What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-02-28 · 396 added, 424 removed, 760 unchanged (52% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets as of December 31, 2023 and 2022

Consolidated Statements of Loss and Comprehensive Loss for the Years Ended December 2022, 2021, and 2020

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity for the Years Ended December 31, 2022, 2021, and 2020

Consolidated Statements of Loss and Comprehensive Income/(Loss) for the Years Ended December 2023, 2022, and 2021

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, 2022, and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022, and 2021

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We have audited the accompanying consolidated balance sheets of Grid Dynamics Holdings, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of loss and comprehensive loss, convertible preferred stock and stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of loss and comprehensive income/(loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 29, 2024 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2022 due to the adoption of Accounting Standards Update 2016-02:

Leases (Topic 842).

Basis for opinion

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Mutual Mobile, Inc.

(“Mutual Mobile”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 1.3 and 0.1 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

As indicated in Management’s Report, Mutual Mobile was acquired during 2022.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Mutual Mobile.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of NextSphere Technologies, Inc.

(“NextSphere”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 1.7 and 2.7 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

As indicated in Management’s Report on Internal Control over Financial Reporting, NextSphere was acquired during 2023.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of NextSphere.

Definition and limitations of internal control over financial reporting

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Cash and cash equivalents $ 257,227 $ 256,729

Accounts receivable, net of allowance of $ 443 , and $ 315 as of December 31, 2022 and December 31, 2021

Accounts receivable, net of allowance of $ 1,363 , and $ 443 as of December 31, 2023 and December 31, 2022, respectively

49,824 48,358

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Additional paid-in capital 397,511 378,006

Retained earnings/(accumulated deficit) ( 14,121 ) 15,093

Accumulated other comprehensive loss ( 848 ) ( 126 )

Accumulated deficit

( 15,886 ) ( 14,121 )

Accumulated other comprehensive income/(loss), net

1,274 ( 848 )

Total stockholders’ equity 382,907 363,044

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GRID DYNAMICS HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE INCOME/(LOSS)

(In thousands, except per share data)

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2023 2022 2021

Revenue $ 310,482 $ 211,280 $ 111,283

Cost of revenue 189,892 123,552 69,662

$ 312,910 $ 310,482 $ 211,280

Cost of revenues

199,764 189,892 123,552

Gross profit 113,146 120,590 87,728

6 unchanged sentences

Other income/(expenses), net 10,418 555 ( 2,502 )

Loss before income taxes ( 20,453 ) ( 2,452 ) ( 15,212 )

Provision/(benefit) for income taxes 8,761 5,248 ( 2,613 )

Income/(loss) before income taxes

4,838 ( 20,453 ) ( 2,452 )

Provision for income taxes

6,603 8,761 5,248

Net loss $ ( 1,765 ) $ ( 29,214 ) $ ( 7,700 )

Foreign currency translation adjustments, net of tax ( 722 ) ( 122 ) ( 4 )

Comprehensive loss $ ( 29,936 ) $ ( 7,822 ) $ ( 12,603 )

Foreign currency translation adjustments

2,122 ( 722 ) ( 122 )

Comprehensive income/(loss)

$ 357 $ ( 29,936 ) $ ( 7,822 )

Loss per share

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GRID DYNAMICS HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Preferred Stock Common Stock Additional

Common Stock Additional

Capital Retained

Earnings Accumulated

(Accumulated Deficit)

Comprehensive

Income/(loss)

Stockholders’

Shares Amount Shares Amount

Shares Amount

Balance at January 1, 2021 50,879 $ 5 $ 128,930 $ 22,793 $ ( 4 ) $ 151,724

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Stock-based compensation — — 33,036 — — 33,036

Conversion of preferred stock ( 1,048 ) ( 9,187 ) 1,048 1 9,187 — — 9,188

Conversion of promissory note to common stock — — 53 — 530 — — 530

Consideration paid to Grid shareholders — — — — ( 123,865 ) — — ( 123,865 )

ChaSerg shares recapitalized, net of transaction costs of $ 4,142

— — 28,088 2 204,323 — — 204,325

Exchange of warrants into common stock 6,680 1 49,123 — — 49,124

Exercise of stock options 1,631 — ( 27,528 ) — — ( 27,528 )

Issuance of shares in connection with vested RSUs — — 28 — — — — —

Foreign currency translation adjustment, net of tax — — — — — — ( 4 ) ( 4 )

Issuance of common stock in 2021 offering, net of transaction costs of $ 498

5,470 1 77,812 — — 77,813

Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards 2,060 — ( 49,296 ) — — ( 49,296 )

Issuance of escrow common stock due to Closing of Business Combination 131 — — — — —

Foreign currency translation adjustment

— — — — ( 122 ) ( 122 )

Balance at December 31, 2021

2 unchanged sentences

Stock-based compensation — — 60,968 — — 60,968

Exchange of warrants into common stock — — 6,680 1 49,123 — — 49,124

Exercise of stock options 341 — 1,432 — — 1,432

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Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards 393 — ( 5,755 ) — — ( 5,755 )

Issuance of escrow common stock due to Closing of Business Combination — — 131 — — — — —

Foreign currency translation adjustment, net of tax — — — — — — ( 122 ) ( 122 )

Foreign currency translation adjustment

— — — — ( 722 ) ( 722 )

Balance at December 31, 2022

74,156 $ 7 $ 378,006 $ ( 14,121 ) $ ( 848 ) $ 363,044

Preferred Stock Common Stock Additional

capital Retained

earnings Accumulated

Comprehensive

stockholders’

Shares Amount Shares Amount

Balance at January 1, 2022 — $ — 66,851 $ 7 $ 212,077 $ 15,093 $ (126) $ 227,051

Net loss — — — ( 1,765 ) — ( 1,765 )

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Exercise of stock options 182 — 821 — — 821

Issuance of common stock in 2022 Offering, net of transaction costs of $ 253

— — 6,571 — 109,284 — — 109,284

Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards 1,549 1 ( 16,832 ) — — ( 16,831 )

Foreign currency translation adjustment, net of tax — — — — — — ( 722 ) ( 722 )

Foreign currency translation adjustment

— — — — 2,122 2,122

Balance at December 31, 2023

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Deferred income taxes ( 4,140 ) ( 3,633 ) 2,611

Debt issuance cost amortization 71 — —

Change in fair value of contingent consideration

( 4,220 ) — —

Stock-based compensation 35,516 60,968 33,036

Change in fair value of warrants — 979 —

Other expenses

Changes in assets and liabilities:

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Cash flows from financing activities

Proceeds from exercises of stock options, net of shares withheld for taxes 510 1,432 ( 27,528 )

Payments of tax obligations resulted from net share settlement of vested stock awards ( 16,831 ) ( 5,755 ) ( 49,296 )

Proceeds from issuance of Common Stock from 2022 and 2021 Offerings — 109,537 78,311

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Proceeds from exercise of warrants — — 48,145

Cash received from ChaSerg — — 208,997

Payments of tax obligations resulted from net share settlement of vested stock awards ( 5,755 ) ( 49,296 ) —

Proceeds from exercises of stock options, net of shares withheld for taxes 1,432 ( 27,528 ) 99

Payment of contingent consideration related to previously acquired businesses — ( 6,933 ) —

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Equity issuance costs — ( 253 ) ( 498 )

GDI shares redeemed for cash — — ( 123,865 )

Net cash provided by financing activities 97,758 49,134 82,967

Net cash (used in)/provided by financing activities

( 16,321 ) 97,758 49,134

Effect of exchange rate changes on cash and cash equivalents 1,676 ( 722 ) ( 122 )

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Acquisition fair value of contingent consideration issued for acquisition of business $ 932 $ 3,288 $ 4,986

Conversion of preferred stock to common stock $ — $ — $ 9,187

The accompanying notes are an integral part of these consolidated financial statements.

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(In thousands, except share and per share data)

Note 1 — Background and nature of operations

Note 1 — Description of business and summary of significant accounting policies

Description of business

Grid Dynamics Holdings, Inc.

(the “Company” or “GDH”) provides enterprise-level digital transformation in the areas of search, analytics, and release automation to Fortune 1000 companies.

(the “Company” or “GDH” ) is a leading provider of technology consulting, platform and product engineering, and advanced analytics services.

The Company’s core business includes cloud platform and product engineering, supply chain and advanced manufacturing, and data and machine learning platform engineering.

Grid Dynamics also helps organizations become more agile and create innovative digital products and experiences through its deep expertise in emerging technology, such as artificial intelligence (“AI”), data science, cloud computing, big data and DevOps, lean software development practices and a high-performance product culture.

The Company’s headquarters and principal place of business is in San Ramon, California.

The Company was originally incorporated in Delaware on May 21, 2018 as a special purpose acquisition company under the name ChaSerg Technology Acquisition Corp.

(“ChaSerg”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving ChaSerg and one or more businesses.

On March 5, 2020 (the “Closing”), the Company consummated its business combination with Grid Dynamics International, Inc.

(“GDI”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated November 13, 2019 (the “Business Combination”).

In connection with the Closing, the Company changed its name from ChaSerg Technology Acquisition Corp.

to Grid Dynamics Holdings, Inc.

The Company’s common stock is now listed on the NASDAQ under the symbol “GDYN”.

Unless the context otherwise requires, the “Company” refers to the combined company and its subsidiaries following the Business Combination, “ChaSerg” refers to the Company prior to the Closing, and “GDI” refers to GDI prior to the Closing.

Refer to Note 3 for further discussion of the Business Combination.

Note 2 — Basis of presentation and summary of significant accounting policies

The following is a summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements.

Basis of presentation

The Business Combination was accounted for as a reverse recapitalization in accordance with U.S.

Although ChaSerg was the legal acquirer, for accounting purposes, GDI was deemed to be the accounting acquirer.

GDI was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

• GDI holds executive management roles for the Company and those individuals are responsible for the day-to-day operations;

• GDI’s former owners have the largest minority voting rights in the Company;

• From a revenue and business operation standpoint, GDI was the larger entity in terms of relative size;

• GDI’s San Ramon, CA headquarters are the headquarters of the Company;

• The intended strategy of the Company will continue GDI’s strategy of driving enterprise-level digital transformation in the Fortune 1000 companies.

Refer to Note 3 for further discussion of the Business Combination.

Principles of consolidation

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The Company provides services to its customers utilizing its own personnel as well as personnel from subcontractors.

The most significant subcontractor as of December 31, 2022 is GD AM, LLC (“Affiliate”), third-party contractor located in Armenia.

During the years ended December 31, 2021 and 2020 the Company had a similar subcontractor that ceased its operations in the beginning of 2022.

The Affiliates exclusively support and perform services on behalf of the Company and its customers.

The Company has no ownership in the Affiliates.

One of the subcontractors exclusively supports and performs services on behalf of the Company and its customers.

The Company had no ownership in this subcontractor (“Affiliate”) as of December 31, 2023.

During the years ended December 31, 2022 and 2021 the Company had similar subcontractors that ceased its operations at the beginning of 2022.

