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What changed in GRID DYNAMICS HOLDINGS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of GRID DYNAMICS HOLDINGS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+433 added−476 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-29)

Top changes in GRID DYNAMICS HOLDINGS, INC.'s 2024 10-K

433 paragraphs added · 476 removed · 364 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur expertise in platform engineering, cloud migration and modernization, DevTestSecOps, microservices, and serverless architecture helps organizations generate more revenue, reduce costs, improve time to value, and enhance performance. By leveraging our services, customers can partner with Grid Dynamics to drive focus on innovation and growth using the latest advancements in platform engineering and product development.
Biggest changeBy leveraging our services, customers can partner with Grid Dynamics to drive focus on innovation and growth using the latest advancements in platform engineering and product development. • AI/ Machine Learning and Data Platform Engineering Our AI/Machine Learning and Data Platform Engineering practice offers specialized services that empower businesses to unlock the full potential of their structured and unstructured data.
Additional market differentiators include: • a culture of engineering excellence, R&D investment, and innovation in groundbreaking technologies before they become ubiquitous; • a co-innovation model with continuous knowledge-sharing throughout delivery that reduces implementation risk and time-to-value, enables enterprises to build in-house capabilities, retain control of proprietary technology and data, and benefit from the adoption of new technologies; and • a global footprint, and a “Follow-the-Sun” delivery model bolstered by engineering talent driven by innovation, and technical mastery, resulting in transformational business outcomes.
Additional market differentiators include: • a culture of engineering excellence, R&D investment, and innovation in groundbreaking technologies before they become ubiquitous; • a co-innovation model with continuous knowledge-sharing throughout delivery that reduces implementation risk and time-to-value, and enables enterprises to build in-house capabilities, retain control of proprietary technology and data, and benefit from the adoption of new technologies; and • a global footprint, and a “Follow-the-Sun” delivery model, bolstered by engineering talent driven by innovation and technical mastery, resulting in transformational business outcomes.
Grid Dynamics faces competition primarily from: • emerging small to mid-cap digital services companies, such as Globant S.A., Endava plc, EPAM Systems, Inc., and Thoughtworks Holding Inc.; • large global consulting and outsourcing firms, such as Accenture plc and Capgemini SE;. • India-based technology outsourcing IT services providers, such as Cognizant Technology Solutions Corporation, Infosys Technologies, and Wipro; • in-house IT departments of Grid Dynamics’ clients and potential clients.
Grid Dynamics faces competition primarily from: • emerging small to mid-cap digital services companies, such as Globant S.A., Endava plc, and Thoughtworks Holding Inc.; • large global consulting and outsourcing firms, such as Accenture plc, EPAM Systems, Inc., and Capgemini SE; • India-based technology outsourcing IT services providers, such as Cognizant Technology Solutions Corporation, Infosys Technologies, and Wipro; • in-house IT departments of Grid Dynamics’ clients and potential clients.
ITEM 1. BUSINESS Business Overview Grid Dynamics Holdings, Inc. (“Grid Dynamics,” “GDH,” the “Company,” “we,” “us,” or “our”) is a leading provider of technology consulting, platform and product engineering, and advanced analytics services. Fusing technical vision with business acumen, we enable positive business outcomes for enterprise companies undergoing business transformation by solving their most pressing technical challenges.
ITEM 1. BUSINESS Business Overview Grid Dynamics Holdings, Inc. (“Grid Dynamics,” the “Company,” “we,” “us,” or “our”) is a leading provider of technology consulting, platform and product engineering, and advanced analytics services. Fusing technical vision with business acumen, we enable positive business outcomes for enterprise companies undergoing business transformation by solving their most pressing technical challenges.
As we expand our geographical 1 reach, we are also investing in developing a multi-discipline approach to address the challenges facing our clients. This involves developing hybrid team capabilities focused on end-to-end problem-solving. Strategies and Strengths Grid Dynamics’ objective is to become a global leader in enabling digital transformation at Fortune 1000 companies.
As we expand our geographical reach, we are also investing in developing a multi-discipline approach to address the challenges facing our clients. This involves developing hybrid team capabilities focused on end-to-end problem-solving. Strategies and Strengths Grid Dynamics’ objective is to become a global leader in enabling digital transformation at Fortune 1000 companies.
Another strategic advantage of our “Follow-the-Sun” approach is that these geographies grow technology markets with large talent pools of highly skilled technical talent and cost-efficient scalability due to their large and well-recognized university infrastructures — a valuable asset for fueling our internship programs and attracting top talent.
Another strategic advantage of our “Follow-the-Sun” approach is that these geographies grow technology markets with large talent pools of highly skilled technical talent and cost-efficient scalability due to their large and well-recognized university 1 infrastructures — a valuable asset for fueling our internship programs and attracting top talent.
Grid Dynamics also places its self-managed teams of IT professionals at client premises aimed at successful delivery of innovative projects and programs. Quality and Process Management Grid Dynamics enforces stringent security standards and has maintained a continuous ISO 27001:2013 certification since August 2014.
Grid Dynamics also places its self-managed teams of IT professionals at client premises aimed at successful delivery of innovative projects and programs. Quality and Process Management 4 Grid Dynamics enforces stringent security standards and has maintained a continuous ISO 27001:2013 certification since August 2014.
Given Grid Dynamics’ focus on complex digital transformation programs, technical employee base and the development and continuous improvement in new software technology, Grid Dynamics believes that it is well positioned to compete effectively in the future. Human Capital and Employees People are critical to the success of Grid Dynamics.
Given Grid Dynamics’ focus on complex digital transformation programs, technical employee base and the development and continuous improvement in new software technology, Grid Dynamics believes that it is well positioned to compete effectively. Human Capital and Employees People are critical to the success of Grid Dynamics.
Recruitment and Retention Grid Dynamics hires both for technical skills and cultural fit. The reality of the changing technological landscape demands that our engineering personnel can continuously acquire new proficiencies and skills. 5 Grid Dynamics’ hiring program is driven by demand within current and projected clients.
Recruitment and Retention Grid Dynamics hires both for technical skills and cultural fit. The reality of the changing technological landscape demands that our engineering personnel can continuously acquire new proficiencies and skills. Grid Dynamics’ hiring program is driven by demand within current and projected clients.
Grid Dynamics’ strategy to achieve such an objective is based on leveraging the following core strengths. Proprietary Processes Optimized for Innovation Grid Dynamics recognizes the changing dynamics of the IT services space. Increasingly, corporations expect their service providers to participate and help shape innovation programs.
Grid Dynamics’ strategy to achieve such objective is based on leveraging the following core strengths: • Proprietary Processes Optimized for Innovation Grid Dynamics recognizes the changing dynamics of the IT services space. Increasingly, corporations expect their service providers to participate in and help shape innovation programs.
A key differentiator for Grid Dynamics is our 7+ years of experience and leadership in Enterprise artificial intelligence (“AI”), supported by profound expertise and ongoing investment in cloud, data, advanced analytics, and customer experience.
A key differentiator for Grid Dynamics is our 8+ years of experience and leadership in enterprise artificial intelligence (“AI”), supported by profound expertise and ongoing investment in cloud, data, advanced analytics, and customer experience.
Grid Dynamics’ long-lasting expertise in complex open-source technology and in building massively scalable distributed systems, the company-wide culture of agile co-creation as well as a deep understanding of digital commerce have enabled Grid Dynamics to build strong business relationships with the leading players in this sector.
Grid Dynamics’ expertise in complex open-source technology and in building massively scalable distributed systems, the company-wide culture of agile co-creation and deep understanding of digital commerce have enabled Grid Dynamics to build strong business relationships with leading players in this sector.
As of December 31, 2023, Grid Dynamics had 3,920 full-time and part-time personnel and delivered services from engineering centers located in the following countries: the United States, Mexico, Jamaica, United Kingdom, Netherlands, Poland, Serbia, Romania, Ukraine, Moldova, Armenia, and India.
As of December 31, 2024, Grid Dynamics had 4,730 full-time and part-time personnel and delivered services from engineering centers located in the following countries: the United States, Mexico, Argentina, Jamaica, the United Kingdom, Switzerland, Netherlands, Poland, Serbia, Romania, Ukraine, Moldova, Armenia, and India.
Accordingly, attracting and retaining personnel is a key factor in Grid Dynamics’ ability to grow revenues and meet its clients’ needs. As of December 31, 2023, Grid Dynamics had 3,920 personnel across 13 countries (the U.S., Mexico, Jamaica, Armenia, India, the Netherlands, the U.K., Poland, Romania, Serbia, Switzerland, Moldova, and Ukraine).
Accordingly, attracting and retaining personnel is a key factor in Grid Dynamics’ ability to grow revenues and meet its clients’ needs. As of December 31, 2024, Grid Dynamics had 4,730 personnel 5 across 14 countries (the U.S., Mexico, Argentina, Jamaica, Armenia, India, the Netherlands, the U.K., Poland, Romania, Serbia, Switzerland, Moldova, and Ukraine).
Grid Dynamics believes that the principal competitive factors in its business include technical expertise and industry knowledge, culture, reputation and track record for high-quality and on-time delivery of work, effective employee recruiting, training and retention, responsiveness to clients’ business needs and financial stability.
Grid Dynamics believes that the principal competitive factors in its business include technical expertise and industry knowledge, culture, reputation and track record for high-quality and on-time delivery of work, effective employee recruiting, training and retention, responsiveness to clients’ business needs and financial stability. In addition, companies may prefer to keep business in-house, rather than to outsource it.
Available Information We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, accordingly, file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, with the Securities and Exchange Commission (the “SEC”).
See Item 1A, “ Risk Factors—Risks Related to Regulations, Legislation and Legal Proceedings. ” Available Information We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, accordingly, file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, with the Securities and Exchange Commission (the “SEC”).
Retail By utilizing Grid Dynamics’ deep expertise in the digital retail space and providing a mix of consulting and engineering services, Grid Dynamics enables its clients to win market share, shorten time to market, and reduce the costs of digital operations.
By merging technology with business processes, Grid Dynamics delivers tailored solutions in several key industry verticals: • Retail By utilizing Grid Dynamics’ deep expertise in the digital retail space and providing a mix of consulting and engineering services, Grid Dynamics enables its clients to win market share, shorten time to market, and reduce the costs of digital operations.
We believe that the combination of our delivery model optimized for co-innovation and the placement of our technology leaders at clients’ premises creates a key competitive advantage that enables us to better understand and meet a client’s diverse needs. Grid Dynamics has engineering personnel located within Grid Dynamics’ engineering centers across Europe, India, and the Americas.
We believe that the combination of our delivery model optimized for co-innovation and the placement of our technology leaders at clients’ premises creates a key competitive advantage that enables us to better understand and meet a client’s diverse needs.
Services In today’s engineering and IT services market, customers are increasingly looking for service providers that can be co-innovation partners rather than an implementation agency or a cost-saving measure. Grid Dynamics addresses this need by focusing on four high-value, high-impact service areas.
Services In today’s engineering and IT services market, customers are increasingly looking for service providers that can be co-innovation partners rather than an implementation agency or a cost-saving measure.
Grid Dynamics also maintains a dedicated sales force as well as a marketing team, which coordinates corporate-level branding efforts that range from sponsorship of programming competitions to participation in and hosting of industry conferences and events.
This strategy has been effective both in deepening relationships with existing clients and increasing the number of Grid Dynamics’ clients. Grid Dynamics also maintains a dedicated sales force as well as a marketing team, which coordinates corporate-level branding efforts that range from sponsorship of programming competitions to participation in and hosting of industry conferences and events.
Their unique business approaches and ability to move fast in adapting to changing market conditions allowed them to develop strong market positions and maintain defense against competitiors. Grid Dynamics is well-placed as a strategic partner of choice for these opportunities.
Sophisticated and scalable software platforms developed and continuously adapted to enterprise needs propelled many of today's most successful companies. Their unique business approaches and ability to move fast in adapting to changing market conditions allowed them to develop strong market positions and maintain defense against competitors. Grid Dynamics is well-placed as a strategic partner of choice for these opportunities.
Technical Expertise and Scalable Engineering Grid Dynamics believes in great engineering underpinning mission-critical services. From its inception, Grid Dynamics has built its engineering DNA with a focus on emerging technologies, leading with AI and generative AI, data engineering, cloud and microservices, DevOps and AIOps, modern frontend technologies, and QA automation.
From its inception, Grid Dynamics has built its engineering DNA with a focus on emerging technologies, leading with AI and generative AI, data engineering, cloud and microservices, DevOps and AIOps, modern front-end technologies, and QA automation.
The following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated: For the year ended December 31, 2023 2022 2021 (in thousands, except % of revenue) Retail $ 102,551 32.8 % $ 99,681 32.1 % $ 61,717 29.2 % Tech, Media and Telecom 98,830 31.6 % 98,334 31.7 % 67,689 32.0 % CPG/Manufacturing 42,861 13.7 % 61,216 19.7 % 43,461 20.6 % Finance 28,842 9.2 % 21,893 7.1 % 17,515 8.3 % Other 39,826 12.7 % 29,358 9.4 % 20,898 9.9 % Total $ 312,910 100.0 % $ 310,482 100.0 % $ 211,280 100.0 % Delivery Model and Operating Structure Our service delivery model involves using an efficient mix of on-site, off-site and offshore staffing.
The following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated: For the year ended December 31, 2024 2023 2022 (in thousands, except % of revenue) Retail $ 113,957 32.5 % $ 102,551 32.8 % $ 99,681 32.1 % Technology, Media and Telecom 95,048 27.1 % 98,830 31.6 % 98,334 31.7 % Finance 60,157 17.2 % 28,842 9.2 % 21,893 7.1 % CPG/Manufacturing 40,468 11.5 % 42,861 13.7 % 61,216 19.7 % Healthcare and Pharma 11,109 3.2 % 13,653 4.4 % 7,711 2.5 % Other 29,832 8.5 % 26,173 8.3 % 21,647 6.9 % Total $ 350,571 100.0 % $ 312,910 100.0 % $ 310,482 100.0 % Delivery Model and Operating Structure Our service delivery model involves using an efficient mix of on-site, off-site and offshore staffing.
With our proprietary processes optimized for innovation, emphasis on talent development, and technical expertise, Grid Dynamics is well-positioned for continued success. Grid Dynamics has offices across the U.S., Mexico, Jamaica, the U.K., Europe, and India. During the last three years, Grid Dynamics acquired NextSphere Technologies Inc. (“NextSphere”), Mutual Mobile Inc. (“Mutual Mobile”), and Tacit Knowledge Inc. (“Tacit”).
With our proprietary processes optimized for innovation, emphasis on talent development, and technical expertise, Grid Dynamics is well-positioned for continued success. Grid Dynamics has offices across the U.S., Mexico, Argentina, Jamaica, the U.K., other European countries, and India. During the last four years, Grid Dynamics acquired Mobile Computing S.A. (“Mobile Computing”), JUXT Ltd. (“JUXT”), NextSphere Technologies Inc.
Grid Dynamics works with the compliance departments of its clients to comply with the client’s open-source licensing policies. 6 Regulations Due to the industry and geographic diversity of Grid Dynamics’ operations and services, Grid Dynamics’ operations are subject to a variety of laws and regulations in the United States and the foreign jurisdictions in which we operate.
Regulations Due to the industry and geographic diversity of Grid Dynamics’ operations and services, Grid Dynamics’ operations are subject to a variety of laws and regulations in the United States and the foreign jurisdictions in which we operate.
We co-innovate with clients and prioritize customer-centric approaches to design, build, and deploy engaging digital presences that resonate with their target audiences — increasing satisfaction and revenue. We partner with leading vendors in MACH and Composable Commerce to drive the highest return on investment for our clients.
We co-innovate with clients and prioritize customer-centric approaches to design, build, and deploy engaging digital presences that resonate with their target audiences — increasing satisfaction and revenue.
All key company locations, departments and teams are within the scope of the deployed information security management system. Grid Dynamics policies, standards and procedures are reviewed annually during both internal and external certification audits.
All key company locations, departments and teams are within the scope of the deployed information security management system. Grid Dynamics policies, standards and procedures are reviewed annually during both internal and external certification audits. Grid Dynamics has successfully passed nine ISO 27001:2013 audits, as well as over a dozen exhaustive audits from top financial services customers.
Grid Dynamics believes that technology changes rapidly, and Grid Dynamics' employees must adapt even more rapidly. Grid Dynamics offers many formal and informal training programs, such as Grid University, an online education platform with thousands of hours of training videos, to ensure that professionals can expand and enhance their capabilities.
