Grid Dynamics Reports Second Quarter 2022 Financial Results

Rhea-AI Summary

Grid Dynamics reported a record revenue of $77.3 million for Q2 2022, marking a 62.2% increase year-over-year and an 8.3% sequential rise. This marks the eighth consecutive quarter of record revenue. The non-retail verticals contributed 67.1% of revenue, with notable growth in Technology, Media, and Telecom at 30.2% of revenue. Despite the revenue growth, the company faced a GAAP net loss of $(13.2 million), or $(0.20) per share. Looking ahead, revenue guidance for Q3 2022 is forecasted between $78.5 million and $80.0 million.

Positive

• Record revenue of $77.3 million, up 62.2% year-over-year.
• Non-GAAP net income of $8.2 million, or $0.12 per diluted share.
• Non-GAAP EBITDA increased to $13.3 million, up from $9.7 million in Q2 2021.
• Cash provided by operating activities increased to $15.3 million for the first six months of 2022.

Negative

• GAAP net loss of $(13.2 million), or $(0.20) per share, compared to a net loss of $(1.5 million) in Q2 2021.
• GAAP gross profit margin decreased to 37.3% from 41.5% year-over-year.

Record Revenue of $77.3 million, up 8.3% sequentially and 62.2% year-over-year

SAN RAMON, CA / ACCESSWIRE / August 4, 2022 / Grid Dynamics Holdings, Inc. (Nasdaq:GDYN) ("Grid Dynamics"), a leader in enterprise-level digital transformation, today announced results for the second quarter ended June 30, 2022.

We are very pleased to report another record quarter of revenue in the company's history. Our revenue of $77.3 million in the second quarter of 2022 was up 8.3% on a sequential basis and 62.2% on a year-over-year basis and this marked the eight consecutive quarter of record revenues in the company's history. During the second quarter we witnessed growth across most of our verticals and customers.

Our non-retail industry verticals represented 67.1% of revenue in the second quarter and grew 7.9% on a sequential basis and 48.5% on a year-over-year basis. Totaling 30.2% of our second quarter revenue, the Technology, Media and Telecom ("TMT") vertical grew 9.1% on a sequential basis and 45.2% on a year-over-year basis. During the quarter our largest technology customer continued to grow with us as we expanded into new geographies. Our Retail vertical, at 32.9% of our second quarter revenue, grew 9.2% on a sequential basis and 100.0% on a year-over-year basis. Within this vertical, we witnessed growth across our e-commerce retailers. Our CPG and Manufacturing vertical, representing 20.8% of our second quarter revenue, grew 7.4% on a sequential basis and 62.5% on a year-over-year basis.

"I am proud of our second quarter results. We made significant progress across multiple facets of our business. This includes scaling our global presence with new locations, expanding our partnerships, adding new customers, and flawlessly transitioning a significant proportion of the workforce while continuing to deliver projects in a timely manner. Our company has shown incredible resilience and this is a testament of the company's strong fundamentals. I am also grateful to all our customers. They continue to demonstrate unwavering faith in our capabilities. I greatly appreciate our employees who have shown incredible team spirit and commitment to the business," said Leonard Livschitz, CEO.

Second Quarter of 2022 Financial Highlights

• Total revenue was $77.3 million, a 62.2% year-over-year increase.
• GAAP gross profit was $28.9 million or 37.3% of revenue in the second quarter of 2022 compared to GAAP gross profit of $19.8 million or 41.5% of revenue in the second quarter of 2021. Non-GAAP gross profit was $29.1 million or 37.7% of revenue in the second quarter of 2022 compared to Non-GAAP gross profit of $19.9 million or 41.8% of revenue in the second quarter of 2021.
• GAAP Net loss attributable to common stockholders was $(13.2) million, or $(0.20) per share, based on 67.1 million weighted-average common shares outstanding in the second quarter of 2022 compared to GAAP Net loss of $(1.5) million, or $(0.03) per share, based on 54.4 million weighted-average common shares outstanding in the second quarter of 2021. Non-GAAP Net income was $8.2 million, or $0.12 per diluted share, based on 69.9 million weighted-average common shares outstanding in the second quarter of 2022 compared to Non-GAAP Net income of $6.1 million, or $0.10 per diluted share, based on 61.0 million weighted-average common shares outstanding in the second quarter of 2021.
• Non-GAAP EBITDA (earnings before interest, taxes, depreciation, amortization, other income, fair value adjustments, stock-based compensation, transaction and transformation-related costs as well as geographic reorganization expenses), a non-GAAP metric, was $13.3 million in the second quarter of 2022 compared to Non-GAAP EBITDA of $9.7 million in the second quarter of 2021.

