Grid Dynamics Holdings, Inc.

Greetings. Welcome to the Grid Dynamics third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I'll now turn the conference over to your host, Lilia Chernova, head of investor relations. You may begin.

Good afternoon. Welcome to Grid Dynamics' third quarter 2021 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 2021 financial guidance, the growth 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 Securities and Exchange Commission 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 that could cause our actual results to differ materially from today's discussion in the Risk Factors section of the company's form, Thank You, filed on August 5, 2021, and in subsequent periodic reports that the company filed 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 aid case filed with the SEC. This call is also available via webcast. You can find all the information I have just described in the investor relations section of Great Dynamics website. Joining us today on the call are CEO Leonard Lischitz and CFO Anil Dharadla. 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. Green Dynamics had another record quarter with multiple positive catalysts shaping our results. More importantly, since speaking with you all three months ago, we have made solid progress across multiple fronts of our business. With that backdrop, I'm excited to share a key highlight for our third quarter results, provide insights into the underlying business trends, and talk about how the company is well positioned to leverage significant digital transformation opportunities both in the near and long term. Now coming to the third quarter results. I'm very pleased to report another record quarter of revenue in our company history. This marks the third consecutive quarter of reporting record revenue. In the third quarter, our revenue of $57.9 million exceeded our expectations. The organic revenue of $44.1 million was higher than our guidance range of $39 to $40.5 million, and our recent acquisitions revenue of $13.8 million exceeded our expectation of $11 million. In the quarter, we witnessed strong interest across the customer base in engaging our services as digital transformation initiatives take center stage priority across the enterprise world. Based on the current demand trends, we enter the fourth quarter in 2022 with incremental confidence and expect the company to continue being a preferred partner for our customers. These accomplishments would have not been possible without the efforts of our dedicated employees, and I would like to thank all of them for their continuous hard work and dedication. There are many positive trends in third quarter, and I want to share with you some of the notable ones. We witnessed robust demand across our business. This was highlighted by double-digit sequential growth rates across most of our verticals. Furthermore, the strong trends exceeded our expectations, as highlighted by the outperformance relative to our forecast. Customers are investing aggressively in digital transformation initiatives, with a deep sense of urgency. As we highlighted in the past, it's been driven by several factors that include improving customer sentiment, greater shift over digital commerce, and continued catch-up in spending at some customers who held back in 2020. Based on our business pipeline and customer engagement, we'll exit this year strong and we'll enter 2022 with incremental growth. The men for engineering skill sets continue to be robust, and during the quarter, we started to see the efforts that were put in place around scaling detail acquisitions to be paying off. This included increasing capacity of our recruiting organization, expanding our geographic locations of hiring, and aggressively ramping up the internship program. Partnering with the top universities, we expect to double the number of interns in 2021 over 20, and again, more than double in 2022. During the third quarter, we had a total of 374 people. Over the second quarter, our headcount reached 2,884 employees. We picked up momentum on the new logo front as we added seven new logos to our organic business, with all of them contributing residents. This brings our total year-to-date new logo addition to 18, and it's higher than 16 new logos we added in the entire 2020. Of the seven, three were Fortune 500 and two global pharma companies. The total count of the clients in the quarter three reached 213. Within our top five clients, two were in the TMT space, one was CPG, and two were retail. Our concentration at our top clients continues to decline as we continue to expand our business with new customers, go deeper with existing customers, and leverage our new acquisitions. During the quarter, revenue from our top five customers was 42%, down from 60% of our revenues in the same quarter a year ago. Our continued effort around customer diversification via our new logo revenue ramped up and paying off. During the quarter, we made some strategic hires on the sales front across the United States. Additionally, we have made progress around integrating our sales organization across our recent acquisitions, and organic business. The focus continues to be around implementing an enhanced value strategy by partnering with innovative clients. During the quarter, we benefited from cross-selling as customers started