Q1 2022 Globant SA Earnings Call
Good day and welcome to governance first quarter 2022 earnings conference call I am Katarina do an agenda.
Chief Digital officer at Goldman.
All participants on this call will be on listen only mode. After today's presentation, there will be an opportunity to ask questions.
Please note that this event is being recorded and stream lived on Youtube by now you should have received a copy of the earnings release. If you have not a copy is available on our website investors <unk> com.
Our speakers today are Mark <unk> co founder and Chief Executive Officer, Quentin with Yang Chief Financial Officer, Patricio <unk>, Chief operating officer, and Diego that a better global Chief Technology Officer.
Before we begin I would like to remind you that some of the comments in our call today may be deemed forward looking statements. This includes our business and financial outlook and the answers to some of our questions.
Such statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Please note that we follow <unk> accounting rules in our financial statements. During our call today, We will report non native forest or adjusted measures, which is how we track performance internally and the easiest way to <unk>.
Baird global to our peers in the industry you will find a reconciliation of ifr as our non <unk> measures at the end of the press release, we published on our Investor Relations website announcing this quarter's results I'd now like to turn the call over to Martin <unk> our CEO .
Good afternoon, everyone I'm happy to be back with you again.
This has been another important quarter for our company's growth.
I'm excited to share some of our newest and update.
Clemens creativity innovation and interpret area culture continues to deliver strong results.
In Q1 total revenue was 401 $4 million.
Representing 48, 6% year over year growth.
And five 7% quarter over quarter growth.
This was made possible by our ability to meet the expanding demand for digital transformation.
Regardless, the short terms event in global markets and geopolitics organizations everywhere need the right technologies to grow.
Because of these Gartner estimates that through 2025, 75% of enterprises will accelerate their plans for digital business transformation.
Across all sectors and geographies users' needs to interact seamlessly with companies at all times.
So organizations are eager to leverage all sorts of technologies and touch points to deliver superb experiences.
New ways of engaging with customers and employees such as the members will continue to appear.
Our global we have build our capability to scale and identify new trends as they arise.
Just like we have done with artificial intelligence augmented reality, the met hours or blockchain technologies.
We're confident in our capacity to offer our clients the best mix between ideation innovation design and engineering.
We deliver end to end solutions drove our full agile and global delivery model.
Now before we move on.
Like to say on behalf of the global family, how shock and sub we are regarding Russia innovation of Ukraine.
Even though we don't have operations or clients in either country, we start with the families affected by this conflict.
We will continue providing all the help that we can as the situation develops.
Now I would like to share some insights on our plans for the future as we continue to grow our teams of talent.
First.
Regarding our geographic expansion in Latin America, we continue executing on our plan to expand in the region in Chile, we intend to increase our workforce by 40%.
To accommodate such growth we have recently opened a new office in Santiago.
And when I say this one of our largest talent development centers. We have opened our office in the newest high rise building in the city, which we are calling the global tower.
It will enable us to continue expanding our local team.
Beyond our physical locations, we want to reinforce our sales as the employer of choice for digital Nomad.
In this sense, we have launched different plans to promote autonomy and flexibility.
For example, our work from anywhere policy aims to provide flexibility for those who want to travel and develop their career at the same time.
Our second growth pillar in both global innovative platforms developed under our global next division.
I am excited to share our most recent acquisition that comes to expand our blow on export folio of platforms as well as the geographic reach of our clients.
Last month, we announced our acquisitions of Gen Xs and AI power low code software solution company.
There are products simplify software development by generating enterprise applications and user experiences without the need to learn each new technology from scratch.
<unk> is a trusted partner for companies in all regions of the world with over 1700 organizations using his products.
Global is also taking a big step in our geographic expansion into Asia with this acquisition as 30% of its revenue comes from Japan.
Most importantly, this acquisition is directly addressing a huge trend regarding low code and no code software.
The concept of making software development easier through AI will guide organizations to strategies for the future.
<unk> come to address the ambition and complements two of our <unk> X platforms first.
Sure.
Our augmented coding brothers that accelerates the coding process.
It's AI power engine remove the complexity from cluttered coal basis.
Our GOR makes gold more accessible by helping people understand and automatically document called bases from multiple repository fast and simple.
Second magnify approve that offers automated visual testing to enable better and faster quality assurance and product <unk>.
Unify us as an AI powered magnifying glass that delivers amazing results today, the product is already being used by clients such as Rockwell automation D C and Nissan.
And finally, we continued to drive the way forward for our reinvention studios.
With these studios, we are helping our clients as we challenge the way things are done across different industries.
Today I'm pleased to talk about two new reinvention studios.
Ill begin with our smart payments reinvention studio.
Digital payments have been an amazing growth trend for many decades and hidden inflection point with the pandemic.
Today consumers have many choices in how were uneven when to pay for their products and services.
Companies across all sectors need reliable ways for clients to interface with their platforms with.
With the smart payments reinvention studio, we leverage <unk> capabilities in AI UX analytics on blockchain to make digital payments simpler faster and more secure.
We graded customized payment solutions that provide a scale level adaptability to deliver frictionless experiences and drive trust.
Recently, we have also launched the ethics studio.
To respond to an important paradigm shift in education sector.
Until recently most professional spend the early parts of their lives with formal education.
And then move into the War force.
Today disruptive technology is constantly changing the world.
Creating the need for lifelong learning Upskilling and Reskilling with.
With the <unk> studio, we leverage our boss experienced in the industry to develop personalized learning pathways and provide engaging experiences.
Lastly, I would like to share some news about our board of directors regular.
We are glad to welcome Andrea Padrone as our newest board of director member.