The Company is required to apply accounting standards which address how a business enterprise should evaluate whether it has a controlling financial interest in a variable interest entity (“VIE”) through means other than voting rights and accordingly should determine whether or not to consolidate the entity.

The Company has determined that it is required to consolidate the Affiliates because the Company has the power to direct the VIEs’ most significant activities and is the primary beneficiary of the Affiliates.

The assets and liabilities of the Affiliates primarily consist of inter-company balances and transactions all of which have been eliminated in consolidation.

The net income of the Affiliates was $ 0.7 million, $ 0.6 million and $ 0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company has determined that it is required to consolidate the Affiliate because the Company has the power to direct the VIE’s most significant activities and is the primary beneficiary of the Affiliate.

The assets and liabilities of the Affiliate primarily consist of inter-company balances and transactions all of which have been eliminated in consolidation.

There was minimal activity in the Affiliate during the year ended December 31, 2023.

Use of estimates

The preparation of the consolidated financial statements in accordance with U.S.

GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

The preparation of the consolidated financial statements in accordance with the U.S.

generally accepted accounting principles (“GAAP”) requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

The Company evaluates its estimates on an ongoing basis including allowance of credit losses, determination of fair value, useful lives and recoverability of intangible assets and goodwill, valuation of stock-based compensation and contingent consideration payable, determination of provision for income taxes, deferred tax assets and liabilities and uncertain tax positions.

The Company builds its estimates on historical data and assumptions as well as forward-looking expectations that the Company believes to be reasonable under current conditions and circumstances.

Actual results could differ from these estimates and such differences could be material.

Significant estimates include determination of fair value, useful lives and recoverability of intangible assets and goodwill, stock-based compensation, contingent consideration payable, determination of provision for income taxes, deferred tax assets and liabilities and uncertain tax positions.

Foreign currency translation

The Company’s reporting currency is the U.S.

All assets and liabilities of consolidated foreign subsidiary whose functional currency is different from the U.S.

dollar are translated into U.S.

dollar at the current exchange rate as of the end of the period, and revenue and expenses are translated at average exchange rates in effect during the period.

Resulting translation adjustments are recorded as a component of Accumulated other comprehensive income/(loss), net.

Cash and cash equivalents

Cash equivalents are short-term highly liquid investments and deposits with original maturities of three months or less.

Cash and cash equivalents consist of cash balances and short-term, highly liquid investments and deposits with original maturities of three months or less.

Cash equivalents are stated at cost, which approximates fair value due to their short-term nature.

Accounts receivable and allowance for credit losses

Accounts receivable, less allowance for credit losses, reflect the net realizable value of receivables and approximate fair value.

Non-marketable securities

The Company holds investments in privately-held entities.

Such investments do not have readily determinable fair value and as such are accounted for under the fair value measurement alternative.

Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Non-marketable securities are classified as Other noncurrent assets on the consolidated balance sheets.

All gains and losses on non-marketable securities, whether realized or unrealized, are recognized in Other income/(expense), net in the consolidated statements of loss and comprehensive income/(loss).

Contract balances

Depending on the timing of revenue recognition and contractual payment terms, the Company records trade receivables, contract assets or contract liabilities in its consolidated financial statements.

The Company’s accounts receivables are rights to consideration that are conditional only on the passage of time.

Accounts receivable are recorded net of allowance for credit losses.

From time-to-time, a service period may overlap with a period-end and the unbilled receivables represent amounts for services performed through period-end, but not yet billed.

The unbilled receivable represents the amount expected to be billed and collected for services performed through period-end in accordance with contract terms.

Comparatively, if a right to consideration is conditional upon factors other than the passage of time, the Company records contract assets.

Contract assets usually arise in fixed-price arrangements when services have been provided, but the Company is to satisfy other performance obligations to receive consideration.

If the Company receives consideration in advance of the performance obligation being satisfied or in excess of the revenue recognized, the Company records a contract liability.

The Company records its contract assets and liabilities on a net contract-by-contract basis at the end of each reporting period.

Allowance for credit losses

The Company maintains an allowance against accounts receivable for the estimated probable losses on uncollectible accounts.

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Accounts receivable are charged off against the reserve when, in management’s estimation, further collection efforts would not result in a reasonable likelihood of receipt.

Unbilled receivables

Generally, the Company will not bill customers until the services have been completed.

From time-to-time, a service period may overlap with a period-end and the unbilled receivables represent amounts for services performed through period-end, but not yet billed.

The unbilled receivable represents the amount expected to be billed and collected for services performed through period-end in accordance with contract terms.

Contract assets

The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset.

A trade receivable is a right to consideration that is unconditional (i.e., only the passage of time is required before payment is due).

A contract asset is a right to consideration that is conditional upon factors other than the passage of time.

Contract assets are recorded when services have been provided but the Company does not have an unconditional right to receive consideration.

Contract assets primarily relate to fixed-fee contracts.

Movement of allowance for credit losses for the years ended December 31, 2023, 2022 and 2021 is presented in the following table:

Beginning of Year

Provision/Adjustment

Net Foreign Currency Exchange Rate Changes

Year ended December 31, 2023 $ 443 945 ( 47 ) 22 $ 1,363

Year ended December 31, 2022 $ 315 132 — ( 4 ) $ 443

Year ended December 31, 2021 $ 418 45 ( 148 ) — $ 315

Property and equipment

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Software development costs

The Company capitalizes costs incurred during the application development and implementation stages for computer software developed or obtained for internal use that are specifically identifiable, have determinable lives and relate to probable future economic benefits.

Capitalized computer software costs are included in Property and equipment, net in the consolidated balance sheets.

Average useful life of such costs is two to three years .

Amortization of internally developed software is recorded within Engineering, research, and development and Sales and marketing expenses in the consolidated statements of loss and comprehensive loss as the software is developed for purposes of supporting internal R&D, engineering, and marketing activities.

Costs associated with minor enhancements and maintenance or costs incurred during the preliminary project stage, and costs for training, data conversion, and maintenance are expensed as incurred.

Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

Internally developed software did not have any impairment in the years ended December 31, 2022, 2021 and 2020.

The Company incurs certain internal and external costs associated with the development of internally used software.

Such costs are capitalized once the application development stage is reached, and it is probable that the project will be completed, and the software will be used to perform the function intended.

Capitalization ceases and amortization begins once the developed software is substantially complete and ready for its intended use.

The capitalized amounts are included in Property and equipment, net on the consolidated balance sheets.

Costs incurred during planning, preliminary project and post-implementation stages are expensed as incurred.

Internally developed software is amortized on a straight-line basis over the useful life of the respective asset, generally two years .

Amortization of internally developed software is recorded within Engineering, research, and development and Sales and marketing expenses in the consolidated statements of loss and comprehensive income/(loss) as the software is developed for purposes of supporting internal R&D, engineering, and marketing activities.

Management evaluates the useful lives of these

assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

There was no impairment of internally developed software in the years ended December 31, 2023, 2022 and 2021.

Business combinations

The Company accounts for business combinations under the acquisition method of accounting, in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, recording any assets acquired and liabilities assumed based on their respective fair values.

The Company accounts for business combinations under the acquisition method of accounting that requires to allocate the purchase price of acquired company to any assets acquired and liabilities assumed at the acquisition date based on their estimated fair values.

Any excess of the fair value of purchase consideration over the fair value of the assets acquired less liabilities assumed is recorded as goodwill.

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Goodwill represents the excess of purchase price over the fair value of the net assets of businesses acquired.

On an annual basis, the Company makes a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill.

Goodwill is not amortized but is to be tested for impairment at least annually, or more frequently if indicators of potential impairment arise.

Impairment evaluation is performed at reporting unit level.

Based on the internal reporting structure, the Company had one reporting unit as of December 31, 2023 and 2022.

On December 31 of each year the Company makes a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill.

If the Company determines that the fair value of the reporting unit is less than its carrying amount, it will perform a quantitative analysis;

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Impairments, if any, are charged directly to earnings.

As of December 31, 2022 and 2021, the Company had a single reporting unit and determined there were no indicators of impairment.

Intangible assets

Finite-lived intangible assets are stated at cost less accumulated amortization.

Amortization is computed either on the straight-line basis over the asset’s useful lives or declining balance method ranging between two and 12 years.

Intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable.

There was no impairm ent of goodwill in the years ended December 31, 2023, 2022 and 2021.

Intangible assets other than goodwill

Finite-lived intangible assets include assets acquired as a result of a business acquisition and are initially measured at estimated fair values as of the acquisition date.

Depending on class of intangible asset the Company may utilize various methods to determine its estimated fair value, including “multi-period excess earnings”, “relief-from-royalty”, or “with and without” methods.

After the initial recognition finite-lived intangible assets are amortized over the asset’s useful lives.

Amortization is computed either on the straight-line basis or declining balance method ranging between two and 12 years.

The Company evaluates the estimated useful lives and potential impairment of finite and indefinite-lived intangible assets on an annual basis or more frequently whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable.

If facts and circumstances indicate that the carrying value might not be recoverable, projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives is compared against their respective carrying amounts.

If an asset is found to be impaired, the impairment charge will be measured as the amount by which the carrying amount of an entity exceeds its fair value.

As of December 31, 2022 and 2021, the Company determined there were no indicators of impairment.

There was no impairme nt of intangible assets in the years ended December 31, 2023, 2022 and 2021.

The Company does not have intangible assets other than goodwill that have indefinite useful lives.

Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is significant to the fair value measurement.

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The Company determines if an arrangement is a lease or contains a lease at lease inception.

Assessment and classification of lease as either an operating or a financing is performed at the lease commencement date.

Assessment and classification of lease as either operating or financing is performed at the lease commencement date.

Operating lease liabilities and their corresponding right-of-use assets (“RoU Assets”) are initially measured based on the present value of future lease payments over the expected remaining lease term.

RoU Asset value is additionally adjusted by initial direct costs and incentives received.

Present value is calculated based in either interest rate implicit in lease agreement or, if not available, based on our incremental

borrowing rate.

Incremental borrowing rate reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

Present value is calculated based on either the interest rate implicit in the lease agreement or, if not available, based on our incremental borrowing rate.

The incremental borrowing rate reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

The Company typically only includes an initial lease term in its assessment of a lease arrangement.

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For transition, practical expedients were accepted to carry forward historical accounting for any expired or existing contracts that are or contain lease contracts and not to re-assess initial direct costs for any expired or existing leases.

Revenue recognition

The Company accounts for a contract with a customer when 1) the parties to the contract have approved the contract and are committed to performing their respective obligations, 2) the contract identifies each party’s rights regarding the goods or services to be transferred, 3) the contract identifies the payment terms for the goods or services to be transferred, 4) the contract has commercial substance, and 5) collection of substantially all consideration pursuant to the contract is probable.

The Company derives its revenue from offering a suite of digital engineering and information technology (“IT”) consulting services, including digital transformation strategy, emerging technology, lean labs and legacy system replatforming.

