Good afternoon, everyone. Welcome to Grid Dynamics's second quarter 2022 earnings conference call. I'm Bin Jiang, Head of Investor Relations. At this time, all participants are in listen-only mode. Joining us on the call today are CEO Leonard Livschitz and CFO Anil Doradla. 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 today's 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 filings with SEC. During this call, we will discuss certain non-GAAP measures of our performance. GAAP to non-GAAP financial reconciliation and supplemental financial information are provided in the earnings press release and the 8-K 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 the 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 are 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. Grid Dynamics' solid results over the past several quarters have shown the company incredible resilience in bouncing 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 our 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 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. More importantly, customer interest in engaging our services around digital engineering continued to be strong in this quarter. During the quarter, our geographical 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 nearshore presence. Several large clients who welcome our nearshore strategy have expressed interest in partnering with our Mexican operation. Finally, Poland, with advantage being one of the largest country in Central Europe with a strong IT presence, will continue to support our operations as with scale in Europe. We also ramped up hiring of the engineering talent of 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. There are a couple reasons for that. First, at 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.
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 footwear 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 a 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 MACH Alliance for the Health/Pharma Project. Our capabilities and strengths are gaining 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 G-sales executive to focus specifically on building opportunities, one of the top three cloud providers. Finally, some of the largest cloud provider partners will launch new pro-products 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 1,000 engineers and is planned to be rolled out on a company-wide basis. At a global CPG company, we implemented a unified interface system for wholesale orders. This system will not only significantly reduce the amount of manual work, but also speeds up order and 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 information and event management. Our solution migrated the on-premises 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. For 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 regularly identify and quantify potential risk losses and suggests 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-$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 we 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.
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 reductions 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 H2 of the year, we expect our headcount to continue to expand. At the end of the second quarter of 2022, our total U.S. 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 U.S. 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 five and top ten customers were 44.2% and 60.2% respectively.
During the same period a year ago, our top five and top ten customer concentration was 45.4% and 62.3% respectively. The diversification across our top five and top ten was driven by a combination of factors that included new logo 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 JUXT, which we acquired in December 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% of revenue, up from $11.4 million or 15.9% in the first quarter of 2022, and up from $9.7 million or 20.4% in the year-ago quarter. The sequential increase in EBITDA was due to a combination of higher levels of revenue and flattish operating expenses.
Our GAAP net loss in the second quarter totaled a loss of $13.2 million or loss of $0.20 based on a share count of 67 million shares, compared to the first quarter loss of $2.7 million or a loss of $0.04 per share based on 67 million shares and a loss of $1.5 million or a loss of $0.03 per share based on 54 million shares in the year-ago quarter. The sequential and year-over-year increase in GAAP net loss was largely due to higher levels of stock-based compensation and geographic reorganization costs offset by higher levels of revenue. During the second quarter, we incurred $6 million in geographic reorganization costs.
On a non-GAAP basis, in the second quarter, our non-GAAP net income was $8.2 million or $0.12 per share based on 70 million diluted shares, compared to the first quarter of 2022 non-GAAP net income of $6.9 million or $0.10 per diluted share based on 70 million diluted shares and $6.1 million or $0.10 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 net 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 totaled $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-$80 million. We expect our non-GAAP EBITDA in the third quarter to be in the range of $12.6 million-$13.6 million or 16%-17% of revenue. For 2022, we expect our basic share count to be in the 67-68 million range, and our diluted share count to be in the 70-71 million range. That concludes my prepared remarks. Bin Jiang, 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 your camera. Our first question comes from Puneet Jain from JP Morgan. Your line is open.
Hey, can you hear me?
Yes. Hey, Puneet.
Okay.
Can you please turn on your camera?
I'm trying to. It's not allowing me to. Sorry. Nice quarter. Like, really nice quarter. I just had, like, a quick question. Like, is active relocation of employees or projects away from Eastern Europe completely behind you now? Should we expect you to operate in, like, a steady state from here onwards?
It's more as a statement than a question, Jain. 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 a, I would say, outside of the traditional risk area. We still feel very committed to Ukraine and continue to operate from Ukraine. But you know, with the diversity of the workforce and scalable capability, we see a very positive reaction from our clients.
Understood. 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. 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 their budgets already. We've seen some other customers which are considering to tighten their 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 than we were. If you noticed, we're delivering our growth. We also are positioned more strategically than before. Not ever, but before. I believe that the importance is how deeply you're entrenched with the customer execution on 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.
Understood. Thank you.
Of course. Thank you.
Thanks, Puneet. Next question comes from Mayank Tandon from Needham. Please go ahead.
Great. Leonard Livschitz and Anil Doradla, 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. Also any sort of framework to think about 4Q, and maybe, I'll be a little greedy here, ask about any initial indications for 2023 as well.
All right. I'm gonna start a little bit on a high level, Mayank, and then I'll have Anil to give you a little bit more color on the guidance. 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, look at other factors, and we just wanna make sure that we react properly. The growth and profitability go hand-in-hand. We wanna make sure we continue responsibly, and we continue with 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.
