GDYN 2024Q4

Good afternoon everyone. Welcome to Grid Dynamics' Fourth Quarter and Full Year 2024 Earnings Conference Call. I’m Cary Savas, Director of Branding and Communications. At this time, our participants are in listen-only mode. Joining us on the call today are CEO, Leonard Livschitz; CFO, Anil Doradla; and COO, Yury Gryzlov; and SVP, Americas, Vasily Sizov. Following the prepared remarks, we will open up the call to your questions. Please note that today’s conference is being recorded. Before we begin, I would like to remind everyone that today’s discussion will contain forward-looking statements. This includes our business in a financial outlook and the answers to some of your questions. Such statements are subject to the risks and uncertainty as described in the company’s earnings release and other filings 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 8-K filed with the SEC. You can find all the information I just described in the Investor Relations' section of our website. I now turn the call over to Leonard, our CEO.

Thank you, Cary. Good afternoon everyone and thank you for joining us today. I'm delighted to share that Grid Dynamics delivered another strong quarter, exceeding our own outlook and Wall Street expectations on revenue and non-GAAP EBITDA. Grid Dynamics' revenue and profitability was the highest in the company's history. And in the fourth quarter, we achieved an important milestone of $100 million revenue. These record-breaking results were fueled by contributions from both new and existing clients. To put it in perspective, when we went public in early 2020, our annual revenue was in the $100 million range, and we achieved it now just in one quarter. I'm proud of this milestone and I thank our global team for their numerous efforts and unwavering dedication. Coming to the demand environment. We saw improvements across our customers and industry verticals in the fourth quarter. This has been a consistent pattern for our company over the past several quarters, and we anticipate it will carry forward in 2025. Furthermore, the foundation of our business model is well intact and our long-term targets for growth profitability and technical leadership remain unchanged. In Q4 and into Q1 2025, we're seeing a continuation of improving trends in booking and pipeline. In fact, we reached some of the highest levels of these metrics since post-COVID revenue acceleration in 2021, indicating robust demand for our services. In addition to growth at our new customers, we're witnessing new deal activity within existing customers across industry verticals. Partnerships are also playing a pivotal role in our growth strategy with a focus on hyperscalers. After setting record levels in the second and third quarters, the company once again attained its highest-ever billable engineering headcount by the end of Q4, a leading indicator of future growth, and we achieved that before factoring in contribution from recent acquisitions. Additionally, in the fourth quarter, we witnessed the highest levels of open engineering positions during the last three years. Customers, both existing and new, are contributing to our strong results. At our top customers, we provide a significant proportion of our revenues, which we continue to execute exceptionally well. Additionally, in the fourth quarter, we signed three notable enterprise clients. The first is related to the automotive industry; the second is one of the largest global auction companies; and the third is one of the world's largest grocery retail groups. Now, shifting our focus to AI initiatives. I'm pleased to share that our AI capabilities are gaining strong momentum across our customer base. We have significantly expanded our AI portfolio, offering tailored solutions and services designed specifically for Fortune 1000 companies across diverse industries. These solutions aim to drive both revenue growth and operational efficiency for our enterprise clients. On the revenue side, we're enhancing customer experiences and optimizing marketing, pricing, and product strategies. On the cost side, our focus remains on improving efficiency and advancing enterprise knowledge management. There are several reasons to be optimistic in 2025. Improving trends in demand, growth in our existing and new customers, growth in our hyperscale partnership business, and increasing demand for IT partners with a strong technology focus are just a few examples of why we believe 2025 will be a good year. Given our incremental confidence, we are providing a full-year outlook. For 2025, we expect our revenues to be in the range of $415 million to $435 million with a potential growth of 20% plus over 2024. To achieve our 2025 growth targets, we have identified five priorities to support our GigaCube strategy. First, leveraging our strengths in data and AI to enhance productivity across client business processes. Second, increasing the portfolio of accelerators and technological artifacts to address industry-specific business needs. Third, increasing industry diversification by an enhanced focus in verticals such as finance, manufacturing, pharma, and healthcare. Fourth, ensuring our Follow the Sun strategy provides global support to our clients. And finally, fifth, leveraging our strong relationships with our partners at new and existing customers. To talk more about these five priorities of 2025, let me hand it over to our COO, Yury Gryzlov.

