GRID DYNAMICS HOLDINGS INC

Previous wording

•We recorded revenues of $79.8 million that remained flat compared to the corresponding period of 2023.

Current wording

•We recorded revenues of $83.0 million that grew 7.4% compared to the corresponding period of 2023.

Previous wording

•Our GAAP and Non-GAAP gross profit margins during the first quarter of 34.7% and 35.3%, respectively, slightly decreased from 35.7% and 36.3%, respectively, compared to the three months ended March 31, 2023. The decline in gross profit margin, both on a GAAP and Non-GAAP basis was driven mainly by increased employee-related costs and foreign currency headwinds.

Current wording

•Our GAAP gross profit margins during the second quarters of 2024 and 2023 were 35.6% and 36.6%, respectively. GAAP gross profit margins during the six months of 2024 and 2023 were 35.1% and 36.1%, respectively. The decline in gross profit margins, both on the quarterly and year-to-date basis was driven mainly by increased employee-related costs.

Previous wording

•We ended the first quarter of 2024 with Non-GAAP EBITDA of $10.3 million, or 12.9% of revenues compared to $10.8 million, or 13.5% of revenues in the corresponding period of 2023. The decline was largely due to decreased gross profits, combined with increased operating expenses, excluding stock-based compensation.

Current wording

•We ended the second quarter of 2024 with Non-GAAP EBITDA of $11.7 million, or 14.1% of revenues compared to $12.0 million, or 15.5% of revenues in the corresponding period of 2023. The decline was largely due to increased operating expenses, excluding stock-based compensation.

Previous wording

Grid Dynamics’ ability to retain and expand its relationships with existing customers and add new customers are key indicators of its revenue potential. During the three months ended March 31, 2024, the total number of customers was 210, down from 220 customers in the same period a year ago. Grid Dynamics’ procurement of new customers has a direct impact on its ability to diversify its sources of revenue and replace customers that may no longer require its services. Grid Dyna mics has a relatively high level of revenue concentration with certain customers and constantly works toward decreasing those levels. During the three months ended March 31, 2024 and 2023, one customer accounted for 10% or more of Grid Dynamics’ revenues in each of the periods indicated. We expect to continue our focus on maintaining our long-term relationships with customers while diversifying our customer base.

Current wording

Grid Dynamics’ ability to retain and expand its relationships with existing customers and add new customers are key indicators of its revenue potential. The total number of customers for the six months ended June 30, 2024 was 220 down from 247 for the six months ended June 30, 2023. Grid Dynamics’ procurement of new customers has a direct impact on its ability to diversify its sources of revenue and replace customers that may no longer require its services. Grid Dyna mics has a relatively high level of revenue concentration with certain customers and constantly works toward decreasing those levels. During the three and six months ended June 30, 2024 and 2023, one customer accounted for 10% or more of Grid Dynamics’ revenues in each of the periods indicated. We expect to continue our focus on maintaining our long-term relationships with customers while diversifying our customer base.

Previous wording

The three months ended March 31, 2024 compared to the three months ended March 31, 2023

Current wording

The three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023

Previous wording

Our CPG and Manufacturing vertical, representing 12.0% of our revenues for the three months ended March 31, 2024, showed decrease of 24.4% compared to the three months ended March 31, 2023. The key reasons for the decline were a combination of macro-related uncertainty resulting in a more cautionary outlook towards spending and customer specific factors at some of our larger customers.

Current wording

Our CPG and Manufacturing vertical decreased 9.5% from $10.9 million during the second quarter of 2023 to $9.8 million during the three months ended June 30, 2024. On a year-to-date basis, the decline of $4.1 million or 17.5% was largely driven by a combination of macro-related uncertainty resulting in a more cautionary outlook towards spending and customer specific factors at some of our larger customers.

Previous wording

During the three months ended March 31, 2024, our sales and marketing expenses increased by $1.7 million as compared to the same period of 2023 and reached $7.3 million. Sales and marketing expenses as a percentage of revenue during the first quarter of 2024 increased by 2.1% to 9.1% from 7.0% in the corresponding period of 2023. The changes were largely driven by increases in sales personnel and new sales initiatives.

Current wording

During the three and six months ended June 30, 2024, our sales and marketing expenses increased by $1.3 million and $3.0 million, respectively, as compared to the same periods in 2023 and reached $7.3 million and $14.6 million. Expressed as a percentage of revenues, our sales and marketing expenses increased by 1.1% and 1.6%, respectively, in the periods indicated above. The changes were largely driven by our investments in our sales and marketing organization including investments in sales personnel and new sales initiatives.

