Q2 2020 Globant SA Earnings Call
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Thank you operator, and thanks, everyone for joining us today on our call to review, our second quarter 2020 financial results.
By now you should have received a copy of the earnings release, if you have not a copies are available on our website investors Dr. <unk> dot com.
Our speakers today, our Martin Mcglynn, <unk> co founder and Chief Executive Officer, one or two Yagi, Chief Financial Officer, and actually SAP on me, it's cheap delivery and people officer.
Before we begin I would like to remind you that some of the comments on our call today may be deemed forward looking statements.
This concludes our business and financial outlook and the answers to some of your question.
Such statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the FCC.
He is not w., followed by far the accounting rules in our financial statements. During our call today, We will report non IRS, our adjusted measures, which is how we track performance internally and the easiest way to compare go then to appears in the industry.
You will find a reconciliation of IRS and non as far as measures at the end of the press release, we published on our Investor Relations website.
I think this quarter's results.
I would now like to turn the call over to Martin May go out our CEO thinks I made on hi, everyone. It's great to be we do again I hope you all continue to be safe. This year has accelerated the need for digital transformation across all industries and regions and they need we continued to grow as markets some markets reports.
The industry for dishes or confirmation is expected to double from the current bodies to more than a trillion dollar say year by 2025, she does slow and I'm excited to say the discuss being another successful quarter for us as we champion the drive for DC Southern company transformations companies continue to reach.
Spawned imported too we brought in one kind of done $82.7 million he'd rather than you deliver in 16% Yearoveryear growth. These figures are encouraging given that the first half of the year brought an unprecedented global event that God everyone wore it from the board room do that.
Either real however, our team took on inventive approach well for both seem flexible and adoptive solutions for our current and potential clients. This way, we weren't able to weather the storm our profitability well. It's also healthy. We then adjusted net income margin of 10.9%.
We know that much uncertainty remains on the road ahead for everyone. But we also know that we face a unique opportunity Cobiz 19, Dusty das in new ways I'm from day, one I told our blowers that we needed to be closer toward clients than ever were determined to emerge.
Richard from this situation much stronger than before.
Global companies entering a new phase of hyper agility that demands sweep efficient and enjoyable collaboration between teams regardless of where they are they need smart and seamless connections with their customers on a partner that understands how to guide them to become an edge.
Organization over the future.
The same time companies must also be mindful and sensitive to what is happening on our society diversity inclusion and environmental care. Our key this concept should not only be company policy, but should be shared with all our employees and stakeholders.
To go over how Globant is approaching these I would like to bypass except for me as our chief the Liberty I'm people officer to give you all that perspective on how we are looking out for our Globers I know what communities, but hopefully.
Thanks, My team and hi, everyone, it's nice to be with you again.
I'm proud to say that over the past month, we have been able to keep working hard from home why we continue to meet all delivery commitments to our clients.
Therefore, we don't employees needs in mind, we will contain all work from home is that just for the time then.
We went live alone faces of return into the office as the public health conditions I Love It.
In this challenging times for our global community organization must lead the way to advocate for diversity and promoting cushion. They should also foster a culture, where everyone can grow regardless of their raised gender relishing nationality or sexual orientation among others.
I cannot and will not be on the sidelines first we launched a new campaign called all for quality aim at raising awareness of diversity and inclusion in every level of decision, making with support from our clients an extra effort from our clubbers on our own corporate the nation.
We have waste money that the what's the needed to 13 organizations that to work to protect underprivileged community across to work.
Globant is also doubling down our big tiny initiative, which I have shared with you on several occasions, we are moving forward with our commitment to achieve 50% of management position held a woman and non binary gen. There's by 2025, we have implemented a framework with a different stages that will help elevate Jeff.
They're minorities in our industry.
This framework, which includes the collaboration with the key partners spend across all the station and needs of individuals we strive to inspire by getting more woman and non binary gender people interested in the sense films.
To educate by offering trains and scholarship and expand gender minority participation and 80 industry.
The promotes equal opportunity hiring three specific policy and programs.
Company woman grow their careers through their life stages and to elevate their growth and leadership with a specific mentoring programs policies and courses.
We will continue to invest in this initiatives as we promoted globally and inclusive company with equal opportunities for all our top arse. Thank you very much nothing.
Thanks, but though [laughter] I want to highlight the importance of fallout or be kind initiatives.
Making sure it true impact on society is very important for Globant.
Now, let me share some of our business updates.
As we expand our global presence to better serve our client we're repositioning key executives to lead this exciting phase in the U.S. and Canada Fernando Mclean has seen recently appointed that's our chief business officer to fully oversee our growth strategy in our largest market.
Lundell will work closely with Nicholas I would like his new role as Chief Technology Officer for the region and each of them about not head of our chief solution officers in Europe, and Asia, we will enter into new markets, like Germany, France, Switzerland, and Singapore led by fear that he could be anomaly in Latin America.