Grid Dynamics offers many formal and informal training programs, such as Grid University, an online education platform with thousands of hours of training videos, to ensure that professionals can expand and enhance their capabilities. • Technical Expertise and Scalable Engineering Grid Dynamics believes in great engineering underpinning mission-critical services.
Understanding digital transformation and successfully delivering strategic programs is impossible without a strong understanding of emerging technology. Deep knowledge of how new technology, such as cloud, big data, and AI, transforms the way corporations develop their businesses is a prerequisite for leadership roles in Grid Dynamics. • Education .
Deep knowledge of how new technology, such as cloud, big data, and AI, transforms the way corporations develop their businesses is a prerequisite for leadership roles in Grid Dynamics. • Education . Grid Dynamics believes that technology changes rapidly, and Grid Dynamics' employees must adapt even more rapidly.
Grid Dynamics requires its employees, independent contractors, vendors, and clients to enter into written confidentiality agreements upon the commencement of their relationships with Grid Dynamics. These agreements generally provide that any confidential or proprietary information disclosed or otherwise made available by Grid Dynamics must be kept confidential.
Grid Dynamics requires its employees, independent contractors, vendors, and clients to enter into written confidentiality agreements upon the commencement of their relationships with Grid Dynamics.
For example, Grid Dynamics has been providing software engineering, continuous delivery and deployment automation, machine learning, internal tool development, and quality engineering services to one of the largest cloud services providers, becoming one of their key technological services partners.
For example, Grid Dynamics has been providing software engineering, continuous delivery and deployment 3 automation, machine learning, internal tool development, and quality engineering services to one of the largest cloud services providers, becoming one of their key technological services partners. • Finance With expertise in capital markets, banking, and wealth management, Grid Dynamics crafts technology solutions to help financial institutions drive innovation, accelerate digital transformation, and maximize the value of client interactions.
Supply Chain, IoT, and Advanced Manufacturing Our Supply Chain, Internet of Things (“IoT”), and Advanced Manufacturing practice focuses on transforming traditional operations into smart, connected ecosystems.
We partner with leading vendors in MACH and Composable Commerce to drive the highest return on investment for our clients. • Supply Chain, IoT, and Advanced Manufacturing Our Supply Chain, Internet of Things (“IoT”), and Advanced Manufacturing practice focuses on transforming traditional operations into smart, connected ecosystems.
For example, Grid Dynamics accelerated digital transformation in a global shoe manufacturing company by building composable commerce and other digital ecosystem capabilities, replacing a monolithic commerce engine, and speeding time to market with modern and flexible functionality.
For example, Grid Dynamics accelerated digital transformation in a global shoe manufacturing company by building composable commerce and other digital ecosystem capabilities, replacing a monolithic commerce engine, and speeding time to market with modern and flexible functionality. • Healthcare and Pharma Leading companies leverage our cloud, app modernization, data science, and digital commerce solutions to accelerate drug discovery, product development, and time-to-market, optimize marketing and sales operations, and personalize customer experiences with valuable data insights and automation.
For example, Grid Dynamics has worked closely with a large U.S. retail company over many years to develop a strategic omnichannel transformation program and became a key contributor to the development of a new omnichannel platform including consumer experience, product discovery, analytics, and inventory optimization. 3 Consumer Packaged Goods and Manufacturing Grid Dynamics helps its manufacturing customers harness digital transformation by applying novel approaches to engage consumers directly and optimize back-end supply chains.
For example, Grid Dynamics has worked closely with a large U.S. retail company over many years to develop a strategic omnichannel transformation program and became a key contributor to the development of a new omnichannel platform including consumer experience, product discovery, analytics, and inventory optimization. • Technology, Media and Telecom Grid Dynamics has a strong presence in the digital technology sector, particularly among analytics, SaaS, and platform vendors that are driven by a constant need for innovation.
Grid Dynamics customarily enters into non-disclosure agreements with its clients concerning the use of their software systems and platforms. Grid Dynamics’ clients usually own the intellectual property in the software or systems Grid Dynamics develops for them. Grid Dynamics and its clients often use open-source software to improve quality and reduce time-to-market.
These agreements generally provide that any confidential or proprietary information disclosed or otherwise made available by Grid Dynamics must be kept confidential. 6 Grid Dynamics customarily enters into non-disclosure agreements with its clients concerning the use of their software systems and platforms. Grid Dynamics’ clients usually own the intellectual property in the software or systems Grid Dynamics develops for them.
With the acquisitions of Tacit in May 2021, Mutual Mobile in December 2022, and NextSphere in April 2023, we have gained customers in the U.K., North America, as well as Continental Europe and Asia. Grid Dynamics has a high level of revenue concentration with certain clients.
With the acquisitions during recent years, we have gained customers in the U.K., North and Latin America, as well as Continental Europe and Asia. Grid Dynamics has a high level of revenue concentration with certain clients. We generated approximately 55.7% and 56.1% of our revenues from our 10 largest clients during the years ended December 31, 2024 and 2023, respectively.
Culture-First Approach to Talent Development The ever-increasing role of digital transformation leads to the emergence of a new kind of business leader that combines a vision of business transformation with a deep understanding of possibilities brought together by modern digital technology. Earning the trust of these leaders is one of the pillars of Grid Dynamics’ success.
The effectiveness of such teams is further increased by close collaboration with a client’s technology and business leadership teams and active inquiry into a client’s business priorities on all levels. • Culture-First Approach to Talent Development The ever-increasing role of digital transformation leads to the emergence of a new kind of business leader who combines a vision of business transformation with a deep understanding of possibilities brought together by modern digital technology.
AI/ Machine Learning and Data Platform Engineering In the domain of Data and Machine Learning Platform Engineering, we offer specialized services that empower businesses to unlock the full potential of their structured and unstructured data. Our team of experts builds robust, scalable platforms that facilitate batch and streaming data ingestion, quality, governance, orchestration, semantic modeling, observability, and analysis at scale.
Our team of experts builds robust, scalable platforms that facilitate batch and streaming data ingestion, quality, governance, orchestration, semantic modeling, observability, and analysis at scale.
Grid Dynamics’ technology leaders deployed at clients’ premises play an integral role in identifying, developing and expanding potential business opportunities. This strategy has been effective both in deepening relationships with existing clients and increasing the number of Grid Dynamics’ clients.
Sales and Marketing Grid Dynamics’ sales and marketing strategy focuses on increasing revenues from new and existing clients through a “land and expand” strategy. Grid Dynamics’ technology leaders deployed at clients’ premises play an integral role in identifying, developing and expanding potential business opportunities.
Grid Dynamics demands accountability and ownership of a client’s success, whether or not such success is a contractual matter. Understanding the goals of Grid Dynamics’ clients and the ability to manage such goals across reporting lines is a must for any leadership role within Grid Dynamics. • Technological innovation .
Understanding the goals of Grid Dynamics’ clients and the ability to manage such goals across reporting lines are a must for any leadership role within Grid Dynamics. • Technological innovation . Understanding digital transformation and successfully delivering strategic programs are impossible without a strong understanding of emerging technology.
These acquisitions diversified our geographical presence, client base, and industry vertical presence. Industry Background and Market Opportunity Digital transformation is a rapidly expanding market that is still in its early stages. Enterprises strive to compete in the digital world, facing the need to transform to survive attacks from the nimbler and more technologically advanced newcomers.
(“NextSphere”), Mutual Mobile Inc. (“Mutual Mobile”), and Tacit Knowledge Inc. (“Tacit”). These acquisitions diversified our geographical presence, client base, and industry vertical presence. Industry Background and Market Opportunity Digital transformation is a rapidly expanding market that is still in its early stages.
Grid Dynamics selects, trains, and promotes its leadership based on the following cultural principles. • Global integration . Demands of modern businesses transcend cultural and language boundaries. Grid Dynamics builds teams that are transparently distributed across countries, time zones, and reporting lines. • Partnership with client .
Earning the trust of these leaders is one of the pillars of Grid Dynamics’ success. Grid Dynamics selects, trains, and promotes its leadership based on the following cultural principles: • Global integration . Demands of modern businesses transcend cultural and language boundaries.
Traditional approaches to managing information technology as a mix of vendor solutions and outsourced services often break down in the face of the imperative to innovate through technology. Increasingly, business executives are looking at the use of technology as a competitive advantage rather than a way to cut costs with software-defined capabilities becoming the essence of the business capabilities.
Increasingly, business executives are looking at the use of technology as a competitive advantage rather than a way to cut costs with software-defined capabilities becoming the essence of the business capabilities. The rise of AI signifies a shift from the automation of business processes to the automation of decision-making itself.
Grid Dynamics typically enters into a master services agreement with its clients, which provides a framework for services that is then supplemented by statements of work, which specify the particulars of each individual engagement. Competition Grid Dynamics faces competition from both global IT services providers as well as those based in CEE.
During each of the years ended December 31, 2024 and 2023, we had one customer that accounted for 16.0% and 14.4% of our revenues, respectively. Grid Dynamics typically enters into a master services agreement with its clients, which provides a framework for services that is then supplemented by statements of work, which specify the particulars of each individual engagement.
This drives demand for highly technical software development, creating an opportunity for pure-play platform engineering and software development service providers such as Grid Dynamics. Sophisticated and scalable software platforms developed and continuously adapted to enterprise needs propelled many of today's most successful companies.
To differentiate, corporations are directing investments toward building new digital products and experiences, instead of buying off-the-shelf software products and entire business underpinning platforms. This drives demand for highly technical software development, creating an opportunity for pure-play platform engineering and software development service providers such as Grid Dynamics.
Cloud Platform and Product Engineering Our Cloud Platform and Product Engineering practice provides innovative services that enable businesses to harness the power of cloud computing and modern application development methodologies. We specialize in architecting, designing, and building scalable, secure, and resilient cloud-based platforms and business applications that power digital transformation and business 2 agility.
Grid Dynamics addresses this need by focusing on four high-value, high-impact service areas: • Cloud Platform and Product Engineering Our Cloud Platform and Product Engineering practice provides innovative services that enable businesses to harness the power of cloud computing and modern application development methodologies.
Verticals Grid Dynamics has strong vertical-specific domain knowledge backed by extensive experience. By merging technology with business processes, Grid Dynamics delivers tailored solutions in several key industry verticals: Tech, Media, and Telecom (“TMT”); Retail; Consumer Packaged Goods (“CPG”)/Manufacturing; Finance.
Verticals Grid Dynamics has strong vertical-specific domain knowledge backed by extensive experience.
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The rise of AI signifies a shift from the automation of business processes to the automation of decision-making itself. To differentiate, corporations are directing investments toward building new digital products and experiences, instead of buying off-the-shelf software products and entire business underpinning platforms.
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Enterprises strive to compete in the digital world, facing the need to transform to survive attacks from the nimbler and more technologically advanced newcomers. Traditional approaches to managing information technology as a mix of vendor solutions and outsourced services often break down in the face of the imperative to innovate through technology.
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The effectiveness of such teams is further increased by close collaboration with a client’s technology and business leadership teams and active inquiry into a client’s business priorities on all levels.
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Grid Dynamics builds teams that are transparently distributed across countries, time zones, and reporting lines. • Partnership with client . Grid Dynamics demands accountability and ownership of a client’s success, whether or not such success is a contractual matter.
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Tech, Media and Telecom Grid Dynamics has a strong presence in the digital technology sector, particularly among analytics, SaaS, and platform vendors that are driven by a constant need for innovation.
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We specialize in architecting, designing, 2 and building scalable, secure, and resilient cloud-based platforms and business applications that power digital transformation and business agility. Our expertise in platform engineering, cloud migration and modernization, DevTestSecOps, microservices, and serverless architecture helps organizations generate more revenue, reduce costs, improve time to value, and enhance performance.
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Finance In the early days of Grid Dynamics, the financial sector recognized our ability to tackle high-end technology programs, such as moving from batch to real-time fraud detection. Today, Grid Dynamics has evolved from a niche provider to a proven partner, enabling agility and time to market in the most challenging regulatory environments.
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For example, we helped a core banking and payments provider modernize its security frameworks, enabling a shift to cloud-native architectures and DevOps. In wealth and asset management, we use AI to build platforms that provide advisors with access to financial data, improving decision-making and client engagement.
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For example, a major commercial bank chose Grid Dynamics to solve the challenge of evolving its security frameworks to realize benefits from cloud and DevOps. In addition, Grid Dynamics enables clients operating in the Finance vertical to maximize the value of every customer interaction.
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These AI-driven solutions use digital assistants and analytics to synthesize client profiles, analyze investments, and deliver wealth management strategies. • Consumer Packaged Goods and Manufacturing Grid Dynamics helps its manufacturing customers harness digital transformation by applying novel approaches to engage consumers directly and optimize back-end supply chains.
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By leveraging neural search and generative AI technology, Grid Dynamics creates solutions with seamless access to financial and economic data that enable Financial advisors to make quicker, more informed decisions, and better serve their clients.
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Grid Dynamics has engineering personnel located within Grid Dynamics’ engineering centers across Europe, India, and the Americas to support our “Follow-the-Sun” strategy.
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Furthermore, Grid Dynamics enables Insurance clients to achieve outstanding results with advanced customer analytics and risk-scoring models using the latest advancements in deep learning and decision sciences.
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Competition Grid Dynamics faces competition from both global IT services providers as well as those based in Central and Eastern European (“CEE”), Latin America and India.
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Grid Dynamics has successfully passed nine ISO 27001:2013 audits, as well as over a dozen exhaustive audits from top financial services customers. 4 Sales and Marketing Grid Dynamics’ sales and marketing strategy focuses on increasing revenues from new and existing clients through a “land and expand” strategy.
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Grid Dynamics and its clients often use open-source software to improve quality and reduce time-to-market. Grid Dynamics works with the compliance departments of its clients to comply with the client’s open-source licensing policies.
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In the year ended December 31, 2023 one customer accounted for 10% or more of Grid Dynamics revenue compared to two in each of the years ended December 31, 2022 and 2021.
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See Item 1A, “ Risk Factors—Risks Related to Government Regulations ”.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny economic downturn in the U.S. or in other parts of the world, including Europe, or disruptions in the credit markets may have a material adverse effect on our business, financial condition and results of operations. • We face intense competition. • Damage to our reputation may adversely impact our ability to generate and retain business. • Our failure to successfully attract, hire, develop, motivate and retain highly skilled personnel could have a significant adverse effect on our business, financial condition, and results of operations. 7 • Our business operations may be severely disrupted if we lose the services of our senior executives and key employees. • Failure to adapt to changing technologies, methodologies, and evolving industry standards may have a material adverse effect on our business, financial condition and results of operations. • Social and ethical issues relating to the use of AI in our offerings may result in reputational harm or liability. • Security breaches and incidents, system failures or errors, and other disruptions to our networks and systems, could result in unauthorized access to, or disclosure or other processing of, confidential information and expose us to liability, which would cause our business and reputation to suffer. • Undetected software design defects, errors or failures may result in loss of business or in liabilities that could have a material adverse effect on our reputation, business and results of operations. • War, terrorism, other acts of violence, or natural or man-made disasters may affect the markets in which we operate, our clients and our service delivery. • Our global business, especially in CIS and CEE countries, exposes us to significant legal, economic, tax and political risks. • Acquisitions could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value and adversely affect our financial condition and results of operations, we may not achieve the financial and strategic goals that were contemplated at the time of a transaction, and we may be exposed to claims, liabilities and disputes as a result of the transaction that may adversely impact our business, operating results and financial condition.
Biggest changeRisks Related to Our Use of Technology and Artificial Intelligence • Failure to adapt to changing technologies, methodologies, and evolving industry standards may have a material adverse effect on our business, financial condition, and results of operations. • Social and ethical issues relating to the use of artificial intelligence (“AI”) technologies in our offerings may result in reputational harm or liability. • Security breaches and incidents, system failures or errors, and other disruptions to our networks and systems, could result in unauthorized access to, or the disclosure or other processing of, confidential information and expose us to liability, which would cause our business and reputation to suffer. • Undetected software design defects, errors or failures may result in loss of business or in liabilities that could have a material adverse effect on our reputation, business and results of operations.
Neither our past financial performance nor the past financial performance of any other company in the technology services industry is indicative of how we will fare financially in the future. Our future profits may vary substantially from those of other companies and our past profits, making an investment in us risky and speculative.
Neither our past financial performance nor the past financial performance of any other company in the technology services industry is indicative of how we will fare financially in the future. Our future profits may vary substantially from our past profits and those of other companies, making an investment in us risky and speculative.