For most contracts, the Company uses master agreements to govern the overall relevant terms and conditions of the business arrangement between the Company and its customers.

When the Company and a customer enter into a Master Services Agreement (“MSA”), purchases are generally made by the customer via a statement of work (“SOW”) which explicitly references the MSA and specifies the services to be delivered.

Fees for these contracts may be in the form of time-and-material or fixed-fee arrangements.

The majority of the Company’s revenues are generated under time-and-material contracts which are billed using hourly, daily or monthly rates to determine the amounts to be charged directly to the customer.

Fees are billed and collected as stipulated in the contract, and revenue is recognized as services are performed.

If there is an uncertainty about the receipt of payment for the services, revenue is recognized to the extent that a significant reversal of revenue would not be probable.

Consulting services revenue is a single performance obligation earned through a series of distinct daily services and may include services such as those described above.

The Company recognizes revenue for services over time as the customer simultaneously receives and consumes the benefits as the Company performs IT consulting services.

For revenue contracts, the customer derives value from the Company providing daily consulting services, and the value derived corresponds to the labor hours expended.

Therefore, the Company measures the progress and recognizes revenue using an effort-based input method.

For fixed fee contracts, the Company recognizes revenue as the work is performed, the monthly calculation of which is based upon actual labor hours incurred and level of effort expended throughout the duration of the contract.

For time-and-material contracts, the Company applies the variable consideration allocation guidance.

Therefore, instead of allocating the variable consideration to the entire performance obligation, the Company determined the variable consideration should be allocated to each distinct service to which the variable consideration relates, which is providing the customer daily consulting services.

The Company also offers volume discounts or early settlement discounts.

Volume discounts apply once the customer reaches certain contractual spend thresholds.

Early settlement discounts are issued contingent upon the timing of the payment from the customer.

The Company accounts for a contract when there is a commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Revenue is recognized only when control of the promised services is transferred to a customer in an amount that reflects the consideration that the Company expects to receive in exchange for those services.

A promise to transfer a distinct service is defined as a performance obligation.

The Company derives its revenue from contracts for consulting and hosting services.

These contracts have different terms based on the scope and complexity of engagements and are priced based on time-and-material, fixed-fee or multiple fee types.

Consideration for some contracts may include variable consideration including volume discounts.

If the consideration promised in a contract includes a variable amount, the Company only includes estimated amounts of consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

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The determination of whether to constrain consideration in the transaction price are based on information (historical, current and forecasted) that is reasonably available to the Company, taking into consideration the type of customer, the type of transaction and the specific facts and circumstances of each arrangement.

Although the Company believes that its approach in developing estimates and its reliance on certain judgments and underlying inputs is reasonable, actual results may differ from management’s estimates, judgments and assumptions.

These estimates have historically not been material to the consolidated financial statements.

Cost of revenue

If the Company is not certain about collectability of consideration for services rendered, revenue recognition is deferred until uncertainty is sufficiently resolved.

The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the consolidated statements of loss and comprehensive income/(loss).

Consulting services

The Company offers a suite of digital engineering and information technology (“IT”) consulting services, including digital transformation strategy, emerging technology, lean labs and legacy system replatforming.

The Company recognizes revenue for services over time as the customer simultaneously receives and consumes the benefits as the Company performs IT consulting

Consulting services require the Company to provide a series of distinct daily services and as such represent a single performance obligation earned over the term of a contract and the value derived corresponds to the labor hours expended.

Therefore, the Company measures the progress and recognizes revenue using an effort-based input method.

Where applicable the Company applies the practical expedient and revenue from time-and-materials contracts is recognized based on the right to invoice for services performed, with the corresponding cost of providing those services reflected as cost of sales when incurred.

Hosting services

The Company’s hosting services contracts comprise of the right to access hosted software, and use apart from hosting, set-up, installation, support and maintenance services.

The Company does not grant the customer with the right to take possession of the software at any time during the hosting period.

Due to the complexity of software, installation, set-up, support and maintenance services are provided only at the level of service provider, and the customer can benefit from these services only when combined with software and hosting services.

Accordingly, each of these services is not considered a distinct performance obligation in terms of a contract, and are combined in a single performance obligation.

Because hosting services are transferred to the customer evenly over the contract period, the Company recognizes revenue ratably over the term of the contract.

Cost of revenues

Cost of revenue primarily consists of compensation for professional staff generating revenues for the Company.

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General and administrative expenses include other operating items such as officers’ and administrative personnel salaries, benefits, stock compensation expenses, legal, tax and audit expenses, public company related expenses, insurance, technology costs, facility costs, performance and retention bonuses, depreciation and amortization, including amortization of purchased intangibles, and operating lease expenses.

Stock-based compensation expense

Stock-based compensation expense is measured based on the grant-date fair value of the share-based awards.

Forfeitures are recognized as incurred.

The Company estimates stock options grant-date fair value using the Black-Scholes-Merton option pricing model.

Advertising and promotional expenses

Advertising and promotional costs are expensed in the period in which they are incurred and are included in Sales and marketing expenses.

For the years ended December 31, 2023, 2022 and 2021, advertising and promotional expenses totaled $ 1.0 million, $ 0.9 million and $ 0.5 million, respectively.

Stock-based compensation

The Company recognizes the cost of its stock-based awards based on the fair value of these awards at the date of grant.

The fair value of service-based and performance based awards at the date of grant is based on the closing price of the Company’s shares on NASDAQ.

Grant-date fair value of stock options is estimated using the Black-Scholes-Merton option pricing model.

The model requires management to make a number of key assumptions including expected volatility, expected term, risk-free interest rate, and expected dividends.

The Company evaluates the assumptions used to value its share-based awards on each grant date.

The fair market value of Grid Dynamics stock is determined based on the closing price on NASDAQ on the measurement date.

The Company amortizes the grant-date fair value of all share-based compensation awards over the employee’s requisite service period for the entire award on a straight-line basis, which is generally the vesting period.

For an award with graded vesting that is subject only to a service condition (e.g., time-based vesting), the Company uses the straight-line attribution method under ASC Topic 718 under which they recognize compensation cost on a straight-line basis over the total requisite service period for the entire award (i.e., over the requisite service period of the last separately-vesting tranche of the award).

basis over the total requisite service period for the entire award (i.e., over the requisite service period of the last separately-vesting tranche of the award).

For awards with performance conditions the compensation cost recognized is based on the actual or expected achievement of the performance condition.

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That is, if the straight-line expense recognized to date is less than the grant date fair value of the award that is legally vested at that date, the company will increase its recognized expense to at least equal the fair value of the vested amount.

The Company made an accounting policy election to account for accounts for forfeitures when they occur.

Refer to Note 15 — Stock-based compensation for additional information.

The requisite service period, which is the vesting period, of service-based and performance-based awards is typically four years and one year , respectively.

The Company made an accounting policy election to account for forfeitures when they occur.

Benefit plans

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The determination of the provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws.

The provision for income taxes reflects a combination of

income earned and taxed in the various U.S.

The provision for income taxes reflects a combination of income earned and taxed in the various U.S.

federal and state, international and other jurisdictions.

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Restructuring

The Company initiated a restructuring plan focused on optimizing utilization during 2020.

For the year ended December 31, 2020, the Company incurred and paid total restructuring expenses of $ 0.9 million, which mostly included employee termination costs.

This amount is included as a component of General and administrative expenses in the consolidated financial statements.

The Company did not incur any restructuring expenses during the years ended December 31, 2022 and 2021, respectively.

Restructuring costs include charges for the costs of exit or disposal activities.

The liability associated with restructuring activities is measured initially at fair value and recognized when the liability is incurred.

During the first quarter of 2023, the Company initiated actions focused on optimization of its billable and non-billable functions and reduction of associated costs.

The Company incurred and paid total restructuring costs of $ 1.5 million during the year ended December 31, 2023.

Restructuring costs comprised of employee severance and other personnel costs and were classified as General and administrative expenses in the consolidated financial statements.

The Company did not incur any restructuring expenses during the years ended December 31, 2022 and 2021.

Earnings per share

The Company accounts for earnings per share in accordance with ASC Topic 260, Earnings per Share.

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period.

Diluted earnings per share is computed using the weighted-average number of common and potential dilutive common shares outstanding during the period.

GAAP, companies are required to include certain option grants granted to employees and convertible preferred stock in the diluted earnings per share calculation, except in cases where the effect of the inclusion of options and convertible preferred stock would be antidilutive.

Diluted earnings per share include outstanding stock options, unvested restricted stock units (“RSUs”) and performance stock units (“PSUs”), except cases where the effect of the inclusion of options would be antidilutive.

The Company includes PSUs in computation of diluted earnings per share when they become contingently issuable

per the authoritative guidance and excludes them when they are not contingently issuable.

The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

Prior period reclassifications

The Company presented and analyzed its revenues by customer locations attributing revenues based upon billed customer location.

Effective December 31, 2023, the Company attributes revenues to geographic regions based upon location of the customer served irrespective of the location billed, or the location of the delivery center performing the work.

The Company believes this change allows it to more effectively analyze its geographies and associated risks.

This change did not result in any adjustments to our previously issued financial statements and were applied retrospectively beginning on January 1, 2021.

Comparative information for the years ended December 31, 2022 and 2021 is presented in the following tables:

For the year ended December 31, 2022 For the year ended December 31, 2021

Customer Location (in thousands)

North America $ 255,480 $ 243,962 $ 168,524 $ 168,561

Europe 54,708 53,109 42,479 36,595

Other 294 13,411 277 6,124

Total Revenues $ 310,482 $ 310,482 $ 211,280 $ 211,280

Certain significant risks and uncertainties

The Company is subject to risks, including but not limited to customer concentration, concentrations of credit and foreign currency risks.

Concentrations of credit risk and significant customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and trade receivable.

The Company’s cash is held with high-quality financial institutions.

Deposits held with banks may, at times, exceed the amount of insurance provided on such deposits.

As of December 31, 2022 and 2021 cash balances held in Ukraine and Russia combined equaled $ 0.8 million and $ 1.1 million, respectively.

Cash in these countries is used for the operational needs of the local entities and cash balances change with the expected operating needs of these entities.

Additionally the Company holds cash deposits in countries where the banking sector remains periodically unstable, banking and other financial systems generally do not meet the banking standards of more developed markets, and bank deposits made by corporate entities are not insured.

Such countries apart from Ukraine include Armenia, Moldova, and Mexico.

The Company places its cash with financial institutions considered stable in the region and conducts ongoing evaluations of the credit worthiness of the financial institutions with which it operates.

However, a banking crisis, bankruptcy or insolvency of banks that process or hold the Company’s funds, may result in the loss of the Company’s deposits or adversely affect the Company’s ability to complete banking transactions, which could adversely affect the Company’s business and financial condition.

The Company records its trade receivable including billed and unbilled amounts at their face amounts less allowances.

Billed and unbilled receivables are generally dispersed across the Company’s customers in proportion to their revenue.