See "Non-GAAP Financial Measures" and "Reconciliation of Non-GAAP Information" below for a discussion of our non-GAAP measures.

Cash Flow and Other Metrics

• Cash provided by operating activities was $15.3 million for the six months ended June 30, 2022, compared to cash provided by operating activities of $6.7 million for the six months ended June 30, 2021.
• Cash and cash equivalents totaled $150.0 million as of June 30, 2022, compared to $153.3 million as of March 31, 2022, and $144.4 million as of December 31, 2021.
• Total headcount was 3,763 as of June 30, 2022, compared with 2,510 employees as of June 30, 2021.

Financial Outlook

• The Company expects revenue in the third quarter of 2022 to be between $78.5 million and $80.0 million.
• Non-GAAP EBITDA in the third quarter of 2022 is expected to be between $12.6 million and $13.6 million.
• For the third quarter of 2022, we expect our basic share count to be in the 67-68 million range and diluted share count to be in the 70-71 million range.

Grid Dynamics is not able, at this time, to provide GAAP targets for net income for the third quarter of 2022 because of the difficulty of estimating certain items excluded from Non-GAAP EBITDA that cannot be reasonably predicted, such as interest, taxes, other income, fair-value adjustments, geographic reorganization expenses, and charges related to stock-based compensation expense. The effect of these excluded items may be significant.

Conference Call and Webcast

Grid Dynamics will host a video conference call at 4:30 p.m. ET on Thursday, August 4, 2022 to discuss its second quarter financial results. Investors and other interested parties can access the call in the following ways: A webcast of the video conference call can be accessed on the Investor Relations section of the Company's website at https://ir.griddynamics.com/ .

A replay will also be available after the call at https://ir.griddynamics.com/ with the passcode $Q2@2022.

About Grid Dynamics

Grid Dynamics (Nasdaq: GDYN) is a digital-native technology services provider that accelerates growth and bolsters competitive advantage for Fortune 1000 companies. Grid Dynamics provides digital transformation consulting and implementation services in omnichannel customer experience, big data analytics, search, artificial intelligence, cloud migration, and application modernization. Grid Dynamics achieves high speed-to-market, quality, and efficiency by using technology accelerators, an agile delivery culture, and its pool of global engineering talent. Founded in 2006, Grid Dynamics is headquartered in Silicon Valley with offices across the US, UK, the Netherlands, Mexico, Switzerland, Central, and Eastern Europe. To learn more about Grid Dynamics, please visit www.griddynamics.com.

To learn more about Grid Dynamics, please visit www.griddynamics.com . Follow us on Facebook , Twitter , and LinkedIn .

Non-GAAP Financial Measures

To supplement the financial measures presented in Grid Dynamics press release in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company also presents non-GAAP measures of financial performance.

A "non-GAAP financial measure" refers to a numerical measure of Grid Dynamics historical or future financial performance or financial position that is included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Grid Dynamics provides certain non-GAAP measures as additional information relating to its operating results as a complement to results provided in accordance with GAAP. The non-GAAP financial information presented herein should be considered in conjunction with, and not as a substitute for or superior to, the financial information presented in accordance with GAAP and should not be considered a measure of liquidity and profitability.

Grid Dynamics has included these non-GAAP financial measures because they are financial measures used by Grid Dynamics' management to evaluate Grid Dynamics' core operating performance and trends, to make strategic decisions regarding the allocation of capital and new investments and are among the factors analyzed in making performance-based compensation decisions for key personnel.

Grid Dynamics believes the use of non-GAAP financial measures, as a supplement to GAAP measures, is useful to investors in that they eliminate items that are either not part of core operations or do not require a cash outlay, such as stock-based compensation expense. Grid Dynamics believes these non-GAAP measures provide investors and other users of its financial information consistency and comparability with its past financial performance and facilitate period to period comparisons of operations. Grid Dynamics believes these non-GAAP measures are useful in evaluating its operating performance compared to that of other companies in its industry, as they generally eliminate the effects of certain items that may vary for different companies for reasons unrelated to overall operating performance.

There are significant limitations associated with the use of non-GAAP financial measures. Further, these measures may differ from the non-GAAP information, even where similarly titled, used by other companies and therefore should not be used to compare our performance to that of other companies. Grid Dynamics compensates for these limitations by providing investors and other users of its financial information a reconciliation of non-GAAP measures to the related GAAP financial measures. Grid Dynamics encourages investors and others to review its financial information in its entirety, not to rely on any single financial measure, and to view its non-GAAP measures in conjunction with GAAP financial measures. Please see the reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures attached to this release.