Nick when I got Bloom will continue his leadership along with Savviness. Neither in her role as Chief solution Officer for the region. We have also appointed BB and South Dallas, Keith as global VP of operations to drive our execution in our most high demand accounts, we're confident that these appointments are going.
To continue to lead our worldwide growth now I'd like to double click on what we have been working on.
Yes, you may know their financial services, some fintech industry has been growing for several years.
It currently makes up nearly a quarter of Globant revenue. This industry has taken off doing these pandemic us more economies needs to go cashless users expect a streamline experience from their bonds on financial services providers, our banking clients rely on our expertise to transform.
There are additional products into smart revenue generating business lines company is a great example, disrupted company is building a next generation platform that brings together banking commerce and lifestyle glow monies building, a new banking service for Cogni, an enabling financially.
Innovation targeted other tech savvy demanding user base.
Education has seen a tremendous impact us well my kids like many of your own aswell have been taking classes spiritually over the past few months companies also need to de lever there trainings in a big tollway for the UK tours and organizations. This creates a major challenge to revamp their dish.
Those skills I'm produced high quality online content that can be the lever on time.
One has to be in serving the Ed Tech industry for several years and we have redoubled our efforts in 2020 in response to the pandemic.
Among several of our at the customers Blackboard stands out with nearly 100 million users. It is the largest education technology and service company in the world. They came to us to enhance their blackboard learn product line onto the lever customized solutions to their higher education.
Segment, and finally, we must mention the most directly impacted sector. This year healthcare I'm proud to say that we have been working alongside our clients in the healthcare and life Science field, especially in this critical time Globant is partnering with the American College of Jess physicians.
To develop their web up known as the clinician much in network. This up bridges the gap between healthcare institutions that have personal needs and health care professionals available.
We have also seen these digital acceleration in another client a layer Phoenix with technology and data as a core of their efficiency and experience Globant is working with them to help them transform into smart data driven organization. These are just some examples of our work on how we built long term.
Relations with our clients as you know since 2016, we have been driving our growth strategy and that our 50 square vision, where we organized our most senior teams to focus on 50 clients that will bring $50 million of revenue. Each. She is then our company how say both expanding our.
<unk> region, our services and our talent throughout industries and regions across the world with a 50 square approach. We have brought in several key accounts that have turned into some of our top clients.
So as we look into the future. We know that we are ready to go for more.
Well elevating our vision to that 100 square objective.
Wanted to focus our most senior teams on bringing I'm building long lasting relations to reach $100 million in revenues come from our top 100 accounts right now many organizations need Telus change. Therefore, we brought together our most impactful services offering so that organizations neurons.
Survive, but thrive. These continuities studio offers digitally enabled solutions to strengthen business operations and great opportunities at the time when constant change. It's a reality of course digital transformation is not just about technology, it's about culture companies cannot.
Change without cultural adoption. So we complement our boat offering with our cultural discovery of framework, we help companies to empower their employees. So that they drive innovation at scale. Many companies heavily invest on how customers interact with their brands they need to do the same thing.
With their employees.
We believe in designing an employee experience journey to make them truly fall in love with a company that way they will fully embraced the buyers and drive it forward. That's corridor I laid out and I went to collaboration concept to all of you globally supplying it skills and AI technology to bring our client companies.
Into the digital age right now we're implementing this concept across our entire offering this quarter. We patented our amended coating technology were taking software design to a new level. This technology will be key to the transformations, we carry out I rented coding come to use.
The jumpstart the Onboarding of new people to quickly learn new skills and programming languages, and even to get a clear understanding of legacy called without spending hours going through it manually. This enables engineers toward more quickly and creatively they can spend more time on more elaborate solutions.
2% this technology on show, how we're reinventing coding well will cost our nasscom barge event on September 17th our keynote speaker will be Steve was <unk> co founder of Poppel, we'll be discussing innovation and the future of software development I invite you all to join us by.
Signing up at cumbersome the globin dotcom on shouldn't third we closed a public offering of 2.3 million common shares including degree issue. We wanted to raise capital for our expansion plans, we're extremely happy with the outcome of this follow on the book was two and a half times oversubscribed.
The response, we received showed that our unique positioning continues to set us apart I want to thank you for your help and support during this process last week, we announced our acquisition of D.A. <unk> quarterly Miami G.A. is a leading cloud developer and digital transformation company.
They bring wide expertise in cloud journey and enterprise up services to Globant us well, that's a broad flying portfolio in key industries, such as healthcare and life science.
There are clients include Johnson and Johnson on the Pepsico Guardedly, Nanthealth Medtronic and many others. They have strategic partnership with companies like Oracle and Sep and specialists in data science and machine learning Unprocessed intelligence with over 1090 professionals I'm really happy to have.
