Grid Dynamics Holdings, Inc. (GDYN) Q3 2021 Earnings Call Transcript

Greetings. Welcome to the Grid Dynamics Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to your host, Lilia Chernova, Head of Investor Relations. You may begin.

Good afternoon. Welcome to Grid Dynamics third quarter 2021 earnings conference call. Before we begin, let me remind everyone that today’s discussion will contain forward-looking statements based on our current assumptions, expectations and beliefs, including our fourth quarter 2021 financial guidance, the growth of Grid Dynamics business, our objectives and business strategies as well as other forward-looking statements. You can refer to the disclosure at the end of the company’s earnings press release and Form 8-K filed with the Securities and Exchange Commission today. For information about forward-looking statements that will be made on this call. All statements made today reflect our current expectations only, and we undertake no obligation to update any of them to reflect the events that will occur after this call. You can learn more about the specific risk factors that could cause our actual results to differ materially from today’s discussion in the Risk Factors section of the company’s Form 10-Q filed on August 5, 2021, and in subsequent periodic reports that the company filed with the SEC. During this call, we will discuss certain non-GAAP measures of our performance. GAAP to non-GAAP financial reconciliations and supplemental financial information are provided in the earnings press release and the 8-K filed with the SEC. This call is also available via webcast. You can find all the information I have just described in the Investor Relations section of Grid Dynamics website. Joining us today on the call are CEO, Leonard Livschitz; and CFO, Anil Doradla. Following their prepared remarks, we will open the call to your questions. With that, let me turn the call over to Leonard.

