Q3 2023 Globant SA Earnings Call
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Good day, and welcome to <unk> third quarter 2022, earning.
Conference call.
Mature Langer Investor Relations officer at launch.
All participants on this call will be on listen only mode. After today's presentation there'll be an opportunity to ask questions. Please.
Please note. This event is being recorded and streamed light on Youtube by.
By now you have received a copy of the earnings release, if you have not a copy is available on our website investors <unk> com or.
Our speakers today are Mark <unk>, co founder and Chief Executive Officer.
Or TRA, Chief Financial Officer, Patricia <unk>, Chief operating officer, Andy what that the global Chief Technology Officer.
Before we begin I would like to remind you that some of the comments on our call today may be deemed forward looking statements.
This includes our business and financial outlook and to answer to some of your questions such statements are subject to risks and uncertainties as described in the Companys 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 <unk> or adjusted measures, which is how we track performance internally and the easiest way to compare glow onto our peers in the industry.
You will find a reconciliation of <unk> and non <unk> measures at the end of the press release, we published on our Investor Relations website announcing this quarter results.
I would now like to turn the call over to Martin <unk> our CEO .
Yeah.
Thank you Arturo and Hello, everyone, it's great to be here to share our Q3 results.
Goldman continues to deliver on our commitment to grow and to be the best transformation partner for our clients.
My team and I are identifying the strongest growth opportunities ahead, Angola for them I'm looking forward to discussing our outlook with you, but first let's begin with the financial results.
Q3 drill and brought in $458 $9 million in revenue.
This represents 34, 2% year over year growth and 6.9% quarter over quarter growth. We continue to lead above the broader market, we're delivering strong revenue growth robust profitability and generating healthy free cash flow.
Global is fully committed to delivering 360 transformations with consumer centric solutions, we execute these through smart process optimization that helps to streamline operations and achieve maximum efficiency.
Our service offering helps our clients improve their cost structures, our end to end capabilities helped them deliver in nobody of experiences for their customers leading to better top line performance and stronger returns.
As we look forward, we do anticipate some challenges caused by macroeconomic and geopolitical uncertainty affecting the global economy.
However, we are ready to run these challenges into strategic opportunities.
In today's complex operating environment, we see a greater emphasis on high return on investment spending.
We have the expertise and unique offering ready to meet this need.
And to end digital transformation projects continue to deliver some of the highest returns for our customers.
The streamline operations, while improving topline kpis.
According to garner 69% of Cfo's aimed to increase their digital technology spending to be more efficient and resilient. We're confident that globally is well position to face this market opportunity, we look forward to helping our clients reinventing themselves and.
These times moving forward, we will be investing in our people new market, our brand and growth areas.
We'll keep growing on our fundamentals remain strong.
Also have a solid pipeline of projects in the near future and we have become leaders in growth markets, such as media Entertainment healthcare and the life Sciences garnered market share recently named global <unk> as the fastest growing it services company wore white when looking at the full year performance.
For 2021.
Also for us on Sullivan recognized globally as the company of the year for 2022 in the global digital transformation services industry.
They created this recognition to our unique studio model. They novation have of global next and our autonomous culture globally now has over 26000 employees present in more than 20 countries.
As we continue to execute on our main growth pillars with the lever is deeper and broader array of services. Some problems I begin with a growth pillar of our geographic expansion, we will have a more targeted and aggressive for Qs on expanding in Asia Pacific and Middle East.
We have created a new regional leadership, specifically focus on this market who has already been serving our customers there.
It's a new step in this endeavor today, we have announced the acquisition of E. Wade.
Born in Australia E wave is a digital commerce experience consultancy.
They are on our winning Adobe platinum partner on our sale force gold partner.
E wave will reinforce global digital commerce capabilities and support the company's expansion in Asia Pacific.
They have offices in Australia, Hong Kong and Singapore.
And they have delivery presence in seven countries in the region.
Wave has an expansive portfolio of b to B and B to C clients. They implement end to end digital commerce transformations in many industries and service areas, including CX design platform engineering optimization and growth.
Finally, we see he waves passion for digital transformation and its culture with a global mindset as a great feed for our team.
They will be valuable partners in the next days for globally. We're also expanding our network of client and talent in the regions, where we already work.
This quarter, we expanded our presence in Italy.
Through our acquisition of six data.
We're now present in all of Western Europe , five largest economies since that provides advisory capabilities and services to blue chip companies in data analytics business intelligence mobile apps and other fields having.
Having a bigger local team in Italy is a great step for global because it brings new clients such as Maserati It will add to our relationship with our core clients. There that include a unicredit and alliance.
Now to our family of studios they.
They continue growing evolving and adapting to the latest technology trends and market needs.
In today's environment companies need to accelerate their digitalization, especially in the areas of cost optimization and process efficiency, we have created and no glasser of studios for enterprise platforms to take advantage of this opportunity. This.
This cluster, we consolidate our alliance and efforts with Salesforce SAP and Oracle all of our finance platform, especially it will be working closer together in order to support clients reinvention from their own car.