A reduction in demand for our services and solutions caused by seasonal trends, downturns in any of our targeted industries, a slowdown or reversal of the trend to outsource IT services in any of these industries or the introduction of regulations that restrict or discourage companies from outsourcing may result in a decrease in the demand for our services and could have a material adverse effect on our business, financial condition and results of operations.
A reduction in demand for our services and solutions caused by seasonal trends, downturns in any of our targeted industries, a slowdown or reversal of the trend to outsource IT services in any of these industries or the introduction of regulations that restrict or discourage companies from outsourcing IT services may result in a decrease in the demand for our services and could have a material adverse effect on our business, financial condition and results of operations.
Our continued growth and success and operational efficiency is dependent on our ability to attract, hire, develop, motivate and retain highly skilled personnel, including IT engineers and other technical personnel, in the geographically diverse locations in which we operate and into which we are expanding.
Our continued growth, success and operational efficiency is dependent on our ability to attract, hire, develop, motivate and retain highly skilled personnel, including IT engineers and other technical personnel, in the geographically diverse locations in which we operate and into which we are expanding.
In addition, any failure or security breach or incident in a client’s system relating to the services we provide could also result in loss or misappropriation of, or unauthorized access, alteration, use, acquisition, disclosure, or other processing of sensitive or confidential information, and may result in a perception that we or our contractors or service providers caused such an incident, even if our and our contractors’ and service providers' networks and other facilities and equipment were not compromised.
In addition, any failure or security breach or incident in a client’s system relating to the services we provide could also result in loss or misappropriation of, or unauthorized access, alteration, use, acquisition, disclosure, or other processing of our sensitive or confidential information, and may result in a perception that we or our contractors or service providers caused such an incident, even if our and our contractors’ and service providers’ networks and other facilities and equipment were not compromised.
Our contractors and service providers face similar risks with respect to their facilities and networks used by us, and they also may suffer outages, disruptions, security incidents and breaches.
Our contractors and service providers face similar risks with respect to their facilities and networks used by us, and they also may suffer outages, disruptions, and security incidents and breaches.
Risks inherent in conducting international operations include: • less established legal systems and legal ambiguities, inconsistencies and anomalies; • changes in laws and regulations; • application and imposition of protective legislation and regulations relating to import or export, including tariffs, quotas and other trade protection measures; • difficulties in enforcing intellectual property and/or contractual rights; • bureaucratic obstacles and corruption; • compliance with a wide variety of foreign laws, including those relating to privacy, data protection and cybersecurity; • restrictions on the repatriation of dividends or profits; • expropriation or nationalization of property; • restrictions on currency convertibility and exchange controls; • fluctuations in currency exchange rates; • potentially adverse tax consequences; • competition from companies with more experience in a particular country or with international operations; • civil strife; • unstable political and military situations; and • overall foreign policy and variability of foreign economic conditions.
Risks inherent in conducting international operations include: • less established legal systems and legal ambiguities, inconsistencies and anomalies; • changes in laws and regulations; • application and imposition of protective legislation and regulations relating to import or export, including tariffs, quotas and other trade protection measures; • difficulties in enforcing intellectual property and/or contractual rights; • bureaucratic obstacles and corruption; • compliance with a wide variety of foreign laws and regulations, including those relating to privacy, data protection and cybersecurity; • restrictions on the repatriation of dividends or profits; • expropriation or nationalization of property; • restrictions on currency convertibility and exchange controls; • fluctuations in currency exchange rates; • potentially adverse tax consequences; • competition from companies with more experience in a particular country or with international operations; • civil strife; • unstable political and military situations; and • overall foreign policy and variability of foreign economic conditions.
If a tax authority in any jurisdiction reviews any of our tax returns and proposes an adjustment, including a determination that the transfer prices and terms we have applied are not appropriate, such an adjustment could have an adverse effect on our business, financial condition and results of operations.
If a tax authority in any jurisdiction reviews our tax returns and proposes an adjustment, including a determination that the transfer prices and terms we have applied are not appropriate, such an adjustment could have an adverse effect on our business, financial condition and results of operations.
Timely collection of client balances also depends on our ability to complete our contractual commitments and bill and collect contracted revenues. If we are unable to meet our contractual requirements, we may experience delays in collection of or inability to collect accounts receivable. If this occurs, our financial condition, results of operations and cash flows could be materially adversely affected.
Timely collection of client balances also depends on our ability to complete our contractual commitments, bill and collect contracted revenues. If we are unable to meet our contractual requirements, we may experience delays in collection of or inability to collect accounts receivable. If this occurs, our financial condition, results of operations and cash flows could be materially adversely affected.
If any of these claims succeed, we may be forced to pay damages on behalf of our clients, redesign or cease offering our allegedly infringing services or solutions or obtain licenses for the intellectual property such services or solutions allegedly infringe.
If any of these claims succeed, we may be forced to pay damages on behalf of our clients, redesign or cease offering the allegedly infringing services or solutions or obtain licenses for the intellectual property such services or solutions allegedly infringe.
Our operating results or financial condition may be adversely impacted by claims or liabilities that we assume from an acquired company or technology or other claims or liabilities otherwise related to an acquisition, including, among others, claims from governmental and regulatory agencies or bodies, terminated employees, current or former customers, current or former stockholders or other third parties, or arising from contingent payments related to the acquisition; pre-existing contractual relationships that we assume from an acquired company that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business; unfavorable revenue recognition or other accounting treatment as a result of an acquired company’s practices; and intellectual property claims or disputes.
Our operating results or financial condition may be adversely impacted by claims or liabilities that we assume from an acquired company or technology or other claims or liabilities otherwise related to an acquisition, including, among others, claims from governmental and regulatory agencies or bodies, terminated employees, current or former customers, current or former stockholders or other third parties, or arising from contingent payments related to the acquisition; pre-existing contractual relationships that we assume from an acquired company that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business; unfavorable revenue recognition or other accounting 13 treatment as a result of an acquired company’s practices; and intellectual property claims or disputes.
Some of the additional risks associated with acquiring a business include, but not limited to the following: • inability to integrate or benefit from acquired technologies or services; • product synergies, cost reductions, increases in revenue and economies of scale may not materialize as expected; • the business culture of the acquired entity may not match well with our culture; • unforeseen delays, unanticipated costs and liabilities may arise when integrating operations, processes and systems in geographies where we have not conducted business; • unanticipated costs or liabilities associated with the strategic transactions; 22 • incurrence of transaction-related costs; • assumption of the existing obligations or unforeseen liabilities of the acquired business; • difficulty integrating the accounting systems, security infrastructure, operations and personnel of the acquired business; • difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the current and prospective customers of the acquired business onto our platform and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company; • diversion of management’s attention from other business concerns; • adverse effects to our existing business relationships with business partners and customers as a result of the strategic transactions; • unexpected costs may arise due to unforeseen changes in tax, payroll, pension, labor, trade, environmental and safety policies in new jurisdictions where the acquired entity operates; • difficulty in retaining, motivating and integrating key management and other employees of the acquired business; • use of resources that are needed in other parts of our business; • dispute over contingent payments; and • use of substantial portions of our available cash to consummate the strategic transaction.
Some of the additional risks associated with acquiring a business include, but are not limited to: • inability to integrate or benefit from acquired technologies or services; • product synergies, cost reductions, increases in revenue and economies of scale may not materialize as expected; • the business culture of the acquired entity may not match well with our culture; • unforeseen delays, unanticipated costs and liabilities may arise when integrating operations, processes and systems in geographies where we have not conducted business; • unanticipated costs or liabilities associated with the strategic transactions and incurrence of transaction-related costs; • assumption of the existing obligations or unforeseen liabilities of the acquired business; • difficulty integrating the accounting systems, security infrastructure, operations and personnel of the acquired business; • difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the current and prospective customers of the acquired business onto our platform and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company; • diversion of management’s attention from other business concerns; • adverse effects to our existing business relationships with business partners and customers as a result of the strategic transactions; • unexpected costs may arise due to unforeseen changes in tax, payroll, pension, labor, trade, environmental and safety policies in new jurisdictions where the acquired entity operates; • difficulty in retaining, motivating and integrating key management and other employees of the acquired business; • use of resources that are needed in other parts of our business; • dispute over contingent payments; and • use of substantial portions of our available cash to consummate the strategic transaction.
Among other things, our certificate of incorporation and bylaws include provisions regarding: • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; • the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of our directors and officers; 31 • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the requirement that directors may only be removed from our board of directors for cause; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by our board of directors, the chairman of our board of directors, or our chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; • the requirement for the affirmative vote of holders of at least a majority of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of our certificate of incorporation or our bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • the ability of our board of directors to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
Among other things, our certificate of incorporation and bylaws include provisions regarding: • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; • the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of our directors and officers; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the requirement that directors may only be removed from our board of directors for cause; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by our board of directors, the chairman of our board of directors, or our chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; • the requirement for the affirmative vote of holders of at least a majority of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of our certificate of incorporation or our bylaws, which could delay changes in our board of directors and also may inhibit the ability of an acquirer to affect such amendments to facilitate an unsolicited takeover attempt; • the ability of our board of directors to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our Company.
We may also face a number of challenges managing larger and more complex projects, including: • maintaining high quality control and process execution standards; • maintaining planned resource utilization rates on a consistent basis; • using an efficient mix of on-site, off-site and offshore staffing; • maintaining productivity levels; • implementing necessary process improvements; • recruiting and retaining sufficient numbers of highly skilled IT personnel; and 19 • controlling costs.
We may also face a number of challenges managing larger and more complex projects, including: • maintaining high quality control and process execution standards; • maintaining planned resource utilization rates on a consistent basis; • using an efficient mix of on-site, off-site and offshore staffing; • maintaining productivity levels; • implementing necessary process improvements; • recruiting and retaining sufficient numbers of highly skilled IT personnel; and • controlling costs.
The costs of litigation are 28 considerable, and such litigation may divert management and key personnel’s attention and resources, which might seriously harm our business, financial condition and results of operations. Third parties making infringement claims may make it difficult for us to enter into royalty or license agreements which may not be available on commercially acceptable terms.
The costs of litigation are considerable, and such litigation may divert management and key personnel’s attention and resources, which might seriously harm our business, financial condition and results of operations. Third parties making infringement claims may make it difficult for us to enter into royalty or license agreements which may not be available on commercially acceptable terms.
The legal systems of Ukraine, Poland, Serbia, India, Mexico, Moldova, Romania and other countries are often beset by legal ambiguities as well as inconsistencies and anomalies due to the relatively recent enactment of many laws that may not always coincide with market developments. Furthermore, legal and bureaucratic obstacles and corruption exist to varying degrees in each of these countries.
The legal systems of Ukraine, Poland, Serbia, India, Mexico, Moldova, Romania, Argentina and other countries are often beset by legal ambiguities as well as inconsistencies and anomalies due to the relatively recent enactment of many laws that may not always coincide with market developments. Furthermore, legal and bureaucratic obstacles and corruption exist to varying degrees in each of these countries.
The impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by the United States, European Union, the United Kingdom, Canada and other countries against officials, individuals, regions, and industries in Russia and Ukraine, and actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions, tensions, and military actions could have a material adverse effect on our operations.
The impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by the United 11 States, European Union, the United Kingdom, Canada and other countries against officials, individuals, regions, and industries in Russia and Ukraine, and actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions, tensions, and military actions could have a material adverse effect on our operations.
Wage inflation, whether driven by competition for talent or ordinary course pay increases, could increase our cost of services as well as selling, general and administrative expenses and reduce our profitability if we are not able to pass those costs on to our customers or charge premium prices when justified by market demand.
Wage inflation, whether driven by competition for talent, ordinary course pay increases or otherwise, could increase our cost of services as well as selling, general and administrative expenses and reduce our profitability if we are not able to pass those costs on to our customers or charge premium prices when justified by market demand.
If a company fails to comply with certain requirements including those relating to minimum net assets, governmental or local authorities can seek the involuntary liquidation of such company in court, and the company’s creditors will have the right to accelerate their claims or demand early performance of the company’s obligations as well as demand compensation for any damages.
If a company fails to comply with certain requirements including those relating to minimum net assets, governmental authorities can seek the involuntary liquidation of such company in court, and the company’s creditors will have the right to accelerate their claims or demand early performance of the company’s obligations as well as demand compensation for any damages.
Such tax consequences mainly include payroll tax liabilities related to employee compensation and, in cases envisaged by international tax legislation, taxation of profits generated by employees during their time of travel. 17 We have internal procedures, policies and systems, including an internal mobility program, for monitoring our tax liabilities arising in connection with business travel.
Such tax consequences mainly include payroll tax liabilities related to employee compensation and, in cases envisaged by international tax legislation, taxation of profits generated by employees during their time of travel. We have internal procedures, policies and systems, including an internal mobility program, for monitoring our tax liabilities arising in connection with business travel.
The Organization for Economic Cooperation and Development has made a number of proposals, including implementing a new global minimum effective corporate tax rate of 15% for large multinational companies and rules that would result in the reallocation of certain profits to market jurisdictions where customers and users are located.
The Organization for Economic Cooperation and Development (the “OECD”) has made a number of proposals, including implementing a new global minimum effective corporate tax rate of 15% for large multinational companies and rules that would result in the reallocation of certain profits to market jurisdictions where customers and users are located.
Further, as a result of a completed acquisition, purchase accounting, and integration of the acquired business, we may be required to take write-offs or write-downs, restructuring and impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.
Further, as 14 a result of a completed acquisition, purchase accounting, and integration of the acquired business, we may be required to take write-offs or write-downs, restructuring and impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.
Our ability to acquire new clients 14 and retain existing clients may be adversely affected and our reputation could be harmed if we receive a qualified opinion, or if we cannot obtain an unqualified opinion in a timely manner, with respect to our controls and procedures in connection with any such audit.
Our ability to acquire new clients and retain existing clients may be adversely affected and our reputation could be harmed if we receive a qualified opinion, or if we cannot obtain an unqualified opinion in a timely manner, with respect to our controls and procedures in connection with any such audit.
A number of U.S. states have passed legislation that restricts state government entities from outsourcing certain work to offshore IT services providers. Given the ongoing debate 26 over this issue, the introduction and consideration of other restrictive legislation is possible.
A number of U.S. states have passed legislation that restricts state government entities from outsourcing certain work to offshore IT services providers. Given the ongoing debate over this issue, the introduction and consideration of other restrictive legislation is possible.
Continued growth and expansion may increase challenges we face in recruiting, training and retaining sufficiently skilled professionals and management personnel, maintaining effective oversight of personnel and delivery centers, developing financial and management controls, coordinating effectively across geographies and business units, and preserving our culture and values.
Continued growth and expansion increase challenges we face in recruiting, training and retaining sufficiently skilled professionals and management personnel, maintaining effective oversight of personnel and delivery centers, developing financial and management controls, coordinating effectively across geographies and business units, and preserving our culture and values.
The ability of our clients to terminate agreements makes our future revenues uncertain. We may not be able to replace any client that elects to terminate or not renew its contract with us, which could materially adversely affect our revenues and thus our results of operations.
The ability of our clients to terminate agreements makes our future revenues uncertain. We may not be able to replace any client that elects to terminate or not renew its contract with us, which could materially adversely affect our revenues and our results of operations.
The laws and regulations in Mexico and India to which we have become subject thereby, and interpretations thereof, may change, sometimes substantially, as a result of a variety of factors beyond our control, including political, economic, regulatory or social events.
The laws and regulations in Mexico, India and Argentina to which we have become subject thereby, and interpretations thereof, may change, sometimes substantially, as a result of a variety of factors beyond our control, including political, economic, regulatory or social events.
High attrition rates of IT personnel would increase our operating costs, including hiring and training costs, and could have an 11 adverse effect on our ability to complete existing contracts in a timely manner, meet client objectives and expand our business.
High attrition rates of IT personnel would increase our operating costs, including hiring and training costs, and could have an adverse effect on our ability to complete existing contracts in a timely manner, meet client objectives and expand our business.
Any increased or unexpected costs, delays or failures to achieve anticipated cost savings, or unexpected risks we encounter in connection with the performance of our contracts, including those caused by factors outside our control, could make these contracts less profitable or unprofitable.
Any increased or unexpected costs, delays or failures to achieve anticipated cost savings, we encounter in connection with the performance of our contracts, including those caused by factors outside our control, could make these contracts less profitable or unprofitable.
Although a substantial majority of our revenues are generated from repeated business, which we define as revenues from a client who also contributed to our revenues during the prior year, our engagements with our clients are typically for projects that are singular in nature.