Thank you, Lilia. Good afternoon, everyone, and thank you for joining us today. Grid Dynamics had another record quarter with multiple positive categories shaping our results. More importantly, since speaking with you all three months ago, we have made solid progress across multiple fronts of our business. With that backdrop, I’m excited to share key highlights for our third quarter results, provide insights into the underlying business trends, and talk about how the company is well-positioned to leverage significant digital transformation opportunities, both in the near and long term. Now coming to the third quarter results. I’m very pleased to report another record quarter of revenue in our company’s history. This marks the third consecutive quarter of reporting record revenue. In the third quarter, our revenue of $57.9 million exceeded our expectations. The organic revenue of $44.1 million was higher than our guidance range of $39 million to $40.5 million, and our recent acquisitions revenue of $13.8 million exceeded our expectation of $11 million. In the quarter, we witnessed strong interest across the customer base in engaging our services as digital transformation initiatives extend stage priority across the enterprise work. Based on recurring demand trends, we entered the fourth quarter of 2021 with incremental confidence and expect the company to continue being a preferred partner for our customers. These accomplishments would not have been possible without the efforts of our dedicated employees, and I would like to thank all of them for their continuous hard work and dedication. There are many positive trends in the third quarter, and I want to share with you some of the notable ones. We witnessed a robust demand across our business. This was highlighted by double-digit sequential growth rates across most of our verticals. Furthermore, the strong trends exceeded our expectations, as highlighted by the outperformance relative to our forecast. Customers are investing aggressively in digital transformation initiatives with a deep sense of urgency. As we highlighted in the past, this has been driven by several factors, including improving customer sentiment, greater shift to digital commerce and a continued catch-up in spending as some customers who held back in 2020. Based on our business pipeline and customer engagement momentum, we will exit this year strong, and we will enter 2022 with incremental coverage. The network engineering skill sets continue to be robust. During the quarter, we started to see the efforts that were put in place around scaling detailed acquisitions paying off. This included increasing the capacity of our recurring organization, expanding our geographic locations for hiring and aggressively ramping up our internship program. Partnering with the university, we expect to double the number of interns in 2021 over 2020 and again, more than double in 2022. During the third quarter, with a total of 374 people over the second quarter, our headcount reached 2,884 employees. We picked up momentum on the new logo front, as we added seven new logos to our organic business with all of them contributing revenues. This brings our total year-to-date new logo addition to 18, which is higher than the 16 new logos we added in the entire 2020. We have clients from the Fortune 500, including two global pharma companies. The general account decline in the third quarter reached 25. Within our clients, two were in the TMT space, one was CPG, and two were retail. Our concentration in our top clients continues to decline as we expand our business with new customers, deepen our existing customer relationships, and leverage our new acquisitions. During the quarter, revenue from our top five customers was 42%, down from 60% of our revenues in the same quarter a year ago. Our continued efforts around customer diversification with new logos are ramping up, and they are paying off. During the quarter, we made some strategic hires on the sales front across the United States. Additionally, we have made progress around integrating our sales organization across our recent acquisitions and our organic business. The focus continues to be around implementing an enhanced value strategy by partnering with innovative clients. During the quarter, we benefited from cross-selling as customers started seeing the value of our combined technical synergies and skill sets. On the partnership front, we’re executing our plan of building deeper relationships with the major cloud providers. Recently, we issued a press release highlighting Grid Dynamics earning Google Cloud Premier Partner status. This Premier Partner status is a testament to the differentiation we created in our offerings. Partnerships are crucial in scaling our business and accelerating new enterprise logo acquisitions. In the third quarter, we started rolling out the Pod model for our client engagement. There are many benefits to the pod engagement model, which include efficiencies, better cost control and enhanced flexibility in delivering services to clients. Each Grid Dynamics pod is an autonomous trans-functional team managed by a dedicated experienced team leader. Multiple pods could be working with the same customers. During the third quarter, we started rolling out the pod model at some of our larger customers, and going forward, we expect this form of engagement to continue increasing. Now coming to some segment commentary. At 32% of the third quarter revenue, our retail business emerged as our largest vertical in the quarter. Underpinning the strong sequential growth was our organic business in the fourth quarter and the addition of revenue from Tacit Knowledge. During the quarter, we saw strong growth across our retail customers as they aggressively invested in e-commerce platforms. In many ways, the retail industry is undergoing transformation, with customers increasingly shifting their spending toward online. Retailers across the industry ranging from e-commerce-friendly apparel brands, home improvement specialists, and traditional brick-and-mortar retailers are positioning themselves with strong online presence. At the center of their online strategy is building our large robust cloud platforms with specialized artificial intelligence and machine learning solutions for optimal product placements, areas where we have built a strong reputation and industry-leading expertise. And 30% of our third quarter revenue, the TMT vertical grew 39% on an annual basis and was our second largest vertical. The growth in the quarter was across our customer base, with top technology customers fueling the growth. Similar to the last couple of quarters, our top TMT customers continue to focus on expanding offshore delivery centers. At 19% of our third quarter revenue, CPG and manufacturing continued to show robust growth, both on a sequential and year-over-year basis. Underpinning this growth was the addition of revenue from logos outside of our largest CPG customers and a full quarter of revenue contribution coming from Tacit Knowledge acquisition. Within this vertical, we continue to engage with large global brands that are focused on enhancing direct consumer interactions. Our largest CPG customers are engaged in significant new projects that are expected to roll out in Q4 and 2021. During the quarter, Grid Dynamics undertook several notable projects. First, with a global technology company, we orchestrated and built a reactive subsystem for detecting fraudulent advertising activities. This system successfully scales to provide a negative event from creation to decision in a fraction of the time compared to the previous situation, providing significant savings due to substantial improvement in ad performance. Secondly, for one of the largest U.S. home improvement retailers, Grid Dynamics delivered a visualization tool for room renovation material discovery. Our team designed, implemented, and rolled out a tool that allows visualization of specific products and color sets in a customer environment, making it easier for consumers to make a purchase decision without the necessity to physically enter the store. This led to an increase in customer sales conversion and significantly reduced abandonment rates for environment-specific product purchases. Thirdly, we worked with one of the fastest-growing telemedicine companies to implement the initial version of a new unified platform that integrates patient-doctor communication solutions, customer portals, and marketing tools in a single environment. This will maximize the speed to market for new features as well as keep maintenance and support costs under control. Lastly, for a major U.S. manufacturing enterprise, we implemented a unified platform based on the Grid Dynamics analytical data platform, developed jointly with AWS. This platform has already been deployed for one of the largest business segments. Finally, we’re increasingly finding ourselves playing a central role in influencing and shaping our customers’ growth strategies. The key question every enterprise asks today is how we can scale our online presence and stay relevant in business. We believe that an effective response to these key questions relies on building high-quality, robust digital commerce solutions that are scalable, adaptable and reliable. Grid Dynamics core DNA is built around designing and implementing such solutions. As we approach 2022, our DNA will propel Grid Dynamics to scale and strengthen our business positioning and reputation in the market. With that, let me turn the call over to Anil, who will discuss Q3 results in more detail. Thank you.

