Grid Dynamics Holdings, Inc.

everyone welcome to great dynamic second quarter 2022 earnings conference call i'm bing chiao head of investor relations at this time our participants are in this only mode join us on the call today a ceo lamma delicious and cfo a little de rodler following their prepared remarks we will open the call to your questions please note today's conference is being recorded Before we begin, I would like to remind everyone that this discussion will contain forward-looking statements. This includes our business and financial outlook and answers to some of your questions. Such statements are subject to the risks and uncertainties as described in the company's earnings release and other findings with the SEC. During this call, we will discuss certain non-GAAP measures of our performance. gap to non-gap financial reconciliation and supplemental financial information are provided in the earnings press release and the AK filed with SEC. You can find all the information I have just described in the investor relations section of our website. With that, I will now turn the call over to Leonard, our CEO.

Thank you, Bin. Good afternoon, everyone, and thank you for joining us today. Q2 2022 was another record revenue quarter of $77.3 million, and this marked the eighth consecutive quarter of record revenue in a company's history. I want to emphasize these results, which are definitely exceptional given the circumstances the world has been facing over the past five months. Grid dynamics executed flawlessly in transitioning a significant proportion of the workforce while continuing to deliver projects in a timely manner. I will go into details shortly. Three months ago, I committed that we will exit Russia. Today, I would like to report that we ceased Russian activities and we're now geographically more diversified, as well as continuing to expand across all our industry client verticals. More importantly, our customers demonstrating unwavering faith in grid dynamics capability. I'm confident of our strengths and our ability to successfully navigate the business in the future, despite the geopolitical challenges. As our quarterly results reported, we progressed across multiple fronts of our business. This includes scaling our global presence with new locations, expanding our partnerships and adding new customers. Great dynamic solid results over the past several quarters have shown the company incredible resilience in balancing back stronger from the global pandemic crisis first and recently from the war perpetuated by Russia. It is a true testament of the company's strong fundamentals, teamwork, and commitment to the business and the shareholders. On this call, we'll provide insights into the demand environment, global operations, and financial performance for the second quarter 2022, and also provide outlook for the third quarter. Again, in the second quarter, our revenue of 77.3 million well exceeded our expectations that we shared with you three months ago. We ended the second quarter with an adjusted EBITDA of $13 million, which is 17% of our revenue. The better than expected performance were due to a couple of factors. First, we witnessed stronger demand across our industry verticals and customers. Second, we had minimum disruption to billability as we transitioned out of Russia. And more importantly, customer interest in engaging our services around digital engineering continued to be strong in this quarter. During the quarter, our geographic footprint grew across the world. In Europe, our new office in Switzerland will become our European headquarters, while London and Amsterdam will continue to serve as customer-facing centers of excellence. India, Mexico, and Poland will play strategic roles in scaling delivery footprint over time. India, with its extensive talent pool, will offer an unmatched ability to scale our operations in the long term. Mexico, with its large pool of talent engineers and convenient time zone to our U.S.