Thank you, Leonard. Let's review our priorities in more detail. First, I'm pleased to share that our AI capabilities are gaining strong momentum across our customer base. We have significantly expanded our AI portfolio, offering tailored solutions and services designed specifically for Fortune 1000 companies across diverse industries. In Q4, we identified 130 AI opportunities, a 30% increase over the third quarter. This growing demand reflects the changing expectations of customers with AI-based systems becoming increasingly prevalent in both consumer and enterprise environments. Our top AI initiatives include search, Agentic systems, and supply chain optimization. As 2025 unfolds, we expect the pipeline we've developed over the past couple of quarters to convert into meaningful projects. Second, expanding our technology offerings. Our portfolio continues to diversify, driven by our deep understanding of customer needs and aspirations. Our core strengths in data and AI, digital engagement platforms, and modern application development remain highly valued by our customers and align closely with their strategic priorities. Our CTO organization continues to develop innovative accelerators that shorten sales cycles and improve customer speed to value. This investment in our technology portfolio positions us well as enterprises increase their digital transformation investments. Third, industry diversification. Our capabilities are in high demand across verticals. This, in turn, gives us the opportunity to expand beyond our established industries such as TMT, retail, and CPG. We achieved this organically or through acquisitions. In the fourth quarter of 2024, we acquired U.K.-based JUXT, elevating our industry expertise in banking and financial services. Their focus on risk platforms, structured products, equity derivatives, and financial reporting is highly complementary to our current offerings. Since acquiring JUXT, several global banks based in the U.S. have expressed interest in working with us, and we expect those opportunities to convert in 2025. Fourth, our Follow the Sun strategy. This continues to be our guiding principle, enabling uninterrupted around-the-clock client service. In just three years, we have expanded our geographic footprint substantially, and I'm proud of our ability to serve our customers across 19 countries, spanning North America, Europe, and India. We are committed to investing in our engineer skills and knowledge globally. We have launched a comprehensive AI training program that includes both introductory and advanced tracks along with partnership-centric training. Thousands of our engineers are currently participating in this program, and we're excited to see the innovative solutions they will develop as they apply their AI skills in billable roles. Since launching operations in India three years ago, the country has become a top three delivery location for the company. Most of our efforts in India are centered on supporting U.S. businesses, and we continue to work closely with many global captive centers across industry domains. In the fourth quarter, we set up an AI innovation team to support a global financial client and expanded the team to support a global credit agency client. Argentina-based mobile computing, acquired in October of last year, also enhanced our Follow the Sun capabilities. Several U.S.-based customers have already engaged us to provide engineering skills from Argentina, and we expect to significantly scale operations in 2025. By adding this talented team in Argentina, our clients now have expanded options in the Americas, complementing our established presence in the United States, Mexico, and Jamaica. Fifth, our partnerships. In 2024, 18% of our total revenue was driven by partnerships with hyperscalers playing a significant role. In 2025, we expect our hyperscale partnerships to continue growing significantly. Our confidence in 2025 is driven by three noteworthy trends. First, our commitment to technology innovation and engineering excellence has resulted in greater appreciation by global enterprise customers. This has resulted in Grid Dynamics being chosen by many of our partners' Tier 1 customers. Second, our partner relationships are evolving. We are now more engaged in strategic discussions with senior management at our key partners. And third, at an operational level, we have enhanced collaboration between the sales and marketing teams at Grid Dynamics and our partners. All of this has translated into more opportunities for our entry into new global projects and programs across industry verticals. During the fourth quarter, there were several notable client achievements and updates. Let me now hand it over to our SVP Americas, Vasily Sizov.