Although a substantial majority of our revenues are generated from repeated business, which we define as revenues from a client that also contributed to our revenues during the prior year, our engagements with our clients are typically for projects that are singular in nature.
However, we do not insure for all risks in our operations and if any claims for injury are brought against us, or if we experience any business disruption, litigation or natural disaster, we might incur substantial costs and diversion of resources.
However, 19 we do not insure for all risks in our operations and if any claims for injury are brought against us, or if we experience any business disruption, litigation or natural disaster, we might incur substantial costs and diversion of resources.
For example, measures aimed at limiting or restricting outsourcing by U.S. companies are periodically considered in Congress and in numerous state legislatures to address concerns over the perceived association between offshore outsourcing and the loss of jobs in the U.S.
For example, measures aimed at limiting or restricting outsourcing by U.S. companies are periodically considered in Congress and in numerous state legislatures to address concerns over the perceived 20 association between offshore outsourcing and the loss of jobs in the U.S.
Security breaches and incidents, system failures or errors, and other disruptions to our networks and systems could result in unauthorized access to, or disclosure or other processing of, confidential information and expose us to liability, which would cause our business and reputation to suffer.
Security breaches and incidents, system failures or errors, and other disruptions to our networks and systems could result in unauthorized access to, or the disclosure or other processing of, confidential information and expose us to liability, which would cause our business and reputation to suffer.
If we cannot obtain all necessary licenses on commercially reasonable terms, our clients may be forced to stop using our services or solutions and may seek refunds of amounts they have paid us for such services or solutions.
If we cannot obtain all necessary licenses on commercially reasonable terms or at all, our clients may be forced to stop using our services or solutions and may seek refunds of amounts they have paid us for such services or solutions.
Failure to manage growth effectively could have a material adverse effect on the quality of the execution of our engagements, our ability to attract and retain IT professionals, as well as our business, financial condition and results of operations.
Failure to manage growth effectively could have a material adverse effect on the quality of the execution of our 9 engagements, and our ability to attract and retain IT professionals, as well as on our business, financial condition and results of operations.
Because of increases in the number of our personnel and our contractors’ and service providers’ personnel working remotely, we face increased risks of such attacks and disruptions that may affect our systems and networks or those of our clients, contractors and service providers.
Because of increases in the number of our personnel and our contractors’ and service providers’ personnel working remotely, we face increased risks of such attacks and disruptions that 15 may affect our systems and networks or those of our clients, contractors and service providers.
If we lose the services of one or more of such senior executives or key employees, our business operations can be disrupted, and we may not be able to replace them easily or at all.
If we lose the services of one or more of such senior executives or key employees, our business operations may be disrupted, and we may not be able to replace them easily or at all.
In addition, if our professionals make errors in the course of delivering services to our clients or fail to consistently meet the service requirements of a client, these errors or failures could disrupt the client’s business.
In addition, if our professionals make errors in the course of delivering services to our clients or fail to consistently meet the service requirements of a client, these 17 errors or failures could disrupt the client’s business.
Any intellectual property claims, with or without merit, could be very time-consuming and expensive to settle or litigate, could cause us to incur significant expenses, pay substantial amounts in damages, ongoing royalty or license fees, or other payments, require us to cease making, licensing or using our offerings that incorporate or use the challenged intellectual property, require us to re-engineer all or a portion of our business or require that we comply with other unfavorable terms.
Any intellectual property claim, with or without merit, could be very time-consuming and expensive to settle or litigate, could cause us to incur significant expenses, pay substantial amounts in damages, ongoing royalty or license fees, or other payments, require us to cease making, licensing or using our offerings that incorporate or use the challenged intellectual property, require us to re-engineer all or a portion of our business or require that we comply with other unfavorable terms.
Any failure to increase 9 our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving and maintaining profitability or positive cash flow on a consistent basis. If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected.
Any failure to increase 10 our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving and maintaining profitability or positive cash flow on a consistent basis. If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected.
There are a number of factors relating to our clients that are outside of our control which might lead them to terminate a contract or project with us, including: • financial difficulties for the client; • a change in strategic priorities, resulting in elimination of the impetus for the project or a reduced level of technology spending; • a change in outsourcing strategy resulting in moving more work to the client’s in-house technology departments or to our competitors; • the replacement by our clients of existing software with packaged software supported by licensors; • mergers and acquisitions or significant corporate restructurings; and • changes in the macro-economic environment resulting in weak demand at our customers' business.
There are a number of factors relating to our clients that are outside of our control which might lead them to terminate a contract or project with us, including: • financial difficulties for the client; • a change in strategic priorities, resulting in elimination of the impetus for the project or a reduced level of technology spending; • a change in outsourcing strategy resulting in moving more work to the client’s in-house technology departments or to our competitors; • the replacement by our clients of existing software with packaged software supported by licensors; • mergers, acquisitions and significant corporate restructurings; and • changes in the macroeconomic environment resulting in weak demand at our customers’ business.
The 2022 Credit Agreement provides for a three-year secured multicurrency revolving loan facility in an initial aggregate principal amount of up to $30.0 million, with a $10.0 million letter of credit sublimit. We may increase the size of the revolving loan facility up to $50.0 million, subject to certain conditions and additional commitments from existing and/or new lenders.
Our credit agreement provides for a three-year secured multicurrency revolving loan facility in an initial aggregate principal amount of up to $30.0 million, with a $10.0 million letter of credit sublimit. We may increase the size of the revolving loan facility up to $50.0 million, subject to certain conditions and additional commitments from existing and/or new lenders.
Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock. ITEM 1B.
Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock. 31 ITEM 1B.
If clients’ demand for our services declines as a result of economic conditions, market factors or shifts in the technology industry, our business, financial condition and results of operations would be adversely affected. Our stock performance is highly dependent on our ability to successfully execute and grow the business.
If clients’ demand for our services declines as a result of economic conditions, market factors, shifts in the technology industry, competition or otherwise, our business, financial condition and results of operations would be adversely affected. Our stock performance is highly dependent on our ability to successfully execute and grow the business.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including investors’ perception of, and demand for, securities of IT services companies, conditions in the capital markets in which we may seek to raise funds, our future results of operations and financial condition, and general economic and political conditions.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including investors’ perception of, and demand for, securities of IT services companies, conditions in the capital markets in which we may seek to raise funds, our future results of operations and financial condition, and general economic and geopolitical conditions.
Any failure to successfully deliver contracted services or causing disruptions to a client’s business, including the occurrence of any failure in a client’s system or breach of security relating to the services provided by us, may expose us to substantial liabilities and have a material adverse effect on our reputation, business, financial condition and results of operations.
Any failure to successfully deliver contracted services, or any resulting disruptions to a client’s business, including the occurrence of any failure in a client’s system or breach of security relating to the services provided by us, may expose us to substantial liabilities and have a material adverse effect on our reputation, business, financial condition and results of operations.
In select cases, we also offer volume discounts once a client reaches certain contractual spend thresholds, which may lower the reference price for a client or result in a loss of profits if we do not accurately estimate the amount of discounts to be provided.
In select cases, we also offer volume discounts once a client reaches certain contractual spend thresholds, which may lower the reference price for a client or result in a loss of profits if we do not accurately estimate the number of discounts to be provided.
If any of these software, hardware or SaaS applications become unavailable due to loss of license, extended outages, interruptions, or because they are no longer available on commercially reasonable terms, there may be delays in the provisioning of our services until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could increase our expenses or otherwise harm our business.
If any of these software, hardware or SaaS applications become unavailable due to loss of license, extended outages, interruptions, or because they are no longer available on commercially reasonable terms, there may be delays in the provisioning of our services until equivalent technology is either developed by us, or, is identified, obtained and integrated, which could increase our expenses.
Furthermore, any errors or defects in or failures of third-party software, hardware or SaaS applications could result in errors or defects in or failures of our services and solutions, which could be costly to correct and have an adverse effect on our reputation, business, financial condition and results of operations.
Furthermore, any errors or defects in or failures of third- 16 party software, hardware or SaaS applications could result in errors or defects in or failures of our services and solutions, which could be costly to correct and have an adverse effect on our reputation, financial condition and results of operations.
As we do not hedge our foreign currency, we are exposed to foreign currency exchange transaction risk related to funding our non-U.S. operations and to foreign currency translation risk related to certain of our subsidiaries’ cash balances that are denominated in currencies other than the U.S. dollar.
As we may not hedge our foreign currency, we are exposed to foreign currency exchange transaction risk related to funding our non-U.S. operations and to foreign currency translation risk related to certain of our subsidiaries’ cash balances that are denominated in currencies other than the U.S. dollar.
Our business is also subject to seasonal trends that impact our revenues and profitability between quarters, driven by the timing of holidays in the countries in which we operate and the U.S. retail cycle, which drives the behavior of several of our retail clients.
Our business is also subject to seasonal trends that impact our revenues and profitability between quarters, driven by the timing of holidays in the countries in which we operate and the U.S. retail cycle, which drives the behavior of several of our retail customers.
Our revenues have historically been highly dependent on a limited number of clients and industries and any decrease in demand for outsourced services in these industries may reduce our revenues and adversely affect our business, financial condition and results of operations. Our revenues have historically been highly dependent on a limited number of clients.
Our revenues have historically been highly dependent on a limited number of clients and industries, and any decrease in demand for outsourced services by these clients or in these industries may reduce our revenues and adversely affect our business, financial condition and results of operations. Our revenues have historically been highly dependent on a limited number of clients.
The 2022 Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments and acquisitions, make certain restricted payments, dispose of assets, enter into certain transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the 2022 Credit Agreement.
The credit agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments and acquisitions, make certain restricted payments, dispose of assets, enter into certain transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions.
Failure to attract, hire, develop, motivate and retain personnel with the skills necessary to serve our clients could decrease our ability to meet and develop ongoing and future business and could materially adversely affect our business, financial condition and results of operations.
Failure to attract, hire, develop, motivate and retain personnel in the locations and with the skills necessary to serve our clients could decrease our ability to meet and develop ongoing and future business and could materially adversely affect our business, financial condition and results of operations.
We cannot yet fully predict the impact of these laws on our business or operations, but developments regarding these and other privacy and data protection laws and regulations around the world may require us to modify our data processing practices and policies and to incur substantial additional costs 24 and expenses in an effort to maintain compliance on an ongoing basis.
We cannot fully predict the impact of these laws on our business or operations, but developments regarding these and other privacy and data protection laws and regulations around the world may require us to modify our data collection and processing practices and policies and to incur substantial additional costs and expenses in an effort to maintain compliance on an ongoing basis.
While many Fortune 1000 enterprises, including our clients, have been willing to devote significant resources to incorporate emerging technologies and related market trends into their business models, they may not continue to spend any significant portion of their budgets on services like those provided by us in the future.
While many Fortune 1000 enterprises, including our clients, have been willing to devote significant resources to incorporate emerging technologies and related market trends into their business models, they may not continue to spend any significant portion of their budgets on services like those provided by us.
Certain provisions of local laws may allow a court to order liquidation of a locally organized legal entity on the basis of its formal noncompliance with certain requirements during formation, reorganization or during its operations.
Certain provisions of local laws may allow a court to order liquidation of a locally organized legal entity on the basis of its formal noncompliance with certain requirements during formation, reorganization and during its operations.
Any significant failure to generate revenues or delays in recognizing revenues after incurring costs related to sales processes could have a material adverse effect on our business, financial condition and results of operations. Failure to obtain engagements for and effectively manage increasingly large and complex projects may have an adverse effect on our business, financial condition and results of operations.
Any significant failure to generate revenue or delay in recognizing revenues after incurring costs related to sales processes could have a material adverse effect on our business, financial condition and results of operations. Failure to obtain engagements for and effectively manage increasingly large and complex projects may have an adverse effect on our business, financial condition and results of operations.
Failure to perform or observe any contractual obligations could result in cancellation or non-renewal of a contract, which could cause us to experience a higher than expected number of unassigned employees and an increase in our cost of revenues as a percentage of revenues, until we are able to reduce or reallocate our headcount.
Failure to perform or observe any contractual obligations could result in cancellation or nonrenewal of a contract, which could cause us to experience a higher than expected number of unassigned employees and an increase in our cost of revenues as a percentage of revenues, until we are able to reduce or reallocate our headcount.
Industry clients tend to engage multiple IT services providers instead of using an exclusive IT services provider, which could reduce our revenues to the extent that our clients obtain services from competing companies.
Typically, clients tend to engage multiple IT services providers instead of using an exclusive IT services provider, which could reduce our revenues to the extent that our clients obtain services from competing companies.
We cannot assure you that all of our employees, agents, representatives, business partners or third-party intermediaries will not take actions in violation of applicable law for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase.
We cannot assure you that all of our employees, agents, or other third-party intermediaries will not take actions in violation of applicable law for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase.
We are subject to governmental export controls and trade and economic sanctions that could impair our ability to compete in international markets or subject us to liability if we violate these controls.
We are subject to governmental export controls and trade and economic sanctions that could impair our ability to compete in international markets and subject us to liability if we are found to violate these controls.
Our growth largely depends on our ability to diversify the industries in which we serve, continued demand for our services from clients in these industry verticals and other industries that we may target in the future, as well as on trends in these industries to outsource the type of services we provide.
Our growth largely depends on our ability to diversify the industries in which we serve, continued demand for our services from clients in these industry verticals and other industries that we may target, and trends in these industries to outsource the type of services we provide.
Many of our present and potential competitors have substantially greater financial, marketing and technical resources, and name recognition than we do. Therefore, they may be able to compete more aggressively on pricing or devote greater resources to the development and promotion of technology and IT services and we may be unable to retain our clients while competing against such competitors.
Many of our present and potential competitors have substantially greater financial, marketing and technical resources, and name recognition than we do. Therefore, they may be able to compete more aggressively on pricing or devote greater resources to the development and promotion of technology and IT services. Thus, we may be unable successfully compete and retain our clients against such competitors.
Legal proceedings, claims, and such requests for information, whether with or without merit, may be time-consuming and expensive; divert management’s attention and other resources; result in adverse judgments for damages, injunctive relief, penalties and fines; and negatively affect our business. There can be no assurance regarding the outcome of any legal proceedings, claims or the like.
Legal proceedings, claims, and such requests for information, regardless of merit, may be time-consuming and expensive; divert management’s attention and other resources; result in adverse judgments for damages, injunctive relief, penalties and fines; and negatively affect our business. There can be no assurance regarding the outcome of any legal proceedings, claims or the like.
Development and introduction of new services and products, including generative AI, is expected to become increasingly complex and expensive, involve a significant commitment of time and resources, and subject to a number of risks and challenges, including: • difficulty or cost in updating services, applications, tools and software and in developing new services quickly enough to meet clients’ needs; • difficulty or cost in making some features of software work effectively and securely over the internet or with new or changed operating systems; • difficulty or cost in updating software and services to keep pace with evolving industry standards, methodologies, regulatory and other developments in the industries where our clients operate; and • difficulty or cost in maintaining a high level of quality and reliability as we implement new technologies and methodologies.
Development and introduction of new services and products, including generative AI, is expected to become increasingly complex and expensive, involve a significant commitment of time and resources, and are subject to a number of risks challenges, and/or associated costs, including with respect to: • updating services, applications, tools and software and developing new services quickly enough to meet clients’ needs; • making software features work effectively and securely over the internet or with new or changed operating systems; • updating software and services to keep pace with evolving industry standards, methodologies, regulatory and other developments in the industries where our clients operate; and • maintaining a high level of quality and reliability as we implement new technologies and methodologies.
In addition, if a disruption in the credit markets were to occur, it could pose a risk to our business if clients or vendors are unable to obtain financing to meet payment or delivery obligations to us or if we are unable to obtain necessary financing. We face intense competition.
In addition, if a disruption in the credit markets were to occur, it could pose a risk to our business if clients or vendors are unable to obtain financing to meet payment or delivery obligations to us or if we are unable to obtain necessary financing.
Protracted litigation could also result in existing or prospective clients deferring or limiting their purchase or use of our software product development services or solutions until resolution of such litigation or could require us to indemnify our clients against infringement claims in certain instances.
Protracted litigation could also result in existing or prospective clients deferring or limiting their purchase or use of our services or solutions until resolution of such litigation or could require us to indemnify our clients against infringement claims in certain instances.
If clients suffer financial difficulties, it could cause them to delay payments, request modifications to their payment arrangements that could increase our receivables balance, or default on their payment obligations. In addition, some of our clients may delay payments due to changes in internal payment procedures driven by rules and regulations to which they are subject.