Thanks, Leonard. Good afternoon, everyone. Our third quarter revenue of $57.9 million exceeded our guidance range of $50 million to $51.5 million and was up 21.5% on a sequential basis and 120% on a year-over-year basis. Excluding revenues from our acquisitions of DAXX and Tacit Knowledge, which contributed $13.8 million in the quarter, our organic revenue of $44.1 million was up 14.8% sequentially and 67.3% on a year-over-year basis and exceeded our guidance of $39 million to $40.5 million. The better-than-expected revenue in the quarter was driven by strong demand for our services across industry verticals. During the third quarter, retail, our largest vertical representing 31.5% of our revenues, grew 43.5% on a sequential basis and 198.2% on a year-over-year basis. The strong sequential and year-over-year growth was driven by strength across our customer base, with e-commerce-friendly and brick-and-mortar retailers continuing to focus on digital transformation initiatives. Additionally, we benefited from a full quarter of revenue contribution from Tacit Knowledge. On a year-over-year basis, the growth was driven by continued improvements in our retail vertical combined with revenue contributions from acquisitions, which we made from the fourth quarter onwards. Our TMT vertical was our second largest vertical, representing 30.4% of our third quarter revenues, and grew 9.2% on a sequential basis and 39.2% on a year-over-year basis. Growth in the quarter largely stemmed from some of our large TMT customers who continue to ramp their offshore operations with us. Here are the details of the revenue mix of other verticals. Our CPG and manufacturing represented 19.3% of our revenue in the third quarter and grew 13.2% on a sequential basis and 233.9% on a year-over-year basis. This growth during the quarter primarily came from a ramp-up of new customers, combined with contributions from Tacit Knowledge. Finance represented 9% of revenue and grew 28.3% on a sequential basis and 69% on a year-over-year basis. The sequential growth in the financial vertical was largely driven by a combination of growth from our large financial customers combined with ramping programs from recently added customers. Finally, the other segment represented 9.8% of our third quarter revenue and was up 15.9% on a sequential basis. Within this vertical, we witnessed continued ramps at some of our recent client wins. We exited the third quarter with a total headcount of 2,884, up from 2,510 employees in the second quarter of 2021 and significantly up from 1,204 employees in the third quarter of 2020. The sequential increase of 374 employees or 14.9% was largely due to increases in engineering headcount stemming from improving demand. The increase from 2020 was largely due to a combination of improving demand resulting in headcount increases, combined with our acquisitions of Tacit Knowledge and DAXX. At the end of the third quarter of 2021, our total U.S. headcount was 293 employees or 10% of the company’s total headcount, slightly down from 11% in the second quarter and significantly down from 21% in the year-ago quarter. Our non-U.S. headcount, which we sometimes refer to as offshore located in Central Eastern Europe, UK, the Netherlands, and Mexico, was 2,591 or 90%. In the third quarter, revenues from our top 5 and top 10 customers were 42% and 58.2%, respectively. During the same period a year ago, our top 5 and top 10 customer concentrations were 59.9% and 77.7%, respectively. The decline was driven by a combination of new logo ramp-up, continued industry diversification, and acquisitions of DAXX and Tacit Knowledge. During the third quarter, we had a total of 215 customers with 55% coming from our organic business and the remaining 160 from Tacit Knowledge and DAXX acquisitions. Our organic business customer count of 55% was up from 51% in the second quarter of 2021 and up from 42% in the third quarter of 2020. As a reminder, we only count revenue-generating customers in the quarter and do not include customers who were inactive during the quarter. Relative to the second quarter, we added seven new logos, two in the TMT vertical, two in the financial vertical, and four in other verticals, which included two global pharma companies. Moving to the income statement. Our GAAP gross margin during the quarter was $25.3 million or 43.6%, up from $19.8 million or 41.5% in the second quarter of 2021 and up from $11.2 million or 42.4% in the year-ago quarter. On a sequential basis, the increase in gross margin as a percentage was due to a combination of factors including tailwinds from more working days and billable hours, favorable offshore mix, and a full quarter of our recent acquisition of Tacit Knowledge. On a non-GAAP basis, our gross margin was $25.4 million or 43.9%, up from $19.9 million or 41.8% in the second quarter of 2021 and up from $11.2 million or 42.6% in the year-ago quarter. The sequential increase in our non-GAAP gross margin as a percentage was driven by the same factors mentioned earlier. Our non-GAAP EBITDA during the third quarter, which excludes stock-based compensation, depreciation and amortization, transaction and other related costs, was $12.5 million or 21.6%, up from $9.7 million or 20.4% in the second quarter of 2021 and up from $4.2 million or 15.8% in the year-ago quarter. The sequential increase in EBITDA as a percentage of revenue was largely due to leverage on higher levels of revenue and gross margin tailwinds offset by higher operating expenses. Additionally, in the year-ago quarter, our business was recovering from pandemic-related headwinds, resulting in lower levels of EBITDA both in dollar terms and percentage. Our GAAP net loss in the third quarter totaled a loss of $0.5 million or a loss of $0.01 based on a share count of 63 million shares compared to a second quarter loss of $1.5 million or a loss of $0.03 per share based on 54 million shares and a loss of $1.1 million or $0.02 per share based on 50 million shares in the year-ago quarter. The sequential decrease in GAAP net loss was largely due to higher levels of revenue, both organic and acquisition, offset by increases in operating expenses. On a non-GAAP basis, in the third quarter, our non-GAAP net income was $7.9 million or $0.11 per share based on 69 million diluted shares compared to the second quarter non-GAAP net income of $6.1 million or $0.10 per share based on 61 million diluted shares and $2.5 million or $0.05 per share based on 52 million diluted shares in the year-ago quarter. The key reason for the increase in non-GAAP net income was similar to GAAP net income, which included leverage from higher revenues and the full quarter of Tacit Knowledge revenues, offset by smaller increases in operating expenses. Coming to the balance sheet. On September 30, 2021, our cash, cash equivalents and short-term investments totaled $199 million, up from $68 million in the second quarter of 2021. The sequential increase in our cash position was from our secondary offering and redemption of warrants. As for the fourth quarter guidance, we expect revenues to be in the range of $58 million to $59 million. This includes $12.5 million in acquisition revenue. We expect our non-GAAP EBITDA in the fourth quarter to be in the range of $9 million to $9.9 million. Based on our fourth quarter guidance, for full year 2021, we expect our revenues to be in the range of $202 million to $203 million. This includes a contribution of $42 million from our acquisitions. For fourth quarter 2021, we expect our basic share count to be in the range of 65 million to 66 million and our diluted share count to be in the 72 million to 73 million range. That concludes my prepared remarks. Operator, we are ready to take questions.

Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from the line of Mayank Tandon with Needham & Co. You may proceed with your question.

Thank you. Good evening. Congrats, Leonard and Anil, on a strong quarter.

Thanks, Mayank.

Wanted to kick things off just based on the pipeline and the pace of deal activity, do you believe that growth can continue to run above trend? And how does that play into your thinking about 2022 at this juncture?

Thank you, Mayank, and thank you for the kind words. So if you look at Q2 and actually the nine months of 2021, we have been successfully executing our strategy on expanding and building the pipeline with new customers, but also scaling our relationships with existing clients as well. We would like to see that momentum growing. I believe we have a strong future going forward. We’re cautiously optimistic because there are still general market headwinds, not just in our line of business, but in general. So we believe that looking forward, our 20-plus growth is a path we feel good about at this point. I think when we get back to year-end February, there will be more clarity on 2022. At this point in time, we have a strong position and are expanding our relationships with clients.

Got it. That’s very helpful. And then just as a quick follow-up. How are you addressing the supply side challenges of recruiting and retaining talent? Are you looking at new delivery hubs? Just maybe some thoughts around how do you address those challenges to meet the strong demand climate. Thank you.

Sure. Yeah. Well, it’s very hard to ignore the scale of the business across the entire industry and demand continues to grow. From our perspective, I believe we’re well prepared. We have expanded our recruiting capabilities on time, but we have also built very strong training facilities, both virtual and in place across multiple locations. Our university internship programs are growing faster than ever. With acquisitions, we are broadening our engineering centers, and we continue to add more. So stay tuned. Obviously, we look for high-quality places with strong engineering talent and great university programs. So we’re positioning ourselves well at this point.

Great. Thank you so much for taking my questions. Congrats again.

Thank you.

Thanks, Mayank.

Our next question comes from the line of Maggie Nolan with William Blair. You may proceed with your question.

Hi, Leonard. Hi, Anil.

Hi, Maggie.