Thank you, Yury. During the quarter, Grid Dynamics delivered some notable projects. First, let me share a few examples of our AI programs at large enterprises. These implementations showcase how we are helping enterprises move beyond basic AI applications to create sophisticated solutions that deliver measurable business results. At one of the largest food distributors, our team is implementing comprehensive AI-driven catalog enrichment. Using generative AI, we are creating detailed product descriptions and high-quality product images to enhance product discoverability and appeal. This initiative has already demonstrated meaningful business impact with expected revenue uplift of over 5%. At one of the largest beverage companies, we are expanding our knowledge AI system into a comprehensive Agentic AI platform. This platform is designed to automate various aspects of enterprise operations, significantly enhancing efficiency across the organization. At a leading payment company, we are developing an innovative Agentic AI platform that creates a multi-agent marketplace. This solution intelligently connects consumers with optimal deal offerings from card issuers, brands, and retailers, creating a more personalized and efficient shopping experience. In addition to our AI projects, I also would like to highlight some notable projects around our other capabilities. We partnered with a leading multinational technology company to optimize their open-source machine learning compiler to implement their CPU strategy, address performance limitations, and integration challenges. The results of our work allowed it to achieve consistently high performance across various workloads. This collaboration has notably accelerated the client's product roadmap, reducing time to market from two years to one and enabling end users to benefit from this advanced implementation much sooner. With another client, one of the top 10 global largest banks, we are working to create a cutting-edge technology platform for structured products, starting with structured nodes. Instead of focusing on specific products, the platform is designed around key product features, giving the bank flexibility to create appealing offerings and quickly adapt to market changes. This approach speeds up the process of building, pricing, and launching structured products, driving business growth. Another example, a multi-chain restaurant and hospitality client with over 33,000 locations engaged Grid Dynamics to scale their data pipeline management solution. The scope involved scaling from dozens to thousands of concurrent pipelines with modern data transformation flows. We delivered a system enabling data flows to operate at a truly massive scale with virtually unlimited growth potential due to its containerized architecture and load balancing capabilities. Additionally, the framework we designed significantly reduced the development life cycle for new pipelines or migrations, cutting it from days to hours. The solution is already being actively used by client data engineering teams for the development of hundreds of new pipelines to enhance their analytics platform. Now, shifting our focus to Europe, there were some noteworthy projects. A global medical device manufacturer selected Grid Dynamics to be a strategic partner on their data and AI platforms. This multi-year engagement is expected to bring efficiencies to their business processes. Additionally, at a leading meal preparation company, we are working on modernizing their customer service platform in partnership with one of the hyperscalers. With that, let me turn the call over to Anil, who will discuss the results of the fourth quarter in more detail. Anil?

