Globant S.A.

Good day, and welcome to Globin's fourth 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 Urtiage, chief financial officer, Patricia Pomies, chief operating officer, and Diego Tartara, 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 Investor Relations website announcing this quarter's result. I'd now like to turn the call over to Martin McGuire, our CEO.

Thanks, Amit, and hello, everyone. I'm happy to be back after another strong quarter and full year. Globan continues to deliver solid performance, and we aim to surpass expectations of our stakeholders and clients. As we look back over the past 19 years, since we started the company, 2021 stands out. This was one of our most transformative years ever. Our Q4 2021 revenue reached $379.8 million. This represents 63.3% year over year growth and 11.1% growth over Q3. For 2021, we became a billion dollar revenue company for the first time ever. The top line reached nearly $1.3 billion, representing 59.3% year over year growth. This is the strongest annual revenue growth since our IPO. Our CFO, Juan Urtiaga, will go into detail later in the call. These strong results have been made possible by the team of talent we have cultivated. I've never been more proud of our Glovers. They are creative and adaptable. They work together as one team throughout 18 countries. Our business fundamentals are stronger than ever. We're in a position to capture the significant market opportunity in front of us. As we know, reinvention and transformation is not an end-to-end process. It is a constant state of adaptability to grow in the face of challenges. This time, a full adoption of digital transformation is here. The IDC has forecasted global spending in the sector to exceed $10 trillion over a five-year period. We aim to be the partner of choice of our clients and to help them bridge the gap between the innovation opportunities and actionable transformation. We are executing this strategy through the pillars of growth that I laid out in 2021, our geographic expansion, our invention studios, and our growing platforms. First, our geographic expansion. Global footprint continues to grow throughout the regions where we work. Lately, we added two new countries to our Latin America operations, Costa Rica and Ecuador. This solidifies our already strong presence in the region. In Europe, we have recently announced our expansion to Germany, Austria, and Switzerland. In North America, we continue to expand our local presence throughout the United States and Canada. We are reaching new clients and hiring more talent in all those regions to lead this growth. We have also brought on new talent and expertise through strategic M&A. In 2021, we incorporated five new companies to the Globan family. These companies have combined operations in 12 countries. Their talent has reinforced our capabilities in multiple spaces from blockchain to digital sales and marketing, AI, Salesforce, and more. As we look to the major trends of the near future, we're already working on consolidating our capabilities in these spaces. A major transformation for how brands relate to consumers will be brought on by Web 3.0. Web users in the first generation of the internet were exclusively on the receiving end of information. They later became content creators, active consumers, and participants in the second phase. In this new phase, they will become owners. Through blockchain technology and decentralization, Web 3.0 puts the user in the driver's seat. They will have more autonomy in their consumption, creation, and interface with the internet. This is actually part of a larger change. Throughout the digital and cognitive revolutions, focus has shifted towards the consumer. This is a huge opportunity for Globant, since we have built our core business around these revolutions for the past two decades. In this era, the most successful brands are the ones that can apply the right technology to improve relationships with their stakeholders. A major way that people will experience this new phase of the web will be the metaverse. Organizations will have new spaces and platforms where they can extend their presence, offering, and creativity. They will be able to maximize engagement with their customers and employees. Last year, Globan launched the Metaverse Studio to guide companies in taking advantage of these opportunities. Although many will see the potential, they need a partner with the technology and the expertise for best-in-class execution. Globan believes that these and other trends in AI, machine learning, and teamwork agility will have a strong influence on our world in 2022 and beyond. We have done a deep dive on many of them on our Trend Report 2022. I encourage you to check it out at trends.globan.com. We also continue to develop our product and platforms offering under GlobanX. The goal is to keep expanding our existing products such as Start Me Up, Augmented Testing, and Augmented Coding, among others. At the same time, we will continue to add new offerings to our product portfolio. For example, Globanex is developing an MVP of a new platform, Project YORD. YORD is a diagnostic tool that aims to reduce the carbon emissions and operational costs of digital products and services. It identifies solutions by designing linear digital services as it measures energy consumption of software. It pinpoints areas where energy emissions and costs can be optimized by up to 25%. We believe that technological innovation is a force for good. However, we are mindful of the potential side effects that come from misuse or excess. We see several concerning examples in our society. from texting and driving, to cyberbullying, to internet security, to privacy, just to mention some. So as you may remember, last quarter, we launched our Be Kind tech fund. We will support and fund startups that develop apps that bring solutions to these challenges. Today, we are proud to announce three world-renowned ecosystem partners, Endeavor, New Lab, and LAFCA. Thanks to their extensive networks, we will be able to engage with a greater number of high-quality entrepreneurs and startups. We already have dozens of submissions, and we continue open to receiving applications from startups at BeKindTechFund.com. I've been happy to see our team's efforts generating greater recognition of Globan's brand identity. For the first time in 2022, Brand Finance has ranked Globan on its list of the top 10 strongest IT service brands in the world. The report studies marketing investment, stakeholder equity, and business performance. It showed an estimated 31% growth in Globant's brand value in the last year. This is great news for us, and we hope to continue improving our positioning moving forward. With that, I pass it over to Diego Tartara, our CTO, to comment on our studios and clients. Thank you very much, and looking forward to see you soon.

