GRID DYNAMICS HOLDINGS, INC. www.griddynamics.com
trusted engineering partner for digital transformation
Grid Dynamics Investor Presentation
NASDAQ: GDYN | Q2 2020
Disclaimer
Forward-Looking Statements
This communication contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts and involve risks and uncertainties that could cause actual results of Grid Dynamics to differ materially from those expected and projected. These forward-looking statements can be identified by the use of forward-looking terminology, including the words "believes," "estimates," "anticipates," "expects," "intends," "plans," "may," "will," "potential," "projects," "predicts," "continue," or "should," or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include, without limitation, statements concerning Grid Dynamics' expectations with respect to future performance, market size and industry trends. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside Grid Dynamics' control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (i) Grid Dynamics has a relatively short operating history and operates in a rapidly evolving industry, which makes it difficult to evaluate future prospects and may increase the risk that it will not continue to be successful; (ii) Grid Dynamics may be unable to effectively manage its growth or achieve anticipated growth, which could place significant strain on Grid Dynamics' management personnel, systems and resources; (iii) Grid Dynamics' revenues are highly dependent on a limited number of clients and industries that are affected by seasonal trends, and any decrease in demand for outsourced services in these industries may reduce Grid Dynamics' revenues and adversely affect Grid Dynamics' business, financial condition and results of operations; (iv) Grid Dynamics' revenues are highly dependent on clients primarily located in the United States, and any economic downturn in the United States or disruptions in the credit markets may have a material adverse effect on Grid Dynamics' business, financial condition and results of operations; (v) Grid Dynamics faces intense and increasing competition; (vii) Grid Dynamics' failure to successfully attract, hire, develop, motivate and retain highly skilled personnel could materially adversely affect Grid Dynamics' business, financial condition and results of operations; (viii) failure to adapt to rapidly changing technologies, methodologies and evolving industry standards may have a material adverse effect on Grid Dynamics' business, financial condition and results of operations; (ix) failure to successfully deliver contracted services or causing disruptions to clients' businesses may have a material adverse effect on Grid Dynamics' reputation, business, financial condition and results of operations; (xi) the impact of the COVID-19 pandemic has and may continue to materially adversely affect our stock price, business operations, and overall financial performance; and (xii) other risks and uncertainties as specified in Grid Dynamics' filings with the SEC, including those under the sections entitled "Risk Factors." Grid Dynamics cautions that the foregoing list of factors is not exclusive. Grid Dynamics cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Grid Dynamics does not undertake any obligation to update any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.
Use of Projections
This presentation contains projections for Grid Dynamics, including with respect to its revenue. Grid Dynamics' auditors have not audited, reviewed, compiled or performed any procedures with respect to the projections for the purpose of their inclusion in this presentation, and accordingly, have not expressed an opinion or provided any other form of assurance with respect thereto for the purpose of this presentation. These projections are for illustrative purposes only and should not be relied upon as necessarily indicative of future results. In this presentation, certain of the above-mentioned projection information has been repeated for purposes of providing comparisons with historical data. The assumptions and estimates underlying the projected information are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the projected information. Accordingly, there can be no assurance that the projected results will be indicative of the future performance of Grid Dynamics or that actual results will not differ materially from those presented in the projected information.
Industry and Market Data
This presentation includes market data and other statistical information for sources believed by Grid Dynamics to be reliable, including independent industry publications and other published independent sources. Some data are also based on the good faith estimates of Grid Dynamics, which are derived from their review of internal sources as well as the independent sources described above. Although Grid Dynamics believe these sources are reliable, they have not independently verified the information and cannot guarantee its accuracy and completeness.