seeing the value of combined technical synergies and skill sets. On the partnership front, we're executing our plan of building deeper relationships with the major cloud providers. Recently, we issued a press release highlighting grid dynamics, Google Cloud Premier Partner Status. Premier Partner Status is a testament to the differentiation that great enemies provide. We believe partnerships are crucial in scaling our business and accelerating new enterprise logo acquisitions. In the third quarter, we're starting rolling out the POD model for our client engagement. There are many Mary benefits of the pod engagement model that includes efficiencies, better cost control, and greater flexibility in delivering the services to clients. Each Green Dynamics pod is an autonomous, cross-functional team managed by a dedicated, experienced team leader. Multiple pods could be working with the same customer. During the third quarter, we started rolling out the pod model at some of the larger customers, And going forward, we expect this form of engagement to continue increasing. Now coming to some segment commentary. At 32% of the third quarter revenue, our retail business emerged our largest vertical in the quarter. And they're feeling the strong sequential growth with our organic business and for a quarter of tacit knowledge revenues. During the quarter, we witnessed strong growth across our retail customers as they aggressively invested into e-commerce platforms. In many ways, the retail industry is undergoing a transformation as customers are increasingly shifting their spending patterns toward online. Retailers across the industry, ranging from the e-commerce-friendly apparel brands, home improvement specialists, and traditional brick-and-mortar retailers, are positioning themselves with strong online presence. And the center of their online strategy is building our large, robust cloud platforms with specialized artificial intelligence and machine learning solutions for optimal product placement, areas where we have built a strong reputation, industry-leading expertise. At 30% of our third quarter revenue, TMT grew 39% on an annual basis and was our second largest vertical. The growth in the quarter was across our customer base with top technology customers fueling the growth. Similar to the last couple of quarters, our top TMT customers continue to focus on expanding offshore delivery centers. At 19%, our third quarter revenue, CPG and manufacturing continue to show robust growth, both on a sequential and year-over-year basis, underpinning This was growth from logos outside the largest CPG customer and a full quarter of revenue contribution coming from tacit knowledge acquisition. Within this vertical, we continue to be involved with large global brands that are focused on enhancing direct consumer presence. At our largest CPG customer, we are engaged in new significant projects that are expected to allow in Q4 and 2022. During the quarter, Green Dynamics did some very notable projects. Number one, at a global technology company, we orchestrated and built a reactive subsystem for detecting fraudulent advertisement activities. The system is skilled to successfully provide a magnet of events from creation to decision with a fraction of time from the previous iteration. The system provides significant savings due to the substantial improvement in ad-ranking relevance. Number two, for one of the largest U.S. home improvement retailers, Green Dynamics delivered a visualization tool for room renovation material discovery. Our team designed, implemented, and rolled out a tool that allows visualization, the use of specific products and color sets in a customer environment, making it easier for a consumer to make a choice while purchasing online and eliminating the necessity to physically enter the store. This led to an increase in customer sales conversion and significantly reduced balance rate for environment specific product purchases. Number three, for one of the fastest growing telemedicine company, Green Dynamics has implemented the initial version of a new unified platform that integrates patient-doctor communication solution, customer portal, and marketing tools in a single environment. This will allow maximizing speed to market of new features as well as to keep maintenance and support costs under control. Number four, for a major U.S. manufacturer enterprise, we have implemented the United Platform based on the grid dynamics analytical data platform accelerated, developed jointly with AWS. The platform has already been deployed for one of the largest business segments. And finally, we're increasingly finding ourselves playing central roles in influencing and shaping our customers' growth strategy. The key question every enterprise asks today is, How can we scale our online presence? And how do we stay relevant in the business? We believe that the effective response to these key questions rely on building high-quality robot digital commerce solutions that are scalable, adaptable, and reliable. Green Dynamics Core DNA is built around designing and implementing such solutions. As we approach 2022, our DNA will propel three dynamics to scale and strengthen our business positioning and reputation in the market. With that, let me turn the call over to Anil, who will discuss Q3 results in more detail. Thank you.