Thanks, Vasily. Good afternoon everyone. Our fourth quarter 2024 results were solid as we exceeded our expectations, both on revenue and non-GAAP EBITDA. We achieved record revenues of $100.3 million, surpassing our guidance range of $95 million to $97 million. On a year-over-year basis, our fourth quarter revenues grew at 28.5%. Excluding our recent acquisitions, our organic revenues grew by 12.8% on a year-over-year basis. The impact of FX on our fourth quarter revenues was minimal, both on a sequential and year-over-year basis. Our non-GAAP EBITDA of $15.6 million exceeded our guidance range of $13.5 million to $15.5 million. The stronger-than-expected performance, both in revenue and profitability was driven by strength from both our organic business and recent acquisitions. The retail vertical remained the largest, accounting for 32.6% of our fourth quarter revenues. It showed sequential and year-over-year growth of 9.7% and 33.1% respectively. During the quarter, we witnessed growth across a wide range of retail customers that included specialty retail, home improvement space, and department store customers. Our TMT and financial verticals contributed 23.5% and 23.1% of our fourth quarter revenues respectively. In the fourth quarter, our TMT vertical remained relatively flat on a dollar basis compared to the third quarter as we were impacted by the typical year-end slowdown at some of our large customers. The finance vertical showed the strongest performance with sequential and year-over-year growth of 63.8% and 180.1% respectively. Strength in the financial vertical was driven by a combination of increased demand from fintech and insurance customers as well as our recent acquisitions. Here are the details of the revenue mix of other verticals. Our CPG and manufacturing, representing 11.2% of our quarter revenues grew sequentially by 14.8% and 16.4% on a year-over-year basis. Strength in this vertical was driven by both our organic business and recent acquisitions. Our other vertical, which represented 7.2% of our fourth quarter revenues, grew slightly on a sequential basis, but declined by 11.3% year-over-year. And finally, healthcare and pharma vertical represented 2.4% of our revenues. We ended the fourth quarter with a total headcount of 4,730, up from 4,298 employees in the third quarter of 2024 and up from 3,920 in the fourth quarter of 2023. The sequential growth in headcount was driven by both our organic business and recent acquisitions. At the end of the fourth quarter of 2024, our total U.S. headcount was 351 or 7.4% of the company's total headcount versus 345 or 8% in the third quarter and 331 or 8.4% in the year-ago quarter. Our non-U.S. headcount located in Europe, Americas, and India was 4,379 or 92.6%, up from 3,953 or 92% in the third quarter and 3,589 or 91.6% in the year-ago quarter. In the fourth quarter, revenues from our top five and top 10 customers were 35.6% and 55.8% respectively versus 39.8% and 59.2% in the third quarter and 39.7% and 55.3% in the same period a year ago respectively. During the fourth quarter, we had a total of 211 customers, up from 201 in the third quarter of 2024 and down from 218 in the year-ago quarter. The increase during the quarter was mainly due to customers coming from the acquisitions. The year-over-year decline in the number of customers was primarily driven by our continued efforts to rationalize our portfolio of non-strategic customers. Moving to the income statement. Our GAAP gross profit during the quarter was $37 million or 36.9% compared to $32.7 million or 37.4% in the third quarter of 2024 and $28.1 million or 36% in the year-ago quarter. On a non-GAAP basis, our gross profit was $37.6 million or 37.5%, up from $33.3 million or 38% in the third quarter of 2024 and up from $28.6 million or 36.6% in the year-ago quarter. Our non-GAAP EBITDA during the fourth quarter, which excluded interest income, expense, provision for income taxes, and depreciation and amortization and was further adjusted for the impact of stock-based compensation, restructuring expenses related to geographic reorganization and transaction, and other related costs was $15.6 million or 15.6% of revenues, up from $14.8 million or a 16.9% of revenues in the third quarter of 2024 and $10.7 million or 13.7% in the year-ago quarter. The dollar increase on a sequential basis was largely due to higher revenues, partially offset by an increase in operating expenses. As a percentage of revenues, the decline in non-GAAP EBITDA margin was primarily driven by a combination of lower gross margin as a percentage and higher levels of OpEx, both from organic business and our recent acquisitions. Our GAAP net income in the fourth quarter was $4.5 million or $0.05 per share based on a diluted share count of 83.8 million shares compared to the third quarter income of $4.3 million or $0.05 per share, based on a diluted share count of 78.8 million and an income of $2.9 million or $0.04 per share based on 78 million diluted shares in the year-ago quarter. On a non-GAAP basis, in the fourth quarter 2024, our non-GAAP net income was $10.3 million or $0.12 per share based on 83.8 million diluted shares compared to the third quarter non-GAAP net income of $10.8 million or $0.14 per share based on 78.8 million diluted shares and $7.5 million or $0.10 per share, based on 78 million diluted shares in the year-ago quarter. On December 31st, 2024, our cash and cash equivalents totaled $334.7 million, up from $231.3 million in the third quarter of 2024. The increase in cash was largely driven by our follow-on offering in November of 2024. Coming to the guidance. For the first quarter of 2025, we expect revenues to be in the range of $98 million to $100 million or growth of roughly 23% to 25% on a year-over-year basis. At the midpoint of $99 million, we expect our first quarter revenue to grow by 24% on a year-over-year basis. We expect our non-GAAP EBITDA in the first quarter to be in the range of $12.9 million to $13.9 million. For Q1 2025, we expect our basic share count to be in the range of 84 million to 85 million and our diluted share count to be in the range of 89 million to 90 million. For the full year 2025 we expect revenues to be in the range of $415 million to $435 million, representing a growth of 18.4% to 24.1% on a year-over-year basis. At the midpoint of $425 million, we expect our 2025 revenues to grow by 21.2% on a year-over-year basis. That concludes my prepared remarks. We are now ready to take questions.

