Grid Dynamics Holdings Inc.
10/30/2025 | Press release | Distributed by Public on 10/30/2025 14:38
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The following discussion and analysis of the financial condition and results of operations of Grid Dynamics Holdings, Inc. should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2024 included in the Company's Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission ("SEC") on February 27, 2025.
The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act) that involve risks and uncertainties. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seek," "intends," "plans," "estimates," "projects," "anticipates," or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in the section titled "Cautionary Note Regarding Forward Looking Statements," included elsewhere in this Quarterly Report on Form 10-Q, and the section titled "Risk Factors" in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025 and in our Annual Report on Form 10-K.
Overview
Grid Dynamics Holdings, Inc. ("Grid Dynamics," "GDH," the "Company," "we," "us," or "our") is a leading provider of technology consulting, platform and product engineering, and advanced analytics services. As a forefront provider of technology consulting, platform and product engineering services, and bespoke software development, we draw from over eight years of leadership in enterprise artificial intelligence ("AI"), coupled with profound expertise in cloud, data, and advanced analytics. Our commitment to engineering excellence, R&D leadership, a co-innovation ethos, globally efficient "Follow-the-Sun" delivery model, and an unwavering "whatever it takes" dedication to client success empower us to solve even the most complex enterprise challenges, ensuring profitable business outcomes and future-proof growth.
Established in 2006 and headquartered in Silicon Valley, Grid Dynamics partners with clients ranging from innovative start-ups to the largest companies in the world. Grid Dynamics believes the key to its success is a culture encouraging an unwavering "whatever it takes" dedication that puts client success over contract terms, products over projects, and real business results over pure technical innovation. With our proprietary processes optimized for innovation, emphasis on talent development, and technical expertise, we believe Grid Dynamics is well-positioned for continued success.
Established in 2006 and headquartered in Silicon Valley, Grid Dynamics partners with clients ranging from innovative start-ups to the largest companies in the world. Grid Dynamics believes the key to its success is a culture encouraging an unwavering "whatever it takes" dedication that puts client success over contract terms, products over projects, and real business results over pure technical innovation. With our proprietary processes optimized for innovation, emphasis on talent development, and technical expertise, we believe Grid Dynamics is well-positioned for continued success.
The following table sets forth a summary of Grid Dynamics' financial results for the periods indicated:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per share data and percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 104,163 | 100.0 | % | $ | 87,435 | 100.0 | % | $ | 305,673 | 100.0 | % | $ | 250,289 | 100.0 | % | |||||||||||||||||||||||||||||||
| Gross profit | $ | 34,711 | 33.3 | % | $ | 32,729 | 37.4 | % | $ | 106,211 | 34.7 | % | $ | 89,957 | 35.9 | % | |||||||||||||||||||||||||||||||
| (Loss)/income from operations | $ | (241) | (0.2) | % | $ | 2,136 | 2.4 | % | $ | (2,401) | (0.8) | % | $ | (3,366) | (1.3) | % | |||||||||||||||||||||||||||||||
| Net income/(loss) | $ | 1,177 | 1.1 | % | $ | 4,282 | 4.9 | % | $ | 9,362 | 3.1 | % | $ | (483) | (0.2) | % | |||||||||||||||||||||||||||||||
|
Diluted net income/(loss) per share
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$ | 0.01 | n/a | $ | 0.05 | n/a | $ | 0.11 | n/a | $ | (0.01) | n/a | |||||||||||||||||||||||||||||||||||
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Non-GAAP Financial Information(1)
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Non-GAAP EBITDA(1)
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$ | 12,696 | 12.2 | % | $ | 14,813 | 16.9 | % | $ | 40,050 | 13.1 | % | $ | 36,839 | 14.7 | % | |||||||||||||||||||||||||||||||
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Non-GAAP net income(1)
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$ | 8,150 | 7.8 | % | $ | 10,828 | 12.4 | % | $ | 26,395 | 8.6 | % | $ | 26,938 | 10.8 | % | |||||||||||||||||||||||||||||||
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Non-GAAP diluted EPS(1)
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$ | 0.09 | n/a | $ | 0.14 | n/a | $ | 0.30 | n/a | $ | 0.34 | n/a | |||||||||||||||||||||||||||||||||||
(1)Non-GAAP EBITDA, Non-GAAP net income and Non-GAAP diluted EPS are non-GAAP financial measures. See "Non-GAAP Measures"below for additional information and reconciliations to the most directly comparable GAAP financial measures.
Quarterly Highlights
Our key metrics for the three months ended September 30, 2025 are presented below:
•Our revenues were $104.2 million, representing an increase of 19.1% on a year-over-year basis.