If clients suffer financial difficulties, it could cause them to delay payments, request modifications to their payment arrangements, or default on their payment obligations. In addition, some of our clients may delay payments due to changes in internal payment procedures driven by rules and regulations to which they are subject.
While we believe that we have complied with all such requirements and have fulfilled all 27 requirements necessary to acquire all rights in intellectual property developed by our contractors and subcontractors, these requirements are often ambiguously defined and enforced.
While we believe that we have complied with all such requirements and have fulfilled the requirements necessary to acquire all rights in intellectual property developed by our employees, contractors and subcontractors, these requirements are often ambiguously defined and enforced.
In some cases, litigation may be necessary to enforce our intellectual property rights or to protect our trade secrets. Litigation could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property.
In some cases, legal action may be necessary to enforce our intellectual property rights and contractual rights or to protect our trade secrets. Litigation could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property.
Although we maintain insurance for liabilities incurred as a result of certain security-related damages, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
Although we maintain insurance for liabilities incurred as a result of certain security-related damages, our coverage may not be adequate for liabilities actually incurred, insurance may not continue to be available to us on economically reasonable terms, or at all, or any insurer may deny coverage as to any future claim.
If a government authority or court makes any adverse determination with respect to some or all of our independent contractors, we could incur significant costs, including for prior periods, in respect of tax withholding, social security taxes or payments, workers’ compensation and unemployment contributions, and recordkeeping, or we may be required to modify our business model, any of which could materially adversely affect our business, financial condition and results of operations.
If a government authority or 24 court makes any adverse determination with respect to some or all of our independent contractors, we could incur significant costs, including for prior periods, for amounts related to tax withholding, social security taxes or payments, workers’ compensation and unemployment contributions, and recordkeeping in the impacted jurisdiction, or we may be required to modify our business model, any of which could materially adversely affect our business, financial condition and results of operations.
We use our data centers and networks, and certain networks and other facilities and equipment of our contractors and service providers, for these purposes.
We use our data centers and networks, and certain networks and other facilities and equipment of our third-party contractors and service providers, for these purposes.
Consequently, our stock price may be adversely impacted by our inability to execute to our plan, our inability to meet or exceed forward looking financial forecasts, and our inability to achieve our stated short-term and long-term goals.
Consequently, our stock price may be adversely impacted by our inability to execute our plan, to meet or exceed financial and other forecasts, and to achieve our stated short-term and long-term goals.
In the future we may seek to acquire or invest in other businesses, products or technologies that we believe could complement or expand our services, enhance our technical capabilities or otherwise offer growth opportunities.
We seek to acquire or invest in other businesses, products or technologies that we believe could complement or expand our services, enhance our technical capabilities or otherwise offer growth opportunities.
Additionally we hold cash deposits in countries where the banking sector remains periodically unstable, banking and other financial systems generally do not meet the banking standards of more developed markets, and bank deposits made by corporate entities are not insured. Such countries apart from Ukraine include Armenia, Moldova, Serbia and Mexico.
Additionally we hold cash deposits in countries where the banking sector remains periodically unstable, banking and other financial systems generally do not meet the banking standards of more developed markets, and bank deposits made by corporate entities are not insured. Such countries in addition to Ukraine include Argentina, Armenia, Moldova, Serbia and Mexico.
In addition, we have granted certain equity-based awards under our equity incentive plans and expect to continue doing so. For the years ended December 31, 2023, 2022, and 2021 we recorded $35.5 million, $61.0 million, and $33.0 million respectively, of stock-based compensation expense related to the grant of equity-based awards.
In addition, we have granted certain equity-based awards under our equity incentive plans and expect to continue doing so. For the years ended December 31, 2024, 2023, and 2022 we recorded $34.2 million, $35.5 million, and $61.0 million respectively, of stock-based compensation expense related to the grant of equity-based awards.
Failure to comply with laws and regulations relating to privacy, data protection, and cybersecurity could lead to government enforcement actions, private litigation and adverse publicity. We receive, store and process personal information and other data from and about customers in addition to our employees and contractors.
Failure to comply with laws and regulations relating to privacy, data protection, and cybersecurity could lead to government enforcement actions, private litigation and adverse publicity. We receive, store and process personal information from and about customers, employees and contractors.
Risks Associated with Intellectual Property We may not be able to prevent unauthorized use of our intellectual property and our intellectual property rights may not be adequate to protect our business, financial condition and results of operations.
Risks Related to Intellectual Property We may not be able to prevent unauthorized use of our intellectual property, and our intellectual property rights may not be adequate to protect our business, financial condition and results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor additional information regarding whether any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition, please refer to Item 1A, “Risk Factors,” in this annual report on Form 10-K, including the risk factors entitled “Failure to comply with laws and regulations relating to privacy, data protection, and cybersecurity could lead to government enforcement actions, private litigation and adverse publicity”.
Biggest changeFor additional information regarding risks related to cybersecurity threats, please refer to Item 1A, “Risk Factors,” in this Annual Report on Form 10-K, including the risk factor entitled “Failure to comply with laws and regulations relating to privacy, data protection, and cybersecurity could lead to government enforcement actions, private litigation and adverse publicity.” Governance Board of Directors Oversight Our board of directors is responsible for monitoring and assessing strategic risk exposure, including cybersecurity risks, and our executive officers are responsible for the day-to-day management of the material risks we face.
Our CISO and our management committee on cybersecurity oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
Our CISO and management committee on cybersecurity oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
These risk 32 assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, attack surface state and threat modeling, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
These risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, attack surface state and threat modeling, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
Engage Third-parties on Risk Management We engage third party auditors in connection with our risk assessment processes. These service providers assist us with designing and implementing our cybersecurity policies and procedures, as well as with monitoring and testing our safeguards at different levels.
Engage Third-Parties on Risk Management We typically engage third party auditors in connection with our risk assessment processes. These service providers assist us with designing and implementing our cybersecurity policies and procedures, as well as with monitoring and testing our safeguards at different levels.
As part of our overall risk management system, we monitor and test our safeguards and train our employees on these safeguards, in collaboration with human resources, IT, and a dedicated Grid University training department. Personnel at all levels and departments are made aware of our cybersecurity policies through multiple channels of communication and training.
As part of our overall risk management system, we monitor and test our safeguards and train our employees on these safeguards, in collaboration with human resources, IT, and a dedicated “Grid University” training department. Personnel at all levels and departments are made aware of our cybersecurity policies through multiple channels of communication and training.
We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein. We conduct regular risk assessments to identify cybersecurity threats.
We require each third-party service provider to ensure that it has the ability to implement and maintain appropriate security measures, consistent with all applicable laws, to implement and maintain reasonable security measures in connection with their work with us, and to promptly report any suspected breach of its security measures that may affect our company.
To address and mitigate potential risks associated with our use of such third parties, we require each third-party service provider to ensure that it has the ability to implement and maintain appropriate security measures, consistent with all applicable laws, to implement and maintain reasonable security measures in connection with their work with us, and to promptly report any suspected breach of its security measures that may affect our company.
We perform internal audits of our cybersecurity procedures, review data access rights, conduct system vulnerability scans and prepare incident logs, alerts and threat reviews. We received ISO 27001 certification in 2014 and are subject to annual ISO 27001 standard compliance monitoring audits and periodic customer security audits.
We regularly perform internal audits of our cybersecurity procedures, review role-based data access rights, conduct system vulnerability scans and prepare incident logs, alerts and threat reviews. We have maintained our ISO 27001 certification since 2014 and are subject to annual ISO 27001 standard compliance monitoring audits and periodic customer security audits.
Our current management committee on cybersecurity includes dedicated full-time specialists in relevant fields ranging from code, application, system, and network security to computer forensics, data privacy and applied cryptography, physical security, social engineering and red teaming.
They are assisted by dedicated information security and IT staff, our DPO, HR Director, and legal and finance representatives. Our current management committee on cybersecurity includes dedicated full-time specialists in relevant fields ranging from code, application, system, and network security to computer forensics, data privacy and applied cryptography, physical security, social engineering and red teaming.
We conduct regular risk assessments to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats.
We also conduct assessments as part of our regular process in the event of a material change in our business practices or established procedures that may affect information systems, which are vulnerable to such cybersecurity threats.
Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards.
We incorporate results of these risk assessments to our policies and procedures, to maintain reasonable safeguards on an ongoing basis to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards.
Our CISO who has been leading the team for over a decade, has 20+ years of industry experience, is a Certified Information Systems Security Professional and lead ISO 27001 auditor, and has authored five books on information security auditing strategy, wired and wireless network security, and penetration testing.
Our CISO, who has been leading the team for over a decade, has over 20 years of industry experience, is a Certified Information Systems Security Professional and lead ISO 27001 auditor, and has authored five books on information security auditing strategy, wired and wireless network security, and penetration testing Our CISO and our management committee on cybersecurity, which includes our Chief Executive Officer (“CEO”), COO and IT Director, are primarily responsible for assessing and managing our material risks from cybersecurity threats.
The processes by which our CISO and our management committee on cybersecurity are informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents includes the following: risk assessment and management, policy development and implementation, prevention strategies, detection mechanisms, incident response and mitigation, remediation and recovery, reporting and communication, compliance and legal considerations, efforts at continuous improvement, and training and awareness. 33 Reporting to Board of Directors Our COO reports to our audit committee on a quarterly basis regarding the Company’s current cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, customer escalations and requests, cybersecurity systems testing, relevant threat landscape and activities of third parties, security controls implementation status and the implementation of any new cybersecurity tools.
Reporting to Board of Directors Our COO reports to our audit committee on a quarterly basis regarding the Company’s current cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, customer escalations and requests, cybersecurity systems testing, relevant threat landscape and activities of third parties, security controls implementation status and the implementation of any new cybersecurity tools.
Risks from Cybersecurity Threats We have not encountered any cybersecurity incident that had any significant impact on our operations or financial standing.
Risks from Cybersecurity Threats We have not experienced any cybersecurity events, including cybersecurity incidents, that have had or which are likely to have any material impact on our business strategy, results of operations or financial position.
We devote significant resources and designate high-level personnel, including our Chief Information Security Officer (“CISO”) who reports to our Chief Operations Officer (“COO”), to manage the risk assessment and mitigation process.
Our board of directors administers its cybersecurity risk oversight function directly as a whole, as well as through the audit committee. 32 Management’s Role Managing Risk We devote significant resources, and designate high-level personnel, including our Chief Information Security Officer (“CISO”) and Data Protection Officer (“DPO”), who each report to our Chief Operations Officer (“COO”), to manage cyber-related risk assessment and mitigation processes.
Our audit committee regularly reports its activities, including review of cybersecurity matters, to our board of directors.
Our audit committee regularly reports its activities, including review of cybersecurity matters, to our board of directors. There is also an annual senior management meeting and report to our CEO and COO that follows our internal information security audit, which is overseen by the CEO.
Removed
Governance Board of Directors Oversight Our board of directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks we face. Our board of directors administers its cybersecurity risk oversight function directly as a whole, as well as through the audit committee.
Added
During the year ended December 31, 2024, we completed the transition to the latest version of the standard and added two additional locations to the certification scope.
Removed
Management’s Role Managing Risk Our CISO and our management committee on cybersecurity, which includes our CEO, COO and IT Director, are primarily responsible to assess and manage our material risks from cybersecurity threats. They are assisted by dedicated information security and IT staff, our Data Protection Officer (“DPO”), HR Director, and legal and finance representatives.
Added
Our formal information security program includes measures to address: risk assessment and management, policy development and implementation, prevention strategies, detection mechanisms, incident response and mitigation, remediation and recovery, reporting and communication, compliance and legal considerations, efforts at continuous improvement, and training and awareness.
Added
Through these measures, our CISO and management committee on cybersecurity are informed about and monitor the lifecycle (i.e., prevention, detection, mitigation, and remediation) of cybersecurity threats or incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeGrid Dynamics’ offices are located in Plano, Texas and Tampa, Florida, the U.S., as well as Guadalajara, Mexico; Yerevan in Armenia; Hyderabad and Chennai in India; Krakow, Gdansk, Warsaw and Wroclaw in Poland; Belgrade in Serbia; Zug in Switzerland; various cities across Ukraine; Chisinau, Moldova; Amsterdam, the Netherlands; Kingston, Jamaica; and London, the United Kingdom.
Biggest changeWe currently provide our services through a network of 28 facilities in 14 countries including offices located in Plano, Texas and Tampa, Florida, U.S.; as well as Guadalajara, Mexico; Buenos Aires, Argentina; Yerevan in Armenia; Hyderabad, Chennai and Bangalore in India; Krakow, Gdansk, Warsaw and Wroclaw in Poland; Belgrade and Novi Sad in Serbia; Zug in Switzerland; various cities across Ukraine; Chisinau, Moldova; Amsterdam, the Netherlands; Kingston, Jamaica; London, the United Kingdom and Bucharest and Iasi, Romania.
ITEM 2. PROPERTIES Facilities Grid Dynamics currently provides its services through a network of 23 facilities in 12 countries. Grid Dynamics’ principal executive office is located at 5000 Executive Pkwy Suite 520, San Ramon, CA 94583.
ITEM 2. PROPERTIES Facilities Our principal executive office is located at 5000 Executive Pkwy Suite 520, San Ramon, CA 94583.
Grid Dynamics leases all of its facilities. Grid Dynamics believes that its existing facilities are adequate to support its existing operations and that it has ample opportunities to expand office space in all current locations to sustain expected growth.
We do not own any real property. We believe that our existing facilities are adequate to support our current operations and that we have ample opportunities to expand office space to sustain expected growth.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Although Grid Dynamics is, from time to time, involved in litigation and claims arising out of its operations in the normal course of business, Grid Dynamics is not currently a party to any material legal proceeding.
Biggest changeITEM 3. LEGAL PROCEEDINGS Although we are, from time to time, involved in litigation and claims arising out of our operations in the normal course of business, we are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us or contemplated to be brought against us.
The results of any litigation cannot be predicted with certainty and, regardless of the outcome, litigation can have an adverse impact on Grid Dynamics because of defense and settlement costs, diversion of management resources and other factors. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 34 PART II
The results of any litigation cannot be predicted with certainty and, regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 33 PART II
In addition, Grid Dynamics is not aware of any material legal or governmental proceedings against it or contemplated to be brought against it. Future litigation may be necessary, among other things, to defend Grid Dynamics or its customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish Grid Dynamics’ proprietary rights.
Future litigation may be necessary, among other things, to defend us or our customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing. 35 Company/Index Base Period 03/06/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Grid Dynamics Holdings, Inc. $ 100.00 $ 107.60 $ 324.25 $ 95.82 $ 113.83 S&P 500 $ 100.00 $ 129.07 $ 166.12 $ 136.04 $ 171.80 Peer Group $ 100.00 $ 154.70 $ 237.79 $ 154.37 $ 190.69 ITEM 6. [RESERVED] Not applicable.
Biggest changeThe performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing. 34 Company/Index Base Period 03/06/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Grid Dynamics Holdings, Inc. $ 100.00 $ 107.60 $ 324.25 $ 95.82 $ 113.83 $ 189.92 S&P 500 $ 100.00 $ 129.07 $ 166.12 $ 136.04 $ 171.80 $ 214.78 Peer Group $ 100.00 $ 154.70 $ 237.79 $ 154.37 $ 190.69 $ 198.42 ITEM 6. [RESERVED] Not applicable.
Performance Graph The following chart compares the changes in cumulative total return on our common stock with the changes in cumulative total returns of the S&P 500 and a Peer Group for the period from March 6, 2020 (the date our common stock began trading on the Nasdaq after the ChaSerg Business Combination) through December 31, 2023.
Performance Graph The following chart compares the changes in cumulative total return on our common stock with the changes in cumulative total returns of the S&P 500 and a Peer Group for the period from March 6, 2020 (the date our common stock began trading on the Nasdaq after our merger) through December 31, 2024.
Holders of Record As of February 15, 2024, there were approximately 13 holders of record of our common stock. Because many of our shares of common stock are held by brokers or other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders.
Holders of Record As of February 17, 2025, there were approximately 12 holders of record of our common stock. Because many of our shares of common stock are held by brokers or other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders.
Dividend Policy We have not paid any cash dividends on our common stock since our merger with ChaSerg Technology Acquisition Corp.