Thank you, Anil. The first question is from Puneet Jain from JPMorgan.

Hey. Very good quarter guys. So, today, it's kind of unique, so all of your peers, yourself reported results on the same day. And among the four companies, your result, particularly for 2025 guidance, definitely is well above your peers, right? So, what's driving that strength that your peers are not seeing? What's driving this outperformance in Grid Dynamics versus peers for this year?

Well, thank you, Puneet. Well, I can't comment for my colleagues, let's focus on Grid Dynamics. I believe what we've been consistent in the story in 2024, we're just continuing to pick up our business relationships with a number of clients, the top clients, as well as the new clients we acquired. And the introduction of technology, introduction of AI and scaling the solution offerings and hyperscaler relationships just gave us a confidence, which we decided it's time for us to revert back and issue the annual guidance. So, we feel comfortable about where we are. We feel comfortable about the appreciation by the customer for our capabilities. And more important, we feel really good about our returning back to the scale of the GigaCube strategy with our follow-the-sun employment and servicing. So, all the indicators look good.

And is the growth for 2025, will it be broad-based, which vertical? And perhaps which client will drive the outperformance, 20% growth?

Yes, of course. So, I would not name a specific client because it may give them some kind of leverage. So, basically, we're strong in our CPG. We're strong in our technology TMT. I think we see a really good ramp-up in our fintech business that kind of helps us. We also see a pickup from our relationships with the, I would say, the GCC clients and particularly in India. So, we're adding more people, both U.S. and India. Europe is picking up too. But fundamentally, the appreciation of our technology, which comes from the actual implementations gives a very broad-based positioning. Now, you fully understand, we've been around for a long time that you must have growth from the top 10 clients. We see that happening. We also see a pickup of the newer clients. Now, how much of new business is going to come up? That's something we will talk about in the next couple of quarters. But overall, we do see a broad-based TMT, CPGs, fintech.

And AI, like you talked about Agentic AI and helping your clients embrace generative AI solutions. How should we think about the revenue contribution that AI generates for you? Whether it's Agentic AI or implementation of Gen AI solutions for your clients, whether it's for code efficiency or whatnot?

So, I will let Vasily Sizov to have his first answer for the questions. We have the privilege of having him on the call. So Vasily?

Sure. Thank you for the question, Puneet. So, AI becomes a component for almost every engagement right now. So, if we were talking about POCs like last year, right now, it's a component of every big program. So, it's very difficult to discern like which particular piece belongs to AI. Actually, I would say it can be attributed to most of the bigger engagements. But I can tell for sure that there are two general trends. First of all, our biggest customers are changing the balance from looking into optimizing the cost to more revenue generation initiatives. And that historically has been a very strong area for Grid Dynamics that actually represents our positioning. And secondly, AI becomes a big interest, and that's where Grid Dynamics historically has been very, very strong. If you recall, we wrote the first book about AI in 2017. And right now, everyone is talking about that as a new thing. So, having both components, actually, we see a lot of opportunity for us to grow and fulfill that demand, which exists in the market.