Forward-Looking Statements

This communication contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results of Grid Dynamics to differ materially from those expected and projected. These forward-looking statements can be identified by the use of forward-looking terminology, including the words "believes," "estimates," "anticipates," "expects," "intends," "plans," "may," "will," "potential," "projects," "predicts," "continue," or "should," or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include, without limitation, the quotations of management, the section titled "Financial Outlook," and statements concerning Grid Dynamics's expectations with respect to future performance, particularly in light of the COVID-19 pandemic and the Russian invasion of Ukraine.

These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside Grid Dynamics's control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (i) Grid Dynamics has a relatively short operating history and operates in a rapidly evolving industry, which makes it difficult to evaluate future prospects and may increase the risk that it will not continue to be successful and may adversely impact our stock price; (ii) Grid Dynamics may be unable to effectively manage its growth or achieve anticipated growth, particularly as it expands into new geographies, which could place significant strain on Grid Dynamics' management personnel, systems and resources; (iii) Grid Dynamics' revenues are highly dependent on a limited number of clients and industries that are affected by seasonal trends, and any decrease in demand for outsourced services in these industries may reduce Grid Dynamics' revenues and adversely affect Grid Dynamics' business, financial condition and results of operations; (iv) macroeconomic conditions, inflationary pressures, and the geopolitical climate, including the impact of the COVID-19 pandemic and the Russian invasion of Ukraine, have and may continue to materially adversely affect our stock price, business operations, overall financial performance and growth prospects; (v) Grid Dynamics' revenues are highly dependent on clients primarily located in the United States, and any economic downturn in the United States or in other parts of the world, including Europe or disruptions in the credit markets may have a material adverse effect on Grid Dynamics' business, financial condition and results of operations; (vi) Grid Dynamics faces intense and increasing competition; (vii) Grid Dynamics' failure to successfully attract, hire, develop, motivate and retain highly skilled personnel could materially adversely affect Grid Dynamics' business, financial condition and results of operations; (viii) failure to adapt to rapidly changing technologies, methodologies and evolving industry standards may have a material adverse effect on Grid Dynamics' business, financial condition and results of operations; (ix) failure to successfully deliver contracted services or causing disruptions to clients' businesses may have a material adverse effect on Grid Dynamics' reputation, business, financial condition and results of operations; (x) risks and costs related to acquiring and integrating other companies; and (xi) other risks and uncertainties indicated in Grid Dynamics filings with the SEC.

Grid Dynamics cautions that the foregoing list of factors is not exclusive. Grid Dynamics cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Grid Dynamics does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Further information about factors that could materially affect Grid Dynamics, including its results of operations and financial condition, is set forth under the "Risk Factors" section of the Company's quarterly report on Form 10-Q filed May 5, 2022 and in other periodic filings Grid Dynamics makes with the SEC.

Contacts

Grid Dynamics Investor Relations:
investorrelations@griddynamics.com

Schedule 1:
GRID DYNAMICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND
COMPREHENSIVE LOSS
Unaudited
(In thousands, except per share data)

		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Revenue		$	77,335			$	47,676			$	148,745			$	86,810
Cost of revenue			48,474				27,879				93,105				51,676
Gross profit			28,861				19,797				55,640				35,134
Operating expenses
Engineering, research, and development			3,840				1,772				6,936				3,555
Sales and marketing			5,132				2,837				9,347				5,869
General and administrative			30,738				13,804				50,003				26,104
Total operating expenses			39,710				18,413				66,286				35,528
Income/(loss) from operations			(10,849	)			1,384				(10,646	)			(394	)
Other expenses			(626	)			(79	)			(1,326	)			(1,129	)
Income/(loss) before income taxes			(11,475	)			1,305				(11,972	)			(1,523	)
Provision for income taxes			1,711				2,788				3,881				2,022
Net loss		$	(13,186	)		$	(1,483	)		$	(15,853	)		$	(3,545	)
Foreign currency translation adjustments, net of tax			(782	)			(35	)			(1,065	)			14
Comprehensive loss		$	(13,968	)		$	(1,518	)		$	(16,918	)		$	(3,531	)
Loss per share
Basic		$	(0.20	)		$	(0.03	)		$	(0.24	)		$	(0.07	)
Diluted		$	(0.20	)		$	(0.03	)		$	(0.24	)		$	(0.07	)
Weighted average shares outstanding
Basic			67,136				54,431				67,028				53,044
Diluted			67,136				54,431				67,028				53,044

Schedule 2:
GRID DYNAMICS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except share and per share data)