Thank you, Martin, and hello again, everyone. It's good to be back. As Martin mentioned, a major pillar of our growth strategy is the new industry reinvention studios, which we announced last year. This is the next step in the evolution of our signature studio model. Instead of focusing on a specific technology or trend, these new studios seek to transform the industries themselves. This widens the scope of our work and increase the potential upside. Each reinvention studio is supported by the expertise of our digital studios in areas such as the metaverse, data and AI, blockchain, and much more. I'd like to double-click today on the Life Sciences Industry Reinvention Studio. Its goal is to provide organizations with technology-driven solutions to face challenges in the healthcare value chain. These stakeholders include patients and relatives, healthcare professionals, public-private players, and institutions, academia, pharmaceutical and medical device companies, among many others. Globan has appointed Agustin Lamas as this new studio Globan Managing Director. Building on his experience as a pharmaceutical executive at AstraZeneca and GSK, we're happy to have Agustin on board as we reinvent this industry. The Life Sciences Studio will be a hub of modern design thinking, combining bioscience talent with our digital expertise across other industries. Now, some remarks on the ongoing work with our clients. Continuing the focus on Life Sciences, last quarter we started partnering with Abbott, a leading multinational healthcare and medical device company. Our teams integrated with theirs to understand their challenges and we are redesigning their analytics platform solution. The new data platform will allow for faster, more efficient data processing, enabling more intuitive decision making. In the same industry, we're also working with Vyer Medical to help with modernizing and redesigning their ventilator interface design. Vyer is a global leader in the respiratory diagnostics, ventilation, anesthesia delivery, and patient monitoring segments. We're also working with them on redesigning their UX and their medical incubator screen interfaces. As Martín explained, the metaverse is a concept that is quickly becoming reality and one of the reasons why we created our Metaverse Studio. In December 2021, we formed a partnership with Pixelinks, a leading music metaverse gaming platform. Pixelink is developing a new virtual world ecosystem that will allow artists to launch their own interactive environments and monetize them through NFTs, social music experience, and virtual performances. Our expertise in metaverse, blockchain, and gaming, along with their deep knowledge of the industry, are allowing us to accelerate the reinvention of the music industry together. We're also proud to be working with Dapper Labs, the creator of the world's most successful digital collectible blockchain apps, including NVA Top Shot and CryptoKitties. We're helping them optimize their processes as we automate the creation of NFTs. We have a long track record working with companies as we bring our technological expertise to education. We have recently been working with EverFi. EverFi enables private, public, and social sector organizations to respond to some of today's most pressing challenges through education, activating community engagement at scales delivered as a service. Through its technology and learning platform, EverFi has reached more than 45 million learners globally while also delivering critical insights to its corporate partners so they can measure and amplify impact on their educational programs. We partner with them to build their brand new onboarding and enrollment platform. We're building a more robust, scalable foundation that integrates with third-party sources of information and eliminates data mismatch and keeps rostering as a core service. It is extremely important for companies to remain human-centric as they embrace technology to improve their own processes and services. The implementation of conversational interfaces is a great example of this. This past year, we began an exciting engagement with Tabisca, a CX Loyalty technology platform, which is a division of JPMorgan Chase. Tabisca and CX Loyalty build products and solutions that empower some of the world's leading customer engagement and loyalty programs. And they're constantly transforming the way brands engage and reward their most loyal customers. The first project called Chatbot recently went live. It helps them improve their service offering and relationship with customers to meet business goals. In the food and beverage space, Danone has partnered with Globant for its transformation to a data-driven company. By applying AI, we're empowering them to have a higher and more insightful level of understanding of their shoppers and consumers and improve the route to market. we're working with agile methodologies and modernization of their platforms, improving the capacity to respond to context changes and to capture the new opportunities that the market generates from changes in consumer behavior. Thank you everyone for your time again. I look forward to Globant's continuous expansion of the array of expertise to keep delivering superb 360 digital transformation. With that, I'll hand it over to Pato, our COO.