Concentrations of credit risk

Capital resources

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

We manage our credit risk exposure through timely assessment of our counterparty creditworthiness and credit limits.

The Company places its cash and cash equivalents with high credit-quality financial institutions.

The Company places its cash with financial institutions considered stable in the region and conducts ongoing assessment of its creditworthiness.

At the same time, a banking crisis, bankruptcy or insolvency of banks that process or hold the Company’s funds, may result in the loss of the Company’s deposits or adversely affect the Company’s ability to complete banking transactions, which could adversely affect the Company’s business and financial condition.

As of December 31, 2023 and 2022, cash held by the Company outside the U.S.

was $ 21.2 million and $ 16.8 million, respectively, and included, among others, the U.K., Netherlands, India, Poland, Ukraine, Armenia, Moldova, Serbia, Mexico and other countries.

The banking sector of Ukraine, Armenia, Moldova, Serbia, and Mexico remains periodically unstable, banking and other financial systems generally do not meet the financial standards of more developed European and American markets, and bank deposits made by corporate entities are not insured.

In addition to that, the Ukrainian financial system was and continues to be significantly impacted by military action launched by Russia against the country.

As of December 31, 2023 and 2022, cash balances held in Ukraine equaled $ 4.3 million and $ 0.6 million, respectively.

The Company tends to hold cash in Ukraine and other countries of its presence with less developed and regulated banking systems at levels necessary to cover operating needs of local entities.

The Company derives its revenues from customers operating in multiple industries located around the world.

This fact accompanied by ongoing evaluation of customer financial position allows the Company to disaggregate and limit its exposure to credit risk.

Historically, the Company has not experienced significant credit losses and write-offs of accounts receivable, however, if any of its customers encounter financial difficulties or become insolvent, the Company’s credit losses could increase which would negatively affect its results of operations.

The following table shows number of customers exceeding 10% of the Company’s billed and unbilled receivable balances at December 31, 2023 and 2022:

As of December 31,

Billed receivable 2 1

Unbilled receivable 2 1

The Company has not experienced any losses on its cash and cash equivalents and minimal losses on its trade receivable.

The Company performs ongoing evaluations of its customers’ financial condition.

Billed receivables

Unbilled receivables

The following table shows the amount of revenue derived from each customer exceeding 10% of the Company’s revenue during the years ended December 31, 2023, 2022 and 2021:

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Customer 1 14.4 % 12.6 % 11.6 %

Customer 2 10.6 % 11.0 % 11.8 %

Customer 2 n/a 10.6 % 11.0 %

Foreign currency risks

Grid Dynamics’ functional currency apart from the U.S.

dollar includes EURO, British pounds, Mexican pesos, Moldovan leu and Indian rupees.

Grid Dynamics contracts with customers for payment in and generates predominantly all of its revenue in U.S.

dollars, except for Daxx and Tacit that generate revenue predominantly in EURO and British pounds.

The international subsidiaries convert the U.S.

dollars to their respective local currencies to fund operations such as labor and materials required for the entity to operate.

The Company’s international subsidiaries’ accounting records are denominated in their respective local currencies.

The Company is exposed to foreign currency exchange rate changes that could impact remeasurement of foreign denominated monetary assets and liabilities into U.S.

The Company is exposed to foreign currency exchange rate risk in the ordinary course of business.

The Company’s operations are predominantly conducted in U.S.

Other than U.S.

dollars, the Company generates revenues in EURO and British pounds and incur expenditures principally in Polish zlotys, EURO, British pounds and Mexican pesos.

International foreign operations expose the Company to foreign currency exchange rate changes that could impact remeasurement of foreign denominated monetary assets and liabilities into the U.S.

dollars with the remeasurement impact recorded to income.

The Company is also exposed to fluctuations in foreign currency exchange rates related to cash outflows for expenditures in foreign currencies.

The net income/(loss) on foreign currency transactions was $( 1.5 ) million, $( 0.7 ) million, and $ 0.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The Company has not entered into any foreign exchange forward contracts, derivatives, or similar financial instruments to hedge against the risk of foreign exchange rate fluctuations.

During the years ended December 31, 2023, 2022, and 2021, the net loss on foreign currency transactions was $ 2.3 million, $ 1.5 million, and $ 0.7 million, respectively.

Recently adopted accounting pronouncements

Changes to U.S.

Changes to the U.S.

GAAP are established by the Financial Accounting Standards Board (the “FASB”), in the form of Accounting Standards Updates (“ASUs”), to the FASB’s ASC.

The Company will adopt according these changes according to the various timetables the FASB specifies.

The Company will adopt these changes according to the various timetables the FASB specifies.

In February 2016, the FASB issued ASU 2016-02 , Leases (Topic 842).

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The adoption of Topic 842 on January 1, 2022 resulted in the recognition of RoU Assets for operating leases of $ 5.9 million and operating lease liabilities of $ 5.7 million.

The adoption of Topic 842 did not have an impact on the consolidated statement of loss and comprehensive loss, consolidated statement of changes in stockholders’ equity or the consolidated statement of cash flows.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments .

Topic 326 was subsequently amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, ASU 2019-05, Financial Instruments — Credit Losses (Topic 326):

Targeted Transition Relief, and clarified the guidance with the release of ASU 2020-02 Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842).

The adoption of Topic 842 did not have an impact on the consolidated statement of loss and comprehensive income/(loss), consolidated statement of changes in stockholders’ equity or the consolidated statement of cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments that was subsequently amended by ASU 2019-4, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, ASU 2019-5, Financial Instruments — Credit Losses (Topic 326):

Targeted Transition Relief, and clarified with the release of ASU 2020-2 Financial Instruments — Credit Losses (Topic 326) and Leases (Topic 842).

These ASUs replace the current incurred loss impairment methodology with a methodology that reflects expected credit losses measured at amortized cost and certain other instruments, including loans, held-to-maturity debt securities, net investments in leases, and off-balance sheet credit exposures.

The update is effective for fiscal years beginning after December 15, 2022, and interim periods with fiscal years after December 15, 2022.

The Company has determined that the adoption of this guidance will not have a material effect on the on the consolidated financial statements.

In March 2020, FASB issued ASU No.

2020-03, Codification to Financial Instruments.

This ASU improves and clarifies various financial instruments topics, including the current expected credit losses standard issued in 2016.

The ASU includes seven different issues that describe the areas of improvement and the related amendments to U.S.

GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications.

The amendments related to Issue 1, Issue 2, Issue 3, Issue 4, and Issue 5 were effective upon issuance of this update.

The new guidance did not have a material impact on the consolidated financial statements.

The amendments related to Issue 6 and Issue 7 are effective for the Company the earlier of January 1, 2023 or when the Company adopts ASU 2016-13, if early adopted.

The Company has determined that the adoption of this guidance will not have a material effect on the consolidated financial statements.

Note 3 – Business combination

On March 5, 2020, ChaSerg consummated its business combination with GDI pursuant to the Merger Agreement.

Immediately following the Business Combination, there were 50.8 million shares of common stock with a par value of $ 0.0001 , and 11.3 million warrants outstanding.

GDI began operations in September 2006 to provide next-generation ecommerce platform solutions in the areas of search, analytics, and release automation to Fortune 1000 companies.

Under ASC 805, Business Combinations, GDI was deemed the accounting acquirer, and the Business Combination was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded in accordance with U.S.

ChaSerg was treated as the “acquired” company for financial reporting purposes.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of GDI issuing stock for the net assets of ChaSerg, accompanied by a recapitalization.

The net assets of ChaSerg were stated at historical cost, with no goodwill or other intangible assets recorded.

Reported shares and earnings per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination (approximately 1.685 GDH shares to 1.0 GDI share).

The following represents the aggregate consideration for the Business Combination:

(in thousands, except for per share amounts)

Shares transferred at Closing 27,006

Post-Closing share adjustment ( 857 )

Total shares transferred at Closing 26,149

Value per share $ 10.19

Total share consideration $ 266,459

Cash transferred to GDI stockholders 130,000

Closing merger consideration $ 396,459

The shares transferred at Closing included 4.3 million options to purchase the Company’s shares that were vested, outstanding and unexercised, which were determined using 1.7 million vested options at Closing converted at an exchange ratio of approximately 2.48 .

Additionally, 0.4 million options to purchase the Company’s common stock that were unvested, outstanding and unexercised were assumed by the Company, which were determined using 0.1 million unvested options at Closing converted at an exchange ratio of approximately 2.48 .

In connection with the Closing, 0.1 million shares of common stock were redeemed at a price per share of approximately $ 10.21 .

See Note 14 for details of the Company’s common stock prior to and subsequent to the Business Combination.

In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $ 4.7 million, consisting of legal and professional fees, of which $ 4.1 million were related to equity issuance costs and recorded to Additional paid-in capital as a reduction of proceeds and $ 0.6 million were recorded to General and administrative expenses.

In connection with the Business Combination, all outstanding retention bonus obligations from a 2017 acquisition totaling $ 3.4 million were accelerated and paid in full to Grid Dynamics’ personnel immediately prior to the Closing and were recorded in Cost of revenue and Operating expenses in the consolidated financial statements.

The Company adopted Topic 326, effective January 1, 2023, using a modified-retrospective approach.

Adoption of Topic 326 did not have any impact on its consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) – Disclosures by Business Entities about Government Assistance , which requires entities to make annual disclosures about government assistance received during reporting periods presented.

Disclosures are aimed at increasing transparency and include the following (1) the nature, significant terms and conditions of the transactions, including related commitments and contingencies, (2) the related

accounting policy applied to those transactions;

and (3) the effect of those transactions on an entity’s financial statements.

The new guidance is effective for annual reporting periods beginning after December 15, 2021 and impacts only annual financial statement note disclosures.

The Company receives government grants in certain countries of its operations.

The grants are mainly aimed at reaching certain employment rates.

The Company recognizes grants in Other income/(expense), net or as a reduction to the related Operating expenses in the consolidated statement of loss and comprehensive income/(loss) when there is reasonable assurance that the terms of the grant will be met.

Funds received before the Company meets the terms of the grant are reported as a deferred income classified in the consolidated balance sheets under Accrued expenses and other current liabilities or Other noncurrent liabilities depending on grant’s maturity.

During the year ended December 31, 2023, the Company recognized $ 1.3 million related to government grants, which are included in Cost of revenues and Operating expenses in the consolidated statements of loss.

There were no material grants received during the years ended December 31, 2022, and 2021, respectively.

Recently issued accounting pronouncements

On November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures, that expands disclosures requirements around significant segment expenses and other segment items that are included in reported measure of segment profit or loss.

The guidance also requires entities to provide in their interim financial reports all disclosures about a reportable segment’s profit or loss and assets that are currently required only on annual basis.

Guidance also obliges entities with a single reportable segment to provide all the disclosures under amended ASC 280 in their interim and annual financial statement.

The new guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods within fiscal years beginning after December 15, 2024 on a retrospective basis, The Company is currently evaluating the impact on this guidance on its consolidated financial statements.

