Good afternoon, everyone. Welcome to Grid Dynamics Fourth Quarter and Full Year 2023 Earnings Conference Call. I’m Bin Jiang, Head of the Investor Relations. At this time, all participants are in listen-only mode. Joining us on the call today are CEO, Leonard Livschitz; and CFO, Anil Doradla.

Following 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 the 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 reconciliations and supplemental financial information are provided in the earnings press release and the 8-K filed with the SEC. You can find all 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..

knowledge management, partnerships, new vertical focus and winning larger deals. In each of these fronts we made progress, both in the Q4 and in full 2023. With our knowledge management efforts, we have catalogued over 100 important delivery case studies that are being used across pre-sales, sales and delivery organizations. This is important.

We accelerate the proliferation of our learnings from each project and program to ensure that the whole company benefits from it. During the quarter, Grid Dynamics delivered some notable projects. For a leading global technology company, Grid Dynamics enhanced the recommendation engine, one of the largest online streaming services.

We successfully implemented cutting-edge machine learning, heuristic techniques to enhance the quality of the data used by recommendation engine. Our engagement covered end-to-end machine learning process including model engineering, evaluation, deployment and postproduction efficacy monitoring.

This resulted in significant improvements in the relevancy recommendations and the system’s capability to self adjust in real-time. For one of the largest auto part distribution retail company, Grid Dynamics has been actively engaged in the modernization of the product catalog, which enables search and browse functionality.

Our solution uses Generative AI to correct product images, generate descriptions, correct categorization, enhance attributes and highlight discrepancies in the product details. As a result, this client expects to improve customer conversion and user experiences, leading to increase in sales across both B2B and B2C channels.

For a multinational financial service provider, Grid Dynamics leads a cybersecurity program to onboard over 400 custom built applications to SailPoint IdentityIQ platform. The solution enables our client with a full lifecycle of identity and access management, ensuring proper duty separation to meet the latest security compliance standards.

We expect to expand this project during the next phase and onboard another over 1000 applications to this platform. For a global automotive manufacturer, Grid Dynamics developed a cloud native e-commerce platform based on robust microservices architecture.

This platform enables an intuitive end-to-end user experience and promotes in-house financing to car shoppers, which anticipates to increase the vehicle sales through the digital channel. With that, let me turn the call to Anil who will discuss Q4 results in more details.

Anil?.

Thanks Leonard. Good afternoon everyone. Our fourth quarter revenue of $78.1 million was slightly ahead of our guidance range of $76 million to $78 million and exceeded Wall Street expectations. On a sequential basis, our revenue grew 0.8% and was down 3.1% on a year-over-year basis.

Relative to last quarter, we saw greater stabilization across the majority of our accounts. During the fourth quarter, Retail, our largest vertical, representing 31.5% of our revenues, decreased by 7.4% on a sequential basis and by 4.2% on a year-over-year basis.

On a sequential basis the decline was largely from specialty retail offset by strength in home improvement, TMT, our second largest vertical, represented 31% of our fourth quarter revenues, grew 1.9% on a sequential basis and decreased by 10.9% on a year-over-year basis.

On a sequential basis, the growth was largely driven by some of the large technology customers. Here are the details of the revenue mix of other verticals. Our CPG and Manufacturing represented 12.4% of our revenue in the fourth quarter, flat on a sequential basis and decrease of 31.3% on a year-over-year basis.

During the quarter, we witnessed stabilization at our largest CPG customer and growth at other customers. The finance vertical represented 10.6% of revenue, an increase of 13.4% on a sequential basis and 32.6% on a year-over-year basis. The growth in the quarter came from a combination of financial technology, customers and new logos.

And finally, the Other segment represented 14.5% of our fourth quarter revenue and was up 11.5% on a sequential basis. The sequential growth was driven by strength across multiple customers, some of them in the healthcare and restaurant industries.

We exited the fourth quarter with a total headcount of 3920, versus 3823 employees in the third quarter of 2023 and up from 3798 in the fourth quarter of 2022. At the end of the fourth quarter of 2023, our U.S. headcount was 331, or 8.4% of the company’s total headcount.