-based clients, offer an excellent near-shore presence. Several large clients have welcomed our near-shore strategy and have expressed interest in partnering with our Mexican operations. And finally, Poland, with Advantage being one of the largest country in Central Europe with a strong IT presence, we'll continue to support our operations as we scale in Europe. We also ramped up hiring of the engineering talent on several countries such as Romania, Armenia, and Serbia, and some others. Each of these countries offer a unique advantage in our global growth. In the quarter, there were several positive trends which I would like to share with you, and there are a few notable ones. Demand trends. In the second quarter, the demand across our verticals and customers was strong. This was indicated by the sequential and year-over-year growth across all of our industries and majority of our clients. As you know, the current macro recession concern has been on everyone's mind, and our clients have been no exception. Currently, we're not witnessing significant widespread headwinds. It's still more customer-specific in nature. And there are a couple of reasons for that. First, many of our clients' digital transformation initiatives are given higher priority and we're increasingly involved in a project of strategic importance in comparison to some of the past experience. Second, we're now a more diversified company. with less exposure to recession-sensitive retail brick and mortar business. Even within our retail business, there are mix shifting away from some of those sensitive areas. And finally, third, healthy pickup in our new logos over the several quarters enabled us to be more resilient as we go across a larger customer base. Coming to some additional second quarter segment commentary. Similar to last quarter, our largest technology customer continued to ramp aggressively and support our growth as we expanded into new geographies. Within our retail business, strong sequential growth was driven by our e-commerce friendly retail customers. At our largest CPG customer, we continue to grow. And more importantly, we finalized on several key programs, not just for this year, but for 2023 as well. We're bullish on our prospects and continue to leveraging our position as a strategic partner of many. Logo momentum. In the quarter, we added five new logos across industries. Of these, one was a global food manufacturing retailer, one was one of the largest distributor of beverages in the United States. One was a delivery service operation. We also had additional logos in technology and healthcare space. Our pipeline in the third quarter is healthy and I expect to share some significant logo wins next quarter. Partnerships. We're witnessing good momentum on the partnership front. In the second quarter, we saw healthy growth in our pipeline and expect partnerships to play increasingly important roles in our growth. During the quarter, we received an award from the Mac Alliance for the best healthcare project. Our capabilities and strengths are getting greater prominence across our partners' ecosystems, and this in turn is leading to the new opportunities. We're also enhancing our team by adding a senior sales executive to focus specifically on building opportunities with one of the top three cloud providers. And finally, some of the largest crowd provider partners will launch new product starter kit and enhance our competencies and specializations. During the quarter, Grid Dynamics delivered also some of the notable projects. For a global technology company, we built a centralized continuous integration platform. Our solution standardized best practices for collaboration among engineering teams and increases their productivity and transparency for the engineering leadership. The platform currently serves over a thousand engineers and is planned to be rolled out on a company-wide basis. At a global CPG company, we implemented a unifying interface system for wholesale orders. This system will not only significantly reduce the amount of manual work, but also speeds up order processing and fulfillment. As a key technology partner to a global cybersecurity company, Grid Dynamics helped to build the next generation cloud solution for the security incident and event management. Our solution migrated the on-premise storage model to the major cloud platform. We built a high-volume, high-velocity security event ingestion pipeline, anomaly detection, and behavior analytics. The solution enables a competitive edge in the marketplace by offering near infinite scale, speed, and low cost of ownership. We're one of the largest manufacturing services company. We developed an intelligent cloud-based supply chain platform that provides real-time visibility across the entire ecosystem. It covers the whole process from planning to delivery and utilizes big data, machine learning and predictive analytics. The system allows to practically identify and quantify potential risk losses and suggest mitigation options with the proper cost estimates. Currently, our client uses the system to manage tens of thousands of the suppliers across the globe. With that, let me turn the call over to Anil, who will discuss Q2 results in more details. Anil?