•Our net income was $1.2 million, compared to $4.3 million in the prior-year quarter, primarily reflecting higher cost of revenues.
•Our non-GAAP EBITDA totaled $12.7 million, or 12.2% of revenues for the quarter, compared to $14.8 million, or 16.9% of revenues in the corresponding period of 2024.
The results in any period are not necessarily indicative of the results that may be expected for any future period.
Business Update Regarding Military Action in Ukraine
In 2022, Russian forces launched a significant military action against Ukraine, with increased attacks and other activity in recent periods. The impact on Ukraine, coupled with the actions taken by other countries, including sanctions imposed by the U.S., Canada, the U.K., the European Union, and other countries, companies and organizations against officials, individuals, regions, and industries in Russia and certain regions of Ukraine, and each country's potential response to such sanctions, tensions, and military actions could have a material adverse effect on our operations. For example, Russia could attempt to take control of assets in Ukraine belonging to companies registered in the U.S., such as Grid Dynamics. Any such material adverse effect from the conflict and enhanced sanctions activity may disrupt our delivery of services, impair our ability to complete financial or banking transactions, cause us to continue to shift all or portions of our work occurring in the region to other countries, and may restrict our ability to engage in certain projects in the region or involving certain customers in the region.
We continue to actively monitor the security of our personnel and the stability of our infrastructure, including communications and internet availability. We executed our business continuity plan and have adapted to developments as they occur to protect the safety of our people and handle potential impacts to our delivery infrastructure. We continue to actively work with our personnel and with our customers to meet their needs and to ensure smooth delivery of services.
We have no way to predict the progress or outcome of the military action in Ukraine, its continued escalation or the chance and terms of any possible peaceful or other resolution of the war, as the conflict and government responses continue to develop and are beyond our control. Continued unrest, military activities, expansion of hostilities, or broad-based sanctions could have a material adverse effect on our operations and business outlook. For example, if Russia were to invade other countries, such as Moldova, it could adversely affect our business. In addition, the current geopolitical situations in Armenia, Serbia and elsewhere in Eastern Europe create additional uncertainty in the region, and could adversely affect our business.
Key Performance Indicators and Other Factors Affecting Performance
Grid Dynamics uses the following key performance indicators and assesses the following factors, among others, to analyze its business performance, to make budgets and financial forecasts and to develop strategic plans:
Employees by Region
Attracting and retaining the right employees in the right regions is critical to the success of Grid Dynamics' business and is a key factor in Grid Dynamics' ability to meet customers' needs and grow its revenue base. Grid Dynamics' revenue prospects and long-term success depend significantly on its ability to recruit and retain qualified IT professionals. We seek to employ the appropriate professionals globally to support our "Follow-the-Sun" strategy of client service and in locations to optimize our employee costs and expenses. A substantial majority of Grid Dynamics' personnel is comprised of such IT professionals.
The following table shows the number of Grid Dynamics personnel (including full-time and part-time employees and contractors serving in similar capacities) by region, as of the dates indicated:
| As of September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
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Americas(1)
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835 | 543 | |||||||||
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Europe(2)
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3,227 | 3,042 | |||||||||
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Rest of the world(3)
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909 | 713 | |||||||||
| Total | 4,971 | 4,298 | |||||||||
(1)Americas includes personnel located in North, Central and South America.
(2)Europe includes personnel located in Western, Central and Eastern Europe.
(3)Rest of the world includes personnel located in India and other countries not included in regions described above.
Attrition
There is significant competition for IT professionals in the regions in which Grid Dynamics operates, and such competition may adversely impact Grid Dynamics' business and gross profit margins. Employee retention is one of Grid Dynamics' main priorities and is a key driver of our operational efficiency. Grid Dynamics seeks to retain top talent by providing the opportunity to work on exciting, cutting-edge projects for high profile clients, a flexible work environment and training and development programs.
Hours and Utilization
As most of Grid Dynamics' customer projects are performed and invoiced on a time and materials basis, Grid Dynamics' management tracks and projects billable hours as an indicator of business volume and corresponding resource needs for IT professionals. To maintain its gross profit margins, Grid Dynamics must effectively utilize its IT professionals, which depends on its ability to integrate and train new personnel, to efficiently transition personnel from completed projects to new assignments, to forecast customer demand for services and to attract and deploy personnel in the right regions with appropriate skills and seniority to projects. Grid Dynamics' management generally tracks utilization with respect to subsets of employees, by location or by project, and calculates the utilization rate for each subset by dividing (x) the aggregate number of billable hours for a period by (y) the aggregate number of total available hours for the same period. Grid Dynamics' management analyzes and projects utilization to measure the efficiency of its workforce and to inform management's budget and personnel decisions.
