Good afternoon, everyone. Welcome to Grid Dynamics Second Quarter 2022 Earnings Conference Call. I'm Bin Chiang, Head of Investor Relations. At this time, all participants anr in listen-only moder. Joining us on the call today are CEO, Leonard Livschitz; and CFO, Anil Doradla. Folowing their prepared remarks we will open the call to your questions.

Please note, today's conference is being recorded. Before we begin, I would like to remind everyone that today's discussion will contain forward-looking statements. This includes our business and financial outlook and answers to some of your questions.

Such statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. During this call, we will discuss certain non-GAAP measures of our performance.

GAAP to non-GAAP financial reconciliation and supplemental financial information are provided in the earnings press release and the 8-K filed with the SEC. You can find all of the information I have just described in the Investor Relations section of our website. With that, I will now turn the call over to Leonard, our CEO..

Thank you, Bin. Good afternoon, everyone, and thank you for joining us today. Q2 2022 was another record revenue quarter of $77.3 million, and this marked the eighth consecutive quarter of record revenue in the company's history.

I want to emphasize these results, which are definitely exceptional, given the circumstances the world has been facing over the past five months. Grid Dynamics executed flawlessly and transitioning a significant proportion of the workforce, while continuing to build our projects in the timely manner. I will go into details shortly.

Three months ago, I committed that we will exit Russia. Today, I would like to report Russian activities, and we are now geographically more diversified as well as continuing to expand across all our industry client verticals. More importantly, our customers demonstrating unwavering faith in Grid Dynamics' capability.

I'm confident of our strength and our ability to successfully navigate the business in the future, despite the geopolitical challenges. As our quarterly results reported, we progressed across multiple fronts of our business. This includes scaling our global presence with new locations, expanding our partnerships and adding new customers.

Grid Dynamics' solid results over the past several quarters have shown the company incredible resilience in bouncing back stronger from the global pandemic crisis first, and recently from the word perpetuated by Russia. It is a true testament of the company's strong fundamentals, teamwork and commitment to the business and the shareholders.

On this call, we'll provide insights into the demand environment, global operations and financial performance for the second quarter 2022, and also provide an outlook for the third quarter. Again, in the second quarter, our revenue of $77.3 million well exceeded our expectations that we shared with you three months ago.

We ended the second quarter with an adjusted EBITDA of $13 million, which is 17% of our revenue. The better-than-expected performance was due to a couple of factors. First, we witnessed stronger demand across our industry verticals and customers. Second, we had minimum disruption to billability as we transition out of Russia.

And more importantly, customer interested in engaging our services around digital engineering continue to be strong in this quarter. During the quarter, our geographic footprint grew across the world.

In Europe, our new office in Switzerland will become our European headquarters, while London and Amsterdam will continue to serve as customer facing centers of excellence. India, Mexico and Poland, will play strategic roles in scaling delivery footprint over time.

India with its extensive talent pool will offer an unmatched ability to scale our operations in the long-term. Mexico with its large pool of talent engineers and convenient time zone to our U.S.-based clients offer an excellent nearshore presence.

To our large clients, to welcome our nearshore strategy and have expressed interest in partner with our Mexican operation. And finally, Poland, with advantage being one of the largest country in Central Europe with a strong IT presence will continue to support our operations as with scale in Europe.

We also ramped up hiring of the engineering talent on several countries such as Romania, Armenia and Serbia and some others. Each of these countries offer a unique advantage in our global growth. In the quarter, there were several positive trends, which I would like to share with you, and there are a few notable ones. Demand trends.

In the second quarter, the demand across our verticals and customers was strong. This was indicated by the sequential and year-over-year growth across all our industries and majority of our clients. As you know, the current macro recession concern has been on everyone's mind, and our clients have been no exception.

Currently, we are not witnessing significant widespread headwinds. It's still more customer specific in nature. And there are a couple of reasons for this.

First, at many of our clients, digital transformation initiatives are given higher priority and we're increasingly involving the project of strategic importance in comparison to some the past experience. Second, we're now a more diversified company with less exposure to recession-sensitive retail brick-and-mortar business.

Even within our retail business, there are mix shifting away from some of those sensitive areas. And finally third, healthy pick up in our new logos over the several quarters enabled us to be more resilient as we go across a larger customer base. Coming to some additional second quarter segment commentary.