Thanks, Leonard. Good afternoon, everyone. Our second quarter revenue of 77.3 million exceeded our guidance of 72 to 73.5 million and was up 8.3% on a sequential basis and 62.2% on a year-over-year basis. The better-than-expected revenue in the quarter was driven by strong demand for our services across industry verticals. During the second quarter, retail, our largest vertical, representing 32.9% of revenues, grew 9.2% on a sequential basis and 100% on a year-over-year basis. The strong sequential and year-over-year growth was driven by strength across our customer base from e-commerce friendly and brick-and-mortar retailers as they continue to focus on digital transformation initiatives. Our TMT vertical was our second largest vertical and represented 30.2% of our second quarter revenues and grew 9.1% on a sequential basis and 45.2% on a year-over-year basis. We witnessed strength across our customer base. Additionally, during the quarter, one of our largest technology customers aggressively grew as we expanded into new geographies. Here are the details of the revenue mix of other verticals. Our CPG and manufacturing represented 20.8% of our revenue in the second quarter and grew 7.4% on a sequential basis and 62.5% on a year-over-year basis. The growth during the quarter primarily came from the ramp at our largest CPG customer. Finance represents 6.5% of revenue, increased 11.5% on a sequential basis, and grew 24% on a year-over-year basis. And finally, the other segment represented 9.6 of our second quarter revenue and was up 2.8% on a sequential basis. The growth came from healthcare as well as our new customers. We exited the second quarter with a total headcount of 3,763, up from 3,671 employees in the first quarter of 2022, and up from 2,510 in the second quarter of 2021. In the second quarter, we hired aggressively across our locations in Europe, India, and North America. This headcount addition was offset by a couple of factors. First, as we exited Russia, there were headcount predictions that included ramp down of overhead and administration personnel. Second, we scaled down our bench of engineers, which had grown to compensate for any war-related supply disruptions. As we progress through the second half of the year, we expect our headcount to continue to expand. At the end of the second quarter of 2022, our total US headcount was 326, or 9% of the company's total headcount, and remained on the same level compared to the first quarter of 2022. and down 11% in the year-ago quarter. The year-over-year decline as a percentage of the total headcount was largely driven by greater mix of our non-U.S. headcount, our non-U.S. headcount, which we sometimes refer to as offshore, located in Central and Eastern Europe, U.K., Netherlands, and Mexico, and other locations was 3,437, or 91%. In the second quarter, revenues from our top 5 and top 10 customers were 44.2%, and 60.2% respectively. During the same period a year ago, our top five and top 10 customer concentration was 45.4% and 62.3% respectively. The diversification across our top five and top 10 was driven by a combination of factors that included new lower ramp, industry diversification, and our acquisition. During the second quarter, we had a total of 208 customers, down from 213 customers in the first quarter and 212 customers in the year-ago quarter. The sequential decline in our customers was largely driven by our commercial business, or DOCS, which we acquired in December of 2020. As a reminder, we only count the revenue-generating customers in the quarter and do not include customers who were inactive during the quarter. Moving to the income statement, our GAAP gross profit during the quarter was $28.9 million or 37.3%, up from $26.8 million or 37.5% in the first quarter of 2022, and up from $19.8 million or 41.5% in the year-ago quarter. On a non-GAAP basis, our gross profit was $29.1 million or 37.7%, up from $27 million or 37.8% in the first quarter of 2022, and up from $19.9 million or 41.8% in the year-ago quarter. The sequential and year-over-year increase in gross profit was largely driven by increase in revenues. Non-GAAP EBITDA during the second quarter that excluded stock-based compensation, depreciation and amortization, expenses related to geographic reorganization transaction other related costs were 13.3 million or 17.2 percent of revenue up from 11.4 million or 15.9 percent in the first quarter of 2022 and up from 9.7 million dollars or 20.4 percent in the year ago quarter the sequential increase in ebita was due to a combination of higher levels of revenue and flattish operating expenses Our gap net loss in the second quarter totaled a loss of $13.2 million or loss of 20 cents based on a share count of 67 million shares compared to the first quarter loss of $2.7 million or a loss of 4 cents per share based on 67 million shares and a loss of $1.5 million or a loss of 3 cents per share based on 54 million shares in the year-ago quarter. The sequential and year-over-year Increase in gap net loss was largely due to higher levels of stock-based compensation and geographic organization costs offset by higher levels of revenue. During the second quarter, we incurred $6 million in geographic reorganization costs. On a non-gap basis, in the second quarter, our non-gap net income was $8.2 million, or 12 cents per share based on 70 million diluted shares, compared to the first quarter of 2022 non-GAAP net income of $6.9 million or 10 cents per diluted share based on 70 million diluted shares and $6.1 million or 10 cents per diluted share based on 61 million diluted shares in the year-ago quarter. The key reasons for the increase in the non-GAAP net income on a sequential basis were higher levels of revenue and flattish operating expenses. The increase in the non-GAAP NIT income in comparison to the year-ago quarter was largely from higher levels of revenue partially offset by higher operating expenses. On June 30, 2022, our cash and cash equivalents total $150 million, down from $153.3 million in the first quarter of 2022, and up from $144.4 million in the fourth quarter of 2021. During the second quarter, we paid down our line of credit to the amount of $5 million. Additionally, in the second quarter, we accrued short-term liabilities of roughly $3 million that we expect to pay out in the third quarter. We also invested $1 million into a technology company. Coming to the third quarter guidance, we expect revenues to be in the range of $78.5 million to $80 million. we expect our non-GAAP EBITDA in the third quarter to be in the range of 12.6 million to 13.6 million, or 16% to 17% of revenue. For Q3 2022, we expect our basic share count to be in the 67 to 68 million range, and our diluted share count to be in the 70 to 71 million range. That concludes my prepared remarks. Bin, we're ready to take questions.

