Globant S.A.

Good day and welcome to Globe and Second Quarter 2021 Earnings Conference Call. I'm Amit Singh, Head of Finance for the U.S. and Global Head of Investor Relations. 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 Urtiaga, Chief Financial Officer, Patricia Pomeas, Chief Operating Officer, Gilbert Engelbien, President of GlobantX and LATAM, and Diego Tatara, Global 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 Globin 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 InvestorLation 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 happy to be with you again. Today, we will look back at our strong first half of 2021. We will also share with you our vision to reinvent ourselves and our professional services industry. But first, let's look at Q2. We closed the quarter with $305.3 million in revenue. This represents 67.1% year-over-year growth and breaks last quarter's record as our strongest year-over-year growth as a public company. And, as we look back, Globant's revenue has surpassed $1 billion over the last 12 months for the first time. We expect to close this year with more than $1.2 billion in revenue. I also have the pleasure to share with you other important news. We are now a team of 20,000 Glovers working all over the world. It took us 16 years to reach 10,000 employees. Today, just two years later, we have double our team. I'm proud of the extraordinary growth and the individuals who have joined us along the way. They inspire me every single day. As we know, strong technology companies are defined by creative, resilient, and adaptable people on their teams. Gloman has put this at the center of our work. We will continue to scale up our talent worldwide while fostering our culture of innovation, entrepreneurship, and reinvention. Every person, business, and even nature itself face a need for reinvention. They need to evolve and to become better versions of themselves and to navigate through constant challenges. It is our vision to seek reinvention in everything we do. We apply this concept to our clients as we help them create a way forward into a sustainable future. We don't just supply technology for short term. We design profound transformations to go beyond digital. And we apply it to ourselves as we provide our glowers with the tools to augment their work, to develop new skills, and to build and transform their own career paths. I'm happy to see how this case of reinvention is resonating with our investors' community. Confidence in our track record and our vision was reflected in our last follow-on in May. It was more than five times oversubscribed. Almost all the participants were fundamental, long-term investors. This capital helped solidify our plans to expand both organically and through acquisitions. This quarter, we acquired an 80% stake in Wallmeric. They specialize in developing marketing automation technology, combining lead management, online marketing, and sales enablement. With this strategic integration, we want to disrupt the digital sales strategies for our clients. Globan has always focused on helping the world's top brands interact better with their customers. With Walmeric on board and our digital sales studio, we want to bring this full benefit of the digital and cognitive revolutions to improve the sales of new products. Now I would like to share some thoughts on what we have been doing for our clients. All regions have seen growth as we continue to make our mark all over the world. Starting in North America, Globan is proud to be serving the National Football League to help build and launch a new set of apps for connected TVs that will enable fans to best engage and enjoy the sport they love. In the robotic process automation space, Globan is proud to be partnering with Automation Anywhere and the development of their latest enterprise platform, Automation Anywhere Robotic Interface, that provides unique capabilities to end users in personalizing their automation tasks for both the front and back office. Vivid Seeds, a leading online ticket marketplace, is partnering with Globant in multiple digital initiatives, from delivering experiences in the marketplace to creating a data-driven approach for growth. In gaming, Globant continues providing co-development expertise for Ubisoft's latest version for the guitar-teaching music game Rocksmith+. The award-winning Rocksmith franchise has sold over 4.8 million copies already. At Zynga, Globan develops tools for systems for its CSR racing franchise with over 130 million downloads worldwide. Our clients and partners span multiple sectors and disciplines, which brings me to the Inter-American Development Bank. After working with them for several years on their digital transformation journey, we are widening our scope of work. We have embarked on a three-year AMS engagement for Salesforce and ServiceNow towers. With just a few months in, we have begun to see the results with all quality KPIs met, 97% of satisfaction on customer surveys in the organization, and high engagement from business partners and team leaders. This quarter, we celebrated a decade of partnership with Stride, an education technology company that supports more than 2 million students with online and blended learning solutions. We began working with them to create learning experiences and improve their educational platform. Over the years, we have provided tools in areas from data analytics, improving assessment systems, and refining their digital education content. It is great to see the passion in our teams to challenge the status quo. We are also working with the digital transformation with telecom. We have successfully launched a new version of their e-commerce platform. It is a key part of the new digital ecosystem. In the construction space, we are working closely with ETICS in creating a technological foundation of its new division called New Ways. This work is aimed at impacting and reinventing the supply value chain. We are supporting ETICS in their ambition to be a key player in the transformation of the construction industry in the emerging market for off-site, lightweight and modular building solutions. Now, to our geographic expansion. Last month, we opened up our new offices in Montevideo, with President Luis Lacalle Pou in attendance. Over the coming months, we look forward to opening new offices throughout the global regions where we work. I'm looking forward to sharing more of those details with you in the future. Last month marked the seventh anniversary of our IPO, and I still feel like we are just getting started as the market opportunity keeps increasing. According to IDC, the numbers of companies that embrace a digital transformation strategy is up 43% since 2019. With the need to constantly adapt in order to face uncertainty, we anticipate this market to continue expanding. We also see how certain key areas continue to be disruptive and garner more attention from companies. An example of this are blockchain technologies. which are enabling the decentralization of finance while also penetrating in more industries. Particularly, even in the past few months, the tokenization of assets has become an increasing trend. Blockchain is already disrupting the concepts of work, business, and commerce worldwide, and it's just getting started. Digo Tartara, our CTO, will talk more about what we are doing in this field shortly. Similarly, artificial intelligence adoption continues to expand and the AI market is expected to grow by $76 billion by 2025. We're confident that these trends, together with the growth of our market, will allow us to grow fast. As we continue our expansion, it is important to understand that the future belongs to sustainable companies that pay attention both to their P&L, the impact in their communities, and all their stakeholders. Sustainability is an essential element to everything we do at Globant. I'd like to draw attention to our expanding ESG activities under our Be Kind initiative. As we are committed to being a carbon-neutral company by the end of 2021, Globan submitted last week its first carbon disclosure project. With this annual disclosure, we hold ourselves accountable to environmental transparency. We are committed to acting responsibly as we create a way forward into a thriving, sustainable future. In line with this accountability, we are also officially committed to the Science-Based Target Initiative. We have joined the more than 1,000 companies all over the world that are working to limit global temperature rise to 1.5 degrees Celsius above pre-industrial levels. Now let's talk on how Globan has been innovating and working on its signature tools. I'd like to bring my friend, co-founder, and president of GlobanX, Gilbert Englevien. He will share some of the updates of this division focused on our unique technologies and new revenue streams. Gilbert, please.