Thanks, Diego. Hello again, everyone. Before I get into discussing our talented Glovers, a few notes to reflect the strength of our operations and our performance with our clients. The Walt Disney Company continues to be our largest client, growing this quarter at 69.1% year-over-year and 7.1% quarter-over-quarter. We continue to be very well diversified within Disney and serve a multitude of its business verticals. The rest of our accounts collectively grew by 62.6% year-over-year and 11.6% quarter-over-quarter. Our 100-square strategy continues to advance. Over the last 12 months, we had 12 accounts that brought in more than $20 million of revenue compared to seven from last year. We also had 185 customers with more than $1 million of annual revenue compared to 129 one year ago. In Q4, 63.9% of our revenues were from North America. 23.5% in Latin America and others, 10.7% in Europe, and 1.9% in Asia. As you know, we think of our clients as our partners, and having a long-standing and strong relationship is directly tied to our focus on quality. The net promoter score is a value that we have been measuring for quite some time to keep a close eye on how our customers perceive our quality of service. There is no official benchmark for the score, but most available benchmarks position scores generally between 30 and 40 for our industry. I am very pleased to share with you that our scores have been consistently above 60, well over the existing benchmarks. Our score was 64 for the last 12 months. As Martin said, 2021 was a major year of growth and achievements for Globant. We are now a worldwide team of 23,526 globers with 22,167 being technology, design and innovation professionals. 1,594 of the new hires in the quarter were IT professionals, up 45% year-over-year. Every year we have more geographical diversity. This offers our clients a truly global delivery structure, as we now have glovers in 18 countries. Colombia and Argentina are nearly tied as our largest talent markets, with a bit over 5,300 glovers each. In 2021, India saw the highest growth, with headcount up 94% year over year. We remain confident that we can continue bringing in strong talent, and we envision a strong hiring process moving forward. Global saturation rate is currently 18.7%. As you know, our talent market remains competitive, and there has never been a better time to work in the IT sector. For us, this is an opportunity. It drives us to continuously work on our employees' experience, benefits, and opportunities to make Lobant the place to work in the industry. We have seen that our efforts and the value proposition we provide to employees is leading to a stabilization of the attrition rate. Our structure has always respected that work-life balance and family support. Now we are going further. We want to enable our talent to feel in control of their own career path and their life. And we have taken the steps to provide that through three unique initiatives. The first one is ensuring that every Glover has a clear path to leadership. Advancing in one's career is a highly sought-after goal, and providing a consistent structure that allows for that to become a reality within the same company fosters a stronger commitment to our vision and our future. Secondly, we are now offering Glovers flexibility to work from anywhere in the world for up to 30 days out of the year. This includes places where we don't have an office. For globers who choose locations with global offices, they are encouraged to interact with local globers and experience our revamped office experience. It's a win-win because we grant employees the flexibility they seek, and we also ensure a globally cohesive team. And finally, we have a new platform, Open Career, that gives Glovers the keys to their own career path. This platform acts as a career marketplace and talent placement accelerator within the company itself. Globers can apply to any of our open positions in any project that we have. We want to allow them to find more exciting challenges within the company without needing to look elsewhere. It is our way to promote autonomy, flexibility, and opportunities worldwide. And finally, some exciting new updates to our Be Kind initiative. This is now an enduring part of Globan's identity. Our Globers have taken ownership of it and have made it their own. Not only are we fulfilling its promise, we are expanding it so we can have an even greater impact. As you know, Be Kind has four pillars. Be kind to your peers, to the planet, to humanity, and to yourself. In Be Kind to Your Peers, we are reaffirming our commitment to diversity, equality, and inclusion. We recognize that we work in the most dynamic and promising job sector in the world. So by promoting inclusion in the sector at large, we are building a brighter future for the industry. On top of our goal to achieve gender parity, we are setting a new one. We will grant 15,000 technology scholarships by 2025. Through thought leadership, community involvement and mentorship, we want to inspire up to 2 million young people to enter the STEM fields. For Be Kind to the Planet, we became carbon neutral in 2021. We are also following reduction trajectories in line with the science-based targeted standard, aligned with the Race to Zero initiative. Now we are incorporating a new objective. We aim to save 10 million tons of CO2 emissions through a digital sovereignty strategy. We want to train our Glovers on digital sovereignty to be able to educate our world-class clients while designing their digital services and products. Our Be Kind to Humanity pillar was what inspired the Be Kind Tech Fund described earlier by Martin. We will seed and support the startups that tackle the misuse of technology. Within the company, we have the initiative of Be Kind Labs to help lovers with inspiring ideas and transform them into real projects. For Be Kind to Yourself, we have launched a new company wellness plan, partnering with experts in mindfulness and mental health. Our objective is for the program to reach an influence of 100% of our Globers. I am proud to see that this impact in ESG are getting noticed. For 2022, Globon has been included in the S&P Global Sustainability Yearbook. To be included, companies must be ranked within the top 15% of their industry in the key ESG metrics. As the awareness of our efforts to improve our own company and our sector's community, we look forward to seeing more of this inclusion as we grow. With that, I'll turn it over to Juan to discuss our financials.

