Globant S.A.

Good day, and welcome to Globan's third quarter 2024 earnings conference call. I am Arturo Langa, Investor Relations Officer at Globant. All participants on this call will be on listen-only mode. After today's presentation, there will be an opportunity to ask questions. Kindly refrain from raising hands as we'll aim to address a select number of questions to ensure efficiency. 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.globant.com. Our speakers today are Martin Migoya, Co-Founder and Chief Executive Officer. Juan Urtiaga, 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 our 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 risk 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 Globan to our peers in the industry. You will find a reconciliation of IFRS and non-IFRS measures at the end of the press release we published on our investor relations website, announcing this quarter's results. I'd now like to turn the call over to Martín Migoya, our CEO.

Good afternoon, everyone. It is great to be back with all of you, and I'm really pleased to share that Globan has had another strong quarter. We have seen top line growth, better margins, increased profitability. I look forward to sharing our results with you. This quarter, we brought in $614.7 million in revenue. That's a 4.6% growth from the last quarter and 12.7% more than the same time last year. We see strong demand in our main sectors with our top clients and across different regions. We're growing our market share everywhere. For 2024, we're expecting the highest growth of any major IT service provider with an estimated of 15% increase in revenue. Our bookings are solid with two of the biggest in our company's history secured in the last six months. For 2025, we're confident about double-digit revenue growth thanks to a strong pipeline and faster organic growth. As I mentioned during our last earnings call, AI is being adopted massively by our customers. They're using AI tools both personally and professionally. It is the biggest breakthrough since smartphones. As AI evolves, customers want more. Companies and governments need to keep up with these enhanced digital products. Last year, companies spent 15 billion on generative AI solutions. McKinsey predicts that spending could reach 175 billion to 250 billion by 2027. At Globan, we're already capturing this opportunity. In the first nine months of 2024, AI-related work generated over $250 million in revenue, up 120% from the same period last year. This growth is partially due to our AI power tools like Agur, Magnify, and GeneXus. With global enterprise AI, we can generate agentic workflows to automate processes in every industry. At the same time, it can be a portal to connect to any LLM to both optimize costs or find the best possible answer between those LLMs. These tools speed up software development and improve the quality and security of the final product. Our clients are benefiting from these productivity gains. Recently, we helped a leading bank to transform their COBOL-based system into Java microservices. In just 105 hours, we modernized over 11,000 lines of legacy code, reducing it to nearly 5,000 lines of state-of-the-art architecture. We aim to expand our leadership as this business grows. Some analysts predict AI applications could add over 1.5 trillion to global GDP by boosting productivity by up to 30%. Organizations need sophisticated consultancy for AI adoption. Three years ago, we established our AI reinvention studios to meet this demand. We now have studios for 15 industries with strong growth in airlines, finance, and connected experiences. For example, digital technologies are enhancing the fun experience at live events. People expect more from their favorite artists or sport teams. This is evident in our partnership with the LA Clippers. Their new stadium, the Intuit Dome, is now open and offers the most advanced fan experience in the world. Fans can enter the arena and buy food and merchandise using facial recognition, which means shorter lines. Our AI technology powers some interactive promotional experiences, allowing fans to participate directly from their seats. It is the first time such technologies are used in a stadium this size. We're excited to bring this concept to more stadiums globally. The Intuit Dome also houses our newest office, keeping us close to our clients. It is just steps away from the basketball court. We're also working on groundbreaking projects in the Middle East, our newest business region. We have partnered with Kidiya Investment Company to develop the Play-Life Connected Experience at Kidiya City. It will be a state-of-the-art digital ecosystem, a global destination for entertainment, sports, and culture focused on the art of play. Play-Life Connected Experiences will offer visitors a seamless, personalized interface to book events and manage itineraries with real-time updates and recommendations. We're growing in our established markets too. In Europe, our fastest growing region in revenue this year, we have opened new offices in Madrid and Milan. These offices will host AI innovation hubs, with Milan becoming our headquarters in Italy. Regarding M&A, we want to be a growth vehicle for ambitious entrepreneurs. We offer a unique startup culture, valuing transparency and autonomy over corporate bureaucracy. In the US, we recently acquired Blank Factor, a specialist in financial services. We're excited to integrate their expertise in payments, banking, and capital markets. They work with six of the top 10 payment processors and major banks. Finally, I invite you to our annual Converge event. This year's theme is AI Disrupt the Light Connect. It is on November 21st, featuring speakers like Gwyneth Paltrow of Goop, Marcos Halperin of Mercado Libre, and Chris Young of Microsoft. You can register via the QR code on the screen. Now, I hand it over to Diego for more on our technology focus. Thank you very much. Diego, please.

Thank you, Martin. For organizations to fully adopt artificial intelligence, they must integrate it into their products, strategies, and cultures. To explore AI's impact on software development, we collaborated with the Massachusetts Institute of Technology for their publication, MIT Technology Review Insights. Findings reveal that while generative AI is modernizing processes, its most significant impact is still forthcoming. Currently, only 20% of respondents consider it a well-integrated part of their software development lifecycle. You can access the full report through the link on the screen. AI agents represent a new frontier transforming software creation. We are utilizing these agents throughout the entire development cycle, from product definition to back-end prototyping and application design, including BA agents and CodeFixer agents. Our studio networks are central to these innovations. We are excited to announce the launch of the digital twin studio within our digital network. This studio aims to enhance design and operations by creating digital twins that simulate and analyze physical processes in real time, thereby streamlining decision making. Additionally, we've introduced the Legal AI Studio, focusing on providing tailor-made technology and AI tools for corporate legal teams, law firms, and public administrations. AI enhances efficiency and accuracy across various legal processes, from data management to intellectual property protection, facilitating digital transformation in the legal sector. Globant is committed to helping leading brands enhance their customer experiences. Our partnership with Formula One is progressing well, similar to our collaboration with FIFA. In addition to innovating race technology and fan experiences, Formula One offers a significant platform for elevating our brand recognition. Regarding our client work, we are collaborating with Topgolf Callaway to drive strategic transformation for Callaway Golf. Utilizing our Magnify platform and generative AI accelerators, we are enhancing productivity and efficiency in quality assurance. Our Globant Gut Network is also making waves globally. In the Netherlands, Gut suggested that Kraft Heinz innovate their iconic product by creating Hegelchup, the first sprinkleable ketchup inspired by Hegel Slag. This agile initiative utilized earned media and organic buzz, generating excitement with a limited supply and a pop-up in Amsterdam. Moreover, we were selected by Stellantis and you to run a digital transformation program across their dealer network in Europe. Our focus is on simplifying processes and automating operations to improve efficiency and reduce costs. Our expertise in the automotive sector and our technology stack, including Globant X tools, were key to our selection. This quarter, within the Enterprise Studio Network, we launched a new product in partnership with Quick Play, enhancing our advanced video search tool developed with Google. This product enriches and tags extensive content, enabling creators and broadcasters to craft dynamic, personalized channels. Lastly, I invite you to explore our new website, featuring an interactive AI assistant that guides you through Globant services, showcasing how we can elevate your organization. With that, I will hand it over to Patricia Pomis, our COO. I look forward to seeing you at the Q&A session shortly. Thank you.

Thank you, Diego. Globin's growth continues to thrive thanks to our commitment to quality and the strong relationships we've built with clients over the years. Currently, we have 21 clients generating over $20 million in annual revenue and 331 clients contributing more than $1 million annually. Notably, revenue from our largest client, the Walt Disney Company, increased by 17.5% year-over-year and 14% quarter-over-quarter. Our strongest growth this quarter came from new markets in the Middle East and APAC, with a remarkable 35.3% sequential growth and 53.1% year-over-year. We are optimistic about the prospects in this region. Year over year, our revenue growth was 24.8% in Europe, 13.9% in Latin America, and 6.6% in North America. As our revenue diversifies, North America accounts for 55.7% of our top line, followed by Latin America at 21.8%, Europe at 17.6%, and the Middle East and APAC at 4.9%. This quarter, seven out of eight industry verticals experienced sequential growth, reflecting a broadening of our business. Key growth areas included travel and hospitality, 11.1%, media and entertainment, 6.3%, BFSI, 3.7%, and consumer, retail, and manufacturing, 2.7%. We're also pleased to report growth in the technology and telecommunications and professional services verticals, which posted sequential growth of 5.2% and 1.6%, respectively. As of Q3, our total headcount stands at 29,998 Globers, a 9.1% increase year-over-year, with 27,927 being IT professionals. Our utilization rate is currently at 79.8%, showing a slight increase, and our attrition rate has decreased to 9%, down from 9.5% in Q3 2023. To sustain Globin's growth trajectory, we are continually assessing how to better support our teams, enhancing their effectiveness and creativity for clients. As Martin mentioned, our clients' need for industry-specific consultancy has provided an opportunity to empower our studios. We aim to blend creativity with industry-specific knowledge, ensuring our teams can deliver applicable expertise. Consequently, our local portfolios will now feature more industry experts, irrespective of geography. Our AI reinvention studios are now crucial, contributing over 20% of the company's revenue and marking one of the fastest growth areas for us. The combination of industry specialization with relevant AI technology has enabled our success in consultancy during challenging times for major players. Applying AI in a smart way, focusing on critical processes, is key both for us and our clients. With that in mind, we are incorporating AI agents into our delivery process to optimize quality and speed. They take on different tasks alongside our delivery managers as they define and onboard the team, execute the delivery, and monitor the overall project status. we are adapting our structure to facilitate quicker local decision-making. Latin America has been subdivided into two regions to strengthen our focus in Mexico and Brazil. Additionally, to support our growing business in the Middle East, we will open a new office in Riyadh for transformational projects like Qidiyah. Globant's commitment to community work is gaining recognition. We ranked sixth on Fortune's 2024 Change the World list, noted for our sustainability initiatives. Projects like Cori Concha in Peru helped prevent the release of 12,000 tons of CO2 equivalents. And our green energy farming project in India improved the quality of life for over 6,500 beneficiaries while preventing 10 tons of wood from deforestation. In October, we were honored as the company of the decade by the Council of the Americas for our global growth and commitment to developing local communities, particularly in emerging markets. We hope this recognition inspires more companies in Latin America to dream big and expand globally. Our Women That Build initiative has successfully completed its fifth edition. Since 2020, we've evaluated over 6,500 candidates, partnered with 270 judges globally, and collaborated with organizations like AON, AWS, and KPMG. We proudly recognize trailblazing women from 12 regions with three global winners, reinforcing our commitment to narrowing the gender gap in the industry and fostering inclusive growth. Thank you all for your time. I will now hand it over to Juan to discuss our financials.

Thank you, Pato, and good afternoon, everyone. I am pleased to be here with you today to discuss our third quarter results. During this period, we achieved strong sequential revenue growth, driven by robust performance from our top client and several key accounts, along with recent new wins across different geographies and verticals. We managed to grow our business while enhancing profitability and generating free cash flow, all while maintaining a prudent and healthy balance sheet. Our revenues reached a record level of $614.7 million, up 12.7% year-over-year and 4.6% sequentially, in line with our guidance. Excluding the negative impact of foreign exchange, revenue growth stood at 13.7% year-over-year. We estimate a 9% year-on-year revenue growth in organic constant currency terms for Q3. Additionally, from a quarter-on-quarter growth perspective, we are experiencing initial signs of recovery in specific verticals that faced headwinds in the first half of the year. Q3 also experienced a robust growth in our top account. We had a strong quarter from the profitability perspective. We closed Q3 with an adjusted gross profit margin of 38.5%, up 40 basis points sequentially and 30 basis points year over year. Our adjusted operating margin reached 15.6%, reflecting an increase of 50 basis points sequentially and 30 basis points year over year. These margins are the highest recorded over the past two years. In addition, this quarter we managed to dilute SG&A by 20 basis points sequentially. Our effective tax rate stood at 20% for the quarter, resulting in an adjusted net income of $72.4 million, with an 11.8% adjusted net profit margin, up 40 basis points sequentially. Adjusted diluted EPS was $1.63, up 10.1% year over year. Our balance sheet remains strong, ending the quarter with $213.5 million in cash and short-term investments, or $27.2 million in net cash. With $165 million drawn from our $725 million revolving credit facility, we have ample liquidity to support our growth initiatives. During the third quarter, we generated $69.7 million of free cash flow versus $60.6 million in the same period last year, achieving a free cash flow to adjusted net income ratio exceeding 96%. As always, our free cash flow generation is much stronger in the second half of the year. Now let's discuss guidance. In organic constant currency terms, we continue to expect growth of close to 10% for the full year 2024. We project Q4 2024 revenues in the range of $642 million to $648 million, representing an 11.1% year-over-year increase at the midpoint of the range, with adjusted operating margins between 15% and 16%. The IFRS effective income tax rate is expected to be in the 20% to 22% range. Adjusted EPS for the fourth quarter is now expected to be between $1.71 to $1.75, assuming an average of 44.7 million diluted shares. For the full year, we are raising the lower end of our prior guidance, which is now estimated to range from $2.415 billion to $2.421 billion. We now forecast 80 basis points of FX headwind in our full year guidance, as currencies in Latin America continue to depreciate against the dollar. We anticipate adjusted operating margins in the range of 15% to 15.5%. The 2024 IFRS effective income tax rate is expected to be in the 20% to 22% range. Finally, our adjusted EPS is expected to be between $6.37 to $6.43, assuming an average of 44.5 million diluted shares outstanding for the year. To conclude, we are very pleased with our year-to-date financial performance which reflects our unique position in the industry. Our leading indicators remain positive, reinforcing a strong end to the year and setting a solid start to 2025 with organic growth showing signs of improving relative to 2024. Thank you for your continued support and we look forward to sharing more updates on our growth and achievements in the coming months.

Thank you, Juan, and hi, everyone. It's good to see you again. Unfortunately, Martin will not be able to join us today. He was stuck on a flight delay. So with that in mind, I will call your name, and then I will please ask you to unmute your line and ask your question. After your question is done, please mute your line. And we'd also like for you to limit yourself to one question, please, to give everybody a chance to ask. With that in mind, the first question comes from the line of Tien-Singh Juan from JP Morgan. Tien-Singh, please go ahead.

Thank you. So, yeah, I'll ask on the visibility on the faster organic growth for next year. I think both Martine and then Juan, you just mentioned there's some signs of that. How much of that is driven by the large backlog that you have versus maybe what the macro is telling you or even what the larger clients are perhaps telling you? Just a little bit more insight on that statement of faster organic growth.

Okay, thank you, Dinjin. Good morning, good afternoon, everyone, depending on where you are. Look, what we're seeing about 2025, I think, is a reflection of the performance of some of the large deals that we are ramping up, some of the deals that we are closing in the Middle East. There is also a component of a strong performance in our top account and in media and entertainment in general, including sports as well. And finally, I would also add that there is some kind of an acceleration in the number of deals that are AI related or with AI components. So that's the majority of the improvement that we are seeing, that we've been seeing over the last few months. There is some, of course, also some macro things that are getting, you know, that are more clear now. You know, we now have the elections behind. We have interest rates coming down, inflation is under control. So I think that on the macro front, some of the variables that were making some noise are starting to clear. But I would mainly assign the visibility to the first few points that I mentioned before.

Thank you, Xinxin. The next question comes from the line of Jim Schneider from Goldman Sachs. Jim, please go ahead.

Good afternoon. Thanks for taking my question. Relative to the work you talked about in AI and the acceleration you're expecting for next year, how do you see your work for clients changing into 2025? Is there a greater emphasis on certain practice areas like data? And are you seeing the AI projects getting larger in size or scope or not? Thank you.

I will take that one. Thank you for your question. What we've seen compared to last year, to 2023, is there's definitely a different approach into incorporating AI within companies. Last year, there was a lot of the work that was exploratory. analyzing the technology, getting deep dive into it, assessing impact in many different places. So typical booking was very small. The pipeline compared to the work we were executing was actually very small because it started as POC and that can extend it and extend it. What we've seen this year in comparison, like I said, with last year, is that the work is much more intentional so there's an end goal we need to reach so and that's why we see bigger pipeline there's a mission that mission has to provide an enterprise and business result And as a result of that, the type of work mandates we have have a different level of maturity. There's a good balance. Last year, there was an imbalance between Gen AI and traditional and other models, sorry. And this year is about producing impact. You know, Gen AI, when it makes sense, traditional other models and in some optimizations, et cetera. What I'm foreseeing for 2025 is a continuity of this line. So I think investments are now much more directed, like they have an objective. AI is definitely a factor into the forecasting of every company as results that it needs to bring. And that gives us more visibility on what's coming, larger projects. So overall, that's the visibility we have.

Thank you, Jim. The next question comes from the line of Brian Bergen from TD Cohen. Brian, please go ahead.

Hey, guys. Thank you. Good afternoon. So I wanted to actually ask the Middle East. Can you just talk about the potential of this region for you? We saw the deal announcement a week ago, making it official there on that project. Just in the context of kind of the historically larger deals, that you have had, how can these potentially compare?

Yeah, so I'll take that one. So, Brian, you know, we're starting from a very small base. So, you know, it's easy to see growth in over the coming quarters. Typically, the size of the deals is large. You know, they begin small, but they become large very quick. As you know, in that region, every project tends to be large. magnificent, like very, very large, including massive investments in real estate, massive investments in technology. You know, they are trying basically to create new experiences and to attract people from Asia and from other regions to visit those countries, to visit those new locations. And as they are starting from serum in many cases, you know, they are starting from basically from nothing, there is a lot to be built. That's going to take time. You know, it's going to be an evolution. There was going to be an evolution. They're going to start with certain assets. Then you're going to keep on expanding. But, you know, it's one of these. I mean, we've been talking about this for a few quarters. It's one of these regions that is moving, you know, with a different trend. with a different macro, right? There is a lot of money that they want to invest. They are trying to diversify the sources of income of their economies. And a lot of it is related to experience, to creating an experience. Globant, I think, is extremely well positioned to build software on that area. And, you know, we are seeing very good traction in many of the deals over there, including, of course, the one that was announced a couple of weeks ago.

And adding to that, I think that it's interesting to say that we just opened an office there. So we are still putting people there, training people, helping in order to achieve those goals and growing in new markets area. I think it's very interesting for us. It's a new market, as Juan was mentioning. So we are still designing with the region, I mean, all the strategy there. and opening an office of course was one part of the strategy i think that that is going to continue growing and at least that is what we are planning but of course as many other markets in global you know that we have many other markets also we are taking care we're putting a specific team there with a specialist and trying to to be very close to our clients thank you brian the next question comes from the line of maggie nolan from william lair maggie your line is open

Thank you. I was interested in the commentary about incorporating AI agents into the delivery process. Is this IP that you have, is it unique in the services industry? And then to what degree, if any, is this replacing human labor and how do you factor that into the economics of the engagement?

Well, I take that one. Thank you, Maggie, for your question. It's not that we are replacing people. It's more that, as we have been mentioning in the last quarter, we have been using AI for the last 10 years in different kinds of processes internally in Globant, in the way we are recruiting people, in the way we are training people. And now in the delivery framework, it has to do with using agents in order to work with our delivery people with the engagement partners in order to try to or define scope or help to to check on the health of the projects so we are using ai in all the projects so that means that these kind of agents that we are using for many of our clients is is one of the things that we are using internally for our teams also and that is giving us results or the health of the projects I mean, where we are trying this kind of agents is really good and the results have been amazing. We are working together with the clients in order to show what we are doing. And I think this is the kind of way that Globen is doing business, right? We also are, of course, talking about AI projects, but internally as a company, we have been using this for many, many years. And this is one of other examples.

Thank you, Maggie. The next question comes from the line of Leonardo Olmos from UBS. Leo, your line is open.

Hi, everyone. Thank you for taking my question. So you mentioned previously that local portfolio will future more industry experts. You also mentioned maybe shifting some people to the Middle East. And of course, you're growing a lot sequentially. So how should you think about employee growth going forward and their utilization rates? Thank you.

Okay, so in terms of employee growth, you're gonna see another quarter of net additions in Q4. We are hiring probably in mostly Latin America, in India, and a little bit less in Eastern Europe. But overall, we are hiring in the three regions. Again, you should keep on expecting positive net additions in terms of, and probably even a little bit faster than Q3. In terms of utilization, this quarter we ended at 79.8% compared to 79.5% in Q3. I think that's still below our targets. As you know, we typically target 81% to 82%. We have done even more than that in the past. We have had quarters of 83% or 84%, but I think that 81% to 82% is a good target, and we will continue to look for that target. I think as the industry... accelerates over time, we're going to be able to take utilization a little bit higher. I don't expect big changes in the very near future, but we do continue to target a higher number.

i i think that you also mentioned about the the industry experts in the portfolio and i think that that is one of the things that we have been doing uh also us with with diego here that was uh leading all the the studios i think that that means that as we have been seeing growth in many industries what we are doing nowadays is organizing our team the best possible ever so we are putting more expertise next to our portfolios in this intrigue to the geographic they belong I think that that is very important for us. It's a vision that we have, that we want to be next to our clients and we have the expertise. So we are training also people internally. I think next week we are launching our first hub of AI. And that means that this digital hub where we're going to train people in AI and industry experts. I think that those kind of movements is a thing that Globan is all the time doing right now.

Thank you very much. Oh, sorry. Oh, sure. No, one additional comment with regards to going deeper into industries. I think there has been so much change in the technological landscape that domain expertise becomes super important to be proactive with your offering to the client. And we want to provoke our clients with every single technology that comes to play. So we're thinking about AI. We're thinking about spatial computing. We're thinking about digital twins. So instead of waiting for the industry maturity, for, you know, getting... the opportunities we want to provoke, we want to explore before that. And that's why this is a natural evolution for us. We continue, of course, to be a deeply technical company, but this is a part of our sales channel strategy.

Very good. Thank you so much. Good evening. Thank you.

Thank you, Leo. The next question comes from the line of Jonathan Lee from Guggenheim. Jonathan, please go ahead.

Hey guys, great. Thanks for taking our question and tremendous to hear about your commitment to double-digit revenue growth next year. As we think about the remainder of the year into 2025, are you seeing any sales cycle elongation or perhaps deal delays? And if so, how much of that contracted backlog is being pushed into next year?

Hi, Jonathan. No, we're seeing a similar scenario like what we've seen over the last few quarters. That's why the numbers are pretty much not changing. I think that the type of conversation remains improving in terms of revenue kind of revenue oriented projects relative to productivity or efficiency type of project. And that is something that we continue to see, you know, a more balanced approach. We are also not seeing deterioration in budgets for 25 at our customers. I mean, doesn't mean that they're growing a lot but you know it's unlikely i mean we we see pretty much no customers uh you know targeting a lower number for for next year in their investment in technology uh so in general i would say that um we're not seeing elongated closing cycles we're not seeing any further any deterioration and i would say that on the macro we're actually seeing a more more more stabilization and as i was saying at the very beginning variables are getting more clear. So we are optimistic for next year. And I think that's what we're looking for after two or three years of an industry where growth was scarred. We did quite well, but it was a tough industry. And it looks like things are stabilizing or getting a little bit better.

Thank you, Jonathan. So the next question comes from the line of Jason Kupferberg from Bank of America. Jason, please go ahead.

Hi, thank you. So I just had a two-part question about 2025. You talked about the organic growth rate accelerating off the 10% number. You've got M&A, looks like maybe a 2% to 3% contributor next year based on the deals you've announced already. So I just wanted to confirm that. And just on the adjusted operating margins, if we look at 2023 and 2024, I think we've been closer to the lower part of your typical 15 to 17 percent annual target range. So what are the puts and takes we should be considering on that line for 2025?

Yeah, I'll take the two questions, Jason. So, you know, in terms of 2025, as we mentioned during the call, you know, we are looking at some small acceleration relatives in terms of organic growth. You know, this year we're closing at about almost 10% constant currency growth. uh we're seeing a little bit of a small acceleration there plus at this point we can say two to three points of uh you know the the impact of of the mnas uh so i would say that for next year we are looking at something into you know low double digit to meet double digit as of today of course we will provide an update in February, but those are our numbers as of now for 2025. In terms of operating income, as you remember, during 2022, second part of 22, a little bit in 23 and the beginning of 24, um pretty much all latin american currencies appreciated significantly relative to the dollar that put some pressure at the margin level uh we have been able uh you know to make a number of actions a number of efficiencies and of course in the second half of the year we started to see some depreciation of currencies in Latin America. When you look at the Mexican peso, when you look at the Colombian peso, the Chilean peso, the Brazilian real, all those around july started to depreciate that did have an impact on the revenue front of course because we do have some revenues in those currencies but the impact at the cost level is more relevant and we are seeing now some tailwinds coming from from effects so again actions that we took to be more efficient uh you know improving a little bit utilization uh continue to work on the revenue per head that has been going up plus some tailwind have taken us to you know an improved q3 you know we close at 15.6 operating income we're expecting a similar number for q4 and i think that's kind of a base number as of now of course for 2025. of course again as as we get closer to february uh you know when we report and when we guide officially We're going to provide a more accurate number, but I would say that's the situation as of today.

Thank you, Jason. The next question comes from the line of Surinder Thin from Jefferies. Surinder, please go ahead.

Thank you. Diego, I think this question is for you. Can you talk a little bit more about the MIT review article and the underpenetration in some of the newer technologies, and then maybe put that into perspective of where you guys are on that journey in terms of how aggressive have you been in deploying the AI and those kinds of things internally, what you've seen from that deployment, and how much more you can do at this point?

Good. This is actually a long question. I'll try to make it short. The work we've done and conducted had actually two aspects to it. One was positioning, but one that was super important is to be able to compare with the industry and get an industry baseline. What we have done internally is tops what's best in the industry. We've developed our own tools as you probably know for doing code fixing aka bug fixing, for doing testing, business analysis, estimations And we've done all of them in an authentic way, meaning we're not augmenting a person's capacity to do the job. We're actually taking care of full workflows. Results so far are promising on some of the areas uh there's still a lot to be done on other areas and let me give you an example um llms are super good when it comes to translating and writing code while you might maintain your job within a certain specific domain. When you have to do architecture at scale, things become more complicated. It's super difficult to factor in reuse, make the code coherent, et cetera, et cetera. And that's our typical job. And there is when things get a little bit more complicated. We have been... super aggressive with regards to adopting every single tool, whatever it makes sense, to bring efficiencies to our clients. And we've been very effective. Some of those tools, we're actually charging for them. Some others are adopting either our own or third-party tools to make the processes more efficient. One of the things that happened in ai nowadays is that you know models are coming to a plateau and there's an agreement of this on this so you're seeing incremental benefits from you know increasing the number of parameters etc etc do not bring actual reasonable results so now it's time for working with know the models the agents uh the mixture of experts etc etc to get the most out of it and and that's what uh what we are doing um i know that the typical question is like uh well will you able are you actually replacing you know people with it we're making our systems more efficient and this has been happening forever like uh integrated development environments are all about that i mean a developer nowadays calls Trust me, two times as fast as I used to code 15 years, 10 years ago. So, and this is, we need to understand, we as a company need to embrace that and bring those efficiencies and the best of it to our clients. So that's what we're doing.

Thank you, Sarinder, for your question. The next question comes from the line of Brian Keane from Deutsche Bank. Brian, please go ahead.

Hi, guys. Thanks for taking my questions. Just on the two acquisitions, Blank Factor and Exusia, the recent two acquisitions, I think they closed recently here. So do they add and how much do they add to the fourth quarter revenues for this year? And then just a follow-up question, those specific verticals that you talked about with the headwinds, which that are showing a recovery, what sign are you seeing in those verticals that are showing that recovery? Thanks.

Sure. So, I mean, I'll start by the second part of the question, and then I will continue with the first part. So in terms of verticals, you know, clearly we have a very good quarter in travel and hospitality, which has been doing really, really well throughout the year. Consumer retail manufacturing has also been doing well. We're seeing some improvements in BFSI. You know, some of the financial institutions, especially in Europe, are, you know... growing with us we are expanding our business uh for example in in ireland we mentioned about a customer over there and we're expanding the business in in spain as well uh we're also seeing if you look at professional services and if you look at technology this quarter was a decent quarter and those are two sectors that have been struggling for for a while uh so in general i would say that uh it's been a good quarter across the board in terms of of industries uh you mentioned about the acquisitions exusia closed at the very end of q3 uh plan factor closed a couple of weeks ago so it's there's it's it's gonna have some impact in q4 The number that we guided for Q4 is 11.1% total growth at the midpoint. There is also 150 basis points of FX impact year over year. So if we were to take a year over year Q4 growth, That would be 12.6% in constant currency and about 8.5% of constant currency growth for Q4. So the inorganic impact is about four points for the growth in Q4.

Thank you, Brian. The next question comes from the line of Divya Goyal from Scotia. Divya, please go ahead.

Good afternoon, everyone. I wanted to get a little bit more color on the growth in Latin America and Europe specifically. So if you could potentially help us understand how are these two geographies doing and do you have any potential M&A in the pipeline and what are some of the gaps you are looking to fill across these regions in order to maintain the growth momentum there? Thank you so much.

Well, I can explain the thing about, well, in terms of LATAM, as we have been explaining before, we split the region in two right now. We put two heads there, one in Brazil and the other one in Mexico. What we are seeing there is that we are slightly growing. year over year. Now we start growing faster in terms of the financial vertical is getting better there. And some other consumer and retail are growing fast. In Europe, as you know, I mean, we have been expanding. We just opened a new office in Spain, in Milan. We have markets in France. We have in Germany. They're also, of course, UK. And there we have different kind of industry. Most of them are there, are just launching and growing fast. And in terms of the M&A strategy, as you know, we are all the times looking for the best selling opportunities. Right now, what we are seeing is what we have is in the pipeline. It's OK. We are right now creating a great strategy. a scenario probably i mean we we are looking for some new spaces all the time of course also in a lot of time in europe but mainly what we are focusing with these days is in organic growth there also uh the teams are more than ready to to to grow europe is uh is the group then the most growing uh region that we have been uh doing awesome the last couple of quarters and i think that it continues that way we have a great team there and we still are designing and empowering people there so i think those are regions that are starting to show that the the growth is is amazing and and finally well as us has been all the time our markets our biggest market we we keep growing in other regions and of course new markets as we mentioned later

I can add a little bit there. The pipeline of M&A usually has different regions, different technologies, different industries. So there is a combination of different factors that we take into consideration. We follow companies and sometimes when we're able to close those deals, we get them done. you should expect more growth coming from Europe, more growth coming from Middle East, from new markets, what we call new markets. Those are going to be the fastest growing regions. And then we're seeing some recovery, some nice recovery in the US and Latin America, you know, a little bit less, you know, with less acceleration. And I think it's a little bit related also to the fact that If you look at all Latin America, you know, currencies have been impacting a little bit the growth. So there is some effects impact there. There are some countries that went through elections recently and those are still, you know, trying to understand, you know, the economic environment for the following, for the future. But again, Europe and new markets are going to be leading the growth.

Thank you very much, Livia. The next question comes from Sean Kennedy from Itsuho. Sean, please go ahead.

Hi, everyone. Thank you for taking my question. So congratulations on the impressive Disney growth this quarter. I was wondering what sort of projects are driving this growth and how sustainable are those trends as we head into 2025?

Yeah, as you probably know, I mean, Disney is well differentiated between experiences, aka parks, and media. On the media side, we're generating traction on both of them. In media, the plan has been always to come to a single platform. And that's what we're working on nowadays. And it's a combination of, you know, we did the merge between Disney Plus and Hulu. Now we're doing the same for ESPN. But on top of that, there's a ton of... their strategy is maximizing revenue and driving more engagement, bringing new sources of revenue. So we have a strong pipeline there. On the park side, on the other hand, we have a clear indication of what's the strategy. Still, we don't have such a good visibility as we have on the media side still. The strategy has to do with operational efficiency, but now it speaks a lot about improving the experience. And as you all probably know, we are there and super strong. So based on that as a guiding principle, I think we're very good position.

Great. Thank you.

Thank you, Sean. The next question comes from the lines of John Knott from Piper Sandler. John, please go ahead. I believe John might be having problems. We'll move on to the next question. The next question comes from the lines of Tiago Kapuskis from Itaú. Tiago, please go ahead.

Hi, everyone. Thanks for squeezing me in. So just one question on your headcount. We've been seeing you gaining or getting more and more share in India in this quarter, another two points. It's almost the size as your headcount in Argentina, right? So just wondering how you're thinking about your headcount, geographical mix, and if India should continue to gain share and even become larger than your historical hubs, which are Colombia and Argentina going forward.

This quarter, you know, part of the growth that you see in India came from the acquisition of Exusia. But it's also correct that India has been growing throughout the year and will continue to grow. You know, we started in India back in 2014. So it's more than 10 years operating in the region and expanding our business. It's completely integrated to our operation. Every studio that we have in the company has a meaningful presence in India. And at the same time, we expanded our revenues from Being mostly in the US, now more global with more business in Europe and more business towards the Middle East and APAC. So that creates even more opportunities to expand our operation in India. And not just in India, you know, we are expanding in the Philippines and And we're expanding in Vietnam as well. So Asia for us is a priority as our business becomes more global. Europe takes a larger share as well as the new markets. Again, Latin America is our home market. It will continue to be our main region, but we are going to be more balanced going into the future with a larger Asia and eventually with a larger Eastern Europe, which today is a very, very small part of our business.

Well, adding to that, I just want to congratulate our team from Colombia. We just hit the 6,000 people there, and I think it's an amazing milestone. So, I mean, this shows also the commitment that we have in continuous growing around the world. And adding what Juan was mentioning before, of course, I mean, India is growing because all our markets are growing rapidly. India is serving globally, it's a hub that is not only serving just US or Latin American market, it's serving more new markets also and Europe. And I think that is an amazing thing. So we keep growing in mostly all the people, we said all the time global everywhere. so that is where we are trying to do right going where the talent is we are still looking for the best talent that we need right now we are also training the existing one that that we have in global more than 20 000 globers are in the campus right now receiving different kinds of training specializing in eight ai tools as i mentioned before so i think about our head count is the the beautiful thing is that what The structure of our pods is so mixed and we have been able to put teams that are from everywhere. So in the same team are working people from different kinds of countries. And that is something that is really important in terms of the framework of the delivery. So we are putting the best people around the globe that we have for the best team ever. So for us always, it has to do with giving the best to our clients and the best talent that we have.

Great. Thank you very much.

Thank you very much, Thiago. I believe Martín was able to join just for a closing remark. He's here on the line. We're going to try to pass the line to him and see if he's available, and if not, I'll pass the line over to Juan. Martín, are you there?

Hello, can you hear me?

Hi, Martín, we can hear you.

Hello, can you hear me? Yes, how are you? Yeah, great. So, fine, I'm doing great, and just still on a plane, so I will try to connect from here.

Great. Well, Martin, we are closing remarks for the call, but thank you so much for joining. I'm going to pass the line over to Juan to conclude the call, but thank you everybody for joining. Juan, please go ahead.

Okay. Well, thank you guys for joining us today. Thank you As always, for your continued support. And see you soon. Thank you very much. Have a nice evening.

Bye. Thank you.