Thanks, Martin. It's a pleasure for me to be with all of you today. Let me tell you a little bit about GlobantX. We established GlobantX to be the space where we nurture Globant's homegrown innovation, so we can apply it and turn it into exponential revenue opportunities. As we aim to transform our industry, GlobantX is applying AI to augment the way we code, the way we test, we design, we get collectively smarter, we reinforce our team's culture, how we recruit, and how we assemble teams. This is enabling us to achieve scalability into everything Globant does. At GlobantX, we are also exploring opportunities to enable our customers to disrupt their own industries. For example, to enable new conversational channels, as we are doing with our technology-patented solution Fluent Labs. GlobantX is key to continue driving the entrepreneurial spirit that has made Globant what it is today. In addition to this, we believe Globant is a lighthouse for many entrepreneurs pursuing exciting opportunities. Let me go over some highlights of our initiatives. Our patented augmented coding technology, enhancing the coding process by seamlessly accelerating our developers to write better, safer code in less time. We are building a strong leadership team to carry the project forward and have appointed Tiburcio de la Caracoba as CEO of Augmented Coding to make it happen. Tiburcio used to be the CEO of GMR, one of our acquisitions from last year, and he has an extensive track record as a successful founder and entrepreneur. GlobantX will also oversee StartMeUp OS, which many of you know has been key to establishing a strong culture within Globant. Today, Start Me Up acts as a nervous system that creates a high-performing organization where everyone feels part of a strong, aligned team, providing a seamless personal experience to every employee in an environment of high autonomy. The pandemic has represented a huge shift for the future of work. While we still need to create an engaging environment to attract talent and build a diverse and inclusive organization, we also believe that being able to assemble strong organizations in a distributed work environment is key. We have seen how clients like Prisma and many others are seeing in StartMeUp a solution to strengthen their organization culture during these challenging times. As the digital transformation requires a human transformation, I'm excited to continue expanding this operating system to build a smarter future for our customers. Next, to speak about some exciting new studios, I would like to introduce Diego Tartara, our Chief Technology Officer. Diego?

Thanks, Giebert. Hi, everyone. I'm excited to be with you again to talk about Globan's expanding array of studios. First, I'd like to go over Globant's blockchain studio. We have been seeing continued adoption of the technology throughout many industries and sectors. The rise of NFTs, cryptocurrency adoption, and use of private and semi-private blockchains has created a surge in demand. We are revamping this offering through our new practices. Smart contracts, digital tokenization, decentralized platforms, and decentralized finance. we will continue to design and build decentralized and resilient solutions that boost strategic business value enabling efficiency, immutability, and transparency. In financial services, the lending market is being disrupted through AI. This brings a number of powerful benefits for financial institutions, including data-driven decisions, improved customer experience, and significant cost savings. we have been working on the strategic integration of Bluecap's team to Globant. Due to their extensive experience in financial consulting, their team will integrate with ours to form the backbone of our new digital lending studio. We leverage the in-depth expertise on the sector combined with our expertise in AI for our product offering in the most innovative lending practices. Examples include using advanced analytics to ensure desired risk profiles, anticipating defaults months in advance and cost savings through optimizing the collection processes. This past quarter, we successfully held our Digital Disruptors edition of the Global Awards. We wanted to recognize those individuals who are driving the change within their organizations for technological innovation of products, processes, and culture. the digital disruptors. After receiving over 2,000 nominations from four continents, 22 leaders were chosen and recognized for their efforts. The best part of this initiative, however, was not even the award itself, but the conversation of innovation that we were able to spread. This is a mark of cultural change that Globan wants to achieve. We look forward to hosting these awards again next year. I'll now turn it over to Pato, our COO,

