Grid Dynamics Holdings, Inc.

Ladies and gentlemen, thank you for your patience. Welcome to Grid Dynamics' fourth quarter and full year 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the presentation. Please note that this is being recorded. I will now turn it over to our host, Ben Jiang, Head of Investor Relations. Thank you.

You may begin. Good afternoon. Welcome to Green Dynamics fourth 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 first quarter 2022 financial guidance, the growth of Green Dynamics business, our objectives and business strategy, 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 Security 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 factor section of the company's form 10-Q filed on November 4, 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. Gap to non-gap financial reconciliations and supplemental financial information are provided in the earnings press release and APA 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 Green Dynamics website. Joining us today on the call a CEO, Leonard Delicious, and a CFO, Anil Dhiradlar. Following their prepared remarks, we will open the call to your questions. With that, let me turn the call over to Leonard.

Thank you, Ben. Good afternoon, everyone, and thank you for joining today. And under any other circumstances, there'd be a phenomenal discussion about how we performed in Q4 and how successful 2021 year was for Green Dynamics. But it's not that important at this moment. We are in war. And what I'm going to do right now, I'm going to tell you how Green Dynamics operates in this condition in Ukraine, how we deal with our people, and how we provide uninterrupted work for our companies. Before I do that, I will still walk you through all these results of our year and give you an example of how we perform. And then I come back to relay the questions how Green Dynamics deals in the situation where we are right now. And then I will take questions together with Anu. On that note, I want to provide you business and financial performance for fourth quarter, full year 2021, and provide our look for the coming Q1 quarter 2022. As you have seen from our solid fourth quarter results published this afternoon, I'm very pleased to report another record quarter revenue in our history. And this marks the fourth consecutive quarter of reporting record revenue. Before I get into the highlights of Q4, I wanted to make some comments on our 2021 accomplishments and how it has been an important transformation year for the company. At over $200 million in annual revenue, we almost doubled the revenue of last year. Organic business, which grew more than 50% over the previous year, is now at quarterly run rate over two times in comparison to June 2020, which was during the pandemic. We had 22 new logos in the year, accelerated our client's new addition over the previous year, and set up a positive back drop. Our partnership announcements with cloud providers, such as Google and Amazon, have elevated our status in the history. Our two acquisitions made in December 2020 and May 2021 have enhanced our capability and offering. Retired our warrants, both public and private, resulting in a clean capital structure and successfully executed an equity offering that not only raised cash for the company, but also enhance liquidity to our shareholders. We have significantly exceeded everyone's expectation and set such a high level of execution, which is a testament to our strong fundamentals, as well as differentiation, and more importantly, the hard work and dedication of our people. I'm very proud of our entire team across the globe, their hard work, and would like to thank every one of them for the efforts in making 2021 a remarkable year. Now we come back to the war. How it relates to our business. As you all know, on February 24th, Russia launched the invasion against Ukraine. The situation is ongoing. And evolving daily, we have been monitoring very closely, but not just monitoring. We're actively participating in the lives of our people to take out of the harm wave. We have activated our business continuity plan, or BCP, that defines action to be taken by the company on a different level of risk of the business. Sadly, we had to test our plan going back to 2014 and because of our experience to continue updating. The main focus is on the safety of our employees and continuity of our client's business. As war unfolds, our top priority has been to ensure the safety of all our employees. On that front, I'm very happy to say that majority of our employees in Ukraine are safe and accounted for. Within Ukraine, we have roughly 1,400 employees stretched across the country, and we are addressing the needs in multiple ways. To begin, we have offered to all employees the choice to work out from their preferred location, And we are helping in any variety of the ways that includes transportation, shelter, food, medical help. Some of our employees have chosen to stay in their locations, and they've been sheltering in place with their families. Others have chosen to move toward the western part of Ukraine, Poland, Moldova, and others. As of today, Majority of our employees have relocated into the western part of Ukraine, and their families have been on the way to the safety of neighboring countries. Additionally, we continue to accelerate to bring the remaining of our employees and their families to safety as the