Globant S.A.

Good day and welcome to Globin's first quarter 2021 earnings conference call. I'm Amit Singh, Head of Finance and Investor Relations for the US. All participants on this call will be on listen-only mode. After today's presentation, there'll be an opportunity to ask questions. Please note, this event is being recorded and streamed live on YouTube. By now, you should have received a copy of the earnings release. If you have not, a copy is available on our website, investors.globin.com. Our speakers today are Martin Migoya, Co-Founder and Chief Executive Officer, Juan Urtiage, Chief Financial Officer, Patricia Pomies, Chief Operating Officer, and Diego Tartara, Chief Technology Officer. Before we begin, I would like to remind you that some of the comments on our call today may be deemed forward-looking statements. This includes our business and financial outlook and the answers to some of your questions. Such statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Please note that we follow IFRS accounting rules in our financial statements. During our call today, we will report non-IFRS or adjusted measures, which is how we track performance internally and the easiest way to compare Glovin to our peers in the industry. You will find a reconciliation of IFRS and non-IFRS measures at the end of the press release we published on our Investor Relations website, announcing this quarter's results. I would now like to turn the call over to Martin McGuire, our CEO.

Thanks, Amit, and hello, everyone. I'm excited to speak to you today in this new format to present our first quarter earnings for 2021. This quarter, we brought in $270.2 million in revenue, representing a 41% growth over the previous year. It is the highest year-over-year growth since we launched our IPO in 2014. It reflects the opportunities we are taking advantage of as the market keeps evolving. A few updates on our leadership team as we focus ourselves on keep growing sustainably. With them, we want to boost our offerings, regional coverage, talent, and synergies between delivery, performance, and operations. Co-founder Guyver Englevien will become president of GlobanX and Globan Ventures. He will lead our startup accelerator and will work to develop new business and revenue models through initiatives like Augmented Coding and Start Me Up, which are all part of our GlobanX division. Finally, he will also assume as the company's president for Latin America. Co-founder Martin Umaran takes a new role of president of Europe and Asia and chief corporate development officer. He will oversee the successful integration of companies into the family as part of our global expansion strategy. Patricia Pomies has become our new Chief Operating Officer. Her task will be to turn our executive strategy into measurable goals for growth, delivery, and execution. She will consolidate a comprehensive vision between delivery, people, performance, and operations. Diego Tartara will take on the new role as Global Chief Technology Officer, overseeing our studios of expertise and how they deliver technologies that transform companies every day. Each Global Business Region will be led by a respective Chief Business Officer, with Fernando Masking as Chief Business Officer for North America, Nicolás Kaplum as Chief Business Officer for Latin America and Federico Pienovi as Chief Business Officer for Europe and Asia. And finally, I'd like to welcome Maria Pinelli as the newest member of our Board of Directors. Maria brings 34 years of experience in helping companies develop their technology products and to reach their customers. I'm happy to have her strategic advice as we keep growing our business and to serve our clients better all over the world. I'd like to congratulate all of these executives for their new appointments. We have an amazing leadership team that will enable us to achieve our goals and go beyond. We all saw the inflection point of the digital transformation space in 2020. The increased adoption of digital technologies in all processes of our professional and personal lives is opening up exciting opportunities for our sectors, in parallel with increasing optimistic macroeconomic predictions. Industry analysts like IDC have increased their forecasts for the worldwide services market due to a soft landing in 2020 and a strong return to growth in 2021. And this is global opportunity to position itself as the leader and preferred partner in this space, which we aim to reinvent and disrupt. That's why we continue to seek out the best talent and bring them on board as our team continues to expand. Last quarter saw yet another acquisition as we welcomed CloudShift to the family. I'm excited to bring in their deep Salesforce multi-cloud expertise to Globant so that we can take a larger role in the cloud space. At the same time, we announced the acquisition of Abitant, a leading Spanish digital marketing agency. Abitant's experience is fusing digital marketing, digital sales, technology, design, innovation, and data. It is a complementing element so that we can continue developing unique products. and solutions for lasting transformations. Looking forward, there will surely be additional exciting acquisitions that reinforce and expand our many capabilities, as well as our organic growth. Now a few notes on our geographic expansion. As we grow, we continue scaling our business throughout the globe. This quarter, we announced new operations in Malaga, Spain, where we will be opening a new artificial intelligence innovation center. In Latin America, I'm pleased to announce new operations in Monterrey, Mexico, Cali in Colombia, Viña del Mar in Chile, and Bariloche in Argentina. This is in line with our strategy of being the employer of choice for the ambitious talent of the region. We have also announced a greater expansion of our operations in Miami, which will be the hub of our brand new Smart Venues Studio, a new concept to transform how patrons connect with brands. Leveraging our experience working with the entertainment and many other sectors, we're launching this studio focused on creating the best physical experience. Through digitalization, we revolutionize how companies interact with their consumers, patrons, and fans across their physical and digital spaces, allowing them to create a new user experience that is far more engaging. Creating these new ways of interaction serves as an exceptional tool to better understand customers and allows organizations to identify new and unconventional ways to generate new revenue. Now news about a collaboration with Apple. We began working on a project with Apple through our Life Science Studio a year ago that seeks to improve the health and wellness of communities through a highly configurable, wide-level recognition and reward platform using Apple Watch. The aim is to help clients improve the health of their customers, members, or employees. The app encourages a more healthy lifestyle for its users and provides companies an ability to create deeper, more meaningful engagements. And today, I'm pleased to announce that London Drugs, a large drugstore chain in Western Canada, is our first client to roll out this program. They have already launched a pilot rewards program in a number of stores in Vancouver that incentivize customers to complete activity goals tracked by Apple Watch. with an ambition to expand in the coming months. It should be noted that this program adheres to the most stringent privacy guidelines set by all three companies. Let me share more updates in some of our most recent projects. We're working closely with Nissan customer experience team this year to develop a seamless customer journey across physical and digital channels. We're helping to revamp their online vehicle ordering process, enabling their customers with greater choice and intuitive and engaging ways to choose and buy their cars. We have expanded our involvement into market operations with data systems integrations and the development of customer and business applications. Globan continues to expand its footprint in the digital health arena. For example, during Q1, we began our partnership with Boston Scientific to provide implementation consulting services for a CRM strategic rollout. We also started working with the Diagnostic Division of Roche to develop an automated multi-cloud solution for this global pharmaceutical and biotechnology giant. In the retail and consumer goods space, we won a very strategic engagement with Backcountry.com. This is an online specialty retailer that sells clothing and outdoor recreation gear. Globan has been engaged to partner on their digital transformation journey aimed at delivering impactful customer experiences by leveraging our digital and cognitive capabilities and technologies. To go into finer detail about our studios and our technology offering, I'd like to welcome Diego Tardara, our new CTO. Diego, please.

