Grid Dynamics Holdings Inc (GDYN) 2021 Q1 法說會逐字稿

Greetings, and welcome to the Grid Dynamics Holdings, Inc. First Quarter 2021 Earnings Call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Liliia Chernova, Head of Investor Relations. Thank you. You may begin.

Good afternoon. Welcome to Grid Dynamics' First 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 second quarter 2021 financial guidance, the growth of Grid Dynamics' business, our objectives and business strategies as well as other forward-looking statements. You can refer to the disclosure at the end of company's earnings press release and Form 8-K filed with the Securities and Exchange Commission today for information about forward-looking statements that will be made on this call.

All statements made today reflect our current expectations only, and we undertake no obligation to update any of them to reflect the events that will occur after this call. You can learn more about the specific risk factors that could cause our results to differ materially from today's discussion in the Risk Factors section of the company's Form 10-K filed on March 5, 2021, and in the subsequent periodic reports that the company filed with the SEC.

During this call, we will discuss certain non-GAAP measures of our performance. GAAP to non-GAAP financial reconciliations and supplemental information are provided in the earnings press release and the 8-K 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 Grid Dynamics' website.

Joining us on the call today are to CEO, Leonard Livschitz; and CFO, Anil Doradla. Following their prepared remarks, we will open the call to your questions.

With that, let me turn the call over to Leonard.

Thank you, Lilia. Good afternoon, everyone, and thank you for joining us today. I'm excited to share my thoughts on how Grid Dynamics is making strides across its business and highlight the progress we have made since we spoke with you a few months ago.

On the call today, I will provide highlights of our first quarter results, share with you what we are witnessing across our business on the demand front and talk about the trends that are shaping our second quarter in 2021.

When we spoke with you all in March, we provided commentary around the demand environment, both for the first quarter and the full year 2021 as well as highlighted reasons for our upbeat outlook. Today, on the call, I'm happy to reiterate the positive catalysts we shared then. And furthermore, our strong first quarter results and guidance for the second quarter clearly indicates a robust demand environment where customers are actively seeking our services for strategic digital transformation projects across different industry verticals.

Now coming to the first quarter. I'm very pleased to report the highest revenue quarter in the history of Grid Dynamics. Even after factoring out our recent acquisition of Daxx, this was an all-time high quarter. In the first quarter, our revenue of $39.1 million included $6.5 million of revenues from Daxx, and it was higher than our guidance range of $35 million to $36.6 million. Both Daxx and non-Daxx revenues exceeded our expectations as demand picked up across all our vertical industries.

As I indicated last year, Q1 '21 is an important milestone achieved. And this quarter, our revenue exceeded pre-COVID level of Q1 2020. There are many positive trends in this quarter, and I wanted to share with you some of the notable ones. In each of 3 months of the first quarter, our revenue were higher than our expectations.

Towards the end of January, we witnessed a significant pick up in customer activities as digital transformation initiative took center stage. While there are several reasons for this, we believe a positive economic outlook, improving customer sentiment and catch-up and spending at some customers, who held back in 2020 have been some reasons.

Additionally, for many customers digital transformation initiatives have elevated to become mandatory. Based on our customer engagement and interactions, we believe these positive trends will persist, leading us to be incrementally positive for the remainder of 2021. There have been an uptick in demand for talent across multiple skill sets. While there is something we've weakness last quarter with a greater demand for data science specialists and big data engineers, this quarter, the demand spread across a wide spectrum of engineering skill sets. Example of these include front-end and back-end engineers, DevOps and quality engineers as well.

We will increase our focus on hiring, expanding our internship offerings and training Grid Dynamics engineers. During the first quarter we added a total of 162 people over the first quarter of 2020, and our headcount reached 2,056 employees. Our workforce continues to expand offshore as we built dedicated offshore centers at some of our customer locations. We exited the first quarter with 88% of our workforce in offshore locations, up from 86% in the last quarter and 81% in the quarter a year ago.

As we highlighted last quarter, a combination of continued focus on cost efficiencies, greater acceptance of remote work and ability to step and scale delivery teams quickly have been key factors. We expect that trend to reverse as we slowly return to normalcy in the United States and customers see greater collaboration with onshore presence.

During the quarter, we added 6 new logos in our core organic business, where all of them contributing to revenue in this quarter. Two are in TMT space, one in healthcare, one in services, one in the specialty retail and one on CPG.