situations permit. We also added delivery capacity to minimize disruption to our client projects. On this, we have been working on multiple fronts. First, we're setting up our hiring process across all the geographic locations, including Mexico, Poland, Moldova, Serbia, and Armenia. We achieved a significant milestone with our extension of delivery operations in India. This week, we announced the creation of Green Dynamics IndiaWire's strategic partnership with Sigma Infotech. We are excited that this opportunity will present to us the best path for the entry in growth in India. We anticipate to have more partnerships going forward, and we expect our first set of deliverable employees in India in a very short period of time. Over time, we plan to grow our presence in India to achieve at least 500 or more people capacity. And I stress the focus on the high talent and the goodwill and partnership with our great people who currently will work in India. And the third one, I want to highlight how our employees have done well beyond their call of duty. Across all of our geographies, all our employees have shown tremendous team spirit and have stepped up by taking additional responsibility with client projects. They work day and night. They step up to make sure that clients are satisfied with the best of all capabilities. And a percentage of our business rollout is going daily. And it's playing an important role, and it's a testament of our culture and highlights how resilient and how camaraderie our engineers are and how they care about each other. I also believe our size and delivery DNA positions us well in a difficult navigation through the current situation. Since founding the company, we have ensured client project and domain expertise to be not concentrated in any geographic location. For a smaller company, disruptions in client work due to concentrated resources would have had a major impact on the business. In case of where dynamics were distributed, and we are set to provide the best possible support to the clients. Not working, the impact is of hundreds of people, not thousands, not tens of thousands. Given that we are in over 12 countries and 15 time zones, we have access to tap into large labor pools. And bottom line, we're more nimble and can address the capacity issues as quickly as possible. It is a very difficult time. not just degree dynamics, but it's a test for the entire humanity in the world. And to my delight, our customers have proven to be outstanding partners and have shown tremendous support to the company and our employees. We're engaged with all our customers on a daily basis and have not seen any loss of customers so far. On opposite ways, our customers are stepping up, and they're helping us with logistics. They're patient. They're committed. And in addition to our business relationship, they're happy to participate and contribute to the charities established by Great Dynamics. Again, it's a testament of years of relationships, and our track record of being a reliable, intelligent, and committed partner. Now coming to the fourth quarter. We finished this year strongly with revenue of $66 million, representing 120% year-over-year growth, significantly exceeding our expectations which we shared with you last quarter. We also ended the fourth quarter with adjusted EBITDA of $11.6 million, representing growth over 3X over the same period in the prior year. On a sequential basis, our revenue grew 15%, Market is one of the strongest first quarter in terms of sequential growth rate. As you know from our previous commentary around seasonality, our first quarter grows a bit more modestly than our third. Nevertheless, the quarter has performed better than expected. We witnessed a strong demand across all our industries, all our verticals, and we've seen the growth through our organic business as well as with acquisitions. The efforts we made on the supply chain during 2021 resulted in significantly higher billable headcount. And depending on the trends was the strong customer interest in engaging our services around digital engineering as these programs take center stage priority across the enterprise world. In the fourth quarter, there were several positive trends And I want to share a few of them. Please understand that under current circumstances, some of the comments may not as important as they have seemed just a few weeks ago. But nevertheless, I want to point it out. Number one, demand trends across all the segments continue to grow, and there is a healthy demand of all algorithms. During the fourth quarter, Our large technology customers continue to aggressively dedicate their work with great dynamics. Retail has another strong sequential quarter. It was the largest vertical in Q4. We saw the strength of our home improvement clients along with e-commerce friendly apparel retailers. On the CBG and manufacturing front, we continue to leverage our expertise in digital commerce. Our investment into adjacent areas of order fulfillment and supply chain led to the interest from CBG and manufacturing clients, including some of the top players from each vertical. And within other verticals, the demand was largely driven within healthcare and pharmaceutical clients. We've seen a huge demand for talent. Demand for skill sets continue to be robust. That said, on the supply side, our worth of scaling talent acquisition since the beginning of 2021 has significantly