This involves improving process optimization as the backbone of their organization, while taking into account the ever changing context for every industry. As you May remember last August we launched the fast code studio upon the incorporation of Genex's.
Our aim is to boost new ways of creating low and no code software.
This is also an applicable tool for clients that need to reduce time and cost when developing and deploying products. There is a particular market opportunity that we see right now due to the demand for efficient time to market and the growth sector of Super apps.
With the recent release of Gen. Xers 18, we now have the first enterprise grade platform for low code development of native Super a mini apps, we have trained over 5000 globally in relevant speciality of the space, including UX and business analysis.
As we grow our products and platforms continue to consolidate their own identity and recognition with our client community let.
Let me share some quick updates on some of these we're seeing growth in our visual testing platform magnify.
Many of our clients are renewing and increasing their usage of the tool to improve testing quality, so that they develop better products faster.
Final testing processes are being reduced significantly the software as a service version of the product was launched in October and we will expand the features in the months to come our platform, our water, which accelerates the way to create called also continues to grow.
After a year of implementing these tool a global software development has become faster and more efficient we look forward to seeing these efficiency multiplied through.
Through the services, we offer our clients positively impacting their development costs.
Now some thoughts on growth areas.
That we are very proud of as you may remember in 2020, we'll launch our smart venue concept. This vision is to reinvent the user experience in life sports and entertainment through technology.
Third the exceptional digital adoption after the 2020 pandemic, we have seen the growing need for this transformation.
Now demand more.
And they should in Q3, we scored major goals in turning this vision to life landing some exciting new projects in late September My team and I went to Spain to publicly announce our joint venture with La Liga Spains Top Soccer League and one of the largest.
In the World together, we will leverage <unk> experience in delivering industry transformation with La Liga expertise in global sporting events, we're creating a new global technology company that will deliver digital reinventions to sport organizations by leveraging web <unk>.
People know technologies met ours and gaming capabilities. Among other fields. Three weeks later, we announced a multiyear partnership with FIFA to become the global platform supporter of FIFA plus there are signature content up.
This agreement give us global exposure for our brand.
<unk> will be seen on the screen during every world Cup much.
This is a huge step for us we strongly believe in the power of sports in bringing people together and the key role that technology place to do it.
Finally, I admit that I am a soccer fun, but I'm excited that glove and we'll be working on other sports as well.
We have signed a multiyear partnership with Los Angeles Clipper to provide the game changing digital platform for their new into a dome opening in 2024.
<unk> will term steep bombers vision of a digital fan centric experience into reality.
It is an honor to be working on this transformation to create such a meaningful and seamless user experience.
Our goal is to achieve a maximum benefit for stuff players I'm funds. In addition to these exciting new projects I'm happy to see global ambition of Tech trends in our society share with our audiences on November 2nd we hosted our eighth annual converge event.
It is an opportunity for global to bring together some of the walls creative and leading voices. This year with focus on the issue of reinventing connections to go over how technology is changing the way our society interacts.
I myself had the pleasure of sitting down with Bob Iger, former Disney Chairman and CEO we.
We had a great conversation about the future of technology, the constant pursuit of perfection and Disney's reinvention.
Some of my colleagues had similar talks with thought leaders, including Arianna Huffington Cuddly clause on Rafik annulled. The recording is available at converge that global Dot com.
Closing out I continue to believe that we are among the most dynamic innovative talented and diverse organizations in the world. We're constantly reinventing the way we offer our services and products also how we have structured our teams to take advantage of every opportunity.
I'm confident in the future and keep expanding our presence and growth.
It is a pleasure to work with our Glowered.
Who broaden the horizon of digital transformation everyday.
With that I'll turn it over to Diego thorough our global CTO. Thank you very much.
Thank you Martin and Hello, everyone.
It's great to me back with you to discuss the evolution of Logan's technology offering.
We're making exciting advances into new technologies and platforms for our clients. We're also providing them with solutions to improve their systems and platforms to optimal efficiency.
I'd like to begin with a closer look at the what Marty mentioned about our studios.
We launched two new Enterprise studios for SAP and Oracle as Martin mentioned, they will become part of the enterprise platforms to your cluster together with the sales force and process optimization Studios.
This cluster will help current and prospective clients increase productivity reduce cost and maximize their business results.
Now some new development regarding our current studios that are reinventing the game for our clients.
Our healthcare and life Sciences re measure studio is capitalizing on opportunities of each sector now that technology and life Sciences are completely intertwined.
This studio is working with a British multinational pharmaceutical and biotech company, we're helping them to develop a virtual contact platform that expand the reach of doctors, who today are not accessible and go to geography relocation of resources among other reasons.
This industry really mention studio has earned recognition for its work in September Wilder and knowledge solutions named global industry leader in 2020, Twos Park matrix for health care services.
They highlighted low in central and consulting capabilities to enhance customer impact and service excellence for our clients as the resource behind their recognition.
In financial services.
And I think all systems are notoriously complex and undergoing a transformation through technology.
We have been expanding and leveraging our expertise in the sector for our global clients through our finance studio.