I wanted to ask about the kind of onshore-offshore mix at your largest clients. Is that more closely matching where it should be on a client-by-client basis or more closely matching the overall company mix? Or is there still potential for more work to move offshore at key accounts as you scale with them?

Yes. This is a broader question. First of all, the numbers we report in some cases are a bit confusing because, as you know, especially with acquisitions, we have greatly expanded the business outside of the United States. So if you look at the total presence onshore in the United States, it’s not 100% by far. We are actually growing our onshore presence and other locations, for example, in the UK. If we concentrate specifically on the United States, I think we’re in a good mix as the dynamics hopefully will increase and we will get more opportunities to bring people on assignments. We’re actively hiring in the States. Our customers are becoming more and more accustomed to our global capabilities. As we describe our business pod model, which is enhancing relationships, customers are quite knowledgeable in terms of our team compositions on onshore technical leadership, offshore technology project management across the globe. So I think this division between onshore and offshore is becoming less visible from a delivery capability standpoint. We’re also bringing in near-shoring capabilities with our centers in Mexico. So I believe that the balance is okay, but I would not just read the numbers in isolation; I consider how our customers’ expectations and our positioning looks today about our balance with them.

Okay. Thanks for that color, Leonard. And then on the gross margin, I know you’ve talked about the bump from Tacit and the bump from the offshore mix. And do you feel like there are structural items? I’m wondering how attrition trends and utilization trends are factoring into how you’re looking at gross margin going forward? And what’s kind of the right level that we should be thinking about for the normalized business?

Sure. As far as Q3 is concerned, Maggie, you saw a 210 basis points increase, right? We did see a pickup in some of the utilization trends and some offshore improvements. As you rightly pointed out, Q3 in terms of working days was a little better. As we get into Q4, I think the key question is around the utilization of our engineering resources. But I think when you look at us, we’re still maintaining our long-term target model. Should we be at our target model in the near term? I feel comfortable saying yes. But again, it’s all a function of how utilization plays out and how the macro environment affects us. So as we enter 2022, we’ll reassess and update everyone on whether we have to revisit that from a long-term perspective. But for now, I think we’re moving in the right direction.

Thank you, both.

Thank you.

Thanks, Maggie.

Our next question comes from Bryan Bergin with Cowen. You may proceed with your question.

Hi, guys. Good afternoon. Leonard, I was hoping you could dig in here a little bit more on the pod model that you’re talking about. So can you go into details around the operational benefits that this gives Grid Dynamics? Also, what are the financial benefits that this structure can provide as you scale it?

Thank you, Bryan. That’s a very insightful question. Essentially, we’ve been a product-oriented company servicing clients for a long time. The question becomes where we can call it our business model versus our execution model. I mean we do a lot of custom development, microservices, combining with global cloud migration, data engineering, and data science. The question becomes, at one point in time, what makes sense to structure in terms of business positioning that would be beneficial for our clients and for us? Essentially, we help the client be more clear and specific on deliverables. So instead of a traditional time and materials business arrangement, we offer a combination of skills on the project led by experienced project leads, which gives the customer a better understanding of our deliverables and enhances our relationships. On the financial side, it should be mutually beneficial, meaning that clients have a better understanding of the ROI from their relationship with Grid Dynamics, and it allows us to deploy the proper level of resources. The product-oriented delivery is one of our strengths. We’re just putting a little more emphasis on letting customers know about this.

Okay. And then a follow-up here, more of a macro supply chain impact question for you. Given the magnitude of global supply chain issues, I’m curious if you’re seeing any impact on your client budgets. Actually, I’m more interested if this is creating more opportunities for you in the retail and CPG verticals.

In terms of demand versus supply, I would not differentiate retail and CPG from other verticals. Demand is everywhere. We are a notable expert delivering experience and digital commerce globally. These two verticals, among others, continue to build relationships with Grid Dynamics. There are major supply chain issues across the globe, but it’s not what we’re primarily focused on. We’re about the capabilities, technical excellence, and system integration we deliver to our clients. When they come to us, it’s not just because they struggle with talent; they want the full-service deliverables from us, including technical consultancy and business partnership, which is growing, as is our delivery capability. I would say that as global demand grows, our relationships grow stronger because they seek our expertise.

Okay. Thank you.

Sure.

Our next question comes from the line of Josh Siegler with Cantor Fitzgerald. You may proceed with your question.

Hi. Good afternoon. Congratulations on the stellar results. My first question is on pricing. So how receptive have your clients been in negotiations for incremental price movements recently?