Thanks, Leonard. Good afternoon, everyone. Our third quarter revenue of $57.9 million exceeded our guidance range of 50 million to 51.5 million and was up 21.5% on a sequential basis and 120% on a year-over-year basis. Excluding revenues from our acquisitions of DOCS and tacit knowledge, which contributed 13.8 million in the quarter, our organic revenue of $44.1 million was up 14.8% sequentially and 67.3% on a year-over-year basis and exceeded our guidance of $39 million to $40.5 million. The better-than-expected revenue in the quarter was driven by strong demand for our services across industry verticals. During the third quarter, retail, our largest vertical representing 31.5% of our revenues, grew 43.5% on a sequential basis and 198.2% on a year-over-year basis. The strong sequential and year-over-year growth was driven by strength across our customer base with e-commerce friendly and brick-and-mortar retailers continuing focusing on digital transformation initiatives. Additionally, we benefited from a full quarter of revenue contribution from tacit knowledge. On a year-over-year basis, the growth was driven by continued improvements in our retail vertical combined with revenue contributions from our acquisitions which we made from the fourth quarter onwards. Our TMT vertical was our second largest vertical and represented 30.4% of our third quarter revenues and grew 9.2% on a sequential basis and 39.2% on a year-over-year basis. Growth in the quarter largely came from some of our large TMT customers who continue to ramp their offshore operations with us. Here are the details of the revenue mix of other verticals. Our CPG and manufacturing represented 19.3% of our revenue in the third quarter and grew 13.2% on a sequential basis and 233.9% on a year-over-year basis. The growth during the quarter primarily came from ramp of new customers combined with contributions from TASA knowledge. Finance represented 9% of revenue and grew 28.3% on a sequential basis and 69% on a year-over-year basis. The sequential growth in the financial vertical was largely driven by a combination of growth from our large financial customers combined with rampant programs from recently added customers. And finally, the other segment represented 9.8% of our third quarter revenue and was up 15.9% on a sequential basis. Within this vertical, we witnessed continued ramps at some of our recent client wins. We exited the third quarter with a total headcount of 2,884, up from 2,510 employees in the second quarter of 2021, and up from 1,204 employees in the third quarter of 2020. The sequential increase of 374 employees, or 14.9%, was largely due to increase in engineering headcount from improving demand. The increase from 2020 was largely due to a combination of improving demand resulting in headcount increase combined with our acquisitions of tacit knowledge and docs. At the end of the third quarter of 2021, our total US headcount was 293 employees or 10% of the company's total headcount. This was slightly down from 11% in the second quarter and significantly down from 21% in the year-ago quarter. Our non-U.S. headcount, which we sometimes refer to as offshore, located in Central Eastern Europe, U.K., the Netherlands, and Mexico locations was 2,591, or 90%. In the third quarter, revenues from our top five and top 10 customers were 42% and 58.2% respectively. During the same period a year ago, our top five and top 10 customer concentrations was 59.9% and 77.7% respectively. The decline was driven by a combination of new logo ramp, continued industry diversification, and acquisitions of docs and tacit knowledge. During the third quarter, we had a total of 215 customers with 55 coming from our organic business and the remaining 160 from our tacit knowledge and docs acquisitions. Our organic business customer count of 55 was up from 51 in the second quarter of 2021 and up from 42 in the third quarter of 2020. As a reminder, we