Them onboard the synergies between our teams will produce unique services to our clients in the face afford this year has thrown at us I'm extremely happy about how lower team responded well not shaken in our drive to reinvent our industry. We have found our food.
And how the healthy pipeline and I would be system continues to expand as we go through these here and now it's full speed ahead as we continue to grow think reinvent and have some fun to now I'll turn it over to one to go deeper into the financials. Please one.
Thank you very much.
Thank you Martin Thank you all for joining us today I sincerely hope you your families I'm colleagues are all the way unsafe. During this unprecedented times, let me start by summarizing our second quarter 2020 results I will then discuss our guidance for the third quarter.
We're very pleased we I went over all results for the second quarter of this year as we displayed strong execution amidst a turbulent macroeconomic environment, our revenues for Q2 amounted to $182.7 million, beating our guidance I representing a solid.
Sixtym per cent yearoveryear growth.
Q2 revenue growth was 17.9% year over year in constant currency.
As we predicted in our first quarter earnings call core remain team has an impact on our second quarter revenues in Q2, we witnessed some project delays I'm also a few perfect cancellations, primarily in the travel and hospitality vertical this impact was most pronounced.
At the beginning of the second quarter. However, the overall demand environment largely stabilized in the latter trough the second quarter and in fact, we have started we must see improvements Indian markets in the last several weeks.
We remain bullish about the demand environment Bostic always 19 crises and are encouraged by the recent positive trend in our bookings that said, we also remain cautious about any potential impact to the end market due to additional work so slow downs, especially for some.
<unk>.
I've discussed on our last earnings call because of all the Swift actions related to transition in our employees to working from home. We shop continued to maintain seamless delivery of some of its historic customers. Moreover, due to the strong I mean, nobody initiatives by your where delivery and people team.
Employee productivity in Morocco remain high Disney was once again, our largest customer for the quarter growing at a healthy 19% on a year over year very sheesh, but he was down 12.4% quarter over quarter. We expect revenues from these me to increase their third.
Corridor on a sequential basis as we are now experiencing improvement in the account as we have discussed previously we're very well diversified within these me serving the majority of its subsidiaries revenues from top five top 10 accounts increased 36.2% and 27.2.
2%, respectively over the second quarter of 29 team.
Customers 11, and beyond increased 8.2% every year on a sequential basis revenues from customers 11, and beyond decreased 11%. During Q2 2020 due to the impact from Cobiz 19, primarily in our travel and hospitality entertainment and some.
Return customers our top accounts are proving to be more resilient to cope with my team embark relative to the rest our customer concentration numbers for Q2 2020 with our top one top five on top 10 accounts, representing 10.7% sorry 1.9.
Excellent and 44.9% of revenues compared to 10.4%, 27.2% I'm, 41% of revenues respectively for the second quarter of 29 team looking at diversification of our revenues by industry verticals, we remain balanced across the different industries.
Financial services, and media and entertainment, leaving the park accounting for 24.8% on 23.4% of revenues, respectively professional services on financial services, while the fastest growing industry verticals in Q2 growing at 52% I'm, sorry, 3.3% year over year.
Respectively.
Regarding the progress of our 100 square strategy. During the last 12 months ended June 30, 2020, we shot for 10 accounts for about $10 million in any other revenues compared to 12 customers for the same period last year, we shot 113 customers with more than $1 million will find your Roe.
Even years compared to 97, one year ago, we continued to expand our relationships with our key account the varies for our continuous growth in terms of geographic regions. During the second quarter of 2020, 72.8% of our revenues worry North America 20.8.
Sent in Latin America, and others and 6.4% in Europe.
During the second quarter of 2020, 57% of our revenues, where they dominated in us dollars, providing a hedge toward topline against currency fluctuations as we have discussed before why the Korean 19 pandemic has created some near term pressure on revenues. It is also create.
These to deepen our relationship with our customers. Moreover, we believe this crises will create material near and mid term business opportunities to accelerate or initiate digital transformation journeys for enterprises across the globe Globant as previously discussed by Martin where prepay.
There are two captured those opportunities turning now to profitability. Our adjusted gross profit for the period increased to $69.8 million, representing 48.2% I'd, just two girls marching compared to $63.3 million representing 40.2%.
Just to gross margin in the second quarter of 2019.
Every year adjusted gross margin decline is mainly explained by the lower revenue due to come in 19, I lower utilization as we shop in managing our headcount with the assumption that Cobiz 19 crises short term in nature.
We finished the quarter with 2333, Globers 11500 on 73 of which were 80 professionals.
Following several quarters of very strong net additional scope lovers in anticipation of what was expected to be a very strong 2020 prior to the Cobiz 19 outbreak, we decided to focus on selective hiring a fight the professionals in the second quarter of 22 in these temporary adjustment in our.