Thanks, Martin. And hello, everyone. It's an honor for me to be with you this afternoon. I had the great experience of leading Globan's diverse and expansive studios for several years. In my new role as global CTO, our aim will be to leverage our global talent and expertise to build a portfolio of solutions that enable our clients to fully embrace the future. To get started, I have a few more new studios to announce, in addition to the smart venues concept. First, the cultural hacking studio. We know that a successful and lasting digital transformation involves not only a technological adoption, but infusing the organization with a culture of flexibility and resilience. We've therefore consolidated this new studio to help businesses achieve their goals through faster and healthier cultures. Our teams work with the client to create cultural strategies, reshape the organization and form new habits and behaviors that are conducive to alignment between business goals and the organization's purpose. This studio works to unleash the talent and potential of the employees, to reskill them, realign, understand cognitive capabilities and position them in the optimal place for embracing change and provide value to the organization's development. There's no way to scale up if you don't have a sustainable culture. We're also improving our value proposition through our new digital sales studio. For digital marketing strategies to be successful, they require more than managing media. There is a great opportunity to be more business-oriented and increase performance of digital channels by using data, AI, and the right technology stack. The Digital Sales Studio comes to address this challenge by orchestrating digital capabilities, increasing digital sales with data and technology. Digital sales acceleration means having business, marketing, and technology working together, a mix to be driven by data under a 360-degree consumer view. Now, many of you might remember the Women That Build edition of the Global Awards in 2020. The turnout and feeling after sharing those inspiring stories was so positive that we are launching a new edition for 2021, Digital Disruptors. Organizations of the future will be led by individuals who embrace reinvention, take risks, and push the limits on what's possible. We call them digital disruptors. We want to recognize those leaders who are going the extra mile to guarantee that their companies stay at the cutting edge of every tech revolution. We've invited a fascinating list of judges. We include Diego Lerner, President of the Walt Disney Company Latin America, Michel Lezama, President of the National Action Council for Minorities in Engineering, Nuria Simo, CIO of the Inter-American Development Bank, Donald Hicks, Airbnb's VP of Trust Policy, Xapo's CEO, Wences Casares, and many more. I invite you all to check out the initiative for yourselves at digitaldisruptors.globan.com. Let me now welcome Patricia Pomis, our new Chief Operating Officer, who will go into details on our activities.