Thank you and good afternoon, everyone. I hope you're all doing well. Let me start by summarizing the results of our fourth quarter and full year 2021. I will then discuss our guidance for the first quarter and the full year 2022. We are delighted with our overall results for the fourth quarter of 2021, as our business continued to show robust momentum. Revenues for Q4 were $379.8 million, representing 63.3% year-over-year growth and 11.1% sequential growth. Globant continues to deliver industry leading growth and we expect this trend to continue for the foreseeable future. We estimate organic revenue growth for Q4 was around 54.5% year over year. As discussed earlier, The demand for our end-to-end digital services and platforms is much stronger now than what it was before the start of the COVID-19 pandemic. And at this time, we are not witnessing any material impact from COVID-19 to our business. We feel confident in delivering robust levels of growth in the upcoming years. Turning now to profitability, our adjusted gross profit for the period increased to $149.7 million, representing 39.4% adjusted gross margin, compared to $92 million, representing 39.6% adjusted gross margin in the fourth quarter of 2020. Adjusted operating income for the quarter amounted to $63.6 million or 16.7% of revenues, compared to $37.9 million or 16.3% of revenues for the fourth quarter of 2020. demand and pricing environment continues to be strong, offsetting the ongoing inflation in the labour market and we also continue to drive SE&A efficiencies with our increasing size. In addition, we continue to drive an increasing amount of revenues from services, products and platforms that support breaking revenue and employee growth linearity. Together, this will help us maintain a healthy adjusted operating margin profile and continue making the required investments in the company to seize the attractive market opportunity in front of us. Our IFRS effective tax rate for the quarter was 23.4%, largely in line with our guidance. Adjusted net income for the fourth quarter of the year totaled $45.8 million, representing 12.1% adjusted net income margin, compared to $27.6 million, representing 11.9% adjusted net income margin for the fourth quarter of 2020. Adjusted net income for the Q4 implies 65.7% year-over-year growth above our Q4 revenue growth rate. Adjusted diluted EPS for this quarter was $1.07, based on 42.8 million average diluted shares for the quarter, compared to 68 cents for the fourth quarter of 2020, based on 40.9 million average diluted shares for the quarter. Adjusted EPS for the Q4 implies a solid 58.3% year-over-year growth. Moving on to the balance sheet, our cash and cash equivalents and short-term investments as of December 31st, 2021 amounted to $460.4 million. During the fourth quarter, we generated strong free cash flow of $47.9 million versus $20.7 million in the fourth quarter of the last year. During this quarter, we paid $64.2 million for acquisitions. Currently, our credit facility is fully enthroned. We also continue to successfully execute our capital allocation strategy with integrations of recently acquired companies going as planned. Now let's look at the full year 2021 performance. revenues for 2021 were 1 billion 297.1 million dollars implying a solid 59.3 percent year-over-year growth this represents by far our strongest year-over-year revenue growth since we are a public company we estimate our 2021 organic revenue growth to be above 45 percent year-over-year our m&a deals from 2021 also continued to perform strongly with cross-selling of services creating synergies. Adjusted gross profit for 2021 was $512.7 million, or 39.5%, an increase of 40 basis points year-over-year. Adjusted profit from operations for 2021 was $214.3 million or 16.5% adjusted profit from operations margin compared to $124 million or 15.2% adjusted profit from operations margin for the last year. This represents an increase of 130 basis points and is driven primarily by the improvement in gross margins and the SC&A efficiencies achieved during 2021. During 2021, we also continued to strongly invest to capture the significant opportunities in front of us. Adjusting net income for 2021 was $158.4 million or 12.2% adjusting net income margin compared to $90.6 million or 11.1% adjusting net income margin for the last year. Adjusting net income increased 74.9% year over year, solidly above our 2021 revenue growth rate. Adjusted diluted EPS for 2021 was $3.76, based on 42.1 million average diluted shares for the year, compared to $2.28 for the last year based on 39.7 million average diluted shares. During 2021, we generated strong free cash flow of $102.6 million versus $47.4 million during 2020, an increase of 116.6% year over year, and implying free cash flow to adjusted net income of 65%. During the year, we paid $144.5 million for acquisitions. Now, I would like to talk about our guidance for Q1 2022 and the full year 2022. As discussed, the demand environment remains robust. Based on current visibility, we expect Q1 2022 revenues to be at least $395 million or 46.2% year-over-year growth. At this point, we do not expect any effects impact to our first quarter revenues. Q1 adjusted operating margin is expected to be in the 16% to 17% range. IFRS effective tax rate is expected to be in the 22% to 24% range for Q1 2022. Adjusted diluted EPS is expected to be at least $1.16 assuming 42.9 million average diluted shares outstanding for the quarter. Regarding the full year 2022, we expect revenues to be at least $1,751,000,000 or 35% year-over-year growth. We currently assume no effects impact our full year 2022 revenues. For 2022, we expect our adjusted operating margins to be in the 16% to 17% range, while we continue to strongly invest in training programs in cutting-edge technologies and expand our sales coverage to further develop our business. IFRS effective tax rate is expected to be in the 22-24% range for the full year 2022. Finally, we expect our adjusted diluted EPS to be at least $4.86 for the full year 2022, assuming 43.1 million average diluted shares outstanding for the full year. Thanks everyone for participating in the call, for your coverage and support.

Thank you, Juan. So as we go through our question and answer section, I'll announce your name. At that point, please unmute your line and ask your questions. Please mute your line after your questions are 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. JP Morgan, Tinjin, please go ahead.

Thanks, Ahmed. Appreciate it. Nice results again here. I'll ask maybe if you don't mind just on visibility. I know I've asked that in the past, but I think it's appropriate here since you're giving 22 guidance for the first time. Just curious on visibility, how it stands, how does it compare to this time last year, and especially in the second half of 22 and your ability to replenish your backlog and whatnot. Any thoughts there would be great. Thank you.