Similar to last quarter, our largest technology customer continuing to ramp aggressively and support our growth as we expand it into new geographies. Within our retail business, strong sequential growth was driven by our e-commerce friendly retail customers.

At our largest CPG customer, we continue to grow, and more importantly, we finalized on several key programs, not just for this year, but for 2023 as well. We're bullish on our prospects and continue to leveraging our position as a strategic partner of many. Logo momentum. In the quarter, we added five new logos across industries.

Of this, one was a global footwear manufacturing retailer. One was one of the largest distributor of beverages in the United States. One was the delivery service operation. We also have additional logos in technology and healthcare space. Our pipeline in the third quarter is healthy, and I expect to share some significant logo wins next quarter.

Partnerships. We're witnessing good momentum on the partnership front. In the second quarter, we saw a healthy growth in our pipeline and expect partnerships to play increasingly important roles in our growth. During the quarter, we received an award from the MACH Alliance for the best healthcare project.

Our capabilities and strengths are gaining greater prominence across our partners' ecosystems and this, in turn, is leading to the new opportunities. We're also enhancing our team by adding a senior sales executive to focus specifically on building opportunities with one of the top three cloud providers.

And finally, some of the largest cloud provider partners will launch new products and enhance our competencies and specializations. During the quarter, Grid Dynamics delivered also some of the notable projects. For a global technology company, we've built a centralized continuous integration platform.

Our solution standardized best practices for collaboration among engineering teams and increases their productivity and transparency for the engineering leadership. The platform currently serves over 1,000 engineers and is planned to be rolled out on a company-wide basis.

At a global CPG company, we implemented a unified interface system for wholesale orders. The system will not only significantly reduce the amount of manual work, but also speeds up order in processing and fulfillment.

As a key technology partner to a global cybersecurity company, Grid Dynamics helped to build the next-generation cloud solution with the security incident and event management. Our solution migrated the on-premise storage model to the major cloud platform.

We've built a high volume, high velocity, security event ingestion pipeline, anomaly detection and behavior analytics. This solution enables a competitive edge in the marketplace by offering near infinite scale, speed and low cost offers.

We're one of the largest manufacturing and services company, we developed an intelligent cloud-based supply chain platform that provides real-time visibility across the entire ecosystem. It covers the whole process from planning to delivery and utilizes big data, machine learning and predictive analytics.

The system allows to frankly identify and quantify potential risk losses and suggest mitigation options with the proper cost estimates. Currently, our client uses the system to manage 10s of 1,000s of the suppliers across the globe. With that, let me turn the call over to Anil, who will discuss Q2 results in more details.

Anil?.

Thanks, Leonard. Good afternoon, everyone. Our second quarter revenue of $77.3 million exceeded our guidance of $72 million to $73.5 million and was up 8.3% on a sequential basis and 62.2% on a year-over-year basis. The better-than-expected revenue in the quarter was driven by strong demand for our services across industry verticals.

During the second quarter, retail our largest vertical representing 32.9% of revenues, grew 9.2% on a sequential basis and 100% on a year-over-year basis.

The strong sequential and year-over-year growth was driven by strength across our customer base, from e-commerce friendly and brick-and-mortar retailers as they continue to focus on digital transformation initiatives.

Our TMT vertical was our second largest vertical and represented 30.2% of our second quarter revenues and grew 9.1% on a sequential basis and 45.2% on a year-over-year basis. We witnessed strength across our customer base. Initially, during the quarter, one of our largest technology customers aggressively grow as we expanded into new geographies.

Here are the details of the revenue mix of other verticals. Our CPG and manufacturing represented 20.8% of our revenue in the second quarter and grew 7.4% on a sequential basis and 62.5% on a year-over-year basis. The growth during the quarter primarily came from the ramp at our largest CPG customer.

Finance represents 6.5% of revenue, increased 11.5% on a sequential basis and grew 24% on a year-over-year basis. And finally, the other segment represented 9.6% of our second quarter revenue and was up 2.8% on a sequential basis. The growth came from healthcare as well as our new customers.

We exited the second quarter with a total headcount of 3,763, up from 3,671 employees in the first quarter of 2022 and up from 2,510 in the second quarter of 2021. In the second quarter, we hired aggressively across our locations in Europe, India and North America. This headcount addition was offset by a couple of factors.