Dividend Policy We have not paid any cash dividends on our common stock since our merger in March 2020.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

74 edited+21 added−29 removed29 unchanged
Biggest changeResults of Operations Year Ended December 31, 2023 compared to Year Ended December 31, 2022 The following table sets forth a summary of Grid Dynamics’ consolidated results of operations for the periods indicated, and the changes between periods: Year ended December 31, Change 2023 2022 Dollars Percentage (in thousands, except percentages) Revenues $ 312,910 $ 310,482 $ 2,428 0.8 % Cost of revenue 199,764 189,892 9,872 5.2 % Gross profit 113,146 120,590 (7,444) (6.2) % Engineering, research, and development 14,741 15,772 (1,031) (6.5) % Sales and marketing 24,151 19,808 4,343 21.9 % General and administrative 79,834 106,018 (26,184) (24.7) % Total operating expense 118,726 141,598 (22,872) (16.2) % Loss from operations (5,580) (21,008) 15,428 (73.4) % Other income/(expenses), net 10,418 555 9,863 1,777.1 % Income/(loss) before income taxes 4,838 (20,453) 25,291 (123.7) % Provision for income taxes 6,603 8,761 (2,158) (24.6) % Net loss $ (1,765) $ (29,214) $ 27,449 (94.0) % Revenues We recorded revenues of $312.9 million, which was a slight increase of $2.4 million, or 0.8% from the previous year.
Biggest changeRecently Adopted and Issued Accounting Pronouncements Recently issued and adopted accounting pronouncements are described in Note 1 in the notes to our consolidated financial statements in this Annual Report on Form 10-K. 40 Results of Operations Year Ended December 31, 2024 compared to Year Ended December 31, 2023 The following table sets forth a summary of Grid Dynamics’ consolidated results of operations for the periods indicated, and the changes between periods: Year ended December 31, Change 2024 2023 Dollars Percentage (in thousands, except percentages) Revenues $ 350,571 $ 312,910 $ 37,661 12.0 % Cost of revenue 223,566 199,764 23,802 11.9 % Gross profit 127,005 113,146 13,859 12.2 % Engineering, research, and development 18,347 14,741 3,606 24.5 % Sales and marketing 28,622 24,151 4,471 18.5 % General and administrative 82,141 79,834 2,307 2.9 % Total operating expense 129,110 118,726 10,384 8.7 % Loss from operations (2,105) (5,580) 3,475 (62.3) % Interest and other income, net 13,160 10,418 2,742 26.3 % Income before income taxes 11,055 4,838 6,217 128.5 % Provision for income taxes 7,014 6,603 411 6.2 % Net income/(loss) $ 4,041 $ (1,765) $ 5,806 n.m.
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.
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.
General and Administrative General and administrative expenses include costs to support the business and consist primarily of administrative personnel and officers’ salaries, employee benefits including performance bonuses, stock-based compensation, legal and audit expenses, insurance, operating lease expenses of office premises and other facility costs, workforce global mobility initiatives, restructuring and employee relocations cost not directly related to customer projects, and depreciation and amortization expenses related to such activities.
General and Administrative General and administrative expenses include costs to support the business and consist primarily of administrative personnel and officers’ salaries, employee benefits including performance bonuses, stock-based compensation, legal and audit expenses, insurance, operating lease expenses of office premises and other facility costs, workforce global mobility initiatives, 42 restructuring and employee relocations cost not directly related to customer projects, and depreciation and amortization expenses related to such activities.
You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and in Item 1A, “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Annual Report on Form 10-K.
You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and in Item 1A, “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and 35 elsewhere in this Annual Report on Form 10-K.
Founded in 2006, Grid Dynamics is headquartered in Silicon Valley and has a global talent pool of intellectually curious problem solvers in offices across the U.S., Mexico, Jamaica, the U.K., Europe, and India.
Founded in 2006, Grid Dynamics is headquartered in Silicon Valley and has a global talent pool of intellectually curious problem solvers in offices across the U.S., Mexico, Jamaica, Argentina, the U.K., Europe, and India.
The impact on Ukraine, coupled with the actions taken by other countries, including new and stricter sanctions imposed by the U.S., Canada, the U.K., the European Union, and other countries, companies and organizations against officials, individuals, regions, and industries in Russia and certain regions of Ukraine, and each country’s potential response to such sanctions, tensions, and military actions could have a material adverse effect on our operations.
The impact on Ukraine, coupled with the actions taken by other countries, including sanctions imposed by the U.S., Canada, the U.K., the European Union, and other countries, companies and organizations against officials, individuals, regions, and industries in Russia and certain regions of Ukraine, and each country’s potential response to such sanctions, tensions, and military actions could have a material adverse effect on our operations.
Key Performance Indicators and Other Factors Affecting Performance Grid Dynamics uses the following key performance indicators and assesses the following other factors to analyze its business performance, to make budgets and financial forecasts and to develop strategic plans: 38 Employees by Region Attracting and retaining the right employees is critical to the success of Grid Dynamics’ business and is a key factor in Grid Dynamics’ ability to meet customers’ needs and grow its revenue base.
Key Performance Indicators and Other Factors Affecting Performance Grid Dynamics uses the following key performance indicators and assesses the following other factors to analyze its business performance, to make budgets and financial forecasts and to develop strategic plans: Employees by Region Attracting and retaining the right employees in the right regions is critical to the success of Grid Dynamics’ business and is a key factor in Grid Dynamics’ ability to meet customers’ needs and grow its revenue base.
Our historical results are not necessarily indicative of the results that may be expected for any period in the future. 36 Overview Grid Dynamics Holdings, Inc. (“Grid Dynamics,” “GDH,” the “Company,” “we,” “us,” or “our”) is a leading provider of technology consulting, platform and product engineering, and advanced analytics services.
Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Overview Grid Dynamics Holdings, Inc. (“Grid Dynamics,” the “Company,” “we,” “us,” or “our”) is a leading provider of technology consulting, platform and product engineering, and advanced analytics services.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 includes a discussion and analysis of our financial condition and results of operations between the years ended December 31, 2022 and 2021 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is hereby incorporated herein by reference.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 includes a discussion and analysis of our financial condition and results of operations between the years ended December 31, 2023 and 2022 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is hereby incorporated herein by reference.
Revenues Determining the amount of revenue to be recognized requires from us significant estimates and judgements, including whether services specified in the agreements are single or distinct performance obligations, whether obligations are satisfied over time or at a point in time and what is the best method to measure our progress to completion.
Revenues Determining the amount of revenue to be recognized requires from us significant estimates and judgments, including whether services specified in the agreements are single or distinct performance obligations, whether obligations are satisfied over time or at a point in time and what is the best method to measure our progress to completion.
(2) 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) 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 revenues, 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) 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) 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 revenues, 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.
As a forefront provider of technology consulting, platform and product engineering services, and bespoke software development, we draw from over 7 years of leadership in Enterprise artificial intelligence (“AI”), coupled with profound expertise in cloud, data, and advanced analytics.
As a forefront provider of technology consulting, platform and product engineering services, and bespoke software development, we draw from over eight years of leadership in Enterprise artificial intelligence (“AI”), coupled with profound expertise in cloud, data, and advanced analytics.
See Note 7 “Debt”, Note 8 “Leases” and Note 15 “Commitments and contingencies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for detailed information on our contractual obligations and commitments.
See Note 7 “Debt”, Note 8 “Leases” and Note 14 “Commitments and contingencies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K for detailed information on our contractual obligations and commitments.
Our commitment to engineering excellence, R&D leadership, a co-innovation ethos, globally efficient “Follow-the-Sun” delivery model, and an unwavering “whatever it takes” dedication to client success empower us to solve even the most complex enterprise challenges, ensuring profitable business outcomes and future-proof growth.
Our commitment to engineering excellence, R&D leadership, a co-innovation ethos, globally efficient “Follow-the-Sun” delivery model, and an unwavering “whatever it takes” dedication to client success empower us to solve even the most complex enterprise challenges, facilitating profitable business outcomes and future growth.
(3) We implemented a restructuring plan during the first quarter of 2023. Our restructuring costs comprised of severance charges and respective taxes and are included in General and administrative expenses in the Company’s consolidated statement of loss and comprehensive income/(loss). We did not incur any restructuring expenses during the years ended December 31, 2022 and 2021.
(3) We implemented a restructuring plan during the first quarter of 2023. Our restructuring costs comprised of severance charges and respective taxes and are included in general and administrative expenses in the Company’s consolidated statement of loss and comprehensive income/(loss). We did not incur any restructuring expenses during the year ended December 31, 2022.
Non-GAAP Measures To supplement Grid Dynamics’ consolidated financial data presented on a basis consistent with U.S. GAAP, this Annual Report contains certain non-GAAP financial measures, including Non-GAAP EBITDA, Non-GAAP net income and Non-GAAP diluted earnings per share, or Non-GAAP diluted EPS.
Non-GAAP Measures To supplement our consolidated financial data presented on a basis consistent with U.S. GAAP, this Annual Report contains certain non-GAAP financial measures, including Non-GAAP EBITDA, Non-GAAP net income and Non-GAAP diluted earnings per share, or Non-GAAP diluted EPS.
(3) We implemented a restructuring plan during the first quarter of 2023. Our restructuring costs comprised of severance charges and respective taxes and are included in general and administrative expenses in the Company’s consolidated statement of loss and comprehensive income/(loss). We did not incur any restructuring expenses during the years ended December 31, 2022 and 2021.
(3) We implemented a restructuring plan during the first quarter of 2023. Our restructuring costs comprised of severance charges and respective taxes and are included in General and administrative expenses in the Company’s consolidated statement of net income/(loss) and comprehensive income/(loss). We did not incur any restructuring expenses during the year ended December 31, 2022.
Significant estimates used in valuation of intangible assets may include, but are not limited to, revenue projections, expected economic life of customer relations, royalty rates, useful lives and discount rates.
Significant estimates used in the valuation of intangible assets may include, but are not limited to, revenue projections, expected economic life of customer relations and trade names, royalty rates, useful lives and discount rates.
Other Income/(Expenses), Net Other income/(expense), net represents interest earned on our cash and cash equivalents, including money market funds, interest expense related to our borrowings, foreign exchange gains and losses as well as changes in the fair value of contingent considerations.
Interest and Other Income, Net Interest and other income, net represents interest earned on our cash and cash equivalents, including money market funds, interest expense related to our borrowings, foreign exchange gains and losses as well as changes in the fair value of contingent considerations and marketable equity securities.
Our current liquidity needs relate mainly to compensation and benefits of our employees and contractors and capital investments to support our growth and geographical expansion. Our ability to expand and grow our business will depend on many factors including capital expenditure needs and the evolution of our operating cash flows.
Our current liquidity needs relate mainly to compensation and benefits of our employees and contractors and capital investments to support our growth and geographical expansion. Our ability to expand and grow our business will depend on many factors including capital expenditure needs and financing sources and our operating cash flows.
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.
We believe that our cash and cash equivalents balance, cash generated from operating activities and proceeds from our recent public offering 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.
We are actively monitoring the security of our personnel and the stability of our infrastructure, including communications and internet availability. We executed our business continuity plan and have adapted to developments as they occur to protect the safety of our people and handle potential impacts to our delivery infrastructure.
We continue to actively monitor the security of our personnel and the stability of our infrastructure, including communications and internet availability. We executed our business continuity plan and have adapted to developments as they occur to protect the safety of our people and handle potential impacts to our delivery infrastructure.
To maintain its gross profit margins, Grid Dynamics must effectively utilize its IT professionals, which depends on its ability to integrate and train new personnel, to efficiently transition personnel from completed projects to new assignments, to forecast customer demand for services and to deploy personnel with appropriate skills and seniority to projects.
To maintain its gross profit margins, Grid Dynamics must effectively utilize its IT professionals, which depends on its ability to integrate and train new personnel, to efficiently transition personnel from completed projects to new assignments, to forecast customer demand for services and to attract and deploy personnel in the right regions with appropriate skills and seniority to projects.
For example, in response to increased sanctions, Russia could attempt to take control of assets in Ukraine belonging to companies registered in the U.S., such as Grid Dynamics.
For example, Russia could attempt to take control of assets in Ukraine belonging to companies registered in the U.S., such as Grid Dynamics.
Item 1A. Risk Factors” included in this Annual Report on Form 10-K.
Risk Factors” included in this Annual Report on Form 10-K.
These measures exclude certain expenses that are required under U.S. GAAP. Grid Dynamics excludes these items because they are not part of core operations or, in the case of stock-based compensation, non-cash expenses that are determined based in part on Grid Dynamics’ underlying performance.
These measures exclude certain expenses that are required under U.S. GAAP. We exclude these items because they are not part of core operations or, in the case of stock-based compensation, non-cash expenses that are determined based in part on our underlying performance.
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.
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. We compensate for these limitations by providing investors and other 43 users of our financial information a reconciliation of non-GAAP measures to the related GAAP financial measures.
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.
We have included these non-GAAP financial measures because they are financial measures used by our management to evaluate the Company’s 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 these supplemental performance measurements are useful in evaluating operating performance, as they are similar to measures reported by its public industry peers and those regularly used by security analysts, investors and other interested parties in analyzing operating performance and prospects.
We believe these supplemental performance measurements are useful in evaluating operating performance, as they are similar to measures reported by our public industry peers and those regularly used by security analysts, investors and other interested parties in analyzing operating performance and prospects.
The following table presents the reconciliation of Grid Dynamics’ Non-GAAP EBITDA to its consolidated net loss, the most directly comparable GAAP measure, for the annual periods indicated: Year ended December 31, 2023 2022 2021 (in thousands) GAAP net loss $ (1,765) $ (29,214) $ (7,700) Adjusted for: Depreciation and amortization 8,926 6,626 5,049 Provision for income taxes 6,603 8,761 5,248 Stock-based compensation 35,516 60,968 33,036 Geographic reorganization (1) 1,858 11,023 — Transaction and transformation-related costs (2) 2,038 604 942 Restructuring (3) 1,488 — — Other (income)/expense, net (4) (10,418) (555) 2,502 Non-GAAP EBITDA $ 44,246 $ 58,213 $ 39,077 __________________________ (1) 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.
The following table presents the reconciliation of Non-GAAP EBITDA to consolidated net income/(loss), the most directly comparable GAAP measure, for the annual periods indicated: Year ended December 31, 2024 2023 2022 (in thousands) GAAP net income/(loss) $ 4,041 $ (1,765) $ (29,214) Adjusted for: Depreciation and amortization 14,228 8,926 6,626 Provision for income taxes 7,014 6,603 8,761 Stock-based compensation 34,167 35,516 60,968 Geographic reorganization (1) 1,627 1,858 11,023 Transaction and transformation-related costs (2) 3,144 2,038 604 Restructuring (3) 1,413 1,488 — Interest and other income, net (4) (13,160) (10,418) (555) Non-GAAP EBITDA $ 52,474 $ 44,246 $ 58,213 __________________________ (1) 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.
If the consideration promised in a contract includes a variable amount, we include estimated amounts of consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Volume discounts apply once the customer reaches certain contractual spend thresholds. If the consideration promised in a contract includes a variable amount, 39 we include estimated amounts of consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
The following table presents revenues concentration by amount and as a percentage of our revenues for the periods indicated: 39 Year ended December 31, 2023 2022 2021 (in thousands, except percentages) Top one customer $ 44,961 14.4 % $ 39,084 12.6 % $ 24,603 11.6 % Top five customers $ 115,862 37.0 % $ 134,955 43.5 % $ 92,768 43.9 % Top ten customers $ 175,588 56.1 % $ 185,253 59.7 % $ 127,564 60.4 % Top twenty customers $ 213,790 68.3 % $ 225,303 72.6 % $ 153,229 72.5 % Customers below top twenty $ 99,120 31.7 % $ 85,180 27.4 % $ 58,051 27.5 % The following table shows the evolution of Grid Dynamics’ customer base where customers are grouped by revenues recognized for each annual period presented: Year ended December 31, 2023 2022 2021 >$5.0 million 10 13 9 >$2.5 - 5.0 million 11 8 5 >$1.0 - 2.5 million 27 27 20 >$0.5 - 1 million 32 21 19 Seasonality Grid Dynamics’ business is subject to seasonal trends that impact its revenues and profitability between quarters.