Thanks Diego. Hi everyone and welcome back. It's been another great quarter as we continue to differentiate ourselves through the quality of our delivery. In this direction, we have received important international certifications based on our innovation, our inclusion of augmented coding as a tool that elevates our delivery and the continuous improvement of our pods. This is a recognition to the effort that our glovers make daily to ensure that we meet and surpass client expectations, even under challenging circumstances. In the outlook for 2021, we will remain on a remote first policy for our operations. However, we have decided to open our offices to all those who voluntarily want to work from them. In essence, we will continue working from home, but at the same time, our glovers will have the flexibility to return when necessary for collaborative ideation or other relevant meetings. We remain vigilant to the COVID-19 situation in Latin America and India, both very important locations for us. We are accompanying our Globers in different ways to help them through this crisis, and we will continue to support them by offering supplies, experts' guidance and counsel, and make donations to local institutions and hospitals. We finished the quarter with 17,267 Globers, 16,284 of which were technology, design and innovation professionals. We continue our strong hiring in Q1, with a robust addition of 994 IT professionals, up to 39% year over year, in order to meet the strong market demand. Over the last few years, Globan has invested heavily in establishing a robust training and hiring infrastructure across the globe. Combined with our ongoing expansions, this gives us a strong ability to seamlessly increase the hiring and training as required. At this moment, we do not foresee any challenges in finding the right talent to meet the demand. Attrition for the past 12 months continued low at 14.2%, compared to 15% in Q1 2020. Going forward, we continue to estimate a normalized attrition rate of 14 to 16%. Some news on our benefits for our Glovers, who are the center of everything we do. We are launching an employee stock purchase plan through the second half of this year. We are giving our Glovers the opportunity to purchase shares of the company at a discounted price so that they can have a greater stake in our performance and growth story. We continue to expand our Be Kind concept. This initiative has guided us to take bold steps at our company. From committing to having half of our managerial positions held by women by 2025, to having transitioned to renewable energy in 2020 and going carbon neutral, a commitment that we will achieve this year. We are doing this because we want to continue making an impact in the world and in the tech sector, helping make it more inclusive, diverse and vibrant. Related to this, I am glad to share that we have created a new initiative and a space called Be One of a Kind, where we are sharing to promote the concepts of inclusion and diversity. We want to make sure that everyone, especially people who are often overlooked, feel welcomed, seen and supported. I invite you to visit BeOneOfAKind.com to learn from the stories there and maybe even share your own. Now, a few points on our revenue performance. Disney was our largest customer for the quarter, growing strongly at 27.4% year-over-year and 14.7% quarter-over-quarter. We continue to be very well diversified within Disney, serving the majority of its business units. Other than Disney, the rest of our accounts collectively grew at a solid 42.8% year-over-year, with revenues from top 5 and top 10 accounts increasing at a robust rate of 37.5% and 41.2%, respectively, over the first quarter of 2020. Outside of Disney, rest of the accounts collectively also grew strongly at 16.3% quarter over quarter, as we experienced improvements in most industry verticals. Moreover, during the quarter we continued to successfully cross-sell services with the companies we acquired in the recent past. Regarding the progress of our 100-square strategy, during the last 12 months ended March 31, 2021, we had 15 accounts above $10 million in annual revenue, compared to 12 customers for the same period last year. We had 139 customers with more than $1 million of annual revenue, compared to 112 one year ago. Overall, we continue to expand our relationships with our key accounts, the base for our continuous growth. In terms of geographic regions, Europe witnessed a strong acceleration in revenues, growing at 183.7% year-over-year and at 43.3% on a sequential basis. Latin America and others show continued strength, growing at 80.2% year-over-year and 17.9% sequentially. North America was up strongly at 19.3% year-over-year and 11.2% sequentially. Asia also witnessed robust growth at 78.7% year-over-year and 31.3% sequentially. We are enthusiastic about the demand we see in our growing market and foresee a healthy pipeline ahead. For 2021 and beyond, we'll keep applying our talent to help them make it happen and ensure that they have the latest training to be great. With that, I'll pass it over to Juan to go over the financials.

Good afternoon, everyone. I hope you're all doing well and staying safe. Let me start by summarizing the results of our first quarter 2021. I will then discuss our guidance for the second quarter and for the full year 2021. Our business in 2021 started on a very strong note and we are very pleased to announce another quarter of record revenues and strong financial performance. Our revenues for Q1 were $270.2 million, representing a solid 41% year-over-year growth. On a sequential basis, our revenues for Q1 increased 16.1%, showing a very healthy trend. This was Globan's strongest year-over-year and sequential growth since we are a public company. Q1 revenue growth was 40.3% year-over-year in constant currency. While the COVID-19 pandemic is still ongoing, it did not have any incremental impact on our Q1 results. We remain bullish about the demand environment post the COVID-19 crisis and are encouraged by the ongoing positive trend in our bookings and revenues. Turning now to profitability, our adjusted gross profit for the period increased to $107 million representing 39.6% adjusted gross margin, compared to $75.6 million, representing 39.5% adjusted gross margin in the first quarter of 2020. Adjusted operating income for the quarter amounted to $45 million or 16.6% of revenues, compared to $29.9 million or 15.6% of revenues for the first quarter of 2020. Adjusted operating margin improved 100 basis points year over year and 30 basis points sequentially. As our revenue growth profile and utilization continues to improve, it will have a positive impact in our adjusted operating margin. At the same time, salary increases start in Q2 and we plan to continue investing in the company, taking advantage of the huge opportunity in front of us. Our IFRS effective tax rate for this quarter was 24.9%, largely in line with our guidance. Adjusted net income for the first quarter of the year totaled $34.2 million, representing 12.7% adjusted net income margin, compared to $22.4 million representing 11.7% adjusted net income margin for the first quarter of 2020. On a sequential basis, adjusted net income margin increased by 80 basis points. Starting the first quarter of 2021, we are including tax impact of non-IFRS adjustments in the calculation of adjusted net income. Excluding this tax impact, adjusted net income for the first quarter of 2021 is $37 million, representing adjusted net income margin of 13.7% compared to, as reported, $24.4 million, representing adjusted net income margin of 12.7% in the first quarter of 2020. Adjusted diluted EPS for this quarter was 83 cents, based on 41.2 million average diluted shares for the quarter, compared to 59 cents for the first quarter of 2020 based on 38.1 million average diluted shares for the quarter. Excluding the tax impact to non-IFRS adjustments discussed earlier, adjusted diluted EPS for the first quarter of 2021 is 90 cents, strongly above our guidance of at least 79 cents and compared to, as reported, 64 cents in the first quarter of 2020. Moving on to the balance sheet, our cash and cash equivalents and short-term investments as of March 31st, 2021 amounted to $195.6 million. During the first quarter, we paid $42.2 million for acquisitions and repaid $25 million of our credit facility. Currently, our credit facility is fully undrawn. We also continue to successfully execute on capital allocation strategy with integrations of recently acquired companies going as planned. To wrap up, I would like to share with you our outlook for Q2 and for the full year 2021. We note that given the ongoing COVID-19 pandemic, there are a number of factors that we may not be able to accurately predict. Based on current visibility, we expect Q2 2021 revenues to be at least $283 million, implying 54.9% year-over-year growth. At this point, we do not expect any FX impact over second quarter revenues. Q2 adjusted operating margin is expected to be in the 15.5% to 17% range, and adjusted deleted EPS is expected to be at least $0.84, assuming 41.4 million average deleted shares outstanding for the quarter. Regarding the full year 2021, given the robust demand environment we are witnessing, we are significantly increasing our revenue guidance. and we now expect revenues to be at least $1,135,000,000, representing 39.4% year-over-year growth. We currently assume no effects impact our full-year 2021 revenues. For 2021, we now expect our adjusted operating margin to be in the 15.5% to 17% range versus the 15% to 17% range guided before. At Globant, we continue to strongly invest in globalizing our operations, training programs in cutting-edge technologies, and expanding our sales coverage. IFRS effective income tax rate is now expected to be in the 23% to 25% range for both Q2 2021 and the full year 2021. Finally, we expect adjusted diluted EPS to be at least $3.37 for the full year 2021. assuming 41.6 million average diluted shares outstanding for the full year. To note, our adjusted diluted EPS calculation now also includes tax impact of non-IFRS adjustments. Thanks everyone for participating in the call, for your coverage and support.