First, as we exited Russia, there were headcount reductions that included ramp down of overhead and administration personnel. Second, we scaled down our bench of engineers, which have grown to compensate for any war-related supply disruptions. As we progress through the second half of the year, we expect our headcount to continue to expand.

At the end of the second quarter of 2022, our total U.S. headcount was 326 or 9% of the company's total headcount and remain on the same level compared to the first quarter 2022, and down 11% in the year ago quarter. The year-over-year decline as a percentage of the total headcount was largely driven by greater mix of our U.S. -- non-U.S.

headcount, our non-U.S. headcount, which we sometimes refer to as offshore located in Central and Eastern Europe, U.K., Netherlands and Mexico and other locations was 3,437 or 91%. In the second quarter, revenues from our top five and top 10 customers were 44.2% and 60.2%, respectively.

During the same period a year ago, our top five and top 10 customer concentration was 45.4% and 62.3%, respectively. The diversification across our top five and top 10 was driven by a combination of factors have included new lower ramp, industry diversification and our acquisition.

During the second quarter, we had a total of 208 customers, down from 213 customers in the first quarter and 212 customers in the year ago quarter. The sequential decline in our customers was largely driven by our commercial business, our Daxx, which we acquired in December of 2020.

As a reminder, we only count the revenue generating customers in the quarter and do not include customers who were inactive during the quarter. Moving to the income statement.

Our GAAP gross profit during the quarter was $28.9 million or 37.3%, up from $26.8 million or 37.5% in the first quarter of 2022, and up from $19.8 million or 41.5% in the year ago quarter.

On a non-GAAP basis, our gross profit was $29.1 million or 37.7%, up from $27 million or 37.8% in the first quarter of 2022, and up from $19.9 million or 41.8% in the year ago quarter. The sequential and year-over-year increase in gross profit was largely driven by increase in revenues.

Non-GAAP EBITDA during the second quarter that excluded stock-based compensation, depreciation and amortization, expenses related to geographic reorganization, transaction and other related costs were $13.3 million or 17.2% of revenue, up from $11.4 million or 15.9% in the first quarter of 2022 and up from $9.7 million or 20.4% in the year ago quarter.

The sequential increase in EBITDA was due to a combination of higher levels of revenue and flattish operating expenses.

Our GAAP net loss in the second quarter totaled a loss of $13.2 million or loss of $0.20 based on a share count of 67 million shares compared to the first quarter loss of $2.7 million or a loss of $0.04 per share based on 67 million shares and a loss of $1.5 million or a loss of $0.03 per share based on 54 million shares in the year ago quarter.

The sequential and year-over-year increase in GAAP net loss was largely due to higher levels of stock-based compensation and geographic organization costs, offset by higher levels of revenue. During the second quarter, we incurred $6 million in geographic reorganization costs.

On a non-GAAP basis, in the second quarter, our non-GAAP net income was $8.2 million or $0.12 per share based on 70 million diluted shares compared to the first quarter of 2022 non-GAAP net income of $6.9 million or $0.10 per diluted share based on 70 million diluted shares and $6.1 million or $0.10 per diluted share based on 61 million diluted shares in the year ago quarter.

The key reasons for the increase in the non-GAAP net income on a sequential basis were higher levels of revenue and flattish operating expenses. The increase in the non-GAAP net income in comparison to the year ago quarter was largely from higher levels of revenue, partially offset by higher operating expenses.

On June 30, 2022, our cash and cash equivalents totaled $150 million, down from $153.3 million in the first quarter of 2022 and up from $144.4 million in the fourth quarter of 2021. During the second quarter, we paid down our line of credit to the amount of $5 million.

Additionally, in the second quarter, we accrued short-term liabilities of roughly $3 million that we expect to pay out in the third quarter. We also invested $1 million into a technology company. Coming to the third quarter guidance, we expect revenues to be in the range of $78.5 million to $80 million.

We expect our non-GAAP EBITDA in the third quarter to be in the range of $12.6 million to $13.6 million or 16% to 17% of revenue. For Q3 2022, we expect our basic share count to be in the 67 million to 68 million range and our diluted share count to be in the 70 million to 71 million range. That concludes my prepared remarks.

Bin, we're ready to take questions..

Thank you, Anil. As we go to the Q&A session of this call, I will first announce your name at that point, please unmute your line and turn on the camera. Our first question comes from Puneet Jain from JP Morgan. Your line is open..

