Filed pursuant to Rule 424(b)(5)
Registration Nos. 333
-255732 and 333-238202

Prospectus supplement
(To prospectuses dated May 13, 2021)

10,100,262 Shares

Common Stock

We are offering 4,000,000 shares and the selling stockholders are offering 6,100,262 shares of our common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.

Our common stock is listed for trading on The NASDAQ Stock Market LLC under the symbol GDYN. On June 30, 2021, the last reported sale price of our common stock was $15.03 per share.

We are an emerging growth company under applicable Securities and Exchange Commission rules and will be subject to reduced public company reporting requirements for this prospectus supplement and future filings.

Investing in our common stock involves a high degree of risk. Please read Risk Factors beginning on page S-17 of this prospectus supplement, in the accompanying prospectuses and in the documents incorporated by reference into this prospectus supplement and the accompanying prospectuses.

      

 

Per Share

 

Total

Public offering price

 

$

15.03

 

$

151,806,938

Underwriting discount

 

$

0.71392

 

$

7,210,779

Proceeds, before expenses, to Grid Dynamics

 

$

14.31608

 

$

57,264,320

Proceeds, before expenses, to the selling stockholders

 

$

14.31608

 

$

87,331,839

We and certain of the selling stockholders have granted the underwriters an option for a period of 30 days to purchase up to an additional 1,470,039 shares from us and 45,000 shares from such selling stockholders of our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectuses is truthful or complete. Any representation to the contrary is a criminal offense.

Delivery of the shares of common stock is expected to be made on or about July 6, 2021.

Joint book-running managers

J.P. Morgan

 

William Blair

 

Cowen

Co-managers

Needham & Company

     

Cantor Fitzgerald

June 30, 2021

 

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ABOUT THIS PROSPECTUS SUPPLEMENT

We provide information to you about this offering in three separate documents that are bound together: (1) this prospectus supplement, which describes the specific terms of this common stock offering and also adds to and updates information contained in the accompanying prospectuses and the documents incorporated by reference herein; (2) the accompanying base prospectus covering the sale of shares of common stock by Grid Dynamics; and (3) the accompanying base prospectus covering the sale of shares of common stock by the selling stockholders. Each base prospectus provides general information, some of which may not apply to this offering. The accompanying base prospectus covering the sale of shares of common stock by Grid Dynamics is part of a registration statement on Form S-3 (333-255732) and the accompanying base prospectus covering the sale of shares of common stock by the selling stockholders is part of a registration statement on Form S-3 (333-238202) that we filed with the Securities and Exchange Commission (SEC) utilizing a shelf registration process.

Generally, when we refer to this prospectus supplement, we are referring to all three parts of this document combined. To the extent there is a conflict between the information contained in this prospectus supplement and the information contained in the accompanying prospectuses or any document incorporated by reference therein filed prior to the date of this prospectus supplement, you should rely on the information in this prospectus supplement; provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date, for example, a document incorporated by reference in the accompanying prospectuses, the statement in the document having the later date modifies or supersedes the earlier statement.

Neither we, the selling stockholders nor the underwriters have authorized anyone to provide any information other than that contained or incorporated by reference in this prospectus supplement or the accompanying prospectuses. We, the selling stockholders and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus supplement and the accompanying prospectuses do not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this prospectus supplement and the accompanying prospectuses in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer or solicitation of an offer in such jurisdiction. The information contained in this prospectus supplement or the accompanying prospectuses, or incorporated by reference herein or therein is accurate only as of the respective dates thereof, regardless of the time of delivery of this prospectus supplement and the accompanying prospectuses or of any sale of our common stock. It is important for you to read and consider all information contained in this prospectus supplement and the accompanying prospectuses, including the documents incorporated by reference herein and therein, in making your investment decision. You should also read and consider the information in the documents to which we have referred you in Where You Can Find Additional Information and Incorporation by Reference in this prospectus supplement and in the accompanying prospectuses.

We and the selling stockholders are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The distribution of this prospectus supplement and the accompanying prospectuses and the offering of our common stock in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectuses must inform themselves about, and observe any restrictions relating to, the offering of our common stock and the distribution of this prospectus supplement and the accompanying prospectuses outside the United States.

The Grid Dynamics design logo and the Grid Dynamics mark appearing in this prospectus supplement are the property of Grid Dynamics Holdings, Inc. Trade names, trademarks and service marks of other companies appearing in this prospectus supplement are the property of their respective holders. We have omitted the ® and designations, as applicable, for the trademarks used in this prospectus supplement.

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PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights information contained in greater detail elsewhere in this prospectus supplement, the accompanying prospectuses, or incorporated in this prospectus supplement by reference. This summary is not complete and does not contain all of the information you should consider in making your investment decision. Before you decide to invest in our common stock, you should carefully read the entire prospectus supplement and the accompanying prospectuses, including the financial statements and related notes and other information incorporated by reference herein or therein and the matters set forth under the section of this prospectus supplement and the accompanying prospectuses captioned Risk Factors.

Overview

Grid Dynamics is an emerging leader in enterprise-level digital transformations in Fortune 1000 companies. For enterprises that create innovative digital products and experiences, Grid Dynamics offers close collaboration to provide digital transformation initiatives that span strategy consulting, development of early prototypes and enterprise-scale delivery of new digital platforms. Since its inception in 2006 in Menlo Park, California, as a grid and cloud consultancy firm, Grid Dynamics has been on the forefront of digital transformation, working on big ideas like cloud computing, NOSQL, DevOps, microservices, big data and artificial intelligence (AI), and quickly established itself as a provider of choice for technology and digital enterprise companies.

As a leading global digital engineering and information technology (IT) services provider with its headquarters in Silicon Valley and engineering centers in the United States and multiple Central and Eastern European countries, Grid Dynamics core business is to deliver focused and complex technical consulting, software design, development, testing and internet service operations. Grid Dynamics also helps organizations become more agile and create innovative digital products and experiences through its deep expertise in emerging technology, such as AI, data science, cloud computing, big data and DevOps, lean software development practices and a high-performance product culture.

Grid Dynamics believes that the key to its success is a business culture that puts products over projects, client success over contract terms and real business results over pure technical innovation. By leveraging Grid Dynamics proprietary processes optimized for innovation, emphasis on talent development and technical expertise, Grid Dynamics has been able to achieve significant growth, increasing its revenue from $91.9 million for the year ended December 31, 2018 to $111.3 million for the year ended December 31, 2020, a 21% increase, although revenue for 2020 decreased 6% from $118.3 million for the year ended December 31, 2019 mostly due to disruptions caused to its retail vertical which was negatively impacted by the coronavirus (COVID-19) pandemic.

On December 14, 2020, Grid Dynamics acquired Netherland-based Daxx Web Industries B.V. (Daxx) in an all-cash transaction. Headquartered in Amsterdam, and with 492 employees, Daxx has engineering centers situated in major tech hubs across Ukraine. Daxx has over 20 years of experience in delivering software services to clients across a wide range of industry verticals that include high-tech, digital media, healthcare, and education. Some of the key capabilities include consulting services spanning agile process reengineering, lean development, and DevOps. Daxx serves customers in the Netherlands, Germany, U.K., and U.S., and has strong relationships with high-growth start-ups and established software companies. Grid Dynamics believes the acquisition of Daxx will enable the company to have a stronger foothold in Europe and will enable it to continue diversifying its business.

On May 29, 2021, Grid Dynamics acquired Tacit Knowledge, a Pitney Bowes owned company, and leading provider of end-to-end digital commerce solutions for global brands. Founded in 2002, Tacit Knowledge is a global provider of digital commerce solutions, serving customers across the United Kingdom, North America, Continental Europe and Asia. Tacit Knowledge serves leading global brands across technology, CPG, financial, and retail markets. As a part of the acquisition, the entire team of more than 180 employees across the

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United Kingdom, Mexico, Moldova, and the United States, including senior management, joined Grid Dynamics. Grid Dynamics believes the acquisition of Tacit Knowledge will enable Grid Dynamics to have a stronger international foothold and will enable it to continue diversifying its business.