Thanks, Juan. So as we go through the question and answer section of this call, I'll announce your name. At that point, please unmute your line and ask your questions. And please mute your line after your question is done. We also ask you to please limit your time to one question and one follow-up. Thank you. The first question today comes from the line of Tianjin Huang from J.P. Morgan. Please go ahead.

Hey, great. Hope you can hear me. Hi, Martin. You guys all look great. Great presentation. Obviously, great results as well. And I appreciate the update on the people side with some of the changes. So I wanted to ask, maybe start with the people question of, you know, I think coming out of this earnings season, everyone, we've we've heard a lot about. you know, wage inflation and fight for talent. I would imagine your utilization is probably running pretty high as well. It sounds like no real COVID impact. So can you just maybe give us an update on how you feel about, you know, the people side of the equation in terms of cost utilization? Sounds like attrition is under control, but I'm curious how you feel about your ability to meet some of the demand that you're expressing here with the race guidance.

Yeah, sure. Let me summarize. First, the recruiting power remains higher than ever. Well, it is higher than ever. And we're extremely happy with the amount of people we are recruiting right now. It's pretty amazing to see the amount of net incomes that we are getting every quarter, as you may see here. Utilization is higher, of course, higher than before. And the environment of demand for the people also is hotter. And we believe that using all our things, tools, value proposition, uniqueness in terms of how we position our offer and our value proposition as employers, we'll still have you know, uh, an advantage, uh, compared to our competitors in terms of how to attract, maintain, and propose to our, uh, to our glovers, uh, a better, you know, a better value every day, as you have heard on some of the things that, that we explained during the presentation. And, um, I believe that, you know, attrition remains, uh, stable, um, Of course, it's not as slow as it was in the middle of the pandemic. But that also connects with how the market is behaving in terms of demand. And we're seeing a pretty large demand. We're seeing not enough pressure on prices, which is interesting. So that's the full picture. Not really concerned about that. Of course, we're doing everything we do. and we will keep on improving, which is the most important part, keep on improving the value proposition for our current lovers and for our future lovers.

Okay, great. Then maybe it's my quick follow-up. Then, Juan, just on the gross margin side, staying with that theme, anything to call out for the second quarter or for the balance of the year? Thank you. I'll go to mute.

Yeah. Thank you, Nathan. Gene, how are you? So for the second quarter and for the rest of the year, we continue to think that the 38 to 40% range, the target that we have set up long time ago remains valid. If you look at Q1, we ended at 39.6%, slightly ahead of Q4 last year. And during Q2 and Q3, we have salary increases, but also we have a business that is very, very strong. with utilization, we should be able to offset some of that impact. So I would say basically that we will continue to be within the range, 38 to 40%, and we will continue to have a very efficient organization in terms of SCNA. If you look at the operating income guidance that we provided, it was 15 and a half to 17, slightly up from 15 to 17 that we were Guiding in the last quarter. So overall, we think that the profitability of the company is very strong. Thank you.

Good to see you.

Next question comes from the line of Brian version from Colin. Brian, please go ahead.

All right. Thanks. Good afternoon. So based on the growth performance, it would appear the majority of your client base is back to pre-COVID spending pace. But I'm curious if there are still parts of the portfolio that are not yet back to a normalized rate. If there are, where are those? And are you building recovery in those as well into the rest of the balance of the year and the guide?

Hi, how are you? Thank you for the question. Look, the two sectors that are not still coming back are cruise lines, which is, you know, we hope it will come back very soon as the restrictions will lift up very soon in the U.S., I feel. And the second thing is, the second place are airlines. And some of them are picking up and going back again. Some of them were maintained, as I explained on other calls. And some others are just, you know, struggling to survive. So I believe that those are the two segments. All the rest of the segments are going. And I feel that those two segments will come back very soon, including media entertainment. Of course, all the streaming part is very, very strong as always. the in-presence entertainment like the parks and resorts, so on and so forth, are picking up very fast. This is my view right now. Maybe I'm missing something, but this is the most important part.

If you look at all the other industries, you're seeing very strong growth. We are seeing very strong demand and a very strong level of bookings So with only that exception that Marquis mentioned, all the rest of the business is building very, very well, building up very, very well.

Okay. That actually dovetailed into a follow-up. I wanted to ask about just pace of bookings. Did it accelerate in the quarter from what you were seeing before? Did it maintain good pace? And any qualitative commentary you can give there?