Thank you, Diego. Hi, everyone. I'd like to start with our talent. Martin mentioned that in July, we achieved the important milestone of being 20,000 Globers. That was possible thanks to our track record for growth. Focusing on Q2, our hiring accelerated, and we finished the quarter with 19,428 Globers. 18,350 of which were technology, design and innovation professionals. More than 2,000 of these new hires were IT professionals, up 59% year-over-year, in order to meet the strong market demand. This is the strongest year-over-year growth in our IT headcount as a public company. We are entering a new phase of Globant's growth story, with our team becoming more diverse, more global and more skilled. We welcome this growth and the diversity. Constantly exposing ourselves to new ways of thinking and perspectives are what have moved us forward. However, as we bring in more members to our team, we will continue to foster our culture of agility, resilience and reinvention at every step of the way. As we look forward, the scope of our hiring will be global, in India, Europe, the US, Canada and Latin America. In order for our business to reach its full potential, we need to be number one place to work in the industry, and we orient the global career path to offer challenges, projects, incentives, benefits, and exposure that are unique to Globant. It's important for us that they hone their existing skills and also develop new ones. That's why we launched Globant University last year, which you may remember from our previous calls. Today, the results are in 93% of our Globers went through the trainings. On this platform, there are 2,700 learning resources available, so that our Globers can build their capabilities based on their passions, generating more engagement and compassion rates. This is part of our focus at Globen, enabling our Globers to have autonomy in building their careers. Attrition for the past 12 months was at 16.6%. This increase is largely attributed to the very strong demand environment for talent as we exit this pandemic. We now expect the attrition rate to normalize around 15.5% to 17.5% level in the near mid-term. Despite the modest increase in attrition, the net employee additions for the quarter set a new record for the company. Our value proposition to our employees continue to be very, very appealing. In the incoming months, we will also be holding another edition of the Women That Build Awards. I look forward to bringing together a panel of judges like the last time and being able to give a better spotlight to the trailblazing women in technology today. We want to give them a greater recognition so that their qualities of leadership, innovation, and drive can spread. Now, a few points on our revenue performance. Disney was our largest customer for the quarter, growing strongly at 61.3% year over year and 10.9% 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 also grew at a solid 67.8% year-over-year and 13.2% 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 June 13, 2021, we had 18 accounts above $10 million in annual revenue, compared to 13 customers for the same period last year. We also had 154 customers with more than $1 million of annual revenues compared to 113 one year ago. Overall, we continue to expand our relationships with our key accounts, the base for our continuous growth. Looking at diversification of our revenues by geographic regions, during the second quarter of 2021, 63.8% of our revenues were in North America, 21.6% in Latin America and others, and 13.2% in Europe. Our efforts on expanding our presence in Europe continue to bear fruit, with Europe witnessing another quarter of a strong acceleration in revenues, growing at 242.1% year over year and at 23.7% on a sequential basis. 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. Nice to be with all of you again. To go into finer detail, I'll pass it over to Juan, our CFO. Juan, please.