Non-GAAP Financial Measures
In this presentation, Grid Dynamics supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures, including Adjusted EBITDA, non-GAAP Net Income, Non-GAAP Gross Profit, and non-GAAP Earnings Per Share. Management believes these measures help illustrate underlying trends in Grid Dynamics' business and uses the measures to establish budgets and operational goals, communicate internally and externally, for managing its business and evaluating its performance, including in comparison to prior periods. Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation and Amortization, and excludes transaction expenses, stock-based compensation expenses, retention bonuses, and restructuring charges. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to, or more meaningful than, income from operations as a measure of operating performance or to cash flows from operating, investing or financing activities or as a measure of liquidity. Reconciliations of the differences between the non-GAAP measures to the comparable GAAP financial measures are included in this presentation. Grid Dynamics anticipates that it will continue to report certain non-GAAP financial measures in its financial results, including non-GAAP results that exclude stock-based compensation expense, acquisition-related charges, impairment of goodwill, amortization of certain intangible assets, retention bonuses, restructuring charges, items related to one-time charges and benefits, gains and losses related to foreign exchange, and the tax impact of any such pre-tax adjustments. Because these non-GAAP financial measures are not calculated in accordance with GAAP, these measures are not comparable to GAAP and may not be comparable to similarly described non-GAAP measures reported by other companies within Grid Dynamics' industry. Consequently, Grid Dynamics' non-GAAP financial measures should not be evaluated in isolation or supplant comparable GAAP measures but should be considered together with the information in Grid Dynamics' consolidated financial statements, which are prepared in accordance with GAAP.
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About Grid Dynamics
Grid Dynamics is the emerging leader in driving enterprise-level digital transformation in the Fortune 1000.
NASDAQ CM | HEADQUARTERS |
GDYN | SAN RAMON, CA, USA |
FY 2019 REVENUE | Q2 2020 REVENUE |
$118.3 M | $22.4 M |
CASH | Q3 2020 REVENUE EXPECTATIONS |
$123 M | $24.5 M to $26 M |
DILUTED SHARES * | EMPLOYEES |
49.6 M | 1200+ |
* Includes warrants, options and restricted stock units |
CEO
LEONARD LIVSCHITZ
Q2 2020 GAAP/non-GAAP EPS
$(0.04) / $0.01
LOCATIONS
UNITED STATES
POLAND
RUSSIA
SERBIA
UKRAINE
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2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
History Inception
Established in 2006 in San Ramon, CA as a grid computing consulting company by a founding team from Sun Microsystems, Grid Dynamics has quickly established the reputation of solving the toughest algorithmic challenges the companies had to offer.
Customers such as PayPal, Cisco, and eBay helped Grid Dynamics refine and expand its service portfolio.
Looking to source the top talent for challenging algorithmic tasks, Grid Dynamics turned its gaze east, opening its first offices in CEE through relationships with the alma mater of ACM programming contest champions.
Traction
The crisis of 2009 and post-crisis shift to online and mobile spending helped Grid Dynamics see the transformation opportunity in the traditional enterprises. Over the next years, Grid Dynamics became a digital partner of choice for the top retailers in the country. Strong technical underpinnings and deep understanding of the digital operations made Grid Dynamics widely known for its expertise in the emerging cloud and big data spaces.
On average, Grid Dynamics has been adding a new engineering center every two years, quickly becoming an employer of choice due to its engineering-focused culture.
Growth
By 2018, Grid Dynamics graduated to become a tier-1 supplier to many Fortune-100 enterprises. With its focus on transformative capabilities of new technologies, platform to deliver end-to-end solutions, and strong financial metrics, leadership had set their sights to the new horizon.
Grid Dynamics became publicly listed on NASDAQ Capital Markets in 2020. With presence in five countries and counting over 1,000 employees generating industry-leading per capita revenues, Grid Dynamics is the newest challenger in the fast-growing digital transformation market.
We are just getting started.
4 | NASDAQ: GDYN © 2020 Grid Dynamics Holdings, Inc. All Rights Reserved. | Grid Dynamics / Investor Presentation Q2 2020 |
" The best agile | 1 |
service providers excel in co- creation, helping clients apply the latest technology to solve their,
and their customers', challenges. 1 "
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Digital market is growing in excess of 20% YoY, set to reach 1T by 2026
Owing to rising urbanization and digitalization across the world, organizations are switching towards using technology driving solutions to match the rapid pace of business growth[… Digital transformation has helped organizations in expanding customer base through better interactions and swifter customer support services. 2
- of application purchases supporting digital will be "build", not "buy"
The research shows that many organizations already favor a new kind of "build" that does not include out- of-the-box solutions, but instead a combination of application components that are innovative, software packaged with professional services or solutions that are increasingly sourced from startups, disrupters or specialized local providers. 3
'and'
Digital leaders learned to drive growth while finding innovative ways of to reduce total cost
Most companies are caught trying to either cut costs or invest for growth, but the top-performing enterprises are doing both. A core challenge facing the industry is how organizations can operate as both a traditional company and a technology company at the same time[…] These 'and' dilemmas will drive future IT spending trends. 4