Previous wording

General and administrative expenses decreased from $24.7 million in the first quarter of 2023 to $21.5 million in 2024. The year-over-year decline was largely due to lower levels of stock-based compensation expenses. As a result, expressed as a percentage of revenues, our general and administrative expenses decreased by 3.9% to 27.0% during the three months March 31, 2024 compared to 30.9% a year ago.

Current wording

General and administrative expenses remained relatively on the same level during the three months ended June 30, 2024 reaching $18.1 million in 2024 compared to $17.7 million in the year ago quarter. During the six months ended June 30, 2024, our general and administrative expenses decreased to $39.7 million, representing a decline of $2.8 million or 6.6% as compared to $42.5 million reported in the corresponding period of last year. The decrease in the first half of 2024 was largely due to lower levels of stock-based compensation expenses. As a result, expressed as a percentage of revenues, our general and administrative expenses decreased by 1.1% and 2.7% to 21.8% and 24.3% during the three and six months June 30, 2024, respectively, compared to 22.9% and 27.0% in the year ago periods.

Previous wording

During the three months ended March 31, 2024 we recognized a provision for income tax of $0.9 million compared to $3.7 million in the same period of 2023. The difference in the tax provision was attributable mainly to Section 162(m) compensation deduction limitations, foreign rate differential, and foreign inclusion adjustments.

Current wording

During the three months ended June 30, 2024 we recognized a provision for income tax of $3.5 million compared to $1.7 million in the same period of 2023. During the first half of 2024, we recognized a provision for income tax of $4.5 million compared to $5.4 million during the six months ended June 30, 2023. The difference in the tax provision was attributable mainly to Section 162(m) compensation deduction limitations and foreign inclusion adjustments.

Previous wording

As of March 31, 2024, Grid Dynamics had cash and cash equivalents amounting to $249.4 million compared to $257.2 million at December 31, 2023. Of this amount, $22.1 million and $21.2 million, respectively, was held outside the United States, and included among others the U.K., Netherlands, Switzerland, Poland, India, Mexico, Armenia and other countries. We did not have any debt outstanding under the revolving credit facility at any balance sheet date presented. We believe that our cash and cash equivalents balance and cash generated from operating activities will be sufficient to fund currently expected levels of operating, investing and financing expenditures for a period of twelve months from the date of this filing. However, if our resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing, which may be subject to conditions outside of our control and may not be available on terms acceptable to our management or at all.

Current wording

As of June 30, 2024, Grid Dynamics had cash and cash equivalents amounting to $256.0 million compared to $257.2 million at December 31, 2023. Of this amount, $28.2 million and $21.2 million, respectively, was held outside the United States, and included among others Switzerland, the U.K., Netherlands, India, Armenia, Mexico, Poland and other countries. We did not have any debt outstanding under the revolving credit facility at any balance sheet date presented. We believe that our cash and cash equivalents balance and cash generated from operating activities will be sufficient to fund currently expected levels of operating, investing and financing expenditures for a period of twelve months from the date of this filing. However, if our resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing, which may be subject to conditions outside of our control and may not be available on terms acceptable to our management or at all.

Previous wording

Operating Activities. Net cash provided by operating activities for the three months ended March 31, 2024 decreased by $8.4 million to $3.2 million from $11.7 million provided in the same period of 2023, driven by changes in timing of the employee-related compensations in some of the offshore locations and timing of some customers’ payments.

Current wording

Operating Activities. Net cash provided by operating activities for the six months ended June 30, 2024 decreased by $8.7 million to $13.9 million from $22.6 million provided in the same period of 2023, driven by changes in timing of the employee-related compensations in some of the offshore locations and timing of some customers’ payments.

Previous wording

Investing Activities. Net cash used in investing activities during the first quarter of 2024 primarily reflects our сapital expenditures that increased from $1.6 million during the three months ended March 31, 2023 to $3.2 million in the current year quarter.

Current wording

Investing Activities. Net cash used in investing activities during the first half of 2024 primarily reflects our capital expenditures that increased from $3.8 million during the six months ended June 30, 2023 to $5.8 million in the current year quarter. Net cash used in investing activities during the first half of 2023 was primarily affected by payment of $17.8 million for the acquisition of NextSphere.

Previous wording

Financing Activities. Net cash used in financing activities in the three months ended March 31, 2024 was $7.0 million and reflected the tax withholding obligations due to issuance of shares in connection with vested awards that was $1.4 million lower compared to 2023. We also benefited from proceeds from exercise of stock options that increased by $0.6 million compared to the first quarter of 2023.

Current wording

Financing Activities. Net cash used in financing activities in the six months ended June 30, 2024 was $7.9 million and reflected the tax withholding obligations due to issuance of shares in connection with vested awards that was $4.9 million lower compared to 2023. We also benefited from proceeds from exercise of stock options that increased by $0.7 million compared to the first half of 2023.