As you all know, in December 2020, we acquired Daxx, and as we highlighted, Daxx customers tend towards the startups and mid-market customer base. During the quarter, we had a total of 184 customers, out of which, 48 customers were part of organic Grid Dynamics.

Revenues from our top 5 customers in the quarter was 50%. This was down from 64% of our revenues in the same quarter a year ago. The diversification of our customer revenues was largely driven by a combination of our continued success in renting new logos, going deeper with existing customers and our recent acquisition of Daxx. Within our top 5 clients, 2 are in the TMT space, one is in banking, one in CPG and one is retail.

During the quarter, we launched an accelerator in partnership with AWS. This partnership enables our customers to launch modern data platform based on Amazon's Cloud and roll out advanced data analytics capability in short timeframes. Customers deploying our accelerator can reduce implementation times from months to days. During the quarter, we had 3 customer wins across CPG and manufacturing markets.

Now we're coming to some segment commentary. At 37% of our first quarter revenues, TMT continues to be our largest vertical. Similar to last quarter, our largest TMT customers continue to focus on expanding offshore delivery offices with Grid Dynamics. That said, we see at those customers a return to revenue growth over the first quarter. Going forward, we continue to believe TMT will continue to be our largest vertical, and the focus will be complemented by acquisition of Daxx, where roughly 2/3 of this revenue derived from the TMT industry vertical.

At 22% of our first quarter revenue, CPG and manufacturing continued to show robust growth, both on a sequential and year-over-year basis. Underpinning the strong growth was our success at one of the largest global CPG brand, which became one of the largest customers of Grid Dynamics in the first quarter.

As we highlighted in our call in March, we entered 2021 with key design wins at this customer and expect to maintain strong momentum in 2021. At 23% of the first quarter revenue, retail business continued to witness growth over last quarter. Within the segment, we witnessed e-commerce-friendly brands to continue driving the growth in the quarter, while the brick-and-mortar department store continued to be a mix balance.

During this quarter, we delivered on some of the notable projects. For California-based enterprise search company, offering artificial intelligence power search engine solutions to many of the world's largest brands, we assisted the company in improving its search products. Our solutions were in the area of OPEC search, and we use semantic query parsing to improve the overall performance. We also expect the customer to deploy this offering across various industries.

For a technology company in the field of computer accessibility, we helped to create a product that detects accessibility issues in mobile applications. It extends the product offering of the client, which was until recently covering web only. The main and valuable product was delivered in the record time of 2 months, allowing our customer to announce its release before a round of funding. In the burner context, the product will help bring the attention of companies to accessibility limitation in the application and make digital technology available to everyone.

For an EMA-based online marketplace, we implemented a modern search engine based on open source technology to help overcoming the challenge of returning products of interest during the browsing experience. The platform has been developed to and make ready for go live in a SaaS based schedule of only 9 weeks. Discovering the right product is the most critical part of channeling users' buying behavior. With Grid Dynamics search technology, the company will be able to effectively attract, absorb and retain more and more business to come.

For one of the largest U.S.-based manufacturing company, Grid Dynamics' architecture and engineering teams developed a groundbreaking new concept of new lifestyle platform that were released to the public in Q1 2021. Grid Dynamics assessed the market needs and brought to the client a versatile knowledge of the best practices in CPMG. It's a very successful start to the recent partnership.

With that, let me turn the call over to Anil, who will discuss Q1 results in more details. Anil?

Thanks, Leonard. Good afternoon, everyone. Our first quarter revenue of $39.1 million exceeded our guidance range of $35 million to $36.5 million and was up 30% on a sequential basis and 21% on a year-over-year basis.

Excluding revenues from Daxx, which contributed $6.5 million, revenues in the first quarter of $32.6 million increased by 12% on a sequential basis and slightly up on a year-over-year basis. The better than expected revenue in the quarter was driven by a pick up in demand across industry verticals.

Similar to the last couple of quarters, our technology vertical was the largest vertical in the quarter. As Leonard pointed out, this was not only the highest quarterly revenue, but also the quarter that marked the company returning back to pre-COVID revenue levels.

In the first quarter, our non-retail business, now representing 77% of revenues, was up 36% on a sequential basis and 85% on a year-over-year basis. During the quarter, our retail segment, representing 23% of our revenues, grew 14% on a sequential basis. The growth in the quarter was largely driven by our top e-commerce-friendly retail clients and to a lesser extent by others. In spite of a 14% sequential growth, retail was down 45% on a year-over-year basis.