Industry Background and Market Opportunity

Digital transformation is a rapidly expanding market which is still in its early stages. Enterprises strive to compete in the digital world, facing the need to transform to survive attacks from the nimbler and more technologically advanced newcomers. Traditional approaches to managing information technology as a mix of vendor solutions and outsourced services often break down in the face of the imperative to innovate through technology.

Increasingly, business executives are looking at use of technology as a competitive advantage rather than a way to cut costs. The rise of AI signifies a shift from automation of business process to automation of decision making itself. In an effort to differentiate, corporations are directing investments towards building digital new products and experiences, instead of buying off-the-shelf software products. This drives demand for highly technical software development, creating an opportunity for pure-play software development service providers such as Grid Dynamics.

As the demand for technical software development talent continues to grow, the shortage of this talent in the United States and Europe, as well as the inability of non-technology-based companies to attract and retain such talent, encourages organizations to look to third parties, such as Grid Dynamics, to satisfy the demand.

Further, the growing acceptance of the offshore delivery model, beyond the traditional India-based IT services provider, has created significant opportunities for software development service providers delivering from CEE. CEE-based service providers now compete against the largest global IT service providers and are capable of providing complex technology services. Grid Dynamics believes that CEE is increasingly known for the quality of its software development talent, enabled in part by decades of focus on fundamental STEM disciplines in higher education. CEE-based teams and individuals are frequent winners of programming contests such as the ones held by the Association for Computing Machinery, or ACM, TopCoder and Kaggle.

Grid Dynamics believes that this disparity between the supply and demand for technical talent can be a significant opportunity for Grid Dynamics.

Strategies and Strengths

Grid Dynamics objective is to become a global leader in enabling digital transformation at Fortune 1000 companies. Grid Dynamics strategy to achieve such objective is based on leveraging the following core strengths.

Proprietary Processes Optimized for Innovation

Grid Dynamics recognizes the changing dynamics of IT outsourcing. Increasingly, corporations expect their service providers to participate and help shape innovation programs, which are not addressed well by the traditional service models used by outsourcing providers. Grid Dynamics melds technical consulting, engineering and analytics competencies into unified, cross-functional digital teams which are designed to respond and adapt to the change in the clients business. The effectiveness of such teams is further increased by a close collaboration with the clients technology leadership teams and active inquiry into clients business priorities on all levels.

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Culture-First Approach to Talent Development

The ever-increasing role of digital transformation leads to the emergence of a new kind of business leader that combines a vision of business transformation with deep understanding of information technology. Earning the trust of these leaders is one of the pillars of Grid Dynamics' success. Grid Dynamics selects, trains and promotes its technical leadership based on the following cultural principles.

• Global integration.    Demands of modern businesses transcend cultural, political and language boundaries. Grid Dynamics builds teams which are transparently distributed across countries, time zones and reporting lines. Decisions on hiring, staffing and promotion are all managed centrally from Grid Dynamics U.S. offices, allowing Grid Dynamics to optimize for quality rather than convenience.

• Partnership with client.    Grid Dynamics demands accountability and ownership of the clients success, whether or not such success is a contractual matter. Understanding Grid Dynamics clients goals and ability to manage such goals across reporting lines is a must for any leadership role within Grid Dynamics. Therefore, Grid Dynamics places a significant proportion of its IT personnel at client sites and offers team members temporary assignments to client locations through fellowships.

• Technological innovation.    Understanding digital transformation and successfully delivering IT programs is impossible without a strong understanding of emerging technology. Deep knowledge of how new technology, such as cloud, big data and AI, transforms the way corporations develop their businesses is a pre-requisite for leadership roles in Grid Dynamics.

• Education.    Grid Dynamics believes that technology changes rapidly, and it is critical for Grid Dynamics employees to adapt even more rapidly. Grid Dynamics offers many formal and informal training programs, such as Grid University, an online education platform with thousands of hours of training videos, to ensure that professionals can expand and enhance their capabilities.

Technical Expertise and Scalable Engineering

Grid Dynamics believes in strong infrastructure underpinning mission-critical services. From its inception, Grid Dynamics has been focusing on developing and using its expertise in the latest technologies, such as AI, cloud engineering solutions, data platform, data science and analytical data platforms, DevOps, MLOps, microservices, mobile, QA automation, search and user interfaces. We make such emerging technologies accessible to clients through the use of proprietary skill development programs, industry experience and solution accelerators. Accelerators enable us to dramatically accelerate our clients time-to-market and improve the design / engineering quality. Proprietary accelerators include pre-integrated microservices, cloud-native data analytics, data anomaly detection, price and promotion optimization, AI powered semantic search, consumer tailored product recommendations, consumer intelligence, visual image search, and test automation. Grid Dynamics seeks to strengthen its position as a technical leader with its established clients and attract new clients by leveraging the deep expertise within its three main practice areas: Cloud, Data and Experience.

• Cloud.    Grid Dynamics enables enterprises to embrace cloud architectures and platforms. Practice areas within Cloud Migration & DevOps include facilitating workload migrations to public cloud environments, implementing DevOps and enabling continuous delivery. Grid Dynamics engineers work with clients to build an agile culture, the organization and team structures necessary for continuous delivery, as well as automated application development, testing, deployment and production operations. To achieve greater scalability and customization, Grid Dynamics helps companies shift to microservices architectures based on open source and cloud-native technologies and implements microservices management platforms to handle complex orchestrations. Grid Dynamics employs service virtualization testing techniques to anticipate migration issues and ensure the microservices architecture operates efficiently. Successful cloud migrations often set the stage for additional projects involving AI, machine learning and data analytics use cases.

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• Data.    Grid Dynamics experts enable clients to digest petabytes of data into actionable insights through machine learning and state-of-the art models. To unlock the value of data, Grid Dynamics helps clients build data lakes with robust data governance, implement real-time data streaming solutions and deploy AI platforms. We help clients integrate their AI platform with a data lake or analytical data platform, make the data easily available, onboard the MLOps process, train data scientists, implement a common library of machine learning models and ensure that the data science process works smoothly from data to insights. Grid Dynamics ensures the platform supports a variety of machine learning algorithms including predictive analytics, deep learning, reinforcement learning and the creation of various types of neural networks. Grid Dynamics MLOps solution offers clients a blueprint for streamlining and automating all stages of machine learning.

We have invested years of research to develop predictive models that learn from large volumes of historical data, analyze real-time data and are easily understood by business users across industries. Our models for dynamic pricing, demand prediction, trade promotion optimization, customer intelligence solutions, personalization models, marketing spend optimization, supply chain and inventory management solutions, all help our clients maximize profit, efficiently win new customers and increase long-term customer retention.

Grid Dynamics has always facilitated robust, vigilant data quality monitoring, which helps detect, prevent and auto-correct data defects. Machine learning fraud detection algorithms combined with powerful, automated case analysis tools help to reduce manual review and improve operational efficiency.

• Experience.    Grid Dynamics experts drive cutting-edge commerce with a deep understanding of the modern consumer and the help of artificial intelligence. We develop responsive Web UI solutions for clients that feature a rich UI experience with an adaptive design, a scalable front-end that runs on the cloud with lightweight architecture and continuous updates using DevOps and agile processes.

Grid Dynamics ensures that client applications work across mobile devices and platforms and are stress tested for load stability even during periods of heavy consumer traffic. We have a long history of engineering high-end mobile applications for Google Android / Apple iOS platforms and are well-versed in the newest mobile technologies, including Flutter, React Native, Iconic and mobile augmented reality (AR), among others. High engineering quality is maintained by deploying rapid regression testing cycles and implementing frequent automated testing.

We leverage the latest search technologies including sematic vector search, Endeca re-platforming / open source search, visual search and smart suggestion generation, to help clients evolve their sites search capabilities to better understand customer keywords, interpret the meaning of queries and ultimately anticipate shopping intent.