		As of
		June 30, 2022				December 31, 2021
Assets
Current assets
Cash and cash equivalents		$	150,018			$	144,364
Accounts receivable, net of allowance of $447 and $315 as of June 30, 2022 and December 31, 2021, respectively			44,160				38,838
Unbilled receivables			4,599				4,475
Prepaid income taxes			1,171				584
Prepaid expenses and other current assets			7,805				4,503
Total current assets			207,753				192,764
Property and equipment, net			7,343				6,169
Operating lease right-of-use assets, net			4,929				-
Intangible assets, net			17,856				19,097
Goodwill			35,958				35,958
Deferred tax assets			3,153				2,731
Other noncurrent assets			1,181				-
Total assets		$	278,173			$	256,719
Liabilities and equity
Current liabilities
Accounts payable		$	3,394			$	2,053
Accrued liabilities			1,932				1,150
Accrued compensation and benefits			18,509				10,562
Accrued income taxes			5,058				1,980
Operating lease liabilities, current			2,053				-
Other current liabilities			7,622				9,599
Total current liabilities			38,568				25,344
Deferred tax liabilities			4,015				4,324
Operating lease liabilities, noncurrent			2,665				-
Total liabilities			45,248				29,668
Stockholders' equity
Common stock, $0.0001 par value; 110,000,000 shares authorized; 67,294,377 and 66,850,941 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively			7				7
Additional paid-in capital			234,869				212,077
Retained earnings/(accumulated deficit)			(760	)			15,093
Accumulated other comprehensive loss			(1,191	)			(126	)
Total stockholders' equity			232,925				227,051
Total liabilities and stockholders' equity		$	278,173			$	256,719

Schedule 3:
GRID DYNAMICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
(In thousands)

		Six Months Ended June 30,
		2022				2021
Cash flows from operating activities
Net loss		$	(15,853	)		$	(3,545	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			3,280				2,100
Operating lease right-of-use assets amortization expense			1,431				-
Bad debt			132				(65	)
Deferred income taxes			(731	)			1,115
Debt issuance cost amortization			20				-
Stock based compensation			25,048				12,346
Change in fair value of warrants			-				839
Changes in assets and liabilities:
Accounts receivable			(5,454	)			(8,779	)
Unbilled receivables			(124	)			(371	)
Prepaid income taxes			(587	)			(229	)
Prepaid expenses and other assets			(3,302	)			(1,666	)
Accounts payable			1,341				1,393
Accrued liabilities			782				358
Accrued compensation and benefits			7,947				1,410
Operating lease liabilities			(1,642	)			-
Accrued income taxes			3,078				376
Other current liabilities			(44	)			1,368
Net cash provided by operating activities			15,322				6,650
Cash flows from investing activities
Purchase of property and equipment			(3,213	)			(1,940	)
Purchase of investment			(1,000	)			-
Acquisition of business, net of cash acquired			-				(30,585	)
Net cash used in investing activities			(4,213	)			(32,525	)
Cash flows from financing activities
Equity issuance costs			-				(465	)
Proceeds from exercises of stock options, net of shares withheld for taxes			830				416
Payments of tax obligations resulted from net share settlement of vested stock awards			(3,086	)			(18,861	)
Payment of contingent consideration related to previously acquired business			(1,933	)			-
Proceeds from debt			5,000				-
Repayment of debt			(5,000	)			-
Debt issuance costs			(201	)			-
Net cash used in financing activities			(4,390	)			(18,910	)
Effect of exchange rate changes on cash and cash equivalents			(1,065	)			14
Net increase/(decrease) in cash and cash equivalents			5,654				(44,771	)
Cash and cash equivalents, beginning of period			144,364				112,745
Cash and cash equivalents, end of period		$	150,018			$	67,974
Supplemental disclosure of cash flow information:
Cash paid for income taxes		$	1,880			$	1,150
Supplemental disclosure of non-cash activities:
Conversion of warrants		$	-			$	918
Fair value of contingent consideration issued for acquisition of business		$	-			$	3,400

Schedule 4:
GRID DYNAMICS HOLDINGS, INC.
RECONCILIATION OF NON-GAAP INFORMATION
Unaudited
(In thousands, except per share data)

		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Revenue		$	77,335			$	47,676			$	148,745			$	86,810
Cost of revenue			48,474				27,879				93,105				51,676
GAAP gross profit			28,861				19,797				55,640				35,134
Stock-based compensation			272				149				521				260
Non-GAAP Gross profit		$	29,133			$	19,946			$	56,161			$	35,394