Okay, good. Thank you, Dingxin. How are you? Great. Thank you for the question. Look, there's a pretty good visibility, as always, on our numbers for the quarter, and And the year looks great in terms of the quality of the relationships we have with our customers. And I believe as compared to the first quarter last year, we're seeing a pretty solid demand on the table. We're seeing Pretty much the same strength as we were seeing last year. But, you know, there's always caveats in terms of how the world is going to be evolving in terms of amount of investment, so on and so forth. But we're not feeling that yet in the demand. So in terms of visibility and expansion of the business, this is what we are seeing. In terms of being able to fulfill the demand and concrete the backlog, it's still extremely healthy. And we're seeing our ability to recruit still intact, attrition under control, and the growth is going down a little bit. And I believe that we won't have any problem moving forward, neither challenges. Of course, there's always challenges, but we won't have any issue, I feel, with fulfilling the backlog and the demand we're seeing ahead.

OK, that's great. Just my quick follow up then for Juan. I know we've talked about margins a lot. And of course, everyone is aware of all the supply issues on the labor front. So you gave a pretty wide range, 16 to 17 percent. You did the midpoint of that in 21. Which way might it lean? What factors should we be considering in terms of where you might land in that range?

Thank you, Tinjin. Also, I just wanted to add to Martin's answer in the previous question. If you remember, over the last two quarters, we've been talking about 2022, and we were more like in the 25 plus 2.5 percent initial guidance for 2022. Now we have significantly raised that number to 35%, which is roughly 32.5% organic, plus 2.5% coming from the acquisitions that we have already done. So in a way, I think that is a result of the level of confidence and the visibility that we are having into 2022. You know, now moving into where operating margin is going to land, I think, you know, and our expectation is like it happened during 2021, being able to offset cost inflation, cost increases, which are happening and are going to happen. uh with price with pricing with the fee with utilization as we have done during 2021 where we're able to increase our gross margin for the year around 40 basis points so we do expect at this point to land you know hopefully you know between the middle and the upper part of the operating income guidance good and thanks for pointing it out right i mean anything north of 30 is

That's a big upgrade, but that does speak to the confidence and the visibility. So thanks, guys.

Thank you. Thank you. Thank you. As always. Thank you very much, Tinjin. So the next question comes from the line of Ashwin Chiragar from Citi. Ashwin, please go ahead.

Hey, guys. Good afternoon. Congratulations on the solid print and equally solid outlook. I guess, you know, I just wanted to start perhaps with a question on your point that you just made, the sharp increase in outlook from what you said the last time. And maybe to delve into that, is that driven by, you know, just bringing on new clients? Is that driven by sharp ramps in sort of your order book that you're sort of seeing? What has led to the sharp increase that you're seeing?

Thank you, Ashwin, for the question. It's a combination of factors. One is that we have completely removed the cautiousness that we used to have in our guidance over the last two years. We believe that COVID is pretty much behind us and we have to guide where we feel that we're gonna be able to land and hopefully exceed by a little bit. So we remove a little bit of the conservatism that maybe was embedded over the last two years, I think not just by us, but for many companies, you know, in the market, it's the right time to get rid of that. On top of that, as Martínez said at the beginning, you know, we continue to see strong relationships continuing, you know, and expanding for 2022. You know, how Disney, for instance, performed during 2021, the top five, top 10, 11 to 20 and 11 to the end accounts performed. Now we are seeing like multiple areas of growth. We close the year with over 12 accounts above $10 million, which is a significant increase compared to last year. Actually, the number is higher. Just give me one second. I wanna give you that number. So I think it's an important number. And together with that, you know, we continue to see our top accounts, you know, becoming larger and expanding those strategic relationships in line with the 100 square program that we have in place. Sorry, we closed the year with 12 accounts over 20 million. and with 22 accounts over $10 million. That is a significant increase compared to last year. And I think it's a clear proof of how we are able to penetrate those accounts, how we are able to become more strategic in the type of relationships that we have. And of course, at the end of the day, this is what is giving us the confidence to increase our guidance relative to what it was a couple of quarters ago.

That makes sense. My other question is with regards to sort of the expected cadence as we go through the quarters for growth and margins. And maybe just a small clarification on what you said. Does the caution comment translate from the fact that your clients now, that for example, the theme park side of Disney, you had travel clients, that traffic has now, that volume has now come back basically.