Thank you.

Thank you, Puneet.

Thank you, Puneet.

Thank you, Puneet. The next question comes from Mayank Tandon from Needham. Go ahead, Mayank.

Hey, thank you. Congrats, Anil and Leonard and the team. Great quarter. And as Puneet said, you guys are the outlier today. All your peers are stumbling and you guys have put up another really strong quarter and guide for 2025. So, I'll ask you sort of more on the drivers of revenue growth. As we think about that 21.2% midpoint growth for 2025, how do you think about that in terms of recruiting, impact of pricing? And then is there any utilization improvement built in as well? How would that underlying growth come from these three key drivers of growth?

Okay, great. Let me hand it over to Yury. He holds two roles as the Head of Europe and COO, which are important responsibilities he manages. So, Yury?

Thank you, Leonard, and Mayank for the question. As Leonard highlighted, from an operational standpoint, our main focus is on recruiting, which is crucial as we implement our GigaCube strategy and the follow-the-sun delivery model. It's essential for us to attract top talent, train them effectively, and ensure a steady influx of skilled individuals both from the market and universities. While this presents some challenges, expanding from a handful of countries to 19 in recent years has been relatively manageable thanks to our established system. Even when reviewing our location composition, we still have many smaller countries contributing, so our approach feels natural. We are currently staying within our capabilities regarding talent acquisition and training, ensuring that our teams are prepared for billable projects. Additionally, a significant part of our operations is linked to our R&D efforts and the activities of our CTO. It’s vital that each location has personnel dedicated to these R&D projects. Overall, I believe what we are doing is typical growth based on our progress in recent years.

Okay, terrific. For my follow-up, I'll ask Anil to repeat what you mentioned about the M&A impact in the fourth quarter and what is included in your guidance for the first quarter and fiscal 2025.

For the fourth quarter, we reported a 12.8% year-over-year growth in organic revenue, which translates to about a 1% sequential growth rate. Looking ahead to the first quarter, we anticipate that, at the upper end of our guidance, the organic business will remain relatively flat compared to Q4, indicating a potential $2 million variance. This suggests that organic revenue will likely fall between $86 million and $88 million. For the entire year, we expect organic growth to be in the teens, starting off in the low teens, and we hope to continue discussing positive trends.

Perfect. I'll get back in queue. Thank you so much. Congrats again.

Thank you, Mayank.

Thank you. The next question comes from Jared Levine of TD Cowen.

Thank you. Jared Levine on for Bryan Bergin today. In terms of your top customer did show outperformance in 2024. Is higher growth relative to the company average expected to continue here in 2025? And if so, can you share more color on what gives you the confidence there?

The revenue growth comes from our top five and top ten clients, as well as from a broader base. We have confidence in the growth of our top five clients, which span three main categories: technology, CPGs, and fintech. Our strong relationships with hyperscalers and their AI platforms facilitate engagement with new clients, showcasing our ability to enhance their value and capture market share. We've seen impressive results from our initial production implementations, leading to increased revenue not only from existing clients who already trust us but also from a new wider base of clients we partner with, either through hyperscalers or independently. This situation is reminiscent of the early days of cloud migration, where the first adopters achieved the best results. We are currently in the early stages of implementing various products, which sets a solid foundation for broader growth.

Got it. And then I wanted to touch on margins for FY 2025 here. Can you discuss what are the key puts and takes here as 2025 progresses? And anything regarding cadence here would be helpful?

Anil?

So, look, for 2025, we've given you full year revenue guidance. Over time, we'll give you a little bit more color on the margins. What I've told over the last couple of months, talk to investors, don't model any margin compression of 2025 over 2024. So, the slope of the curve will come back. We'll give you a little bit more color, but that's how we would set up the margin profile for 2025.

All right. Thank you.

Thank you, Jared.

The next question comes from Jesse Wilson from William Blair.