This remained on the same level compared to the third quarter of 2023 and slightly decreased from 8.9% in the year ago quarter. Our non-U.S. headcount located in Europe, Americas and India was 3,589, or 91.6%.

In the fourth quarter, revenues from our top five and top ten customers were 39.7% and 55.3%, respectively, versus 43.2% and 60.4% in the same period a year ago, respectively. We witnessed continuous diversification and greater contribution from our recently acquired loans.

During the fourth quarter we had a total of 218 customers, down from 224 in the third quarter of 2023 and flat in the year ago quarter. The declines were largely from our commercial customers, offset by growth in our enterprise customers.

Moving to the income statement, our GAAP gross profit during the quarter was $28.1 million, or 36% and remained flat compared to $28.2 million or 36.4% in the third quarter of 2023 and down from $32.3 million, or 40.1%, in the year ago quarter.

On a non-GAAP basis, our gross profit was $28.6 million, or 36.6% versus $28.7 million, or 37%, in the third quarter of 2023 and down from $32.7 million, or 40.6%, in the year ago quarter.

The decrease in gross margin as a percentage on a year-over-year basis, both on a GAAP and non-GAAP basis was largely due to a combination of FX headwinds, costs associated with expansion into new geographies and other investments.

Non-GAAP EBITDA during the fourth quarter that excluded stock-based compensation, depreciation and amortization, restructuring expenses related to geographic reorganization, transaction and other related costs was $10.7 million, or 13.7% of sales versus $10.7 million, or 13.9% of sales in the third quarter of 2023 and down from $16.5 million, or 20.4% of sales in the year ago quarter.

The year-over-year decline in non-GAAP EBITDA as a percentage was largely due to a combination of decline in gross margins, increase in operating expenses related to acquisitions, and investments into our sales organization.

Our GAAP net income in the fourth quarter totaled $2.9 million, or $0.04 based on basic share count of 75.7 million shares, compared to the third quarter income of $0.7 million, or $0.01 based on a basic share count of 75.5 million and a loss of $6.7 million, or $0.9 per share based on 74 million basic shares in the year ago quarter.

The year-over-year increase in GAAP net income was largely due to lower levels of stock-based compensation and significant decrease in geographic reorganization costs.

On a non-GAAP basis, in the fourth quarter, our non-GAAP net income was $5.7 million, or $0.07 per share, based on 78 million diluted shares, compared to the third quarter, non-GAAP net income of $5.9 million, or $0.08 per share, based on 77.3 million diluted shares and $10.5 million, or $0.14 per diluted share based on 76.5 million diluted shares in the year ago quarter.

On December 31, 2023, our cash and cash equivalents totaled $257.2 million, up from $253.7 million in the third quarter of 2023. Coming to the first quarter guidance we expect revenues to be in the range of $77 million to $79 million. We expect our non-GAAP EBITDA in the first quarter to be in the range of $9.5 million to $10.5 million.

For Q1 2024, we expect our basic share count to be in the 76.5 million to 77.5 million range and our diluted share count to be in the 78.5 million to 79.5 million range. That concludes my prepared remarks. Bin we are 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 un-mute yourself and turn on your camera. Our first question comes from the line of Maggie Nolan from William Blair. Maggie, your line is open. Hi..

Hi, thank you. Appreciate the update. The business sounds really solid, so congrats.

I know you only guide one quarter at a time, but at this point in the year I’m wondering if there is any visibility, anything you can share with us, either quantitatively or qualitatively, about how the second quarter is coming together and beyond if there is anything to comment there..

Hi Maggie. Thank you for your question. Well, it’s interesting to start the ramp up of 2023, talk about six months going forward, but you probably sense the tone of conversation that we are a bit on a rebound and we do sound optimistic. I would say that without going into all the details, because the environment is still a bit of a complex.

I would say that I expect Q2 to be our new high watermark in terms of our revenue position at all time now. It doesn’t sound a lot today, but if you look at the last 12 months, I think, we are kind of getting ourselves back to shape, to the normalized growth..

Okay, great. And then great to see that new logo commentary, the additions that you’ve had. I am curious what we can expect from those in terms of the revenue ramp and the margin contribution as we see those accounts ramping..

Good. So, as you know, our model, probably it’s a little bit beat up by now it’s 85%, 10%, 5%, right. But this 5% is turning to be a little bit more predictable and some extent the 10% as well.