Thank you and good afternoon everyone. I hope you are all doing well. Let me start by summarizing the results of our second quarter 2021. I will then discuss our guidance for the third quarter and the full year 2021. Our business in the second quarter showed robust acceleration and we are very pleased to announce a quarter of record revenues and industry-leading financial performance. Our revenues for Q2 were $305.3 million, representing a solid 67.1% year-over-year growth. On a sequential basis, our revenues for Q2 increased 13%, showing a very healthy trend. This quarter's revenue growth even exceeded our last quarter's record growth. Revenue growth in Q2 represents the strongest year-over-year revenue growth since we are a public company. At this moment, we also do not foresee any material incremental risks to our business going forward due to the COVID-19 pandemic. This is largely because we derived the majority of our revenues from the US, where the business environment is largely back to pre-COVID level. During the initial days of the pandemic, we had communicated that the demand environment coming out of the pandemic will likely be stronger than the demand environment before the pandemic. Our results for Q2 and our robust pipeline make us believe that demand for our services is evolving in line with our expectations, and we strongly believe we can deliver robust and elevated levels of growth in the upcoming years. Turning now to profitability, our adjusted gross profit for the period increased to $119.9 million, representing 39.3% adjusted gross margin, a 110 basis points improvement compared to the second quarter of 2020. Adjusted operating income for the quarter amounted to $49.4 million, or 16.2% of revenues, compared to $24.6 million, or 13.5% of revenues, for the second quarter of 2020. Adjusted operating margin improved 270 basis points year-over-year. The improving demand and pricing environment and SCNA efficiencies, driven by our increasing size, along with our increasing exposure to services that help us break revenue and employee growth linearity, will continue to have a positive impact on our adjusted operating margin. At the same time, we will continue our ongoing investments in the company to capture the huge opportunity in front of us. Our IFRS effective tax rate for the quarter was 21.2%, below our guidance, as taxes came in lower than our initial expectation in certain geographies. Adjusted net income for the second quarter of the year totaled $36.5 million, representing 12% adjusted net income margin, compared to $17.5 million, representing 9.6% adjusted net income margin for the second quarter of 2020. Adjusted diluted EPS for the quarter was $0.88 based on 41.7 million average diluted shares for the quarter, compared to $0.45 for the second quarter of 2020 based on 38.8 million average diluted shares for the quarter. Adjusted EPS for the quarter implies a solid 94.3% year-over-year growth, strongest year-over-year growth since we are a public company and significantly above our record year-over-year revenue growth in the quarter. In addition, our average diluted shares for the quarter were higher than guidance due to our follow-on offering during the quarter. Moving on to the balance sheet, our cash-in-cash equivalents and short-term investments as of June 30th, 2021 amounted to $465 million. During Q2, we successfully raised $286.2 million in a follow-on transaction. I would like to thank our investors for the support on this transaction, which was more than five times oversubscribed. Currently, our credit facility is fully undrown. We also continue to successfully execute on capital allocation strategy with integrations of recently acquired companies going as planned. Now let's talk about our business going forward. I would like to share with you our outlook for the Q3 and for the full year 2021. As discussed earlier, we are witnessing a very robust demand environment. In addition, we do not foresee any material incremental risks to our business going forward due to the COVID-19 pandemic. Based on current visibility, we expect Q3 2021 revenues to be at least $325 million, implying 56.8% year-over-year growth. At this point, we do not expect any effects impact to our third quarter revenues. Q3 adjusted operating margin is expected to be in the 15.5% to 17% range, and adjusted diluted EPS is expected to be at least $0.92, assuming 42.7 million average diluted shares outstanding for the quarter. Regarding the full year 2021, given the overall improvement in the market conditions, we are significantly increasing our revenue guidance this quarter, and we now expect revenues to be at least $1,236,000,000, representing 51.8% year-over-year growth. Our industry-leading growth guidance significantly exceeds end-market growth rates. We currently assume no FX impact to our full year 2021 revenues. For 2021, we continue to expect our adjusted operating margin to be in the 15.5% to 17% range. At Globant, we continue to strongly invest in globalizing our operations, training programs in cutting-edge technologies, and expanding our sales coverage. IFRS income tax rate is expected to be in the 23% to 25% range both for Q3 2021 and for the full year 2021. Finally, we expect adjusted duty DPS to be at least $3.58 for the full year 2021, representing a solid 57% year-over-year growth. Adjusted DPS guidance assumes 42 million average duty shares outstanding for the full year 2021. Thank you very much.

Thank you, Juan. So as we go through the question and answer section of this call, I will announce your name. At that point, please unmute your line and ask your questions. Please remember to mute your line after your question is done. We also request you to please limit your time to one question and one follow-up. Thank you very much. So the first question today comes from the line of Tinjin Huang from JP Morgan. Tinjin, please go ahead.

I hope you can hear me and see me. Thanks for taking the question, guys. Good results here. Just the Walmeric acquisition I thought was really interesting. It looks like it's a platform or product acquisition. It's a little bit different than what you guys have done in the past. So curious what attracted you to this and could we see more of these kind of deals going forward?

Hey, how are you? Thank you for the question. I think it's a very interesting point, your question, because for the first time we did a platform acquisition and it's something that we can spread out across all our studios and all our customers around the globe. And it's quite interesting because, you know, it goes straight into this, you know, decoupling strategy that Giver was mentioning, you know, together with Glovo Annex. And it's very interesting as it gives us like a different perspective on how to build a team based on those kind of, you know, nonlinear revenue connected to our growth. So yes, it's a different animal for the first time. And we are trying, we're experimenting. It's not a huge company, but it's something that it could be, it could, I would say, generate a lot of synergies with our current digital sales effort around many different studios and around many different customers. So it's very complimentary. And I think it will be, we will be learning a lot out of that, you know, new member of our family. Okay.

No, it's great. It's exciting. I like it. So just my quick follow-up then, maybe for Juan, just something to always ask about gross margin. It sounds like attrition is in a good place and you're still able to hire. Any considerations for second half gross margin? And it sounds like no surprises on the people side, supply side. Just wanted to make sure that's the case. Thanks.

Yeah, thank you, Dinjin. So, you know, for the rest of the year, we continue to see very good traction in terms of talent acquisition, you know, in terms of hiring. Attrition did come up a little bit, but we don't really expect any meaningful impact on our gross margin numbers. We continue to see gross margin in similar levels where we are, where we were back in Q1 as well. So I would say that the 38 to 40% range remains valid even with maybe a market that is a little bit more challenging. But again, even though attrition came up a little bit, as you can see by the net additions, in this quarter, we remain extremely competitive and we actually have the largest net addition number ever in our history. So that's basically the way we are seeing it, Tingxing. Here's.

Thank you, Tangelo. All right, so the next question comes from the line of Ashwin Sherwaker from Citi. Ashwin, please go ahead.

Great. Thank you and great job, congratulations. I guess let me start with, you know, it seems as though demand, not really the concerns. Let me ask a little bit more about the supply side. just to check whether you're modifying or changing your hiring or retention practices, you know, what you're doing to further scale up your supply side. You know, any changes there if you can kind of comment.