Based in Hong Kong, Andrea has an extensive career of JP Morgan in business Advisory investment banking and human capital both in Asia Pacific and Latin America.
She brings a new and more diverse perspective to the table.
We look forward to her insights as we seek to expand two exciting new growth markets and finding more ways to connect with partners clients and communities throughout the world.
As we look for <unk> continues to have a strong pipeline across different client sectors and regions of the world. We're confident in our ability to deliver high growth in the upcoming years.
For a closer look at our expanding technological offering.
I would like to turn it over to Diego <unk>, our CTO vivo. Please thank you very much.
Thanks, Martina and Hello, everyone I'm here to share insight on Lumens growing network of studios and how we find new ways to help our clients transform.
As Marty mentioned, we have launched two new Ray mentioned studios, we see that there is a need to understand industries holistically as they face the need to remain due to several trends that are driving consumer expectation. One of these trends is the appearance of the meta versus while in its early stages. It is here to see organizations now feature.
The challenge as they need to get their business ready for this new word while their users are still learning to embrace this new era.
We just launched our Sentinel report about this trend with very interesting findings, we uncover that a while 73% of the respondents field of meta versus accessible to them only 26% of them have experiences.
So there's a huge potential for the mirrors and we'll continue our company and our clients as a dive into this new word.
To read more about this key trend we invite you to check our Sentinel report at Sentinel <unk> Com.
As we expand our digital capabilities, we want to give our clients the right tools and processes to build an organization that is ready to succeed as a digitally transform.
Last month, we announced the creation of the digital performance studio to improve output of teams within organizations.
In two decades of assembling auto parts, we have learned that not all organizations have the same level of performance in this position to carry out change.
In many cases the leaders who are tasked with fixing this like the right information to make the right decisions.
We have collected an aggregated data Paul methodology.
This new studio has turn these learnings into our proprietary platform to provide insights into the efficiency and performance of teams.
This insights help leaders, making informed decisions that not only improved performance, but also foster environments that are attractive for top talent.
Now I would like to share with you more about <unk> Torrey told through work with our clients and our partners I'm excited to share that our digital payment platform Power chart part of our global portfolio has recently closed a deal with Spanish venture capital firm Simon Sonic.
Together, we will create a groundbreaking <unk> solution set to transform how consumers make payments moving from ups and cards towards the most juice platform in the spring.
Moreover, we are providing engineering and <unk> services to improbable.
Base metal versus technology company there.
Establishing a network of interoperable with three meta versus powered by either Morpheus technology. This technology allows companies brands and creators to interact in virtual spaces with less friction.
Are eager to be participating in this new space, because simplifying human experiences and intuitive ways through technology is <unk> core mission.
Then we were partnering with dropbox to create a new platform for artificial intelligence and context, driven enterprise search.
This project integrates Buster rate of its internal and third party knowledge repositories. This search engine will have dropped most engineers and customer support professionals to assign behr products for its customers, while working smarter and faster DAA.
The AI component of this engine is expected to improve the developer productivity, but as much as 15%.
In Latin America, we're working with mall Plaza, a shopping center with 23 sites and part of the <unk> group one of the region's largest retailers, we're partnering with them to build an agile delivery model carried out by a click and collect appreciate those solution.
To do this we're bringing together hardware integration and our flexible back office management platform for our commercial partners the.
The result for the customer will be to seamlessly purchase a product online and pick it up from the smart locker located at one or more plus sites.
Lastly, also in Latin America, we continue to work with the financial services sector and industry in the middle of a profound transformation in <unk> is a leading platform for be two repayments on installation treasury.
So each platform multibank operations, our centralized into a single platform solution, making transactions more efficient and ensuring the streamline accounting management.
Laurent is boosting their digital transformation and acceleration program to develop and launch new and disruptive digital products and capture the market momentum now.
Now I'd like to turn it over to Patricia <unk> our CFO .
Hello, everyone. It's nice to be here again, I'm excited to share news and our work with <unk> as well as with our clients.
I'll begin with a snapshot of Q1.
The Walt Disney Company continues to be our largest client.
It reflected our growth this quarter of 55% year over year, and five 1% quarter over quarter. The rest of our accounts collectively grew by 47, 8% year over year, and five 7% quarter over quarter.
Our 100 square strategy continues to show results.
Over the last 12 months, we have 13 accounts that brought in more than $20 million of revenue compared to eight from last year.
We also had 206 customers with more than $1 million of annual revenue compared to 139, one year ago.
Turning to the geographic distribution of their revenues in Q1, 63.1% of our revenue was from North America 23, 5% from Latin America.
Seven 1% from EMEA, and two 3% from Asia and Oceania.
During our last earning call I shared how we monitor our net promoter score as a metric to determine how our clients see the quality of our service and our overall relationship.
We believe in building lasting meaningful and transformational relations with our partners as we carry out consistent reinvention.
Over the last 12 months ending in Q1, we had a score of 66 two points above the previous quarter.
I'm happy to see that this remains well above the industry benchmarks.
Our team of global keep expanding we are now 24500 for creative mind.
This represents an increase of 41, 9% year over year.
73158 of our global profession.
Professionals.
This represents an increase of 42, 2% year over year, we continue to grow our presence in all of our delivery centers and we are proud of having consistently work towards a well balanced geographic distribution.
Some of our locations have been growing at unprecedented rates, such as India, where we have increased our head count by 85, 4% year over year.
Our core attrition rate is 19, 6%.
There is no denying that competition for talent is as high as ever.
However, we believe we are better prepared to adapt the new talent needs as we are constantly reinventing the global experience.
<unk> put we want low band to be the best place to work anywhere in the world.
To make this dream reality, we are developing a new internal approach for talent and career management.