So the larger logos which we grab upon now last quarter, the quarter after, they’re ultimately are a bit more defined in terms of the project based rather than pro concept based. So we have a little bit better anticipation of the ramp up of their logos.

Saying that again, that gives me the confidence for some of the upswing for the company, but also I see the return back to the positive momentum on our existing logos.

I think the question on the new enterprise logo, the winnings in late 2023 and what we already have actually in 2024 combined with some of the trends with larger existing customers gives that level of optimism..

Thank you..

Thank you, Maggie..

Thanks, Maggie for your question. Next question comes from Ryan Potter from Citi. Ryan, please go ahead..

Hey, thanks for taking my question and a good quarter here. Want to start on headcount, it was good to see headcount growing sequentially on an organic basis in the quarter.

But can you help reconcile the flattish sequential growth in the 1Q outlook versus this headcount growth? Is it tree [ph] view it more as a sign of you see a demand recovery coming later in the year? And then also any color you can give in terms of where you’re growing headcount the fastest, whether it be India or any other GS..

A lot of questions in one, getting demanding, right? So let me start with the last, because it kind of rolls back, right? So if you notice from even our press release, we indicated a bit of a shift in terms of the diversification. We see more on the rate of growth in what I say non-retail verticals or non-retail customer verticals.

It doesn’t mean we’re moving away from B2C. It’s all B2B business. But the skills and capabilities in a more traditional skill set, in data management, cloud migrations, the bespoke tooling partnerships mentioned that combined with the new developed applications relate to the AI technologies. And that’s a separate point of discussion.

Everybody’s asking that, right? This gives us a bit more upswing on a fintech, pharma. We see more in a TMT, our favorite tech segment. So that gives us a bit more of, I would say, continuation of the growth. That, that – and again, those sectors a little bit less volatile even though the economy has not been stable again.

And the first part of the question, I believe you wanted to know specifically accounts, can you just give me a little bit more lean on what….

Yes. The headcount growth versus the flattish outlook sequential is a sign of demand to come later in year..

Right, right, right. So this is about reading on tea leaves, right? So the growth of the headcount happens in India, that’s one area, as we mentioned again is picking up. I think our customer base has grown with understanding of our versatility of the following the sun strategy.

What it means, it means that Grid Dynamics provides the same quality level of services whether we’re in Europe, in Latin America or in India. And the access to talent in India is quite larger from the market, but everybody is there. So you see the little bit uptick part of it that it’s a little bit longer time to bring the talent in India.

So we need to start building the pipeline there. Not saying we’re going to reshuffle some of the people in Europe. There is – there are many activities there, but that’s where the growth coming and it just requires a bit more the capable people.

And also you’ve noticed we talked about our presentation about rigorous training program, right, so mentioned that it takes sometimes up to a quarter to bring the talent up to speed with the new tools and capabilities, specifically in AI/ML sector.

So it’s an investment of the, I would say rounding the people and building the pipeline of capable technical execution folks. And India is at the forefront..

Got it. And echoing that was good to see the sales momentum continue in the quarter.

But as the demand environment stabilizes in your existing client base, should we foresee any changes to your sales strategy in 2024, we have to shift more sales org more to kind of expansion with clients versus hunting new logos or are you able to continue to balance both efforts?.

Well, that’s one of the area which you again noticed from our conversations was the point of investment in 2023.

It’s a bit – I would say sometimes maybe ambiguous when the company invests into R&D and sales during the year of being flat, right? But at one point of time, it’s beneficial to reach for the resources when they’re available in the market, right? So when the market is a bit stagnant, you have a broader selection of the talent.

On the R&D side, it takes more time for people to come to speed both on an architecture side, SME side, grade the materials, industry specific, artifacts, accelerators. So when we talk about sales, it’s a combination of sales and technical presales and first level engagement.

When it comes to the hunting per se, we actually added hunting capability for the first time. Typically as a company we’re still relatively small to bear with many others, so we focused on a diversity of the responsibilities for the same individuals.

Right now we have dedicated sales force people in the United States with hunting accounts, but we also double down on farming of the new business lines with an existing large account, so that’s pretty much this.