Thank you for your question, Ashwin. I think that we are having a 360 plan on this. I mean, it's not only that we are doing just one strategy. I mean, we are trying to have plan all over what our Glovers has been asking and what the market is. The market is really, really hot in terms of talent acquisition. We are being more diverse than ever, more global. We are hiring, we are using artificial intelligence in some of our places in the way we are interviewing, in the way we are going into the talent. Of course, in terms of the retention, we have been putting in place different kind of benefits and plans according to the seniorities and to the profiles of each of our Glovers. I mean, we are trying to keep very, very close conversation with our leaders in terms of working very close with the Glovers also there. So I think that what we have been seeing is a strong hiring As Juan mentioned before, this is a record for us in terms of net addition this quarter. So I think that the pipeline looks really, really nice for us in those topics. And I think that, of course, India, Europe, U.S., Canada, and LATAM still are markets there, and we are getting deeper in those areas.

Got it. Got it. And... Maybe I can just return back to the Volmeric question. I agree with what Tenjin said. It's a really fascinating acquisition. Maybe a two-parter. And I understand it's relatively small, but how would the go-to-market work in a platform acquisition like that? Is the intent to sell the platform or sell the follow-on services or the add-on services that flow from that? And then any particular reason it was structured this way with the 80%?

Good question, Ashwin, as all of them. I think that the first thing is that we need to understand exactly what this platform does. And they are connected with a very specific cycle, very specific part of the cycle of the digital sales process, which is the connection between when the lead is already generated and how you convert that into real sales. We haven't seen many platforms doing this. Indeed, you know, pretty much all the platforms go on the part that is before that. And one of the rationales for our investment was saying, okay, there's an opportunity there to sell exactly that part, which is not very common to all of our customers that are trying to expand the digital sales platform. effort and help them to convert better into sales their leads. And that's the whole platform. That's the idea of the whole platform. So I expect to use that platform in pretty much all our projects where new things need to be launched or new products need to be launched. And the reason why we did the 80% was a negotiation matter with the entrepreneur that wants to keep on riding the winner horse as he was riding up to now. And he has a pretty large market share in Europe. And now we're seeking to expand that into many other places. Now, about the 80%, we have a put and we have a call option on that. So it won't be a problem for us to get the 100% in the near future if we want.

Got it. Thank you.

Thank you very much for the question. Thank you. And thank you for being here today.

Thank you, Ashwin. So the next one in line, the next analyst, Brian Burgin from Colin. Brian, please go ahead.

Hi, all. Thank you. Glad you're doing well here. I want to ask about the reorganization that you formalized this year. So understanding it's still very recent, can you talk about how that's performed relative to your expectations and any aspects of the regional management changes that have surprised you?

No, look, I mean, the reorganization was pretty much in line with our ideas from a long time ago. So there's no massive changes there. I think that every single person that has been promoted is really performing great. The regions are really rocking. If you see the numbers of the growth of each of the regions are really impressive. So we're very pleased with the results and with the quality of the team that we put it together. And I think, as I said, after 28 quarters of being CEO of a public company, I still think that we're at the very beginning of the story. And we're at the very beginning of what we can do as a management team. So I think that it is something that I'm very pleased with. I think the team itself is very happy with that too, which is very, very important. And yeah, I think we form a pretty unique and very solid organization with our 20,000 global now that we have to manage. And it's ready to grow much faster than before, as we demonstrated on this quarter with a pretty solid foundation.

Okay, makes sense. And then just a follow up on supply. Can you talk about what the organic headcount growth in the quarter one? Also, how is mix of regions looking as you end 2Q? And can you talk about where you're going to push most aggressively in the second half on headcount addition?

Sure. Thank you, Brian, for the question. So in terms of the net additions during Q2, I think only and a little bit less than 100 people came from acquisitions. So we're talking primarily a purely organic number out of the 2,100 people that joined the company. In terms of mix, I think what you will see going forward is incremental employees, incremental developers out of Mexico, out of Brazil, out of India, and then the rest of the countries and regions will follow, you know, in line. We may also have some, you know, additional growth in Eastern Europe.

All right. Thank you.

You're welcome.

Thank you very much, Brian.

All right. Thank you very much, Brian. So next question comes from Maggie Nolan from William Blair. Maggie, please go ahead.

Hi. Can you hear me okay?

Yes. Yes.

Thanks. So I wanted to kind of build up on some previous questions. When you think about some of those key delivery geographies, are you seeing any differences in the level of wage inflation in each of those, like Argentina versus India versus Colombia?

Yeah, thank you, Maggie. Of course, you know, different countries have different salary increases because of, you know, local currency, because of inflation in that market. Typically, you know, you see Argentina with a higher salary increase in local currency. But when you look at that in US dollars, it goes, you know, close to the medium of the company so you know in general what we see is a is a number you know about five six percent for the full year in dollar terms company-wide uh that is a little bit higher maybe than than you know some time ago especially compared to last year but i think it's something manageable that we can uh you know we can offset uh through pricing we can offset offset through utilization. And that's why we continue to see our gross margins in the same range than in the past. We don't expect, you know, any of these to have a material impact on the numbers. And in fact, you know, we continue to have the same range that we always provided.