The following table presents revenues concentration by amount and as a percentage of our revenues for the periods indicated: 38 For the years ended December 31, 2024 2023 2022 (in thousands, except percentages) Top one customer $ 56,261 16.0 % $ 44,961 14.4 % $ 39,084 12.6 % Top five customers $ 133,486 38.1 % $ 115,862 37.0 % $ 134,955 43.5 % Top ten customers $ 195,180 55.7 % $ 175,588 56.1 % $ 185,253 59.7 % Top twenty customers $ 243,716 69.5 % $ 213,790 68.3 % $ 225,303 72.6 % Customers below top twenty $ 106,855 30.5 % $ 99,120 31.7 % $ 85,180 27.4 % The following table shows the evolution of Grid Dynamics’ customer base where customers are grouped by revenues recognized for each annual period presented: For the years ended December 31, 2024 2023 2022 >$5.0 million 14 10 13 >$2.5 - 5.0 million 14 11 8 >$1.0 - 2.5 million 22 27 27 >$0.5 - 1 million 31 32 21 Seasonality Grid Dynamics’ business is subject to seasonal trends that impact its revenues and profitability between quarters.
Net cash used for financing activities was $16.3 million in the year ended December 31, 2023, reflected primarily the tax withholding obligations due to issuance of shares in connection with vested stock awards and was $11.1 million higher compared to 2022.
Cash used in financing activities during the year ended December 31, 2023 was $16.3 million and reflected the tax withholding obligations due to the issuance of shares in connection with vested awards.
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 includes a discussion and analysis of our cash flows between the years ended December 31, 2022 and 2021 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Off-Balance Sheet Arrangements and Commitments We do not have any material off-balance sheet commitments or contractual arrangements other than those disclosed in Note 8 “Leases” and Note 15 “Commitments and contingencies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 includes a discussion and analysis of our cash flows between the years ended December 31, 2023 and 2022 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Off-Balance Sheet Arrangements and Commitments We do not have any material off-balance sheet commitments or contractual arrangements other than those disclosed in Note 8 “Leases” and Note 14 “Commitments and contingencies” in the notes to our consolidated financial statements in this Annual Report on Form 10-K. 46 As a result of analysis related to Grid Dynamics’ functional control of its subcontractors one was determined to be a variable interest entity (“VIE”) and is therefore consolidated in Grid Dynamics’ financial statements.
The following table shows the number of Grid Dynamics personnel (including full-time and part-time employees and contractors serving in similar capacities) by region, as of the dates indicated: As of December 31, 2023 2022 2021 Americas (1) 567 521 386 Europe (2) 2,806 3,034 2,888 Rest of the world (3) 547 243 — Total 3,920 3,798 3,274 __________________________ (1) Americas includes personnel located in North, Central and South America.
A substantial majority of Grid Dynamics’ personnel is comprised of such IT professionals. 37 The following table shows the number of Grid Dynamics personnel (including full-time and part-time employees and contractors serving in similar capacities) by region, as of the dates indicated: As of December 31, 2024 2023 2022 Americas (1) 830 567 521 Europe (2) 3,134 2,806 3,034 Rest of the world (3) 766 547 243 Total 4,730 3,920 3,798 __________________________ (1) Americas includes personnel located in North, Central and South America.
Cash Flows The following table summarizes Grid Dynamics’ cash flows for the annual periods indicated: Year ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 41,093 $ 31,652 $ 17,973 Net cash used in investing activities (25,950) (16,323) (35,366) Net cash (used in)/provided by financing activities (16,321) 97,758 49,134 Effect of exchange rate changes on cash and cash equivalents 1,676 (722) (122) Net increase in cash and cash equivalents 498 112,365 31,619 Cash and cash equivalents (beginning) 256,729 144,364 112,745 Cash and cash equivalents (ending) $ 257,227 $ 256,729 $ 144,364 Operating Activities.
Cash Flows The following table summarizes Grid Dynamics’ cash flows for the annual periods indicated: Year ended December 31, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 30,198 $ 41,093 $ 31,652 Net cash used in investing activities (51,301) (25,950) (16,323) Net cash provided by/(used in) financing activities 101,162 (16,321) 97,758 Effect of exchange rate changes on cash and cash equivalents (2,131) 1,676 (722) Net increase in cash, cash equivalents and restricted cash 77,928 498 112,365 Cash, cash equivalents and restricted cash (beginning) 257,227 256,729 144,364 Cash, cash equivalents and restricted cash (ending) $ 335,155 $ 257,227 $ 256,729 Operating Activities.
(4) Other (income)/expense, net consist primarily of gains and losses 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 and returns on investments in money-market funds. 45 The following table presents a reconciliation of Grid Dynamics’ Non-GAAP diluted EPS and its Non-GAAP net income to its consolidated net loss for the annual periods indicated: Year ended December 31, 2023 2022 2021 (in thousands, except per share data) GAAP net loss $ (1,765) $ (29,214) $ (7,700) Adjusted for: Stock-based compensation 35,516 60,968 33,036 Geographic reorganization (1) 1,858 11,023 — Transaction and transformation-related costs (2) 2,038 604 942 Restructuring (3) 1,488 — — Other (income)/expense, net (4) (10,418) (555) 2,502 Tax impact of non-GAAP adjustments (5) (3,640) (6,199) (4,620) Non-GAAP net income $ 25,077 $ 36,627 $ 24,160 Number of shares used in the GAAP diluted EPS 75,193 69,197 58,662 GAAP diluted EPS $ (0.02) $ (0.42) $ (0.13) Number of shares used in the Non-GAAP diluted EPS 77,651 72,223 67,305 Non-GAAP diluted EPS $ 0.32 $ 0.51 $ 0.36 __________________________ (1) 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.
(4) Interest and other income, net consist primarily of gains and losses on foreign currency transactions, fair value adjustments, interest on cash held at banks and returns on investments in money-market funds, and other miscellaneous non-operating expenses. 44 The following table presents a reconciliation of Non-GAAP diluted EPS and Non-GAAP net income to consolidated net income/(loss) for the annual periods indicated: Year ended December 31, 2024 2023 2022 (in thousands, except per share data) GAAP net income/(loss) $ 4,041 $ (1,765) $ (29,214) Adjusted for: Stock-based compensation 34,167 35,516 60,968 Geographic reorganization (1) 1,627 1,858 11,023 Transaction and transformation-related costs (2) 3,144 2,038 604 Restructuring (3) 1,413 1,488 — Other (income)/expense, net (4) (2,597) (1,113) 1,591 Tax impact of non-GAAP adjustments (5) (4,573) (6,338) (6,822) Non-GAAP net income $ 37,222 $ 31,684 $ 38,150 Number of shares used in GAAP diluted EPS 79,974 75,193 69,197 GAAP diluted EPS $ 0.05 $ (0.02) $ (0.42) Number of shares used in non-GAAP diluted EPS 79,974 77,651 72,223 Non-GAAP diluted EPS $ 0.47 $ 0.41 $ 0.53 __________________________ (1) 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.
Fiscal Year Highlights The following table sets forth a summary of Grid Dynamics’ financial results for the annual periods indicated: Year ended December 31, 2023 2022 2021 % of revenue % of revenue % of revenue (in thousands, except percentages and per share data) Revenues $ 312,910 100.0 % $ 310,482 100.0 % $ 211,280 100.0 % Gross profit 113,146 36.2 % 120,590 38.8 % 87,728 41.5 % Income/(loss) from operations (5,580) (1.8) % (21,008) (6.8) % 50 — % Net loss (1,765) (0.6) % (29,214) (9.4) % (7,700) (3.6) % Diluted loss per share $ (0.02) n/a $ (0.42) n/a (0.13) n/a Non-GAAP Financial information Non-GAAP EBITDA (1) 44,246 14.1 % 58,213 18.7 % 39,077 18.5 % Non-GAAP net income (1) 25,077 8.0 % 36,627 11.8 % 24,160 11.4 % Non-GAAP diluted EPS (1) 0.32 n/a 0.51 n/a 0.36 n/a __________________________ (1) Non-GAAP EBITDA, Non-GAAP net income and Non-GAAP diluted EPS are non-GAAP financial measures.
Fiscal Year Highlights The following table sets forth a summary of Grid Dynamics’ financial results for the annual periods indicated: Year ended December 31, 2024 2023 2022 % of revenue % of revenue % of revenue (in thousands, except percentages and per share data) Revenues $ 350,571 100.0 % $ 312,910 100.0 % $ 310,482 100.0 % Gross profit 127,005 36.2 % 113,146 36.2 % 120,590 38.8 % Loss from operations (2,105) (0.6) % (5,580) (1.8) % (21,008) (6.8) % Net income/(loss) 4,041 1.2 % (1,765) (0.6) % (29,214) (9.4) % Diluted income/(loss) per share $ 0.05 n/a $ (0.02) n/a (0.42) n/a Non-GAAP Financial information Non-GAAP EBITDA (1) 52,474 15.0 % 44,246 14.1 % 58,213 18.7 % Non-GAAP net income (1) 37,222 10.6 % 31,684 10.1 % 38,150 12.3 % Non-GAAP diluted EPS (1) 0.47 n/a 0.41 n/a 0.53 n/a __________________________ (1) Non-GAAP EBITDA, Non-GAAP net income and Non-GAAP diluted EPS are non-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. 44 Grid Dynamics defines and calculates its non-GAAP financial measures as follows: • Non-GAAP EBITDA : Net income/(loss) before interest income/expense, provision for income taxes and depreciation and amortization, and further adjusted for the impact of stock-based compensation expense, transaction-related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to Grid Dynamics’ merger and acquisition and capital-raising activities), impairment of goodwill and other income/(expenses), net (which includes mainly interest income and expense, foreign currency transaction losses and gains, fair value adjustments and other miscellaneous expenses), and restructuring costs. • Non-GAAP net income : Net income/(loss) adjusted for the impact of stock-based compensation, impairment of goodwill, transaction-related costs, restructuring costs, other income/expenses, net, and the tax impacts of these adjustments. • Non-GAAP diluted EPS : Non-GAAP net income, divided by the diluted weighted-average number of diluted shares outstanding for the period.
We define and calculate non-GAAP financial measures as follows: • Non-GAAP EBITDA : Net income/(loss) before interest income/(expense), provision for income taxes and depreciation and amortization, and further adjusted for the impact of stock-based compensation expense, transaction-related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to Grid Dynamics’ merger and acquisition and capital-raising activities), impairment of long-lived assets, restructuring costs, one-time charges, and non-operating income/(expenses), net (which includes mainly foreign currency transaction gains and losses, fair value adjustments and other miscellaneous expenses). • Non-GAAP net income : Net income/(loss) adjusted for the impact of stock-based compensation expense, transaction-related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to Grid Dynamics’ merger and acquisition and capital-raising activities), impairment of long-lived assets, restructuring costs, one-time charges, and non-operating income/(expenses), net (which includes mainly foreign currency transaction gains and losses, fair value adjustments and other miscellaneous expenses), and the tax impacts of these adjustments. • Non-GAAP diluted EPS : Non-GAAP net income, divided by the diluted weighted-average number of diluted shares outstanding for the period.
General and administrative expenses include a substantial majority of Grid Dynamics’ stock-based compensation costs for the financial periods discussed herein. General and administrative expenses decreased by $26.2 million, or 24.7%, to $79.8 million in the year ended December 31, 2023 from $106.0 million in the year ended December 31, 2022.
General and administrative expenses include a substantial majority of Grid Dynamics’ stock-based compensation costs for the financial periods discussed herein. General and administrative expenses were $82.1 million in the year ended December 31, 2024, an increase of $2.3 million, or 2.9%, from $79.8 million in the previous year.
The following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated: Year ended December 31, 2023 2022 2021 % of revenue % of revenue % of revenue (in thousands, except percentages) Retail $ 102,551 32.8 % $ 99,681 32.1 % $ 61,717 29.2 % Tech, Media and Telecom 98,830 31.6 % 98,334 31.7 % 67,689 32.0 % CPG/Manufacturing 42,861 13.7 % 61,216 19.7 % 43,461 20.6 % Finance 28,842 9.2 % 21,893 7.1 % 17,515 8.3 % Other 39,826 12.7 % 29,358 9.4 % 20,898 9.9 % Total $ 312,910 100.0 % $ 310,482 100.0 % $ 211,280 100.0 % During the year ended December 31, 2023, our Retail vertical remained the largest comprising 32.8% of total revenues and grew 2.9% compared to the prior year.
The following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated: Year ended December 31, 2024 2023 2022 % of revenue % of revenue % of revenue (in thousands, except percentages) Retail $ 113,957 32.5 % $ 102,551 32.8 % $ 99,681 32.1 % Technology, Media and Telecom 95,048 27.1 % 98,830 31.6 % 98,334 31.7 % Finance 60,157 17.2 % 28,842 9.2 % 21,893 7.1 % CPG/Manufacturing 40,468 11.5 % 42,861 13.7 % 61,216 19.7 % Healthcare and Pharma 11,109 3.2 % 13,653 4.4 % 7,711 2.5 % Other 29,832 8.5 % 26,173 8.3 % 21,647 6.9 % Total $ 350,571 100.0 % $ 312,910 100.0 % $ 310,482 100.0 % Retail remained our largest vertical, contributing 32.5% of total revenues during the year ended December 31, 2024.
The revolving credit facility provides us with $30.0 million of available borrowing capacity. See Note 7 “Debt” in the notes to our consolidated financial statements in this Annual Report on Form 10-K. As of December 31, 2023, Grid Dynamics had cash and cash equivalents amounting to $257.2 million compared to $256.7 million at December 31, 2022.
See consolidated statement of changes in stockholders’ equity and Note 7 “Debt” in the notes to our consolidated financial statements in this Annual Report on Form 10-K regarding our follow-on offering and debt details. As of December 31, 2024, Grid Dynamics had cash and cash equivalents amounting to $334.7 million compared to $257.2 million at December 31, 2023.
Of this amount, $21.2 million was held in countries outside the U.S, and included among others 46 the U,K., Netherlands, India, Poland, Ukraine and other countries (compared to $16.8 million as of December 31, 2022). We did not have any debt outstanding under the revolving credit facility at any balance sheet date presented.
Of these amounts, $38.6 million and $21.2 million, respectively, were held in countries outside the U.S, and included among others the U.K., Switzerland, the Netherlands, India, Poland, Argentina, Mexico, Armenia, Moldova, Serbia and other countries. We did not have any debt outstanding under the revolving credit facility at any balance sheet date presented.
Grid Dynamics has a relatively high level of revenue concentration with certain customers and constantly works toward decreasing those levels.
This work resulted in a decrease in the total number of customers from 275 in 2023 to 264 in 2024. Grid Dynamics has a relatively high level of revenue concentration with certain customers and constantly works toward decreasing those levels.
Provision for income tax was $6.6 million in the year ended December 31, 2023 compared to $8.8 million in the year ended December 31, 2022. The effective tax rate increased between periods from (42.8)% in 2022 to 136.5% in 2023.
Provision for income taxes was $7.0 million in the year ended December 31, 2024 compared to $6.6 million in the year ended December 31, 2023. The effective tax rate decreased between periods from 136.5% in 2023 to 63.4% in 2024. The difference in the tax provision was mainly attributable to an increase in pre-tax book income.
Additionally we have written-off our contingent consideration liability related to Mutual Mobile and NextSphere acquisitions in the amount of $4.2 million. Provision for Income Tax Grid Dynamics follows the asset and liability method of accounting for income taxes. The provision for income taxes reflects income earned and taxed in the various U.S. federal and state and non-U.S. jurisdictions.
Interest and other income, net in 2023 benefited mainly due to the write-off of our contingent consideration liability related to Mutual Mobile and NextSphere acquisitions in the amount of $4.2 million. Provision for Income Taxes Grid Dynamics follows the asset and liability method of accounting for income taxes.
We derive our revenues through time and materials and fixed fee contracts. Although the majority of revenues have been derived through time and material contracts, our fixed-fee customer contracts business is constantly increasing. Grid Dynamics recognizes revenue for services over time as hours are incurred by Grid Dynamics’ engineering personnel.
We derive our revenues through time and materials and fixed fee contracts. Grid Dynamics recognizes revenues for services over time as hours are incurred by Grid Dynamics’ engineering personnel. For all contracts, the customer derives value from the Company providing daily consulting services, and the value derived corresponds to the labor hours expended.
During the year ended December 31, 2023, one customer accounted for 10% or more of our revenues for the period, compared to two customers each accounting for 10% or more of our revenues during the years ended December 31, 2022 and 2021, respectively.
During the years ended December 31, 2024 and 2023, one customer accounted for 10% or more of our revenues in each of the periods indicated, compared to two customers during the year ended December 31, 2022. We expect to continue our focus on maintaining our long-term relationships with customers while diversifying our customer base.
During the year ended December 31, 2023, other income/(expenses), net increased to $10.4 million from $0.6 million reported in the prior year. The increase was primarily driven by income generated by our money market funds which we started to receive during the third quarter of 2022.