Now the proof is in the pudding, but I think even though we live it sweated the margins last year, I think that gives us a bit more runway, not just kicking the can to the second half of the year, talk about 2025, but more immediate targets as early as now..

Great. Thanks again..

Thank you..

Thank you, Ryan. Next question comes from the line of Zachary Ajzenman from TD Cowen. Zach, please go ahead..

Hey, thanks. It’s Zach Ajzenman on for Bryan Bergin. First question we had was just on the overall demand backdrop, so good to hear more of the stabilization commentary. It’s evident in the Q1 guide. I was hoping to further dig into the dynamics that have actually changed from three months ago.

Is it just a higher prevalence of more optimistic client conversations, or have you seen a change in actual signings or willingness to go ahead with new programs? Just trying to get a better sense of recent client behavior and how that’s informing your view into 2Q, which sounds like it’s going to be even better than what we’re seeing into 1Q..

Very good, Zach. Well, you have to fill big shoes because Bryan, one of the most talented analyst, so welcome. The question is about what is really happening in the forefront of our business.

And as you know, traditionally, at least from Grid Dynamics perspective, from our client perspective, there is always what I call the bit of a turnover from the projects and business directions between the late Q4 and early Q1.

That’s kind of – I wouldn’t call it a pit stop, but it’s released more than just budgets, reassessment of their own performance, tuning the business. A lot of disruption happened with AI tools.

So we had to go last year and start making a lot of proposals how to get viable conversion of their top line with more economic budget leveraging various AI technologies.

And again, it’s not just you plug in [indiscernible] it gets you more money, right? So it’s a very complex process of using private data and public access tools, various clouds, our Grid Dynamics know how and understanding of their business based on a previous expertise, even in machine learning – transition from machine learning to AI.

So we see the conversion on a contractual basis. I think that’s very important. So not just the words, again, we’re still in February and we are not completely out of the spirit of retooling of our clients. But the new logos and existing logos on a demand side are contractually driven. So we’re not talking just about the proof of concept.

Let’s run another one, two, three months of the test. What are the initiatives to trend out? On a – this is on a B2C business.

On a B2B business, it’s a bit different, right? Because there is no more like people understand that new technology first and foremost need to bring the better results and their models is not as trivial because it’s a complex of supply chain logistics, the demand on the various products.

So that business probably going to kick in a little bit more on a later part of this year because they’re still more in a steady state learning and adoption. But because we have both markets, we see an immediate remuneration as well as potential upside with existing plans..

That’s helpful. Maybe we move to margins, we were hoping to dig into the factors that have been weighing more recently.

How long are these items expected to be headwinds and what are the controllable levers that Grid can pull to partly insulate, including maybe any color around pricing or utilization?.

Sure. So, Zach, again that’s a loaded question. There are many moving parts of it, right, from a COGS point of view and OpEx point of view. I’ll let Leonard talk about the pricing, but let me talk about a couple of moving parts as we move in the course of the year. Now, year-over-year, you’ve seen the difference right on our gross margins.

Half of it came from FX, the other half of it came from the fact that we’ve expanded into some of these new geographies. And there’s a certain cost structure there. If you look at our OpEx, 2023, as Leonard pointed out, was a year of investment, because we are investing into our future.

As we move in 2024 and beyond, let me talk about OpEx and we’ll talk about COGS. On the OpEx front, the focus for me internally is to keep the growth rate lower than the revenue growth rate. So you’re going to see leverage on that front. Now, there will be times when you’ll have to invest, but that is my focus right now.

On the COGS side, as you can see, we’re in all these different geographies. We’re scaling in each of these geographies. And as we scale into some of these geographies, some of them identified and follow the sun strategy, you’re going to get some benefits there.

But as far as the focus, again, is obviously go back to customers, but operationally also reorganize ourselves. We have T&M, we have pods, we have fixed price, we have the pyramid. There’s so many operational aspects which we can work on.

And, Leonard, do you want to talk about pricing?.

You just covered it. I don’t want to double down. Actually, I want to walk you a little bit on a visualization of pricing to cost and back, because there are two things actually very well connected with each other. In order to us get to the higher profitability, it’s not directly margin related, but it’s a contract related, right.

So pods, fixed bid delivery performance associated with a certain major milestone expending budget signing now, longer term budgets, we see that happening. It doesn’t mean that individual rates, for example, are going to be aggressively moving up. I mean, the market is still, I would say, demand driven than supply.

And the value we’re bringing, while we are increasing some of the basic rate, we’re offering more and more system, which I just described with which Anil pointed out, which ultimately brings a better architecture of the team structure. In other words, within the team, our cost benefit is evident to us, but for the customer, it’s a result driven.

So they’re getting better efficiency with understanding their pocketbook spending without constantly going back and forth and looking at each individual rate. In many cases, also, we gain the trust of the customers sufficiently that they allow us to pick a proper tip formation. And it’s getting more and more on the scale.

That also helps still, all the evils, right, moving from Eastern Europe to Central Europe, scaling the number of offices, opening offices in India, that’s well understood. But our model of 2020, no matter how difficult it sounds today with where we are, it’s unrelenting pursuit. And I see the trend is coming.

The numbers can’t say there yet, but judging by the contracts we’re signing, I’m quite bullish..

Thanks for all the color..

Thank you..

Thank you..

Thank you, Zach. Next question comes from Puneet Jain from JPMorgan. Puneet, your line is open..

Thanks for taking my question. I wanted to ask about GigaCube. It looks like great progress in financial services. The vertical was up nicely.

Can you also share like the contribution from other verticals such as healthcare? And do you plan to share progress like you make in India, in Europe, as well as smaller verticals on a quarterly or annual basis there?.

Anil, why don’t you talk about….

[Indiscernible] So as you see, the other segment was about 14.5%, right? And that had a nice growth. So what you’re going to see, starting from next quarter, we’re going to break down the other segment because we’re going to have the healthcare part. So healthcare life sciences, that’s becoming an increasingly bigger part.

That has actually been one of the contributors in our growth. And as we evolved in the course of the year, some of the sectors that you talked about, financial services, I mean, there’s a lot of activity going on there and we’re bullish on that..

So Puneet, that’s a formal way – informal way. I like to have statistical significance before I claim the flag at the top of the hill. I can tell you confidently that in the fintech world, our investment is turning to the factual material improvement. When we talk about pharma and healthcare, the number of accounts is growing.

But I can say that we are a dominant player yet. We understand the capability of learning new ways of adding business value. You will see that trend. There are wealth management and insurance part of the BFSI, right, for a long time, we had one of a very large partner on the wealth management. Those segments will grow too.

And why we grow is because you guys, to some extent, help us to assess four years ago that what does it mean to be a public company, right. That you need constantly to challenge yourself, not just on the growth but on the hedge, right. How you build a business.

So we were very heavy, depending on a brick and mortar store, that’s a long history we were having, depending on certain brands. Again, it’s a history. The tech is also diversified. But I would give the more specific material content when I see at least two, three quarters of consistent signing of the new clients.

And I think the biggest right now division for me is B2C application and B2B application. We’ll continue to break it down, as Anil said, as we feel that they’re statistically significant..

Got it. Now that’s very helpful. And let me ask second question. So now that the macro headwind appears to be behind you and you’re seeing stabilization in some of the large customers. So some of those, like, the largest of your large customers, like, I think they peaked at somewhere around like $30 million, $35 million, maybe $40 million.

How high is addressable market at those clients? Like how large those customers can get given your current service mix?.

Yes. So you’re getting me into trouble..

All right. There is quite a bit of a ceiling on those clients. Why? Because we’re changing our attire too, right? Maybe the market cap is still not there, but we’re much more mature company, not just from performance perspective, but the stable capability perspective and resilience perspective, right.

Every client, every large client, they look not just into the supplier capability, but again, hedging against certain unforeseen events, right. So I think they’re getting more comfortable without reach and without touch, right.

So I would say that the ceiling is less driven by our capabilities, which are proven and more opening up when people are start become comfortable that coming back to the GigaCube strategy, one day, we are $1 billion company. So yes, if you judge from that perspective, I’m not going to throw numbers of $100 million account today.

Again, it would be bit premature, but there is nothing stands between us and having a number of accounts, which are that $30 million to $50 million range now. And then time will tell how much we can go further. Having just one account been so much bigger than everything else, that’s another bit of a challenge. So we’ve seen others struggling.