On December 14, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) — I mprovements to Income Tax Disclosures, which expands annual disclosure requirements around income taxes primarily related to the rate reconciliation and income taxes paid.

The new guidance is effective for annual reporting periods beginning after December 15, 2024 with early adoption permitted.

The guidance will be applied on a prospective basis with a retrospective application option.

The Company is currently evaluating the impact on this guidance on its consolidated financial statements .

Note 2 — Acquisitions

NextSphere — On April 18, 2023, the Company completed the acquisition of 100 % of NextSphere Technologies, Inc.

(“NextSphere”).

Founded in 2006, NextSphere is headquartered in Tampa, FL, has an engineering presence in Phoenix, AZ, and operates two large engineering centers in India’s tech hubs of Hyderabad and Chennai.

NextSphere specializes in modern application development, systems monetization, product development, cloud and infrastructure services, and quality assurance.

Over the years, NextSphere has worked with several brands across numerous industry verticals with expertise in Healthcare, Fintech and CPG/Manufacturing industries.

The Company believes this acquisition will support the Company’s objectives of enhancing its technical capabilities, expanding its global footprint, and increasing its client base.

The total purchase consideration is $ 25.2 million and consists of cash consideration of $ 24.3 million paid at closing, and fair value of the contingent consideration at the date of the acquisition of $ 0.9 million.

The maximum amount of potential contingent cash consideration is $ 2.0 million.

The contingent consideration is payable based on revenue and gross profit metrics to be achieved by NextSphere within 12 months.

The Company recorded a liability for the contingent consideration amount based on the Company’s best estimate of the fair value of the expected payout.

See Note 3 for further details on contingent consideration.

Mutual Mobile — On December 23, 2022, the Company acquired 100 % of the equity interest of the software company Mutual Mobile Inc.

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The acquisition of Mutual Mobile added approximately 180 employees to the Company’s headcount.

acquisition will accelerate Company’s strategic expansion into the India engineering market and further solidifies Grid Dynamics’ commitment to global growth.

The acquisition will accelerate the Company’s strategic expansion into the India engineering market and further solidifies Grid Dynamics’ commitment to global growth.

The total purchase consideration is $ 16.1 million and consists of cash consideration of $ 12.8 million paid at closing, and fair value of the contingent consideration at the date of the acquisition of $ 3.3 million.

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Founded in 2002, Tacit is a global provider of digital commerce solutions, serving customers across the UK, North America, Continental Europe, and Asia.

The acquisition of Tacit added approximately 180 employees to the Company's headcount.

The acquisition of Tacit added approximately 180 employees to the

Company's headcount.

The acquisition will augment the Company’s service offerings and will strengthen its competitive position within the market.

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See Note 3 for further details on contingent consideration.

Daxx — On December 14, 2020, the Company completed its acquisition of Daxx Web Industries B.V.

(“Daxx”), a Netherlands-based software development and technology consulting company.

In addition to high-end software development, Daxx provides consulting services spanning agile process reengineering, lean development, and DevOps.

The Company expects to gain market share and realize synergies through the acquisition of Daxx.

The total purchase consideration is up to $ 23.3 million and included cash consideration of approximately $ 18.4 million and contingent consideration payable of up to $ 4.9 million.

The contingent consideration is payable based on revenue and EBITDA metrics achieved by Daxx for 270 days following the date of the acquisition.

The Company recorded a liability for the contingent consideration amount based the Company’s best estimate of the fair value of the expected payout.

See Note 5 for further details on contingent consideration.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as updated for any changes as of December 31, 2022 for Daxx, Tacit and Mutual Mobile:

Daxx Tacit Mutual Mobile

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as updated for any changes as of December 31, 2023 for NextSphere, Mutual Mobile, and Tacit:

NextSphere Mutual Mobile Tacit

(in thousands)

Current assets $ 9,708 $ 4,982 $ 9,145

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Purchase price allocation $ 24,931 $ 15,582 $ 37,617

Current assets acquired include cash and cash equivalents in the amount of $ 2.3 million, $ 3.0 million and $ 3.5 million for Daxx, Tacit and Mutual Mobile acquisitions, respectively.

The fair value of current assets acquired include cash and cash equivalents in the amount of $ 6.4 million, $ 3.5 million, and $ 3.0 million for NextSphere, Mutual Mobile, and Tacit acquisitions, respectively.

The purchase price was assigned to assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition, and any excess was allocated to goodwill, as shown in the table above.

Goodwill represents the value the Company

expects to achieve through the implementation of operational synergies and growth opportunities as the Company expands its global reach.

The goodwill recognized as a result of the NextSphere acquisition represents the value the Company expects to achieve through the implementation of operational synergies and growth opportunities as the Company expands its global reach as well as the assembled workforce acquired, The goodwill is not deductible for income tax purposes.

The goodwill recognized as a result of the Mutual Mobile acquisition is attributable to synergies expected to be achieved by combining the businesses of the Company and Mutual Mobile, expected future contracts, the assembled workforce acquired and other factors.

The goodwill is not deductible for income tax purposes.

The goodwill recognized as a result of the Tacit acquisition is attributable to synergies expected to be achieved by expanding the Company’s ability to serve customers in Europe and the assembled workforce acquired.

The goodwill for all acquisitions is not deductible for income tax purposes.

During the first quarter of 2021, the Company finalized the fair value of the assets acquired and liabilities assumed in the acquisition of Daxx with no additional adjustments recorded.

During the second half of 2021 the Company updated fair value of the contingent consideration for Tacit at acquisition date that resulted in the increase of goodwill for $ 0.7 million.

During the fourth quarter of 2021, the Company finalized the fair value of the assets acquired and liabilities assumed in the acquisition of Tacit.

For the acquisition of Mutual Mobile, the estimated fair values of the assets acquired and liabilities assumed are provisional and based on the information that was available as of the acquisition date.

During the fourth quarter of 2023, the Company finalized working capital adjustment for NextSphere that resulted in a decrease of original purchase price in the amount of $ 0.3 million and updated fair value of deferred taxes by $ 0.2 million.

These adjustments resulted in a corresponding net change in goodwill by $ 0.1 million.

Due to complexity of valuation and potential adjustments to income taxes, the estimated fair values of certain assets acquired and liabilities assumed are provisional and subject to potential adjustments.

The Company expects to complete the purchase price allocations as soon as practicable but no later than one year from the acquisition date.

During the fourth quarter of 2023, the Company finalized working capital adjustment for Mutual Mobile which reduced the original purchase price by $ 0.5 million and decreased fair value of deferred taxes by $ 0.2 million.

These adjustments resulted in

a corresponding net change in goodwill by $ 0.7 million.

The Company then finalized the fair value of the assets acquired and liabilities assumed in the acquisition of Mutual Mobile.

During the second half of 2021, the Company updated fair value of the contingent consideration for Tacit at the acquisition date that resulted in increase of goodwill for $ 0.7 million.

During the fourth quarter of 2021, the Company finalized the fair value of the assets acquired and liabilities assumed in the acquisition of Tacit.

The estimated fair value, useful lives and amortization methods of identifiable intangible assets as of the date of acquisition updated for any changes during the year ended December 31, 2023 are as follows:

Daxx Tacit Mutual Mobile

NextSphere Mutual Mobile Tacit

Fair Value Useful Life Fair Value Useful Life Fair Value Useful Life

Customer relationships $ 8,415 10 years $ 3,453 8 years $ 11,737 12 years

Acquired software 995 2.5 years — — — —

Trade name 496 2 years 152 4 years 1,176 4 years

Non-compete agreements 440 2 years — — 144 2 years

Non-compete agreements — 144 2 years — —

Total identified intangible assets $ 9,906 $ 3,749 $ 12,913

During the years ended December 31, 2023, 2022 and 2021, the Company incurred $ 1.0 million, $ 0.6 million and $ 0.9 million, respectively, of transaction-related costs, that were included in General and administrative costs in the consolidated statement of loss and comprehensive income/(loss).

The Company used acquisition method of accounting for all acquisitions, and consequently, the results of operations for all acquisitions are reported in the consolidated financial statements from the dates of acquisition.

Revenues generated by acquired companies during the period of one year starting from acquisition date and included in the Company’s consolidated statement of loss totaled $ 14.6 million, $ 44.9 million and $ 1.0 million during the years ended December 31, 2022, 2021 and 2020.

The following unaudited pro forma information presents the combined results of operations as if the acquisitions of Daxx, Tacit and Mutual Mobile had occurred at the beginning of the year preceding acquisition date.

Pre-acquisition results of businesses acquired have been added to the Company’s historical results.

The pro forma results contained in the table below include adjustments for amortization of acquired intangibles, depreciation expense, related to the financing and related income taxes.

Any potential cost savings or other operational efficiencies that could result from the acquisition are not included in these pro forma results.

These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor are they necessarily an indication of future operating results.

(Unaudited) 2022 2021 2020

Revenue $ 321,969 $ 219,312 $ 149,219

Net loss $ ( 27,811 ) $ ( 5,910 ) $ ( 10,792 )

Diluted loss per share $ ( 0.40 ) $ ( 0.10 ) $ ( 0.24 )

Pro forma results of operations have not been presented because the effect of the acquisitions on the Company’s consolidated financial statements was not material individually or in the aggregate.

Note 3 — Fair value

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities masured at fair value on a recurring basis

The Company measures contingent consideration payable at fair value on a recurring basis using significant inputs that are not observable in the market.

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The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved.

Changes in the fair value of contingent consideration payable primarily result from changes in the timing and amount of specific milestone estimates and changes in probability assumptions

with respect to the likelihood of achieving the various earnout criteria.

Changes in the fair value of contingent consideration payable primarily result from changes in the timing and amount of specific milestone estimates and changes in probability assumptions with respect to the likelihood of achieving the various earnout criteria.

These changes could cause a material impact to, and volatility in the Company’s operating results.

During the years ended December 31, 2023, 2022 and 2021, the Company completed three acquisitions under which the Company committed to make a cash earnout payment subject to attainment of specific performance targets.

The weighted average discount rates used to determine fair values of Daxx, Tacit and Mutual Mobile contingent considerations were 4.8 %, 13.5 % and 10.1 %, respectively.

average discount rates used to determine fair values of NextSphere, Mutual Mobile and Tacit contingent considerations were 15.5 %, 10.3 % and 13.5 %, respectively.

The Company records contingent consideration payable in Other current liabilities in its consolidated balance sheets.