Yeah, well, we've got a pretty large acceleration in Europe and Latin America and also in the U.S., And we see that acceleration in booking being transformed in revenue. And as you've seen, you know, the growth has been very significant, you know, historic growth. And the guidance for the next quarter is also pretty solid. So that's connected to an acceleration on the demand. And that thing that we were talking about, the pandemic, really generated like a pretty, I would say, interesting place for our services. And everybody is trying to get things for tomorrow. Everybody is trying to accelerate their projects. That doesn't mean, in my opinion, that it will slow down in the future because it's a trend that will never change now. And I believe that this is something that is pretty clear right now. I don't know, Pat, if you want to add something on the demand side.

Yes, of course. I think, I mean, we are seeing a strong demand on gaming industry also. So there we have been working with different partners in terms of how to gamificate some other industries in the space of the digital payments. Also, we are seeing a strong demand there. Online learning, of course, is something that probably is not going to change, not in the near future. I think that we have a strong demand there also. Social networking also. I think there are different kinds of verticals that also are being impacted for this post-COVID situation, or at least in some of the industry, we are seeing a very, very good transition in our pipeline and on the demands.

Thank you very much.

You're welcome.

Thank you.

The next question comes from the line of Maggie Nolan from William Blair. Maggie, please go ahead.

Marie.

We cannot hear you. We cannot hear you, Marie.

Can you hear me? Yes. Great. When you look at the Q2 guidance one, when you think about the quarter over quarter change in the margins, I just wanted to clarify, is that driven by mostly the impact to salary increases? And is that a larger impact this year than you would have seen in years prior?

It's a good question. So I think that when you look at quarter two, in terms of gross margin, clearly you may expect a small impact as salaries salary increases kicking we even though the market is hot we also have the ability to keep on increasing utilization a little bit and that should help us offset that part of that impact in the very short term right and then eventually you know pricing discussions that are happening with our customers should also kick in and help us with the margins back to where they're supposed to be, right? So I would say that you should expect a small impact during the Q2 numbers. It's not going to happen at the operating income level. Operating income is solid as well for the second quarter. And then for the rest of the year, we should be able to recover part of that as we continue to talk to our customers. I mean, I think that the demand side is very, very strong. And that should help to offset some of the impact that we may have. I don't think it's going to be very different from other years. I think that after two quarters, Q2, Q3 last year, where things were kind of calm, we're just coming back to what it was prior to COVID. It's not different from what we have seen over the last several years. This is a market that is strong, that there is a lot of demand. there is an acceleration coming out of or rebounding out of the COVID crisis in Q2 and Q3. So we're just coming back to a normal scenario, like it was prior to COVID, with, of course, a little bit of an additional acceleration that, of course, has an impact on the labor market. But again, when you look at our ability to bring people into the company, we added 1,000 people, 900 pretty much of which were organic, so very strong organic growth. We continue to believe that those companies that have, you know, a great value or offer great value to employees will continue to attract talent. You know, we have very attractive projects, very attractive culture. It's a unique organization. And you've seen over the last two or three years when the market was also booming that we have been able to bring a lot of amazing engineers and designers into our company. So we are not even though we acknowledge that there is a tougher market, we also think that we will continue to be very attractive as we have been over the last three, four years in terms of bringing people into global.

okay great and then martin in a scenario where you partner with a company like apple like you outlined in your remarks can you give us some insight into how your team and their teams work together and where globint is able to kind of take the lead and and show their strengths yeah it was it was um it was an idea that we took together with the with the apple team and um it took us a while like a year um

to finalize agreement with Apple and to be able to develop the application. And now this application can be sold to any health insurance company or any health-related company. that wants to provide some kind of incentive for people to behave in a more healthy way. And it's an application that is mounted on the Apple Watch. And then when you use that application, the Apple Watch measures some of your things and activities, and then you get rewarded with discounts and many other things connected to your activity. And then how we get paid on that is pretty interesting because it's not because of the development that we did, but it's because it's connected to the amount of users and it's a monthly payment for every user that we get. Is that clear?

Yes, thank you.

You're very welcome, Maggie.

Thank you very much, Maggie. The next question comes from the line of Ashwin Sherryker from Citi. Ashwin, please go ahead. Ashwin, can't hear you.

Hey, can you hear me now? Yes. Yeah. Cool. Good quarter, guys. I might have missed this. I was wondering if you could talk about organic versus inorganic growth in the quarter as well as the increment in terms of the outlook. And you made an interesting acquisition, I guess, another interesting acquisition recently, Habitat, if you could talk about that.

Hello, Ashwin. I can start with the organic and inorganic question, and then I'll let Martin talk about depositions, right? So, as you know, and always, you know, we work very hard to integrate in companies that we acquire. Now having said that, you know, our estimate for Q1 is that organic growth was north of 23%. For the Q2 number, which, you know, we guided 55% or 54.9%, our best estimate of the organic growth is approximately 37%. And then for the full year number, which we guided, 39.4%. Again, our best estimate in terms of organic is around 27.5%. But again, keep in mind that it's not easy sometimes to isolate the effects of some of the acquired companies as we integrate very fast, which is part of our strategy of integration. I don't know, Martin, if you want to comment.