only count revenue generating customers in the quarter and do not include customers who are inactive during the quarter. Relative to the second quarter, we added seven new logos, two in the TMT vertical, two in the financial vertical, and four in the other vertical, which included two global pharma companies. Moving to the income statement, our GAAP gross margin during the quarter was $25.3 million, or 43.6%, up from $19.8 million, or 41.5%, in the second quarter of 2021, and up from $11.2 million, or 42.4%, in the year-ago quarter. On a sequential basis, the increase in gross margin as a percentage was from a combination of factors that included tailwinds for more working days and billable hours, favorable offshore mix, and a full quarter of our recent acquisition of tacit knowledge. On a non-GAAP basis, our gross margin was $25.4 million, or 43.9%, up from $19.9 million, or 41.8%, in the second quarter of 2021 and up from $11.2 million or 42.6% in the year-ago quarter. The sequential increase in our non-GAAP gross margin as a percentage was driven by the same factors highlighted earlier. Non-GAAP EBITDA during the third quarter that excluded stock-based compensation, depreciation and amortization, transaction and other related costs was $12.5 million or 21.6% up from $9.7 million or 20.4% in the second quarter of 2021 and up from $4.2 million or 15.8% in the year-ago quarter. The sequential increase in EBITDA as a percentage of revenue was largely due to leverage on higher levels of revenue and gross margin tailwinds offset by higher operating expenses. Additionally, in the year-ago quarter, our business was recovering from pandemic-related headwinds, resulting in lower levels of EBITDA, both in dollar terms as well as percentage. Our GAAP net loss in the third quarter totaled a loss of $0.5 million, or a loss of one cent based on a share count of 63 million shares, compared to a second quarter loss of $1.5 million, or a loss of three cents per share, based on 54 million shares and a loss of $1.1 million, or two cents per share, based on 50 million shares in the year-ago quarter. The sequential decrease in GAAP net loss was largely due to higher levels of revenue, both organic and acquisition, offset by increases in operating expenses. On a non-GAAP basis, in the third quarter, our non-GAAP net income was $7.9 million or 11 cents per share based on 69 million diluted shares compared to the second quarter non-GAAP net income of $6.1 million or 10 cents per share based on 61 million diluted shares and $2.5 million or 5 cents per share based on 52 million diluted shares in the year-ago quarter. The key reason for The increase in non-GAAP net income was similar to GAAP net income, which included leverage from higher revenues, and the full quarter of tacit knowledge revenues offset by smaller increases in operating expenses. Coming to the balance sheet, on September 30, 2021, our cash, cash equivalents, and short-term investments totaled $199 million, up from $68 million in the second quarter of 2021. Sequential increase in our cash position was from our secondary offering and redemption of warrants. Coming to the fourth quarter guidance, we expect revenues to be in the range of $58 million to $59 million. This includes $12.5 million in acquisition revenue. We expect our non-GAAP EBITDA in the fourth quarter to be in the range of $9 million to $9.9 million. Based on our fourth quarter guidance, For full year 2021, we expect our revenues to be in the range of $202 to $203 million. This includes a contribution of $42 million from our acquisitions. For fourth quarter 2021, we expect our basic share count to be in the range of 65 to 66 million, and our diluted share count to be in the 72 to 73 million range. That concludes my prepared remarks, operator. We are ready to take questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Mayank Tandon with Needham & Co. You may proceed with your question.