Customer Concentration
Grid Dynamics' ability to retain and expand its relationships with existing customers and add new customers are key indicators of its revenue potential. New customers have a direct impact on the Company's ability to diversify sources of revenue and replace customers that may no longer require its services. The total number of customers for the nine months ended September 30, 2025 was 222 customers, a small decrease from 229 a year ago.
Grid Dynamics has a relatively high level of revenue concentration with certain customers and constantly works toward decreasing those levels. During each of the three and nine months ended September 30, 2025 and 2024, one customer accounted for 10% or more of Grid Dynamics' revenues. The Company expects to continue its focus on maintaining long-term relationships with customers while diversifying its customer base.
The following table presents revenue concentration by amount and as a percentage of Grid Dynamics' revenues for the periods indicated:
|
Three Months Ended September 30, |
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| 2025 | 2024 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Top one customer | $ | 17,108 | 16.4 | % | $ | 14,973 | 17.1 | % | |||||||||||||||
| Top five customers | $ | 41,755 | 40.1 | % | $ | 34,825 | 39.8 | % | |||||||||||||||
| Top ten customers | $ | 60,773 | 58.3 | % | $ | 51,797 | 59.2 | % | |||||||||||||||
| Top twenty customers | $ | 78,383 | 75.3 | % | $ | 64,448 | 73.7 | % | |||||||||||||||
| Customers below top twenty | $ | 25,780 | 24.7 | % | $ | 22,987 | 26.3 | % | |||||||||||||||
|
Nine Months Ended September 30, |
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| 2025 | 2024 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Top one customer | $ | 46,645 | 15.3 | % | $ | 42,157 | 16.8 | % | |||||||||||||||
| Top five customers | $ | 114,960 | 37.6 | % | $ | 98,213 | 39.2 | % | |||||||||||||||
| Top ten customers | $ | 175,490 | 57.4 | % | $ | 141,616 | 56.6 | % | |||||||||||||||
| Top twenty customers | $ | 223,559 | 73.1 | % | $ | 177,954 | 71.1 | % | |||||||||||||||
| Customers below top twenty | $ | 82,114 | 26.9 | % | $ | 72,335 | 28.9 | % | |||||||||||||||
Results of Operations
The three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024
The following table sets forth a summary of Grid Dynamics' consolidated results of operations for the periods indicated, and the changes between periods:
|
Three Months Ended September 30, |
Change | |||||||||||||||||||||||||
| 2025 | 2024 | Dollars | Percentage | |||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Revenues | $ | 104,163 | $ | 87,435 | $ | 16,728 | 19.1 | % | ||||||||||||||||||
| Cost of revenues | 69,452 | 54,706 | 14,746 | 27.0 | % | |||||||||||||||||||||
| Gross profit | 34,711 | 32,729 | 1,982 | 6.1 | % | |||||||||||||||||||||
| Engineering, research, and development | 5,759 | 4,446 | 1,313 | 29.5 | % | |||||||||||||||||||||
| Sales and marketing | 7,339 | 6,817 | 522 | 7.7 | % | |||||||||||||||||||||
| General and administrative | 21,854 | 19,330 | 2,524 | 13.1 | % | |||||||||||||||||||||
| Total operating expense | 34,952 | 30,593 | 4,359 | 14.2 | % | |||||||||||||||||||||
| (Loss)/income from operations | (241) | 2,136 | (2,377) | (111.3) | % | |||||||||||||||||||||
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Other income, net
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3,364 | 3,466 | (102) | (2.9) | % | |||||||||||||||||||||
| Income before income tax | 3,123 | 5,602 | (2,479) | (44.3) | % | |||||||||||||||||||||
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Provision for income taxes
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1,946 | 1,320 | 626 | 47.4 | % | |||||||||||||||||||||
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Net income
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$ | 1,177 | $ | 4,282 | $ | (3,105) | (72.5) | % | ||||||||||||||||||
|
Nine Months Ended September 30, |
Change
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| 2025 | 2024 | Dollars | Percentage | |||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Revenues | $ | 305,673 | $ | 250,289 | $ | 55,384 | 22.1 | % | ||||||||||||||||||
| Cost of revenues | 199,462 | 160,332 | 39,130 | 24.4 | % | |||||||||||||||||||||
| Gross profit | 106,211 | 89,957 | 16,254 | 18.1 | % | |||||||||||||||||||||
| Engineering, research, and development | 18,989 | 12,945 | 6,044 | 46.7 | % | |||||||||||||||||||||
| Sales and marketing | 22,712 | 21,395 | 1,317 | 6.2 | % | |||||||||||||||||||||
| General and administrative | 66,911 | 58,983 | 7,928 | 13.4 | % | |||||||||||||||||||||
| Total operating expense | 108,612 | 93,323 | 15,289 | 16.4 | % | |||||||||||||||||||||
| Loss from operations | (2,401) | (3,366) | 965 | (28.7) | % | |||||||||||||||||||||
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Other income, net
|
15,294 | 8,656 | 6,638 | 76.7 | % | |||||||||||||||||||||
| Income before income tax | 12,893 | 5,290 | 7,603 | 143.7 | % | |||||||||||||||||||||
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Provision for income taxes
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3,531 | 5,773 | (2,242) | (38.8) | % | |||||||||||||||||||||
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Net income/(loss)
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$ | 9,362 | $ | (483) | $ | 9,845 | n.m. | |||||||||||||||||||
Revenues
Our total revenues grew by 19.1% and 22.1% on a quarterly and year-to-date basis, reaching $104.2 million and $305.7 million for the three and nine months ended September 30, 2025, respectively. Our growth reflected the continued diversification of our customer base across multiple verticals and the benefit of strategic acquisitions completed during 2024.