Hey, can you hear me?.

Yes. Hey, Puneeth.

Can you please turn on your camera?.

Trying to. It's not Sorry, nice quarter, like really nice quarter. I just had like a quick question.

Like, is active relocation of employees or projects away from Eastern Europe completely behind you now? And should we expect you to operate in like a steady state from here onwards?.

It's more as a statement than a question, Jain. Good to hear from you. Yes, of course, Russia is behind us. I mean there is still a lot of uncertainties in the region, as you know, work is far from a bit over. We look very optimistically as we grow our position in, I would say, outside of the traditional risk area.

We still feel very committed to Ukraine and continue to operate from Ukraine. And with the diversity of the workforce and scalable capability, we see a very positive reaction from our clients..

Understood.

And then as we think about the macro environment, specifically over the last few months, are there any differences in client behavior or their priorities across different verticals, maybe like retail, CPG, clients might be more impacted from inflation versus like tech vertical or other verticals? Like, have you seen any changes in client behavior or the spending pattern type of projects to execute across different verticals?.

Sure. There is a difference. We've seen several customers which have tightened the budgets already. We've seen some other customers which are considering to tighten the budget. We're not 100% immune, but we feel very good where we are. There will be some softness. I mean, this is the reality of the world. We're more diversified where we were.

If you notice, we're delivering our growth. We also are positioned more strategically than before, not ever, but before. And I believe that the importance is how deeply you're entrenched with the customer execution on the strategy. One thing about retail generally, because I'm sure this question will come back again.

The e-commerce related or more e-commerce driven enterprises in the retail CPG space are more capable to withstand the variance on the market than somebody who is much more brick-and-mortar dependent..

Yes, sir. Thank you..

Of course. Thank you..

Thanks, Puneet. Next question comes from a Mayank Tandon from Needham. Please go ahead..

Great. Leonard and Anil, good to see you. Congratulations on the quarter. I just wanted to ask you about the guidance coming off this really strong second quarter performance. If you look at 3Q guidance, it does call for a deceleration. Maybe you could speak to that. And also, any sort of framework to think about 4Q.

And maybe I'll be a little greedy here, ask about any initial indications for '23 as well..

So I'm going to start a little bit on the high level, Mayank, and then I'll have Anil to give you a little bit more color on the guidance. So by nature, as you know, we are conservative.

We would like to be conservative, because, as you know, from the week after we became a public company in the world, we got into turmoil in March 2020 and it seems like never stopped. When we look at macro indicators, we look at other factors, and we just want to make sure that we react properly. The growth and profitability go hand to hand.

We want to make sure we continue responsibly, and we continue with the ability to scale. And my big focus remains to be under technology innovation, regardless of region where we are still about client offerings. So I believe that we are on the path continuing to grow.

But in terms of specific sensitive variance in terms of the forecasting, I think Anil will add to that please..

Thank you, Leonard. And Mayank, thanks for the question. You're right, as we go from Q2 to Q3 seasonally, you all know how the quarter shapes are, which is a strong sequential growth. I think Leonard summarized it very well.

Look, I mean we look at all our clients, we look at their forecast, and we are in an environment where there are a lot of moving parts. So there's nothing fundamental. There is no loss in clients, there is no loss in business, there is no loss in any of the customers.

It's basically a bottoms up analysis of how we're looking and giving the best forecast as we can at this stage. Again, look, we'll see how the macro plays out and will come back in three months. You're on mute, Mayank..

Not letting me unmute.

Could you guys hear me now?.

We can..

Okay. A little lag there. Just a quick follow-up question on the supply side. Given all the cost issues that everyone in the industry is seeing, how are you able to offset that your clients receptive to price increases with these cola provisions? Any commentary around that would be very helpful. Thank you..

Of course, I wanted to start saying what cost issues, right? So there are certainly pressures and there are variants. But there are cost issues on one side, there's actually a little bit of a tailwind on a stronger dollar. We're talking fundamentals.

The fundamentals, obviously, when you scale the teams and you're moving from one cost operating zone to another cost operating zone, the driver is, how well your position with attracting their trucking talents, which becomes your tip of the spear. So we believe we prepared well for key countries, which I described in earlier remarks.

So we have the mitigation plans. When we look at more senior talents, obviously, there is always more cost pressure. We are growing, we're still a fairly young company. And I tell you, from the customer perspective, there is a fair level of understanding on the high quality and performance of the teams we offered them on a strategic project.

So, we're not out of the woods from the world, but we certainly feel very comfortable on balancing the regions, the talent and client relationships..

Thank you. Appreciate it..

Thank you..

Thank you, Mayank. Thanks for your question. The next question comes from the line of Maggy Nolan from William Blair. Please go ahead..

Hi, guys. This is Justin on for Maggie. Congrats on a nice quarter. We had a couple of questions for you guys on talent. So first, could you talk about how progress is going in India and Mexico? I know we've been talking about expansion plans in those two geographies recently..

Great. Thanks for the question. And obviously, zero relevant. I believe when we look at Mexico, it's steady. We're growing. I see more and more relationship with university, I see more and more hiring, I see more and more conflicts with the clients that will include Mexico, but it's proportionate.

With India, I have been on disproportionate growths over time. India is a very strategic number one location.

Let's say, today, the growth is a little bit slower than I would like to see at the moment, not because it's an issue for us, but we had to go through incorporation, we have direct hiring now, we got through all these hoops with a formality of partners helping us. So that's going well.

The other factor which plays the role overall picture is that you may have noticed that, we planned for some catastrophic event in one of the countries. So far I'm not going to -- the resilience of our delivery and the quality of work -- basically efficiency on the environment they are in hold strong.

Most of the Russian engineers relocated, and Ukraine team performs well in other countries as well. So while we see India growing, this absolute urgent demand is in line with, I would say, more continued growth. We'll give you the updates as we grow. The good thing is, we jumped all other formality hurdles and one thing is for sure.

The Indian Grid Dynamics will be the same quality, the same performance, the same capabilities, any other locations. And that's what we're going to accomplish. And that's what still statying behind..

Okay. That's helpful color. And then for my follow-up, I wanted to touch on attrition.

So if you adjust out the exit from Russia, how did attrition trend in this quarter? And what do you think are the puts and takes there?.

Well, I think Anil summarized in his part quite well. It's in line with the past. I mean, in some areas, it's actually slowed because during the turbulent, thank people try to hold to the mothership of the company. I think we respect a lot how we managing our freight.

So I believe that voluntary attrition is pretty in the line, I would say, if not decreasing to some extent. But in voluntary for known reasons, which we mentioned, and Anil emphasized increase obviously higher than other quarters. But I'm very comfortable with the direction of our retention of workforce..

All right. Good. Thanks for taking my questions.

Of course..

Thanks, (ph). Next question comes from Bryan Bergin from Cowen. Your line is open. Please go ahead..

Hi. good afternoon. It's good to see you all. I wanted to just follow-up on the operating footprint here first.

So just -- can you just give some color on how you see the global footprint mix evolve? And really, I guess as you exit the year, can you give us any sense of a rough composition of just where your professionals are going to be?.

Well, as you know, Bryan, we guide quarter-over-quarter, right? So this is a little bit more philosophical question at the end of the year, boy. When is the end of the year? And what company you're going to work for, and then there is a lot of changes in the world, and congrats on the acquisition.

So the reality is, we announced our generic footprint, all right? So we emphasized that India, Mexico and Poland, our three strategic growth. From that, as you know as well, we are not nearly to call, excuse me, India and Mexico today as largest locations. We have a very strong continuity in Ukraine, and we're going to stay strongly with Ukraine.

Our engineering talent in Ukraine deserves the support as much as we can, but we grow elsewhere, right? So certainly got a bump, as you can imagine that quite a few Russian engineers move there, so did Armenia.

But where we are today and where we're going to be by the end of the year, where we're going to be next year? It's actually a fundamental question. So I didn't want to say generically regions because, regionally very brush folks, I wanted to be kind of narrowing down, India, Mexico, Poland, that's the growth.

Ukraine strongly behind, rest, I'm going to form around that. And, of course, from the priority of the business, which is very important, U.S. remains exceptionally strong priority for us, but as you can see we're building a bit more focus on Europe. Again, we mentioned the headquarter in Switzerland.

We emphasized that in London and Amsterdam were playing stronger role. Wearing more business resources in Europe. And that kind of also tailor a little bit more to the global expansion strategy as we go..

Okay. Understood. On the margin front, so just trying to understand some of the partnerships that you've developed here and maybe the financial implications around those. So understanding you're using established partners to build talent in new locations, places like India.

From a financial perspective, is there a significant cost that flows through the model here, this year as a result of that? I'm just trying to think about as you go forward the return to profitability -- prior or levels like profitability or whether there's anything the last thing we need to consider there in those relationships?.

I thought you asked me a good question about my partners in the business development side, which is super exciting. And you came down to this partners and supplier side. So it's okay, I'll take the third question from you.

But on the partners, on the supplier side, it's specifically new, and as alluded before, we have established fully operational breadth organization. So the priorities for the growth will be direct. Of course, for the immediate needs, I'm blessed to have reliable partners contributing.

But I believe from the financial overall perspective, it's not going to be a very significant impact.

But again, Anil, do you want to chime in?.

No, I think that's exactly right, because, so we always had a two pronged strategy, as Leonard said, going directly and partnering with these guys. And as we scale up directly in reliance on partner diminishes. And also there is also transfer of those partner employees to our direct hiring too. So whatever we were giving them goes back in our pockets..

Okay. That's fair. Leonard, since you open it up, I'll ask about your corporate development partners.

I know you have plenty to do organically here which is, how are you thinking about potential M&A in this environment?.

All right. It's not exactly about partners, but it's okay. So M&A strategy is very critical. It is very critical because when I look at the broader world, we have very ambitious plans for expansion and investment primarily goes from the by point of view innovation, but innovation is related to the specific, I would say related fields.

And when we talk about fields, it's a combination of technology and knowledge and capability business acumen as well. And we're focusing more and more on the core knowledge in the verticals we enhance and we are expanding in. The cybersecurity, supply chain, life science, we're going to areas where you don't build acumen overnight.

So when we look at that area that's a kind of a primary focus in M&A. The other one is again part of the regional strategy, question, where you want to be on the growth. And I think the message is very clear, we're going to make sure it's also financially efficient, we're responsible for the shareholders.

But overall, it's one of the key priorities and we will continue to grow. Not from the operational health, but from the operation growth..

Okay. Appreciate the detail. Thanks..

Of course..

Thanks, Bryan..

Thanks, Bryan. Next question comes from Ryan Potter from Citibank. Please go ahead..

Hi, guys. Thanks for taking the question and congrats on the great quarter. I want to start up on your diversification across like India in.

Are you seeing some kind of the new skill sets you guys did have as much exposure to come into the mix? And are you also seeing some clients, but it recently come to you, because you also like delivering locations like India..

I'm trying -- let me repeat the question, there was a little bit of a variance of the voice.

So you are talking about the -- whether India brings in new capabilities?.

Yes, new skill sets and also our new clients, because we have this India presence..

Very good. The first one today is, I would say less critical. I think what do we do, we actually bring some contingent from Europe to India, to make sure that we have a good blend. Obviously, we'll continue to see the new skill talent. But we have some work to do before that. In the terms of the client side, absolutely right.

So there are certain segments which are very strong and part of our expansion capabilities and something we've been intending for a while relates to where some of the clients, some notable U.S. clients. They prefer, India is a center of excellence. And just India center of excellence with our specific locations, where we are.

We are kind of in the cradle of the value add innovation part in India, notably right now in Hyderabad will be in somewhere else as well. And that's kind of drives this almost like Indian business development relationship which we're already building today. So the first answer, not much yet. The second one, very much so..

Got it. And then focusing specifically on the retail vertical, growth there has been pretty strong in the past few quarters.

So I guess first of all, how much this is inorganic growth? So was the organic growth re-scale? And secondly, some color on what's driving the demand that you're seeing in retail? Is it still kind of a pandemic catch up or are you seeing some growth with existing clients even some new logos come in?.

Okay. So on the first part, you're asking whether we have organic or non-organic growth.

Anil, what is non-organic in the recognition?.

Yes. So Ryan, as you know what we have is one month of revenue which was organic, so there was roughly, call it $4 million, because last year we acquired towards the end of May, so we had a month of June. So when you extract that out, we still grew north of 50% year-over-year.

And it was driven -- so the both organic part was there and of course, we had a couple of months of tests..

So let me come back for the second. The growth is -- so -- I don't know whether the catch-up is a right word. I think Grid Dynamics made such a incredible turn around the V-shape return in 2020. So there we're just going strongly after very broad base of the clients.