I believe that we are on the path to continue to grow. In terms of specific, sensitive, variants in terms of the forecasting, I think Anil will have to chime in. Please.
Sure. Thank you, Leonard. Mayank, thanks for the question. You're right. As we go from Q2 to Q3 seasonally, you all know how the quarter shapes up, 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. 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, Mayank.
It's not letting me unmute. Can you guys hear me now?
We can.
Okay. 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 call-up provisions? Any commentary around that would be very helpful. Thank you.
Of course. I wanted to start saying what cost issues, right? There are certainly pressures and there are variants, but you know there are cost issues on one side, there's actually a little bit of a tailwind and a stronger U.S. dollar. 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. We believe we've prepared well for key countries which I described in our earlier remarks. We have the mitigation plans. When we look at more senior talent, there's obviously 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 them on a strategic project. 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, Mayank. 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. 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. Thanks for the question, and obviously they are relevant. I believe when you look at Mexico, it's steady. We're growing. I see more and more relation with universities. I see more and more hiring. I see more and more contracts with the clients that include Mexico, but it's proportional. With India, I bet on disproportionate growth over time. 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 it 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 partner was helping us. 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, and knock on wood, the resilience about delivering the quality of work and, you know, if basically efficiency of the environment they are in, hold strong. Most of the Russian engineers relocated, and Ukrainian team performs well in other countries as well. While we see India growing, this, you know, absolute urgent demand is in line with, I would say more continued growth. We'll give you the updates as we grow. The good thing is we jumped over the formality hurdles, and one thing is for sure, the Grid Dynamics India will be the same quality, the same performance, the same capabilities as any other locations.
That's what we're gonna accomplish, and that's what I'm fully standing behind.
Okay. That's helpful, Leonard . Then for my follow-up, I wanted to touch on attrition. If you adjust out the exit from Russia, how did attrition trend in this quarter, and what do you think are the puts and takes there?
Well, I think Anil summarized it 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 a turbulent time, people try to hold to the mothership of the company. I think we respect a lot how we manage and operate. I believe that voluntary attrition is pretty in line, if I would say, if not decreasing to some extent. Involuntary for known reasons, which were mentioned, and we'll emphasize, increased obviously higher than other quarters. I'm very comfortable with the direction of our rotational workforce.
Very good. Thanks for taking my questions.
Of course.
Thanks, Jesse. The question comes from Bryan Bergin from Cowen. Your line's open. Please go ahead.
Hi, good afternoon. It's good to see you all. 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 really? I guess, as you exit the year, can you give us any sense of a rough composition of just where your professionals are gonna be?
As you know, Bryan, we guide quarter over quarter, right? This is a little bit more philosophical question, the end of the year, boy. When is the end of the year? What other company you guys are working for? A lot of changes in the world, right, conversations and acquisitions. The reality is we announced our geographic footprint, right? We emphasized that India, Mexico, and Poland are three strategic growth. From that, as you know as well, we are not merely local, excuse me, India and Mexico together today as large locations. We have a very strong contingent in Ukraine. We're gonna stay strongly with Ukraine. Our engineering talent in Ukraine deserves the support as much as we can, but we grow elsewhere, right?
Certainly it got a bump, as you can imagine that you know quite a few Russian engineers moved there, so did Armenia. Where we are today and where we're gonna be by the end of the year, we're gonna be next year, it's actually a fundamental question. I didn't wanna say generically regions, because regions are very brush strokes. I wanted to be kind of narrowing down. India, Mexico, Poland, that's the growth. Ukraine, strongly behind. The rest, we're gonna form around that. Of course, from the priority of the business, which is very important, U.S. remains exceptionally strong priority for us. As you can see, we're building a bit more focus in Europe. Again, we mentioned the headquarters in Switzerland. We emphasized that you know London and Amsterdam play a stronger role. We're getting more business resources in Europe.
That kind of will also tailor a little bit more to the global expansion of coverage.
Okay. Understood.
Of course.
On the margin front, just trying to understand some of the partnerships that you've developed here and maybe the financial implications around those. 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? Is the return to profitability prior year 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 on the business development side, which is super exciting. You can get down to this, you know, partners site. I'll take the third question. Specifically in India. As I learned before, we have established fully operational direct organization. The priority is the growth will be direct. Of course, for the needed needs I'm contributing, but I believe from the financial overall perspective, it's not gonna be a very significant impact. Again, Anil, do you wanna chime in?
No, I think that's exactly right because we always had a two-pronged strategy, as Leonard said, going directly and partnering with business banks. As we scale up directly, you know, the reliance on partners diminishes. There's also transfer of those partner employees to our direct hiring tools. Whatever we were doing then was backed in our
Okay. That's fair. I know you have plans you need to do organically here, which is how are you thinking about potential M&A in this environment?
All right. It's not exactly about partners, but it's okay. M&A strategy is very critical. It's very critical because when I look at the broader world, we have very ambitious plans for expansion, you know. Our investment primarily goes from the buy point of view and innovation. Innovations relate to the specific, I would say, related fields. When we talk about fields, it's a combination of technology, knowledge and capability, business acumen as well. We're focusing more and more on the core knowledge in verticals we enhance, and we are expanding in, you know, cybersecurity, supply chain, you know, life science. We're going to areas where you don't build acumen overnight. 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.