Okay, thank you. And then, you know, you've brought up augmented coding in the past and you talked about it again today. Are your clients asking you to build similar kind of accelerants for their internal organizations? And if so, do you view the advancement of technology like this as additive to your addressable market?

Well, Maggie, thanks for the question. Definitely, we are applying AI not just to ourselves, but also to our customers in a variety of projects. In some cases, we have seen that it makes sense for us to actually apply it and create a technology like augmented coding, not just to apply it for ourselves, but we also believe that many other organizations could benefit from that. Our current customers? and future customers. So that's for that reason is that we have assembled a strong team with the leadership of Tiburcio and we expect that to continue growing. So Answering your question, yes. We are applying augmented to pretty much everything. One of the interesting things is that we started this process of thinking AI on every aspect of what we do five years ago. Today, we are using it to pretty much a lot of things. As Patricia was mentioning, we are using it to conduct interviews, to assemble teams, to code better, test better, design better, to share knowledge. So there are... a very wide array of solutions that we expect could benefit not only ourselves, but our customers as well.

Thank you.

Thank you, Maggie.

Thank you very much, Maggie. So the next question comes from Arturo Langa from Itaú. Arturo, please.

Hi, thank you for taking my question and also congratulations on the results, very impressive. I think my first question is, I wanted to ask in terms of new logos, how has that evolved? And are you seeing a big increase in new companies that you're serving. And I think just following up on Maggie's question, this is also for Guy. For example, we've seen recently a company like Microsoft releasing a co-pilot on GitHub, which is this augmented coding platform as well. It's interesting to see that you're doing something in the same space. And maybe just if you could give us a broad view of how big that opportunity is there, it would be interesting to have your view on that. That would be helpful.

So let me take that. Sorry, Arturo, can you repeat the first part of the question? Yeah, the first question.

New logos. New logos, yeah. Yeah, no, look, in terms of total customers, once again, the number went up. But as we always say, you know, we really don't focus on the total number of customers. We focus on those that have a big potential to become multimillion dollar accounts, right? And, you know, we, for example, we now have nine accounts over 20 million compared to seven a year ago. We have 18 accounts over 10 million compared to 13 a year ago. So the wallet share continues to increase. Now, going into the, you know, specific low of, you know, some of them were mentioned during the call. We continue to see very good traction to get new customers. The company you know, the brand has become much stronger over the recent past. And we are seeing, you know, great traction in the three regions, right? Both EMEA, LATAM and the US continue to bring new logos.

Thank you, Juan. Regarding augmented coding and GitHub Copilot, definitely there is a lot of movement in the area and we believe that Copilot actually proves that we are on the right track. We started working on this several years ago and we obtained a patent related to this. We believe that as the world is hitting the, you know, the software is hitting the world, as Andreessen was saying, you know, there will be more and more tools to speed up the development process. We believe that by using augmented coding, developers can make software that is safer, is cleaner and it's going to be doing in much less time than what we used to do. So what do we see as a main difference between what Copilot and augmented coding are doing is we are working a lot on assembling and creating value across a team of developers. So software is not just augmenting, this is not just about augmenting your self-coding, but doing it in the middle of a team who's already producing code and looking for synergies between all the developers.

And enterprises.

Yes, and as a result of that, our target is going to be enterprise class developers, not just individuals.

Perfect. Thank you very much and congratulations.

But it's a huge validation for us. I mean, the co-pilot is a huge validation and we announced it and we started working many years ago, but we announced it a year ago before co-pilot. So we have some experience.

Yes, that was interesting to see you guys move first. And then I think IBM and Microsoft have put out interesting validations, as you say.

Perfect. Thank you very much, Arturo. So the next question comes from Moshi Katri from Redbush. Moshi, please go ahead.

Hey, guys, thanks for taking my question and congrats on very strong numbers. So the first one is for Juan. Can you remind us what was organic growth for the quarter and then what's embedded in terms of organic growth for calendar 21? And then the second one is a follow up from our team. Clearly, organic growth has been accelerating. Some of it is driven by the pandemic and the further adoption of digital. What are we doing to sustain this growth beyond 21 and 22 in terms of your product mix, your ecosystem, in terms of what you're doing to market these offerings or whatever you're doing to your end markets, i.e. your enterprise clients? Thanks.

Thank you, Moshi. So out of the 67% year-over-year growth in Q2, we estimate organic growth to be around 48%. So very, very solid or vast growth in Q2. For Q3, out of the 57% year-over-year growth, we estimate organic growth to be around 43%. And for the full year number, which is $1,236,000,000, 52% year over year growth, there it becomes a little bit more difficult to basically differentiate the two, but we estimate organic growth to be around 38% for the year.

Yeah, so these are pretty robust numbers.

It's an acceleration, significant acceleration.