Thank you. Good evening. Congrats, Leonard and Anil, on a strong quarter. I wanted to kick things off with just based on the pipeline and the pace of deal activity, do you believe that growth can continue to run above trend? And how does that play into your thinking about 22 at this juncture?

Thank you, Mayang, and thank you for the kind words. So, if you look at the Q2 and actually the nine months in 2021, we have been successfully executing our strategy on expanding and building the pipeline with the new customers, but also scaling our relationship with existing large clients as well. We would like to see that momentum growing. I believe we have a strong future going forward. We're a bit of a cautiously optimistic because there's still, you know, potential general market headwinds, not just necessarily in our line of business, but in general. So we believe that looking forward, our so-called 20 plus growth is something we kind of believe it's going to be the right path to look for at this point. I think when we get back to a year in February, there'll be a more clarity on 2022. At this point of time, we have a strong position in expanding our relationship with clients.

Got it. That's very helpful. And then just as a quick follow-up, how are you addressing the supply-side challenges of recruiting and retaining talent? Are you looking at new delivery hubs? Just maybe some thoughts around how do you address those challenges to meet the strong demand climate? Thank you. Sure, sure.

Yeah, well... It's very hard to ignore the scale of the business across the entire industry, and demand continues to grow. From Greenland Bank's perspective, I believe we're well prepared. We have expanded our recruiting capabilities on time, but we also built very strong training facilities, both virtual and in place, multiple locations. University internship programs are growing faster than ever. With acquisitions, we are broadening our engineering centers, and we continue to add more, so stay tuned. I mean, obviously, we look at very high-quality places with a strong engineering talent and great university skill set. So we're still smaller, and I think the capacity and capability and demand we are positioning good at this point.

Great. Thank you so much for taking my questions. Congrats again. Thank you. Thanks.

Our next question comes from the line of Maggie Nolan with William Blair. You may proceed with your question.

Hi, Leonard. Hi, Nell. ask about the kind of onshore offshore mix at your largest clients is that more closely matching you know where it should be on a client by client basis or more closely matching the overall company mix or is there still potential for more work to to move offshore at key accounts if you scale with them yes thank you um this is a broader question first of all the numbers um which we report

in some case could be a bit confusing because, as you know, especially with acquisitions, we greatly expanded the business outside of United States. So if you look at the total presence onshore in the United States, now it's not 100% by far. So we're actually growing so-called onshore presence in other locations, for example, like UK. But if we concentrate specifically on the United States, I think we're in a good mix as the dynamics hopefully will increase and we'll get more opportunities to bring people on a rotational assignment to us. We'll have some additional people here, but we're actively higher in the States. And our customers are becoming more and more accustomed with our global capabilities. So as we describe our business pod model, which is actually the enhancing relationship, so the customers are quite knowledgeable in terms of our team compositions on the onshore technical leadership, offshore technology, project management across the globe. So I think this whole division between onshore, offshore becomes less, you know, kind of visible from the delivery capability standpoint. We're also bringing the nearshoring capability with El Centro, Mexico. So I believe that the balance is okay, but I would not just read the numbers. I would think about how our customers' expectations and our positioning, and it looks today, our balance with them is well accepted.

Okay, thanks for that color, Leonard. And then on the gross margin, Anil, you talked about the bump from Tacit and the bump from the offshore mix, and These feel like a little bit more kind of structural items. I'm wondering how, you know, attrition trends and utilization trends are factoring into how you're looking at gross margin going forward and what's kind of the right level that we should be thinking about for the normalized business.

Sure. So as far as the Q3 is concerned, Maggie, you saw 210 bits increase, right? So we did see a pickup in some of the utilization trends, some offshore. As you rightly pointed out, we had some tacit mix there. And of course, Q3, in terms of working days, was a little bit better. As we get into Q4, I think the key question is around utilization of our engineering resources. But I think when you look at us, we're still maintaining our long-term target model of 4020. So, you know, should we be at our target model in the near term? You know, I think I feel comfortable to say, but again, you know, it's all a function of, you know, how utilization plays out, how the macro environment is there. So as we come into 2022, we'll take a look once again and, you know, update everyone on, you know, whether we have to revisit that from a long-term point of view. But for now, I think we're moving in the right direction.

Thank you both.

Thank you. Our next question comes from Brian Bersion with Cowen. You may proceed with your question.

Hi, guys. Good afternoon. Leonard, I was hoping you could dig in here a little bit more on the pod model that you're talking about. So can you go into details around really the operational benefits that gives the grid and as well as the financial benefits potentially that that structure can give you as you scale it. Right.

Thank you, Brian. If somebody would ask the question like that, it should be you. So it's, um, it's, it's a very, um, it's very insightful because essentially we've been product oriented company, uh, servicing, uh, clients for a long time. And, uh, The question becomes where we can call it as our business model versus our execution model. I mean, we do a lot of custom development, we do a lot of microservices, combining with global cloud migration, data engineering, data science, et cetera. The question becomes, at one point of time, what it makes sense to structure in terms of business positioning, would make sense for our clients, it would make sense for us. So essentially, we are helping the client to be more clear and more specific on green dynamic deliverables. So instead of a traditional T&M business arrangement, we bring the combination of variety of the skills on the project lead, led by experienced project leads. which gives the customer a better understanding of our deliverables. It gives them better relationships. On the financial side, obviously, it should be mutually beneficial. This means that clients have a better understanding of the ROI, return investment, from the relation with Green Dynamics, and it gives a better positioning from Green Dynamics to deploy proper level of resources. So the product-oriented solution Delivery, it's one of our 14. We're now just putting a little bit more of the formal way to let customers be aware of it.