The new global centric model focuses on what each blogger needs to encourage autonomy creativity and teamwork.
We've simplified processes as all the internal areas focused on solving any challenges our globus may have.
From carrier development to Onboarding and benefits, we embrace a global centric mindset as a reflection of our embedded Purion Ms. Org chart, where the organization's primary goal is to achieve both global and client satisfaction.
In parallel we are improving the global experience by offering benefits that aligned to each stage of the global carrier and personal lives.
With our diverse approach we have mapped benefits that go beyond the standard ones and address different needs for different time, such as parental leave leadership training and counseling.
It's been an ongoing principle of this company to offer opportunities in this industry for talent all over the world.
Through our <unk> initiative, we have put in place different courses and programs that aimed to help people joined the bromine industry.
Today, I am happy to share that we will be granting 15000, it's called our seats for people to be training technology. This is in line with our previous wrong of 5000 scholarships in the cardio future initiative.
We are really proud of the positive impact that these programs are having in the broader community and we expect to continue investing in similar initiatives.
At the same time, we believe that is imperative to inspire the younger generations.
We want to transform reality through education, and bringing the right tools to inform multi rate and facilitate access to 10 carriers around the world.
Our project inspire.
Aims to help teenagers throughout the award fee the endless opportunities that the technology field offered through workshops courses and much more.
We set a goal of reaching up to 1 million young people. So that we can spark the next generation of disruptive innovation.
Extremely proud to see that all of our initiatives are contributing to a great work environment. We're really happy with the recognition we are receiving for our culture such as great places to work in this ranking we hadn't been named a great place to work in all the countries, where we apply.
Such as the United States, Argentina, Uruguay, Colombia, India and Mexico.
We're in front of a huge opportunity and we'll continue to strive to be the best place for their talent.
Everyone and with that I will turn it over to Juan for the financials.
Thank you and good afternoon, everyone I hope, you're all doing well, let me start by summarizing the results of our first quarter I will then discuss our guidance for the second quarter and full year 2022.
We are delighted with our overall results for the first quarter of 2022.
Our business continued to show robust momentum.
Revenues for Q1 were $401 4 million, representing 48, 6% year over year growth on a five 7% sequential growth.
<unk> continues to deliver industry, leading growth and we continued to reinforce yardstick, although the future of our company.
We estimate organic revenue growth for Q1 was around 43% year over year on a constant FX basis Q1 growth was 49, 2%.
As discussed in prior calls the demand for our end to end digital services on platforms is stronger now than what it was before the start of the COVID-19 pandemic, we feel confident in delivering robust levels of growth in the upcoming years as companies continue investing in digital transformation for their <unk>.
<unk>, turning now to profitability, our adjusted gross profit for the period increased to $158 $4 million representing for a nine 5% adjusted gross margin compared to $107 million, representing 39, 6% adjusted gross margin in the first quarter of <unk>.
'twenty one.
Adjusted operating income for the quarter amounted to $67 $5 million or 16, 8% of revenues compared to $45 million or 16, 6% of revenues for the first quarter of 2021.
Demand and pricing environment continues to be strong largely offsetting the ongoing inflation in the labor market and we also continue to drive SG&A efficiencies with our increasing size.
In addition, we continue to drive us more Boe, increasing amount of revenues from services products on platforms that support breaking revenue on employee growth linearity.
Together this will help us maintain a healthy adjusted operating margin profile and continue making the required investments in the company to the <unk>.
Attractive market opportunity in front of us.
<unk> effective tax rate for the quarter was 23, 8% largely in line with our guidance.
Adjusted net income for the first quarter of the year totaled $58 million, representing 12, 7% adjusted net income margin compared to $34 $2 million, representing 12, 7% adjusted net income margin for the first quarter of 2021.
Adjusted diluted EPS for this quarter was $1 19.
Based on $42 7 million average diluted shares for the quarter compared to 83 four.
For the first quarter of 2021 based on 41 2 million average diluted shares for the quarter.
Adjusted EPS for Q1 implies a solid 43, 4% year over year growth.
Moving onto the balance sheet, our cash and cash equivalents and short term investments as of March 31, 2022 amounted to $371 million.
As expected Q1 free cash flow was negative as it concentrated tax and bonus payments Q2 is expected to improve during the second half of the year, we forecast a significant free cash flow generation in line with prior years.
Currently our credit facility is fully undrawn.
We also continue to successfully execute on our capital allocation strategy with integrations of recently acquired companies going as planned.
Now I would like to talk about our guidance for Q2 and for the full year 2022 based on current visibility. We expect Q2 2022 revenues to be at least $425 5 million or.
Our 39, 4% year over year growth.
This expected revenue growth includes a negative FX impact of two five percentage points.
Q2, adjusted operating margin is expected to be in the 16% to 17% range.
<unk> tax rate is expected to be in the 22% to 24% range.
Adjusted diluted EPS is expected to be at least $1 20.
Assuming $42 8 million average diluted shares outstanding for the quarter.
Regarding the full year 2022, we expect revenues to be at least $1.768 billion or 36, 3% year over year growth. These expected revenue growth.
<unk> may not even fixed impact of two percentage points.
For 2022, we expect our adjusted operating margins to be in the 16% to 17% range. While we continue to strongly invest in training programs, you've got the niche technologies and expand our sales coverage to further develop our business are you for instance would be tax rate is expected to be in the 22% to 24%.
Range for the full year 2022, finally, we expect our adjusted diluted EPS to be at least $4, 94% for the full year 2022, assuming $42 9 million average diluted shares outstanding for the full year. Thanks, everyone for participating in the call for your coverage and support.
Okay.
[music].
Yes.
Sure.
Yes.
Thank you Quinn as we go to the question and answer.