Revenues by Verticals.We assign our customers into one of our five main vertical markets or a group of various industries where we seek to increase our presence, which we label as "Verticals". The following table presents our revenues by vertical and revenues as a percentage of total revenues for the periods indicated:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
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(in thousands, except percentages)
|
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| Retail | $ | 28,951 | 27.8 | % | $ | 29,825 | 34.1 | % | $ | 90,029 | 29.5 | % | $ | 81,233 | 32.5 | % | |||||||||||||||||||||||||||||||
| Technology, Media and Telecom | 28,579 | 27.4 | % | 24,188 | 27.7 | % | 77,369 | 25.3 | % | 71,449 | 28.5 | % | |||||||||||||||||||||||||||||||||||
| Finance | 25,623 | 24.6 | % | 14,158 | 16.2 | % | 76,037 | 24.9 | % | 36,967 | 14.8 | % | |||||||||||||||||||||||||||||||||||
| CPG/Manufacturing | 10,912 | 10.5 | % | 9,807 | 11.2 | % | 32,287 | 10.6 | % | 29,209 | 11.7 | % | |||||||||||||||||||||||||||||||||||
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Healthcare and Pharma
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2,422 | 2.3 | % | 2,510 | 2.9 | % | 7,383 | 2.4 | % | 8,677 | 3.5 | % | |||||||||||||||||||||||||||||||||||
| Other | 7,676 | 7.4 | % | 6,947 | 7.9 | % | 22,568 | 7.3 | % | 22,754 | 9.0 | % | |||||||||||||||||||||||||||||||||||
| Total | $ | 104,163 | 100.0 | % | $ | 87,435 | 100.0 | % | $ | 305,673 | 100.0 | % | $ | 250,289 | 100.0 | % | |||||||||||||||||||||||||||||||
Retail continued to represent our largest vertical, contributing 27.8% and 29.5% of total revenues for the three and nine months ended September 30, 2025, respectively. Retail revenues declined by 2.9% year-over-year during the third quarter and achieved 10.8% growth on a year-to-date basis, reaching $29.0 million and $90.0 million, respectively, compared to $29.8 million and $81.2 million for the corresponding periods in 2024. The year-over-year decline reflected lower activity from a number of large customers, some of whom have since returned to growth. The year-to-date growth was primarily driven by increased demand from specialty retail customers and new customer engagements.
During the third quarter of 2025, the Technology, Media and Telecom ("TMT") vertical surpassed Finance for the first time since the fourth quarter of 2024, becoming our second largest vertical. TMT revenues increased 18.2% on a quarterly and 8.3% on a year-to-date basis, reaching $28.6 million for the third quarter and $77.4 million for the nine months ended September 30, 2025. Growth was primarily attributable to higher demand from our largest technology customers.
Our Finance vertical continued to deliver strong results, contributing 24.6% and 24.9% of total revenues for the three and nine months ended September 30, 2025, respectively. Third-quarter revenues increased to $25.6 million, up from $14.2 million in the prior-year period. On a year-to-date basis, the Finance vertical grew by $39.1 million, reaching $76.0 million. Growth was driven by continued strong demand from fintech customers, along with contributions from our 2024 acquisitions.
Revenues from the CPG and Manufacturing vertical increased 11.3% year-over-year to $10.9 million in the third quarter of 2025, compared to $9.8 million in the prior-year period. On a year-to-date basis, revenues increased 10.5% to $32.3 million, up from $29.2 million in corresponding period of 2024. Growth in this vertical was primarily attributable to contributions from our 2024 acquisitions.