Yeah, to the second part of your question, there's a lot of things that we are doing. I mean, first, platforms, and all the things that we are accelerating, like Gibber described, from augmented coding into the Start Me Up and all the rest of the platforms that we are, and Worldmeric that we just acquired, so on and so forth. I mean, platform for us is central to maintain a differential value proposition for our customers. And that's on the core. And then, of course, our studios. And the studios will keep on evolving, will keep on adapting. We are thinking about the idea of launching industry reinvention studios. I mean, how to reinvent specific industries and studios that are specialized, not just in the traditional industry, but how to reinvent that specific industry. So our studios are a living animal and they're growing and they are changing as we grow and as we need to adapt to different situations and to different market opportunities. Now, the pandemic has accelerated every aspect of the organization and every aspect of the demand. And I don't think that that will be slowing down in the near future. I don't know what's going to happen in the future. But in the near future, I see the demand in a very strong manner. And I see the pipeline very healthy and growing at levels that we haven't seen before. So all in all, I think this situation is pretty, I would say, interesting for Global.

In fact, Moshi, we used to say that our expectation was typically 20% organic production. Plus acquisitions at this point, you know, we do see next year, you know, at this point already at 23, 24% organic, plus maybe about 1% from the recent deals that we did. And of course, we will update as the year goes by and we'll get closer to year end.

Understood. Thank you.

You're welcome. Thank you, Mashi.

Perfect. Thank you very much, Moshe. So the next question comes from Maria Azevedo from Santander. Maria, please go ahead.

Hi, guys. Thanks for the call and congratulations on the super strong results. So it's very clear that demand is not an issue here, but can you give us some color on the pricing and the competitive environment in your key markets and studios? And I think my follow-up question would be on the margin side. If you see any specific industry vertical or geography helping this margin improvement, or is it happening all across the board? Thank you.

I'm going to start with the first part. On the hirings, on the supply side of the business, we have a very attractive employee value proposition. We continue to expand our talent development centers around the globe. We have done it in Uruguay. We have done it in Colombia. We will do it in other cities in some of the countries where we already are. And we are looking into other options also for next year. We do see a lot of room to continue growing existing locations, existing countries. But of course, we also look at other development centers where we can, you know, continue growing our company uh as for the second part of of your question uh so sorry to finish on the first part again as patricia was was discussing before we look at our company in multiple ways you know we have to have the best culture uh to attract talent we have to have very competitive compensation, we have to have very competitive benefits, we have to have the best projects, we have to have the best technologies for people who want to join and work for Globant. They need to see that at Globant they will be able to develop their career, to eventually maybe work from a different country, maybe work in a different industry, maybe switch their career to a new technology. I mean, when you're thinking about attracting or retaining talent, you have to think about all those things, right? It's not one single solution, one size fits all thing. You need to look at multiple things. We're dealing with people, and everyone has its own motivations. On the industry side, when you look at margins per industry, at the end of the day, there are not really significant differences between one industry and another. You do have sometimes one customer even within one industry that may have a higher margin than others. It depends on the technology, it depends on the mix of locations, it depends on the type of project that you are dealing with. So I don't think that you need to think about different industries generating a different mix in terms of margins. That's not necessarily the case.

I think adding to that, I want to mention one thing that is really important. A couple of quarters ago, we announced that we created a global university in the middle of the pandemic. And today, we can say that more than 90% of our glovers went through that university. I mean, there's more than 2700 resources there to skill and reskill our talent. So I think changing industries and trying to skill and reskill our talent there is one of the things that is also key at this time of the of the year. And as you can see, the results in terms of hiring and net addition that are records this quarter, that is not only because we have a huge engine of recruiting. It's also because our culture is really attractive. We are working in a very agile way. We have this mixed culture. So I think that, as Juan mentioned before, is that we tackle this thing in a 360 position. And we are thinking about to complete as a team all the C-level of the company, thinking about how we can improve that, how we can get closer to our globers and their families. So I think it is really important. And we can guarantee the quality of the delivery I mean, trying to hold all the things together.

Perfect. That's very helpful. Thank you. Thank you, Maria.

Thank you, Maria.

Thank you very much, Maria. The next question is from Steve Anders from KeyBank. Steve, please go ahead.

Okay, great. Thanks for taking my question here. Hope everyone's staying safe and healthy. I just wanted to check on the two new studios that you released here in the past couple of months since we last talked. How are you thinking about utilizing these across your customer base and kind of the big points of focus for them moving forward?

No, I didn't get the question. Sorry.

How are we going to use the new studios? if we think that we can use them in all our customers?

Oh, yeah. I mean, every new studio is being thought in a pretty horizontal way. So each time we create a new studio, we think that this can be a solution either for pretty much every industry that we have in our portfolio, or now we are thinking about creating studios on how to reinvent specific industries, which will be nurtured from those original studios and from the experience that we have been gaining with our customers along the years. And I think that that's something that is quite remarkable. At Globan, we never thought that having a silo approach on one studio and another studio, sorry, one industry or another industry was constructive because you have people that just know about one industry but they cannot create an innovative solution bringing ideas or solutions from another vertical. So we try always to focus on our studios. That doesn't mean that we don't know about industries. We know a lot about industries and about how to reinvent those industries. and um i think that they are going across pretty much uh all all the all the every new studio will be going around all this like the digital sales studio or the digital collection studio or the blockchain uh studio the digital lending studio all those studios goes pretty much across all industries now on the other studios that we are creating now we haven't created yet but we are in them The idea will be to reinvent the industries that we touch as we are reinventing Globan to reinvent the professional services space.