Alright.
Question and answer section of this call I will announce their name at that point it'll mute your line and ask your questions. Please mute your line actually your question is done. We also ask you to please limit your time to one question and one follow up. Thank you very much. The first question today comes from the line of changing Wang from Jpmorgan. Please.
Go ahead.
Hi, Thank you Kevin if you can hear me okay.
Nice results of course, I wanted to ask on the low code No code.
We've been hearing a lot about that in the marketplace and of course, you guys did the <unk> acquisition, which you guys really interesting. So im just curious Dan and team.
How do you think about that.
How it fits with just broader.
Obligation develop there right. It just feels like there is.
There's going to be a change in effort if you believe that.
Okay. Good thanks.
And the better ways, I guess I'm trying to understand how does application development change right.
Building the application as we are so used to seeing too for building the tools right.
That help others build applications on their own so I'm just trying to understand what.
That means you have down the road for the broader model.
Yes.
Absolutely maintain thank you so much for the question and thank you for being here today.
I believe that.
Augmenting and changing the way we create software is up.
Absolutely an imperative for this industry I mean, it's part of reinventing.
The industry in which we are.
I think global is playing a big role there and.
We have started already with the augmented coding initiative now call our goals and that progress is taking a lot of traction.
Is gaining really amazing levels of.
How to document how to understand code in a different manner and with that how to help developers to create better cope.
And we were thinking about the way in which we can integrate that understanding of the code into.
How we can create code much faster.
And we have examples within the nexus of creating entire no.
Core banking systems of no 5 million lines of code.
Using kind of a natural way of describing things.
Dragging and dropping health.
Yields and ways of.
Explaining assistant what to do so I believe between.
Genex's between our GOR.
Ah Magnify, which is our augmented testing initiative, which computer vision of help testers to cover which are the difference that our into in the prototype and then on the real product that has been developed.
We're creating kind of an augmented engineering vision that will propel the developer the developer of software towards the future.
My perspective areas when we talk about reinventing the way this industry has been developing in the past and talking about concrete steps concrete actions into that initiative. So yes.
Yes, Okay with logo I think is augmented engineering I think it's a way to create software in a totally different manner of course. This is just one more initiative on that vision that we have.
And we will keep giving more and more steps towards that with a war with magnify with Gen xers and integrating maybe more potent <unk>.
I'll have to hand, it over to be able to.
More about that because this is something that we love so diego.
Hi, <unk>.
Like like Marty said, I mean first one thing.
I got in touch with the Phoenix was 20 years ago.
We're all over.
And connects US have adopt point had being in the market for another 10 years, so and at that point I remember that there was a discussion of our you know like the.
The low code no code tools, taking over.
And here, we are 20 years after they co exist. However.
Given the rapid change in technology, the footprint of local local solutions multi platform development development frameworks etcetera is growing is growing fast and this is a clear change and we want to be drivers of this change no no followers.
<unk> is a very very strong and mature platform.
Allows us not only to create so far without coding with not just to settle with the traditional template those type of interfaces, but it has evolved and incorporated a very solid strong design tool.
Into the tool itself, allowing you to create top notch type of software so.
Our bet here is to drive the next 10 years in terms of how we will develop software. This is part of.
An integral ecosystem is only one move like Martin said, we will we want to we are thinking about 10 years ahead, what's going on what will be going on and we want to be there like now studying now.
So again can exercise I think it's a very strong tool they will be.
Opportunities for <unk> to use it to use it as a baseline for different type of solutions and that will bring immediate risk.
The result, but looking further down the road from a strategic standpoint, I think it's amazing this.
This movie is amazing great.
Great.
Thank you both for the year.
Let me just add a quick follow up if that's okay.
One on the guidance of course.
Guidance question, just with the raise here what were the pieces that chain.
<unk> I think you said two points of FX, that's pretty consistent where we had what about the organic inorganic contribution.
James there and anything else to call out yeah sure. So for the year, we guided.
Millions of $168 million, which is about 36, 3% year over year growth of which we estimate their own 33, 5% organic growth.
I mean the domestic.
In us.
Around $5 million for that for the rest of the year because we do.
Close hopefully in.
The next two or three weeks. So it's a very small impact for this year. However, as our view on Martin explained it's very relevant to us. So in summary for $6 three out of which 33, three and a half are organic and for the full year, we're seeing about two percentage points of negative impact.
From from FX, primarily due to the euro and the GBP would have.
Depreciated significantly relative to the dollar.
Perfect. Thank you guys.
Thank you you're welcome.
Thanks, Tien tsin.
Our next question is going to come from the line of Brian <unk> from Citi. Please go ahead.
Congrats on the good quarter and thanks for taking my question.
I just wanted to touch on the pellet market and competition there given the ongoing geopolitical situations a lot of your competitors have started to look more aggressively in areas like Latin America, India and the hotel.
So I was wondering if you're seeing any incremental competition for talent in those markets and if you believe this could lead to elevated wage inflation or attrition in those markets over time.
And thank you for your question.
The last couple of months of course, I mean, the situation was a little while as Martin mentioned was not very happy for the wall. So that was the first thing that we want to say I mean.
We will all shock about what was happening, but yes, I mean, what we have been building of course in growing as fast as us as you see in our numbers and the talent that we are acquiring a firm that places in India, India is growing mostly than other places in the famous S as Colombia and Argentina.
And of course, I mean, some of the talent that we have and you know that we have a small office in India and we have an office in Romania that is helping contained installation there so for us I mean, keeping the pace and growing the talent has been something that of course, I mean, we sustain.
And we keep the we hope that will go into.
To continue sustaining for the restaurants in Florida.
Idaho and Oregon.