The Healthcare and Pharma vertical generated $2.4 million and $7.4 million of revenues for the three and nine months ended September 30, 2025, representing 2.3% and 2.4% of total revenues, respectively. This compares to $2.5 million and $8.7 million, or 2.9% and 3.5% of total revenues, for the corresponding periods of 2024.
Lastly, the Other vertical grew 10.5% on a quarterly basis and remained flat in absolute dollars on a year-to-date basis. The year-over-year increase primarily reflects increased demand from customers in delivery and service providers sectors. The Other vertical contributed 7.4% and 7.3% of total revenues for the three and nine months ended September 30, 2025, compared to 7.9% and 9.0% in the same periods of 2024.
Cost of Revenues and Gross Margin
Our cost of revenues consists primarily of salaries and employee benefits, including performance bonuses and stock-based compensation, and project-related travel expenses of client-serving professionals. Cost of revenues also includes depreciation and amortization expenses related to client-serving activities.
Cost of revenues was $69.5 million for the three months ended September 30, 2025, an increase of $14.7 million, or 27.0%, compared to $54.7 million in the same period of 2024. For the nine months ended September 30, 2025, cost of revenues increased by $39.1 million, or 24.4%, reaching $199.5 million, compared to the prior-year period. The increase in cost of revenues reflected our continued investment in delivery to support growing customer demand.
Gross profit increased to $34.7 million for the third quarter of 2025, up 6.1% from the same period in 2024. On a year-to-date basis, gross profit grew 18.1% to $106.2 million for the nine months ended September 30, 2025 from $90.0 million in the prior-year period. Expressed as a percentage of revenues, gross margin declined to 33.3% and 34.7% for the three and nine months ended September 30, 2025, respectively, compared to 37.4% and 35.9% in the corresponding periods of 2024. While gross profit increased year-over-year in absolute terms, gross margins declined due to higher cost structures across key delivery locations and adverse foreign exchange impacts.
Engineering, Research and Development
The principal components of engineering, research and development expenses are salaries and employee benefits, including performance bonuses and stock-based compensation for personnel engaged in the design and development of solutions, as well as depreciation and amortization expenses related to engineering, research and development activities.
Our engineering, research, and development expenses increased 29.5% and 46.7% for the three and nine months ended September 30, 2025, respectively, reaching $5.8 million in the third quarter and $19.0 million for the nine-month period. The increase primarily reflected our continued investments in customer delivery capabilities and internally developed software, including AI technologies, aimed at enhancing our scalability, operational efficiency and long-term competitiveness.
Sales and Marketing
Sales and marketing expenses represent spending associated with promoting and selling our services. These expenses are comprised of personnel costs, including performance bonuses and stock-based compensation, marketing events, and travel expenses, as well as depreciation and amortization expenses related to such activities.
Our sales and marketing expenses increased 7.7% and 6.2% for the three and nine months ended September 30, 2025, respectively, reaching $7.3 million and $22.7 million for the current-year periods, respectively, compared to $6.8 million and $21.4 million in corresponding periods of 2024. Despite the increase in absolute dollars, sales and marketing expenses, expressed as a percentage of revenues, decreased to 7.0% and 7.4% for the three and nine months ended September 30, 2025, respectively, compared to 7.8% and 8.5% in the corresponding periods of 2024. The decline as a percentage of revenues primarily reflected operating leverage achieved through revenue growth and cost optimization initiatives of sales and business-development functions.
General and Administrative
General and administrative expenses include costs to support the business and consist primarily of administrative personnel and officers' salaries, employee benefits including performance bonuses, stock-based compensation, legal and audit expenses,
insurance, operating lease expenses of office premises and other facility costs, workforce global mobility initiatives, restructuring and employee relocation costs not directly related to customer projects, and depreciation and amortization expenses related to such activities. General and administrative expenses include a substantial majority of Grid Dynamics' stock-based compensation costs for the financial periods discussed herein.
General and administrative expenses increased 13.1% to $21.9 million for the three months ended September 30, 2025, compared to $19.3 million in the prior-year period. For the nine months ended September 30, 2025, general and administrative expenses totaled $66.9 million, up 13.4% from $59.0 million in the same period of 2024. The increase was primarily driven by higher costs associated with our 2024 acquisitions, including increased compensation, depreciation, amortization, and other acquisition-related costs. This increase was partially offset by a reduction in stock-based compensation expenses.
Expressed as a percentage of revenues, general and administrative expenses continued to decrease, reaching 21.0% and 21.9% for the three and nine months September 30, 2025, respectively, compared to 22.1% and 23.6% for the corresponding periods in 2024, reflecting cost optimization across various corporate functions.
Other Income, Net
Other income, net represents interest earned on our cash and cash equivalents, including money market funds, interest expense related to our borrowings, and foreign exchange gains and losses as well as changes in the fair value of contingent consideration and investments in equity securities.