Key question, where do you wanna be in the growth? I think the message is very clear. We wanna make sure it's also financially efficient and very responsible and we will continue to grow, not from the operational health, but from the operational growth.
Okay. Appreciate the detail. Thanks.
Of course.
Thanks, Bryan.
Thanks, Bryan. Next question comes from Ryan Potter from Citi. Please go ahead.
Thank you. This is Ryan Potter from Citi. It's a new quarter. Let me start off on the delivery team. With your diversification across like India and other locations, are you seeing some kind of new skill sets you guys didn't have as much exposure to come into the mix? Are you also seeing some clients increasingly come to you because you have a 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 variance in the voice. You're talking about the whether India brings new capabilities.
New skill sets and also, are new clients interested because you 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 consultants from Europe to India to make sure that we have a good blend. Obviously, we'll continue to see the new skill set and talent, but, you know, we have some work to do before that. In terms of the clients that are absolutely right. 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, the notable U.S. clients, they prefer India as a center of excellence. Not just India as a center of excellence, but our specific locations where we are.
We're kind of in the cradle of the value add innovation part, you know, probably right now in Hyderabad would be and somewhere else as well. That's kind of drives this almost like India business development relationship, which we're already building today. The first answer, not much yet. The second one, very much so.
Got it. Focusing specifically on the Retail vertical, growth there has been pretty strong the past few quarters. I guess first of all, how much of this is inorganic growth? What's the organic growth in Retail? Second, can you give 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 seeing some new logos come in?
Okay. The first part you're asking whether we have organic or non-organic growth. I know what is non-organic.
Yeah.
in a definition?
Yeah. Ryan , as you know, what we had is one month of revenue, which was organic. There was roughly, call it $4 million, because last year we acquired towards the end of May, so we had the month of June. When you extract that out, we still grew north of 50% year-over-year. And it was driven. The organic part was there, and of course, we had a couple of months of testing.
Let me come back to the second part. The growth is. I don't know if the catch-up is the right word. I think, Retail has made such an incredible turnaround, the V-shape return in 2020, they were just going strongly after very broad base of the clients. If you look again from an annual position 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 specific clients is getting reduced as we grow more, in a broader base of the clients. 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.
I've seen some activities after, you know, COVID hit more on the defensive side. Now with economic turmoil, when we see the next subsequent quarters, a little bit more of that too, which we are prepared. Right now people continue to execute on their plans and of course take some caution. Sorry, how much budgets to commit for how long. I think that's the best to describe the environment for growth.
All right. Thanks, and congrats again.
Thank you.
Thank you, Ryan.
Thanks, Ryan. Next question comes from Josh Siegler from Cantor Fitzgerald. Please go ahead, sir.
Yeah. Hi, Leonard and Anil. Thanks for taking my question. Really nice to see such strong execution 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. The wage is, of course, geographically varying, right? But it's also tied to various currencies, customary tax environments, you know, cost of living, et cetera. From the locations we operate in, it goes both ways. I think overall, everybody's talking about real cost pressure, wage pressure. I think for us, we still grow very much into the young innovative world. Some of the impact on a more senior wage pressure, we're adding more talent. Talent is not like we're taking advantage of the guys, it's just the younger, they're eager to learn, and we create the environment for them to become more, you know, competent specialists.
It's not one to one the wage versus price increases, and it's not every territory. We watch very carefully. There's one thing for sure, no matter where you go, once you scale, you're much more efficient. That's why I'm actually careful with geographies. You notice I'm not talking about doubling countries and just scatter all over. It happens naturally, there's more places we go. The concentration of talent, the scalability, the relation with universities, and the hiring machine and the recognition of the brand, that's ultimately your wage control. 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. 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 is an additional next couple of quarters?
Yeah. Technology for Grid Dynamics actually really means technology. We have, like, three-pronged technology investment. I'll add the fourth one, which is more recent. Number one, it's understanding the vertical in depth. We need to have the subject-matter expertise in where we are. The second one is more horizontal. What accelerates with modern technologies? What the elements of integration part. The third one, which is quite important, is where the you know, the open source implementation kind of blends with a software you know, integration. This is more proven. The partnership with the.
It's not only with the hyperscalers, the partnership with the broader number of the software developers and 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 source and those technologies on the product side, which gives customer much better value on return. That's the third one. Those kind of three areas where we continue to innovate. The fourth one started as, you probably noticed the tiny little script, we invested a little bit of money on one of the technology company. We believe some of the notable small technology company deserve a little bit more closer relationship because that gives us more access to the cradle, and we'll continue that path.
Again, it's small now, but that's the fourth wing. The first three is a continuous expansion of Dynamics technology capabilities.
Great. Thank you very much.
Of course.
Thank you, Josh. At this point, we have no further questions. Ladies and gentlemen, that would 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 Grid Dynamics' ability to deliver to the stated goals and our commitment to the business. Grid Dynamics 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 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.