Hi guys. It's Jesse Wilson on for Maggie Nolan. Thanks for taking our questions and congrats on the results this evening. I wanted to start by asking, of the five initiatives you laid out to achieve 2025 guidance, which do you think you've gotten a head start on? And which do you think require a bit more focus or muscle this year?

Yes. So, definitely, further investment in AI and technology is probably one of the very top priorities because we definitely see a big pick-up on the market or the adoption of AI technology. As I mentioned, if we were talking about POC, now we are talking about massive implementations and finally, about implementation of platforms, Gen AI platforms. And we started seeing particular business impact from implementation of those things. So, just to give you an example, things that would generate revenue when we're talking about a typical B2C business like browsability of products, discoverability of products. We implement things like catalog enrichment, let's say you have a catalog with subpar quality meta-information. And we use Gen AI to generate proper descriptions, images, etc., which allows the customers to better pick the product. And it directly impacts the revenues of our customers because more products in the carts are getting converted and generating additional revenue. So, I would say that would be the number one priority. Our CTO office invests in the development of artifacts and accelerators to help with that. So, I would say that's kind of the number one.

I want to add that our next priority, which is relatively new over the past couple of years, is our strong relationship with hyperscalers. This focus emerged last year, and we have moved quickly to engage with them. I believe further investment in this area will be necessary globally. Currently, 18% of our revenue comes from these partnerships, with hyperscalers playing a significant role. This is an incremental change, yet strategically, it's crucial for us to keep investing in this sector.

Just to summarize, if you look at the technology offering and follow-the-sun strategy, those have been happening for a while. So, we are pretty strong on that. And technology becomes always a pivotal part of our new engagements. Now, as guys mentioned, basically, AI is very critical, hyperscale, which is kind of warming up, but there are some very strategic partnerships and you will see this year we are part of these very strong initiatives and participate with very core relationships with the key players. And when it comes to diversification in the industry, frankly, to be a serious player in some new industries, that's where acquisitions come into play. So, the recent acquisition really puts us more on the map with various large financial institutions. So, it's outside of fintech. So, diversification is really the fifth and most kind of up and coming.

Got it. And then just to involve everyone, I had a follow-up for Anil. So, you've previously talked about your efforts to rationalize your portfolio of accounts so that you can focus on those accounts with the most potential over time. And now you're talking about enhanced collaboration between Grid Dynamics salesforce and your hyperscalers salesforces. So, do you expect to get any benefit on the SG&A line from those two developments?

Good question. The answer is yes, but there are always some investments involved. It's never a straightforward process. So, if your question, Jesse, is about the efforts required to secure some of these prestigious global customers, yes, we are gaining significant value. However, as you mentioned, we are also co-investing with our partners, which adds a bit of complexity. If the question is whether our operating expenses will grow faster than revenue growth over the next couple of years, the answer is no. Our revenue will outpace the trends in operating expenses. But I don't know, Vasily, do you want to add?

He's smiling.

No, I concur with what you've just said. I mean, our partnerships will definitely give us boost on the introduction of new relationships. Talking specifically about the salesforce, I would say we, of course, do some reshufflings internally from the perspective of a little bit more focus on developing those relationships with partners and supporting them with their pursuits and also bringing them leads. I would say it's more of a qualitative change, which should result in better future outcomes overall. But it's a little difficult to say quantitatively the impact for 2025.

So, I'm going to use the earnings call as a little bit of marketing for Grid Dynamics. For salespeople with a good technical background and understanding of the core hyperscale capabilities, please apply. So, that actually works very well with your question, Jesse, because we actually would need to increase the positioning with the salesforce and technology supported program management and implementation team, not just high-quality engineers, and that pace needs to accelerate. So, I would say that Anil answered the question the most pragmatically. The rate of gross revenue will surpass, but you will see quite a rate of growth of the front-facing organization, both on the sales account management and delivery management side. Thank you for a good question.