This team is leading business transformation and advanced analytics with proprietary models, helping clients to optimize their use of their data and adapting their management models quickly.
The studio is currently working with a top 10 European lung that offers a full range of financial services for 15 million individual customers and for about 500000 companies in several European countries.
<unk> is carrying out a transformation in digital lending for the SME segment.
We're helping transform the full end to end experience.
And the go to market value proposition for Smes the customer experience is now Fayetteville and improved for optimum customer satisfaction.
Through AI technology, and advanced analytics, we're assisting reinventing this client's credit and lending decisions and issue additional importance during times of higher interest rates and market volatility.
Now some news regarding our sustainable business studio.
Golar launched these two during 2020, because we understand the role that disruptive technologies can play in closest sustainably, leaving gaps.
Studio has been providing solutions that achieve both a stronger strategic focus as well as an incorporation of sustainable processes.
This quarter the studio performed a research initiative for Inmarsat.
Ward leader in satellite communications to explore to the positive impact of the space technology towards net zero emissions goal.
The findings revealed that existence satellite technologies could save up to five 5 billion tonnes of cotwo per ear.
This is particularly encouraging because it's one step closer in creating a powerful way to reach net zero emissions by 2050.
That is looking more possible through consistent global education and implementation for both the public and private sectors.
Absolutely Theyre the same technology, we recognize our own company you can have multiplayer effect in the global effort to help the planet.
This is made possible through education and training.
We're now providing a companywide green 18 training to both inform and inspire our global team.
Just as we had our entire company training, both AI and blockchain in recent years, regardless of their focus area. They know will be encouraged to design and develop digital solutions. According to low carbon tools processes and best practices.
Training offers have locations on the mill dosing green, so forth and they should also variety.
Sustainable coding practices for wave UX mobile and Bakken are specialist and best practices to efficient and can create a managed data and optimized cloud infrastructure in terms both of cost and energy consumption.
Now some additional context on exciting projects for some new clients are worried with FIFA is aimed to supercharge the growth of the FIFA plus streaming platform.
Goldman will create new features and connected experiences for FIFA plus users, while supporting the platform's distribution.
By doing this FIFA will be able to exponentially increase the viewership of his official content, while allowing filers, who shared their preferred contact with friends and family and bigger screens.
As you heard earlier, we were selected as your official digital transformation partner of the into it though.
The new home of DLA papers.
When completed in 2024 and is expected to be one of the most technologically advanced smart venues in the world.
Nolan has begun to co develop the digital roadmap for the brand New Arena, we will at lower most disruptive technologies to bring to life, a new user experience that includes seamless ticketing personalized loyalty programs that tango payments point of sales. Among other features globally differential is that we're on.
All of these different services in a cohesive 316 implementation package in an extensive in close partnership with yearly Clippers.
Also in North America, non is partnering with Amazon web services to enable a large scale cloud transformation for Stryker.
One of the worlds, leading medical technology company.
We are working on voice communication services for their nearly 2000 institutions, which include hospitals and health care facilities throughout the world.
We're planning to offer these services through a highly scalable multi tenant solution via the AWS cloud.
As long as playing a key role in transforming the existing monolithic more IP service into a micro services architecture, enabling stryker to our new customers are twice the speed and saving millions of dollars over the next three to five years.
And in America, we're working with a group of an otherwise a multinational retailer with operations in that region to carry out a major expansion cloud.
Their ambition for both organic and inorganic growth present, the need and opportunity to redefine the operating model and technology strategy to accelerate the fulfillment of the group's business objectives are joined work includes a brand new IP strategy and.
Organizational group linked several quick win business cases, and a roadmap that will help Grupo analyze transform their it team to support their business ambition.
In Mexico, we're working with a leading retailer.
They approach globally, because they wanted to enter the Fintech space.
We develop a virtual wallet and enable the company to issue its own debit card for global purchases and ATM withdrawals.
This has enormous multiplayer potential in Mexico, where 60% of the population remains in month.
Hello, and carefully sign workflows to meet the goal of creating a banking interface that offers the best user experience understanding that many of the users would've been using such technology for the first time.
Within the first month more than 5000 digital accounts were opened and the growth has been exponential by the end of the fourth months 180000 monetary transactions were carried out too.
Today, the wahler is used by almost 4 million people.
It is a true honor for global to be working on this business because of the financial inclusion that is providing to the society.
Now some news on our exciting work for Nissan in 2019, Nissan chose global partner to support global customer experience vision based in London.
Today, our teams work together in Europe , and the Americas in support of the Nissan ambition 2038.
Aim to empower mobility and beyond for a cleaner safer and more inclusive word.
We're also working with them to reinvent the customer experience of buying a new car enable them with technology to improve and as new touch points.
In October we hosted the global leader in customer experience, Amit at our new flagship office in London over 17, Nissan executives were in attendance from all over the world.
With that I'll hand, it over to <unk>.
Thanks, Diego, Hi, everyone and happy to be with you all again, let's begin with a breakdown on revenue the Walt Disney Company continues to be our largest clients growing by 25% year over year, and eight 6% quarter over quarter.