Services and Solutions

In the rapidly evolving market of engineering and IT services, customers are increasingly looking for service providers that can be a co-innovation partner rather than a cost saving measure. Grid Dynamics addresses this need by focusing on high value, high impact services. The key service and solutions offerings are the following:

Technical Consulting

Grid Dynamics provides technical consulting services to help executives in charge of digital transformation define an ambitious, yet achievable roadmap, quantify business value attained through new technology, select the right technology stack, develop reference architecture and guide the transformational journey every step of the way.

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Lean Prototypes

Grid Dynamics helps enterprises prototype and test new ideas. This includes both proof-of-concept implementations, which can be rapidly put in front of the end users to verify business assumptions, as well as sophisticated, long-running labs that cross organizational walls to establish feasibility and de-risk large transformational programs. Self-sufficient teams move quickly, use the latest technologies and aim to solve the business use case to demonstrate measurable value to the business stakeholders.

Digital Intelligence

Grid Dynamics helps corporations transform from automation of business processes to automation of decision making. To this end, Grid Dynamics deploys data science approaches to analyze client challenges and arrive at a strategy which produces measurable outcomes. This continuous analyze-assess-decide-measure cycle becomes the foundation of AI programs, leveraging the latest technologies to constantly react to real-time changes in consumer behavior.

Scalable Engineering

Grid Dynamics believes in strong infrastructure underpinning mission-critical services. From inception, Grid Dynamics engineers pushed the boundaries of IT performance, developing a strong expertise in distributed systems. Grid Dynamics experience in cloud, NoSQL, big data, grid computing and performance engineering helps its clients go beyond the capabilities provided by off-the-shelf products.

Development Culture

Grid Dynamics helps clients to contain and rearchitect legacy platforms as a part of the digital transformation journey. A significant factor in the success of legacy transformation is the robustness of the process of breaking down and reassembling monolithic systems into smaller, more manageable pieces. Grid Dynamics has a deep expertise in building agile teams, which are adept at realizing incremental value through a cycle of continuous delivery enabled by automated quality and security assurance. Grid Dynamics offers its clients services that help enable continuous integration, continuous delivery and DevOps at enterprise scale.

Experience Design

Grid Dynamics helps clients achieve higher rates of conversion and end user satisfaction by improving the service experience across engagement channels. This includes transformation of the web user interfaces to a responsive/adaptive model, design and development of next-gen mobile applications as well as leveraging new channels of engagement such as conversational interfaces.

Verticals

Grid Dynamics has strong vertical-specific domain knowledge backed by extensive experience. By merging technology with business processes, Grid Dynamics delivers tailored solutions in several key industry verticals: Retail, Technology, Consumer Packaged Goods (CPG)/Manufacturing, and Finance.

Technology

Grid Dynamics has a strong presence in the digital technology sector, particularly among analytics, Software as a Service (SaaS) and platform vendors which are driven by a constant need for innovation. Grid Dynamics long-lasting expertise in complex open-source technology and in building massively scalable distributed systems, the company-wide culture of agile co-creation as well as a deep understanding of digital commerce have enabled Grid Dynamics to build strong business relationships with the leading players in this sector. For example, Grid Dynamics has been providing software engineering, continuous delivery and deployment automation, machine learning, internal tool development and quality engineering services to one of the largest cloud services providers, becoming one of their key technological services partners.

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Retail

By utilizing Grid Dynamics deep expertise in the digital retail space and providing a mix of consulting and engineering services, Grid Dynamics enables its clients to win market share, shorten time to market and reduce costs of digital operations. For example, Grid Dynamics has worked closely with a large U.S. retail company over a span of many years to develop a strategic omnichannel transformation program and became a key contributor to the development of a new omnichannel platform including consumer experience, product discovery, analytics and inventory optimization.

CPG/Manufacturing

Grid Dynamics helps its manufacturing customers to harness digital transformation by applying novel approaches to engage the consumers directly and optimize the back-end supply chain. For example, Grid Dynamics accelerated digital transformation in a global CPG company by building direct-to-consumer capabilities, modernizing an omnichannel pricing engine, and optimizing operational efficiency with modern data analytics and AI.

Finance

In the early days of Grid Dynamics, the financial sector recognized it for the ability to tackle high-end technology programs, such as moving from the batch to real-time fraud detection. Today, Grid Dynamics has evolved from a niche provider to a proven partner able to enable agility and time to market in the most challenging regulatory environments. For example, a major commercial bank chose Grid Dynamics to solve the challenge of evolving its security frameworks to realize benefits from cloud and DevOps.

The following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated:

 

Year ended December 31,

   

2020

 

2019

 

2018

       

% of
revenue

     

% of
revenue

     

% of
revenue

   

(dollars in thousands)

Technology, Media and Telecom

 

$45,362

 

40.8

%

 

$32,337

 

27.3

%

 

$23,485

 

25.6

%

Retail

 

33,975

 

30.5

%

 

67,367

 

56.9

%

 

58,544

 

63.7

%

Finance

 

13,589

 

12.2

%

 

12,479

 

10.6

%

 

8,089

 

8.8

%

CPG/Manufacturing

 

14,202

 

12.8

%

 

4,850

 

4.1

%

 

1,330

 

1.4

%

Other(1)

 

4,155

 

3.7

%

 

1,293

 

1.1

%

 

417

 

0.5

%

Total

 

$

111,283

 

100.0

%

 

$

118,326

 

100.0

%

 

$

91,865

 

100.0

%

(1) Includes Daxx.

 

Three months ended March 31,

(unaudited, in thousands, except percentages)

 

2021

 

% of
revenue

 

2020

 

% of
revenue

Technology, Media and Telecom

 

$

14,411

 

36.8

%

 

$

10,077

 

31.1

%

Retail

 

 

8,850

 

22.6

%

 

 

16,099

 

49.6

%

Finance

 

 

3,438

 

8.8

%

 

 

4,033

 

12.4

%

CPG/Manufacturing

 

 

8,725

 

22.3

%

 

 

2,183

 

6.7

%

Other

 

 

3,710

 

9.5

%

 

 

65

 

0.2

%

Total

 

$

39,134

 

100.0

%

 

$

32,457

 

100.0

%

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Delivery Model and Operating Structure

Our service delivery model involves using an efficient mix of on-site, off-site and offshore staffing. We believe that the combination of our delivery model optimized for co-innovation and the placement of our technology leaders at clients premises creates a key competitive advantage that enables us to better understand and meet a clients diverse needs.

The majority of Grid Dynamics engineering personnel is located within Grid Dynamics engineering centers in the United States and CEE. As of March 31, 2021, Grid Dynamics had 2,056 full-time and part-time personnel and delivered services from 12 engineering centers strategically located in the United States, the Netherlands, Russia, Poland, Serbia and Ukraine. With the acquisition of Tacit Knowledge on May 29, 2021, we acquired operations in Moldova, Mexico, the United Kingdom and the United States, including more than 180 employees across those jurisdictions.

Grid Dynamics also places a significant proportion of its IT professionals at client premises and promotes temporary assignments to client locations.

Recent Developments

Warrant Exchanges

During the month of May 2021, we completed a series of warrant exchange transactions with certain holders of our outstanding warrants, as follows:

• On May 15, 2021, we and Explorer Parent LLC, the holder of 291,500 of our outstanding private warrants entered into a warrant exchange agreement pursuant to which it agreed to exchange each of its private warrants for an aggregate of 102,320 shares of our common stock.

• On May 17, 2021, we and Cantor Fitzgerald & Co., the holder of 42,625 of our outstanding private warrants entered into a warrant exchange agreement pursuant to which it agreed to exchange each of its private warrants for an aggregate of 14,962 shares of our common stock.