So we want to do not only diversification on the verticals and the skill set, but having large driven partners to be somewhat diversified as well..

Yes, and I totally agree. Multiple clients that are comparable in size. Like, I think we totally get it. That’s unique. Appreciate the comments. Thank you..

Thank you. Thank you, Puneet..

Thank you, Puneet..

Next question comes from Josh Siegler from Cantor Fitzgerald. Please go ahead..

Hi, guys. Thanks for taking my question today. Nice to see the strong KPIs in the quarter and business stabilization throughout this more difficult macro period. I wanted to touch on the partnerships specifically because they seem to be a big contributor over the past year.

How are you thinking about how partnerships will contribute as we progress through 2024 with a more positive macro potentially at our tailwind? Thank you..

Well, I’m glad you pointed out that, I mean, we tried to repeat the favorite number 13, long enough for people to memorize. It would have been not as exciting. It was 12 or 14. But anyways, the factor what Anil mentioned of having just a few years behind the belt is not truly about the partnerships per se. I mean, we always have partnerships.

I think there are a couple of fundamental changes happened a couple of years ago. The number one is we realized that sitting only on an open source is not enough to increase the breadth of the customer relationships. We need to become a bit of an advisory on a buy and build as a combination. It’s basically a stage of maturity, right.

Everything required is investment. So it’s not only about hyperscale, it’s also about the ability to stitch multiple software products. So we started with the areas where we have done most of the work, which is commerce. We’ve done major progress both in Europe and the U.S. And we’re expanding number of the products we are offering.

So that part is very clear. So it’s not just open source, it’s a combination. The other one is going back to hyperscalers, right. The hyperscalers represent a very complex system, right. And you come in, knock on the door and ask them, give me the clients, typically, it goes backwards. You bring the clients, we’ll see, right.

I’m happy to report that it goes two ways. When you do in two ways, on a top of building the capabilities and contributing to the hyperscalers themselves. Then you start getting the tractions, because it’s a joint client effort.

So not only understanding the systems, but understanding the customer ability to have us as a partner of choice, not just integration partner, that just added this number. Now, how big is the number going to be? We – honestly, I can’t tell because we’re going into new verticals.

And again, it’s investment because you can’t just come with the open source and drop all these ideas on the lapse of the big decision maker in other verticals. But it’s certainly the model which we are expanding at this point..

Understood. Appreciate that color there. And then, Anil, real quickly, can you give us an update on how you’re thinking about capital allocation as we progress through the year? Thanks..

Well, look, I mean, the focus obviously is M&A internally, and I know this is a question that comes up very often. At any given point we’re evaluating. Obviously we will tell you when we actually get something done, but the priority obviously is our cash usage is going there. Beyond that, it’s all about cash generation.

It’s all about ensuring that we get back to our 40:20 and we convert it, right. I mean, we as you know, we don’t have any debt on our balance sheet, but these are the two elements in terms of how we’re looking at our balance sheet..

And just to get a little bit of a colour on these. I know you’ve been patiently waiting for us. I mean, it’s been a long time since we collected enough funds, right? And our cash generation exists, but it’s not super large, but we sit on a nice pile of cash. So we completed all the conversions.

Again if you look at our press release and reports, so we have no lingering issues or necessary investments into any of those four acquisitions we’ve done. It’s all integrated, knock on wood by now. And when I mean integrated, you need to integrate both sales and engineering. Engineering sometimes takes a little bit longer on the skill sets.

So we are exploring deals across all these verticals and geographies. Again, there is a range. Obviously, we’re not going to burn all the money in one swoop, but it has to be more focused on ill development. So we’re big enough to train people in what we know.

Some customer acquisition obviously is good, but we really want to add the skills in an AI revolution part, right. So there are new areas which open up by building those skills. So it’s not about just the marketing this, we understand what we’re good at and what it makes sense for us to complement from acquisition.

So that’s kind of a shift you may see from like six months ago..

Great. Thank you. I really appreciate the colour and thanks for taking my question today..

Thanks Josh..

Thank you, Josh. Next question comes from Sam [indiscernible] from Needham. Please go ahead..

Thanks, Bin. Thanks for taking the questions today, guys.

Most of my questions have been asked, but are there any AI related metrics or anything you can share in terms of the number of projects or engagements or logos, just any color you can give us to get some kind of sense into the demand you guys are seeing from AI?.

So the question, Sam, was that what are the AI related matrices, right? And so Leonard is the AI expert. So, but I’ll tell you that from my point of view when I look at the activity, right, we talk about it the Analyst Day in the press release also we talked about, there’s a lot of activity going around with both existing and some of our new.

What I am very impressed with is that many of our new engagements has some level of AI component to it. So there’s a lot of interest where AI is infused across our practices. But if you’re talking about when are we going to reveal the standalone revenues and everything? When the time is right, we’ll do that. But AI is pretty active across the company..

Well, I’m glad that Anil stepped in because I wasn’t sure exactly what you were asking. Sorry about that. Now when I know I can tell you much, a little bit more colour, right. So first of all, the areas where we have progressed a lot, its conversation AI, it’s recommendation AI, catalogs, compliance. We do quite a few of the forum solutions.

What happened is having expertise in the verticals, especially things related to e-commerce but now it’s growing. Helps us to tune the proper models, help to get the visual parts, help us to guide the internal client marketing and business teams to understand the ability to reach certain business results.

The number of cases is growing for a very simple reason. They are factual. The models change, the conversion rates have changed. We can’t promise results unless the client understands the reasonable target.

So the cataloging, understanding their existing environment, cleaning up their code sometimes switching from the old models to the modern – first we need to get the code capable of accepting the new things.

So we do that conversion to augmentation and of course very close work with all the offerings relate the AI models on the cloud as well as the Europe common standalone solutions. So I’m sure we’ll do more presentation webinars. You guys can look at our website, we have a ton of demos, but those demos typically are something open to people to look.

I had a question, why one of the press releases we did with certain clients and certain project, and mainly because a lot of the work is so cutting edge at the front of the customer DNA that we are grateful the ones who are willing to open to share, but many more are preferring to maintain the total proprietary approach to their development..

Okay. Yes, that’s helpful commentary there. And then just one quick follow-up from me.

The weakness in the retail vertical this quarter was that one larger specialty retail client or was that kind of broad based?.

So the question, Sam, because the volume is not clear, your question was we talked about....

How many retail clients do we have, is that was the question?.

Yes. The weakness in the retail like was that one big client or....

Oh it’s not a weakness of retail, it’s just others grow fast. It’s not an absolute dollar situation in general. I mean, you see the trends, but there’s more investment to the modernization. Where we are participating is a way.

I mean, again, I mentioned people who work with us know that the brick and mortar business was a dominant part of our business, and then it becomes brands and CPGs.

We are not dismissing this business, but we put eggs in different baskets, right? So many years ago when we had a market dependency on retail like three-quarter of our business, people were saying, can you grow and bring the market to 20%? So we’re not there in 20%, but we are certainly much more comfortable position.

So we want to grow it numerically as the company grows. But we want to focus on proper brands, which have the growth capabilities and also on various platforms related to retail, because platforms also come and go. You’re probably aware there’s a big reshuffling in the industry going on right now.

So we’re actively pursuing value add businesses, like home improvement businesses, various products and services which are growing in an industry both in the United States and in Europe. But we’re a little bit less excited to go into something we developed six, eight, 10 years ago because that market is a bit diminishing.

So I think that’s a better scope for what’s happening..

Thanks guys..

Thanks, Sam..

Thank you, Sam..

Great. Thank you, Sam. Ladies and gentlemen, that will be all of the Q&A session for today. I will now pass the call back to Leonard for the closing comments..

Thank you everybody for joining us on the call today. We entered 2024 with a marked improvement in sentiments from a year ago. We’re focused on our goals of getting back to our long-term model both from growth and profitability perspective. The last 12 months have proven that Grid Dynamics is adept in navigating uncertainties.

Existing customers appreciate our value, and in 2023 we established a record number of new customers. I’m getting more and more bullish. I am looking forward to see you all in the next quarter. Thank you..

Ladies and gentlemen, this concludes today’s conference call. Thank you all for participating. You may now disconnect..