Okay. Thank you for that. And then a follow-up here, more of a macro supply chain impact question for you. So given the magnitude of global supply chain issues, just curious if you're seeing any impact in your client budgets. I'm actually more interested if this is creating more opportunity for you in retail and CPG verticals.

Well, in terms of the demand versus supply, I would not differentiate retail and CPG from other verticals. I would say demand is everywhere. We're a notable expert delivering the experience in the digital commerce as a global. So these particular two verticals and others just continue to build the relation with Green Dynamics. So there are major supply chain issues across the globe, but it's not what we are about. We're about the capabilities, the technical excellence, and system integration we're delivering to the clients. So when they come to us, it's not just because they may struggle with certain talent. They're coming to us for a full service deliverables from, you know, influencing their decision, technical consultancy, business partnership, which is growing, and obviously the delivery capability. So I would say that as a global demand grows, our relationship is getting strengthened. So it's not just because they struggle with the tones, because they're becoming much more influential.

Okay, thank you.

As a reminder, we are in the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. Our next question comes from the line of Josh Siegler with Cantor Fitzgerald. You may proceed with your question.

Hi, good afternoon. Congratulations on the stellar results. My first question is on pricing. So how receptive have your clients been in negotiations for incremental price movements recently?

Hi, Josh. Well, every customer will love to give us more money. Well, on a serious note, it's not always the case, but more important, again, it's the value of the business. The reason inflation, the price inflation in the market and green dynamics obviously bring more high quality resources and engineering capabilities combined with the project excellence to enhance the customer performance. So to me, obviously the margins are healthy, but it's because we are aligning our pricing and business offering, whether it's you know, pod model, whether it's a TNM model, whether it's a fixed bid model, aligned with the customer returns. So it's always a win-win. We're not just checking the prices or doing something crazy and not the customers. They understand that the value we're bringing become more and more disproportional, and that's where we feel comfortable that our relation of mutual beneficial is the price continue to be a factor of this limit, this is relationship. And we have multiple organization, multiple service centers, broader capabilities which just enhance that kind of partnership.

Great. That's very helpful, Collar. Thank you. And then I'd like to address the Salesforce side. We've been talking about this for a couple of quarters, the build-out of the Salesforce. You've made a couple of strategic hires there. Are you starting to see that pay off? Are they starting to bring in new logos? And what do you think that ramp will be like as we move into 2022?

Oh, thank you. That's actually... It's a good point. We continue to increase and enhance our sales organization. But by itself, sales organization increase is only one part of the matter, right? We have been investing very strongly in our technology organization driven by our CTO technical leadership. We're enhancing our artifacts. We're enhancing our accelerators. We are enhancing our kind of a you know, in-depth technical acumen, which helps with the pre-sales. Now, we have very aggressive targets for the client acquisitions in 2022, both in existing and new verticals. So I would say that rather than say, yeah, absolutely, it would be awesome, let's wait to see the proof in the pudding. So far, the dynamics is good, you know, but I'm never satisfied, you know. I'm an aggressive person and I'm led by a very talented team, so The investments are large. Anil mentioned the margins profile. Obviously, we're conservative when we just throw in the numbers, but for Q4, December made a little bit of an utilization, as you mentioned, but our investments in technology and sales continues to grow, and we expect returns.

Great. That's very helpful, and congratulations again.

Thank you.

Our next question comes from the line of Ryan Potter with Citi. You may proceed with your question.