• On May 19, 2021, we and Shay Capital LLC, the holder of 420,630 of our outstanding publicly traded warrants entered into a warrant exchange agreement. The public warrants were previously issued pursuant to our predecessors public offering registered under the Securities Act, pursuant to a prospectus dated October 4, 2018. Pursuant to the warrant exchange agreement, Shay Capital LLC agreed to exchange each of its public warrants for an aggregate of 153,577 shares of our common stock.

These transactions were exempt from registration under Section 3(a)(9) of the Securities Act.

Management Changes

On June 4, 2021, Victoria Livschitz informed us that she would resign as Executive Vice President of Customer Success, effective June 15, 2021. An entity controlled by Ms. Livschitz entered into a consulting agreement with us, effective June 15, 2021 through June 30, 2022, whereby Ms. Livschitz will continue to work on our behalf of the Company with certain strategic accounts mutually agreed from time to time. On June 4, 2021, Max Martynov also resigned as our Chief Technology Officer.

Risk Factors Summary

• We have a relatively short operating history and operate in a rapidly evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not continue to be successful and may adversely impact our stock price.

• We may be unable to effectively manage our growth or achieve anticipated growth, which could place significant strain on our management personnel, systems and resources.

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• Our revenues have historically been highly dependent on a limited number of clients and industries that are affected by seasonal trends, and any decrease in demand for outsourced services in these industries may reduce our revenues and adversely affect our business, financial condition and results of operations.

• The impact of the COVID-19 pandemic has and may continue to affect our overall financial performance, business operations, and stock price.

• Our revenues are highly dependent on clients primarily located in the U.S. Any economic downturn in the U.S. or in other parts of the world, including Europe, or disruptions in the credit markets may have a material adverse effect on our business, financial condition and results of operations.

• We face intense competition.

• Damage to our reputation may adversely impact our ability to generate and retain business.

• Our failure to successfully attract, hire, develop, motivate, and retain highly skilled personnel could have a significant adverse effect on our business, financial condition, and results of operations.

• Our business operations may be severely disrupted if we lose the services of our senior executives and key employees.

• Failure to adapt to changing technologies, methodologies, and evolving industry standards may have a material adverse effect on our business, financial condition, and results of operations.

• Security breaches, system failures or errors, and other disruptions to our network could result in disclosure of confidential information and expose us to liability, which would cause our business and reputation to suffer.

• Undetected software design defects, errors or failures may result in loss of business or in liabilities that could have a material adverse effect on our reputation, business and results of operations.

• Acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value and adversely affect our financial condition and results of operations, we may not achieve the financial and strategic goals that were contemplated at the time of a transaction, and we may be exposed to claims, liabilities and disputes as a result of the transaction that may adversely impact our business, operating results and financial condition.

Corporate Information

On March 5, 2020, a wholly-owned subsidiary (Merger Sub 1) of ChaSerg Technology Acquisition Corp., a Delaware corporation (ChaSerg), merged with and into Grid Dynamics International, Inc., a California corporation (GDI), with GDI surviving the merger (the Initial Merger). Immediately following the Initial Merger, GDI merged with and into another wholly-owned subsidiary of ChaSerg (Merger Sub 2) with Merger Sub 2 surviving; Merger Sub 2 was then renamed Grid Dynamics International, LLC, and ChaSerg was then renamed Grid Dynamics Holdings, Inc. (the Business Combination). As of the open of trading on March 6, 2020, the common stock and warrants of Grid Dynamics Holdings, Inc. (Grid Dynamics), formerly those of ChaSerg, began trading on The NASDAQ Stock Market LLC (NASDAQ) as GDYN and GDYNW, respectively.

Our principal executive offices are located at 5000 Executive Pkwy Suite 520, San Ramon, CA 94583, and our telephone number is (650) 523-5000.

Our website address is www.griddynamics.com. The information on, or that can be accessed through, our website is not part of this prospectus supplement or the accompanying prospectuses, and you should not consider information contained on our website in deciding whether to purchase shares of our common stock.

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). We will remain an emerging growth company until the earliest to occur of: the last day of the fiscal year in which we have more than $1.07 billion in annual revenues; the date we qualify as a large accelerated filer, with

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at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the Securities Act), for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

Unless expressly indicated or the context requires otherwise, the terms Grid, Grid Dynamics, GDYN, the Company, the Registrant, we, us and our in this prospectus supplement and the accompanying prospectuses refer to the parent entity formerly named ChaSerg Technology Acquisition Corp., after giving effect to the Business Combination, and as renamed Grid Dynamics Holdings, Inc., and where appropriate, our wholly-owned subsidiaries.

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The offering

Issuer

 

Grid Dynamics Holdings, Inc.

Common stock offered by us

 

4,000,000 shares (or 5,470,039 shares, assuming the underwriters exercise in full their option to purchase additional shares as described below).

Common stock offered by the selling stockholders

 


6,100,262 shares (or 6,145,262 shares, assuming the underwriters exercise in full their option to purchase additional shares as described below).

Option to purchase additional shares

 

We and certain of the selling stockholders have granted the underwriters an option for a period of 30 days to purchase up to an additional 1,470,039 shares from us and 45,000 shares from such selling stockholders of our common stock. The underwriters may exercise this option at any time within 30 days from the date of this prospectus supplement. See Underwriting.

Common stock outstanding after giving effect to this offering

 


58,171,375 shares (or 59,641,414 shares if the underwriters exercise their option to purchase additional shares in full).

Use of proceeds

 

The principal purposes of this offering are to increase our financial flexibility, obtain additional capital, facilitate an orderly distribution of shares for the selling stockholders and to increase our public float. We intend to use the net proceeds from this offering for working capital, capital expenditures and other general corporate purposes. We may also use a portion of our net proceeds to fund potential acquisitions of, or investments in, technologies or businesses that complement our business, although we have no present commitments or agreements to enter into any such acquisitions or make any such investments. For a more complete description of our intended use of proceed from this offering, see Use of Proceeds. We will not receive any proceeds from the sale of common stock by the selling stockholders, including any shares sold to the underwriters upon exercise of their right to purchase additional shares of common stock.

Listing

 

Our common stock is listed on NASDAQ under the trading symbol GDYN.

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Dividend Policy

 

We have never paid any cash dividends on our common stock since our merger with ChaSerg. The payment of cash dividends in the future will be at the sole discretion of our board of directors and will be dependent upon revenues and earnings, if any, capital requirements, and general financial condition from time to time and may be limited by the terms of any financing and/or other agreements entered into by us or our subsidiaries from time to time and by requirements under the laws of our subsidiaries respective jurisdictions of incorporation to set aside a portion of their net income in each year to legal reserves. It is presently expected that we will retain all earnings for use in our business operations and, accordingly, it is not expected that our board of directors will declare any dividends in the foreseeable future.

Risk Factors

 

You should read the section titled Risk factors beginning on page S-17 of this prospectus supplement and pages 4 and 9 of the accompanying prospectuses, respectively, and other information included or incorporated by reference in this prospectus supplement and the accompanying prospectuses for a discussion of some of the risks and uncertainties that you should carefully consider before deciding to invest in our common stock.

Except as otherwise stated in this prospectus supplement, the number of shares of our common stock to be outstanding immediately after the closing of this offering is based on 54,171,375 shares of common stock outstanding as of March 31, 2021, and excludes as of that date:

• 6,558,900 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock outstanding as of March 31, 2021, with a weighted-average exercise price of $5.15 per share;

• 107,500 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock granted after March 31, 2021, with a weighted-average exercise price of $14.40 per share;

• 2,380,834 shares of our common stock issuable upon the vesting of restricted stock units (RSUs) outstanding as of March 31, 2021;

• 948,172 shares of our common stock issuable upon the vesting of performance stock awards outstanding as of March 31, 2021;

• 4,963,231 shares of our common stock issuable upon the exercise of warrants to purchase shares of our common stock outstanding as of March 31, 2021, with an exercise price of $11.50 per share (of which warrants to purchase 754,755 shares of our common stock were exchanged for 270,859 shares of our common stock in May 2021); and

• 9,901,209 shares of our common stock reserved for future issuance under our 2020 Equity Incentive Plan (the 2020 Plan), and any additional shares that become available under the 2020 Plan pursuant to the provisions thereof.