Yeah, the other comment we acquired, we announced or we commented on the presentation about two acquisitions. One that is CloudShift that is connected to our strategy of creating every day more value around cloud operations and in particular Salesforce. Now it's adding that ability in Europe, which we had it very concentrated in Latin America. And we are shifting that into Europe. And it's very interesting to see how that is progressing now because the demand is quite high. And then on the digital marketing space, we believe that there's a space there to talk about digital sales. And there's a space in which we have been playing for some time, but adding Abitant, which is one of the leading digital sales companies in Spain, is something that is adding us a lot of value in front of our customers and a new segment to keep expanding the way we talk with them and to keep expanding the portfolio of offering that we have. So remember, organic growth is about being able to talk about new things with our customers every day. And these two acquisitions are 100% connected to that idea.

Understood. And then the second question, you know, the recent organizational changes and sort of the bulking up of the structure I thought was very interesting. Should one think of that as a precursor to perhaps, you know, a relatively aggressive phase of global growth? You're basically preparing the structure for that.

Look, we have always been prepared for that.

Yeah, I understand.

You're asking me, Martel, you're preparing for growth. It sounds weird.

The globalization of the structure.

Yeah. Look, it has to do with the idea of being prepared with, you know, everyday new blood, new management into our teams. In general, most of them are coming from the inside of the company many, many years ago and doing amazing careers within the company, like the case of Diego and Pato. And also some, you know, Additions like Nicolás Kaplum and coming from Accenture or, you know, some other people that have been working for years in the company, like Federico Pianovi or Fernando Matzkin that are leaving Europe and U.S. respectively. So this is something that we are, you know, putting a much deeper effort into making stronger our regions, even playing with the founders of the company connected to that. You know, Martin Umaran connected to Spain, being the president of Spain, working very closely with Federico Pianovi. He moved into Madrid and now we are giving like a totally different spin to the organization in Europe. and Giver moving as president in Latin America, and also president of GlobanX, which is some of the most strategic things that we are doing within Globan, that includes augmented coding, includes all the augmented Globan stuff, including Start Me Up and all the platforms. So this is a pretty big step into the next phase of the company, We're already a $1.1 billion organization, and we need to think different. We want to reinvent the industry, and that needs to be connected with a change or evolution on our management. So Diego Tartara also coming from the company many, many years ago. So look, it's a pretty interesting thing. The board also evolved into a more diverse board. Now we have Maria Pinelli, former partner of Ernst & Young, also one of our customers that she retired from Ernst & Young. Now she's coming into our board of directors. A lot of value added she will add to the organization. So we're preparing the company for big things in the future. And I'm very happy with all the management changes and everything that is going on in the company. Of course, there are always things to improve. I won't say no to that. But we're preparing the company for next things that are going to be big.

Yes, I want to add something to that, Martin. I mean, I think that this reorganization has to do not only with, of course, preparing ourselves for growing. We are growing all the time. But the last couple of years, we have reinvented ourselves many, many times. And all the time that we have done that is amazing. It's because we are hearing our customers because they are asking different kinds of partnerships with us. So that means that we need to be prepared to be different or have different flavors in different areas. For example, EMEA, LATAM, US, I mean, we are being prepared there to be closer to our clients, to understand what they need, to be there with their culture, to communicate. to be near them. And that has been our strategy for the last couple of years, being closer to our clients, understand what they need, understand how we can be prepared. And that means also this reorganization. In the case of operations, I mean, coming together with people, with performance, and with the quality of the delivery, that has to do with one vision and working together as a team, understanding where our glovers are needing and when they need us and be there and prepare the business also to attend that. So I think it is important to have that in mind. We are reinventing the industry and we are reinventing ourselves.

Got it.

Thank you.

Thank you, Ashwin. Thank you very much, Ashwin. Let's move to our next question. And it comes from Surrender Team from Jefferies. Surrender, please go ahead.

Thank you for taking my question. I guess the first question I'd like to ask about is just the visibility. And this is kind of a follow on to the bookings question. Obviously, the magnitude of the beat was pretty big last quarter. So can you comment on that a little bit and how we should actually view the guide as it suggests there's a sequential slowdown in terms of your organic growth?

Maybe I can start with that question. So, you know, when the year started, the COVID situation was still impacting pretty much all our demand markets, you know, the US, Europe, and also Latin America. And again, it was hard to anticipate to what extent the recovery was going to continue or the speed of that recovery. Clearly, you know, it was... a little bit stronger than we anticipated. And that's why we were able to beat the guidance in a slightly bigger way than what we did in the past. We still have in our delivery centers a lot of impact from COVID. Most of our people are in Latin America, India, a little bit Eastern Europe. And in these regions, vaccination is not going as fast as it is going in the US or in continental Europe. So that creates a little bit of uncertainty around that. But I think that what is clear and is becoming more clear is that those companies that were not impacted or strongly impacted by COVID accelerated on their projects. And that's why we are seeing this strong level of bookings that we are that we are seeing in the last couple of quarters. Going forward, again, we always guide, and this is our philosophy forever. We like to guide in a place where we feel that we will be able to meet or hopefully exceed those numbers. And that's our philosophy, of course. These are still uncertain times, and you need to take some extra precaution than what we would we would normally take or we had normally taken in the past. But again, the business is strong. We continue to see strong bookings coming. We continue to hire very aggressively in the market. And we continue to prepare the company, as Martín and Pato described, to become even larger and more global. That's why you've seen some of those employee changes or structural changes that we discussed.

That's helpful. And then switching topics here in ESG question, did I hear you correctly that you guys are carbon neutral at this point, or is that a goal that you're trying to get to? And I just wanted to clarify that.

Otto, you want to take it?