A reconciliation of the beginning and ending balances of Level 3 acquisition-related contingent consideration payable using significant unobservable inputs for the years ended December 31, 2023, 2022 and 2021 are as follows:

(in thousands)

Contingent consideration payable as of January 1, 2021 $ 1,947

Acquisition date fair value of contingent consideration payable - Daxx 1,947

Contingent consideration payable as of December 31, 2020 $ 1,947

Acquisition date fair value of contingent consideration payable — Tacit

Change in fair value of contingent consideration payable included in Other income/(expense) - Daxx ( 14 )

Change in fair value of contingent consideration payable included in Other income/(expense) - Tacit 1,000

Change in fair value of contingent consideration payable included in Other income/(expense), net — Daxx

Change in fair value of contingent consideration payable included in Other income/(expense), net — Tacit

Contingent consideration payable as of December 31, 2021 $ 6,933

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Contingent consideration payable as of December 31, 2022 $ 3,288

Acquisition date fair value of contingent consideration payable — NextSphere

Change in fair value of contingent consideration payable included in Other income/(expense), net — Mutual Mobile

Change in fair value of contingent consideration payable included in Other income/(expense), net — NextSphere

Contingent consideration payable as of December 31, 2023 $ —

There were no transfers of liabilities among the levels within the fair value hierarchy during the years ended December 31, 2023, 2022 and 2021.

Financial assets and liabilities not measured at fair value on a recurring basis

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Non-marketable securities without readily determinable fair values

The Company holds investment in equity securities of a related party that do not have readily determinable fair values.

This investment is recorded at cost and is remeasured to fair value based on certain observable price changes or impairment events as they occur.

The carrying amount of the investment was $ 1.0 million as of December 31, 2022 and was classified as Other noncurrent assets in the Company’s consolidated balance sheets.

The Company did not hold investments in equity securities recorded at cost as of December 31, 2021.

Note 6 — Prepaid expenses and other current assets

The prepaid expenses and other current assets were as follows (in thousands):

As of December 31,

Prepaid expenses $ 3,323 $ 2,188

Guarantee deposits placed 2,295 345

Value added tax receivable 1,384 931

Prepaid insurance 925 921

Other assets 227 118

Total prepaid expenses and other current assets $ 8,154 $ 4,503

The Company holds investment in equity securities of a related party, a company affiliated with the member of the Company’s Board of Directors, that do not have readily determinable fair values.

This investment is recorded at cost and is remeasured to

fair value based on certain observable price changes or impairment events as they occur.

The carrying amount of the investment was $ 1.3 million and $ 1.0 million as of December 31, 2023 and 2022, respectively, and was classified as Other noncurrent assets in the Company’s consolidated balance sheets.

Note 4 — Property and equipment, net

Property and equipment, net consist of the following (in thousands):

(In Years) As of December 31,

Property and equipment, net consist of the following:

As of December 31,

(in thousands)

Computers and equipment 2 - 5

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Furniture and fixtures 3 - 10

Software 3 - 5

Leasehold improvements 2 - 8

Software 3 - 5

Machinery and automobiles 4 - 6

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Capitalized software development costs 2 $ 9,050 $ 6,210

$ 6,210 $ 4,656

Accumulated amortization ( 3,969 ) ( 4,722 )

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Note 5 — Goodwill and intangible assets, net

Goodwill rollforward for the years ended December 31, 2022 and 2021 was as follows (in thousands):

Goodwill rollforward for the years ended December 31, 2023 and 2022 was as follows:

(in thousands)

Goodwill as of January 1, 2022 $ 35,958

Acquisition of Tacit 21,268

Goodwill as of December 31, 2021 $ 35,958

Acquisition of Mutual Mobile 9,556

Goodwill as of December 31, 2022 $ 45,514

There were no impairment losses of goodwill recognized as of December 31, 2022 and 2021.

Intangible assets consist of the following (in thousands):

(In Years) As of December 31,

Mutual Mobile purchase accounting adjustment

Acquisition of NextSphere 9,031

Goodwill as of December 31, 2023 $ 53,868

There were no accumulated impairment losses of goodwill recognized as of December 31, 2023 and 2022.

Intangible assets consist of the following:

As of December 31,

(in thousands)

Customer relationships 8 - 12

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Tradenames 2 - 10

Acquired software 2.5 995 —

Non-compete agreements 2 584 584

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Intangible assets amortization expense for the years ended December 31, 2023, 2022, and 2021 was $ 3.7 million, $ 2.5 million, $ 2.0 million, respectively.

Based on the carrying value of the Company’s existing intangible assets as of December 31, 2022, the estimated amortization expense for the future years is as follows:

Years ending December 31, (in thousands) Amount

Based on the carrying value of the Company’s existing intangible assets as of December 31, 2023, the estimated amortization expense for the future years is as follows (in thousands):

(in thousands)

Thereafter 9,466

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Note 6 — Accrued expense and other current liabilities

The components of accrued expense and other current liabilities were as follows (in thousands):

The components of accrued expense and other current liabilities were as follows:

As of December 31,

Contingent consideration payable $ 3,288 $ 6,933

Value added tax payable 1,345 1,274

(in thousands)

Accrued expenses $ 2,943 $ 1,302

Deferred revenue 1,124 409

Value added tax payable 993 1,345

Customer deposits 756 754

Deferred revenue 577 1,124

Contingent consideration payable — 3,288

Other liabilities 1,007 712

Total accrued expense and other current liabilities $ 6,276 $ 8,525

As of December 31, 2022 and December 31, 2021 the Company had payable to its related party in the amount of $ 0.6 million in each of the respective years that was classified as Accrued expense and other current liabilities in unaudited condensed consolidated balance sheet.

As of December 31, 2023 and December 31, 2022 the Company had payable to its related party, a company affiliated with the member of the Company’s Board of Directors, in the amount of $ 0.6 million in each of the respective years that was classified as Accrued expense and other current liabilities in consolidated balance sheet.

Note 7 — Debt

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The Company includes these options in the lease term when it is reasonably certain that they will be exercised.

As of December 31, 2022, the Company had no finance leases.

Operating lease expense is recorded on a straight-line basis over the lease term and lease costs were as follows (in thousands):

For the year ended

December 31, 2022

The Company had no finance leases as of December 31, 2023 and 2022, respectively.

Operating lease expense is recorded on a straight-line basis over the lease term and lease costs were as follows:

For the years ended December 31,

(in thousands)

Operating lease cost $ 3,860 $ 3,268

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Total lease cost $ 4,608 $ 3,824

Lease expense under operating lease agreements for the year ended December 31, 2021 and December 31, 2020 was $ 4.2 million in both periods.

Lease expense under operating lease agreements for the year ended December 31, 2021 was $ 4.2 million.

Supplemental information related to operating lease transactions is as follows (in thousands):

For the year ended

December 31, 2022

For the years ended December 31,

(in thousands)

Lease liability payments $ 3,692 $ 2,888

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Non-cash net decrease in lease liability due to lease modifications $ ( 553 ) $ 1,015

Weighted average remaining lease term and discount rate as of December 31, 2022 is as follows:

Weighted average remaining lease term and discount rate as of December 31, 2023 and 2022 is as follows:

As of December 31,

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Weighted average discount rate 7.0 % 5.0 %

As of December 31, 2022, operating lease liabilities will mature as follows (in thousands):

Years ending (in thousands) Lease Payments

As of December 31, 2023, operating lease liabilities will mature as follows:

Lease Payments

(in thousands)

Thereafter 269

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Total $ 10,996

There were no material lease agreements signed with related parties as of December 31, 2022.

There were no material lease agreements signed with related parties as of December 31, 2023 and 2022.

As of December 31, 2023, the Company had committed to payments of $ 0.4 million related to operating lease agreement that had not yet commenced as of December 31, 2023.

These operating lease will commence in 2023 with lease term of two years .

The Company does not have any material finance lease agreements that had not yet commenced.

Note 12 — Revenue

These operating lease will commence in 2024 with lease term of 6.2 years.

The Company does not have finance lease agreements that had not yet commenced.

Note 9 — Revenues

Disaggregation of revenues

The tables below present disaggregated revenues from contracts with customers by customer location, industries and contract-types.

The tables below present disaggregated revenues from contracts with customers by customer location, verticals and contract-types.

The Company believes this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.

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The following table shows the disaggregation of the Company’s revenues by major customer location.

Revenues are attributed to geographic regions based upon billed client location.

Revenues are attributed to geographic regions based upon location of the customer served irrespective of the location billed, or the location of the

delivery center performing the work.

Substantially all of the revenue in our North America region relates to operations in the United States.

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Fixed-fee 29,991 24,566 16,354

Other revenues

Total Revenues $ 312,910 $ 310,482 $ 211,280

Contract balances

A contract asset is a right to consideration that is conditional upon factors other than the passage of time.

A contract liability, or deferred revenue, consist of advance payments and billings in excess of revenues recognized.

As of December 31, 2022 and 2021 the Company did not have material contract assets.

Contract liabilities were $ 1.1 million and $ 0.4 million as of December 31, 2022 and 2021, respectively.

The payment terms included on the Company’s contracts with customers vary and depend on multiple factors including type of service provided, credit evaluation of a customer and prior payment history.

When the timing of payment by a customer differs from the timing of rendering services, the Company records either a contract asset or a contract liability.

Contract assets include amounts related to a right to consideration that is conditional upon factors other than the passage of time.

Contract liabilities comprise amounts received in advance of the Company’s performance or billings in excess of revenues recognized.

As of December 31, 2023, 2022, and 2021, the Company did not have contract assets recorded in its consolidated balance sheet.

As of December 31, 2023, 2022, and 2021, the Company recorded $ 0.6 million, $ 1.1 million and $ 0.4 million, respectively that were classified as Accrued and other current liabilities in the consolidated balance sheet.

Decrease in our contract liabilities from December 31, 2022 was largely attributed to a decline in number of fixed fee projects in the total project pool, specifically in the second half of 2023.

Revenues recognized during the year ended December 31, 2023 that were included in Accrued and other current liabilities at December 31, 2022 were $ 1.1 million.

Revenues recognized during the year ended December 31, 2022 that were included in Accrued and other current liabilities at December 31, 2021 were $ 0.4 million.

Revenues recognized during the year ended December 31, 2021 that were included in Accrued and other current liabilities at December 31, 2020 were $ 0.1 million.

Remaining performance obligation

ASC Topic 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of December 31, 2022.

This disclosure is not required for:

As of December 31, 2023, the aggregate amount of transaction price allocated to remaining performance obligations was $ 5.3 million.

Our remaining performance obligations represent commitments for future services for which work has not been performed and revenues are to be recorded in future periods.

The Company expects to recognize approximately 55.5 % of its remaining performance obligations as revenues in fiscal year 2024, and an additional 44.5 % in 2025.

Remaining performance obligations include currently recorded contract liability as well as amounts that will be invoiced in future periods and excludes the contracts that meet at least one of the following criteria under ASC Topic 606:

1) contracts with an original duration of one year or less, including contracts that can be terminated for convenience without a substantive penalty,

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4) variable consideration in the form of a sales-based or usage-based royalty promised in exchange for a license of intellectual property.

All of the Company’s contracts met one or more of these exemptions as of December 31, 2022.

For the years ended December 31, 2022, 2021, and 2020 the Company recorded revenue from its related parties of $ 6.8 million, $ 4.3 million and $ 0.1 million respectfully.

As of December 31, 2022 and 2021 accounts receivable from related parties were $ 0.9 million and $ 0.6 million, respectively.

