DEF: Grid Dynamics Seeks Shareholder Approval for Equity Plan Expansion

Grid Dynamics Holdings, Inc. will hold its 2025 Annual Meeting to elect directors, ratify auditors, vote on executive compensation, and approve an increase of 3.5 million shares for its equity incentive plan.

Summary

• The 2025 Annual Meeting of Stockholders will be held virtually on December 23, 2025, at 7:30 a.m. Pacific Time.
• Stockholders will vote on the election of three Class III directors (Eric Benhamou, Patrick Nicolet, Weihang Wang) to serve until the 2028 annual meeting.
• The ratification of Grant Thornton LLP as the independent registered public accounting firm for fiscal year 2025 is on the agenda.
• A non-binding advisory vote on the compensation of named executive officers will take place.
• Stockholders are asked to approve an amendment to the 2020 Equity Incentive Plan to increase the number of shares authorized for issuance by 3,500,000, bringing the total to 19,800,000 shares.
• For fiscal year 2024, total revenues increased by 12.0% year-over-year to $350.6 million.
• GAAP net income attributable to common stockholders was $4.0 million in 2024, a significant improvement from a GAAP net loss of $(1.8) million in 2023.
• Non-GAAP EBITDA increased to $52.5 million in 2024 from $44.2 million in 2023.
• The company continued to gain new customers and increased deal activity with existing customers, and scaled delivery locations through acquisitions of Juxt (U.K.) and Mobile Computing (Argentina).
• The 2024 Say-on-Pay advisory vote received 98% stockholder support.
• The company's compensation program for 2024 emphasized performance-based equity (55% PSUs, 45% RSUs) and included diverse metrics for incentives.
• NEOs received quarterly cash incentive payments that surpassed target bonus opportunities in three of four quarters in 2024.
• The 2024 PSU performance resulted in 208% of target earned for the first year of the three-year performance period, after a 30% upward adjustment from rTSR and rCAGR modifiers.
• As of November 4, 2025, 3,226,924 shares remained available under the 2020 Plan, with 84,805,201 common shares outstanding.
• The total overhang was 13.0% and the average three-year burn rate (2022-2024) was 3.5%, both below the median of compensation peers.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance in 2024 with significant revenue growth and a positive shift to GAAP net income. Management is actively engaged with stockholders and has refined its executive compensation program to align with performance and market practices, which received high stockholder approval. Strategic acquisitions indicate continued growth initiatives. While the proposed increase in the equity incentive plan shares introduces potential dilution, the company's current overhang and burn rate are below industry peers, suggesting responsible management. The high CEO pay ratio is a notable point but is partially mitigated by the annualized calculation for multi-year awards.

Positives

• Strong financial performance in 2024 with 12.0% revenue growth to $350.6 million.
• Return to GAAP net income of $4.0 million in 2024 from a loss of $(1.8) million in 2023.
• Increased Non-GAAP EBITDA to $52.5 million in 2024 from $44.2 million in 2023.
• Successful customer acquisition and increased deal activity with existing clients.
• Strategic scaling of delivery locations through acquisitions (Juxt in U.K. and Mobile Computing in Argentina).
• High stockholder support for executive compensation (98% Say-on-Pay vote in 2024).
• Proactive engagement with stockholders and implementation of feedback in compensation program design.
• Executive compensation program aligns with stockholder interests, with 55% PSUs and 45% RSUs for long-term incentives.
• NEOs exceeded quarterly cash incentive targets in three out of four quarters in 2024.
• 2024 PSU performance achieved 208% of target for the first year, reflecting strong performance and market outperformance.
• Equity plan overhang (13.0%) and three-year average burn rate (3.5%) are below the median of compensation peers, indicating responsible equity management.
• Non-employee director compensation policy revised to encourage equity compensation, further aligning directors' interests with stockholders.