Yes, of course. I mean, we are working this year in terms of being carbon neutral. We have this plan, you know, this program, Be Kind, that we launched a couple of months ago. And we have been very, very progressive in terms of the sustainability program. So we have built that sustainability studio in order not only to help ourselves be a sustainable company, also to to help our clients and being closer to them to be sustainable. I think that the Be Kind to Your Planet, that is one of the main verticals in this Be Kind program has been progressing. So yes, in 2021, we are going to be carbon neutral. And I think that is an amazing thing to celebrate, of course.

That actually sounds pretty wonderful. So just to clarify my perspective, is that primarily like it's a function of reduced travel or is there other things that we should be thinking about that you've hit the goal or maybe others are struggling to reach that goal?

It's a combination. I think it's a combination between different things. It's not that we're going to be reducing travel. Travel has been reduced as a result of the pandemic. We believe that it will come back. It won't come back that fast. But It's a combination between that and Globan compensating the carbon footprint that we have as a company. In essence, Globan has a pretty low carbon footprint with the activity we do. But in any case, we are very conscious about that and we want to be very conscious about what we are producing. And moving forward, it's not just that we want to compensate our carbon footprint, but also we want to compensate the carbon footprint that our employees have. I mean, we're making numbers now and trying to understand if that's possible or not. But the idea would be that if you work at Globan, you are sure that you're receiving your monthly compensation, and also you're receiving carbon compensation that makes neutral your activity as a human on that specific year. We are very conscious about that. Taking care of the planet for us is one of the main things. Otherwise, we want to be totally out of the out of control very soon. So I think that, you know, this big kind initiative that Pato introduced is extremely important for the company because it's not just taking care of the planet, but taking care of our peers with being more diverse, more inclusive, as we are trying to demonstrate every year, and with very concrete commitments on training women that are trying to come into the industry, promoting women that are inside our organization, having a very clear commitment of having a 50% composition between women and men on our management, on 2025, and then, of course, taking care of the humankind, which is the third pillar, which is how we use technology for the best of the world, instead of using technology just for things that are not healthy for the employment creation, so on and so forth. We added a fourth pillar, which is be kind to yourself. That means that we are, you know, including every day more and more options for our Glovers to take care of themselves, to take care of their bodies, to take care of their minds. And I don't know, Pat, if you want to add something to that.

Yes, of course. I mean, Be Kind to Yourself is the last initiative that we launched, and it has to do with, of course, start talking about mental health in the organization, right, inside the organization. And that means, of course, not only taking care of your body, of course, it has to do with mindfulness, it has to do with how we as an organization are taking care not only about our Glovers, because we are feeling all the time that our Glovers are in a context, in a family, in a different scenario. So as we see our Glovers, we are seeing their families and their structure and how they are living on an everyday basis. So on this working from home scenario, we have put a lot of energy in this strategy, be kind to yourself, giving them tools, understanding what are their pains, putting some psychologists in terms of having calls and trying to be closer to them so we can help them. I think all organizations should have this kind of conversation about mental health inside the organization. And that is something that we have been doing in the last couple of years, but we put up very, very strong efforts the last couple of quarters. So, I mean, in order to be closer to our Glovers. That also has to do with the career path that we are building for our Glovers and how we try to take care of them. in terms of their professional career, also in terms of the Global University. So I think it has to do with a mix of things that makes Global a different culture and a very attractive culture for the new generations and for the talent.

Thank you, Pato, and thank you, Surinder. We'll move on to our next question, which comes from Steve Anders from KeyBank. And just as a reminder, please limit your time to one question and one follow-up. Steve, please go ahead.

Okay, great. Thanks for taking my question. I just want to get a better sense of some of the acquisitions you made in the past few quarters and how you're seeing the cross-sell opportunity with those. And yeah, can you just start there? That'd be great.

How you've seen what? The synergies you said?

Sorry, yeah, the synergies you've seen with some of the acquisitions you've made in the past few quarters and the cross-sell opportunity there.

Great. Thank you for the question. Look, all of them are performing great. And I would say that the strategy we're following during the last few quarters of concentrating on new offerings The new offerings for our value proposition is really important. And I feel that, you know, let's start with the case of Blue Cap, the Spanish company that we bought, I think, in quarter four. That was an amazing upgrade on how we relate with all the financial systems. in Europe. I think that now we are expanding that. I don't think we're expanding that into Latin America now. We are expanding that into some customers in the US. So that's great. Then the second, you know, when we talk about acquisitions like Zapier or CloudShift, which are, as I said, connected with the cloud expansion, with you know, Salesforce and everything that is happening in that space that is picking up in pretty much every customer we do because they like the global way of doing those things. And I think that when we acquire those companies, we pay a lot of attention on their culture and how they do things, how similar they are to what we do. And now, you know, when we talk about GA, we are increasing our portfolio with healthcare, we're increasing our portfolio with, you know, ERP migration, ERP reinvention, which is something that is happening right now, migration to the cloud, everything that has to do with the backend of their company. And also with understanding how the company creates and analyzes its own internal processes. So that is performing quite well and moving into many different customers that we already have so overall they're performing the synergies is like the essential part that we see when we do acquisitions and how we can expand what they offer into all our 800 plus customers. I don't know if that's the exact number, please correct me. All our 800 plus customers. So I think that I'm very happy with the progress of each of them. And of course, you know, we cannot be 100% sure that all of them will work perfectly in the future, but at least right now we are very happy with them. Okay.

Just a comment on that. Again, very strong organic growth, Q1, Q2 for the whole year. And then, of course, accelerated and combined with the new services and the cross selling coming from our positions. The two things are performing really, really strong this year. So I think it's worth having that very clear.