So in terms of wage inflation, yes, definitely we will see more wage inflation for this year.
There is competition for talent pretty much all over the world.
Now we believe we have the right culture the ROI projects.
The right value proposition.
For people to continue to joining our company and we're pretty comfortable to coupon attracting the talent that we need to meet our targets.
Our complement with one more concept I would say that.
That America is a pretty large continent.
And it's not our one data.
When they we cannot operate more any more in our place and now we're turning to Latin America and that says you.
You need to have capillarity, and we have the largest capillarity and the marketing dynamics by far.
So I believe that.
Even though that competition may look.
Like a challenge to us, it's an opportunity because everybody.
Everybody is looking into Latin America, now and we are the largest in the biggest with the larger capillarity in the region.
And that gives us like a like a very good starting point to start discussions so I believe that.
Although that that trend that youre seeing is happening.
We're in the best possible position and one more thing which is.
We're convincing.
So newcomers into the industry in Latin America every month.
And that's a very important thing for the future and for the sustainability of how to develop and how to create this industry. So us summarizing it to your question.
I believe this is an opportunity to us rather than a challenge.
And that only strength.
Our positioning as leaders.
In the region.
Having the largest capillarity and the largest reach in terms of cities amount of employees.
And capability to recruit and to go deeper into other places as we are doing now so one of our core pillar.
Pillars for growth is.
Is that we want to expand everyday into more places in America, but not just in those cities in.
In a more countries, but also in more cities.
Talent as we have seen during the pandemic and we have been talking about this for last.
10 years at least 15 years at least.
Talent is everywhere and the more capital or you are the more the closer you are towards that talent is the better and thats, what we have been beating forever and now it's happening so very very glad to have this opportunity.
As I said, it's very difficult to.
The moment that we are living in terms of all the things that are happening.
In Ukraine, and Russia, and other region I think it's very bad.
Keep on helping and we keep on analyzing the situation as much as we need.
Understood.
Also just touching on attrition in the quarter. It seems like it ticked up a little bit. So I was wondering if there was any areas in terms of countries or is still sites are those concentrated the most I know in past quarters, you said nutritionals kind of heightened the world there in Argentina with some new competitors coming in the space. So I don't know if it was still high in Argentina, and then just one more on that front.
In terms of the Belarus head count that you guys have any.
Color in terms of what you guys plan to do all of that in terms of.
We're maintaining our bodies presence or if it's going to be a tough slog.
Yeah. So.
This quarter.
Reached 19, 6% sliding.
Slight increase compared to last quarter.
We believe that attrition is going to stay around that number.
For the next quarter and eventually we should start seeing some decrease.
And the second part of the year it continues to be driven.
But by Argentina, primarily where given the macroeconomics.
There is still a lot of.
Things happening that make people, maybe more more willing to purchase.
Joe sometimes.
We don't see it happening in other countries or the same level. So it's more concentrated in one country.
As for the second part of your question about Belarus, probably I don't know partners, who want to take it there.
Perhaps minerals Douglas, but it was people moving out Oh, yes of course, I mean tobey.
Yes, I mean windows S&P from from <unk> to <unk> to Argentina, and then we open that and we have been very close to them trying to explain the situation of course and given them the tools to if they want to move or if they want to continue their career, England. As you know we have this.
DNA Anglo entities relevant everywhere. So you have the opportunity to move from different cities. So we have there and we move some fabulous F to Argentina, where they are living in right now and they are planning some of them are planning to stay for long others. I mean are evaluating if theyre coming back are probably move into other.
Places.
Of course, we have a strong I mean, we keep the office function in an open there and then it grows and we were really close there we will have been helping with defense.
Strategies in the sound liking remain and in Ukraine, I mean, we have been open.
Opening positions and four for women for example that are now the head of the families and some of those cases. So we have been recruiting some people in the front. There. So I think that there is a lot of fans and we also opened an office in Poland. So we can operate there and we can of course the EMEA.
Some people that just want to move our funding opportunities near the places Elliot.
We have less than 200, we have around 200 people on there in <unk>.
In fact, they're really important for us their families.
A really important for FERC <unk> of course.
Understood. Thanks, John .
Yes.
Thank you.
Yes.
Alright, Thanks Ryan.
The next question is going to come from the line of Arturo Langa from <unk>. Please go ahead.
Good afternoon, everyone.
Gratulation.
On the results.
I had two questions I think the first one is on the back of the <unk> question.
It would appear to me that <unk> could offer gen Xs a much wider.
Access to Blue chip clients and I, just think thats, a very big opportunity for that type of acquisition and expanding that product to a much wider or.
Or much better set of claims I just wanted to get your guys thought around that.
And then the second one is I wanted to ask about a project you finalized who are carrying out for why PFS in Argentina for the oil company in Argentina regarding the payment solutions I just thought it's interesting that in a country. That's.
Reflection of the current macro environment with inflation and such that a company such as IPF would bet on digital transformation and sort of doubled down on that effort.
And I also wanted to group and congratulate you on your recent award for seals Congratulations for those.
Two questions.
Thank you very much and I'd.
I feel very honoured because as that team build maintain and and being of course, I mean voting by some other peers that were more than 30000 people voting on this yellow rose of being there on the top 50 has been something that we are doing also gathering global and it's just.
One for all of US. So it showed that we are giving in timberland here. So thank you Ed and about in excess I think I'll let.
They've got to explain.
Sure.
So winter versus <unk> definitely we have actually many plans in terms of how to.
How's the go to market for <unk>.
The existing model you probably know is they use partners for creating solutions and.
And they say you should the connects was used to sell.
Two as a solution that was the way it was commercialized I think will have the potential to do much more now.
We have a <unk>.
Join the effort.