Thank you, Anil. As we go to the Q&A session of this call, I will first announce your name. At that point, please unmute your line and turn on the camera. Our first question comes from Puneet Jain from JPMorgan. Your line is open.

Hey, can you hear me?

Yes. Can you please turn on your camera?

I'm trying to. It's not aligned. Sorry. Nice quarter, like really nice quarter. I just had a quick question. Is active relocation of employees or projects away from Eastern Europe completely behind you now? And should we expect you to operate in a steady state from here onwards?

It's more as a statement than a question, Jane. Good to hear from you. Yes, of course. Russia is behind us. I mean, there are still a lot of uncertainties in the region. As you know, war is far from being over. We look very optimistically as we grow our position in, I would say, outside of the traditional risk area. We still feel very committed to Ukraine and continue to operate from Ukraine. But with the diversity of the workforce and scalable capability, we see a very positive reaction from our clients.

understood and then as we think about the macro environment specifically over the last few months are there any differences in client behavior or their priorities across different verticals maybe like retail cpg clients might be more impacted from inflation versus like tech vertical or other verticals like are have you seen any changes in client behavior or their spending pattern type of projects they execute across different verticals?

Sure. There is a difference. We've seen several customers which have tightened the budgets already. We've seen some other customers which are considering to tighten the budgets. We're not 100% immune. But we feel very good where we are. There will be some softness. I mean, this is the reality of the world. We're more diversified where we were. If you noticed, we believe in our growth. We also are positioned more strategically than before, not ever, but before. And I believe that the importance is how deeply you're entrenched with the customer execution and the strategy. One thing about retail generally, because I'm sure this question will come back again, the e-commerce related or more, you know, e-commerce driven enterprises in the retail CPG space, are more capable to withstand the variance on the market than somebody who is much more brick and mortar dependent.

Thank you.

Of course. Thank you.

Thanks, Puneet. Next question comes from from .

Please go ahead. Great. Leonard and Anil, good to see you. Congratulations on the quarter. I just wanted to ask you about the guidance coming off this really strong second quarter performance. If you look at 3Q guidance, it does call for a deceleration. Maybe you could speak to that and also any sort of framework to think about for Q. And maybe I'll be a little greedy here. Ask about any initial indications for 23 as well. All right.

So I'm going to start a little bit on a high level rank and then I'll have Neil, to give you a little bit more color on the guidance. So by nature, as you know, we are conservative. We would like to be conservative because, as you know, from the week after we became a public company, the world got into turmoil in March 2020 and seems like never stopped. We look at macro indicators, we look at other factors, and we just want to make sure that we react properly. The growth and profitability go hand to hand. We want to make sure we continue responsibly and we continue with the ability to scale. And my big focus remains to be on the technology innovation, regardless of region where we are. It's all about client offerings. So I believe that we are on the path to continue to grow. But in terms of specific sensitive variants, in terms of the forecasting, I think Anil will have to chime in. Please.

Sure. Thank you, Leonard. And thanks for the question. You're right. As we go from Q2 to Q3 seasonally, you all know how the quarter shapes out, which is a strong sequential growth. I think Leonard summarized it very well. Look, I mean, we look at all our clients, we look at their forecast, and you know, we are in an environment where, you know, there are a lot of moving parts. So, you know, there's nothing fundamental. There's no loss in clients. There's no loss in business. There's no loss in, you know, any of the customers. It's basically a bottoms up analysis of how we're looking and giving the best forecast as we can, you know, at this stage. Again, look, we'll see how the macro plays out and we'll come back in three months.

You're on mute, Meng.

Not letting me unmute. Can you guys hear me now? We can. Okay. A little lag there. Just a quick follow-up question on the supply side. Given all the cost issues that everyone in the industry is seeing, how are you able to offset that? Are your clients receptive to price increases, at least COLA provisions? Any commentary around that would be very helpful. Thank you.

Of course. I wanted to start saying what cost issues, right? So there are certainly pressures and there are variants, but, you know, there are cost issues on one side. There's actually a bit of a tailwind and a stronger dollar situation. We're talking fundamentals. The fundamentals, obviously, when you scale the teams and you're moving from one cost operating zone to another cost operating zone, the driver is how well you position with attracting the young talent, which becomes your tip of the spear. So we believe we prepared well. for um key countries which i described in a you know earlier remarks so we have the mitigation plans when we look at more senior talent there's obviously there is always more cost pressure We're growing. We're still a fairly young company. And I tell you, from the customer perspective, there is a fair level of understanding on the high quality and performance of the teams we offered on a strategic project. So we're not out of the woods from the world, but we certainly feel very comfortable on the balancing the regions, the talent, and client relationships.