		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
GAAP net loss		$	(13,186	)		$	(1,483	)		$	(15,853	)		$	(3,545	)
Adjusted for:
Depreciation and amortization			1,691				1,154				3,280				2,100
Provision for income taxes			1,711				2,788				3,881				2,022
Stock-based compensation			16,387				6,675				25,048				12,346
Transaction and transformation-related costs (1)			-				518				-				942
Geographic reorganization (2)			6,053				-				6,975				-
Other expenses (3)			626				79				1,326				1,129
Non-GAAP EBITDA		$	13,282			$	9,731			$	24,657			$	14,994

1. Transaction and transformation-related costs include, when applicable, external deal costs, transaction-related professional fees, transaction-related retention bonuses, which are allocated proportionally across cost of revenue, engineering, research and development, sales and marketing and general and administrative expenses as well as other transaction-related costs including integration expenses consisting of outside professional and consulting services.
2. Geographic reorganization includes expenses connected with military actions of Russia against Ukraine and the exit plan announced by the Company and includes travel and relocation-related expenses of employees from the aforementioned countries, severance payments, allowances as well as legal and professional fees related to geographic repositioning in various locations. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.
3. Other expenses consist primarily of losses and gains on foreign currency transactions, fair value adjustments, and other miscellaneous non-operating expenses and other income consists primarily of interest on cash held at banks.

		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
GAAP net loss		$	(13,186	)		$	(1,483	)		$	(15,853	)		$	(3,545	)
Adjusted for:
Stock-based compensation			16,387				6,675				25,048				12,346
Transaction and transformation-related costs (1)			-				518				-				942
Geographic reorganization (2)			6,053				-				6,975				-
Other expenses, net (3)			626				79				1,326				1,129
Tax impact of non-GAAP adjustments (4)			(1,650	)			301				(2,318	)			(1,717	)
Non-GAAP Net Income		$	8,230			$	6,090			$	15,178			$	9,155
Number of shares used in the Non-GAAP Diluted EPS			69,909				60,996				70,126				60,799
Non-GAAP Diluted EPS		$	0.12			$	0.10			$	0.22			$	0.15

1. Transaction and transformation-related costs include, when applicable, external deal costs, transaction-related professional fees, transaction-related retention bonuses, which are allocated proportionally across cost of revenue, engineering, research and development, sales and marketing and general and administrative expenses as well as other transaction-related costs including integration expenses consisting of outside professional and consulting services.
2. Geographic reorganization includes expenses connected with military actions of Russia against Ukraine and the exit plan announced by the Company and includes travel and relocation-related expenses of employees from the aforementioned countries, severance payments, allowances as well as legal and professional fees related to geographic repositioning in various locations. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.
3. Other expenses consist primarily of losses and gains on foreign currency transactions, fair value adjustments, and other miscellaneous non-operating expenses and other income consists primarily of interest on cash held at banks.
4. Reflects the estimated tax impact of the non-GAAP adjustments presented in the table.

Schedule 5:
GRID DYNAMICS HOLDINGS, INC.
REVENUE BY VERTICALS
Unaudited
(In thousands)

		Three Months Ended June 30,
		2022				% of revenue				2021				% of revenue
Retail		$	25,452				32.9	%		$	12,729				26.7	%
Technology, Media and Telecom			23,391				30.2	%			16,115				33.8	%
CPG/Manufacturing			16,090				20.8	%			9,899				20.8	%
Finance			5,049				6.5	%			4,071				8.5	%
Other			7,353				9.6	%			4,862				10.2	%
Total		$	77,335				100.0	%		$	47,676				100.0	%

		Six Months Ended June 30,
		2022				% of revenue				2021				% of revenue
Retail		$	48,759				32.8	%		$	21,579				24.9	%
Technology, Media and Telecom			44,835				30.1	%			30,526				35.2	%
CPG/Manufacturing			31,069				20.9	%			18,624				21.5	%
Finance			9,576				6.4	%			7,509				8.6	%
Other			14,506				9.8	%			8,572				9.8	%
Total		$	148,745				100.0	%		$	86,810				100.0	%

SOURCE: Grid Dynamics Holdings, Inc.

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FAQ

What were Grid Dynamics' revenue results for Q2 2022?

Grid Dynamics reported revenue of $77.3 million for Q2 2022, an increase of 62.2% year-over-year.

What is the expected revenue for Q3 2022 for GDYN?

Grid Dynamics expects revenue for Q3 2022 to be between $78.5 million and $80.0 million.

What was the GAAP net loss for Grid Dynamics in Q2 2022?

The GAAP net loss for Q2 2022 was $(13.2 million), or $(0.20) per share.

How did non-GAAP EBITDA perform in Q2 2022?

Non-GAAP EBITDA for Q2 2022 was $13.3 million, an increase from $9.7 million in Q2 2021.