Other income, net remained relatively flat in absolute dollars on a quarterly basis. During the nine months ended September 30, 2025, other income, net, almost doubled reaching $15.3 million, compared to $8.7 million in the prior-year period. The increase in other income, net on a year-to-date basis was primarily driven by the remeasurement of acquisition-related contingent consideration liabilities, partially offset by foreign currency headwinds.
Provision for Income Tax
Grid Dynamics follows the asset and liability method of accounting for income taxes. The provision for income taxes reflects income earned and taxed in the various U.S. federal and state and non-U.S. jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.
During the three months ended September 30, 2025, we recognized income tax expense of $1.9 million, compared to $1.3 million in the same period of 2024. The increase was primarily attributable to higher non-deductible executive compensation in the current period. During the nine months ended September 30, 2025, we recognized income tax expense of $3.5 million, compared to $5.8 million in the same period of 2024. The decrease in the tax provision was attributable mainly to the income tax benefit related to equity compensation.
Non-GAAP Measures
To supplement Grid Dynamics' consolidated financial data presented on a basis consistent with U.S. GAAP, this Quarterly Report contains certain non-GAAP financial measures, including Non-GAAP EBITDA, Non-GAAP net income and Non-GAAP diluted earnings per share, or EPS. Grid Dynamics has included these non-GAAP financial measures because they are financial measures used by Grid Dynamics' management to evaluate Grid Dynamics' core operating performance and trends, to make strategic decisions regarding the allocation of capital and new investments and are among the factors analyzed in making performance-based compensation decisions for key personnel. These measures exclude certain expenses that are required under U.S. GAAP. Grid Dynamics excludes these items because they are not part of core operations or, in the case of stock-based compensation, non-cash expenses that are determined based in part on Grid Dynamics' underlying performance.
Grid Dynamics believes these supplemental performance measurements are useful in evaluating operating performance, as they are similar to measures reported by its public industry peers and those regularly used by security analysts, investors and other interested parties in analyzing operating performance and prospects. These non-GAAP financial measures are not intended to be a substitute for any GAAP financial measures and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
There are significant limitations associated with the use of non-GAAP financial measures. Further, these measures may differ from the non-GAAP information, even where similarly titled, used by other companies and therefore should not be used to compare our performance to that of other companies. Grid Dynamics compensates for these limitations by providing investors and other users of its financial information a reconciliation of non-GAAP measures to the related GAAP financial measures.
Grid Dynamics encourages investors and others to review its financial information in its entirety, not to rely on any single financial measure and to view its non-GAAP measures in conjunction with GAAP financial measures.
Grid Dynamics defines and calculates its non-GAAP financial measures as follows:
•Non-GAAP EBITDA: Net income/(loss) before interest income/(expense), provision for income taxes and depreciation and amortization, and further adjusted for the impact of stock-based compensation expense, transaction-related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to Grid Dynamics' merger and acquisition and capital-raising activities), impairment of long-lived assets, restructuring costs, one-time charges, and non-operating income/(expenses), net (which includes mainly foreign currency transaction gains and losses, fair value adjustments and other miscellaneous expenses).
•Non-GAAP net income: Net income/(loss) adjusted for the impact of stock-based compensation expense, transaction-related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to Grid Dynamics' merger and acquisition and capital-raising activities), impairment of long-lived assets, restructuring costs, one-time charges, and non-operating income/(expenses), net (which includes mainly foreign currency transaction gains and losses, fair value adjustments and other miscellaneous expenses), and the tax impacts of these adjustments.
•Non-GAAP diluted EPS: Non-GAAP net income, divided by the diluted weighted-average number of diluted shares outstanding for the period.
The following table presents the reconciliation of Grid Dynamics' Non-GAAP EBITDA to its GAAP net income, the most directly comparable GAAP measure, for the periods indicated:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
GAAP net income/(loss)
|
$ | 1,177 | $ | 4,282 | $ | 9,362 | $ | (483) | |||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Depreciation and amortization | 5,010 | 3,424 | 14,629 | 9,579 | |||||||||||||||||||
|
Provision for income taxes
|
1,946 | 1,320 | 3,531 | 5,773 | |||||||||||||||||||
| Stock-based compensation | 6,356 | 7,139 | 23,816 | 25,969 | |||||||||||||||||||
|
Transaction and transformation-related costs (1)
|
348 | 1,571 | 1,109 | 2,238 | |||||||||||||||||||
|
Geographic reorganization (2)
|
310 | 316 | 1,121 | 1,262 | |||||||||||||||||||
|
Restructuring costs (3)
|
913 | 227 | 1,776 | 1,157 | |||||||||||||||||||
|
Interest and other income, net (4)
|
(3,364) | (3,466) | (15,294) | (8,656) | |||||||||||||||||||
| Non-GAAP EBITDA | $ | 12,696 | $ | 14,813 | $ | 40,050 | $ | 36,839 | |||||||||||||||
__________________________
(1)Transaction and transformation-related costs include, when applicable, external deal costs, transaction-related professional fees, transaction-related retention bonuses, which are allocated proportionally across cost of revenues, engineering, research and development, sales and marketing and general and administrative expenses as well as other transaction-related costs including integration expenses consisting of outside professional and consulting services.