Except as otherwise indicated, all information in this prospectus supplement assumes:

• no exercise of outstanding options or settlement of outstanding RSUs or performance stock awards subsequent to March 31, 2021;

• no exercise of outstanding warrants subsequent to March 31, 2021; and

• no exercise of the underwriters option to purchase additional shares from us and the selling stockholders.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth a summary of certain historical financial data as of and for the periods indicated. We derived the summary consolidated statements of operations data for the years ended December 31, 2020 and December 31, 2019 from our audited consolidated financial statements incorporated by reference in this prospectus supplement. We derived the summary consolidated statements of operations data for the three months ended March 31, 2021 and March 31, 2020 and the summary balance sheet data as of March 31, 2021 from our unaudited consolidated financial statements incorporated by reference in this prospectus supplement. Our unaudited condensed interim consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of our management, include all normal recurring adjustments necessary for a fair statement of the information set forth therein. Our historical results are not necessarily indicative of the results that may be expected in the future. The summary of our consolidated financial data set forth below should be read together with the consolidated financial statements and the related notes to those statements, as well as the sections titled Managements Discussion and Analysis of Financial Condition and Results of Operations, incorporated by reference in this prospectus supplement.

 

Year Ended
December 31,

 

Three Months Ended
March 31,

   

2020

 

2019

 

2021

 

2020

   

(in thousands)

Statement of Operations Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

111,283

 

 

$

118,326

 

 

$

39,134

 

 

$

32,457

 

Income/(loss) from operations

 

$

(15,448

)

 

$

15,625

 

 

$

(1,778

)

 

$

(7,034

)

Net income/(loss)

 

$

(12,599

)

 

$

10,807

 

 

$

(2,062

)

 

$

(4,596

)

Comprehensive income/(loss)

 

$

(12,603

)

 

$

10,807

 

 

$

(2,013

)

 

$

(4,596

)

Basic earnings/(loss) per share(1)

 

$

(0.28

)

 

$

0.49

 

 

$

(0.04

)

 

$

(0.16

)

Diluted earnings/(loss) per share(1)

 

$

(0.28

)

 

$

0.49

 

 

$

(0.04

)

 

$

(0.16

)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by/(used in) operating activities

 

$

5,932

 

 

$

12,534

 

 

$

3,044

 

 

$

(2,886

)

Net cash used in investing activities

 

$

(18,339

)

 

$

(2,811

)

 

$

(851

)

 

$

(692

)

Net cash provided by/(used in) financing activities

 

$

82,967

 

 

$

14,604

 

 

$

(15,135

)

 

$

82,868

 

(1) See Note 11 to our audited consolidated financial statements and Note 10 to our unaudited condensed interim consolidated financial statements incorporated by reference in this prospectus supplement for the computation of basic earnings/(loss) per share and diluted earnings/(loss) per share.

Consolidated Balance Sheet Data

 

As of March 31, 2021

   

Actual

 

As adjusted(1)

Cash and cash equivalents

 

$99,852

(2)

 

$156,216

Working capital

 

$108,617   

 

$164,981

Total assets

 

$160,297   

 

$216,661

Total liabilities

 

$20,050   

 

$20,050

Total stockholders equity

 

$

140,247

 

 

$

196,611

(1) Reflects the receipt of approximately $56.4 million in net proceeds from the sale and issuance by us of shares of common stock in this offering at the public offering price of $15.03 per share, and after deducting underwriting discounts and commissions and estimated offering expenses.

(2) On May 29, 2021, we used a portion of our cash in connection with our acquisition of Tacit Knowledge.

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Non-GAAP Measures

To supplement our consolidated financial data presented on a basis consistent with generally accepted accounting principles (GAAP), this prospectus supplement contains certain non-GAAP financial measures, including Non-GAAP Gross Profit, Non-GAAP EBITDA, and Non-GAAP Net Income. We have included these non-GAAP financial measures because they are financial measures used by our management to evaluate our core operating performance and trends, to make strategic decisions regarding the allocation of capital and new investments, and are among the factors analyzed in making performance-based compensation decisions for key personnel. These measures exclude certain expenses that are required under GAAP. We exclude these items because they are not part of core operations or, in the case of stock-based compensation, non-cash expenses that are determined based in part on our underlying performance.

We believe these supplemental performance measurements are useful in evaluating operating performance, as they are similar to measures reported by our public industry peers and those regularly used by security analysts, investors, and other interested parties in analyzing operating performance and prospects. These non-GAAP financial measures are not intended to be a substitute for any GAAP financial measures and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

There are significant limitations associated with the use of non-GAAP financial measures. Further, these measures may differ from the non-GAAP information, even where similarly titled, used by other companies and therefore should not be used to compare our performance to that of other companies. We compensate for these limitations by providing investors and other users of our financial information a reconciliation of non-GAAP measures to the related GAAP financial measures. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view our non-GAAP measures in conjunction with GAAP financial measures.

We define and calculates our non-GAAP financial measures as follows:

• Non-GAAP Gross Profit:    Gross profit adjusted for the impact of stock-based compensation and retention bonuses.

• Non-GAAP EBITDA:    Net income before interest income/expense, provision for income taxes and depreciation and amortization, and further adjusted for the impact of stock-based compensation expense, transaction-related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to our merger with ChaSerg and acquisition and capital-raising activities), impairment of goodwill and other income/expenses, net (which includes mainly interest income and expense, foreign currency transaction losses and gains, fair value adjustments and other miscellaneous expenses), and restructuring costs.

• Non-GAAP Net Income:    Net income adjusted for the impact of stock-based compensation, impairment of goodwill, transaction-related costs, restructuring costs, other income/expenses, net, and the tax impacts of these adjustments.

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The following table presents the reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures for the annual periods indicated:

 

Twelve Months Ended
December 31,

   

2020

 

2019

   

(in thousands)

Revenue to Non-GAAP Gross Profit

 

 

 

 

 

 

 

 

Revenue

 

$

111,283

 

 

$

118,326

 

Cost of revenue

 

$

69,662

 

 

$

70,090

 

GAAP gross profit

 

$

41,621

 

 

$

48,236

 

Retention bonus expense

 

$

1,072

 

 

$

1,026

 

Stock-based compensation expense

 

$

840

 

 

$

148

 

Non-GAAP gross profit

 

$

43,533

 

 

$

49,410

 

GAAP Net Income (Loss) to Non-GAAP EBITDA

 

 

 

 

 

 

 

 

GAAP Net Income (loss)

 

$

(12,599

)

 

$

10,807

 

Adjusted for:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

$

2,672

 

 

$

2,311

 

Provision/(benefit) for income tax

 

$

(2,613

)

 

$

4,642

 

Impairment of goodwill

 

$

 

 

$

139

 

Stock-based compensation expense

 

$

20,006

 

 

$

2,441

 

Transaction and transformation-related costs(1)

 

$

4,407

 

 

$

3,145

 

Restructuring(2)

 

$

912

 

 

$

 

Other (income)/expenses(3)

 

$

(236

)

 

$

176

 

Non-GAAP EBITDA

 

$

12,549

 

 

$

23,661

 

GAAP Net Income (Loss) to Non-GAAP Net Income

 

 

 

 

 

 

 

 

GAAP Net Income (loss)

 

$

(12,599

)

 

$

10,807

 

Adjusted for:

 

 

 

 

 

 

 

 

Impairment of goodwill

 

$

 

 

$

139

 

Stock-based compensation expense

 

$

20,006

 

 

$

2,441

 

Transaction and transformation-related costs(1)

 

$

4,407

 

 

$

3,145

 

Restructuring costs(2)

 

$

912

 

 

$

 

Other (income)/expenses(3)

 

$

(236

)

 

$

176

 

Tax Impact of non-GAAP adjustments(4)

 

$

(5,477

)

 

$

(1,221

)

Non-GAAP Net Income

 

$

7,013

 

 

$

15,487

 

____________

(1) Transaction and transformation-related costs include, when applicable, external deal costs, transaction-related professional fees, transaction-related retention bonuses, which are allocated proportionally across cost of revenue, engineering, research and development, sales and marketing and general and administrative expenses as well as other transaction-related costs including integration expenses consisting of outside professional and consulting services.