Negatives

• The CEO, Leonard Livschitz, did not receive a long-term equity incentive award in 2025, although the 2024 grant was a 3-year award.
• The CEO Pay Ratio for 2024 was 483 to 1, which is high, even when considering the annualized ratio for 3-year awards at 182 to 1.
• The request to increase authorized shares for the equity incentive plan by 3.5 million, while common for growth companies, represents potential future dilution for existing shareholders.

Risks

• Risk of not attracting and retaining highly qualified individuals in a competitive talent market.
• Potential for performance-based incentives to encourage excessive risk-taking, despite mitigation efforts.
• Market volatility impacting the value of equity awards.
• Dilution for existing stockholders from the approval of 3.5 million additional shares for the 2020 Equity Incentive Plan.
• Cybersecurity, IT strategy, operations, policies, controls, and risk management are ongoing areas of oversight, indicating inherent risks.
• Continuous need to monitor and ensure compliance with legal and regulatory requirements.
• Reputational risks are subject to board oversight.

Future Outlook

The company intends to continue aligning eligible participant and stockholder interests through the effective use of equity awards, which are crucial for attracting, motivating, and retaining highly qualified individuals in a competitive market. Management plans to maintain regular dialogue with stockholders regarding executive compensation and company performance. The executive compensation program is designed with challenging performance goals to drive sustainable growth and long-term value creation.

Management Comments

• "We are pleased to invite you to attend the 2025 Annual Meeting of Stockholders."
• "Whether or not you attend the Annual Meeting, it is important that your shares be represented and voted at the meeting."
• "On behalf of the Company's Board of Directors, we would like to express our appreciation for your support of and interest in Grid Dynamics."
• "Our management and board of directors were not aware of any other matters to be presented at the Annual Meeting."
• "We believe that the effective use of equity and equity-based awards is essential to attract, motivate, and retain employees, consultants and directors, to further align participants' interests with those of our stockholders, and to provide participants incentive compensation opportunities that are competitive with those offered by other companies that we compete with for talent."
• "We believe that the structure of our board of directors and its committees provide us strong overall management."
• "We believe our executive compensation program as developed and implemented, and as presented in this CD&A, achieves these objectives and is appropriate for a company in our industry and at our stage of growth."
• "It is our belief that a majority of an executive's total compensation should be variable at risk compensation, meaning it is tied to our financial performance."

Industry Context

Grid Dynamics operates in the highly competitive software and technology industry, specializing in technology consulting, platform and product engineering, and advanced analytics services. The company highlights its leadership in enterprise artificial intelligence (AI) and expertise in data, analytics, cloud & DevOps, application modernization, and customer experience. For executive compensation benchmarking, Grid Dynamics uses a peer group of IT consulting and services, systems software, and applications software companies. As of September 2024, Grid Dynamics was positioned at the 35th percentile in revenue and 32nd percentile in market capitalization within this peer group. The company's equity management, reflected by its overhang and burn rate, is below the median of its compensation peers, suggesting a relatively conservative approach to dilution compared to industry standards.

Comparison to Industry Standards

• Grid Dynamics' revenue ($318 million) and market capitalization ($1,067 million) as of September 2024 position it at the 35th and 32nd percentile, respectively, compared to its compensation peer group, indicating it is a smaller player relative to the median of its chosen industry comparables.
• The company's overhang of 13.0% and average three-year burn rate of 3.5% are both reported as "below the median of the compensation peers used for market comparisons," suggesting a more conservative approach to equity dilution than many industry counterparts.
• The 98% stockholder support for the 2024 Say-on-Pay advisory vote demonstrates strong alignment with stockholder expectations, which is a positive governance benchmark within the industry.
• The compensation committee's use of a balanced mix of financial metrics (revenue, non-GAAP EBITDA, contribution margin, rTSR, rCAGR) for incentive plans, with a heavier emphasis on revenue, is a common practice in growth-oriented technology companies.
• Maximum payout opportunities for long-term incentive awards (up to 200% of target, with +/20% modifiers) are consistent with the 2024 Compensation Peer Group and broader market practices.
• The emphasis on performance-based equity (55% PSUs and 45% RSUs) aligns with best practices for linking executive pay to company performance and stockholder value creation.
• The three-year performance period for PSUs, with annual measurement and multi-year vesting, balances short-term accountability with long-term strategic objectives, a common approach in dynamic technology industries.