During the year ended December 31, 2024, interest and other income, net increased to $13.2 million from $10.4 million in the prior year. The increase was primarily driven by income generated by our money market funds and an increase in the fair value of our investment in marketable equity securities.
(2) Europe includes personnel located in Western, Central and Eastern Europe. (3) Rest of the world includes personnel located in India and other countries not included in regions described above.
(2) Europe includes personnel located in Western, Central and Eastern Europe. (3) Rest of the world includes personnel located in India and other countries not included in regions described above. Attrition There is competition for IT professionals in the regions in which Grid Dynamics operates, and such competition may adversely impact Grid Dynamics’ business and gross profit margins.
Cost of Revenues and Gross Margin Our cost of revenues consists primarily of salaries and employee benefits, including performance bonuses and stock-based compensation, and project-related travel expenses of client-serving professionals. Cost of revenues also includes depreciation and amortization expense related to client-serving activities.
The Other vertical contributed approximately 8.0% of total revenues for each of the years ended December 31, 2024 and 2023. Cost of Revenues and Gross Margin Our cost of revenues consists primarily of salaries and employee benefits, including performance bonuses and stock-based compensation, and project-related travel expenses of client-serving professionals.
Grid Dynamics seeks to retain top talent by providing the opportunity to work on exciting, cutting-edge projects for high profile clients, a flexible work environment and training and development programs. Grid Dynamics’ management targets a voluntary attrition rate no higher than the mid-teen percentages, in line with the industry.
Employee retention is one of Grid Dynamics’ main priorities and is a key driver of our operational efficiency. Grid Dynamics seeks to retain top talent by providing the opportunity to work on exciting, cutting-edge projects for high profile clients, a flexible work environment and training and development programs.
We constantly evaluate our estimates of total efforts required based on available information and experience. Some of our contracts give rise to variable considerations, including volume discounts. Volume discounts apply once the customer reaches certain contractual spend thresholds.
The accuracy of revenues recognized for these contracts during the reporting period largely depends on our ability to correctly estimate the total expected efforts required to fulfill the performance obligation. We constantly evaluate our estimates of total efforts required based on available information and experience. Some of our contracts give rise to variable considerations, including volume discounts.
The factors discussed above caused a decrease in our gross profit from $120.6 million during the year ended December 31, 2022 to $113.1 million during 2023. Expressed as a percentage of revenues, our gross margin declined by 2.6 percentage points from 38.8% in 2022 to 36.2% in the year ended December 31, 2023.
Our gross profit increased $13.9 million to $127.0 million in the year ended December 31, 2024 from $113.1 million during the year ended December 31, 2023. Expressed as a percentage of revenues, our gross margin remained flat during the years ended December 31, 2024 and 2023, reaching 36.2% in both periods.
Business Update Regarding Military Action in Ukraine On February 24, 2022, Russian forces launched significant military action against Ukraine, resulting in sustained conflict and disruption in the region that is likely to continue.
Business Update Regarding Military Action in Ukraine In February 2022, Russian forces launched a significant military action against Ukraine.
Revenues by Vertical. We assign our customers into one of four main vertical markets or a group of various industries where we are increasing our presence, labeled as “Verticals”.
We assign our customers into one of the main vertical markets or a group of various industries where we have or are increasing our presence, labeled as “verticals.” In the first quarter of 2024, we disaggregated Healthcare and Pharma as a separate vertical due to their growing importance to the Company.
Revenues related to fixed fee contracts are recorded as work is performed based upon actual labor hours incurred and level of effort expended throughout the duration of the contract. The accuracy of revenue recognized for these contracts during the 40 reporting period largely depends on our ability to correctly estimate the total expected efforts required to fulfill the performance obligation.
Therefore, the Company measures the progress and recognizes revenue using an effort-based input method. Revenues related to fixed fee contracts are recorded as work is performed based upon actual labor hours incurred and level of effort expended throughout the duration of the contract.
These expenses comprise of personnel costs, including performance bonuses and stock-based compensation, marketing events, travel expenses, as well as depreciation and amortization related to such activities. Our sales and marketing expenses were $24.2 million in the year ended December 31, 2023, an increase of $4.3 million, or 21.9%, from $19.8 million in 2022.
Sales and Marketing Sales and marketing expenses represent spending associated with promoting and selling of our services. These expenses comprise of personnel costs, including performance bonuses and stock-based compensation, marketing events, travel expenses, as well as depreciation and amortization related to such activities.
(4) Other (income)/expense, net 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 and returns on investments in money-market funds. (5) Reflects the estimated tax impact of the non-GAAP adjustments presented in the table.
(4) Other (income)/expense, net consist primarily of gains and losses on foreign currency transactions, fair value adjustments, and other miscellaneous non-operating income and expense. During the year ended December 31, 2024, the Company started to include interest (income)/expense, net in its calculation of non-GAAP net income.
We have no way to predict the progress or outcome of the military action in Ukraine, as the conflict and government reactions continue to develop and are beyond our control. Prolonged unrest, military activities, expansion of hostilities, or broad-based sanctions, could have a material adverse effect on our operations and business outlook.
We continue to actively work with our personnel and with our customers to meet their needs and to ensure smooth delivery of services. We have no way to predict the progress or outcome of the military action in Ukraine, as the conflict and government responses continue to develop and are beyond our control.
The information contained in this section is accurate as of the date hereof, but may become outdated due to changing circumstances beyond our present awareness or control. For additional information on the various risks posed by the military action in Ukraine and the impact in the region, as well as other macroeconomic factors affecting our business, please read “Part I.
In addition, the current geopolitical situations in Armenia and separately in Serbia create additional uncertainty in the region, and could adversely affect our business. For additional information on the various risks posed by the military action in Ukraine and the impact in the region, as well as other macroeconomic factors affecting our business, please read “Part I. Item 1A.
We may need more cash resources due to changing business conditions or other developments, including investments or acquisitions. Our principal source of liquidity continues to be cash generated from our operations. Additionally, on March 15, 2022, we entered into an agreement establishing a revolving credit facility with JPMorgan Chase Bank, N.A., as an administrative agent for the lenders.
We may need more cash resources due to changing business conditions or other developments, including investments or acquisitions. Our principal source of liquidity continues to be cash generated from our operations. From time to time, we seek additional financing by means of follow-on public offerings of our common stock.
As a result of analysis related to Grid Dynamics’ functional control of its subcontractors one was determined to be a variable interest entity (“VIE”) and is therefore consolidated in Grid Dynamics’ financial statements. The assets and liabilities of this VIE consist primarily of intercompany balances and transactions, all of which have been eliminated in consolidation. 47
The assets and liabilities of this VIE consist primarily of intercompany balances and transactions, all of which have been eliminated in consolidation. 47
Grid Dynamics’ revenue prospects and long-term success depend significantly on its ability to recruit and retain qualified IT professionals. A substantial majority of Grid Dynamics’ personnel is comprised of such IT professionals.
Grid Dynamics’ revenue prospects and long-term success depend significantly on its ability to recruit and retain qualified IT professionals. We seek to employ the appropriate professionals globally to support our “Follow-the-Sun” strategy of client service and in locations to optimize our employee costs and expenses.
Expressed as a percentage of revenues, engineering research and development expenses decreased to 4.7% during the year ended December 31, 2023 compared to 5.1% in 2022. Sales and Marketing Sales and marketing expenses represent spending associated with promoting and selling of our services.
Our sales and marketing expenses were $28.6 million in the year ended December 31, 2024, an increase of $4.5 million, or 18.5%, from $24.2 million in 2023. Expressed as a percentage of revenues, our sales and marketing expenses were 8.2% and 7.7% during 2024 and 2023, respectively.
Cash provided by financing activities during the year ended December 31, 2022 of $97.8 million was generated by the equity offering during the third quarter of 2022 that was slightly offset by the payment of contingent consideration related to acquisitions and the tax withholding noted above.
Net cash provided by financing activities of $101.2 million in the year ended December 31, 2024 was generated by the equity offering in the fourth quarter of 2024, slightly offset by tax withholding obligations due to the issuance of shares in connection with vested stock awards.
In 2023, the total number of customers was 275, comparable to 272 customers in 2022. 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.
N ew customers have a direct impact on the Company ’s ability to diversify sources of revenue and replace customers that may no longer require its services. At the same time, the Company continuously works towards rationalization of its portfolio of non-strategic customers.
Net cash used in investing activities during the year ended December 31, 2023 was $26.0 million compared to $16.3 million used in the same period in 2022, primarily due to larger closing payment for the 2023 acquisition compared to the 2022 acquisition. Financing Activities .
Net cash used in investing activities during the year ended December 31, 2024 almost doubled compared to 2023 and reached $51.3 million. The main driver for the increase in cash spending were closing payments, net of cash acquired, for the JUXT and Mobile Computing acquisitions. Financing Activities .
See “Non-GAAP Measures” below for additional information and reconciliations to the most directly comparable GAAP financial measures. Our key metrics for the year ended December 31, 2023 are presented below: We recorded revenues of $312.9 million, an increase of $2.4 million, or 0.8% from the previous year.
See “Non-GAAP Measures” below for additional information and reconciliations to the most directly comparable GAAP financial measures.
During the year ended December 31, 2023, our cost of revenues were $199.8 million, an increase of $9.9 million, or 5.2%, from $189.9 million recorded in 2022. Main drivers of growth include recent acquisitions as well as increased compensation of our delivery professionals due to increased presence in higher cost geographies.
Cost of revenues also includes depreciation and amortization expense related to client-serving activities. During the year ended December 31, 2024, our cost of revenues were $223.6 million, an increase of $23.8 million, or 11.9%, from $199.8 million in 2023. The main driver of this increase was higher headcount to support our revenue growth.
Engineering, research and development expenses decreased by $1.0 million or 6.5%, to $14.7 million in the year ended December 31, 2023 from $15.8 million recorded last year. The decrease was primarily due to decline in stock-based compensation expenses, that was partially offset by increase in staffing and greater investments in customer delivery operations.
Our engineering, research, and development expenses increased significantly by 24.5% during the year ended December 31, 2024 and reached $18.3 million, compared to $14.7 million last year. Growth of our engineering, research, and development expenses primarily reflects our continued investments in customer delivery operations and internally developed software to support our growth.
For example, if Russia were to invade other countries, such as Moldova, it could adversely affect our business, including preventing the relocation of our employees from Russia. In addition, the current geopolitical situations in Armenia and separately in Serbia create additional uncertainty in the region, and could adversely affect our business.
Prolonged unrest, military activities, expansion of hostilities, or broad-based sanctions could have a material adverse effect on our operations and business outlook. For example, if Russia were to invade other countries, such as Moldova, it could adversely affect our business.
The decrease is largely explained by a combination of considerably lower stock-based compensation and geographic reorganization costs partially offset by increased levels of 43 investments in infrastructure, physical assets and facilities. As a result, expressed as a percentage of revenues, our general and administrative expenses decreased bv 8.6% to 25.5% during 2023.
Growth in general and administrative expenses was mainly caused by increased levels of investments in physical assets and facilities and related depreciation expenses, as well as increased acquisition-related costs and provisions for bad debts, partially offset by lower stock-based compensation costs.
Removed
Our GAAP and Non-GAAP gross profit margins were 36.2% and 36.8% respectively, and were down from 38.8% and 39.3% respectively in 2022. The decline in gross profit margin, both on a GAAP and Non-GAAP basis was driven by a combination of increased personnel costs and foreign exchange effect.
Added
Our key metrics for the year ended December 31, 2024 are: • We reported record revenues of $350.6 million, an increase of 12.0% from the previous year. • Our gross profit margins remained steady at 36.2% in both 2024 and 2023. • We reduced our loss from operations to $2.1 million, compared to $5.6 million in the previous fiscal year.
Removed
Loss from operations decreased by $15.4 million reaching $5.6 million during 2023 compared to the prior year, which was largely attributed to decreased levels of stock-based compensation, geographic reorganization, and relocation costs. We managed to decrease net loss by 94.0% to $1.8 million due to lower levels of operating expenses.
Added
This was a result of higher revenues partially offset by increased operating expenses. • In 2024, we recorded net income of $4.0 million, a significant turnaround after four consecutive years of net losses. • Our Non-GAAP EBITDA grew 18.6%, reaching $52.5 million during the year ended December 31, 2024. • Our diluted GAAP EPS was $0.05 per share, compared to $(0.02) per share in the year ended December 31, 2023. • Our diluted Non-GAAP EPS increased to $0.47 per share from $0.41 per share in the year ended December 31, 2023.
Removed
Non-GAAP EBITDA was $44.2 million, or 14.1% compared to $58.2 million, or 18.7% in 2022. The decline in Non-GAAP EBITDA was largely due to decreased gross profit, combined with increased operating expenses both from our acquisitions and our organic business.
Added
The operating results in any period are not necessarily indicative of the results that may be expected for any future period. 36 Recent Acquisitions On October 4, 2024, we acquired Mobile Computing S.A. (“Mobile Computing”), an Argentina-based company offering a comprehensive suite of solutions spanning industries including manufacturing, CPG, and financial services.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeComparatively, approximately 33.4% of Grid Dynamics’ $331.5 million of combined cost of revenue and total operating expenses were denominated in currencies other than the U.S. dollar in the year ended December 31, 2022.
Biggest changeFor the year ended December 31, 2024, approximately 43.2% of Grid Dynamics’ $352.7 million of combined cost of revenue and total operating expenses were denominated in currencies other than the U.S. dollar.
When and where possible, Grid Dynamics seeks to match expenses of each entity to currencies in which revenues are generated creating natural hedge. In future periods, Grid Dynamics may also become materially exposed to changes in the value of Serbian dinars and Moldovan leu against the U.S. dol lar, due to the recent acquisitions and continuous expansion of operations.
When and where possible, Grid Dynamics seeks to match expenses of each entity to currencies in which revenues are generated creating natural hedges. In future periods, Grid Dynamics may also become materially exposed to changes in the value of Serbian dinars and Moldovan leu against the U.S. dol lar, due to the recent acquisitions and continuous expansion of operations.
We analyze sensitivity to the zloty and pesos separately because, in management’s experience, fluctuations in the value of these currencies against the U.S. dollar are frequently driven by distinct macroeconomic and geopolitical factors and have the largest effect on our results during the year ended December 31, 2023.
We analyze sensitivity to the zloty and pesos separately because, in management’s experience, fluctuations in the value of these currencies against the U.S. dollar are frequently driven by distinct macroeconomic and geopolitical factors and have the largest effect on our results during the year ended December 31, 2024.
For the year ended December 31, 2023, approximately 37.9% of Grid Dynamics’ $318.5 million of combined cost of revenue and total operating expenses were denominated in currencies other than the U.S. dollar.
Comparatively, approximately 37.9% of Grid Dynamics’ $318.5 million of combined cost of revenue and total operating expenses were denominated in currencies other than the U.S. dollar in the year ended December 31, 2023.
In addition, Grid Dynamics’ profit margins are subject to volatility as a result of changes in foreign exchange rates. Grid Dynamics’ functional currency apart from the U.S. dollar includes EURO, British pounds, Mexican pesos, Moldovan leu and Indian rupees.
In addition, Grid Dynamics’ profit margins are subject to volatility as a result of changes in foreign exchange rates. Grid Dynamics’ material functional currencies apart from the U.S. dollar includes Euro, British pounds, Mexican pesos, Polish zlotys and Indian rupees.
In the year ended December 31, 2022: • a 10% decrease in the value of the Polish zloty against the U.S. dollar would have resulted in a $2.1 million increase in Grid Dynamics’ income from operations, while a 10% increase in the zloty’s value would have resulted in a $2.6 million decrease in income from operations. • a 10% decrease in the value of the Mexican pesos against the U.S. dollar would have resulted in a $0.9 million increase in Grid Dynamics’ income from operations, while a 10% increase in the pesos’ value would have resulted in a $0.8 million decrease in income from operations.
In the year ended December 31, 2024: • a 10% decrease in the value of the Polish zloty against the U.S. dollar would have resulted in a $5.5 million increase in Grid Dynamics’ income from operations, while a 10% increase in the zloty’s value would have resulted in a $6.7 million decrease in income from operations. • a 10% decrease in the value of the Mexican pesos against the U.S. dollar would have resulted in a $1.3 million increase in Grid Dynamics’ income from operations, while a 10% increase in the pesos’ value would have resulted in a $1.6 million decrease in income from operations.

Other GDYN 10-K year-over-year comparisons