(2) In the twelve months ended December 31, 2020, we implemented a cost reduction plan and incurred restructuring and severance charges of $0.9 million, primarily resulting from a reduction in workforce and other charges.

(3) Other (income)/expenses consist primarily of losses and gains on foreign currency transactions, fair value adjustments, and other miscellaneous non-operating expenses and other income consists primarily of interest on cash held at banks.

(4) Reflects the estimated tax impact at a normalized tax rate of the non-GAAP adjustments presented in the table.

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The following table presents a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures for the interim periods indicated:

 

Three Months Ended
M
arch 31,

   

2021

 

2020

   

(in thousands)

Revenue to Non-GAAP Gross Profit

 

 

 

 

 

 

 

 

Revenue

 

$

39,134

 

 

$

32,457

 

Cost of revenue

 

$

23,797

 

 

$

22,639

 

GAAP gross profit

 

$

15,337

 

 

$

9,818

 

Retention bonus expense

 

$

 

 

$

1,072

 

Stock-based compensation expense

 

$

111

 

 

$

615

 

Non-GAAP gross profit

 

$

15,448

 

 

$

11,505

 

GAAP Net Loss to Non-GAAP EBITDA

 

 

 

 

 

 

 

 

GAAP Net Loss

 

$

(2,062

)

 

$

(4,596

)

Adjusted for:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

$

946

 

 

$

646

 

Benefit for income tax

 

$

(766

)

 

$

(2,682

)

Stock-based compensation expense

 

$

5,671

 

 

$

4,804

 

Transaction and transformation-related costs(1)

 

$

424

 

 

$

3,940

 

Restructuring(2)

 

$

 

 

$

689

 

Other expenses(3), net

 

$

1,050

 

 

$

244

 

Non-GAAP EBITDA

 

$

5,263

 

 

$

3,045

 

GAAP Net Loss to Non-GAAP Net Income

 

 

 

 

 

 

 

 

GAAP Net Loss

 

$

(2,062

)

 

$

(4,596

)

Adjusted for:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

$

5,671

 

 

$

4,804

 

Transaction and transformation-related costs(1)

 

$

424

 

 

$

3,940

 

Restructuring costs(2)

 

$

 

 

$

689

 

Other (income)/expenses(3), net

 

$

1,050

 

 

$

244

 

Tax Impact of non-GAAP adjustments(4)

 

$

(2,018

)

 

$

(3,203

)

Non-GAAP Net Income

 

$

3,065

 

 

$

1,878

 

____________

(1) Transaction and transformation-related costs include, when applicable, external deal costs, transaction-related professional fees, transaction-related retention bonuses, which are allocated proportionally across cost of revenue, engineering, research and development, sales and marketing, and general and administrative expenses as well as other transaction-related costs including integration expenses consisting of outside professional and consulting services.

(2) In the three months ended March 31, 2020, we implemented a cost reduction plan and incurred restructuring and severance charges of $0.7 million, primarily resulting from a reduction in workforce and other charges. We did not incur any restructuring expenses in the three months ended March 31, 2021.

(3) Other expenses consist primarily of losses and gains on foreign currency transactions, fair value adjustments, and other miscellaneous non-operating expenses and other income consists primarily of interest on cash held at banks.

(4) Reflects the estimated tax impact at a normalized tax rate of the non-GAAP adjustments presented in the table.

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information contained in this prospectus supplement and the other information included and incorporated by reference into this prospectus supplement and the accompanying prospectuses, before deciding to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties that you should consider before investing in our company, as fully described below. The principal factors and uncertainties that make investing in our company risky include, among others:

• We have a relatively short operating history and operate in a rapidly evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not continue to be successful and may adversely impact our stock price.

• We may be unable to effectively manage our growth or achieve anticipated growth, which could place significant strain on our management personnel, systems and resources.

• Our revenues have historically been highly dependent on a limited number of clients and industries that are affected by seasonal trends, and any decrease in demand for outsourced services in these industries may reduce our revenues and adversely affect our business, financial condition and results of operations.

• The impact of the COVID-19 pandemic has and may continue to affect our overall financial performance, business operations, and stock price.

• Our revenues are highly dependent on clients primarily located in the U.S. Any economic downturn in the U.S. or in other parts of the world, including Europe, or disruptions in the credit markets may have a material adverse effect on our business, financial condition and results of operations.

• We face intense competition.

• Damage to our reputation may adversely impact our ability to generate and retain business.

• Our failure to successfully attract, hire, develop, motivate, and retain highly skilled personnel could have a significant adverse effect on our business, financial condition, and results of operations.

• Our business operations may be severely disrupted if we lose the services of our senior executives and key employees.

• Failure to adapt to changing technologies, methodologies, and evolving industry standards may have a material adverse effect on our business, financial condition, and results of operations.

• Security breaches, system failures or errors, and other disruptions to our network could result in disclosure of confidential information and expose us to liability, which would cause our business and reputation to suffer.

• Undetected software design defects, errors or failures may result in loss of business or in liabilities that could have a material adverse effect on our reputation, business and results of operations.

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• Acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value and adversely affect our financial condition and results of operations, we may not achieve the financial and strategic goals that were contemplated at the time of a transaction, and we may be exposed to claims, liabilities and disputes as a result of the transaction that may adversely impact our business, operating results and financial condition.

Risks Related to Our Business, Operations and Industry

We have a relatively short operating history and operate in a rapidly evolving industry, which makes it difficult to evaluate future prospects and may increase the risk that we will not continue to be successful and may adversely impact our stock price.

We were founded in 2006 and have a relatively short operating history in the technology services industry, which is competitive and continuously evolving, subject to rapidly changing demands and constant technological developments. As a result, success and performance metrics are difficult to predict and measure. Since services and technologies are rapidly evolving and each company within the industry can vary greatly in terms of the services it provides, its business model and its results of operations, it can be difficult to predict how any companys services, including ours, will be received in the market.

While many Fortune 1000 enterprises, including our clients, have been willing to devote significant resources to incorporate emerging technologies and related market trends into their business models, they may not continue to spend any significant portion of their budgets on services like those provided by us in the future. Neither our past financial performance nor the past financial performance of any other company in the technology services industry is indicative of how we will fare financially in the future. Our future profits may vary substantially from those of other companies and our past profits, making an investment in us risky and speculative. If clients demand for our services declines as a result of economic conditions, market factors or shifts in the technology industry, our business, financial condition and results of operations would be adversely affected.

As a recently formed public company, our stock performance is highly dependent on our ability to successfully execute and grow the business. Consequently, our stock price may be adversely impacted by our inability to execute to our plan, our inability to meet or exceed forward looking financial forecasts, and our inability to achieve our stated short-term and long-term goals.

We may be unable to effectively manage our growth or achieve anticipated growth, which could place significant strain on our management personnel, systems and resources.

Continued growth and expansion may increase challenges we face in recruiting, training and retaining sufficiently skilled professionals and management personnel, maintaining effective oversight of personnel and delivery centers, developing financial and management controls, coordinating effectively across geographies and business units, and preserving our culture and values. Failure to manage growth effectively could have a material adverse effect on the quality of the execution of our engagements, our ability to attract and retain IT professionals, as well as our business, financial condition and results of operations.

In addition, as we increase the size and complexity of projects that we undertake with clients, add new delivery sites, introduce new services or enter into new markets, we may face new market, technological, operational, compliance and administrative risks and challenges, including risks and challenges unfamiliar to us. We may not be able to mitigate these risks and challenges to achieve our anticipated growth or successfully execute large and complex projects, which could materially adversely affect our business, prospects, financial condition and results of operations.