Corporate Governance

Related Party Transactions

• Oksana Livschitz (spouse of CEO Leonard Livschitz) is employed in a non-executive role, with total compensation of approximately $236,988 in 2024 and expected $273,000 in 2025.
• Dr. Daniel Livschitz (son of CEO Leonard Livschitz) is employed in a non-executive role, with expected total compensation of approximately $167,063 in 2025, reflecting a position change in July 2025.
• Ievgenii Nevyerov (step-son of CEO Leonard Livschitz) is employed in a non-executive role, with expected total compensation of approximately $156,642 in 2025, reflecting a position change in September 2025.
• Compensation for these individuals was established in accordance with standard employment and compensation practices applicable to equivalent roles.
• Certain equity holders have registration rights requiring the company to register a sale of their securities pursuant to a Registration Rights Agreement from the Business Combination.
• A Stockholders Agreement (November 13, 2019) outlines voting arrangements for director elections, including designees from ASL and the CEO.
• The audit committee has a formal written policy for reviewing and approving related person transactions exceeding $120,000.

Stakeholder Impact

• Shareholders will vote on key corporate governance matters, including director elections, auditor ratification, executive compensation, and potential dilution from the equity incentive plan. They benefit from strong financial performance and management's efforts to align compensation with stockholder interests.
• Employees benefit from the 2020 Equity Incentive Plan, which is used to attract, motivate, and retain talent, and executive officers' compensation is tied to company performance.
• Customers benefit from the company's continued focus on scaling delivery locations and gaining new customers, indicating a healthy and growing service provider.
• Directors' compensation policy has been revised to encourage equity, aligning their interests more closely with stockholders.

Next Steps

• Stockholders to vote on director elections, auditor ratification, executive compensation, and equity plan amendment at the Annual Meeting on December 23, 2025.
• Final voting results will be published in a current report on Form 8-K within four business days after the Annual Meeting.
• The audit committee will reconsider the appointment of Grant Thornton LLP if not ratified by stockholders.
• The compensation committee and Board will continue to evaluate and refine executive compensation practices based on ongoing stockholder dialogue.
• The 2024-2026 performance period for PSUs will continue, with annual performance measurement.
• Stockholders may submit proposals for the 2026 annual meeting by July 13, 2026 (for inclusion in proxy materials) or between August 25, 2026, and September 24, 2026 (for presentation at meeting).
• Stockholders intending to solicit proxies for director nominees must provide notice by October 24, 2026.

Key Dates

Recommendation

The company demonstrates strong financial health with significant revenue growth and a positive shift to GAAP net income in 2024. The executive compensation program is well-aligned with stockholder interests, as evidenced by high Say-on-Pay approval and performance-based incentives that yielded strong results (208% of target for 2024 PSUs). Strategic acquisitions and efficient equity management (low overhang and burn rate relative to peers) further support a positive outlook. The proposed increase in the equity incentive plan, while dilutive, is a common tool for talent retention and growth in the technology sector and is managed responsibly. These factors suggest a company with solid fundamentals and a clear growth trajectory, making it an attractive investment.

Keywords

Grid Dynamics, GDYN, Proxy Statement, Annual Meeting, Corporate Governance, Executive Compensation, Equity Incentive Plan, Financial Performance, Revenue Growth, Net Income, EBITDA, Acquisitions, Director Election, Auditor Ratification, Say-on-Pay, Stock Options, Restricted Stock Units, Performance Stock Units, Shareholder Dilution, Risk Management, Technology Consulting, Digital Transformation, Artificial Intelligence, Cloud Computing