• Revenue: Achieved record revenues of $100.3 million in Q4 2024, surpassing guidance of $95 million to $97 million.
• Revenue Growth: Year-over-year growth of 28.5%; organic revenue growth of 12.8% year-over-year.
• Non-GAAP EBITDA: $15.6 million, exceeding guidance range of $13.5 million to $15.5 million.
• Retail Vertical Revenue: Accounted for 32.6% of Q4 revenues, with sequential growth of 9.7% and year-over-year growth of 33.1%.
• Finance Vertical Revenue: Sequential growth of 63.8% and year-over-year growth of 180.1%.
• Gross Profit: GAAP gross profit of $37 million (36.9% margin); Non-GAAP gross profit of $37.6 million (37.5% margin).
• Net Income: GAAP net income of $4.5 million or $0.05 per share; Non-GAAP net income of $10.3 million or $0.12 per share.
• Cash and Cash Equivalents: $334.7 million as of December 31, 2024.
• Headcount: Total headcount of 4,730, up from 4,298 in Q3 2024.
• Guidance for Q1 2025: Expected revenues of $98 million to $100 million; Non-GAAP EBITDA of $12.9 million to $13.9 million.
• Full Year 2025 Revenue Guidance: Expected to be in the range of $415 million to $435 million, representing growth of 18.4% to 24.1% year-over-year.

• Warning! GuruFocus has detected 4 Warning Signs with GDYN.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Grid Dynamics Holdings Inc (NASDAQ:GDYN) achieved record-breaking revenue and profitability in Q4 2024, surpassing $100 million in revenue for the first time in a single quarter.
• The company saw improvements in demand across customer and industry verticals, with robust trends in bookings and pipeline continuing into Q1 2025.
• Significant growth in AI capabilities, with a 30% increase in AI opportunities identified in Q4, reflecting strong momentum and demand for AI-based solutions.
• Strategic partnerships, particularly with hyperscalers, contributed to 18% of total revenue in 2024, with expectations for continued growth in 2025.
• Successful acquisition of UK-based Joxst, enhancing expertise in banking and financial services, and expanding opportunities with global banks.

Negative Points

• Despite strong revenue growth, the non-GAAP EBITDA margin declined slightly due to higher operating expenses from both organic business and recent acquisitions.
• The TMT vertical remained relatively flat in Q4 due to a typical year-end slowdown at large customers.
• The number of customers decreased year-over-year, primarily due to efforts to rationalize the portfolio of non-strategic customers.
• The healthcare and pharma vertical represented only 2.4% of revenues, indicating limited growth in this sector.
• There is ongoing pressure from vendor management on pricing, requiring careful negotiation to maintain value without commoditizing services.

Q & A Highlights

Q: What is driving Grid Dynamics' outperformance compared to its peers, particularly in the 2025 guidance? A: The company has consistently strengthened its business relationships with top clients and new acquisitions. The introduction of technology, particularly in AI, and scaling solution offerings have contributed to this confidence. The company feels comfortable with its Gigacube strategy and sees positive indicators across its operations. (Unidentified Company Representative)

Q: Will the growth for 2025 be broad-based, and which verticals or clients will drive this growth? A: Growth is expected to be broad-based, with strong performance in CPG, technology (TMT), and fintech sectors. The company is also seeing growth from relationships with GCC clients, particularly in India, and expects contributions from both top clients and new business. (Unidentified Company Representative)

Q: How significant is AI in Grid Dynamics' revenue contribution, and what trends are being observed? A: AI is becoming a component of almost every engagement, transitioning from POCs to being part of major programs. The focus is shifting from cost optimization to revenue generation, with AI playing a significant role in this transition. (Vasily Sizov, SVP Americas)

Q: What are the key drivers of revenue growth for 2025, and how do recruiting, pricing, and utilization impact this growth? A: Recruiting is a major focus, with efforts to bring in the best talent and train them effectively. The company is leveraging its global presence to support growth. Utilization and pricing strategies are aligned with maintaining value and competitiveness. (Yury Gryzlov, COO)

Q: How does Grid Dynamics view its margin outlook for 2025, and what are the key factors influencing this? A: The company does not expect margin compression compared to 2024. Revenue growth is expected to outpace operating expenses, with strategic investments in partnerships and technology driving efficiency. (Anil Doradla, CFO)

Q: How does Grid Dynamics plan to achieve its 2025 guidance, and which initiatives are prioritized? A: The company is focusing on AI and technology investments, strengthening partnerships with hyperscalers, and industry diversification through acquisitions. These initiatives are expected to drive significant business impact and revenue growth. (Vasily Sizov, SVP Americas)

Q: What is the impact of M&A on Grid Dynamics' growth, and how is it reflected in the guidance? A: M&A has contributed to growth, with organic revenue growth at 12.8% year-over-year in Q4. For 2025, organic growth is expected to be in the low 10s, with M&A continuing to play a role in expanding capabilities and market reach. (Anil Doradla, CFO)

Q: How does Grid Dynamics view its visibility for 2025, and what factors contribute to this confidence? A: The company has strong visibility due to its preferred vendor status with many customers and a significant number of large opportunities. Participation in large RFPs and strategic partnerships also contribute to this confidence. (Leonard Livschitz, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.