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Table of Contents

Our revenues have historically been highly dependent on a limited number of clients and industries that are affected by seasonal trends, and any decrease in demand for outsourced services in these industries may reduce our revenues and adversely affect our business, financial condition and results of operations.

Our revenues have historically been highly dependent on a limited number of clients. In the three months ended March 31, 2021 and the year ended December 31, 2020, we generated a significant portion of our revenues from our largest clients. For example, we generated approximately 67% and 86% of our revenue from our 10 largest clients during the three months ended March 31, 2021 and 2020, respectively, and approximately 79% and 87% of our revenue from our 10 largest clients during the years ended December 31, 2020 and 2019, respectively. Our top two clients each accounted for 10% or more of our revenue during the three months ended March 31, 2021 and the year ended December 31, 2020, and our top three clients each accounted for 10% or more of our revenue during the three months ended March 31, 2020 and the year ended December 31, 2019 . Since a substantial portion of our revenue is derived through time and materials contracts, which are mostly short-term in nature, a major client in one year may not provide the same level of revenues for us in any subsequent year. In addition, a significant portion of our revenues is concentrated in our top two industry verticals: technology and retail. Our growth largely depends on our ability to diversify the industries in which we serve, continued demand for our services from clients in these industry verticals and other industries that we may target in the future, as well as on trends in these industries to outsource the type of services we provide.

Our business is also subject to seasonal trends that impact our revenues and profitability between quarters, driven by the timing of holidays in the countries in which we operate and the U.S. retail cycle, which drives the behavior of several of our retail clients. Excluding the impact of growth in our book of business, we have historically recorded higher revenue and gross profit in the second and third quarters of each year compared to the first and fourth quarters of each year. The Christmas holiday season in Russia and Ukraine, for example, falls in the first quarter of the calendar year, resulting in reduced activity and billable hours of our engineering personnel. In addition, many of our retail sector clients tend to slow their discretionary spending during the holiday sale season, which typically lasts from late November (before Thanksgiving) through late December (after Christmas). Such seasonal trends may cause reductions in our profitability and profit margins during periods affected.

A reduction in demand for our services and solutions caused by seasonal trends, downturns in any of our targeted industries, a slowdown or reversal of the trend to outsource IT services in any of these industries or the introduction of regulations that restrict or discourage companies from outsourcing may result in a decrease in the demand for our services and could have a material adverse effect on our business, financial condition and results of operations.

The impact of the COVID-19 pandemic has and may continue to affect our overall financial performance, business operations, and stock price.

In December 2019, a novel coronavirus COVID-19 was reported in China, and in March 2020, the World Health Organization declared it a pandemic. This contagious disease pandemic has continued to spread across the globe and is impacting worldwide economic activity and financial markets, significantly increasing economic volatility and uncertainty. In response to this global pandemic, local, state, and federal governments have been prompted to take unprecedented steps that include, but are not limited to, travel restrictions, closure of businesses, social distancing, and quarantines.

From March 2020 onwards, we started witnessing the impacts of the COVID-19 pandemic to our revenues, largely as a consequence of the effect of the pandemic on the business conditions at some of our customers operations. The impacts have been more pronounced at our customers exposed to the retail vertical where store closures resulted in sales being severely impacted. Although we witnessed sequential growth in this vertical in the second half of 2020, revenues from most of our retail customers have not come back to pre-COVID-19 levels. The impact of the pandemic to other verticals of our business has largely been determined

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Table of Contents

by customer-specific dynamics. The ongoing COVID-19 pandemic may pose risks in the future to our business as some of our customers are unable to recover to pre-COVID-19 levels of operation. Examples of the COVID-19 pandemics impact to our business have included a temporary scale back to our personnel on projects, our customers placing projects and statements of work (SOWs) on temporary hold, and request for longer payment terms. Additionally, because more of our personnel are working remotely, we face increased cyber threats that may affect our systems and networks or those of our clients and contractors, and we anticipate the potential for increased costs to maintain and help secure our infrastructure and data.

Although recent vaccine approvals and rollout have raised hopes of a turnaround in the COVID-19 pandemic later this year, renewed waves and new variants pose concerns for the outlook. Growth may be stymied if virus surges (including from new variants) prove difficult to contain, infections and deaths mount rapidly before vaccines are widely available, and social distancing or lockdowns are more stringent than anticipated. Slower-than-anticipated progress on medical interventions could dampen hopes of a relatively quick exit from the COVID-19 pandemic and weaken confidence. Specifically, vaccine rollout could suffer delays or be uneven, widespread hesitancy could hamper vaccine take-up, vaccines could deliver shorter-lived immunity than anticipated and advances on therapies could be limited. Intensifying social unrest, including due to higher inequality and unequal access to vaccines and therapies, could further complicate the recovery. Moreover, if policy support is withdrawn before full economic recovery, bankruptcies of viable but illiquid companies could mount, leading to further employment and income losses. The ensuing tighter financial conditions could increase rollover risks for vulnerable borrowers, add to the already large number of economies in debt distress, and increase insolvencies among corporations and households.

In the United States, given the widespread impact of the COVID-19 pandemic, substantial governmental support is still required and the recently passed American Rescue Plan may be insufficient for long-term economic sustainability should there be a protracted recovery. Furthermore, investors fleeing the Dollar could elevate inflation expectations and interest rates. Additionally, high unemployment could lead to mortgage and rental defaults adding losses to the commercial banking industry, resulting in higher loan-loss provision, tighter lending standards and lending curtailment. If the impacts of the COVID-19 pandemic are materially prolonged, it could result in a cascade of additional corporate filings for bankruptcies, further eroding market confidence and increasing unemployment rates. Together, these uncertainties and risks could have a material adverse impact not only on our financial condition, business and results of operations in the United States, but also on our consolidated financial conditions, business and results of operations.

There are no comparable recent events which may provide guidance as to the effect of the spread and the ultimate impact of the COVID-19 pandemic. Consequently, the total magnitude of impact to our business and duration of impact is uncertain and difficult to reasonably estimate at this time.

We continue to take precautionary measures intended to minimize the risk of the virus to our employees, our customers, and the communities in which we operate that include suspension of all non-essential travel. All of our facilities in the Central and Eastern Europe (CEE) region have been opened for employees to work following local government guidelines. That said, the COVID-19 pandemic has placed restrictions in movement, and the majority of our employees continue to work remotely. Additionally, we have been successful in transitioning the majority of our workforce to work remotely and this has resulted in minimal disruption in our ability to deliver services to our customers.

In the three months ended December 31, 2020 and March 31, 2021, our allowance for doubtful accounts was $0.4 million and $0.2 million, respectively, and we continue to be engaged with all of our customers regarding their ability to fulfill their payment obligations. We continue to review our accounts receivable on a regular basis and have put in place regular review and processes to ensure payments from our customers.

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Our revenues are highly dependent on clients primarily located in the U.S. Any economic downturn in the U.S. or in other parts of the world, including Europe, or disruptions in the credit markets may have a material adverse effect on our business, financial condition and results of operations.

The IT services industry is particularly sensitive to the economic environment and tends to decline during general economic downturns. We derive the majority of our revenues from clients in the U.S. In the event of an economic downturn in the U.S. or in other parts of the world, including Europe (where we have gained customers in the Netherlands, Germany and the United Kingdom through our acquisition of Daxx Web Industries B.V. (Daxx) in December 2020, as well as through our acquisition of Tacit Knowledge in May 2021), our existing and prospective clients may reduce or postpone their technology spending significantly, which may in turn lower the demand for our services and may have a material adverse effect on our business, financial condition and results of operations. In addition, if a disruption in the credit markets were to occur, it could pose a risk to our business if clients or vendors are unable to obtain financing to meet payment or delivery obligations to us or if we are unable to obtain necessary financing. The COVID-19 pandemic has had adverse effects on economies and financial markets globally, which have particularly impacted many small, medium as well as large-sized businesses. Although the U.S. government and others throughout the world have or have taken steps to provide monetary and fiscal assistance to individuals and businesses affected by the pandemic, it is unclear whether these government actions will be sufficient to successfully avert or mitigate any economic downturn. Any economic downturn resulting from the COVID-19 pandemic and preventative measures taken by governments and private business worldwide could decrease technology spending and negatively affect demand for our offerings, which could materially adversely affect our business, prospects, financial condition and results of operations.