Okay, that's great to hear. And I just want to clarify, I think you said in the script that you're thinking about increasing sales investments through the second half of the year. Just wondering how and kind of the areas that you're looking to deploy these investments.

Yeah, sales investments will be mainly increasing our team and increasing how we connect with our customers. I think we have a huge challenge in front of us as we exit the pandemic, hopefully soon, to how to keep connecting with customers, how we keep investing in those relationships. During the whole pandemic, we live on the stock of relationships and our people now need to keep on doing the the flow of relationships. And I think that that deserves some investment there. Nothing that will go away of the SG&A that we are already spending, but maybe focusing the investment in different places or different type of profiles as we move forward. And also considering that we, as our size, gets bigger and bigger, we need to change the profile of the people, you know, that connects with those customers or improve those profiles or, you know, get more senior people to start to, you know, pitch higher level solutions. So that's gonna be the whole idea on the sales side.

Yeah, but as you can see from the guidance, that doesn't imply an impact on the operating margin level. With all the growth that we are delivering in terms of revenue growth and keeping our gross margins in line, there is room to do all those investments, as well as expanding in the different geographies where we are and in some geographies where we want to be.

Perfect. Thanks for taking my questions. Thank you very much.

Thanks, Steve. The next question comes from the line of Benjamin Huang. Benjamin works with Surrender at Jefferies. Benjamin, please go ahead.

Hi, everyone. Congratulations on the quarter. I just want to ask the question on the sort of revenue visibility that you guys might have for the next fiscal year as well. And in terms of, I guess, specific industry verticals, Are you seeing some of the, I guess, hospitality trends are kind of coming back next?

So in terms of, yeah, thank you for that question. In terms of visibility, you know, I think we are in a market where pretty much every single company in every industry is or have decided to invest in digital transformation. And that, of course, creates an amazing opportunity for companies like Globant, who are positioned exactly in that market. That, in a way, helped us. The pipeline that we have that has been growing significantly, even the contracts that we have already signed so far increased the visibility that we have compared to other years. That's why, you know, at this point, you know, being in August, we were able to basically raise a little bit the next year initial guidance, you know, that we just provided. So I would say that its visibility has increased, but of course it is related as well with the incremental investments that we are seeing in pretty much every industry. As for your question on travel, I'll let Martin answer that one.

yeah look in terms of industries i mean we have seen a massive growth on on consumer retail uh manufacturing uh on the financial space on media entertainment on professional services space i mean all those sectors has been growing very very fast uh talking about travel and hospitality is like the latest thing that will be reactivated after after the pandemic so we have seen a very modest growth over there and And I'm expecting still those things to kick in as we are having pretty clear signals from that sector that demand is catching up very, very fast, even more in this summer, you know, in Europe and the U.S., And I expect that to recover very fast in the next coming months, but still didn't happen. So still by far is the largest and most affected industry after the pandemic happened.

There is an opportunity, of course, in that industry. Once it comes back, that should be some tailwind for Globant.

Yeah. Perfect. Thank you very much, Benjamin. The next question comes from the line of Vitor Silva. Vitor works alongside Diego at Goldman Sachs. Vitor, please go ahead.

Hey, good evening all and congrats on the results and on the new guidance. So my first question would be, first as a follow-up on travel and hospitality, how does that industry factor into the guidance? You guys just mentioned that It's not something that is already recovering. So could we expect that if it recovers faster than expected, that could generate some upsides to guidance this year or some further upsides to revenue growth next year? Yeah. Go on.

I mean, for this year, you know, we are already in August, so we're not assuming a meaningful recovery of that industry for the rest of the year. In the guidance, we are not considering any significant recovery on that industry. I mean, at least for the first part of next year.

Understood. Thank you. And also, as a follow-up on Walmeric, could you give us some additional color on how it had been performing before the acquisition and also on how easy it is to adapt its software to different geographies in terms of supported channels and any other local factors that could be an issue here? Thank you.

Sure. The performance of the company before we acquired was pretty impressive, and that was one of the drivers on the rationale of the acquisition. And in terms of the geographic adaptation that you are suggesting, it's something that is much more portable than what we expected at the very beginning. And the changes that we need from region to region are very small, very minor, or even nothing in some of the parts of the application. So not a concern at all. Very clear. Thank you very much. You're very welcome. Thank you. Thank you, Victor.

All right. Thank you very much, Vittor. And so the last question for today comes from the line of James Michael. And James Michael works alongside Arvind Ramnani at Piper Sandler. Please go ahead. I think we might have some audio issue there. So I think that'll be all for the Q&A section today. So thank you all for joining. I will now pass the mic to Martin to provide the closing comments. Martin, please go ahead.

Thank you very much, Amit. Well, thank you everyone for participating. I would like to thanks in a very special way to all our investors, to all our analysts, to all of you that are supporting us in every aspect and everything that we do. to all our management team that is doing a terrific job and will be doing a terrific job. And extremely happy to share these results with you. We are very excited about the future of the company, about the reinvention that we can do for our industry and the reinvention that we can do for our customers. So thank you very much. Looking forward to see you in the next quarter. Thank you. Bye-bye.