The rest of our accounts collectively grew by 35, 4% year over year, and six 7% quarter over quarter.
Our 100 square strategy continues to show results over.
Over the last 12 months, we have 13 accounts that brought in more than $20 million of revenue compared to 11 from that same period the year before.
We also have 255 clients with more than $1 million of annual revenue compared to 160 to one year ago.
Regarding our geographical distribution of our revenues in Q3 64, 9% of revenue came from North America.
One 9% from Latin America, 10% from EMEA, and three 2% from Asia and Oceania, We're fully committed to building relationships with new clients. We also see strategic value in accessing the networks of our current clients as an effective way to grow that's why we continue to.
Focus on the net promoter score.
We use this to measure how our clients refer app within their communities over the last 12 months ending in Q3 11 show our net promoter score of 74.
It is four points about this core announcing Q2 comparing to previous 12 miles.
On a general basis, the net promoter score is consistently above 75, and well above the industry benchmark of 41, we remain committed to delivering our projects with operational excellence and high quality now to head count.
Our global team continues to expand.
Luckily our total head count reached 76541 clobbered.
For Manhattan entity, two of whom are it professionals.
This marks 21, 5% year over year growth.
No one's annual attrition rate is currently at 18, 5%.
It's the lower in two years and 140 basis point below Q2's annual figure.
Talent continues to choose club and we offer some of the most engaging projects anywhere in the world and the chance to work on the latest information enable long term career opportunities.
Moving forward, we will continue to strengthen and foster our corporate culture of putting people first.
With an emphasis on China.
We want to ensure the wellbeing of our Gaba so that they achieved the best version of themselves. That's why we are regularly listen to our team to compromise our value proposition and redefine the workplace experience compensation and benefits accordingly.
In July we survey our global in our periodic engagement Paul.
Over 80% responded that they were feeling really well physically mentally and emotionally. This is great news for our efforts to make this company a great place to work.
However, it's also speak to the importance of talent as a strategic asset for Cleveland <unk>.
Pleased to see that global talent Center strategy is being recognized in the market, where we work.
In Latin America home to 74, 6% of our covered we recently received several recognitions in Mexico fourth rank us among the top 10 best employers in the country and player per year recognized glop and among the best employers in Costa Rica.
Brazil, and Chile and number one in Ecuador.
<unk> continued to find new opportunities within the company. Our open carrier platform launches in March has been an effective tool in diversifying the talent opportunities right here at this company is our first scrubber and agile and intuitive way to apply to new positions geographical area anchor.
Our real challenge is over 6000 Glover had applied to find new opportunities within the company.
Additionally, global into University is constantly grow into provide Upskilling and Korea alone learning. During Q3, we launched an AI engine on our digital campus to intelligently adapt new content every day to our clobbered.
And the social learning Forum, the Booth educational exchange.
Roughly 22000 Clubbers use this platform data and now to the pillars of our <unk> initiative, which continues to drive global relationship with all of its communities.
As I mentioned in the last earning call. We mean that they'll awards global recognition to support and promote the development of talented woman and leaders in technology is back for our third edition.
More than 1200 women from 50 countries were nominated in our five category.
Ticketing digital either tack.
<unk> rising star and Tech Ferenza, they've received more than 110000 Boes from all over the globe.
I look forward to sharing with you some of the amazing women leaders that will be recognized in the coming months.
Now some exciting updates of our big kind tax time.
You may remember that we launched this last year.
This fund is unique in the world. It is especially pocket on supporting startups, whose business is to provide solutions to some of the negative effects of technology. Today, we are proud to announce that the fund is investing in polemics.
This is the first platform to introduce web three <unk> technology to the war of ideas and opinions. The startups mission is to upgrade how people support and oppose opinion leaders disrupting the echo chambers cultivated by traditional social media platforms by our sabbatical <unk> show in France.
Different viewpoint or their leaders opinions and.
And financially rewarding detractors, who engage in smart ansible type of debate.
As the pump mission continues and its network grows we are happy to have more institutions joining forces with us.
There might be sandbox innovation fund is partnering with our be kind of fun to raise awareness among students about negative effects of technology.
Their aim is to encourage them to develop ventures that tackle issues had death, AI buyer online harassment and abuse and polarization our signature scholarship program up quality of future continues to expand.
This call is it includes access to talk bootcamp and global of course is the boost employee identity.
In Colombia currently global flagship talent market with nearly 5700 scrubbers, we launched a special edition of this program called Construe shipper in collaboration with the Boa tax City government.
The aim is to give opportunities for education, and and Playability to the population affected by the internal armed conflict, we will be giving scholarships to 500 people to give them a pathway to work into sector before the end of the year aligned with our public commitment of Garanti.
<unk> 15000 coding feature of scholarship by 2025, we will be offering at least 1000 grants for an eight month training process to people from Latin America.
50% will be offered to women I'm proud to see that these educational efforts are being globally recognized in October Fortune magazine, including <unk> for the first time among the top 50 companies with ideas that are changing the world.
Due to the profound social impact of the quality of future program.