Hi, Josh. Well, every customer would love to give us more money. On a serious note, it’s not always the case, but more importantly, it’s about the value we provide. There is inflation and pricing increases in the market, and Grid Dynamics brings high-quality resources and engineering capabilities combined with project excellence, enhancing customer performance. Margins are healthy because we align our pricing and business offering, whether it’s a pod model, time and materials model, or fixed bid model, with customer returns. It's always a win-win. We’re not just raising prices arbitrarily; customers understand that the value we bring is increasingly significant, and that’s where we feel comfortable that our pricing strategy continues to be mutually beneficial.

Great. That’s very helpful color. And then I’d like to address the sales force side. We’ve been talking about the build-out of the sales force for a couple of quarters. You’ve made a couple of strategic hires there. Are you starting to see that pay off? Are they starting to bring in new logos? And what do you think that ramp will be like as we move into 2022?

Thank you. That’s a good point. We continue to increase and enhance our sales organization. However, simply increasing the sales organization is just one part of the plan. We have been investing very strongly in our technology organization, driven by our CTO and technical leadership. We are enhancing our architects as well as our engineers, which helps with presales. We have aggressive targets for client acquisitions in 2022, both in existing and new verticals. I would say that the momentum is good, but we are always striving for more. We are heavily investing in technology and sales, and we expect to see returns.

Great. That’s very helpful. And congratulations again.

Thanks.

Thank you.

Our next question comes from the line of Ryan Potter with Citi. You may proceed with your question.

Hi, Leonard and Anil, and congrats on the good quarter. Just on the retail vertical here. It looks like it’s back to its pre-pandemic run rate. So I was wondering if this means that most of the clients in the vertical have now returned to their pre-pandemic levels? Or have you been able to win incremental work here either through new logos or cross sales? And secondly, as the retail vertical continues to recover toward its pre-pandemic levels, what kind of overall growth tailwind should we expect heading into next year?

Yes. I think, Ryan, it’s a very comprehensive assessment. If you look at the last three months, we saw significant improvement in the retail sector. If you look at the nine-month period, technology still holds a solid lead. There seems to be a recovery in retail, with continued growth in CPG. One key factor in the reporting was that one of our older clients, which was heavily affected by the pandemic, is now doing very well, as indicated by recent market performance. There is a catch-up gain occurring as e-commerce grows, and we have international retail clients as well. I think the segment seems positive and healthier, but Grid Dynamics is also enhancing focus on other verticals like pharma, doing B2B business, and broadening our technology scope. Our partnerships have also expanded significantly, with recent relationships established with major cloud providers.

Got it. And then I’d like to ask a question on M&A. Can you provide an update on how the DAXX and Tacit integrations have been progressing? Have you gained any incremental clients, cross-sell opportunities, or revenue synergies from this? Also, with the healthy level of cash that you have on the balance sheet now, can you provide an update or overview on how the M&A pipeline looks for you currently?

Sure, sure. Very good. You almost asked the question I wanted to address. First of all, Tacit and DAXX are very different companies. Tacit Knowledge has a similar technical positioning with Grid Dynamics, but they target slightly different verticals and have different partnership strategies. They complement us in various ways, particularly in Europe. There are definitely synergies, especially as we’ve started a notable project during this quarter. Everything looks positive, and it's aligned closely in thought leadership. With DAXX, we continue with full integration. They assist us with what we call commercial sales. Many smaller clients want to see more project-based engagements with a small group of people, especially globally. I believe Tacit is becoming a significant driver for new lead generation as well as scalable business. There are a couple of customers I hope to discuss in the next quarter, which look promising. As for new M&As, we have cash and are looking carefully at what we can add to our pipeline. We just brought on board a very strong M&A talent from another company, and he brings relevant experience to our segment. We anticipate more opportunities. Stay tuned for updates earlier next year, and possibly even sooner. There are many prospects in our segment.

Okay. Thank you.

Thanks.

At this time, we have reached the end of the question-and-answer session. I’ll now turn the call back over to Leonard Livschitz for closing remarks.

Thank you, everybody, for joining us on the call today. Our third quarter results were superior across the board and we’re significantly ahead of our expectations. As we enter the fourth quarter, the demand environment continues to be robust, and we enter 2022 with renewed enthusiasm. I look forward to giving you a business update in three months. Thank you.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.