Thank you. Appreciate it.

Thank you.

Thank you, Mayak. Thanks for your question. Next question comes from the line of Maggie Nolan from William Blair. Please go ahead.

Hi, guys. This is Jesse on for Maggie. Congrats on a nice quarter. We had a couple of questions for you guys on talent. So first, could you talk about how progress is going in India and Mexico? I know we've been talking about expansion plans in those two geographies recently.

Right. So thanks for the question. And obviously, they're relevant. I believe when we look at Mexico, it's steady. We're growing. I see more and more relation with university. I see more and more hiring. I see more and more contracts with the clients would include Mexico. But it's proportion. With India, I bet on disproportionate growth over time. And that's a very strategic number one location. Let's say today the growth is a little bit slower than I would like to see at the moment, not because it's an issue for us, but we had to go through incorporation. We have direct hiring now. We got through all these hoops with the formality, our partners helping us. So that's going well. The other factor which plays the role overall in the picture is that you may have noticed that we planned for some catastrophic, almost catastrophic event in one of the countries. So far, knock on wood, the resilience of our delivery and the quality of work and, you know, basically efficiency of the environment they are in holds strong. Most of the Russian engineers And the Ukrainian team performs well in other countries as well. So while we see India growing, this, you know, absolute urgent demand is in line with, I would say, more continuous growth. We will give you the updates as we grow. The good thing is we jumped all of the formality hurdles. And one thing is for sure, the Indian grid dynamics will be The same quality, the same performance, the same capability as any other locations. And that's what we're going to accomplish. And that's what I'm fully staying behind.

Okay, that's helpful color. And then for my follow up. I wanted to touch on attrition. So if you adjust out the exit from Russia. How did attrition trend in this quarter and what do you think, what do you think are the puts and takes there.

Well, I think Anil summarized in his part quite well. It's in line with the past. I mean, in some areas it's actually slowed because, you know, during the turbulent time, people try to hold to the mothership of the company. I think we respect a lot how we manage and operate. So I believe that volunteer attrition is one Pretty in line, I would say, if not decreasing to some extent. But involuntary for known reasons, which we mentioned, and you'll emphasize, increase obviously higher than other quarters. But I'm very comfortable with the direction of our retention of workforce.

Very good. Thanks for taking my questions.

Of course. Thanks, Jesse. The question comes from Brian Bergen from Cohen. Your line is open. Please go ahead.

Hi, good afternoon. It's good to see you all. I wanted just a follow-up on the operating footprint here first. Can you just give some color on how you see the global footprint mix evolving? I guess as you exit the year, can you give us any sense of a rough composition of just where your professionals are going to be?

Well, as you know, Brian, we guide quarter over quarter, right? So this is a little bit more philosophical question, the end of the year, boy. When is the end of the year? And what company are you going to work for? And there's a lot of changes in the world, right? Congrats on the acquisition. So the reality is we announced our generic footprint, right? So we emphasize that India, Mexico, and Poland are three strategic growth. From that, as you know as well, we are not nearly to call, excuse me, India and Mexico today as the largest locations. We have a very strong contingent in Ukraine. We, again, stay very strongly with Ukraine. Our engineering town in Ukraine, deserves the support as much as we can, but we grow elsewhere, right? So Serbia got a bump, as you can imagine, that, you know, quite a few Russian engineers moved there, so did Armenia. But where we are today and where we're going to be by the end of the year, we're going to be next year, it's actually a fundamental question. So I didn't want to say generically regions because regions are very brushstrokes. I wanted to be kind of narrowing down. India, Mexico, Poland, that's the growth. Ukraine, strongly behind. The rest, I'm going to form around it. And of course, from the priority of the business, which is very important. U.S. remains exceptionally strong priority for us. But as you can see, we're building a bit more focus on Europe. Again, we mentioned the headquarters in Switzerland. We emphasized that, you know, London and Amsterdam are playing a stronger role. We're adding more business resources in Europe. And that kind of will also tailor a little bit more to the global expansion strategy as we go.