And with that I'd like to hand, it over to Glen with TIAA. Our CFO . Thank you and good afternoon, everyone I hope you're all doing well.
Let me first recap the solid results for the quarter.
Then I will provide our guidance figures for the fourth quarter and the full year 2022, we are proud of the financial results delivered in the third quarter, we managed to post another quarter of strong growth profitability and cash generation.
Every lowers effort across the organization is reflective in our results. Today also we want to thank each and everyone of our clients for the trust placed England.
Our revenues for Q3 were 450 $849 million, representing a 34, 2% year over year growth on a sequential basis, our revenues for the third quarter of this year increased six 9% Q3 revenue growth was 36.
7% year over year in constant currency.
Two five percentage points above our headline figure.
Inorganic contribution to growth stood at three percentage points in the quarter. Our business model continues to prove resilient in these macroeconomic environment, we continue to assess the increasingly complex economic outlook.
Observe the growth is moderating towards historic averages after an exceptional period of growth during the pandemic years. However, we continue to see our long term growth drivers are unchanged and we continue to believe that we are in the early stages of a multiyear secular.
Our growth trend under the current environment, we see a greater potential for our service offering because it is expansive and adaptable to client needs.
<unk> value proposition continues to be unique in the industry. We continue to see technology as a solution for a wide array of challenges being faced across the business landscape. Our premier end to end capabilities continue to drive high Rois for our clients while our.
Report delivery model allows us to adapt quickly to market conditions also our focus on robust delivery and client satisfaction, coupled with a global and diversified delivery model are all factors why our clients continues to choose to work with US we believe some of these.
Factors are reflective in our growth rates, which remain amongst the highest in the industry. We remain focused on our profitable growth formula.
Our adjusted gross profit for the period increased to 179 $6 million, representing a 39, 1% adjusted gross margin unchanged quarter over quarter as we manage both the demand and supply of the equation FX hedges.
Wages, some pricing with target to deliver towards clients high value add on top of our shareholders and stakeholders above industry average growth. Our gross margin levels continue to reflect the value that our clients see in our services relative to the rest of the industry.
Adjusted operating income for the quarter amounted to $73 $7 million or 16, 1% of revenues flat quarter over quarter adjusted operating margin for the first nine months of 2022 to 16, 3% relatively unchanged on an annual basis.
We are proud of these results after nearly tripling the company's revenues since year end 2019, we have also managed to preserve profitability levels.
We are excited about what lies ahead.
And we are convinced the growth opportunity is still in minutes, we will continue to reinvest to capture that growth. We are excited in terms of building a world famous brand executing on our 100 square strategy enhancing our global delivery and our studio model and reinventing the in.
Industry through low Anteks.
Regarding below the line items.
Our ifr is effective tax rate for the quarter was 21, 9% largely in line with our guidance.
Adjusted net income for the third quarter of the year totaled $54 $7 million, representing 11, 9% adjusted net income margin.
Diluted EPS for this quarter was $1.27.
Based on $42 9 million average diluted shares for the quarter three cents above our quarterly guidance of $1 24 per share.
Adjusted EPS for Q3 implies a solid 29, 6% year over year growth, we continued to execute on our balance sheet management and capital allocation priorities. We believe that our balance sheet is strategically suited to fund our growth ahead at a time in which the market.
Is it starting to offer attractive opportunities inorganically and organically.
Our cash and cash equivalents and short term investments as of September 32022 amounted to $369 $2 million currently our credit facility of $350 million is fully undrawn. We continue to carry a net cash position in our balance sheet.
Which coupled with our organic operating cash flow generation should provide ample on attractive funding to support our organic and inorganic growth strategies in the short term, we posted a strong quarter in terms of cash generation.
Cash flow from operations for the Q3, 2022 was $76 million, while capital expenditures in the quarter amounted to $30 $1 million from our free cash flow perspective, we generated $45 $9 million, representing 84, 1% offer a.
Adjusted net income for the quarter at.
At the end of Q3 DSO was 76 days in line with the same quarter one year ago.
All in third quarter of 2022 reflects the outsized growth and above average profitability of our company.
Solid free cash flow generation, continuing our commitment to deliver value to all our shareholders and key stakeholders will remain committed toward profitable growth formula.
Now, let's talk about our business going forward I would like to share with you our updated outlook for the full year 2022. Despite the current macro uncertainties, we continue to be positive about the growth opportunity for our global and our industry.
Based on current visibility, we are increasing our full year guidance to $1 billion $778 million or 37, 1% year over year growth.
These guidance figures considers approximately two percentage points of FX headwind.
This full year guidance implies Q4, 2022 revenues of at least $488 $5 million or 28, 6% year over year growth.
Full year and Q4 adjusted operating margins are expected to be in the 16% to 17% range are you Faris effective income tax rate is expected to be in the 22% to 24% range for both Q4 2022 and the full year 2022.
Adjusted diluted EPS for the year is also increased and it is now expected to be $5 <unk>, assuming $42 8 million average diluted shares for the year and implying an adjusted EPS for Q4 of $1 <unk>, assuming 43 million average diluted share.
Shares outstanding for the quarter, Thanks to everyone for participating in the call for your coverage and support.
[noise].
Yes.
Sure.
Yeah.
Thank you hi, everyone. So now as we go through the question and answer session of this call I will first when I was running.
At which point please on mute your line and make your question.
Please also ask for your questions and please make sure your line is muted again.
And we also please ask you to limit yourself to one question and to one four.
With that in mind.
I'd like to take the first question from the audience from changing Huang from Jpmorgan.
Please go ahead your line is open.
Hey, Thank you answer I appreciate it.
Yes, so the fourth quarter outlook was encouraging nice sequential growth is there a way to maybe help us understand what's changed in the last 90 days with respect to what you had or the.
In the fourth quarter I know the FX has moved do you have the acquisition of <unk> just want to make sure we understand what's.
What's changed.
Sure. So thank you Jim for the question.
You know over over the last couple of months as you know we have closed the acquisition of <unk> is that the acquisition of you were at the same time, we continue to expand organically our business around the world.
We continue to see strong growth ahead of us.
No we updated our guidance both for the full year for the fourth quarter.
Racing is now 237, 1% year over year very season.
6% for the Q4.
The macro environment has changed deluge has changed a little bit we continue to see.
Some companies are working on the budget for 2023, maybe taking a little longer to close a budget.
But overall, we continue to see growth ahead of us on the Q4 guidance I think is pretty much.
It's a very solid number and it's pretty much unchanged to what we guided in the previous quarter.
Okay, Great and I'm glad to hear and then I know April .
You mentioned Disney clearly group.
Very quickly, but looking at clients two through five or 10 in general any surprises there it looks like it was down a little bit sequentially.
Curious how broad based that is any interesting callouts or considerations.
No theyre not visiting west.
Disney Heather.
June quarter with US we grew eight 8% sequentially, but as you said.
And there are two brackets.
And six to 10.
See actually to two particular customers.
In one case.
In the travel sector and the other one is in the financial sector both of them in Latin America.
In the case of the Av.
The travel company.
Very big project, but we have been working for the last three or four years and expanding that relationship significantly but that project is now moving into an ongoing evolution faced and while we continue to work with them on finding new investment ideas and the opportunities that the level of growth in that account came down a little bit on.
The other one is again a financial institution in Latin America. So it's very specific to those two customers all the rest of the customers who adopt them.
Have grown.
In line with the company and businesses.
As you can see in the numbers has a very good quarter or something that we also by the way anticipated backing.
In August we filed our previous quarter, yes.
Yes, now you did it's all encouraging for that on that side. Thanks for the detail.
Thank you Gigi and thank you to Jim.
Bye bye.
So our next question comes from Ashwin <unk> from Citi. Please go ahead. Your line is open.
Okay.
Thank you and good quarter.
My first question is on head count the.
Growth seemed to slow a bit.
Are you sort of looking at the demand environment then.
Reacting.
Reacting are becoming more careful.
If you can kind of comment on how you were thinking of head count growth going forward.
Obviously, the other factors that come into play with.
The head count include attrition and utilization so.
I'm sure how do you expect that to trend.
Sure.
Joseph for the question.
You know the level of hirings in the level of net additions, it's always a combination between hires a threesome utilization levels.
In the current environment, while we continue to observe how budgets are going to be approved for next year.
What's the macro whenever you like.
You know the rest of the year.
We have been doing is we also anticipated in the last quarter was working on the utilization number which went up.
More than two percentage points. During this quarter working also on the Attritional learned that came down.
From 19, 9% or 18, 5% and we are we will continue to monitor all the macro variables combined with how the industry.
Evolves.
Put that into consideration too to be flexible in the number of people that we attract we hire in a particular quarter, we still have room to grow on the utilization level. We still believe that attrition numbers can come down and we will continue to monitor all the macroeconomic variables.
And however, our customers continue to.
Perform and be flexible and ready to accelerate hiring as soon as we have more clarity into the future.
Understood and then the other question was with regards to the new studio announcement, the Oracle S&P.
Does that.
It seems very promising the question I have is.
Are you getting into more sort of regular system integration type work.
A lot of the other traditional Si play.
Or how are you going to differentiate the typo.
Type of work here.
Hey, Thank you Ashwin.
I may take the first portion and then I will let the vehicle to take the other.
Look this is something that our customers are requesting to us they love the way we work with they love the way, we do things the way we.
In some way we integrate.
Our teams and how is our culture.
And we have seen like a pretty.
Keep growth during the past years in these specific segments.
And we decided to put all that into a new set of studios.
And I.
I think it's a natural evolution I mean, when you start working on the front end then you need to work on the back end to be able to connect that from them without backend.
Then suddenly the guys doing the back and say Oh, well, we are seeing like a new way of doing things and we want more of this and I think this is what is happening.
You know one client after another and that is yielding to a new way of doing things that normally we're doing where we're dialing it in a different way so.
That that's the dynamic that is happening.
I think clients are pushing us more than us pursuing that in a minute.
You know in a in a proactive way, but we're very happy with what's going on and I think we will be investing more in that specific space because there's a lot to change there is a lot to remain.
And.
The global signature is extremely important in that space, where.
The school is the Queen is the king of the of the of the sector. So I don't know.
I think you pretty much cover it just went out.
I think there is currently sort of conception with regards to platforms.
Being a.
Cookie cutter or how you implement software platforms have become.
Very robust but also.
They allow you to go.
Beyond what they used to so nowadays you have a platform says accelerators.
A great in terms of achieving great time to value, but also a value, allowing companies such as global <unk>, which specializes on implementations to create amazing experiences and that's how we're aligning and partnering with these platforms on every specific sector just as an example of that.
<unk> wave.
Got us of grade.
Amount of expertise within the Salesforce cloud commerce.
Sector as an example, reinforcing.
Our expertise and knowledge so.
This is again I think.
What brings too low and here is more end to end capabilities, but always conserving the DNA of loan, which is reinventing industries, creating diverse experiences connecting with clients.
Thank you Ashwin. So our next question comes from Moshe <unk> from Wedbush Moshe.
Please go ahead your line is open.
Very strong results congrats two questions. The first one on Disney So Disney had very strong results for the quarter.
Do you have any preliminary kind of comments on how what should we expect from Disney in calendar 'twenty three.
I'm, assuming you are having some discussions with the various units that they are dealing with but any color here could be helpful.
Yes.
Yeah.
Thank you.
For the question.
We believe we are positive about.
The long term relationship we have with them and we.
We see the relationship growing and we are ranked on the top of the.
Partners that they have.
We work very hard for that to happen. So we.
We feel that the relationship will keep on expanding in different areas and different places and what we see is no parts being very robust in terms of.
Activity on the other side on the direct to consumer.
The things are also very healthy in terms of amount of no.
Things that are happening there.
So overall I believe that.
Next year will be a positive year for D. C. Two and next quarter of course.
So this is what I'm, what I'm seeing right now I don't know.
What's going to happen in the future with macroeconomic situation, but I believe.
D C and our relationship with them.
It is great and the company overall the issue is in very good shape.
Alright, Greg if I can add something there mostly.
If you look at our growth this quarter was very solid at 25% year over year, but also if you look at the growth.
Kevin to the M. So all the rest of our customers. The level of growth was also very solid. So we got the top 10 accounts are just just account for 34% of our revenue right now coming down from almost 40% a year ago. So the point I'm trying to make here is that sometimes growth may.
Driven by you know some of the top accounts doing Disney other times, you know we have a great portfolio of customers about maybe in the 11% to 411% to 50, but also can contribute to that growth. The fact that now <unk> is a smaller number and also gives us the flexibility to grow in multiple parts of the organization.
<unk>.
I think that you know.
The fact that for example, 70% of our revenues coming from public companies is also something that you know in a way that creates a great opportunity for us to keep expanding and growing our business. It doesn't I bought my point was just not depend on one customer yes, I appreciate that this was a <unk>.
Follow up Martin at the beginning of your introduction you spoke about some companies starting to focus more on return on investment or ROI.
Yeah.
Is that in some of your peers are also talking about the fact that some of their some of their clients kind of moving our moving away maybe from a growth mode more more focus on costs and <unk>.
ROI is that something that you are actually seeing and is that changing the nature of the work that you are kind of providing to your to your enterprise clients.
No no country is not is not changing.
I believe.
That focus is because we can provide other at the same time like an increase on the revenue and a lot of efficiencies when you talk about costs and where that kind of company that you know.
We have been working historically on how to increase revenue and now we have a very.
Efficient model of delivering technology from many different places in the world, but not just that.
But also we have tools like magnify or a rule or all the or gen xers to accelerate and.
Both like.
Very good multipliers in terms of efficiency to the same teams producing.
What we develop.
So.
So I think that.
Those two factors combined at the same time is what I refer.
Customers focusing mono return on investment is not just about creating more revenue now it's about being more efficient too.
Yeah.
Understood. Thank you.
Very welcome. Thank you for your questions.
Thank you Moshe So our next question comes from <unk> <unk> from Morgan Stanley . Please go ahead.
Hi, Thank you for taking our question.
We would like to get your thoughts and expectations on human talent management.
Layoffs and the global Tech industry have accelerated and we would like to know how and in what in what timeframe.
Do you believe this could impact your ability to staff people your personal electrician costs and also if there are any differences between labor markets.
Our regions.
In general.
So the first part of our culture and you Didnt get it I don't know millennials.
Yeah, you know what does the.
The picture on our business.
But it's not big.
Okay.
So thank you for the question I mean, you know that.
The market has seen a strong you know the technology is still and on high end demand. So I think that in terms of how it is impacting our human talent in the way we are approaching I mean, it's not directed these days, we haven't invested in how we handle our talent and below one for the last couple of years in terms of putting the people.
In the center of the organization and that is given as a result in terms of the attrition as you can see and we expect that that attrition at the same level for that for the next where we continue to be lower so I think that in the macroeconomics are things that are happening some companies in the tech industry I've been some layoffs of course I mean.