Many of our performance obligations met one or more of these exemptions as of December 31, 2023.

Transactions with related parties

During the years ended December 31, 2023, 2022, and 2021, the Company conducted transaction with a number of companies affiliated with the members of the Company’s Board of Directors.

As a result, the Company recorded revenue from its related parties of $ 7.6 million, $ 6.8 million and $ 4.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023 and 2022, accounts receivable from related parties were $ 0.9 million in both periods, respectively.

Note 10 — Income taxes

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Deferred tax assets

Stock-based compensation $ 4,004 $ 1,328

Capitalized R&D $ 3,968 $ 1,056

Stock-based compensation 3,833 4,004

Accrued compensation 1,950 931

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Allowance for bad debt 185 105

Credits — 195

Total deferred tax assets $ 11,022 $ 7,205

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Fixed asset basis ( 373 ) ( 291 )

Other foreign DTLs — ( 24 )

Total deferred tax liabilities ( 7,878 ) ( 5,963 )

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The Company assessed its ability to realize the benefits of its domestic deferred tax assets (“DTA”) by evaluating all available positive and negative evidence, objective and subjective in nature, including (1) cumulative results of operations in recent years, (2) sources of recent pre-tax income, (3) estimates of future taxable income, and (4) the length of net operating loss (“NOL”) carryforward periods.

The Company determined it is in a three-year cumulative taxable income position as of December 31, 2022 and expects to continue to be in a taxable income position in the long-term foreseeable future.

The Company determined it is in a 3-year cumulative taxable income position as of December 31, 2023, and expects to continue to be in a taxable income position in the long-term foreseeable future.

After an evaluation of all available qualitative and quantitative evidence, both positive and negative in nature, the Company concluded it is more likely than not that sufficient future taxable income will be generated to realize the benefits of its DTAs prior to expiration.

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The Company's provision for income taxes does not include provisions for foreign withholding taxes associated with the repatriation of undistributed earnings of certain foreign subsidiaries that we intend to reinvest indefinitely in our foreign subsidiaries.

As part of the 2017 Tax Cuts and Jobs Act, Section 174 was amended to require that specified research and experimental (SR&E) expenditures be capitalized and amortized but delayed the effective date of this amendment to tax years beginning

January 1st, 2022 or later.

As part of the 2017 Tax Cuts and Jobs Act, Section 174 was amended to require that specified research and experimental (“SR&E”) expenditures be capitalized and amortized but delayed the effective date of this amendment to tax years beginning January 1st, 2022 or later.

The amortization period is 5 years for domestic research expenditures and 15 years for foreign research expenditures using a mid-year convention.

The Company evaluated its R&D expenses both in the US and foreign jurisdictions and determined there were approximately $ 4.4 million of expenses worldwide subject to capitalization and treated as a temporary adjustment.

The Company evaluated its R&D expenses both in the U.S.

and foreign jurisdictions and determined there were approximately $ 12.9 million of expenses worldwide subject to capitalization and treated as a temporary adjustment.

The President signed the CHIPS and Science Act and Inflation Reduction Act (“IRA”) into law on August 9 and 16, 2022, respectively.

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The new law includes a corporate alternative minimum tax, a stock buyback tax, and increased IRS enforcement funding.

The CHIPS Act includes funding for the semiconductor industry in the US.

The CHIPS Act includes funding for the semiconductor industry in the U.S..

Both the Inflation Reduction Act and the CHIPS and Science Act were enacted in 2022.

Both CHIPS Act and IRA were not materially impactful on the Company’s tax positions.

California Assembly Bill 85 (AB 85) was signed into law by Governor Gavin Newsom on June 29, 2020.

The legislation suspended the California Net Operating Loss deductions for 2020, 2021, and 2022 for certain taxpayers and imposes a limitation of California Tax Credits utilization for 2020, 2021, and 2022.

The legislation disallowed the use of California Net Operating Loss deductions if the taxpayer recognizes business income and its income subject to tax is greater than $1.0 million.

Additionally, business credits will only offset a maximum of $5.0 million of California tax liability.

On February 9, 2022, Governor Gavin Newsom signed Senate Bill 113 (SB 113) into law, bringing an early end to California’s 2020-2022 NOLs deduction suspension, thus, allowing taxpayers to deduct NOLs on 2022 tax return.

SB 113 also removed the $5.0 million business tax credit cap and updated the elective pass-through entity tax credit.

As such, the Company utilized the California net operating loss generated in prior periods to offset California taxable income in 2022.

Note 11 — Stockholders’ equity

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The Company is authorized to issue 110.0 million shares of common stock.

At Closing, March 5, 2020, the Company had issued 50.8 million shares of common stock.

On September 12, 2022, the Company concluded a follow-on public offering of 6.6 million shares of its common stock.

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Additionally, there were 3.1 million outstanding vested options to purchase the Company’s common stock.

Preferred Stock

As of December 31, 2019 GDI had 1.0 million shares of no par value shares of preferred stock outstanding convertible on a 1:1 basis with GDI’s common stock.

At the Closing, the preferred stock outstanding was converted into common stock of the Company, par value $ 0.0001 per share.

Therefore, as of December 31, 2020, 2021 and 2022 there was no preferred stock outstanding, respectively.

Founders and underwriter shares subject to earnout provisions

At the Closing, the Company had 1.2 million shares of common stock issued and outstanding subject to earnout provisions (the “Earnout Shares”).

The Earnout Shares are subject to transfer restrictions and the owners of the Earnout Shares cannot sell, transfer or otherwise dispose of their respective shares until the respective earnout provisions have been achieved as described further below.

The Earnout Shares have full ownership rights including the right to vote and receive dividends and other

distributions thereon.

Dividends and other distributions are not subject to forfeiture in accordance with the Amended and Restated Sponsor Share Letter filed with the SEC on January 26, 2020.

The Earnout Shares vesting conditions are as follows:

and 400,001 Earnout Shares vest if the closing price of the Company’s common stock on the principal exchange on which the securities are listed or quoted have been at or about $ 12.00 ;

and $ 15.00 per share, respectively, for 20 trading days (which need not be consecutive) over a thirty trading day period at any time.

The Earnout Shares automatically vest upon and immediately prior to any of the following events:

1) The Company engages in a “going private” transaction pursuant to Rule 13e-3 under the Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise cease to be subject to reporting obligations under Sections 13 or 15(d) of the Exchange Act;

2) The Company’s common stock ceases to be listed on a national securities exchange;

3) The Company is amalgamated, merged, consolidated or reorganized with or into another company or person (an “Acquiror”) and as a result of such amalgamation, merger, consolidation or reorganization, fewer than 50.1% (whether by voting or economic rights) of the outstanding equity securities or other capital interests of the Acquiror or surviving or resulting entity is owned in the aggregate by the shareholders of the Company, directly or indirectly, immediately prior to such amalgamation, merger, consolidation or reorganization, excluding from such computation the interests of the Acquiror or any affiliate of the Acquiror;

4) The Company and/or its subsidiaries sell, assign, transfer or otherwise dispose of (including by bulk reinsurance outside of the ordinary course of business consistent with past practice), in one or a series of related transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to an Acquiror, fewer than 50.1% (whether by voting or economic rights) of the outstanding equity securities or other capital interests of which, immediately following such sale, assignment or transfer, are owned in the aggregate by the pre-transaction Company stockholders;

5) If a Schedule 13D or Schedule 13G report (or any successor schedules, form or report), each as promulgated pursuant to the Exchange Act, is filed with the SEC disclosing that any person or group (as the terms “person” and “group” are used in Section 13(d) or Section 14(d) of the Exchange Act and the rules and regulations promulgated thereunder) has become the beneficial owner (as the term “beneficial owner” is defined in Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of a percentage of shares of the outstanding Company common shares as shall be greater than the percentage of such shares that, at the date of such filing, is held by any other person or group that held more than 50% of the voting or economic power of Company immediately after the Closing.

The Earnout Shares released for any event as noted above shall be subject to an equitable adjustment for share splits, share dividends, reorganizations, combinations, recapitalizations and similar transactions affecting the common stock after the Closing.

Additionally, each such price threshold shall be reduced by the amount of the aggregate cash or the fair market value of any securities or other assets paid or payable by the Company to the holders of common stock, on a per share basis, as an extraordinary dividend or distribution following the Closing;

provided that the declaration and payment of any such extraordinary dividend or distribution shall be subject to all applicable Laws.

An “extraordinary dividend or distribution” means any dividend or distribution other than a regularly-scheduled dividend or distribution.

All of the Earnout Shares vested and are no longer subject to transfer restrictions during the years ended December 31, 2022 and 2021.

On April 12, 2021, the Staff of the SEC issued the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “Staff Statement”).

The Staff Statement provided new guidance for all SPAC-related companies regarding the accounting and reporting for their warrants that could result in the warrants issued by SPACs being classified as a liability measured at fair value, with non-cash fair value adjustments reported in earnings at each reporting period.

The Company reviewed the accounting for both its public warrants and private warrants following the Staff Statement.

The Company determined that the accounting for its public warrants as equity was consistent with the Staff Statement.

The Company determined that its private warrants should be accounted for as liabilities but that the related accounting errors during the year ended December 31, 2020 were not material to the required financial statements and disclosures included in its annual report on Form 10-K filed on March 5, 2021.

The Company began accounting for the private warrants correctly in the beginning of 2021, as disclosed in its quarterly report on Form 10-Q filed on May 6, 2021.

As part of its initial public offering (“IPO”), ChaSerg issued 22.0 million units including one share of common stock and one-half of one redeemable warrant.

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Stock-Based Compensation Expense

Employee stock-based compensation cost recognized in the consolidated statements of loss and comprehensive loss was as follows:

Employee stock-based compensation cost recognized in the consolidated statements of loss and comprehensive income/(loss) was as follows:

Twelve months ended December 31,

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Total stock-based compensation $ 35,516 $ 60,968 $ 33,036

Stock-based compensation costs recognized for the year ended December 31, 2020 included $ 2.5 million of compensation expense related to the acceleration of vesting of awards under the 2018 Stock Plan.

Additional $ 3.4 million of stock-based compensation cost was recognized for the year ended December 31, 2021, in connection to partial vesting and early release of 2021 PSU that would otherwise have been recognized in the first quarter of 2022.

2018 Stock Plan - Effective November 12, 2018, GDI adopted 2018 Stock Option Plan.

2018 Stock Plan - Effective November 12, 2018, GDI adopted the 2018 Stock Option Plan.

Under the terms of the 2018 Stock Plan, certain options are subject to accelerated vesting in full or by an additional 12 months as a result of business combinations.

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2020 Equity Incentive Plan - Effective March 5, 2020, our Board of Directors approved an equity incentive plan (the “2020 Plan”).

Performance Units (“PSUs”), and Performance Shares (“PSAs”) (collectively, the “Awards”) to employees, directors, and consultants of the Company.