(2)Geographic reorganization includes expenses connected with military actions of Russia against Ukraine and the exit plan announced by the Company and includes travel and relocation-related expenses of employees from the aforementioned countries, severance payments, allowances as well as legal and professional fees related to geographic repositioning in various locations. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.
(3)Our restructuring costs are comprised of severance charges and respective taxes, and are included in General and administrative expenses in the Company's unaudited condensed consolidated statements of income/(loss).
(4)Interest and other income, net consist primarily of gains and losses on foreign currency transactions, fair value adjustments, interest on cash held at banks and returns on investments in money-market funds, and other miscellaneous non-operating expenses.
The following table presents a reconciliation of Grid Dynamics' Non-GAAP diluted EPS and its Non-GAAP net income to its GAAP net income for the periods indicated:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||
|
GAAP net income/(loss)
|
$ | 1,177 | $ | 4,282 | $ | 9,362 | $ | (483) | |||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Stock-based compensation | 6,356 | 7,139 | 23,816 | 25,969 | |||||||||||||||||||
|
Transaction and transformation-related costs (1)
|
348 | 1,571 | 1,109 | 2,238 | |||||||||||||||||||
|
Geographic reorganization (2)
|
310 | 316 | 1,121 | 1,262 | |||||||||||||||||||
|
Restructuring costs (3)
|
913 | 227 | 1,776 | 1,157 | |||||||||||||||||||
|
Other (income)/expense, net (4)
|
(327) | (657) | (5,985) | (593) | |||||||||||||||||||
|
Tax impact of non-GAAP adjustments (5)
|
(627) | (2,050) | (4,804) | (2,612) | |||||||||||||||||||
|
Non-GAAP net income
|
$ | 8,150 | $ | 10,828 | $ | 26,395 | $ | 26,938 | |||||||||||||||
|
Number of shares used in the GAAP diluted EPS
|
85,839 | 78,837 | 86,740 | 76,485 | |||||||||||||||||||
|
GAAP diluted EPS
|
$ | 0.01 | $ | 0.05 | $ | 0.11 | $ | (0.01) | |||||||||||||||
|
Number of shares used in the Non-GAAP diluted EPS
|
85,839 | 78,837 | 86,740 | 78,301 | |||||||||||||||||||
|
Non-GAAP diluted EPS
|
$ | 0.09 | $ | 0.14 | $ | 0.30 | $ | 0.34 | |||||||||||||||
__________________________
(1)Transaction and transformation-related costs include, when applicable, external deal costs, transaction-related professional fees, transaction-related retention bonuses, which are allocated proportionally across cost of revenues, engineering, research and development, sales and marketing and general and administrative expenses as well as other transaction-related costs including integration expenses consisting of outside professional and consulting services.
(2)Geographic reorganization includes expenses connected with military actions of Russia against Ukraine and the exit plan announced by the Company and includes travel and relocation-related expenses of employees from the aforementioned countries, severance payments, allowances as well as legal and professional fees related to geographic repositioning in various locations. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.
(3)Our restructuring costs are comprised of severance charges and respective taxes, and are included in General and administrative expenses in the Company's unaudited condensed consolidated statements of income/(loss).
(4)Other (income)/expense, net consists primarily of gains and losses on foreign currency transactions, fair value adjustments, and other miscellaneous non-operating income and expense. During the fourth quarter ended December 31, 2024, the Company started to include interest (income)/expense, net in its calculation of non-GAAP net income. As a result, the Company has adjusted previously reported Other expense, net adjustment to include interest income, net of $2.8 million and $8.1 million for the three and nine months ended September 30, 2024, respectively.
(5)Reflects the estimated tax impact of the non-GAAP adjustments presented in the table.
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital needs, capital expenditures, contractual obligations, and other commitments with cash flows from operations and other sources of funding. Our current liquidity needs relate mainly to compensation and benefits of our employees and contractors and capital investments to support our growth and geographical expansion. Our ability to expand and grow our business will depend on many factors including our capital expenditure needs and the evolution of our operating cash flows. We may need more cash resources due to changed business conditions or other developments, including investments or acquisitions.