Our technology vertical represented 37% of our first quarter revenues, and grew 28% on a sequential basis and 43% on a year-over-year basis. Within this segment, some of our largest technology customers reverted to sequential growth over the fourth quarter as they ramped their offshore operations with us.

Here are the details of the revenue mix of other segments. Our CPG and manufacturing represented 22% of our revenue in the first quarter and grew 41% on a sequential basis and 300% on a year-over-year basis. As Leonard pointed out in his opening comments, the strength came from our engagements with a global CPG brand that is in the midst of ramping key digital transformation programs. Going forward, incremental program wins combined with ramping of existing programs and these clients make us bullish in this segment in 2021.

Financial represented 9% of revenue and grew 14% on a sequential basis and declined 15% on a year-over-year basis. The sequential growth in the financial segment was driven by ramping programs at a key financial customer that had witnessed declines in the last couple of quarters.

And finally, the other segment represented 10% of our first quarter revenue and was up 103% on a sequential basis, largely from faster-than-expected ramps at some of our recent client wins.

We exited the first quarter with a total headcount of 2,056 people, up from 1,894 in the fourth quarter of 2020 and up from 1,357 in the first quarter of 2020. The 9% sequential increase in headcount was largely a reflection of the improving demand environment that resulted in headcount increase across all our regions.

At the end of the first quarter of 2021, our total U.S. headcount was 253 people, or 12% of the company's total headcount, down from 14% in the fourth quarter and down from 19% in the year-ago quarter. Our non-U. S. headcount, which we sometimes refer to as offshore, located in Central and Eastern Europe locations, was 1,803 people or 88%.

In the first quarter, revenues from our top 5 and top 10 customers were 50% and 67%, respectively. During the same period a year ago, our top 5 and top 10 customer concentration was at 64% and 86%, respectively. The decline was driven by a combination of new logo ramped, continued industry diversification and our recent acquisition of Daxx.

During the quarter, we had a total of 184 customers, 48 from our organic business and the remaining 136 from our Daxx acquisition. Within our organic business, we had a total of 48 paying customers during the quarter, up from 43 in the fourth quarter and up from 37 in the first quarter of 2020. As a reminder, we only count the revenue-generating customers in the quarters and did not include customers who were inactive during the quarter. Relative to the fourth quarter, we added 6 new logos, 2 in the technology segment, 1 in CPG, 1 in retail and 2 in the other segment.

Moving to the income statement and including our recent acquisition, our GAAP gross margin during the quarter was $15.3 million or 39.2%, up from $12.3 million or 40.7% in the fourth quarter of 2020, and up from $9.8 million or 30.2% in the year-ago quarter.

On a sequential basis, the decline in gross margin as a percentage was from a combination of factors that included: headwinds from fewer working days; increased headcount costs from hiring; and a full quarter of our recent acquisition of Daxx which has operated at lower margins.

On a non-GAAP basis, our gross margin was $15.4 million or 39.5%, up from $12.4 million or 41% in the fourth quarter of 2020, and up from $11.5 million or 35% in the year-ago quarter. The sequential decline in the non-GAAP gross margin as a percentage was driven by the same factors which were highlighted earlier.

Adjusted EBITDA during the quarter that excluded stock-based compensation, depreciation and amortization, transaction and other related costs was $5.3 million or 13.4%, up from $4.1 million or 13.7% in the December quarter and up from $3 million or 9.4% in the year-ago quarter. The slight sequential drop in EBITDA as a percentage of revenue was largely due to lower gross margins combined with higher operating expenses. Additionally, on the year-ago quarter, our business was impacted by the pandemic-related headwinds, resulting in lower levels of EBITDA, both on -- in terms of dollar amounts as well as percentage.

Our GAAP net loss in the first quarter totaled $2.1 million or a loss of $0.04 based on a share count of 52 million shares compared to the fourth quarter loss of $4.7 million or a loss of $0.10 per share based on 50 million shares and a loss of $4.6 million or a loss of $0.16 per share based on 30 million shares in the year-ago quarter. The sequential decrease in GAAP net loss was a combination of factors that included higher revenue from a full quarter of Daxx and lower stock-based compensation expense.

On a non-GAAP basis, in the first quarter, our non-GAAP net income was $3.1 million or $0.05 per share based on 60 million diluted shares compared to the fourth quarter non-GAAP net income of $2.2 million or $0.04 per diluted share based on 55 million shares, and $1.9 million or $0.05 per diluted share based on 34 million diluted shares in the year-ago quarter. On a non-GAAP basis, the increase from the fourth quarter was largely due to a full quarter of revenue contribution from Daxx.