Hiring activity was in response to the evolving call in 19 crises on the employee exiting Q2 upset hirings during the same period, Oh, sorry, salt. The total number of fight the professionals decreased 1.5% sequentially, though still growing at 25.6.
Percent year over year.
No I, so where business is picking up we try to turn our recruiting engine spot on how we expect to be again net positive in employee additions during the third quarter over the last few years no. One has invested heavily in establishing robust hiring and training infrastructure across the globe, which gives.
That's a from a really to seamlessly ramp up hiring and training cells required at this moment, we don't expect any challenges in finding the right talent to meet that demand attrition for the past fourth month continued to decreased 14.3 per cent compared to 15% one year ago showing us.
We never going to improvement in Moscow talent development centers.
As discussed during the last earnings call amid the Cobiz 19 crises, we have decided to avoid layoffs. That's we expect the demand environment coming out of the crisis to be strong we managed head count by controlling hirings penetration these costs led to a decreasing utilization.
Which impacted margins during Q2, where countering some of this impact through Fracing Gionee hirings on keeping a strong grip on expenses that said, we now expect utilizations are machines to trend slightly optimistic third quarter. Adjusted this year, they came up to 20.7% for quarterly rate.
In use an increase of 80 basis points compared to Q2 2019, despite having achieved quarter over quarter savings in dollar terms.
<unk> continued investing for the future primarily to expand our sales coverage in our target markets.
This focus will better prepare us to capture the increasing demand bostco be 19 crises.
Help maintain our robust long term revenue growth profile as a result, our adjusted operating income for the quarter amounted to $24.6 million or 14.5% of revenues compared to $25.9 million or 16.4% of revenues for the second quarter two.
The 19 us utilization on revenue growth profile improves from here, we expect adjusted operating margin trend to improve from current levels as well share based compensation expense for the second quarter of 2020 amounted to $6.5 million representing three point.
6% of total revenues for the period. This expense is mainly related to the plan of restricted stock units branded to certain key employees on directors of the company as part of our long term retention plan finance expenses amounted to $2.7 million in the second.
North of 2020 compared to $1.3 million for the same period last year. This loss is mainly composed of interest expenses. Some of these liabilities and interest expense on borrowings.
Other financial results net amounted to a gain of $8.9 million for the quarter compared to a loss of $1.4 million. During the second quarter of 29 thing. This item is primarily composed of fixed results from monetary assets and liabilities in local currency.
These results from our restricting strategies I'm games from transactions with bones hourly phariss effective tax rate for the quarter was 25.1% common inline with our expectation of 24% to 26%, we still expect the fully or 2020 effective tax.
Great to be between 25, 27% adjusted net income for the second quarter of the year totaled $19.9 million, representing 10.9% adjusted net income marching compared to $19.9 million, representing 12.6 or so.
Adjusted net income machine for the second quarter of 2019.
Adjusted diluted EPS for the quarter was 51 cents based on 38.8 million average diluted shares for the quarter compared to 53 cents for the second quarter of 29 team based on 37 point Sixmillion average diluted shares for the quarter moving on.
Through the balance sheet, our cash and investments ourselves to him ferry 2020 amounted to 400 on $4.1 million, while borrowings amounted to $76.8 million. During the second quarter 2020 were raised $301 million in our primary follow on off.
For him for 2.3 million shares repaid 50 million of our trade facility and how the strong free cash flow generation over the quarter, we would like to thank our shareholders for the success of the follow on from section, which was more than 2.5 times oversubscribed and.
Also our first primary equity issuance since our IPO in 2014.
Our cash flow generation profile satisfies our needs for investments in our business. Our current credit facility of $350 million, along with more than 300 million gosh erased recently through our public offering of common shares provides with the.
Looks really deal related to internal investments.
While also generating sufficient fire power for us to pursue any potential strategic M&A. This cash position also materially strengthens our it goes to market cooperation during the second quarter on despite some impacts from Koby 19, we generated free cash flow of 20.2 million.
Others as mentioned in Boston, earning calls typically the first part of the your costs are lower free cash flow as we pay bonuses and boxes on the second half of the year is when we should generate the maturity of the free cash flow now, let's talk about a six month ended June 30 2020 revenue.
For the six month ended June 30, Tony Tony was $374.3 million, implying a 23.2% yearoveryear growth. This increase was boosted by our strategic accounts, new customer wins, our portfolio of high potential customers continues to expand access.
Gross profit for the six month period was $145.4 million.
Sorry, 8.9% I talked to gross margin compared to $123.4 million, 40.6%, but just to gross margin for the same period last year, a decrease of 180 basis point on a year to date basis. These marching compression was mainly explained by the lower revenues due to the impact of course.
Either lower utilization as we manage our talent pool, assuming these crises to be short term in nature. Dusty this year and increased 50 basis points accounting for 20.5% of our revenues for the last six months ended June fairy 2020 adjusted profit from operations.
The six month period ended June Terry 2020 was 54.5 million or 14.6% adjusted profit from operations Marsh compare to 50.6 million or 16.7% adjusted profit from operations, partially for the same people last year representing.
A decrease of 210 basis point adjusted net income for the six month period, ending Twod and Threed 2020 was 44 point threemillion or 11.8% adjusted net income margin compared to $38.4 million towards 0.6% adjusted net income machine for the same period.
Last year, representing a compression of 80 basis points adjusted diluted EPS for the six month period ended June 30, 2020 was $1.15 cents based on 38.4 million average diluted shares for the period compared to one dollar some two cents for the.
Same period last year based on 37.5 million average diluted shares to wrap up I would like to share with you our outlook for Q3 based on current visibility. We expect Q3 2020 revenues to be at least $203 million or 18.5% year over year.
Our growth at this point will not expect any a fixed impact on our third quarter revenues Q3, adjusted operating margin is expected to be in the 13 and a half to 15 and a half Percentrange I'm adjustability Dps is expected to be at least 58 cents assuming for it.
Point 9 million average diluted shares outstanding for the quarter included in this Q3 guidance, we estimate deejays contribution of 11 million in terms of revenues and two cents of adjusted diluted EPS, we remain confident well followers through positioning in additional income.
Let me give space given that the market still haas material uncertainty due to the cobiz maintain evolution on impact predicting fully or 2020 results with very high levels of confidence is not feasible. At this time. Therefore, we will not be guiding for the full year 2020 for the time be.
Thanks, everyone for participating in the call for your coverage and support operator can you. Please queue questions. Thank you.
We will now begin the question and answer session to ask your question remember it started wondering if that's true.
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Withdraw your question. Please press Star then too.
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Yes.
<unk>.
And our first question will come from.
Well with JP Morgan. Please go ahead.
Hi, This is funny thing inflicting thing a nice quarter.
So marketing now Riyadh into five months, so that's kind of make.
How's your competitive profile and in our existing that clients are increasingly going toward that still specialist like yourself versus legacy systems.
Yeah.
Well look there's a there's the movement toward making me hey, when it how are you sorry, I'm not thinking for the question we have seen like.
Like a lot of demand happening on the.
On the on the you know pure digital players.
Increasing.
Same dod, meaning either from the entertainment industry or from the finance industry. Those players are really you know picking up very very.
Like you know you saw the N. we expect.
And one that a few minutes ago.
And we are you know coming but in the demand.
Within within our main customer which is great news.
So last quarter. It said that you know what seemed like a plateau that you need some.
I still see that right now but on that.
You know interesting, but starting to happen.
And and again.
Every industry every government every situation every single you know interaction that you need to have a planetary level, we go consumer customers Cds and whatever.
We'll need to be totally different so were in the mining those companies that are understanding the new challenge.
Okay got it.
And your third quarter guidance implies double digit sequential growth.
How much of the growth could be attributed to all that.
Oh got pushed out from Twoq you watch this well that stems from long term trends. So is it just doesn't mature.
And is there any business that you expect will deteriorate from twoq into Threeq, you any verticals like travel and all that could further deteriorated from current levels.
Hello, how are you.
So you're looking to.
We you know we are estimating about.
12% organic growth.
In the quarter last.
Another six weeks and Uh huh.
I mean from inorganic.
That is very.
Well I mean, there's a pick up.
Historically wont relationships.
Some companies that.
During the war.
Wait times I really don't see during Q2 to understand what we're going to be that will impact.
The crises they are coming back because they're starting to be more optimistic about.
What's going to copy or we have seen some.
On the draw we are supposed to be tallied yes. It was expected.
That will continue.
Really.
We are there they're still not.
Coming back strong you have seen some on the income, but really but there's still some some of the airline cruise line that continue to strongly I'm pushing out some project. So that Q3 against a combination all some companies that were not wait and see.
No they call it even more clarity on there, but and acceleration.
Yes.
I think whats explaining given the new way, which companies are interacting with employees with consumers.
The rest of the.
Oh pleasure in general.
Got it thank you.
Thank you and this augmented coding looks really cool.
Look somewhat against it thank you.
Yeah, absolutely. Thank you so much in it.
Our next question will come from Bryan Bergin with Cowen. Please go ahead.
Hey, good afternoon. Thank you wanted to ask you mentioned that you're encouraged about the trends and bookings can you give us any color or metrics they might be seeing there really any color on the pipeline well aside and signings cadence pre co bad versus where it may be today.
Yeah sure. They go to much how are you.
Look the Decatur ER looks like it is no it was.
During the the you know the beginning of the second quarter.
And then again, I'm deli, and all that well, but portion when oldie, but yeah, there will be you.
I mean, probably made from roughly you know ending on those industries or are you know more affected but not at Marquis that them in terms so they're looking at.
Uh huh.
As a general speed, where it was never to know where we had he now like like it much like it like a larger number bookings happening.
Illegally hotter than before and it'll be longer term done before.
The trend and you know we never so a de acceleration on the booking.
That was to be.
What we saw was like it.
Some big crush it be seen people because of the of the.
Oh that all the problems, but now we need.
Q moment.
It is low on the really.
Outgrows the car ending and then we had seen acceleration slight slight acceleration.
On the way new booking.
Our being generated is that you know.
Yeah, I think I, yeah that makes sense. Thank you.
And then I'm kind of curious on really the slope of this growth recovery and how you're thinking about it I guess more so how clients thinking about the spend and the pace of spend on these digital transformation program. You mentioned your view that this is a short term phenomenon and what you say there is so much pent up demand that once we get.
Some macro certainty that the the kind of flood or the Davenport gets released or is this something more gradual than that.
Now would be something gradual although you know.
Well I think people and companies understand that BCC short term in nature.
And you know there already seen candidate they're ready you know like yeah. There are countries that are starting to generate a team looked us Russia.
You heard if you do they go or so so I think the marketing guarantee understanding these are the <unk>.
Reactively short term issue.
So we're we're seeing the is these coming bucket being taken a I said more you know solely trend.
And then when I did it to report the first quarter three months ago.
So.
This is what I'm is what I see no.
Again.
The 20 coming from those companies need to make the transformational.
Yeah, maybe Brian.
Ah, Yes, Tom Mutryn Dot you know, we will very likely do you.
The increase in jeans RBC increase more.
Hmm.
You know.
Good evening, albeit only you games.
Yeah.
More E commerce behavior. So there's some trends, which are actually reshaping the way, which equally good companies, which should be.
Some people who did.
Going forward.
Okay, They really haven't.
Sharp and high pockets of growth for some more obvious ones I mean gradual and Eric yeah. Okay. Appreciate that thank you.
Great. Thank you Brad.
Your next question will come from are being right now with Piper Sandler.
Please go ahead.
Hey, guys congrats on a direct water.
Uh Huh. So you know that Kelly or you know very bullish on the overall demand environment that looks like there are many different opportunities.
You know can help us understand how are your prioritizing a your investments in terms of a developing specific offerings and secondly, you know other specific areas that are a small portion of your current revenues, which are but you think will become more substantially over the next two to three years.
Yeah in terms of right dictation up where we met or to have in we launch.
Ah between the studios and where beefing up some other than we had from before a into something that <unk> in terms of where we are easy for example, the conversations they were seeing a big trend on the game space, but the time, some trends going up but not just on producing gains but also on operating.
Which is something that is becoming the also we are investing in life science. They are you know we laugh acquisition. We did we acquire like a big group of people and big clients to err on the life Science Bay.
Well, we had already you know.
People on projects there.
But they were not that substantial up they are today. So that's another big investment that we are doing the second part of your question was sorry.
Yeah, I are there any any specific areas Oh, yeah offerings, which are which only very small small portion of your current revenue is but over the next two three years. It think will become much much larger.
Look I think I think the conversational space, although now small it would be very deep.
Everything is moving into conversations and people are doing.
How they save them up on building applications that compete on the on the up store and thinking about how it plays a role but behind no faced with let me share or what's up or any of those platforms, where we can accelerate that that's one point that the other point that I see that given this new technology that we're bringing to the market you said.
Coding, we are kind of reinventing the way, which oh, the way of Jim beam or generating code is is it is happening.
And we see that up an acceleration of our current client that we went so we see a although right now we are.
All that growth is that all across our customer and I think that that could drive no big thing for the future and their money. It's nowhere you know our platform and we are using and very successful way, which is starting the apple with a would have been.
Dealing with that for many years already a and I think now we are discovering you know some ways to to make it a grow faster, but those are the towards we think that could you know it would be a really big it towards the future and of course, you know we took the execution on the life Science based no I think less.
It could be really be connected to the.
Great great.
Does that Oh, well no question I know when it had asked this but let me ask you're in a different way.
Suddenly Tokyo is very good and secure a also.
Right are really good guidance are there any workflows.
In Tokyo, or Threeq, you, which are one off in nature or are there any projects, which I guess short time and one off in nature or or are.
Our is you know sort of the upside in revenues coming from projects that are much more on ongoing and and their ability to continue into Fourq you went into next year.
Yeah. So this is why here how are you aren't.
So.
Look I mean, what we.
Well, we continue to see.
Transformational programs right or we may have seen some companies slowing down a little read on that.
And any of the Q2 or keep in mind that we decided to keep you know our employees and the company because you know <unk> basically we felt that we were you know very well.
And to be short term so now.
Our starting listen I listen to come back.
Hey, Larry again on some of those projects are we're ready to start because you know basically we kept pretty much.
All the people become a.
I know you know we came back.
Turning hiring a to be able to face that.
So now you will see not only those great work I know load on scenario again coming back but also there will be some you know some companies that are now decided that it's the time and I cannot take out.
To start this transformation programs. So no I don't think I went out would you probably saw some early but where a low down I mean box.
Great Great Oh, Thank you very much and a lot.
It did back in the future additional questions.
Thank you. Thank you.
Your next question will come from Maggie Nolan with William Blair. Please go ahead.
It is cut on for Matt. Thanks for taking my question, marking so during the quarter and you touched on your prepared remarks, you announced a new members and your management team, including a two general manager in Europe should we read into that in terms of increasing focus and building out presence in Europe.
More meaningfully and maybe any color you can add on expectations.
For Europe, a in the near term here. Thank you.
Hey, how are you. Thank you as a matter of about two Maggie.
The answer the short answer is yes.
And.
So we we're looking into into many different customers Euro ER and completed many other customers to Europe, we see our competitive offering a very attractive for the Europe market and.
I I believe that this this this year could be a very good here you have seen you know that the year over year growth that we deliver for Europe.
It it quarter over quarter goals.
It's very good and I believe that that's been a.
I keep on happening.
So.
Yes, it yet we separated Europe into we analyze.
How we've done a couple of how we're going to be invest in there.
We are thinking about you country when thinking about a new spaces for revenue countries like Germany for example that before they blow on where pretty much unexplored no we're seeking opportunities there.
I think that it did not quarter for for the for the question [laughter].
Yeah, maybe one of them.
No you look for or beyond.
So in a $50 million operation.
And it's very clear that decisively costumers, indeed, although the needs, but those customers how are the same anytime they want.
Yes, so well assay shop.
It's really not penetrated market. So it's a very large people Judy and we are.
No we didn't know if that's what that's man.
To to materialize.
That's great. Thanks, so they sort of color on that and that is one that's about the overall pricing environment, maybe how that's progressing over a quarter and change since the first quarter. Thank you.
Yeah, No you know during during the second quarter.
As expected some industry.
How big partners for long time on where we said really popular by the Cobiz situation. They you know they came asking for you know some concessions on things like that I'm very very selectively I'm very very few cases.
Where we really felt.
Those those companies have been long term.
You know they were being a impacted by the if you buy the Colby.
We did have some some small concessions no doubt that situation.
Its current one m. on on I think about whether with the recovery.
The early industry that pricing.
Question discussion, we come back after capital it's been it's a very hot market.
Historically on the whole market when Youre, providing a service division, but I imagine you know you're typically able to do you know to get up premier or increasing your price. So maybe it's not still got moment, yet, but it wouldn't it shouldn't be too far.
Alright, Thank you very much.
And our next question will come from.
Ashwin Shirvaikar with Citi. Please go ahead.
Oh, Thanks, Hey, I'm not in high one hope you're well.
My first question is with the hundred square.
Initiative.
I think you have currently one client about 50 million. So I mean, I am kind of wondering what the.
What the.
Meaning is currently of ER and I'm, saying, we're expanding the you know from 50 square 100 square.
Are you going to.
For example, up you know spending on on sales is this a no is it just more off a very long term you know yet yeah, we want to get too much larger clients.
There I mean, just wanted to get some color on this.
Yeah, I know I don't I'm not thinking.
Anything that has changed in addition, the change in you know marsh's expect in changing machines for that.
I'm just changing the decent I mean, we are not that far from becoming a beat in the company I think that ill or there is currently not enough or for the addition of the company or the reason that we.
We need to help we need 100 customers instead of the that can drive behind it.
Instead of you know.
So so that that.
A renewed vision for our team and a renewed vishal poor or are we going to do in the market now, yes that would imply anything different from what we had on that is growing the answer the short answer is no.
And would try to people in driving growth I'm faltering does that Gunther ugly thought investing in those accounts and where we did in the bottom same proportionately didn't but.
Of course, there reaches that need some additional investment, but but but he has always been decay.
So I don't see anything changing but the aim and the spirit of what we want to do what the company a message will you guys. That's analysis.
We're always seem to Oh, yeah for the whole company.
Okay. So are you because I also see that the the total number of active clients gone down and kind of wondering if that's a function of.
Just you know near term impact of call it.
Are you, perhaps you know refocusing of stepping away from clients. So you can focus on an idle or list that you can go after more actively.
You know.
Or is it just normal ebb and flow off then.
Sure Hello, everyone Hope your hope, you're well as well loop.
You know.
Your bromine we've grown the company I looked keeping the same amount of Scott <unk> white.
So when we were I believe was basically focusing on.
More potential on overtime, you know ending some some.
Relationships and we would know not read a lot of future. Then we have a number of acquisitions that you know significantly increased the total number of customers, but again you know we continue to boost the company towards focusing on long term customers.