paid off. Largely reflected by our ability to convert a number of engineers into billable positions and resulted in 15% sequential growth in revenues. On the internship front, we have made a solid progress as we partner with the top universities. In 2021, we doubled the number of internships. our 2020, and we expect to continue to grow our headcount. Logo momentum. Our new logo addition to our organic business continues to be robust. In this quarter, we added five new logos, bringing us total to 22 additions for the full year, as I mentioned to you before. And that's just on the organic side compared with 2016-2020. Of these five new logos, two were in the B2B retail, one was in healthcare, one media, and one in apparel retail. Our product-oriented delivery, or COD model, has been increasingly accepted by our larger clients. And these trends heavily drove our building capabilities of larger teams in a multiple offshore organization. I'm happy to report But during Q4, the Fortune 500 pharma company were able to pick up a dedicated offshore location as a center of excellence in the area of data science and artificial intelligence. We expect this trend in favor of POD to continue as clients across industry verticals increasingly see the benefit. Viewers of our dash and dash. Acquisition revenue in that quarter was higher than expected, as both DAX and TASID witness elevated demand across the board. I'm happy to report that integration efforts with both companies are playing out as expected. And at this point, I can report that we have fully completed acquisition and integration of DAX, and DAX is completely part of green dynamics on every facet of the business. We'll do so with TASID in a few quarters. Salesforce expansion. As you may recall, we rolled out a strategy around expanding our Salesforce in early 2021, and in Q4, we made several strategic sales hires across the United States. The focus is central around hiring senior salespeople who can leverage their experience and expertise with their industry connections. In addition to strengthening our geographic coverage, We have invested in bringing up the people with the domain knowledge and such verticals as insurance, fintech, and pharma. I'm excited to see the senior people on board and look forward to continue growing our business in 2022. R&D extension. During the Q4, we made a substantial growth in a number of major R&D initiatives. Some barrier focus include ramping up our accelerator offering, enhancing our pre-sales technology and capabilities, and scaling our consulting practices to make sure we meet all the growing demands from our clients. As we look into 2022 and beyond, we're enhancing our capabilities, creating more platform solutions, which will result in winning larger deals for the company. During the quarter, GridName has delivered some notable projects. Number one, At a global technology company, we built a complex system to predict device failure directly on the company's mission-critical production lines. The system pulled into IAT data with the use of streaming technology, analyzed the data with machine learning, modeling, and provided decisions in real time. This leads to further reduction of production maintenance costs for this large clinic. We expect the system to continue evolving over time and being rolled out on most of their product lines. Number two, at the global CPG brand, we help to integrate their systems with a third-party distribution center provider, thereby significantly increasing their retail supply chain capacity in North America. Our effort will lead to several benefits that include increasing revenues, improve customer satisfaction, and prevention of stuck-out, especially during peak demand of the holiday. Number three, as a large U.S. luxury retailer, Green Dynamics developed and delivered a new cottage-edge mobile application tailored at customer segments that historically had not adopted digital shopping. This invite-only application is experience, recommendation, and personalization-focused, which increases digital engagement and revenue in their journey to become a more digitally prominent brand. As Luxury Terror continues to make investments in this strategic initiative, which is foundational in the company's mobile service. And last but not the least example, for one of the traffic solution manufacturers, we applied data analytics technology to enhance the data management capability of their traffic control systems used by their clients. The system collects information from a wide range of IoT sensors deployed around cities and on vehicles. Redynamics implements several business cases. related to building descriptive analytics and enhanced UI. New features enabled by our solution become one of their competitive advantages and allow this customer to attract new clients. Before I turn to Anil, I want to remind you again that during the Q&A session, both of us will be happy to give you as much power as we can provide to demonstrate how incredibly resilient Redynamics remains to be in the industry and how incredibly proud I am of my employees who work day and night under very difficult circumstances, of my clients who are the most understandable and the most generous partners. And I would like to hear more from our investors Their contribution to success helps Ukraine as well. Thank you. And now we'll turn the call to Anil, who will discuss Q4 results in more details.