Our principal source of liquidity continues to be cash generated from our operations. From time to time, we seek additional financing by means of follow-on public offerings of our common stock. The latest offering closed on November 14, 2024 and resulted in $107.6 million of net proceeds, after deducting underwriting discounts and commissions. Additionally, we entered into an agreement establishing a revolving credit facility with JPMorgan Chase Bank, N.A., as an administrative agent for the lenders. The revolving credit facility provides us with $30.0 million of available borrowing capacity. On May 20, 2025, the maturity of this facility was extended to March 15, 2028. See Note 7 "Debt" in the notes to our condensed consolidated
financial statements in "Part I. Item 1. Financial Statements (Unaudited)" of this Quarterly Report for information regarding our debt.
As of September 30, 2025, Grid Dynamics had cash and cash equivalents amounting to $338.6 million compared to $334.7 million at December 31, 2024. Of these amounts, $40.9 million and $38.6 million, respectively, were held outside the United States, and included Switzerland, the U.K., India, Netherlands, Armenia, Poland, Moldova, and other countries. We did not have any debt outstanding under the revolving credit facility as of September 30, 2025. We believe that our cash and cash equivalents balance, cash generated from operating activities and proceeds from our November 2024 offering will be sufficient to fund currently expected levels of operating, investing and financing expenditures for a period of twelve months from the date of this filing. However, if our resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing, which may be subject to conditions outside of our control and may not be available on terms acceptable to our management or at all.
See Note 7 "Debt", Note 9 "Leases" and Note 14 "Commitments and contingencies" in the notes to our condensed consolidated financial statements in "Part I. Item 1. Financial Statements (Unaudited)" of this Quarterly Report for detailed information on our contractual obligations and commitments.
Cash Flows
The following table summarizes Grid Dynamics' cash flows for the periods indicated:
|
Nine Months Ended September 30, |
||||||||||||||
| 2025 | 2024 | |||||||||||||
| (in thousands) | ||||||||||||||
| Net cash provided by operating activities | $ | 30,704 | $ | 23,130 | ||||||||||
| Net cash used in investing activities | $ | (11,339) | $ | (41,314) | ||||||||||
|
Net cash used in financing activities
|
$ | (17,484) | $ | (7,768) | ||||||||||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
$ | 1,517 | $ | (14) | ||||||||||
|
Net increase/(decrease) in cash, cash equivalents and restricted cash
|
$ | 3,398 | $ | (25,966) | ||||||||||
|
Cash, cash equivalents and restricted cash (beginning of period)
|
$ | 335,155 | $ | 257,227 | ||||||||||
|
Cash, cash equivalents and restricted cash (end of period)
|
$ | 338,553 | $ | 231,261 | ||||||||||
Operating Activities.Net cash provided by operating activities totaled $30.7 million for the nine months ended September 30, 2025, an increase of $7.6 million compared to $23.1 million in the same period of 2024. The improvement was primarily driven by changes in working capital, including timing of employee compensation payments offset by customer collections.
Investing Activities. Net cash used in investing activities was $11.3 million for the nine months ended September 30, 2025, compared to $41.3 million in the prior-year period. The cash outflow in 2025 was primarily related to our capital expenditures and the capitalization of internally developed projects. Net cash used in investing activities during the nine months ended September 30, 2024 primarily reflects the acquisition of JUXT that resulted in the payment of $32.1 million, net of cash acquired.
Financing Activities. Net cash used in financing activities amounted to $17.5 million for the nine months ended September 30, 2025, largely driven by tax withholding obligations related to the issuance of shares in connection with vested equity awards. These obligations were $9.1 million higher as compared to the same period of 2024. Net cash used in financing activities for the nine months ended September 30, 2024 was $7.8 million.
Off-Balance Sheet Arrangements and Commitments
We do not have any material off-balance sheet commitments or contractual arrangements other than those disclosed in Note 9 "Leases" and Note 14 "Commitments and contingencies" of our condensed consolidated financial statements in "Part I. Item 1. Financial Statements (Unaudited)" of this Quarterly Report.
As a result of analysis related to Grid Dynamics' functional control of its subcontractors, one subcontractor was determined to be a variable interest entity ("VIE") and is therefore consolidated in Grid Dynamics' financial statements. The assets and liabilities of this VIE consist primarily of intercompany balances and transactions, all of which have been eliminated in consolidation.
Recently Adopted and Issued Accounting Pronouncements
Recently issued and adopted accounting pronouncements are described in Note 1 to Grid Dynamics' condensed consolidated financial statements in "Part I. Item 1. Financial Statements (Unaudited)" of this Quarterly Report.
Grid Dynamics Holdings Inc. published this content on October 30, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 30, 2025 at 20:39 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]