The 2020 Plan permits the Company to grant a maximum aggregate amount of 16.3 million Incentive Stock Options, Non-Statutory Stock Options (“NSOs”), Restricted Stock, Restricted Stock Units (“RSUs”), Stock Appreciation Rights, Performance Units (“PSUs”), and Performance Shares (“PSAs”) (collectively, the “Awards”) to employees, directors, and consultants of the Company.

Our Board of Directors or any committee appointed by The Board has the authority to grant Awards.

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and thereafter one-sixteenth of the NSOs will vest each subsequent three-month anniversary.

The Company made an accounting policy election to account for accounts for forfeitures when they occur.

RSUs granted to the Board in lieu of the quarterly payments vest immediately.

PSUs are normally capped at 300 % maximum payout and have the following performance goals:

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Fifty percent ( 50 %) of the target number of performance shares granted will vest (if at all) based on the extent of achievement of Revenue Growth for the Performance Period and the remaining fifty percent ( 50 %) of the target number of performance shares granted will vest (if at all) based on the extent of achievement of the Contribution Margin.

As of December 31, 2022, 7.1 million shares of stock remained available for grant under 2020 Plan.

As of December 31, 2023, 7.2 million shares of stock remained available for grant under the 2020 Plan.

All of the awards issued pursuant to the 2020 Plan expire 10 years from the date of grant.

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The simplified method is being used to calculate expected term instead of actual data due to a lack of relevant historical data.

On March 5, 2020 the Company accelerated vesting of certain options due to completion of the Business Combination.

It resulted in recognition of additional expenses of $ 2.5 million.

Additionally part of options was modified and settled in cash pursuant to the terms of the Merger Agreement.

The remaining portion of outstanding vested and unvested options were automatically assumed and converted into options to purchase the Company’s common stock as of the Closing.

Refer to Note 3 for details.

The following table presents details on conversion of the vested and unvested options:

Number of Options

Options outstanding as of December 31, 2019 2,734,327

Options converted to cash at Closing ( 828,590 )

Options forfeited ( 18,940 )

Options outstanding as of March 5, 2020 1,886,797

Options outstanding converted as of March 5, 2020 4,678,011

The following table sets forth the activity for the 2018 Stock Plan for the years ended December 31, 2022 and 2021 after conversion:

The following table sets forth the activity for the 2018 Stock Plan for the years ended December 31, 2023, 2022 and 2021:

Number of Options Weighted Average Exercise Price Aggregate Intrinsic Value, thousands Weighted Average Contractual Term

Options outstanding converted as of March 5, 2020 4,678,011 $ 3.54

Options outstanding as of January 1, 2021 4,599,790 $ 3.54 $ 41,674

Options exercised ( 2,668,191 ) $ 3.54

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Options exercised ( 112,383 ) $ 3.54

Options forfeited ( 30,448 ) $ 3.54

Options outstanding as of December 31, 2023 1,486,428 $ 3.54 $ 14,552 5.04

Options vested and exercisable as of December 31, 2023 1,486,428 $ 3.54 $ 14,552 5.04

The total unrecognized compensation expenses related to 2018 Plan options as of December 31, 2022 was $ 0.04 million, net of forfeitures, to be expensed on a straight-line basis over 0.69 years.

The following table summarizes option activity for for the years ended December 31, 2022, 2021 and 2020 under the 2020 Plan:

The total intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021 was $ 0.9 million, $ 3.8 million and $ 76.6 million, respectively.

As of December 31, 2023 the Company fully recognized stock-based compensation costs related to 2018 Plan options.

The following table summarizes option activity for the years ended December 31, 2023, 2022 and 2021 under the 2020 Plan:

Number of Options Weighted Average Exercise Price Aggregate Intrinsic Value, thousands Weighted Average Contractual Term

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Options granted 766,250 $ 21.61

Options exercised ( 112,087 ) $ 8.20

Options forfeited ( 371,876 ) $ 8.88

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Options forfeited ( 329,889 ) $ 14.99

Options expired ( 44,205 ) $ 19.74

Options outstanding as of December 31, 2023 3,165,715 $ 12.79 $ 7,197 7.53

Options vested and exercisable as of December 31, 2023 1,646,249 $ 11.68 $ 5,382 6.57

The weighted average grant-date fair value of stock options granted during the years ended December 31, 2023, 2022 and 2021 was $ 5.87 , $ 6.93 and $ 8.61 , respectively.

The total intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021 was $ 0.5 million, $ 0.5 million and $ 1.9 million, respectively.

The total unrecognized compensation expenses related to 2020 Stock Plan options as of December 31, 2023 was $ 8.8 million, net of forfeitures, to be expensed on a straight-line basis over the remaining 2.6 years.

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Awards vested and released ( 662,872 ) $ 9.26

Awards forfeited ( 291,157 ) $ 8.14

Unvested awards as of December 31, 2022 2,245,968 $ 11.99

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Awards vested and released ( 1,663,702 ) $ 11.98

Awards forfeited ( 105,008 ) $ 11.25

Unvested awards as of December 31, 2023 729,213 $ 11.99

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Awards granted (1)

1,478,765 $ 15.68

Awards vested and released ( 2,787,001 ) $ 11.64

Awards forfeited ( 32,375 ) $ 15.61

Unvested awards as of December 31, 2021 (1)

112,085 $ 15.69

Awards granted (2)

518,938 $ 39.41

Awards vested ( 112,085 ) $ 15.69

Awards forfeited ( 32,375 ) $ 15.61

Unvested awards as of December 31, 2022 (2)

518,938 $ 39.41

Awards granted (2)

Awards vested ( 112,085 ) $ 15.69

523,938 $ 11.97

Performance achievement adjustment (3)

1,148,376 $ 31.31

Awards vested and released ( 1,335,982 ) $ 39.26

Awards forfeited ( 32,375 ) $ 11.97

Unvested awards as of December 31, 2023 (4)

The vesting of the PSUs with the performance factors based on 2020 results was certified by the Board of Directors for release on February 12, 2021.

Approximately 0.7 million shares were issued upon vesting of the PSUs and 0.8 million shares were withheld to cover $ 10.8 million in tax obligations.

The vesting of the PSUs granted for 2021 performance was partially certified by the Board of Directors with 250 % performance factor for release on December 10, 2021.

Approximately 0.7 million shares were issued upon vesting of the PSUs and 0.7 million shares were withheld to cover $ 25.4 million in tax obligations.

The Board certified the achievement of 2021 PSUs with 271 % performance factor and the remaining shares were released on February 25, 2022.

Approximately 0.06 million shares were issued and 0.05 million shares were withheld to cover $ 0.8 million in tax obligations.

As of December 31, 2022 achievement of 2022 PSUs goals was estimated probable with 256 % performance factor.

Refer to Note 19 for details.

The Company recognized $ 45.0 million compensation expense related to 2022 PSUs was recognized during the year ended December 31, 2022.

822,895 $ 11.97

__________________________

(1) Reported at the certified performance achievement at 271 % of the target shares granted

(2) Reported at 100 % of the target shares granted

(3) Reported at the certified performance achievement at 256 % of the target shares granted in 2022 and at 170 % of the target shares granted in 2023

(4) Reported at the certified performance achievement at 170 % of the target shares granted .

The total unrecognized compensation expenses related to 2022 PSUs as of December 31, 2023 was $ 1.6 million to be expensed on over 0.2 years.

6 unchanged sentences

Note 13 — Earnings per share

The Company computed earnings per share (“EPS”) in conformity with the two-class method required for participating securities.

Undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders.

The Company allocated income between its common and preferred shareholders only for the periods the preferred stock was outstanding, which was January 1, 2020 to March 4, 2020 and May 6, 2019 to December 31, 2019.

There was no preferred stock outstanding March 5, 2020 to December 31, 2020 and January 1, 2019 to May 6, 2019.

As the Company was in a net loss position for the year ended December 31, 2020, the net loss was allocated entirely to common shareholders.

All participating securities are excluded from basic weighted-average number of common shares outstanding.

Diluted EPS is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued.

Potentially dilutive securities include outstanding stock

options, restricted stock units, performance stock units, and convertible preferred securities.

The dilutive effect of potentially dilutive securities is reflected in diluted EPS in order of dilution and by application of the treasury stock method and the if-converted method for stock-based compensation and convertible preferred securities, respectively.

The following table sets forth the computation of basic and diluted EPS of common stock as follows:

9 unchanged sentences

Diluted $ ( 0.02 ) $ ( 0.42 ) $ ( 0.13 )

The denominator used in the calculation of basic and diluted EPS has been retrospectively adjusted for the recapitalization of the Company’s shares as a result of the Business Combination as further described in Note 3.

The following potential dilutive common shares, presented based on weighted average potential shares outstanding during each period and adjusted for the stock split as a result of the transaction, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

The following potentially dilutive common shares, presented based on weighted average potential shares outstanding during each period were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

For the years ended December 31,

1 unchanged sentence

(in thousands)

Convertible preferred stock — — 184

Stock options to purchase common stock 4,823 4,396 5,826

9 unchanged sentences

Geographic Information

Significant portion of the Company’s revenues is generated within North America.

Refer to Note 12 (“Revenue”) for details.

The following table presents revenues by customer location for the years ended December 31, 2023, 2022 and 2021.

The Company attributes customers to respective countries based upon location of the customer served.

It differs from the prior period definition that was based upon location of the customer billed.

Refer to Note 1 for more details on reclassifications.

For the years ended December 31,

2023 2022 2021

(in thousands)

United States 238,155 242,645 167,445

United Kingdom 31,880 21,888 10,574

Netherlands 12,247 15,894 14,599

Other 30,628 30,055 18,662

Total 312,910 310,482 211,280

Long-lived assets include property and equipment, net of accumulated depreciation and amortization.

2 unchanged sentences

( in thousands)

Serbia $ 2,457 $ 1,235

Ukraine 2,437 2,468

United States 2,174 1,317

Serbia 1,235 433

Poland 989 313

Moldova 605 305

Armenia 445 —

Other 4,290 3,195

4 unchanged sentences

The SSA is non-cancelable for a term of 5 years from the effective date and renewable at the election of the Company.

On December 20, 2023 the Company decided to renew the SSA for an additional term of 5 years starting from June 1, 2024.

Payments under the terms of the SSA are due quarterly in advance.

Total future minimum payments under the non-cancelable SSA are as follows:

Years ending December 31, (in thousands) Subscription Payments

Subscription Payments

(in thousands)

Total $ 4,976

The Company is subject to legal proceedings and claims that arise in the ordinary course of its business.

3 unchanged sentences

Note 16 — Subsequent events

The vesting of PSUs with the performance factors based on 2022 results was certified by the Board of Directors for release on February 21, 2023.

Approximately 0.7 million shares were issued upon vesting of 2022 PSUs and 0.7 million shares were withheld to cover $ 8.0 million in tax obligations.

The vesting of PSUs with the performance factors based on the 2023 results was certified by the Board of Directors for release on February 20, 2024.

Approximately 0.8 million shares were released upon vesting of 2023 PSUs with approximately 0.4 million shares net withheld to cover tax obligations.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data