So if you look at again from what Anil positioned on the statistics, we still hold very strong, I would say good healthy concentration on some of our clients in a very diverse verticals. Of course, the concentration with specific clients is getting reduced as we grow more in a broader base of the clients.

But most of them heading business because of their needs, because of their competitive environment on the business side, not because of the catch-up on the defensive side. So, I've seen some activities after COVID hit more on the defensive side.

Now with the economic turmoil, we may see the next subsequent quarters little bit of remedy of that fill, which we have prepared. But right now, people continue to execute on their plans. And of course take some cautionary story, how much budgets to committed for how long. I think that's the best to describe the environment of the growth..

Thanks and congrats again..

Thank you..

Thank you, Ryan..

Thanks Ryan.The next question comes from Josh Siegler from Cantor Fitzgerald. Please go ahead, sir..

Yeah. Hi, Leonard, Anil. Thanks for taking my question. Really nice to see such strong execution this quarter. I'd like to start by diving a little deeper into the current wage environment.

Specifically, are you finding the wage dynamics in recent geographies you've entered to be similar to your pre-existing geographies?.

Well, I think we started with that question in the first part with Puneet. So the wage is, of course, it's geographically varying, but it's also tied to various currency, tied to various customary, tax environment, cost of living, et cetera. So from the locations we move on, it goes both way.

I think, overall, everybody is talking about really cost pressure -- wage pressure. I think for us, we still grow very much into the young innovative world.

So some of the impact on a more senior wage pressure, we're adding more talent, and talent is not like we're taking advantage of the guys, it's just the younger, they're eager to learn and we create the environment for them to become more contributing specialists.

It's not one-to-one the wage versus the price increases and it's not every territory, we wish very carefully. But there is one thing for sure, no matter where you go, once you scale, you're how much more efficient. When you -- and that's why I'm actually careful with geographies you noticed.

I'm not talking about doubling countries and just get it all over, and it happens naturally, there is more places we go. With the concentration of talent, the scalability, the relation with universities and hiring machine and the reputation of the brand, that's ultimately your wage control. And this is what we are poised to accomplish..

Great. Thank you for the color Leonard. Last quarter we talked about the ongoing investments you've been making in your technology organization, and now that's helped drive new logo growth and best for client engagements. So I was wondering if you could give us an update on this initiative.

Does it continue to add to the tailwinds of the business? And do you believe there is additional room for reinvestment both in this and the sales force over the next couple of quarters?.

Yes. So technology for Grid Dynamics actually really moves to technology. We have like three prong technology investment, now have the fourth one, which is more recent. So the number one, it's understanding the vertical and depth. So we need to have the matter expertise in where we are.

The second one is more horizontal what accelerates with modern technologies, with the elements of integration part. The third one, which is quite important is where the open source implementation kind of blends with the software integration. This is something we've been going for a while and that's now becoming more and more prudent.

The partnership with the -- it's not only with the hyperscalers, the partnership with the broader number of the software developers of the various relevant products, especially the cloud effication, automation, data analytics, the scalability of the elements of machine learning, et cetera, bridges the gap between open sourcing in those technologies on the product side which gives customer much better value on the return.

So that's the third one. So those kind of three areas where we continue to innovate. The fourth one started is, you probably noticed the little script that we invested delivery of money on one of the technology company.

We believe some of the notable small technology companies deserve a little bit more closer relationship, because that gives us more access to the cradle. And we continue that path, again it's small now, but that's the fourth swing. But the first three is a continuous expansion of Grid Dynamics technology capabilities..

Great. Thank you very much..

Of course..

Thank you, Josh. At this point, we have no further questions. Ladies and gentlemen, that would be all for the Q&A session today. I will now pass the call back to Leonard for the closing remark..

Thank you, everybody for joining us on the call today. Our second quarter results and our third quarter guidance once again highlighted Grid Dynamics' ability to deliver to the stated goals and our commitment to the business.

Grid Dynamics employees have shown exceptional teamwork and have been working relentlessly in ensuring our business continues uninterrupted, and I will, of course, would like to thank each and every one of them for their tremendous effort once again. I look forward giving you a business update in three months. Thank you very much..

This concludes today's conference call. Thank you all for participating. You may now disconnect..