You know, when you look at how travel is performing, when you look at how Disney and the results reported recently by Disney, you know, but not just those those two sectors. Right. We're seeing strong growth. I mean, if you look at the industry evolution, you're going to see that pretty much every industry has gone, has grown significantly. So we do believe that, you know, there is multiple areas, multiple customers, multiple industries which are going to help us drive that growth. We do see margins kind of stable over the year. We don't see big, big swings between the different quarters, at least at this point, you know. of course we need to see then what happens with the different currencies how they're going to move you know relative to the dollar as you know we are operating in 18 different countries and they may have an impact on on costs right but typically a strong dollar is good news for global we'll see what happens in the future martin if you want to add anything there and on the on the cadence Well, I mean, the guidance for Q1, as you know, has been quite solid at 46% year over year. That is primarily, it's about 41% organic coming from the acquisitions that, and the rest is the remaining 5% comes from the acquisitions that we did during 2021. For the full year at this point, you know, we guided 35%. As I said before, 32 and a half, we estimate to be organic. And of course, as the year progresses, hopefully we are able to give good news, like always. But at this point, we feel that that's the type of guidance that we feel comfortable to provide. And again, removing a lot of the conservatism that was embedded in prior quarters. Thank you, Ashwin. Good to see you.

Thank you.

Thank you, Ashwin. Thank you for your questions, Ashwin. Now let's go to Brian Virgin from Cowen. Brian, please.

Hi, all. Good to see you. Thank you. I wanted to dig into the global diversification efforts that you're making. So I'm curious how you're thinking about the on-site or the in-market mix, how that might evolve, and whether that's an added lever for you that you may consider raising, or should we expect this to remain relatively consistent? And what I'm talking about is kind of in-market in the US and market in Western Europe.

Hi, how are you? Nice to see you again. Right now, we're at 95.5. So we are at 95% offshore, 5% on-site. We are looking into expanding that relation. And we have been decreasing for the massive amount of growth that has been led during the COVID. on the absence of requests for a specific location. It was not a problem where those guys were located. And this is something that helped us to keep moving people of the operation around many of different countries. Now, on the on-site side, where basically where our business is, we are seeing a trend of increasing demand and increasing now that things are going back to kind of normality, which is not true, but at some point is getting back to slowly. They are still not there. We're seeing an increase on that demand and the amount of people that we are hiring for that. And also, it could also have some effect on companies that we acquire or with local footprints. Those are the changing factors that we see moving forward. the revenue per head from last year to this year grew about 12% in terms of, but that without pushing down the mix. So it is a pretty good performance in terms of improving the revenue per head and the rates that we are seeing in front of our customers. And that's a base for us to say that we don't see a massive price pressure on the on the market. There's always competition, of course, but we see a healthy situation there.

Okay, thanks. And then just to follow up on attrition here, so it looks like it's stabilized quarter over quarter. Just based on what you've seen here through January, do you think that's reached the plateau? Maybe just talk about how you see that progressing in 2022 and how that might compare as well across some of your key regions.

Well, you know, hi, how are you? I think that we are going to see something like quite similar, like what we announced in this quarter. But I think that we have been growing fast. I mean, we are more than 23,000 Glovers and we have been hiring. I think that we are in a record of 6,000, more than 6,000 Glovers in the last quarter. And I think that the incoming quarters are going to be quite similar or more. So we don't see any any problem in the demand and how we are hiring. So that that is something that is really we are we feel really proud of that. Of course, we are expanding our places. I mean, we will launch this global everywhere. strategy that has to do with going to find the correct talent and help them achieve their career path growing in global. So I think that, of course, we are still thinking that we're going to get into between 15 and 17. But of course, we are working very closely. We are hiring teams there. And I think that we are right now, it's going to be normalizing probably in two or three quarters. you know that the demand has been really, really hot.

Just a clarification, 6,800 people are the additions for the year, not for the quarter. For the year.

It's a big quarter. Yeah, yeah, yeah. It's a big quarter. All right, thank you very much.

Thank you.

Thanks a lot, Brian. Now the next question comes from Maggie Nolan from William Blair. Maggie, please.

Hi, how are you? I wanted to ask about some of the conversation that's been had around pricing and the revenue guidance. Obviously, pricing is a contributor to that strong guidance there. And you've noted that the increase is more than offsetting the above average wage inflation. So when we're looking on kind of a multi-year basis, should we think about some of those pricing increases having to kind of moderate in the coming years?

I think at the end of the day, pricing is also related to the value that you add. And of course, with what is happening in the labor market, right? During 2021, we saw a strong labor market and a lot of demand. And that enabled pricing discussions that, in our case, help us offset that cost pressure that we saw in 2021. Getting into 2022, the year starts again with strong demand. Also, there is a strong demand for talent that will imply cost pressure for most companies. And our expectation at this point in time is that we will be able to offset again that increase on price negotiations and eventually with some utilization improvements. So what we do, we think that we are targeting to maintain or to be able to offset cost increases. With that, we are adding more value to our employees. We are to our customers. We are expanding our studio value proposition. We are becoming more strategic in many of the accounts that we are servicing, as shown by how we are growing with those accounts. And we believe all that combined should help us offset whatever happens on the labor market.

Okay, great. That makes sense. And then, you know, it was great to hear some of the things you're doing on the talent side, and you can definitely see how that'll help with retention at the organization. I was interested in kind of the dynamic of this creating a path to leadership and how you kind of balance that with the fact that An inherent differentiator for GlobeMint has been the fact that you are kind of a horizontal organization and an agile organization compared to some IT incumbents. So can you kind of reconcile those two concepts for me?