Hi page.
Which is basically the beach.
That's why the 100 square now what that means is we keep on focusing on those accounts, we won't be there are some of the hours eventually may fade away.
Because.
Well before the company's from those those customers.
I'm really really match and change what they do change well they want to do with technology or we can help so I wouldn't look out over a number of customers. You thought you know, we recently announced ideal that would be greatly increasing the number of customers, but I think what what is more imports.
I mean, the quality of those customers on how you know everything we worked and we continue to increase the number of accounts were 1 million over 5 million to let them meeting over 20 million. So that is the focus look what you're trying to do a that's why I didn't really getting to that.
Got it understood all right and then a quick clarification on a on the.
On the Qt outlook.
And Miss what you said the total inorganic contribution would be so then there's.
Great and then it is only one month I think of Bellatrix no.
Yeah. Yeah. We guide you are you, calling on $3 million 11 million, though those will come from inorganic.
Okay.
Well.
Well you fully integrated I don't think Oh, you know I mean im sorry.
I've been distribute it together with their risk.
Organization, So I'm I'm talking about G.H. confusion, because we just bought a company and again, that's always you would see very quickly integrating the teams and everything but what we're seeing anything right now $11 million coming from the second season.
Got it sort of a 5% sequentially, it's pretty good anything one hey, thank you.
Thank you.
Your next question will come from say starting to data with Morgan Stanley. Please go ahead.
Hi, congratulations on that on the result.
I want I mean, you sort of touched on this earlier, but I want to get more visibility to the extent that's possible on how are you aren't doing with a new clients new logos, especially on the New studios that you just launched thank you.
Yeah sure Hi, how are you I think that there's there are many many different you know upfront here.
On the on the conversation has to do that and we are having a like a lot of demand from many different company site at customers from mid sized company Lifesize company.
We are having like demand in terms so.
We need to the breadth and on that new channel and that we are delivering those solutions for them that they're working on those or something then then on the lifetime space, It's a new states, where Oh, we're getting a lot of demand during the day.
The chart, where we came through what what he can come from that acquisition, but also no big you know big brands that are we closed this war or as new customers that we didn't have before oh.
Also very exciting for go one then a on the yeah. The one conversational.
<unk> and life science or the two main.
Then we have under in state and where it seemed like it migration on the deals are going from I mean, you kinda migration, but an addition going from creation and development of gain into operation updates and these games have been very intense either them. So.
You know how many ever they have online how many millions of people they need to serve and with this bundling all got accelerated so I'm feeling and I've seen a like a lot of demand on that a specific state and then on the on the you know gosh replacement space.
I would say hey, it's kind of Fintech Fintech thing were seen also a lot of pvt. Many things are happening in many countries.
Oh the classic so it's like a vector while where the buyers can get you know turns made it and people are preparing not to use Scotch and they are reflected in the demandware in that specific state. So those are four main area, where we're seeing activity right now and of course.
Everything has to do with entertainment a unknown I entertainment is growing better they thought and and you know our main customer Chegg Dot 100 million.
It is subscribers into that plan into the Tappan Zee plot.
That's remarkable that have any jockey picks at a month or so I feel that's something that.
That he will.
It will keep on generating things for us and and we are placing the rightly.
Great. Thank you.
The way look at our final.
And our final question today will come from Alex Kurtz with Keybanc capital markets.
Go ahead, yeah. Thanks.
Thanks, Alex Kurtz is keep.
Q4 in it.
You know the challenges of hiring enough people and you know during during this period here with coded how should we frame.
Hiring plans into the ended a year and into next fiscal year they'll be helpful for the models.
Hi, how are you ready.
And well, we're seeing that became the into higher in Q3, you know that.
My opinion runway explained before I mean, we've had many clients growing faster and asking for for new talent and we are developing you you specific garland within your seriously. So they were hiring and meaning that pick for Q3. So we're expecting to continue growing up.
That's right.
Well thank you maybe.
Oh got Oh.
We all know where engines are really two collier.
No. We have been we probably have very decentralized company for a long time, well, we have always been able to do you know how well we're used to doing interviews on June a you know.
To do that first couple of they can deal fees.
Meeting with people a you know digital channel. So you know the stuff a little bit more.
Well, let me try but we are we're fully fully ready to two people hiring to keep on on boarding people. All the training is really to be though.
Online offline whatever way so I mean, it's going to me I mean, I think we're ready for the challenge or hiring.
Regarding bar.
Thank you.
And this will conclude our question and answer session I'd like to turn the conference back over to Mark King for any closing remarks.
They are much everyone for participating in our Q2 earnings call 2020.
And are really looking forward to see you on our next earnings call and again, that's on an as always thank you very much for your support on attention. During all these are all these years. Thank you bye bye.
And the cost is now concluded. Thank you for attending today's presentation. You may now disconnect your lines the time.