Okay, no, that's, that's great to hear. And just want to just housekeeping question on a get a better sense of the impact on the on the tax rate on the on the guide here from the non I for on RFS adjustment there.

Yeah, so for the full year for the full year, you know, we got a $3.37 with a new with a tax impact on the adjustment. So without that tax, you know, the way we used to to calculate the adjusted EPS, it would have been 363. So, you know, there was a, you know, around 20 something cents impact coming from the tax, but we believe that it improves our reporting. So that's why we decided to walk ahead and make this change.

Thank you very much, Steve. And given the time constraint, I'll ask, we'll take a few more questions, but I'll just request everyone to limit to one question, please. So let's move on to the next question, which comes from Arturo Longa from Itaewoo. Arturo, please go ahead.

Hi, good afternoon, everyone. I was just, well, I had to, but I guess I'll just ask the first one. Do you see any impacts of both from operations and maybe... Go ahead, Arturo, ask the two of them. Thank you. They're simple ones. So just, is Colombia, what's happening on the ground, any concern, maybe from FX perspective or from any other angle? And then the second one is maybe thinking in a five-year horizon, how much should Europe represent in terms of top line?

Those are the two questions?

Yeah.

Okay, Juan, you can take, I mean, in terms of geopolitical, you know, the geopolitical situation of Colombia, we're concerned about what's going on there. Nothing that we think will affect, you know, our business. We're all working from home and people are safe and we haven't had any issues with our own people. So we hope that this will, you know, little by little be diluted. and a normal situation would come back. Regarding the other part of the question, Juan, please, or Pato.

Sure. So, Arturo, you know, we are investing heavily in Europe. It's been an ongoing investment for us for the last two years. We see no reason why Europe as a continent cannot be as big as the US, right? I mean, if you look at some of our peers, they're making billions out of Europe. So there is no limit. There is no size, no specific size that we're targeting. We know that we can grow significantly over the next several years in Europe. And there is no reason why that should not happen. We just need to keep focusing, keep on investing, bringing the right talent, buying the right companies, and we will get there.

Yes, Artur, as Martin mentioned in the beginning of this Q&A, I mean, I think we have put a very solid team in Europe as one of the founders also is there as president of EMEA and also working in corporate development. I think that EMEA for us is a big, big market. So we are putting all our efforts also there to build a stronger region there. And I think that is the most important thing these days, right? This is, of course, it took us a little more to develop there, but we are thinking big there also.

Thank you very much, and thank you, Arturo. The next question comes from the line of Vitor Tomita from Goldman Sachs. Vitor, please go ahead.

Hello, all, and thanks for taking our question. So it's sort of a follow-up on some of the previous questions. In a more general way, Could you give us some more color in how you are seeing the drivers for demand at this point of the pandemic? So mainly, for example, if companies are being motivated more by seeking cost efficiency or by the need to innovate more customer-facing operations, or more generally, whether there are any specific types of projects that are seeing the most demand? Thank you.

Sure. Thank you for the question. Look, in general, what we are seeing, as I have been remarking in some of my past quarter's earnings calls, the first thing is the first trend and the most, I would say, demanding trend is the fact to get closer to consumers. This is our specialty. From the automation industry to the media entertainment industry to the football production companies, to stadiums, going through the pharma industry. I mean, all across the board, we're seeing pretty much the same trend, which is, oh, suddenly the pandemic make us think about the idea of not needing anyone in the middle between us and the brand and the consumers. So we need to change the way we sell our products and understand better who our consumers are. That is happening also, for example, in CPC. So everybody that before was trying to distribute their products through channels, leaving that final connection to consumers into those channels and trying to get back and say, okay, now that we have the tools, we have the technology to get closer to those consumers, We need to go directly to them to understand them better, to understand how to construct products and services for them better, and to connect with them in a more emotional way. And that thing that we started with Disney 13, 14 years ago, now is expanding into pretty much every industry like wildfire. And I think the pandemic has been a very important trigger for that thing happening now. And it will keep on happening as, you know, education moving to that, as governments moving to that, as pretty much everything moves into that direction, which is quite amazing because it's exactly, you know, one of the things that we do best. And it's something that... will keep on growing towards the future. Now, how you deliver that, how you reinvent the way in which you deliver that connection with consumers makes a huge difference at the time of competing for those deals. And at Global, we are convinced that we have like a brand new way of approaching those customers that need to reach those consumers using AI, using our studio model, using the autonomy of our pods, all of the things that we are doing to be able to provide services in a different way. So those are the projects that I'm seeing more and more often. Even a few days ago, I had a meeting with a real estate company. And before they were selling the projects to big institutional funds, Now they want to get into the blockchain to be able to sell tokens connected to those real estate projects. Again, a new way of crowdfunding, a new way of connecting with those, maybe not such high ticket investors, but lower ticket investors. And it's really amazing. It's something that we've never seen before. And it's pretty exciting.

Perfect. Awesome.

Thank you. Thank you so much. So that'll be all for the Q&A section today. Thank you all very much for joining. At this point, actually, I'll pass it back to Martin to please provide the closing comments. Martin, please.

Thank you. Well, thank you very much for everyone participating in this new format. Thank you to all those that didn't ask questions but participated in a way, watching what we have to say this quarter. Looking forward to keep connecting with you and looking forward to keep thriving, glowing to the next level. Thank you and see you next quarter.

Thank you. Bye. Thank you, everyone. Bye. Cheers.