Yes, of course. I mean, I'm more than happy to go deeper there. Well, we launched this augmented leadership thing inside Globent that is a strategy in order to help our leaders to be 360 leaders in the way we are living right now in the middle of this context. So I think that is a new thing that when you get into Globent, you just you are not going to stop your career but you continue your career and we are helping on that i already mentioned about the global university many many times but that has been a very successful initiative and on the other side we we just launched this uh platform in fact we launched it i think two years ago uh that is the open career platform is is is the best I think that we have launched because each global can now deciding which project they can have their experience and they can change and they can move their career path as they as they want. And the leaders are going to to help them in order to grow faster. So this is a unique platform. I mean, because that means that when you are inside Globant is that you are not going to stay forever in the same project, the same industry. We are now doing this kind of thing that probably our competitors are looking for the Globers. And now we are offering them to be inside Globant to keep our talent inside the company and helping them go in the different industry and having different experiences. So that has a main impact in our organization. Also, as you know, the Be Kind to Yourself initiative has helped a lot in terms of how we are helping our Glovers develop their own health and their mind. And we have this concept of having all together spirit, mind, and and bodies so we are helping them in understand if this is not only just a place where you work it's all also a place where we are taking care of each of them and their families so we have been able to understand the situation that has changed some of them working from their home as many of us some others starting to go to the offices and in in the middle of all of that i mean how are we going to to to continue developing my career. So I think that is a really huge differentiation from other competitors. Thank you. Congratulations.

Thank you, Maggie. Thank you. Thank you very much, Maggie. Next, let's go to Arturo Lange from Itaú. Arturo, please.

Hi, good afternoon, everyone. Congratulations on the results and thank you for taking my question. Just a couple. I think the first one is housekeeping, but Juan, I believe you mentioned that from the full year 22 guidance, about 32 percentage points should be organic growth. I just wanted to clarify that. And then my second question is regarding going back to geographic expansion. Maybe if you can talk about your expectations, particularly in Europe and in Asia, in terms of maybe headcount growth and revenue growth. And then maybe there just detail a little bit the rationale behind the expansion in Germany, Austria, and Switzerland. That caught my interest. It seems like a new and exciting geographic footprint to expand into. So those would be my questions. Thank you.

Thank you, Arturo. So on the 35% full year guidance that we provided, we estimate 32.5% to be organic. The remaining 2.5% coming from the acquisitions that we closed in 2021. As for the geographic expansion, I don't know, Diego, if you want to... to discuss a little bit our strategy.

Yeah, sure. With regards to geographic expansion, we expect to have, of course, we have organic and inorganic. We see very good opportunities, especially with regards to the reinvention studios. When you see intersection of the reinvention studio and headquarters for some of the large pharma, some of the things that we will be launching pretty soon, especially And this is also Germany, Switzerland, France. I expect to have a healthy growth there, especially with and probably with on-site people. That's typically the way they tend to hire and work. In Europe, it's kind of different from the US. even from a cultural perspective so hopefully we will be able to increase the local headquarters which is always something uh healthy um and with regards to expanding uh the second question was uh sorry uh germany uh austria asia well asia is more uh i would say asia is more complicated i think uh we've uh we've uh We have two different alternatives, of course, the organic versus inorganic. We are exploring both. I think it's too early to come up with an answer that is actually solid these days. But let's say that we will do it during this year, definitely.

On the organic side, as you can see by the numbers from Asia, we are having new customers in that region. That's why the revenue number has been trending up in Asia. But as Diego said, we look into Asia as a big opportunity that we have to explore either more organically or with M&A or with both. We are analyzing that.

Perfect. Thank you and congratulations.

Thank you.

Thank you, Arturo.

Thank you very much, Arturo. Next, let's go to Diego from Goldman Sachs. Diego, please.

Yes. Hi, everybody. Good to see you all. First, congrats on the results. So, look, it seems that you had a great acceleration on the revenue per IT consultant in the fourth quarter. And if I'm not mistaken, it moved from, you know, 68,000. in the last 12 months as of the third quarter to 69.3, you know, for the year end. So this means that the fourth quarter was very strong and apparently driven by solid performance within existing clients, right? So just wondering if, you know, this came from a specific client or maybe it was just a trend you saw among different clients. Thank you.

Thank you for the question. You know, as we've been discussing over throughout 2021, pricing discussions have been happening throughout the year. And of course, the final revenue per head that you get is a combination of new customers, new projects. changes in pricing in existing customers, different levels of utilization. And they all happen at different points in time, right? It's not that you negotiate and all the prices change at the same date. So what you saw during the year was an evolution. And we have been able to expand our pricing. But at the end of the day, again, this is not just because you go and raise your prices. It is related to the value that you are adding, it is related to how strategic you become. And I think it's a good number, the one that we saw in 2021, because the mix has not changed. So it's basically an increase in value and effectively an increase in rates. That's what happened throughout 2021. And again, the year is just starting, but we target to be able to also increase our prices to offset eventually whatever happens in the labor market. It's still early in the game, but we are confident that it's a good possibility for 2022.