Our cash, cash equivalents and short-term investments totaled $100 million, down from $113 million on December 31, 2020, and down from $121 million on March 31, 2020. The sequential decline in the current quarter was largely due to tax withholding obligations related to issuance of shares in connection with vested awards. The year-over-year decline was primarily due to the acquisition of Daxx, which was paid in cash.

Coming to the first quarter guidance, we expect revenues to be in the range of $40.5 to $42 million. This includes $5.5 million in revenue contribution from our recent acquisition of Daxx. We expect our adjusted EBITDA in the second quarter to be in the range of $6 million to $6.3 million.

For the full year 2021, we expect our revenues to be at least $165 million. This includes a contribution of $23 million from Daxx. For the second quarter, we expect our basic share count to be in the 54 million to 55 million range, and our diluted share count to be in the 62 million to 63 million range.

That concludes my prepared remarks. Operator, we are now ready to take questions.

(Operator Instructions)

Our first question comes from the line of Mayank Tandon with Needham & Company.

Congrats on the quarter. I wanted to start with just the guidance. Obviously, a very strong momentum coming out of 1Q. The Q2 guidance looks good. And the full year does as well. It does call for a pretty sharp deceleration in the second half, if I'm doing my math right. Just wanted to get a sense, if that's just being conservative at this juncture in the year, or is it something else that is impacting the second half outlook relative to the strong momentum in the first half?

Right. Mayank, thank you very much for your question. Look, I mean, we just started the year. If you see our guidance is at least that dollar amount, right? And obviously, our first quarter was strong, we'll come back and give you an update. But based on the business momentum and just the tone of the business, we feel pretty positive for 2021. Look, I mean, this is our best guesstimate right now. As we said, we'll come back in 3 months, and obviously, hopefully give some more positive news.

Got it. That's understandable.

Mayank, this is Leonard. Just more color on it. As you know, we had a very good quarter last year. This quarter is even better. We have a good visibility in Q2, obviously, but we still remain to be a little bit more conservative just to make sure we get the -- all the facts. But you're absolutely, there's no, like, immediate foreseen deceleration, by all means.

Got it. That's very helpful. And then just as a quick follow-up, I wanted to get some color on the supply side of the equation. There have been some concerns expressed by other IT services companies in terms of being able to attract enough talent. There's clearly a war for digital talent pressure on attrition and wage inflation. So any perspective on that would also be very helpful how you're managing some of these headwinds that you made including demand?

Sure, Mayank. Well, you actually asked 2 or 3 questions, right? So let's just make sure we'll have other people a chance to ask the same question because I suspect there'll be more people talking about the same. Just a high level, first of all, on the talent. You're right. There's always a pressure about getting the right people to the company.

And we're getting more and more demand on a variety of skill sets coming through existing and new customers. Something been prepared for that. We built a strong pipeline comes from the internship programs, some of the partnerships, additional hiring. hear some other companies talk about the projects. And one of the benefits that our model of and extend helps us because we're starting many projects with handful of good people, and then we build on top of it. So I believe there's scalability. Definitely, even though it's industry challenged, Grid Dynamics is work prepared.

Our Next question comes from the line of Maggie Nolan with William Blair.

Congrats on the results. I'm wondering on the EBITDA margin. What's holding you back from or creating uncertainty in the EBITDA margin guidance for the full year? And is something in the low-teens, similar to Q1 and your Q2 guide, a reasonable expectation for the full year?

Yes. Thanks a lot for the question, Maggie. So if you look at the full year, right, I mean, there are a couple of moving parts here. Number one is that we've made an acquisition in Daxx, right? And there are some levels of investments and some programs that we're looking at. So the focus is around there.

The second thing is that, as you know, we've been investing in programs within the company, whether it's Salesforce, whether it's building up new lines of business. So there's that element there. And the third thing is that, look, we still have a little bit amount of retail business, right? So some of the moving parts there.

As we proceed with every quarter, I think things are going to get better. We will come to some point where we'll give out more longer-term visibility on the EBITDA. But we're taking one step at a time. And at the right amount, we'll revert to providing a little bit more color.

And Maggie a little bit more color on that. So similar to what Mayank asked about the acceleration, we project the positive trend momentum on our margins as well. At the same time, we're a bit cautioned about some of the trends, which mean that we to the industry, not to. And while I'm very optimistic about the next steps beyond the Q2 and information we have guides us to the very promising 2021, which is trying to be a bit rational how we can pace ourselves.