Okay. Okay. Understood. On the margin front, so just trying to understand some of the partnerships that you've developed here and maybe the financial implications around those. So understanding, you know, you're using established partners to build talent in new locations, places like India. from a financial perspective, is there a significant cost that flows through the model here this year as a result of that? I'm just trying to think about as you go forward, the return to profitability of prior war levels like profitability or whether there's anything lasting we need to consider there in those relationships.

I thought you asked me a cool question about my partners in the business development side, which is super exciting. And you came down to this, you know, partners on the supply side. So It's okay. I'll take the third question from you. But on the partners on the supply side, it's specifically in India. And as I alluded before, we have established fully operational direct organization. So the priorities for the growth will be direct. Of course, for the immediate needs, I'm blessed to have reliable partners and they will be still contributing. But I believe from the financial overall perspective, it's not going to be a very significant impact. But again, Anil, do you want to chime in?

No, I think that's exactly right. So we always had a two-pronged strategy, as Leonard said, going directly and partnering with these guys. And as we scale up directly, you know, the reliance on partner diminishes. And also there's also transfer of those partner employees to our direct hiring tools. So whatever we were giving them goes back in our pockets.

Okay. That's fair. Leonard, since you opened it up, I'll ask about your corporate development partners. I know you got plenty to do organically here, but just how are you thinking about potential M&A in this environment?

All right. Well, it's not exactly about partners, but it's okay. So M&A strategy is very critical. And it's very critical because when I look at the broader world, we have very ambitious plans for expansion, you know, and investment primarily goes from the buy point of view and innovation, but innovations relate to the specific would say related fields and when we talk about fields it's a combination of technology knowledge and capabilities business acumen as well and we're focusing more and more on the core knowledge in the verticals we enhance and we're expanding and you know the cyber security supply chain you know life science we're going to areas where you don't build acumen overnight So when we look at that area, that's a kind of a primary focus in M&A. The other one is, again, part of the regional strategy. I mean, the chicken tongue question, where you want to be on the growth. And I think that message is very clear. We want to make sure it's also financially efficient and very responsible for the shareholders. But overall, it's one of the key priorities, and we will continue to grow, not from the operational health, but from the operational growth.

Okay. Appreciate the detail. Thanks. Of course. Thanks, Brian.

Thanks, Brian. Next question comes from Ryan Potter from Citibank. Please go ahead.

Hey, guys. Thanks for taking the question, and congrats on the big quarter. I want to start off on the delivery side. With your diversification across India and some of these new locations, are you seeing some kind of new skill sets that you guys didn't have as much exposure to come into the mix? And are you also seeing some clients increasingly come to you because you have more diversified delivery mix or also if they're interested in any specific delivery locations like India?

Let me repeat the question. There was a little bit of a variance of the voice. So you're talking about whether India brings the new capabilities.

New skill sets and also our new clients understood because we have this India presence.

Very good. The first one today is, I would say, less critical. I think what we do, we actually bring some contingent from Europe to India to make sure that we have a good blend. Obviously, we'll continue to see the new skill and talent, but we have some work to do before that. In terms of the client side, absolutely right. So there are certain segments. which are very strong and part of our expansion capabilities, and something we've been intending for a while, relates to where some of the clients, some notable US clients, they prefer India as the center of excellence. Not just India as the center of excellence, but our specific locations where we are. We're kind of in the cradle of the value-add innovation part in India, notably right now in Hyderabad, will be in somewhere else as well. And that kind of drives this almost like Indian business development relationship, which we're already building today. So the first answer, not much yet. The second one, very much so.

Got it. And then focusing specifically on the retail vertical, growth there has been pretty strong in the past few quarters. So I guess, first of all, how much of this is in organic growth? So what's the organic growth in retail? And then second, Kate, you have some color on what's driving the demand that you're seeing in retail. Is it still kind of a pandemic catch up or are you seeing some growth with existing clients and even some new love that's come in?

Okay, so the first part you're asking whether we have organic or non-organic growth. What is non-organic in that definition?

Yeah. So, right. As you know, what we have is one month of revenue, which was organic. So there was roughly call it, you know, four million because last year we acquired towards the end of May. So we had a month of June. So when you extract that out, we still grow north of 50 percent year over year. And it was, it was driven. So the both organic part was there. And of course we had a couple of months of tests.