We face intense competition.

The market for technology and IT services is highly competitive and subject to rapid change and evolving industry standards and we expect competition to persist and intensify. We face competition from offshore IT services providers in other outsourcing destinations with low wage costs such as India, China, CEE countries and Latin America, as well as competition from large, global consulting and outsourcing firms and in-house IT departments of large corporations. Industry clients tend to engage multiple IT services providers instead of using an exclusive IT services provider, which could reduce our revenues to the extent that our clients obtain services from competing companies. Industry clients may prefer IT services providers that have more locations or that are based in countries that are more cost-competitive, stable and/or secure than some of the emerging markets in which we operate.

Our primary competitors include IT service providers such as Andersen Lab, Ciklum, EPAM Systems, Inc., Globant S.A. and Endava plc; global consulting and traditional IT services companies, such as Accenture plc, Capgemini SE, Cognizant Technology Solutions Corporation, SoftServe, Inc. and Tata Consultancy Services Limited; and in-house development departments of our clients. Many of our present and potential competitors have substantially greater financial, marketing and technical resources, and name recognition than we do. Therefore, they may be able to compete more aggressively on pricing or devote greater resources to the development and promotion of technology and IT services and we may be unable to retain our clients while competing against such competitors. Increased competition as well as our inability to compete successfully may have a material adverse effect on our business, prospects, financial condition and results of operations.

Damage to our reputation may adversely impact our ability to generate and retain business.

Since our business involves providing tailored services and solutions to clients, we believe that our corporate reputation is a significant factor when an existing or prospective client is evaluating whether to engage our services as opposed to those of our competitors. In addition, we believe that our brand name and reputation also play an important role in recruiting, hiring and retaining highly skilled personnel.

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However, our brand name and reputation is potentially susceptible to damage by factors beyond our control, including actions or statements made by current or former clients and employees, competitors, vendors, adversaries in legal proceedings, government regulators and the media. There is a risk that negative information about us, even if untrue, could adversely affect our business. Any damage to our reputation could be challenging to repair, could make potential or existing clients reluctant to select us for new engagements, could adversely affect our recruitment and retention efforts, and could also reduce investor confidence.

Our failure to successfully attract, hire, develop, motivate, and retain highly skilled personnel could have a significant adverse effect on our business, financial condition, and results of operations.

Our continued growth and success and operational efficiency is dependent on our ability to attract, hire, develop, motivate and retain highly skilled personnel, including IT engineers and other technical personnel, in the geographically diverse locations in which we operate. Competition for highly skilled IT professionals can be intense in the regions in which we operate, and we may experience significant employee attrition rates due to such competition. While our management targets a voluntary attrition rate (expressed as a percentage) no higher than in the low-twenties, the significant market demand for highly skilled IT personnel and competitors activities may induce our qualified personnel to leave and make it more difficult for us to recruit new employees with suitable knowledge, experience and professional qualifications. High attrition rates of IT personnel would increase our operating costs, including hiring and training costs, and could have an adverse effect on our ability to complete existing contracts in a timely manner, meet client objectives and expand our business. Failure to attract, hire, develop, motivate and retain personnel with the skills necessary to serve our clients could decrease our ability to meet and develop ongoing and future business and could materially adversely affect our business, financial condition and results of operations.

Our business operations may be severely disrupted if we lose the services of our senior executives and key employees.

Our success depends substantially upon the continued services of our senior executives and other key employees. If we lose the services of one or more of such senior executives or key employees, as recently occurred in June 2021 when Victoria Livschitz resigned as Executive Vice President of Customer Success and became our consultant and Max Martynov resigned as our Chief Technology Officer, our business operations can be disrupted, and we may not be able to replace them easily or at all. In addition, competition for senior executives and key personnel in our industry is intense, and we may be unable to retain our senior executives and key personnel or attract and retain new senior executives and key personnel in the future, in which case our business may be severely disrupted.

Failure to adapt to changing technologies, methodologies, and evolving industry standards may have a material adverse effect on our business, financial condition, and results of operations.

We operate in an industry characterized by rapidly changing technologies, methodologies and evolving industry standards. Our future success depends in part upon our ability to anticipate developments in our industry, enhance our existing services and to develop and introduce new services to keep pace with such changes and developments and to meet changing client needs.

Development and introduction of new services and products is expected to become increasingly complex and expensive, involve a significant commitment of time and resources, and subject to a number of risks and challenges, including:

• difficulty or cost in updating services, applications, tools and software and in developing new services quickly enough to meet clients needs;

• difficulty or cost in making some features of software work effectively and securely over the internet or with new or changed operating systems;

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• difficulty or cost in updating software and services to keep pace with evolving industry standards, methodologies, regulatory and other developments in the industries where our clients operate; and

• difficulty or cost in maintaining a high level of quality and reliability as we implement new technologies and methodologies.

We may not be successful in anticipating or responding to these developments in a timely manner, and even if we do so, the services, technologies or methodologies we develop or implement may not be successful in the marketplace. Furthermore, services, technologies or methodologies that are developed by competitors may render our services non-competitive or obsolete. Our failure to adapt and enhance our existing services and to develop and introduce new services to promptly address the needs of our clients may have a material adverse effect on our business, financial condition and results of operations.

Security breaches, system failures or errors, and other disruptions to our network could result in disclosure of confidential information and expose us to liability, which would cause our business and reputation to suffer.

We often have access, or are required, to collect, process, transmit and store sensitive or confidential client and customer data, including intellectual property, proprietary business information of Grid Dynamics and our clients, and personally identifiable information of our clients, customers, employees, contractors, service providers, and others. We use our data centers and networks, and certain networks and other facilities and equipment of our contractors and service providers, for these purposes. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks and disruptions by hackers or other third parties or otherwise may be breached due to human error, phishing attacks, social engineering, malfeasance or other disruptions. During the COVID-19 pandemic, because more of our personnel are working remotely, we face increased risks of such attacks and disruptions that may affect our systems and networks or those of our clients and contractors. Any such breach or disruption could compromise our data centers, networks and other equipment and the information stored or processed there could be accessed, disclosed, altered, misappropriated, lost or stolen. In addition, any failure or breach of security in a clients system relating to the services we provide could also result in loss or misappropriation of, or unauthorized access, alteration, use, acquisition or disclosure of sensitive or confidential information, and may result in a perception that we or our contractors or service providers caused such an incident, even if Grid Dynamics and our contractors networks and other facilities and equipment were not compromised.

Our contractors and service providers face similar risks with respect to their facilities and networks used by us, and they also may suffer outages, disruptions, and security incidents and breaches. Breaches and security incidents suffered by us and our contractors and service providers may remain undetected for an extended period. Any such breach, disruption or other circumstance leading to loss, alteration, misappropriation, or unauthorized use, access, acquisition, or disclosure of sensitive or confidential client or customer data suffered by us or our contractors or service providers, or the perception that any may have occurred, could expose us to claims, litigation, and liability, regulatory investigations and proceedings, cause us to lose clients and revenue, disrupt our operations and the services provided to clients, damage our reputation, cause a loss of confidence in our products and services, require us to expend significant resources to protect against further breaches and to rectify problems caused by these events, and result in significant financial and other potential losses.

Our errors and omissions insurance covering certain damages and expenses may not be sufficient to compensate for all liability. Although we maintain insurance for liabilities incurred as a result of certain security-related damages, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance