Q3 2019 Earnings Call
Good day and welcome to the global third quarter 2019 earnings Conference call.
After today's presentation, there will be an opportunity to ask questions.
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Now, let's turn the conference over to public on <unk> Investor Relations Officer for a lot and Europe . Please go ahead.
Thank you operator, and thanks, everyone for joining us today on our go to review our 29 team third quarter financial results by now you should have received a copy you'll see our news release.
No. It copies are available on our website investors dot dot dot dot com our speakers today out of my team you go yet Chief Executive Officer, I wondered if the <unk> Chief Financial Officer before we begin I'd like to remind you that some of the comments on our call today, maybe deemed forward looking statements do you think you'll tell where business I'm fine.
I would look on the answers to some of your questions such statements are subject to their rates kind of stuff to do so I've described in the company sudden its release and other filings with the FCC.
Please note that we photo I. Srs accounting rules in our financial statements. During our call today, We would report non I have forever or adjusted measures, which is how we truck performance internally and the easiest way to compared globin taller Pearson named history.
You will find a reconciliation I Srs and I first met short at the end of the press release, we published on our Investor Relations website announcing this quarter results I'd like now to turn that going over to must be me all yet our CEO .
Thank you, Bob Hi, everyone and thanks for joining us today I'm excited to share with you updates on our basis. Some financial performance for three months ended September Thirtyth, just south of 19 at the end of the goal one would share with you our outlook for Q4 I'm full year 2019.
Q3, 2019 was another record quarter for global dosing at 171.3 million your revenues a robust 27.3% year over year growth. These solid growth was mainly driven by strong performance of our top accounts growing up 27.2% over the third quarter.
For 2018 also due to the outstanding growth outside our top 10 accounts, increasing more than 44% year over year.
As in previous periods, we continue to expand our relationship with our key customers. We now have 100 them for accounts over 1 million any non your revenues compared to 91 year ago. Additionally, during the last 12 months, we had 13 accounts over 10 million in on your revenues compare.
Nine accounts for the same period last year later during the cold one we'll share more details on our financial performance. We continue to see strong demand coming from organizations looking to transform their companies consumerist vacations are growing faster than technology, leading to continuous expansion of the market opportunity in.
Digital transformation technology on industry outlook presentation, I'd see on at least Shlonsky chill on Craig's siemsen points out they expected to see at least 6.1 trillion in direct investment in D., She's a transformation worldwide from 2019 after 2000.
22, this opportunity is touching every industry ranging from financial services manufacturing to retail transportation a more in one of our recent reports coal cutting through Kaos, we analyzed abuse of pieces leaders on their strategies. The report can be accessed W. W.
The globant that com slash cutting capex.
We found that was 87% organizations are currently pursuing additional information initiative only one third believe there is nobody on the our de she doesn't maturity is cutting edge. The study also these cover the most companies still need to consider internal transformation as part of their overall.
Let's try this year all these conclusions shows the huge opportunity in front of fast I said pure play in detail in calling me that's information, we're ready to help companies reinvent themselves for the future challenges.
I'd globin, we're reinventing our company. We then you approach. The goal is to continue to focus on producing real be says impact for our clients. We do that based on three pillars.
One we the LIBOR engineering novation and deciding at scale, we gray so for books that emotionally connect our customers with millions of consumers on employees.
We do that through our studios deep pockets of expertise on the latest technology some trends our studio model Foster scrap GVT and innovation, while allowing us to build disruptive solutions. We're also expanding our consulting capabilities to our business Hocking studio. The goal is to help our customers receive there.
He says to increase their revenue growth second we have an autonomous culture. He is based on a lean structure a focus on I sell Paul it's.
Driven by self regulated teamwork, each ball divorced regularly with our customers I boiling unnecessary bureaucracy or both with the traditional I'd services structures low unfold you learn model eliminates the need for command and control methods. You also provides teams with full independence in customer interaction where.
Well to replicate our unique culture around the world by leveraging technology to start me up a Wes let us disseminate our bodies, while allowing us to gain insights on our globers.
On three where disrupting our industry with artificial intelligence by bringing artificial intelligence into everything we are creating an l. meant it globant, we're increasing blondes capabilities and reinventing the technology industry. Some examples of how were doing these include augmented coding where enhancing.
The coding experience to augment engineers capacity without monthly coding our collaborators confined cold within a brush it repository it accelerates ramp up times and improves quality on delivery.
Rented culture as I mentioned earlier, starting me up Oh. This is a system that help us understand the human tissue within an organization, we can discover cultural leaders influencers trend generators uneven disengage teams.
It help us detect and retain talent promote integration I'm full started the company's growth, where you see artificial intelligence to uncover cultural insights for more information about the amended globant initiatives I invite you to be said Oh commented the globin dotcom, we shared these views.
During our latest cumbersome and eastern New Mexico, My that either on New York. During this event will welcome over 1000 attendees eager to learn more about future trends.
Speakers from organizations like Mastercard Morgan Stanley Open Bank Repsol Global Yeah, Kabi fight the Hershey company, an AB embed shared their thoughts on how industries are evolving very good insights to an interesting points of view.
For those that couldn't attend I'd like to invite you to take our blog stay relevant that blow on that come where we would be boasting the different talks.
In regards to Delaware be says we continue to witness the strong demand coming from a wide variety of industries and geographies. Let me show. Some examples about our current work we're working with brief PSMA, leading Argentine payment company to redefine it's neutral wallet solar panel were creating delivered old business has tried to chew focus or merchants on end.
Users. We're also working with QVC on their spring 2020 launch.
It's an exciting new parts from two feet weak bites of entertainment into any moments of end users day. The best of the creative community will be signing counting intended to specifically for the phone were providing co development for Lucky jackpot casino as social Casino company with leading mobile apps.
For video poker on keynote we have started working with Nissan's global customer experience Sunday sign teams.
We're helping them to create new online experiences that support our ambition and delivering knee sensing telisa mobility to millions of customers around the world. We're working for global one of the fastest growing Tech company seen Spain, Globant is helping to accelerated their digital role not supporting their business expansion were collaborating with.
Something that Argentina to redefine their way of working or their technology teams. We're also redefining how we can deliver value in collaboration with their business stakeholders. We work for IDV optimizing internal processes. We are P.A. must see mice insecurity and efficiency during <unk> user termination.
Process lastly for Benito we studied the transformation program to be a new comprehensive home banking platform for corporate customers were incorporating new technologies in order to speed up onboarding and interaction processes. During the bus corridor, we continue with our global growth by increasing.
Our talented teams throughout the world, we're increasing our operations in Europe Asia, and the Americas on top of thought wed developing more professionals I say wait to expand the industry and the opportunities. It can provide for blow out of talent.
A few months ago, we launch of 500 to scholarships to train people in technology.
Does the 500 scholarships, 80% has been granted to woman promoting inclusion on diversity in DC industry. Today, we already have 200 people actively doing the training. We expect the rest of of course is just started between Q4 2019 on Q1 to South and on 20 did you say key initiative that will.
Helped drive more talent and diversity to fast growing market Lastly, let me remark the Delaware pipeline and backlog remains strong and we feel very confident about our ability to keep delivering sustainable growth in the future without I will turn the call over 200, <unk> our CFO for a further detailed financial review on that.
Third quarter 2019, and also to provide guidance on Q4 I'm full year 2019, one please thank you very much.
Thanks, Martine will assume everyone. Let me start by summarizing the results of our third quarter. A nine month ended September Thirtyth 2019, I will then discuss our guidance for the fourth quarter I'm fully or 29 team I'm very pleased to announce another quarter of record revenues on the strong for NASA.
Performance, our revenues for Q3 amounted to $171.3 million above the midpoint of our guidance I'm, representing solid 27.3% Yearoveryear growth revenue growth was robust despite 70 basis points year over year FX headwind in the quarter.
During Q3 2019 Disney was once again, our largest customer show in a through an acceleration of growth on a sequential basis on growing 27.2% year over year coming from a very tough comp. We are excited with the fact that high potential accounts are scaling up and becoming large meaningful well.
In our customer portfolio no. They seem to strong growth of these me or sic 'em be young clients. Together also these planned robust growth of 27.3% year over year with clients you live in on beyond growing up 44.2% year over year, or where 50 square throws you do carbon diversified base.
Oh from what the meaning that our accounts is progressing line we are expectations. Moreover, during the quarter. We continued to successfully grow services with our recently acquired companies.
During the last month, we had 13 accounts above 10 million not your revenues compared to nine accounts for the same period last year. We shot 100 on four accounts with more than 1 million to find your revenues compared to 91 year ago, we continue to expand our relationship.
We are working accounts, a line, where 50 square strategy.
Looking at diversification of our revenues by industry verticals. It is evident the blow months value proposition on service offerings are attracted to enterprises across all industries or top three industry verticals for this quarter, where media and entertainment with 23.4% of revenues Bonks financial services.
Sure runs with 21.3% of revenues I did notice in telecommunications with 14% of revenues consumer retail among factoring professional services and technology and telecommunications, where our fastest growing industry verticals in Q3 growing up 54% 51.9.
Personally I'm, 51% year over year, respectively.
Customer concentration for Q3, 2019 display some going improvement with our top one but five until then accounts, representing 11.9%, 26.1%, 38.6% of revenues compared to 11.9%, 33.4% I'm 45 point.
8% of revenues, respectively for the third quarter of 2018.
In terms of geographic regions during the third quarter of 2019, 77.1% of revenues were in North America. The U.S., our top country, 17% in Latin America, and others, Argentina, I mean, the top country, and 5.9% where in Europe , Spain, I swear top country during this quarter.
So some growth investment in this information in Latin America during the third quarter of 2019, 86.3% of our revenues were denominated in euros daughters, providing good protection for top line against currency fluctuations, turning now to profitability or when adjusted gross profit for the period increased to 69.
From $6 million, representing 40.6% adjusted gross margin compared to 55, and 5 million representing 41.2% adjusted gross margin in the third quarter 2018, the margin decreased year over year was primarily driven by FX headwinds last year, we benefited from.
The large depreciation was Argentinian peso. So we had a tough comparison given they'll stand in Q3, two an 18 margins sequentially. Our adjusted gross margin experienced an improvement a 40 basis points versus Q2 2019, we finished the quarter with 11293 Globers 10004.
Hundred 62 of which were 80 professionals. This represents a solid 1247 increase quarter over quarter number if I see professionals.
This quarter also marks a huge milestone for the company exceeding 10000 globers worldwide. The strongest hires in the quarter is driven by yeah were robust pipeline across industries and geographies.
The reason for the past 12 months was industry, leading at 14.1 per cent compared to 19.2% in Q3 2018, showing significant improvement in most talent development centers, particularly in Argentina going forward, we know view, 14% to 16% attrition rate as a normalized level.
For me and I.
Definitely an eight decreased 30 basis points compared to Q3, 2018 accounting for 19.4% before quarterly revenues.
We have being very disciplined managing our costs as we gain scale, while we continue investing for the future primarily to expand our sense coverage in our target markets.
During 2019, we have been able to successfully that you'd see a nice despite the new tax experts of services in Argentina, including within these expense line as a result, our adjusted operating income for the quarter amounted to $30.9 million or I didn't bring 1% of revenues compared to $23.2 million.
Our 17.3% of revenues for the third quarter of 2018 this year over year decreasing gross margin was more than offset with SDMA and DNA dilution, leading to our robust 80 basis points improvement in our adjusted operating margins year over year, we're very proud of these margin level for a company.
Precise.
Share based compensation expense for the third quarter of putting 19 amounted to $4.9 million, representing 2.8% of the total revenues for the period. This expense is mainly related to the plan for Threeq. This stock units granted to certain key employees and director since the company as part before long term retention plan.
Financial income and expense net amounted to a loss of $3.5 million. Net result is composed of FX gains and losses, resulting from monetary assets somebody I really just nobody currencies costs related towards getting started his interest expenses from our credit lines, our leasing and finally interest income from our portfolio.
Off investments, our GAAP effective tax rate for the quarter was 21.7% fairly consistent with previous quarters. Adjusted net income for the third quarter of the year totaled $23.5 million, representing 13.7% adjusted net income margin compared to $16.8 million represent.
The fourth from 5% adjusted net income adjusting for the third quarter of 2018.
Adjusted diluted EPS for the quarter. It was very solid 62 cents based on 37.8 million average diluted shares for the quarter above the upper end of our guidance range and compared to 46 cents for the third quarter of 2018 based on 36.8 million average diluted shares for.
The quarter growing at 25.7% year over year bps continue the growing faster than revenues for this quarter. This isn't a stunning result in terms of VBS growth.
Moving on to balance it where it doesn't investments as of September 30th tuning in team was $59.5 million compared to $86.2 million as of December 31st Twin 18 cash generation third quarter was very robust, but reflects more than 57 million payment for M&A now.
Let's talk about the nine month ended September 30, USD 29 team revenue for the nine month ended September Thirtyth, Tony 19 was $475 million, implying a 24.3% yearoveryear growth.
This increase was mainly boosted by our 50 square accounts, a new customer wins since our portfolio of high potential customers continues to grow at a very healthy pace.
The gross profit for the nine month period was $193 million, 40.6% adjusted gross margin compared to $153.6 million, 40.2% adjusted gross margin for the same period last year, an increase of 40 basis points on a year to they basis, we continue.
To see the positive tailwinds of the FX market corrections in Latin American currencies I talked to this year ne is also showing a healthy dilution of 50 basis point currently accounting for 19.8% of our revenues for the nine month ended September Thirtyth 2019.
Profit from operations for the nine month period ended September Thirtyth 2019 was 81.6 million dollar was 17.2% adjusted profit from operations marching.
Compared to $61 million or 15.9% adjusted profit from British machine for the same period last year, representing a solid improvement of 120 basis points. Adjusted net income for the nine month period ended September 30 is 29 team was 61.9 million daughters.
Our 13% adjusted net income marching compared to $45.2 million, 11.8% adjusted net income margin for the same period last year, representing an improvement of 120 basis points Adjustability DBS for the nine month period ended September 30 is 29 Dean was $1.65 cents.
Based on 37.6 million, our rich you did shares for the quarter compared to $1.24 cents for the same period last year based on 36.6 million average diluted shares for the same period last year to wrap up let me provide you with our guidance for Q4 29 team on the full year, but.
Based on current visibility, we expect Q4 2018 revenues to be between 192, I'm $184 million, implying a robust 30.6% yearoveryear growth at the midpoint of the range Adjustability DBS is expected to be between 58 and 62 cents.
Assuming 38 million average diluted shares outstanding for the quarter regarding the full year to 19, we expect revenues to be between $657 million to $659 million, an implied 26% year over year growth at the midpoint of the range in terms of adjusted diluted EPS.
We're now expecting a range of $2.23 to $2. Some 27 cents, assuming 37.7 million average diluted shares outstanding for the full year.
Thanks, everyone for participating Nicole I for your coverage on support operator can you. Please queue questions. Thank you.
We will now begin the question and answer session.
I ask your question.
Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
Our first question today will come from Tencent, along with JP Morgan. Please go ahead.
Hi, Thanks.
Hey, good afternoon, thanks for the.
For the updates I I wanted to ask I guess on the I appreciate the update on on the strategy just a 13 accounts above 10 million.
Isn't a good place I'm curious if those 13 now that you've had that has been rising do you feel like if you have a good group there that can eventually qualify for the for your 50 square.
Strategy, just curious how the the pipeline of of that next wave of large counts are.
Coming along.
Yes, Hello continues is one hurdling.
So yes, I mean, we are.
You know very comfortable with the way our largest customer start performing general.
We are seeing you know more more accounts within our top 20 top 30 accounts.
Well, we novel five or $10 million.
And that is you know probably one of the main at positive results of the 50 square strategy that we launched a few years ago no.
Look at these accounts that are now more than 10 million more lesson.
We are not reporting more than 20 or more than $30 million, but both are also segment that keeps growing.
I would feel very comfortable about that when we look at these me know a very strong performance I mean does it seems that the account we continue performing like that for the rest of the year on the after but also when we look up you know customers. For example, 11 to 20 or six to 10.
You are also seem very strong growth I do know that there was a a little bigger.
A slow down the two to five not yet because of two specific accounts one that we mentioned in the last call. Another one it's a big project coming from Europe that got delayed but except from that you know we see very strong growth in all other groups. You know walk the won six to 10 11 through 2011 to them. So.
We are optimistic about the demand we continue to see a CRO market. So we're very optimistic about next year as well.
Okay. Yeah, I know, that's why I ask <unk> with <unk>. Thank you for that for the couple of accounts you said that [noise].
In two to five you had some issues just what I was asking if you know it's six to 10 and if there's potential for that to replace those two and.
You know into keep the growth trajectory going that's that's why I guess on and also we continue to think that those you know the airline that was probably the last quarter I companies want to come back I mean, we feel comfortable that relationship is very strong there on the other one insights advanced in Europe and then there was this update.
Some international projects that I believe it grows it in Europe that needs to all international.
And I've got a little delayed or but it's one account. So we are thinking about a better Q4 for Europe and I would 29 2020 for Europe as well. So it just specific things all the rest of the accounts of one six to 10 11 to 20, you know there's a lot of potential there.
Great. Thank you.
Our next question will come from Ashwin Shirvaikar with Citi. Please go ahead.
Thank you Uh huh.
Hi, one.
Oh, Hey, how are doing good good.
Yes the.
Question I have is you can maybe delayed and they've done you know any competition that you see any differences from before.
Either in your new client pursuits, or maybe any or are.
You don't get put into existing clients.
And it's kind of goes back.
I think earlier question because.
Hi, This is the second quarter I know that.
Revenues ended up being in the guided range instead of <unk>.
<unk> meeting and it's also been awhile since you did not please.
Upper part.
Of course timing three years or something.
So I'm kind of curious what's going on.
Uh huh.
Yeah. So in terms of the first person in terms of competition no competition.
Then similar.
So what it used to be navin.
Maybe you know a center.
ER Cold war, sometimes the bomb.
You know those kinda like the main accountant, usually compete most of the types of accenture. They didn't start getting bigger or bothering. You know, we're not seen any any differences from them. So oh in market I mean that the demand remained strong.
The the account and we are working with our are embarking on large.
Transformational deals. So we're seeing good opportunities are in terms of our Guy Laurence you know again.
No we always like to guide, where we know that we will end I grew up I know a pretty said that in some quarters in the past we weren't able to.
You know exceed that the guy that we provided but I you know we are again in the guidance. We are raising 1 million dollar for the year or so in general you know we've got well we guide would we would we like to do is basically guy do whatever we know that we can be if we can actually be.
Third like we did for example, where they've yet, but I did the commitment or would we tried to all those targets when we guide.
Appreciate that and and then follow up question is on head count the up 44%.
How much of that is organic.
Yes.
<unk>.
And what if anything.
Well in Fourq.
We are being.
But others wasn't about 600 people.
So we added another 600 on something organic so again it was a she says you know very very large increase in the number of Oh engineers.
If it comes from from organic I'm Gonna have come from from that was you know bellatrix. They would thing there and it wouldn't use there is up you know a other teams from electric where in Latin America, you know in Argentina, Colombia, Peru.
We have already merged the team, even including you know mixing people.
In some offices.
I I, we are already using you know their engineers in our customers. Some for engineered in some form of rolodex customer. So that is a very easy integration in a way for us.
But.
It seems like a good cultural fit thank you.
Thank you asked me.
Our next question will come from Maggie Nolan with William Blair. Please go ahead.
Hi, just wanted to follow up on that commentary about Europe . The customer there yeah. It's really a one off instance in Europe , that's kind of account specific or is there anything that we should be deriving from this instance that maybe you know their accounts Macy's tomorrow.
Weakness or or that you're up I in general could potentially be weaker.
<unk>.
Hello, My thanks for the question. So in terms of these specific customer I mean, a dealer. They this is a very large project.
The Park got you know we weren't we were going to take of international reversed from got delayed because I was another vendor that got delayed before so our park on that project will start at a later stage because of that it's a it's a one off customer in fact, we believe.
He's got a Europe for Q4 is going to be better than Q3, Oh, we have no.
At this point experiencing anything you know.
Across multiple got myself the specific customer we do have some you know Wilson euro with hypertension. So we're not concerned about you early test for one customer thing. It's a specific doesn't seem that it's not really.
Related to us because what led because when I visit but.
Hopefully it when I come back by the end of the year starting next year.
Okay understood and then if we start to think about 2020.
Obviously, you pointed out there was a little bit of a tough compare on the margins and this quarter.
You know given currency movement. So how should we think about that margin I thought that gross margin level.
Going into 2020 and then.
As well as operating level, including any leverage that you're able to dry.
Yeah. So.
No I phone with no in terms of revenues, we we're very optimistic we feel that anybody there the customers that we have other REIT customers the new logos and we're signing of a lot of potential. So you know we are we're where we continue to thing that you know organic 20%.
Laugh, a little more coming from from acquisition or if that long term target that we should have a we're right now working at the budget. So I cannot you know guide or give any more color in terms of various but we are optimistic we are seeing you know wouldn't numbers coming from our regions across the globe.
So we are we are we're happy with where seen so far.
In terms of margins knowing when you look at todays markets you know adjusted operating income on a on a year to date basis. You know we are running at around 17%.
You know coming from about 15.9% left here year to date. So we think that we have for the company that we are besides that we have today are stable machines is what we should be targeting.
Going forward, how we have made a significant improvement in terms of from our our margins both.
For the operating net income margins over the last four five years.
But we believe that we have achieved you know very solid margins you know our gross margin is running at around 40%.
Actually I think has been really did significantly since we did the IPO or on the operating income that we have today you know it's around 17%.
Can you tell very good number.
We should target to.
David Mark it's stable margins going forward.
That's very helpful. Thank you.
You're welcome.
Our next question will come from Arvind Ramnani with Keybanc. Please go ahead.
Hi, Thanks for the question. This is Michael Vick speaking for Ivan I'm. So could you just comment on Latin America and trends you're seeing across there and then the U.S. Thank you.
Okay, and you could comment on Latin America Yep. Please.
Yeah, so you're in terms of revenues.
Yeah, just in terms of execution and like trying to say across there.
Yeah. So you don't have number you guys haven't grown a lot for us.
The last few quarters are part of it is organic some of that is as Martin mentioned in the core like the please my deal.
Some deals with some banks here in the region, a big very beautiful an airline here in the region. So.
It's it's a strong there's a lot of investment going on.
I I mean, you can see gotten in the revenue number also.
I've seen some.
Benefits from the deal families in the past I've also has a big presence in Brazil.
We are seeing would progress and however, I see an operation, which is something very important to us.
In terms of execution, you know Latin America continues to be our largest region in terms of Scotland and growing a lot in terms of talent and this quarter. You know we added another 600 class engineers organically plastic inorganic part I think some came down to below 42 around 14%, so dear seems that or whatever.
Due to attract talent not only Latin America, but wasn't the rest of the war remains very solid on that it's a very very important because as you guys know this is a very highly competitive sector and our ability to attract and retain talent and improving significantly which puts us in a very little piece from four 420.
20, an unknown work so execution on that filmed indicates of Latin America is very very solid.
Great and then can you just talk about the overall feedback from your converge series and how is that how do you. How do you make how do you feel about the Dan environment over the next year given that.
Yeah, you know we think that event was very successful there were like a thousand people attending the conference on I'm very appealing.
Speakers no companies.
Top what work left companies tend to live events, they talked about some of the perfect. They're doing some whatever they are doing without you know we thought we were able to be Scott.
Global I'm convinced that how we think that ended just when I was how we will evolve our company using more a guy.
And your way we work in the way I want to developers war. So we got very very good feed work I of course, I mean typically in this event you also get from some lids.
I'm Douglas that covers success that was already successfully renting overview.
Great. Thank you so much.
Our next question will come from Bryan Bergin with Cowen. Please go ahead.
Hi, Thank you, but wanted to ask a on the top client to some of the areas that we're driving the strength that you saw there than they've obviously been on the news also whether they're new platform can you talk about potential opportunities that you think you might have there also in the future.
Yes, Hello, Brian .
Yeah I know this me as we mentioned on the last call.
And I think both from the previous call.
You know, what's going to come back and grow faster and we saw that these numbers.
One of the area, where we're growing the most is a busy BPAC, which is at the area that among other things.
Uh huh.
To wrap up you know we work for the around where no I mean, we don't do the as you know we don't do that platform itself, but we work all around the platform as you know, helping these me to get content I'm to organize content around the clock.
From a we showed this into two to work on getting statistics on on I'm, you know using information that they can get out of it flat. The platform for example to sell merchandise some things like that so we are very connected to the platform.
I I, we think that these me as we mentioned in the last few calls or half a lot of potential and we continue to see that potential for the rest of the year I'm for 2020, so even though these me if you want to perform really really well again.
As we mentioned in the last few gold at this is not I won this mess or a one company.
Thing when you look today I thought were very concentration.
No and even though the top one it's 11 grew 9%.
No. Other important things are top five is now 26, but then is 38% so that means that.
Our level of dependence on on one or two or five specific customer is decreasing well. These are very good thing going forward.
Look I mean, we worked for the main companies you never industry I see you can see we are continuing to be very diversified in terms of industries.
To be very positive and for the future of the company.
Okay, Thanks, and I just wanted to follow up here.
Relocation investments, even make and can you just talk about how your efforts and scaling the central and eastern Europe locations are progressing.
Yes, so and again, so central Eastern Europe , we have operations in Romania on embed levels.
Oh no the operation in Valeros, if it's going very strongly very nicely and we have some uncle customers and the gaming industry. Oh, we are very optimistic about that indicates off of Romania.
That operation, it's also growing nicely.
Again, you know we're still early stage is integrating that operation in the rest of below one, but we find extremely good talent in both regions on and we find complimentary skill sets and to the rest of the organization. So the fact that now you know we shop, a big operationally Latin am.
America, a growing on a very big operation media properties, a emerging operation in Eastern Europe , I think is very positive in terms of or whatever we need to hire attract talented going forward. So we really were in the right places in different stages of maturity and of course you have.
As a newer location for us, but both both locations are performing in line we are expectations.
Thank you.
Our next question will come from Joseph Foresi with Cantor Fitzgerald. Please go ahead.
Hi, My first question just on Disney.
I think he said it's grown I think 25% plus we thought that that was going to continue what exactly are you willing for Disney and do you expect that to be sort of consistent through 2020.
Yes, so in the case so [noise].
Did you know these me you know as you said, we know we work.
Moving to book.
For most of US right we work.
For the parks and resorts Division.
We work for the cruise lines, we work for the TV channels that they own the TV stations are they all.
We work for VTI, two which is direct to consumer international which is where a decent blast fit. So we are kind of working in multiple areas.
All of them are growing at a different levels of all of them are growing the one that is going to foster to this point is it did you see what is the one that huh.
There's a decent glass.
Plucked from and clearly there are we are again doing a lot of work or to get to hear these me.
You know.
Increase or an improved the usability and the level of content that they are into the platform that is one of their thoughtful more growth and then on the parts position. We're helping these me on some of their the parts.
Outside of Florida to bring some functionalities, let's say one that but we've been working with them in Florida.
Got it so but it isn't one project just around the magic band you're in one particular geography, it's a bunch of no different work that's going to carry the growth rate. Okay. Correct. If we're going to geographies multiple stakeholders, even multiple companies within different group. This group is I'll ask you know it's a huge company on we're working for very different stakeholders.
Oh, you know we do work for fall, So we'll double takeovers there.
Okay and my follow up just on the organic growth side, what's the organic growth in Fourq, you and can you remind us of your thoughts around sort of long term margins I know you take on some new acquisitions I'm. Just wondering if those are accretive or dilutive and if you expect offset it. Thank you.
Yeah. Thank you John So yeah, I mean, Oh game for Q4, we are targeting around.
You know again, depending on how you measure of some of the of the engineers are working for our customers, who asked before I, let targeting around 20% to 21% organic.
On the list you know about.
8% to 9%.
Inorganic contribution that's for Q4.
I'm.
Going forward, we continue to think that the 20, but you know 20 organic plus some confusion for applications that is what we expect.
For the for the mid term I live in terms of margins you know.
This is the conference that we bought a hugely no. These are smaller companies on the Gulf markets. They are at similar levels. While we are in terms of and she and I, usually they come a little bit heavier actually anyway, but you know wants you merge the two companies.
Eventually you start to see some efficiency silver they are on I'm. Hence that's why we think that you know margins going forward should be kind of more stable or for the next year. So.
Thank you.
Well.
Our next question will come from Diego Roggow with Goldman Sachs. Please go ahead.
Yes are thinking for taking my question, Hi, Marty one I guess.
First question is regarding the land up the contract on the New York Pointedly expounding on your strategy to grow a within existing customers. So I was wondering if you can get permanent on the land a bit you know the contract. The new agreements you are signing up at this point, we thought with declines. Thank you.
Hello, Diego, so, yes, what you're seeing.
And this has seen a threat in the last.
Two years, it's I'm extension in the line of the average contract. The reason for that is that was used to be you know digital project no became difficult program. Her company a companywide transformational program I will do in a number of those in different industry. So the average Lang.
Right now look around 15 month.
That's of course the legal.
Yeah, I contract lets say Oh, we tried because what happens although these are perfect get renewed our renewed again and again every year. So when you look up our bulk.
Then I count for example, we've been working with them for more than 80 or so on average so in some cases, we've been working on the same project Oh similar projects for example for one game company for more than eight or nine he has already so what you see that thrown out process, especially those with our consumer facing project actually net.
And they keep evolving on evolving and I'm features and functionality you know they keep growing and growing.
As long as their successful so.
Just to one for your questions hurt it's growing it's now a 15% on that front 16 month on average.
But we continue to see that expanding overtime active disease, you got program become a larger part of their revenues that we huh.
[noise] that's super helpful. Thank you for that and I guess my second question. It gets a follow up a regarding Latin America I do understand that I've got a little exposure, absolutely like ER to Chile, and believe there and I know those pounces I'd say to you know very let's say a lot of uncertainty on the political clout Saul is one.
Just a comment whether you have like some revenues that older troubles pulpwood and ER and the number of people you you haven't whether we should be worried about something or for the fourth quarter. Thank you.
Yes, I think if it wasn't so a in the yourself well yeah, we don't have any operations or any customers. There. So I'm letting the case of Chile, which is there a copy of the country that right now.
It's going through some political issues and we do have some revenues actually.
Growing quite a lot there when you're working for some of the largest companies in Chile.
One were not seeing any any impact of the political issues I think having all these companies continue to invest we are working on long term contract. There. So we haven't seen an impact.
In terms of our employees you know a they continue to go to the obviously them yet the reward that can be into work or the customer premises and I was having had any any issues over there and we expect we hope that this very junket for so as soon as possible for everybody.
There are three or thank you and maybe just a quick follow up I mean, if we would look in constant currency or how much are you're growing in Latin America. Thank you.
Yeah. So a you know the revenue.
The impact of effects was about 80 basis points on the revenue.
So instead of growing 23.7, 0.3, if a company you know.
At constant FX would have grown about 28.1 again, you have very little exposure, especially in Latin America, you know we tried to reviews.
And to to embrace our customers no less we try to avoid using local currency, we only we typically how.
Like contracts in order and then we pay our salaries most of the concerns about where operating we pay sellers in local currencies. So in a way the way. It works is that on the revenue hobbies lean, but on the cost side and that's why sometimes we talk about it you know FX impact on our.
Cool that's why you may have some benefits or headwinds depending on how currencies.
Evolve overtime.
[noise] here. Thank you.
For them.
Our next question will come from Arturo Langa Weve eat how BBCA. Please go ahead [noise].
Hi, Good afternoon, everyone. Thank you for taking my question [noise].
Just two very quick but the first one is.
So organically just to confirm but I estimate that ER revenue growth was close to 24%, which is mostly in line, but a bit above the 23% of the previous quarter or I just wanted to verify that and then second regarding or cantina could you remind us what plans for the government our regarding.
Export taxes, I understand that we should be working.
As if there were to stay but I believe that they will be a renegotiated or potentially a for discussion either 2021 or or 2022, or if you could just remind me the the dates that would be very helpful.
And also what what your expectations are there. Thank you.
Yeah, So I like to thank you for the question. So a for the first question.
Hey, you know.
Both their Randy advance will really be does it feel integrations are going very fast you know they are selling our customers was hitting their customers. The teams are good mix. So sometimes you don't so so easy to do to put an exact number but we aren't we estimate that for Q3 at 20 to 20.5 to 21 point.
5% of revenues.
Our organic purely organic and then you have another 6% to 7% are coming from customers that came and we'd acquisitions. That's for the first question for the second question the export tax it stays until the end of.
December 2020, if these fourth pesos per dollar of exports.
And then by the end of 2020, they governments will decide what they're going to do that.
Thank you and for the into in that regard you're working your base scenarios that it will stay or do you think there's a high likelihood that they could be removed.
Look I have two I have to work with whatever is.
You know stated endeavor relation with these I just want to disappear of course internally, we work with different scenarios, but this is the you know we need to think that was going to happens it's going to disappear.
Okay, and and on that point is there any other piece of regulation that you're looking out for in Argentina, or anything that we should keep our eyes on constrained to think covering incoming government or you know will likely face a lucky or has a majority in Congress.
I I know it's ER.
Although we don't want to speculate on things that you know could be I mean, there are multiple scenarios about possible.
Well, we got that is up go on starting 2003, we grew the company.
Who is a different governments.
Two quick follow Lake.
I know degree on that appears administration. We continue to work will be set me straight Sean. So we'll just have your like company only three four people, 3% to 4% of revenues are coming from Argentina are only about 30% of headcount. This in Argentina. The other 70% it's outside of Argentina. So are you know we will continue growing.
In Argentina, we will continue growing outside of Argentina is well aware of global company I'm, you know we need to the would move given current countries well frightening 16 different countries as we speak on our target markets are still primarily the U.S. in Europe .
Okay, but nothing specific to the sector, though nothing specific to the technology.
If you weren't there was some good news I mean like the indicator of Argentina, I know the new government.
Sorry, the previous government.
I mean Maxim station path, the new regulation for their falling only closed which extends the benefits that we have under the sofa promotion low 510 years or they knew elected precedent.
He will be fitting our offices in Mexico anyway, a few weeks ago.
I was very optimistic about or the industry I mean, our industry generates a lot of employment in the country. I mean every other country, where we are operating it generates at volaris, because it's primarily on exports industry. So I think every government in every country.
And we want these type of industries to grow on the elected President Mr. Fernandez was very positive interest visit office.
Great. Thank you very much.
This concludes our question and answer session I would now like to turn the conference back over to management for any closing remarks.
Okay. So thank you guys for four during the call. Thank you for your continued support and see you soon bye bye.
Thank you for attending today's conference presentation has now concluded and you may now disconnect.
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