Perfect. Thank you, Juan. And maybe, you know, just a quick question here on the platform business, right? Can you just help us to quantify the size of this business today and how fast is this growing? Thank you.

Thank you for the question. The Global Next Initiative continues to evolve. through some of the platforms we already acquired in the past which are performing really great and some of our own platforms that are maturing and continuous continuing that evolution we're still not talking neither disclosing any kind of you know differentiating in those two in those two factors and in those two components but the growth is pretty pretty steady and very solid and in in in the two segments, in the segment of the companies that we acquired and in the segment of the platforms that we are developing for ourselves. And for example, on the augmented coding side, we're about to release the second version of our original idea. And that is expected to have a pretty large impact in many of our customers where we are using it. and um so we are really creating something very interesting on the global next site and on the platform business um but we are not right now uh being able to to disclose or separate the revenue coming from there i know that will be an advantage but we're not doing it yeah it will be great but thank you thank you martin for that thank you no problem

Thank you very much, Diego. Next, let's go to Surinder Thien from Jefferies. Surinder, please.

Hi, guys. A question about the push-pull between on-site delivery and expansion of your global delivery footprint. Can you talk about maybe what you expect for longer-term targets as we look out a few years at this point? And then if... on-site delivery perhaps increases. How does that impact margins?

So I'll take it. So, you know, long term, as we have said in the past, we expect the business in India to become a larger part of our total headcount or global delivery centers. We expect Latin America to become slightly smaller. And we also expect Eastern Europe to become, you know, a larger part of the business. Of course, you know, given the circumstances, maybe, you know, We are not particularly pushing that region very, very fast as we speak. That's in terms of the geographic mix. And the 5% that we have on shore eventually needs to evolve and become around 10% over time. But it's not going to happen from one day to the next. It's not going to happen from one year to the next. It's going to be an evolution. And we want to do it in a healthy way. We don't want to grow... the US or the UK or continental Europe at the expense of significantly impacting our margins. We want to make it in a way by which the offshore business somehow offsets any impact that the growth in the onshore markets may bring. So I don't expect that growth on the onshore to be meaningful for the margins because it's going to be slowly but steady. I expect India to become a larger part of our business, as we have been saying over the last several years. And I do expect Latin America to be smaller. And finally, Eastern Europe has to be a little bit larger than where it is today, which is very small. It's around 2% of our headcount.

And then just a clarification, when you talk about getting to maybe a 10%, 11%, 12% on-site model, is that kind of a five-year type target, or what is, just can you put a timeframe around?

I think five years is a reasonable timeline. Again, you know, we came down a lot over the last few years. The COVID situation basically, you know, pushed the offshore business significantly, but eventually as, you know, things go back to normal, we will want to expand. Diego was just mentioning to have more people in Germany, more people in Switzerland, France. We have been growing in Spain quite a lot this year. We have been also expanding in the UK. In the US, we are landing in Canada much stronger now. So I think that five-year period to double the percentage of people that we have on-site makes sense. And it's more related to business. I mean, like, we know it's going to generate more business once, you know, things go back to normal.

Got it. And then a question on M&A here. Given the really strong growth that you're seeing, how does that potentially change in the near term, your thinking or your strategies? Is it unchanged at this point? Are you willing to maybe get a bit more aggressive to to maybe see if you can capture more of the market when things are, you know, in flux at this point? How should we think about M&A spend?

I would say that the M&A strategy will remain being focused on three regions, Asia, Europe, and Americas in general, North and South America. And the strategy would be to keep on doing them. But of course, valuation has been in a crazy situation during the last few months. We want to be very careful with the kind of deals we do and how we use our own cash and equity. So we will continue doing them. They will be connected to a new geography, for example, to go to Germany or to go to Asia, to go to some of the countries in which we are interested in expanding. They will continue being based on the platform business that we want to build. They will continue being based on how we develop and keep on developing our main delivery centers in the countries in which we are located. And those are the three axes that will be the central tool of the M&A strategy. Pretty much, they didn't change, but yes, of course, we want to be very sure that what we are acquiring makes sense and we are paying a fair value for those acquisitions. I'm not chump like crazy.

Thank you. Thank you very much, Surinder. Next, let's go to Arvind Ramnani from Piper Sandler. Arvind, please. I think, Arvind, you're on mute. Let's move to Walter from Santander. Walter, please go ahead.

Sorry, guys. The question I had, I already answered. So thank you for the results and great results again. Thank you very much. Thank you, Walter. Thank you.

All right. Perfect. Thank you. And so that'll be all for the Q&A session today. Thank you very much, everyone, for joining the call. I'll now pass the call to Martin to provide the closing comments. Martin, please.

Thank you very much, Amit. And thank you to each of you for being there, for supporting us, for helping us. for providing the right analysis for our company and really looking forward to see you soon and on the next quarter. Thank you so much.