Hi, Leonard and Anil, and congrats on the good quarter. I'd like to start on the retail vertical here. It looks like it's back to its pre-pandemic run rate. I was wondering if that means that most of the clients in the vertical have now returned back to their pre-pandemic run rate, or have you been able to win incremental work here, either through new logos or cross sales? And secondly, as the retail vertical continues to recover towards its pre-pandemic levels, if some clients haven't gotten back to those levels yet, what kind of overall growth tailwind should this provide you heading into next year?

Yes, so I think, you know, Well, it's a very comprehensive point of view. If you look at three months, we got a big jump on the retail. If you look at the nine months, the technology still has a solid lead. I believe there is a recovery in the retail and there's continued growth on the CPG. One of the jump on the reporting was that one of our old client, which, you know, being very affected by the you know, pandemic, you know, is doing well. And that's why it did very well yesterday on the market. So there is a catch-up game going into the e-commerce. And we have some international retail clients as well. So I think the segment is good. It's healthier. But greed dynamics doesn't want to fall back into the trap, you know, let's enjoy it right on a digital commerce. We're enhancing our other verticals. You know, this pharma, that's a big thing. We're doing, you know, B2B business, we're enhancing our insurance business. We're growing our technology scope. Our partnership level has grown tremendously. We recently announced our relationship with one of the major cloud provider to be enhanced. Their other ones are doing well. So again, stay tuned for that. So it's a big growth. Of course, we are recognized experts and leaders in digital commerce and retail being a notably strong segment for us historically, so we'll take the business. But it by no means becomes the center of all gravity. I think the expansion, the acidification, something we're excited about and will continue to drive.

Got it. And then I'd like to ask a question on M&A. Can you provide an update on how the DAX and tacit integrations have been progressing And have you been able to gain any incremental clients or cross-sale opportunities, or I guess, in other words, any revenue synergies from these yet? And then also with the healthy level of cash that you guys have in the balance sheet now, can you provide an update or an overview on how the M&A pipeline looks for you currently?

Sure, sure. Oh, very good. You almost asked the question I would like to answer. So first of all, Tacit and Docs are very two different companies. Tacit Knowledge has a very similar technical kind of positioning with Green Dynamics. A little bit different verticals, a little bit different work in terms of their partnership. They're kind of, you know, complementing us with, you know, various tool partnerships with Commerce Tools and others, especially in Europe. So they definitely have synergy, especially in the global, which is doing the one big project in this quarter, so it will record the next quarter. reporting. So it's very good and it's very close on the thought leadership. With DAX, we completed full integration. Basically, they help us with what we call now a commercial sales. A lot of clients on the smaller side would like to see more as a project with a smaller group of people, and especially globally. And I think at this point, DAX is becoming the driver for our you know, the relationship more based on a commercial situation than our traditional expertise in enterprise and technology, global 500 type of relationship. So we're happy with both. We're pushing strongly on DAX to being a higher generator, not only of the new leads, but a scalable business. I believe that there's a couple of customers which we can actually, again, maybe next quarter talk more about, which seems to be more notable. But that relationship is going well as well. Anil needs to do a little bit of work on the margins, but that's something we are in progress. As far as new M&As, obviously, we have cash. We're looking carefully to what we can add to our pipeline. We just acquired a very strong M&A talent, one of the guys from the company which was supposed to go public but didn't due to the largest acquisition in our segment. And he has very strong experience in our segment, so we expect more pipelines. I would say that stay tuned. I would guess early next year we'll see some. more upside, maybe even sooner. But obviously, if you look at our segment, there are a lot of opportunities. We continue to look for the differentiation in the verticals. We continue to broaden our positioning on the market from partnerships and location perspective. And of course, the full service supply, including things which were less driven outside of engineering. So it looks very exciting to me.

Great.

Thank you. Thanks, Ryan.

At this time, we have reached the end of the question and answer session. I'll now turn the call back over to Leonard Lifshitz for closing remarks.

Thank you, everybody, for joining us on the call today. Our third quarter results were superior across the board and were significantly ahead of our expectations. As we enter in the fourth quarter, The demand environment continues to be robust, and we enter into 2022 with renewed enthusiasm. I look forward to giving you a business update in three months. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.