Grid Dynamics Holdings, Inc.

Good day, ladies and gentlemen, and welcome to the Grid Dynamics Holdings, Inc. Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star and then zero on your telephone. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Lilia Chernova of Investor Relations. You may begin.

Good afternoon, and welcome to Grid Dynamics' third quarter 2020 earnings conference call. Before we begin, let me remind everyone that today's discussion will contain forward-looking statements based on our current assumptions, expectations, and beliefs, including our fourth quarter 2020 financial guidance, the goals of Grid Dynamics' business, our objectives, and business strategies, as well as other forward-looking statements You can refer to the disclosure at the end of the company's earnings press release and form 8K filed with the SEC today for information about forward-looking statements that will be made on this call. All statements made today reflect our current expectations only, and we undertake no obligation to update any of them to reflect the events that will occur after this call. You can learn more about the specific risk factors and could cause our actual results to differ materially from today's discussion in the risk factors section of the company form 10Q filed on August 6, 2020, and in subsequent periodic reports that the company filed with the SEC. Also, 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 8K filed with the Securities and Exchange Commission. This call is also available via webcast. You can find all the information I have just described in the Investor Relations section of Green Dynamics website. Joining us on the call today are CEO Leonard Litschitz and CFO Anil Davadla. Following their prepared remarks, we will open the call to your questions. With that, let me turn the call over to Leonard.

Thank you, Lily. Good afternoon, everyone, and thank you for joining us today. I'm excited to share the progress we have made since we spoke with you three months ago. Today, I will provide highlights of our third quarter results, share what we're witnessing across our business on the demand front, and talk about the trends that are shaping up our fourth quarter. In the third quarter, our revenue of $26.3 million grew 18% sequentially and was one of the highest quarter-over-quarter growth in the company's history. More importantly, underlying the trends that shaped up the third quarter, both from the customer demand and the delivery front, were very encouraging and were setting the stage to a favorable fourth quarter in 2021 year. Although there were many positive trends, I would like to highlight a few. First, in the third quarter, we witnessed strong pickup in customer activities across the board as digital transformation initiatives took central stage. These trends will continue in the fourth quarter, and we anticipate revenue run rate to approach the level we had at the end of 2019 with strong contributions from our top clients. Within our retail segments, we witness strong pickup from specialized e-commerce friendly retailers. Furthermore, we see somewhat of an overhaul as new categories of retail customers emerge. Again, as we enter 2021, we will not rely on traditional retail as we succeed in diversifying our revenue composition across CMT, CPG, FinTech, manufacturing, and other industries. Three, some of our larger customers are increasingly seeking to engage with our offshore locations. While the motivations are customer-specific, continued demand for the cost efficiency combined with greater acceptance of remote work have influenced many customers toward increasing the use of great dynamics offshore locations. And finally, number four, companies are increasingly focused on improving efficiencies across their sales lifecycle and operations by leveraging data-driven solutions. Our customers demand great dynamic expertise in data science, big data engineering, and artificial intelligence. And now coming back to the third quarter, we witness growing demand for expertise as customers steady increase their investments in digital transformation. This was not specific to any one market, but rather widespread across industry verticals. In each of the three months of the third quarter, our revenue grew sequential, with September being the fourth consecutive month of the growth. Most important, in October, we saw the same upward trend, leading us to be confident in Q4 outlook and momentum toward recovery to pre-COVID level and beyond. On profitability front, there was a strong pickup in our margins from the second quarter. This was driven by two key factors. The first was tied to increased utilization rate across the company, and the second was from a greater mix of offshoring. While we expect these trends to continue providing tailwind to our business in the fourth quarter, reinstatement of compensation as well as strategic Salesforce hires may upset some of the gains. I knew we'll provide more color around the margins movements in the fourth quarter. Our non-retail business was 77% of revenue and grew 10% on the sequential basis. Also importantly, this part of the business has grown double digits sequentially in each of the third quarters of 2020. The continuous trends even during the pandemic crisis clearly validates the importance of digital transformation. Now coming to our retail segment. We witnessed a strong sequential growth from the second quarter as our retail customers opened their stores and resumed operations. That said, the growth was not consistent across retail customers, with the majority of retailers still working with the smaller IT budgets for the remainder of 2020. While we anticipated a pickup in revenue in Q4, we do not expect achieving pre-COVID levels of revenue business and retail. During the quarter, we have also delivered some notable projects. Number one, we assisted in enhancing the revenue of a leading search technology company by integrating its search engine at several large enterprises in the United States as a part of their partnerships, to improve online customer experience for product search and placement. Number two. At a global CPG company, we optimized their in-house cloud data platform. This resulted in 75% improvement in latency of data processing and significant reduction in costs associated with infrastructure and maintenance. Number three. At a leading digital advertisement company, we built a marketing platform using our expertise with data science and data engineering. One of the tangible outcomes of our efforts was the customer increasing their ad conversion by 44%. One more example. At U.S. retailers, we built a customized loyalty platform replacing an existing platform that was expensive and inefficient. Our implementation... focus on enhancing customer experience, leading to improvements in customer satisfaction. In the current pandemic environment, consumers are increasingly demanding a robust digital online experience to shop for goods and services, and this is just one example of how COVID-19 has become a catalyst to digital transformation. Even during this time of uncertainty and uneven customer demand, we continue to execute very well in adding new customers, especially in our higher growth vertical. During this quarter, Green Dynamics added five new logos, three of which were all considerable significant players. One is in the medical device technology space. Another one is in the home improvement sector. And the last but not the least one is the global financial technology payment platform system. We believe These logos have the potential of becoming large customers over time. Additionally, we continue to make good progress on customer diversification. During the quarter, two of our top five clients were in the technology space and one in each in CPG, retail, and in fintech. Our top clients during the quarter were Apple and Google. With that, let me turn the call over to Anil, who will discuss third quarter results in more detail.