Grid Dynamics Holdings, Inc. Q1 FY2025 earnings call

• Grid Dynamics delivered a strong Q1, exceeding outlook and Wall Street expectations on revenue and non-GAAP EBITDA, with second consecutive quarter of $100M+ revenue. • Acquisitions (Mobile Computing and JUXT) performing well, with synergies realized faster than past acquisitions. • AI initiatives gaining traction, with pipeline of opportunities growing and shift from proof-of-concept to enterprise-scale implementations. • Partnerships: partnership-influenced revenue represented 16% of total revenue, with increased traction with hyperscalers like Google. • European business: successful B2C multi-brand digital commerce replatforming and other projects. • India expansion: emerging as a hub for multi-agent, multi-modal platform engineering with recent wins. • Internship program gained momentum, with 11,000 applications received and several hundred interns selected.

Retail remained the largest vertical, accounting for 31.4% of total revenues in the quarter, with revenues growing 28% year-over-year but declining 3.7% sequentially. Finance contributed 24.9% of total revenues, with revenues increasing 7.9% sequentially and 144.3% year-over-year. TMT accounted for 23.5% of revenues, remaining flat sequentially but declining 1.8% year-over-year. CPG and Manufacturing represented 10.7% of revenues, remaining relatively flat sequentially but growing 12.7% year-over-year. Other verticals contributed 7.1% of total revenues, remaining flat sequentially but declining 15.1% year-over-year. Healthcare and Pharma made up 2.4% of revenues for the quarter.

• Second quarter revenues expected to be in range of $100M to $102M, with recent acquisitions contributing ~12% of revenues. • Second quarter non-GAAP EBITDA expected to be in range of $12.5M to $13.5M. • Maintained full-year 2025 revenue outlook of $415M to $435M, representing 18.4% to 24.1% year-over-year growth.

• Uncertainties related to the macro environment, including global economic risks and potential impacts on client spending and decision-making.

Q: When trying to dig into client behavior, especially in April, and margin/deferral cancellation, can you provide more detail?

A: Leonard noted no major impact from recent economic/political activities on clients, with projects of strategic importance continuing uninterrupted. Anil commented on margin dynamics related to timing of revenue recognition and investments.

Q: How is client behavior in Retail and TMT verticals, especially regarding cost-cutting vs revenue-generating deals?

A: Leonard and Vasily discussed that Grid Dynamics' client base is not China-dependent, and Apple-related work is less affected by supply chain issues.

Q: Thoughts on India as a delivery center and its growth?

A: Rajeev's focus on scaling technical talent in India, with India emerging as a hub for multi-agent, multi-modal platform engineering.

Q: Visibility on second half growth and drivers?

A: Leonard and Anil discussed growth on all fronts, with conservative guidance and bullish outlook on growth in non-traditional segments.

Q: New logos and vertical traction?

A: Growth from acquisitions made in late 2024, with diversification across verticals including Fintech, Manufacturing, etc.

Q: Margins cadence and EBITDA margin trends?

A: Anil discussed margin dynamics related to timing of contracts and investments, with expectation of margin expansion as the year progresses.

Q: Agentic AI solutions, pricing models, and talent balance?

A: Eugene explained Agentic AI solutions are custom-built, with open source and cloud-native components. Vasily and Leonard discussed pricing models and talent distribution focusing on mid-level and interns.