As you recall, when we got into of the storm last year, I made a comment that despite all these headwinds, I'm going to hit the full recovery of revenue in Q1. And at that time, it was a little bit forecast for most of the guys. We the ship, and now we are ahead of the game. And then we're talking one of those quarterly discussion about when we're going to get back to some EBITDA margins. And I mentioned, let's wait for Q2 results. So let's wait and see how the things will turn out.

Okay. And then, when you think about your verticals, obviously, there was good growth in the other segments. Is there anything that sub verticals within there that are good growth drivers could be a breakout that we should keep an eye on? And what does it take to reinvigorate the financial services segment as well?

Yes. So Maggie, you're right. There are a couple of certain dynamics happening with certain customers. They're not getting to a point where we want to break it out as a separate vertical, largely because they're one-off. But these are related to some of design wins or program wins or customer wins we had over the past 12 months.

We have a particular customer in online delivery of groceries, and we have another customer in the -- the closest the food delivery business. So yes, there are a couple of those things. And with time, we'll break it out.

On the financial, if you look at our business, we don't have as many customers perhaps as we have with the TMT and other things. So these handful of customers, when they move, they have a meaningful impact. We saw with this one particular customer reverting back to program growth and that impacted us.

As you may recall, last quarter, we even talked about a global insurance customer. So we're trying to diversify within different subsegments of the financial industry.

Yes. And I think -- thank you, Anil. It's a good overall review. But other thing, which I want to bring attention to, is that some of Grid Dynamics' accelerators, solutions, integrated practices coming from more traditional industries, start accelerating with the digital expansion during the time into other verticals, and the demand for what Grid was able to deliver starts spreading across multiple verticals. I think, Anil is fair to say, it will be early to call the subgroups. But to summarize, they are very much synchronous in terms of our horizontal capabilities just to move into the new fields.

Our next question comes from the line of Joseph Vafi with Canaccord.

Maybe we talk first on that large CPG customer that you called out. I know it's a fast growth customer for you right now. Is that customer still growing, or how do you see the evolution in terms of revenue contributions from that customer playing out over time? And then I'll have a couple of follow-ups.

It's a very good question, Joe. I believe, what you're really asking is it kind of a temporary ramp up or it's a longer-term growth. Well, there are a couple of aspects, which we're currently in the joint work. We are very proud to be not just on the implementation partner, but having a -- the table and a variety of the road maps and a new innovation, which this Daxx CPG customer is demanding, which goes into the areas of business, which we currently are are not present, as well as some of the global international opportunities jointly with this customer.

So I wouldn't have the magic crystal ball to say how and when the acceleration will continue. But we definitely see the continuous demand. And based on my expectation, this customer will continue to grow.

That's helpful, Leonard. And then, on those 6 new logo wins and in general kind of when you look at the sales pipeline, what are you seeing in terms of sizes of enterprises you're engaging with? Are they staying about the same? Are they growing? Do these 6 new logos kind of have capability to become top customers over time? Or any color you can provide there would be helpful.

Sure, sure. So first of all, Anil earlier mentioned, we only name the logos which we haven't just signed the contract with, but generated revenue. So hopefully, by the same time next quarter, we'll give you even more color. And for now, I believe that there is my idea not to talk something that we don't have money in the bank yet.

So these 6 specific customers, I would say, that come from the mid to upper range. I wouldn't call any one of them to be like a supergiant at this point. However, what was very encouraging, some of them -- some of the customers, which we're previously engaged with, start ticking up in Q1 to the level where we would be more comfortable to add them to the top-tier in the second half of this year.

Also some of the contracts we just tied again without revenue yet, we see a huge potential to be also top 10. So 2 parts. The ones we talked, 6, they probably mid to upper range. Some of the guys were just expanded on, I have a very high expectation for the second half of the year and then to come.

Got it. And then, maybe, I guess, I could probably do the math, but Anil, what do you have built into the guide for Daxx growth rate this year, or are you being conservative there?

Yes. So look, I mean, as you see, we had -- on the Daxx front, we haven't changed a lot. We provided everyone a snapshot of Daxx. We're in the earn-out period right now. We're slowly integrating the company, both from a sales and delivery point of view. So we've taken a little bit conservative approach as we integrate, as we understand this company a little better. So we have kept the Daxx numbers at least on an out-quarter same, and we'll just update you. So yes, at this stage, we've just taken that at front.

Our next question comes from the line of Bryan Bergin with Cowen and Company.