6 NASDAQ: GDYN © 2020 Grid Dynamics Holdings, Inc. All Rights Reserved.
Grid Dynamics / Investor Presentation Q2 2020
High value,
high impact services
Experience Design
Web and Mobile
Conversational Interfaces
Development
Culture
Quality and Security Engineering
Agile Development
Continuous Delivery and DevOps
Technical Consulting
Technology Roadmaps Discovery Workshops
Digital
Innovation
Scalable Engineering
Big Data & Fast Data
Cloud Computing
Performance Engineering
Lean Prototypes
Proof-of-Concept
Feasibility Lab
Digital Intelligence
Data Science Artificial Intelligence
7 | NASDAQ: GDYN © 2020 Grid Dynamics Holdings, Inc. All Rights Reserved. | Grid Dynamics / Investor Presentation Q2 2020 |
Differentiated and defensible core
Digital commerce expertise | Driven by consulting | Land and expand |
Grid Dynamics' leadership had decades of | Unlike most of the industry, we maintain a high | Great things start from humble beginnings. |
experience in driving digital profits through the | proportion of our staff onsite at customer's | Grid Dynamics engages with the customers |
use of technology and data. Our track record | premises. This gives us a strong sense of | starting with risky, innovative projects that can |
in digital retail and technology helped us | ownership and ability to advise with a deep | only be delivered in close collaboration with |
create an estimated 200B in value for our | understanding of the business constraints. | the client and enabled by the world's best |
customers. As more and more industries go | Onsite and offshore staff works as a single | technical skills. These initial successes allow |
through digital transformation, demand for | team, eliminating choke points and execution | us establish the trust and position ourselves |
digital skills skyrockets. | delays. | as the top partner for digital programs. |
Focus on engineering | Optimized for innovation | Globally integrated |
We believe that a strong engineering core is | Every process in Grid Dynamics is optimized | Whether in US, Poland, Serbia, Ukraine, or |
paramount to adoption of new technology. We | for time to market and continuous iteration. | Russia, every Grid Dynamics team member is |
hire the top 5% of the already mature markets | We have practiced and coached our | part of the global system. Every pod is built |
and maintain a rigorous training program to | customers on agile, continuous delivery and | and managed as distributed from day 1 and |
ensure our technical skills are up to date. Our | DevOps since the inception and prioritize | every engineer is ready to switch to remote |
senior-to-junior ratio is much higher than the | results. This stands in stark contrast to | mode at the drop of a hat. Everyone speaks |
industry average and relentless attention on | traditional outsourcing project management, | the same language and shares in the same |
quality results in the lower total cost for the | which attempts to tackle multi-year waterfall | set of cultural values. In many of our global |
client. | planning despite the evidence of its | locations, Grid Dynamics is the top |
ineffectiveness. | employment choice. |
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Digital innovation partner for
Fortune 1000
and many more...
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Innovation pods across the US
Seattle
Kirkland
Portland
Boise
San Ramon, CA (2006)
Headquarters and the center of operations for SF Bay Area.
San Francisco
Bay Area
Milwaukee
Chicago
Plano, TX (2018)
Fourth largest metro and the fastest growing in the US. Destination of choice for technical talent.
