is the company approaching M&A strategy currently? A: Anil Doradla, CFO, emphasized that the company maintains high standards for strategic and capability fit in its M&A activities, focusing on acquiring companies that align well with Grid Dynamics' strategic goals rather than merely increasing revenue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