And definitely what you mentioned about go into Blue chip companies one of them.
With regards to IPF. This study. This study is actually long time ago <unk> by the way is the largest oil and gas producer in Argentina, and they started a transformation in terms of what they had to offer.
In 10 in 10 years for 2030.
As a part of that transformation one of the things that you needed to resolve is how they relate related with a user of what was there.
<unk> mission and how the gas stations, we're going to be transformed right in the set of services being offered there was going to be transformed so we partner with them long time ago and is part of that job.
Besides creating the app that was.
The second largest wallet in Argentina.
In terms of the transaction.
It's much more it's a means by which you receive services from both Ypa's you connect to the gas station you.
Pay with the wallet. So so actually it's very central to the value proposition today.
They had a if you go through their kpis that once we set as part of our success.
Cost reduction improvement in the NPS et cetera, we've we've just rocket like I don't know 100%.
Increase in the members of the reward system, 80% growth on the active users.
60% of their payments go through in the gas stations go through the wallet. So as a measure of success. So so actually <unk>.
Yes, they bad Big time, a long time ago, but is actually paying off.
As our business has been very profitable.
Perfect very interesting. Thank you. Thank you for your answers.
Okay.
Thanks Antonio.
The next question is going to come from the line of BMO at Al <unk> from Goldman Sachs. Please go ahead.
Yes, Hi, Hello, everyone. Good to see you all silica first congrats on the results.
Interesting to see a solid trends in a very challenging environment. So again congratulations.
My question is regarding the overall macroeconomic environment and the slowdown we're seeing in the economic activity.
UCP is impacting your business, let's say in the coming years entering a favorite of mine.
I might need to invest more in digitalization in order to be more inflation or do you see visibility to be represented.
<unk>.
For overall demand.
Hi, Thank you very much for the question hear Martijn.
It's an interesting question I believe that.
The long term demand for our services and in general for any kind of digital transformation effort are still intact.
They are way beyond earn interest rate rates right of way beyond that there will be an inflation.
And.
Companies.
We'll need to keep on doing what they are doing now which is.
Basically transforming reinventing their businesses.
And.
That trend will keep on going and that trend.
No matter, which analysts you see.
All of them are forecasting like huge trends in growth.
Of this market so on so forth now what could happen in the in the short term with those kind of companies needing to pay more money for four interest rates instead of paying that same money for video transformation, we don't know but.
What I can tell is what I already said in my in my initial statement, because our pipeline looks great bigger than ever.
And this is still a lot to do.
In terms of market share.
I don't want to be very very.
Very concrete here, which is.
Theres a steel.
Need to those things in a different way, which we bring to the market.
On other competitors don't.
So I believe that here there is a trend.
A very clear trend going towards.
Towards the industry also there's a very clear trend go in.
The companies that are reinventing this space and in the same way people are moving from having traditional cars into Tesla well more businesses are trying to see how they do the same thing they have been doing in the past in a different way and we're playing that.
So I believe our demand will be very strong towards the future of course for US is the day to day fight explaining what we do different.
While our customers to the industry to whatever so.
I believe that those two things.
<unk> be pretty much independent from from any any interest rate.
Right sorry increased.
And.
I believe that the demand will keep on being very strong.
That's.
Very helpful same number being I guess just maybe.
A question I mean, when you look to M&A, how does Kim <unk>.
<unk> your portfolio your full screen, how important it will be M&A and specifically in the next 12 months, given where valuation is for you right now and where it used to be a couple of.
Months ago. So I was wondering whether we use also already impacting some of the private companies and some of the founders and how they see their business. Thank you.
Hope it does hurt the was the percentage of organic inorganic growth is.
One can address that but I would tell you.
<unk> impact on our valuation.
It's absolutely reflecting.
And the impact that will go slower into.
Into the private market valuation, which will lead to opportunities.
We're already seeing in seeing them.
And.
What I can tell you is that we're seeing like three different lines of growth on the inorganic side. The first one being a geographical expansion and figuring out how to expand faster in Europe have disarmed faster in Asia help expand faster in Latin America the second.
Which is how we keep on.
Other things into our menu engineering concept as I was saying before how we keep on adding things into augmented coding or gen xers like things or platforms in general. So that's another way Avenue of acquisitions that by the way there are some interesting things happening there because <unk>.
Issuance of private companies and public companies on the software side has been changing a little bit.
That's an interesting opportunity and then of course.
<unk>.
The customer side, I mean, any if any specific.
Decision on things that we don't do yet.
Want to improve.
We have been doing with.
Yeah.
Some companies regarding Spain.
With many other many other things so I see here like those three avenues in a very healthy way and also seeing opportunities concrete opportunities given valuations changing.
In essence, they are very tactic because I don't think its a long term thing, but yes, its very targeted thing and it's a moment to pay attention to those things and take quick action and decisions. So I don't know if you want to complement.
Again as always blow.
This is an organic growth play.
This quarter of 48, 6%.
A little bit over 44, 43% was actually organic.
For the full year number out of the 36.
3% that we guided roughly 30 333 and a half on an organic so mostly we continue to see strong momentum in the organic business.
As Martin was saying that we will always complement our offering with organic with inorganic strategic deals as we have been doing in the past.
Perfect. Thank you. Thank you. Thank you.
Thank you.
Thanks Diego.
The next question is going to come from the line of <unk> from Jefferies. Please go ahead.
Alright, Thank you for taking my call.
We just don't like to focus on the guidance in the quarter.
I guess when I think about the guide the sequential growth can you help me understand.
It's a little bit weaker than historical so can you comment on that there is usually typically.
Sequential growth was strongest in the cycle. So can you help me understand that commentary near term.
Versus obviously.
Sure the two days apart.
It's more of a secular demand trends.
The full year number.
It's a slight increase compared to with regard to the beginning of the year. So.
It continues to be on.
On the same range a slight increase.
From a <unk>, 35% to 36, 3%.
On the quarter, what do we see this year is a more favorable quarter over quarter growth.
Within roughly a five 7% growth quarter over quarter, we are guiding to around 6% quarter over.
Quarter over quarter growth for Q2, when you do the math you will see an acceleration in Q3, which always happens given the number of <unk> and all that.
Q2 has April which is a month, where there is a lot of holidays and that cross sell some seasonal impact, especially on April .
I mean that seems to be like.
More stable in terms of quarter over quarter growth youre going to see it similar.
Levels of growth throughout the year.
When Martin was talking about the long term demand strong demand.
<unk> still show that right because 36% for the year of which 33 are organic is significantly above pre pandemic levels. When we used to grow 22, 23% plus inorganic. So we are talking about 10 percentage points above the pre COVID-19 level, which is which is I think very very very solid.
The growth.
Specially given the current environment and where we are.
This is we believe that the long term demand given how companies changed their needs how people changed their behavior to live in a more digital world.
I think those are very clear indications of the long term opportunity as well as you know we always talk about the geographic opportunity you know when you look at how big we are in Europe , you can see.
An enormous opportunity to over there when you look at Asia, which is pretty much nonexistent.
For us that's another opportunity. So I think we have more blurry than Q3, sorry, which typically happens for us.
And then a slightly lower than Q3 quarter over quarter growth, but all in all you're going to see kind of all the quarters between five and a half on let's say, 7% quarter over quarter growth at least that's what we're seeing as of now.
Got it that's helpful and then.
As my follow up question.
This was just more of a help me understand.
I heard something about <unk> relationship with the venture capital firms.
Any color on that is that gen.
Why.
Where this third party is there something changed.
Being done this year versus when you built applications for.
Okay.
Doug drugs project, Apple watch and so that.
That was you guys put in your own product.
So what is what is different here.
Is that more.
And in terms of the approach no I mean, I don't know.
Know how familiar you are with by what's up.
<unk> is a platform that is based on on any conversational interface to it.
Able to create digital accounts to send money to to create like a fintech solution, which is our answer to some of the future trends in terms of conversational interfaces now that's a product that we have been developing on our platform, we have been developing with ayers and together with that.
Development of the platform.
We got approached bye bye.
Fund in Spain that wanted to use that technology to create like a final solution like a solution for customers.
So we.
We partner with them to bring their technology, Alright, we will get paid for that technology and they will do the whole equity play like creating the final solution that the.
Creating the payment solution in Spain. So they are doing everything they need to do to make it happen.
So but that was the that was the spirit of the deal I don't know if that answered your question or.
Yes.
That's helpful.
Can take ups, yes, we maintain something very very clear for us which is.
We're always.
Our technology providers.
We do not intend to compete with any of our customers in the sector and we won't do it but were brought me in this case, we're providing strategy to whomever once that technology and we are allowed to do it we will we'll do it but this does not change anything from that.
Got it. Thank you. Thank you. Thank you.
Thanks Brendan.
The next question is going to come from the lineup Marcia country from Wedbush. Please go ahead.
Hey, Thanks, Thanks for taking my question and congrats on very strong numbers.
Couple of things first can you talk a bit about your European business I know, it's relatively small.
And from our perspective, this is where we could see some slow slowdown or maybe some weakness down the road.
And then <unk>.
Follow up can you talk a bit about.
Whats driving your significant head count growth in India, which has been really impressive and maybe talk about the mix out of India and what do you think that kind of it goes down the road. Thanks a lot.
Okay.
Well the first part already.
Yes.
Nice place by the way.
No.
I got to tell you about the truth.
Fantastic.
Now look.
So.
Okay.
I see I see Europe growing.
Very fast I mean, our operation in Europe .
It's much stronger than before but still very small so I see very concrete opportunities there.
Some M&A opportunities, we're taking a look at.
And.
And again I don't see I don't see.
The effect that you're describing in terms of maybe maybe something happens there, but still the need for digital transformation for every every company is absolutely there.
I don't know I don't know what can happen, but I believe that Europe will be strong for us and the growth that we're getting Europe . During this year will be very strong.
We will show in the numbers so.
I don't know if something very strange happens more experience that we're already up and maybe you can have another discussion around that but for how things are going right. Now I believe that that growth that will be very strong and the M&A activity will keep on being a strong as we have done in the past.
So that's on the on the Europe side.
Which countries.
Let me complement daily regardless, so yes, most of our exposure as of now is in the U K and Spain, and then we have some exposure to Germany and have some exposure to Italy, some exposure to France.
Switzerland those are the main areas, where we have exposure, but I think maybe.
Maybe even if Europe as a whole or is a continent.
Gross.
Slowly than the rest of the world. The fact that we are very small player.
Around 10% of our business over there.
We're going to do to win by just because.
Because we are small.
We have also as Martin said, we have been looking and we have done a few deals in the past we have invested organically in building their teams. So I think we should start seeing you know.
Very good growth.
Coming from Europe , as well on the second part of India, India right now.
Third largest development center for Logan.
<unk> been expanding.
Very aggressively it's fully integrated to the company the same way as Colombia. This February is Mexico by the way, Colombia now is larger than than Argentina for this quarter. So what you are seeing as a company is becoming more regional and more global at the same time, that's why you're starting to see places like India you know just.
Competing with Argentina competing with.
The rest of the countries have noncompete, we work together in the same projects but.
Youre going to see it in the middle of everywhere and I think we have a strong presence in Poland.
Our.
Opening in another city very very shortly you will hear about that very very soon and we definitely see India, becoming a much larger operation today, it's around 16% and we do see India, you know getting to 20% to 25% in the next few years and where is Argentina.
Right now its around 20% much appreciate it. Thank you. Thank you. Thank you guys. Thanks.
Thanks, Mike.
The next question come from the line of Zachary Zhang from Calpine.
Please go ahead.
I think this is Jack as a man on for Brian first question from Us relates to the geopolitical situation over in Eastern Europe and.
And the demand fallout just curious has goldstein any incremental business with clients that have derisked exposure to the conflict region and the current utilization levels give globe the flexibility to take on additional clients, who are looking to de risk exposure.
Yeah.
Short or long version.
Thank you for your question.
I think of what it's like.
Bertrand at year end.
And.
Much longer version would be.
We're seeing that demand happening as we speak.
And on the other side, our recruiting engine and training engine and all the capacity engine in general is absolutely ready to take over.
Although all of those pieces of demand at the speed Theyre coming so.
Perfectly fine for that and is becoming unfortunately, a driver of growth for us.
On the on the on the.
Second part of your question. We can we will of course, we have room in the utilization utilization was around 70.
79, 6% for Q1 that gives us around 2% to four percentage points of additional utilization we have done in the past we have been in the past at levels of 82% to 84%.
So there is some room, there, but I mean, we've done.
We don't need that I mean, we can also we can also take on those additional deals by expanding our head count.
I think utilization is is one of the levers that is also there to eventually help us offset some of the cost pressure that we may have which <unk> discussed before it's there.
Got it and the power for US was on lapses, which is the cyber breach that took place at the end of Q1 are you able to quantify the revenue impact in Q1 or if there was any spillover in Q2.
Have there been any lingering issues on the client side or the delivery side and if you can just talk about any changes.
<unk> put in place.
I'll take the first part due in Europe . So on the on Q1, there was no impact because the event happened I think it was the last the last the day before the last of the quarter and then on Q2 or there is something material.
Very very small impact that is.
Happened.
During the month of April .
Okay.
On the single borrower so the regarding.
The current status and then what happened.
As you probably know about six weeks ago, we received.
A cyberattack or that was <unk>.
<unk> claim.
As the the one executing their attack.
We contained the situation very quickly.
We evaluated.
The extent of the attack rate.
By the time, we finished our first runway 95 debt approximately about a 1% of our clients have been exposed.
Exposed to some extent some information.
Meaning.
Some documentation and source code.
For the most part that information given the polices and those servers. They got access to was outdated or a deprecated. So we immediately put in place how we're.
Business continuation program, we connect we connected with every clients, both the ones being effective and the ones that.
We're an affected.
Within a couple of weeks, we have reached toward our normal operation for the most part.
Like 90, 899% of our operation was restored within a couple of weeks a soft today only one small client.
As a partially.
Going back to operation.
So so.
I'm confident to say that the situations has been contained.
And this is approved this has being the first attack.
All of these typing 19 years, we have a lot of learnings, but I can say that after this.
So where we proved to be quite prepared we had lots of <unk>.
Opportunities for improvement here and there, but in terms of us being prepared as a company I think we passed the test.
That's good to hear thanks very much thank.
Thank you thank you Doug.
Thanks Zack.
The next question is going to come from the lineup James Michael Chairman Murray from Piper Sandler.
Please go ahead.
Hello, everyone. Congratulations on the strong first quarter.
For me first upon pricing margin certainly held up in the quarter, but what early proof points do you have the clients are comfortable with larger bill rate increases.
And.
Also that there'll be a shortage.
<unk> magnitude you offset sustained inflation.
So.
As you pointed out.
Q1 was a solid.
Solid margins.
And literally in Q1, but over the last over the last five quarters, we have seen level of margins and we were able to offset all the cost increases that started to happen early last year.
We have increased our revenue per head roughly 13% year over year. That's a that's a very solid number on that basically was the main driver for us offsetting the cost increases.
We do believe that cost will keep on increasing.
We'll continue to have price negotiations price talks with our customers. The current inflationary environment clearly calls for those discussions in customers, leaving the same work, where we leave the hire people also in the technical sector. So they also know that there is some cost inflation there.
And we I mean, we will continue to have those conversations we will work on our utilization levels eventually to help us offset part of that and hopefully you know again, we target to maintain margins in the historical 38% to 40% gross margin have.
We have been on the upper end on the upper range of that but we believe that we should be able to stay within the range even in this inflationary environment.
Yes, that's very helpful color I appreciate it.
And as a follow up the Diego's earlier demand question have you seen any cracks yet and enterprise demand for digital transformation.
And then to put a pin on that.
With steeper declines potentially in the global economy, how should we think about the relative stickiness of.
Digital versus legacy services.
So I think part of this has been addressed in terms of our demand so with regards to digital transformation in the.
The efforts of the company. The one thing that I can say that has changed from last year to this year.
Is.
If you see our pipeline maybe the time it takes to.
Closer deals from the beginning of the opportunity has extended a little bit compared to last year, but the appetite.
For digital transformation.
Moving from legacy to digital is stronger than ever.
Seems to be very very good.
So and we expect that trend even with the current economic situation and geopolitical.
Medical situation, we continue to see data very solid very stable.
So no no headwinds there.
Okay. Thank you.
Thank you.
Thanks, Michael.
That will be all for the Q&A section today.
Paul I will now ask Martin to provide the closing comments.
Thank you everyone for participating today and thank you for joining us and look.
Looking forward to keep talking and let's stay in contact center.
You very much.
Okay.
Yeah.
[noise].
Sure.
Yes.
Yes.
Okay.