I wanted to follow-up on the new engagements and the new accounts. How would you characterize the speed of the project activity among the new customers? I'm curious if there's been any notable shift in the project ramp trajectory of the new clients relative to what you had seen historically.

All right. Thanks, Bryan. I knew this was a philosophical question with a thematic outcome. So it's all definition about what new customer is. As you know, when we just acquire a great new customer, most of the time, it's still and expense. So I assume you more refer to the customers we captured the least quarters in how we expand them.

From that perspective, there has been a significant acceleration on expansion and demand. And the reason I'm saying is it's not just in terms of percentages. I mean, Anil mentioned to you that percentage of contribution from top 5 or top 10 reduced, but it's also on a versatility of the projects.

What we are able to do, which we have not been probably as successful in the past, but shift and expand beyond their regional area origination with a higher speed. And part of it relates to the traditional businesses like specialization in the cloud migration, automation. A lot of related to the data analysis, data analytics, modern world for machine learning or specializations. Our introduction of a broader pod based solutions, in our case, we're bringing the teams to engage in new projects as we get to the customers.

So I would say, that's actually leading momentum for us to look comfortable in the future without over the reliance on just a few top clients, which you may have seen the case in the past.

Okay. Okay, that's helpful. And then on traditional retail, so in the context of just the reopening momentum in the U.S., how have your conversations with the brick-and-mortar customers on the legacy ones, how have those evolved over the last 2 months just given the relative improvement in their business prospects? Is there anything happening there? Anything built-in?

Yes. So there is, I would say, a little bit of a phenomenon, which you picked up. In the last 6 weeks, we strongly started getting quite a bit more demand with those two guys, especially one of the two guys who departed from us that irrational in March last year, right? So I mean, we're able and willing to support them. Some of the smaller guys, more focused customers, they never stopped investing with Grid. But I do see a pickup.

Now being conservative on the whole brick-and-mortar service and more e-commerce-friendly retailers coming to the play, we did not project as much growth of these guys because we wanted to see machine's ability, right? But I pooled with you last 6 weeks, we did a couple of very, very strong demands from the brick-and-mortar retails. But that's on the top of what we already reported.

(Operator Instructions)

Our next question comes from the line of Josh Siegler with Canter Fitzgerald.

Congrats on the quarter. Would you please provide any sort of progress on the sales build out and productivity with that salesforce?

All right. Productivity and Salesforce. So it's the first time we'll talk, so welcome to the (inaudible). We have been reporting to the investor community in the past several quarters our continuous investment in the sales force. We're still in the progress. We are able to capture some senior sales experienced once people with a good roll backs, and we continue to close some of them. We're very selective in terms of how we expand on the front of the senior relations, especially in time of quality, but it's an investment.

We also accelerated a marketing touch. We improved SCOs, a direct marketing campaign, whereas webinars are doing the modelers. So we also combined, I would say, the Salesforce expansion with improvement on existing customer communications as well. We find that actually, there's some feedback, which some of the really interesting clients of the large caliber reached out to Grid Dynamics almost full.

So I would say, the full investment recovery or ROI from the Salesforce will come a little bit later this year with more personal touch. But I have to see -- I have say that even this Q1 from the funnel going forward has been promising.

Great. That's very helpful. Could you also please provide an update on your capital allocation? What are you seeing in the market regarding potential future acquisitions?

You want to know what's (inaudible) taking acquisitions? So I have to say, one thing is it's a great market for both acquirers and acquisition companies. Grid Dynamics has been stating quite continuously that we look at the new regions, new technology, expansion and then capabilities. We closed one deal this December.

Obviously, we are going to have more great opportunities for Grid. Some of them, you may have picked up, but we recently filed (inaudible) to show that we'll be doing some of the fundraising in due time. And that tells you that appetite grows for us as we see more and more fit for Grid Dynamics across multiple fronts.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over to Mr. Livschitz for any closing remarks.

Thank you, everybody, for joining us on the call today. Our first quarter results were strong and as we executed well against our guidance. And I'm proud of Grid Dynamics' team with their continued hard work toward achieving the goals. The demand environment is robust. Customers continue to prioritize their digital transformation initiatives. And we are working very hard to ensure we keep up with the demands of talent.

Our strong come back from the second half of 2020 onwards is a testament of Grid Dynamics' ability to quickly adapt our customer needs, and our core strengths and capabilities are not tied to any specific industry vertical. We started 2021 with incremental confidence, and we look forward to giving you a business update in 3 months. Thank you, very much.

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