Thanks everyone. Nice job.

Thank you, Jesse. Ladies and gentlemen, this concludes the Q&A part of our call. Now, I'm going to turn it over to Leonard.

Hold on, Cary. Mayank might have had a follow-up. Mayank, do you have a follow-up question?

Yes, please. Thank you for squeezing me in here at the end. Great. Two quick ones. Just wanted to clarify one thing. I think Vasily gave me very detailed response on the recruiting efforts. But I didn't quite catch any comments around utilization if there's still some room to expand it? And also, any commentary around pricing because we've been hearing sort of mixed reviews from some of your peers around pricing. That would be one question. And I have another one after that.

Sure. Since you arrived late, I won't take up more time with my team. Yury actually discussed recruiting, but you'll get familiar with the names soon enough. First and foremost, as we discuss recruiting, scaling staff, and pricing, it’s important to recognize that as we grow with clients, the value positioning becomes increasingly crucial due to our mutual dependence. We are continuing to implement our fixed bid offering and partial solutions, with Vasily leading that effort. This approach has positioned us well regarding pricing. In terms of manual negotiation and pricing strategy, we're under pressure from vendor management on how we present ourselves. If we were to commoditize our services, it would create significant issues. During negotiations and positioning, we adhere strictly to a follow-the-sun strategy, ensuring value from wherever our team members originate, including traditional European organizations, India, and now the Americas. Overall, we see a positive trend. There’s also inflation impacting engineers’ costs, but we mitigate that with a robust internship program and retraining initiatives. Our strategy focuses on optimizing pricing while also maximizing utilization through extensive retraining. We’re not cautious about having bench time but believe that the turnover on the bench should increase, as experienced personnel with our clients’ backgrounds are easier to retrain. A lot of our training now emphasizes advanced technology and tools. While there’s always potential for enhancing utilization, we maintain a diligent approach. Regarding pricing, it’s not as simple as just asking clients for increases; the environment is competitive. However, a logical discussion among Grid Dynamics, technical leaders, and client business leaders offers a solid approach. I wouldn't describe the situation as mixed; I believe we are reasonably confident in our pricing position at Grid Dynamics.

Got it. Thank you for that information; it’s very helpful. My final question is regarding your full-year guidance, which indicates strong growth expected for 2025. Does this suggest that you have a clear outlook? Is it largely due to the larger size and scope of deals? Or is there more involved based on your interactions with clients?

Sure. Since you're the one who drives a lot of those numbers.

Absolutely. Yes. Actually, both components were just mentioned. So, from one perspective, we definitely have, I would say, historically better position with many of our customers, where we were recognized as a preferred vendor. So, we have high confidence not only on continuation of the work but also on the gradual growth of this amount of the work we do together. The second thing, which you already also mentioned is the size of the opportunities. I would say, historically, we have probably the biggest number of opportunities of what we consider to be big deals, which means like not like small teams here and there, but actually programs which require coordination, implementation and which have longer tenures by their nature.

So, basically, Mayank, to summarize it, there's one more important factor. We win many more large RFPs. So, that kind of opens up for us the success.

Excellent. Again, thank you so much. Congrats.

Thank you.

Thank you. Ladies and gentlemen, this concludes the Q&A part of our call. I'm now going to turn it back to Leonard for closing statements.

2025 is off to a great start. The demand environment is improving and these results highlight our strengths and unique position in the AI-driven digital transformation industry. With our GigaCube framework in mind, we have identified our key priorities. We're implementing numerous technology enhancements around AI and other advanced computing technologies. We continue to expand our follow-the-sun strategy, adding more capabilities worldwide. We're deepening our vertical expertise and significantly enhancing our partnership capabilities. In summary, Grid Dynamics has a strong foundation and is well-positioned for continued growth in 2025 and I'm confident in our ability to execute. I look forward to updating all of you on our next earnings call.