NYC
Pittsburgh
Baltimore
Columbia
Atlanta
Plano
Frisco
Austin
St Petersburg
Grid Dynamics technical staff
Other client offices
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Engineering offices in Central and Eastern Europe
Warsaw (2019)
Capital of Poland and major technology hub
Krakow (2015)
Largest IT labor market in Poland Technological and innovation
center of Poland
Kyiv (2018)
Largest IT market in Ukraine
Lviv (2016)
Well-known technology and innovation hub in Ukraine
St Petersburg (2009)
Largest IT labor market in Russia
(80K IT specialists)
Consistent world programming
champions
Kharkiv (2009)
2nd largest IT market in Ukraine (~2000 IT graduates/year)
Wroclaw (2019)
3rd largest labor market in Poland
(35 universities)
Belgrade (2018) | Poland |
Largest IT market on Balkans |
Grid Dynamics offices | Serbia |
Universities in the top | 20 programming championship (Source: ACM ICPC Rankings) |
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Russia
Ukraine
Saratov (2006)
Employer of choice for local IT market Oldest Grid Dynamics office
Grid Dynamics / Investor Presentation Q2 2020
Annual Key Metrics (Historical)
$180 | Revenue | $12 | Top 10 Average Spend | 18 | #Clients > $1M | |||||||||||||
15 | ||||||||||||||||||
$160 | $10 | 21% | 16 | 23% | ||||||||||||||
$140 | ||||||||||||||||||
29% | $8 | 14 | ||||||||||||||||
$120 | 12 | 11 | ||||||||||||||||
10 | ||||||||||||||||||
$100 | $6 | 10 | 8 | |||||||||||||||
$80 | 8 | |||||||||||||||||
6 | ||||||||||||||||||
$60 | $4 | 6 | ||||||||||||||||
$40 | $2 | 4 | ||||||||||||||||
$20 | 2 | |||||||||||||||||
$0 | $0 | 0 | ||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | 2015 | 2016 | 2017 | 2018 | 2019 | 2015 | 2016 | 2017 | 2018 | 2019 | ||||
$35 | Adjusted EBITDA 5 | Headcount | Customer concentration | |||||||||||||||
$30 | 100% | |||||||||||||||||
22% | Rest | |||||||||||||||||
$25 | 80% | |||||||||||||||||
27% | ||||||||||||||||||
$20 | 1430 | 60% | Top 10 | |||||||||||||||
$15 | 1144 | Top 5 | ||||||||||||||||
40% | ||||||||||||||||||
$10 | 808 | |||||||||||||||||
554 | 705 | 20% | Top 1 | |||||||||||||||
$5 | ||||||||||||||||||
$0 | 0% | |||||||||||||||||
20156 | 20166 | 20176 | 20187 | 20197 | 2015 | 2016 | 2017 | 2018 | 2019 | 2017 | 2018 | 2019 | Q2 2020 |
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Second Quarter 2020 Results - Key Financial Metrics
GAAP 2Q20 | Non-GAAP 2Q20 | |
Revenue | 22.4M | 22.4M |
Q/Q Change | (31)% | (31)% |
YoY Change | (22)% | (22)% |
Gross Profit | 8.4M | 8.4M |
Gross Margin | 38% | 38% |
Net Income | -2.2M | 0.4M |
% of Revenue | -10% | 2% |
EPS | -0.04 | 0.01 |
Diluted Share Count | 49.6 | 49.6 |
Adj. EBITDA | 1.02M | |
% of Revenue | 5% | |
Revenue ($M)
Non-GAAP Gross Profit Margin ($M)
Non-GAAP Gross Profit Margin (%)
13 NASDAQ: GDYN © 2020 Grid Dynamics Holdings, Inc. All Rights Reserved. | Grid Dynamics / Investor Presentation Q2 2020 |
Trusted engineering partner for digital transformation
Grid Dynamics Holdings Inc.
5000 Executive Parkway,
Suite 520 / San Ramon, CA 1-646-277-1236investorrelations@griddynamics.comwww.griddynamics.com
NASDAQ: GDYN © 2020 Grid Dynamics Holdings, Inc. All Rights Reserved.
Footnotes
- The Forrester Wave™ - Midsize Agile Software Development Service Providers, Q2 2019
- Reports and Data - COVID 19 Impact Analysis of Digital Transformation Markethttps://www.reportsanddata.com/report-detail/digital-transformation-market
- Gartner, 2015https://www.gartner.com/en/newsroom/press-releases/2015-08-27-gartner-says-modernization-and-digital-transformation-projects-are-behind-growth-in-enterprise-application-software-market
- Gartner, 2019https://www.gartner.com/en/newsroom/press-releases/2019-10-23-gartner-says-global-it-spending-to-grow-3point7-percent-in-2020
1. Adj. EBITDA: net income 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).
1. 2015 and 2016 not audited under PCAOB standard
1. 2017, 2018, and 2019 audited and upgraded to PCAOB standard
Cover slide photo by Jonas Jacobsson,https://unsplash.com/photos/YlFM0-LdHu8
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Grid Dynamics Holdings Inc. published this content on 06 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 August 2020 20:53:05 UTC