So let me come back to the second, but the growth is so that I don't know what the catch up is the right word. I think green dynamics made such a incredible turnaround, the V shape returned in 2020 that we're just, going strongly after a very broad base of the clients. If you look at the end, from what Anil positioned on the statistics, we still hold very strong, I would say, good, healthy concentration on some of our clients in the very diverse verticals. Of course, the concentration on the specific clients is getting reduced as we grow more in a broader base of the clients, but most of them adding business because of their needs and because of their competitive environment on the business side, not because of the catch up on the defensive side. So I've seen some activities after COVID hit more on the defensive side now. With the economic turmoil, we may see the next subsequent quarters, a little bit of remedy of that too, which we have prepared. But right now, people continue to execute on their plans and, of course, take some cautionary story how much budgets to commit and for how long. I think that's the best to describe the environment of the growth.

Thanks, and congrats again.

Thank you.

Thank you, Ryan. Thanks, Ryan. Next question comes from Josh Sigler from Cantor Fitzgerald. Please go ahead, sir.

Hi, Leonard and Anil. Thanks for taking my question. Really nice to see such strong execution in this quarter. I'd like to start by diving a little deeper into the current wage environment. Specifically, are you finding the wage dynamics in recent geographies you've entered to be similar to your pre-existing geographies?

Well, I think we started with that question in the first part with Puneet. So the wage is, of course, it's geographically variant, right? But it's also tied to various currency, tied to various customary tax environment, you know, cost of living, et cetera. So from the locations we move on, it goes both ways. I think in an overall, everybody's talking about really cost pressure, waste pressure. I think for us, we still grow very much into the young innovative world. So some of the impact on a more senior wage pressure, we're adding more talent. And talent is not like we're taking advantage of the kids. It's just the younger, they're eager to learn. And we create the environment for them to become more, you know, contributing specialists. It's not one-to-one, the wage versus price increases. And it's not every territory. We watch very carefully. But there's one thing for sure. No matter where you go, once you scale, you're much more efficient. And that's why I'm actually careful with geographies. You've noticed, I'm not talking about doubling countries and just scattered all over. It happens naturally, there's more places we go. But the concentration of talent, the scalability, the relationship with universities and a hiring machine and a reputation with the brand, that's ultimately your wage control. And this is what we are poised to accomplish.

Great. Thank you for the color, Leonard. Last quarter, we talked about the ongoing investments you've been making in your technology organization and how that's helped drive new logo growth and faster client engagement. So I was wondering if you could give us an update on this initiative. Does it continue to act as a tailwind to the business? And do you believe there's additional room for reinvestment both in this and the Salesforce over the next couple of quarters?

Yeah, so technology for grid dynamics, actually, it really means technology. We have like three-prong technology investment. And I'll add the fourth one, which is more recent. So the number one, it's the... understanding the vertical in depth so we need to have the matter expertise in that where we are the second one is more horizontal what accelerates with modern technologies what uh the elements of integration part uh the third one which is quite important is where the um you know the open source implementation uh kind of blends with a software integration. This is something we've been going for a while, and that's now becoming more and more prudent. The partnership is not only with the hyperscalers. The partnership with the broader number of the software developers of the various relevant products especially with the cloudification, you know, automation, data analytics, you know, the scalability of the elements of machine learning, et cetera, bridges the gap between open sourcing and those technologies on the product side, which gives the customer much better value on the return. So that's the third one. So those kind of three areas where we continue to innovate. The first one started is, you probably noticed the tiny little script. We invested a little bit of money on one of the technology companies. We believe some of the notable small technology companies deserve a little bit more closer relationship because that gives us more access to the cradle. And we continue that path. Again, it's small now, but that's the fourth swing. But the first three is a continuous expansion of grid dynamics technology capability.

Great. Thank you very much. Of course.

Thank you, Josh. At this point, we have no further questions. Ladies and gentlemen, that will be all for the Q&A session today. I will now pass the call back to Leonard for the closing remark.

Thank you, everybody, for joining us on the call today. Our second quarter results and our third quarter guidance once again highlighted Green Dynamics' ability to deliver to the stated goals and our commitment to the business. GreenX employees have shown exceptional teamwork and have been working relentlessly in ensuring our business continues uninterrupted. And I, of course, would like to thank each and every one of them for their tremendous effort once again. I look forward to giving you a business update in three months. Thank you very much.

This concludes today's conference call. Thank you all for participating. You may now disconnect.