And has that been in a very way inhibited way in terms of keeping the talent as we have been doing all of the Dcs in the middle of the pandemic. We also keep that in mind. So that is our focus on these days in terms of how it is impacting in terms of the region Latin America.
Still a very strong demand in tech profiles, and we have been able to be the best place to work in many countries is left a couple of months. So I think that's the kind of relationship that we have with our employees has been amazing our pulse engagement interviews with them has been very good results. So I think that the.
The kind of relationship.
There are possibilities were given to our employees is really good. So I think that is a mix of things. We are keeping of course are very in very short our kpis in terms of their utilization in terms of the attrition in order to be seen what is happening on everyday basis of course, we are and relating them.
But I think that at this point is not changing the way we are handling our talent. These days I mean this is at this stage, we keep on spending by our lovers and of course, engaging with them and trying to be closer and now than ever.
Crystal clear thank you.
Thank you. Thank you so much.
Thank you so much Mr. So our next question comes from Kate Carlson from William Blair. Please go ahead. Your line is open.
And everyone. Thank you for taking my question and congrats on a partner.
And tapping into that call it <unk>.
Are you a little bit more so I know that hiring has slowed but I'd like to know when you do hire now are there certain skills that they are prioritizing when you do hire.
Okay.
Well of course, I mean these days I mean, they're they've yet is it has been it's not that we are prioritizing now when it's because they're different from a month before the demand is strong for us and based on kind of profile that we have been looking in the last couple of years. It has to do with the correct talent circle event, the Novartis a platform where.
We are all trained at the people not all at the same one project forever or any one carrier forever. They have been the chance to go to many clients. The accessibility to go to anywhere. They want so that is the kind of the skill set that we are looking at these days that has to do more with the kind of talent that is appreciating the way to grow I mean this is.
Related with a company that once they're in place to keep growing it.
Faster than ever and be the best version of themselves that is the kind of talent that we are still looking.
The last couple of months I mean, we have been working very close with with some of the specific countries that have been in prices and that has to do also with the kind of people that we want in our company to keep grow in and to be hunting, we have been reorganizing some of the structure. The last couple of months in terms of the way we are.
Pro which our clients and that has to do with the kind of management that we are putting leading in front of the plant being closer to them.
100 Square program is an example of that is put in our best talent next to a client in order to be finally, the wind them. So I think that is the end of the skill set that we are looking.
The people that are really here is that they want to learn.
Keep growing in a company that is growing.
As you can tell by the results this quarter and we keep on track I mean that is dead DNA up there at the club and culture right.
Great.
Thank you.
And then shifting gears, a little bit and you guys mentioned on the call that you're.
Targeted focus on Asia Pacific and the Middle East can you talk to me a little bit more about the opportunities you see from wells in those areas.
Yeah sure I can take that one I think that Asia Pacific for US has been an area, which has been absolutely under developed.
In the past.
So.
Some some time ago, we decided that that should change.
And that should be one of the main areas of expansion.
So we decided to start with some acquisitions like we did today.
We announced the acquisition of <unk>.
In Australia.
And also they have operations in Singapore, and Hong Kong and other places, which will help US also when we acquired <unk>. They had an operation in Japan and they will complement those operations that we are acquiring right now with E rate.
And I believe there's a big opportunity there when you add up.
All the Asia Pacific plus the Middle East countries plus.
Some other countries in which we operate but sometimes the market was not a big like India or.
Some other countries over there.
No.
I believe that overall when you take all those things.
Represents a gigantic market.
We're needs are pretty similar to what we serve to our customers in the U S in Europe , and Latin America. So.
I think it's a very good vector of growth for us moving forward.
Great.
Thank you.
Thank you so much.
<unk>.
So it looks like the question comes from Surinder <unk> from Jefferies.
Please go ahead.
Yeah.
Hello.
I surrender. Your line is open. Please go ahead.
So we'll jump back to turn there, but our next question question comes from Bryan Bergin from Cowen Brian . Please go ahead. Your line is open.
Hey, guys. Good afternoon. Thank you.
As you kind of look forward here and scenario plan for what just May come can you just talk about current levels of visibility in the business. How do you think about impacts of potential recessionary pressures and is there any simplistic way to segment. The mix of work that youre doing that might be more exposed versus what's more durable or the amount of clients or Mexico.
Clients that are really extending their budgeting cycles, just trying to think about how growth resilient sheet can confer here given that given the macro and the customer conversations that you're having.
Sure. Thank you Ryan for the question.
Yes.
Over the last four.
Only two quarters.
You know the global economy has been.
Are there any read of freshener with different things happening in different regions.
Now, we're getting close to year end.
Yes, definitely we have seen some customers delaying their.
There are bunch of processes on you know some some projects, sometimes ramping up a little bit lower because of budgets yet not been approved for next year. So that is reducing a little bit the visibility that we would typically have.
By this time of the year.
At the same time, you know we continue to see a good levels of growth as you can see by many of our guidance for the rest of this year.
We continue to see below one <unk>.
Investing.
We really for when the macro Comstock as you can see right investments. We're doing for example on the marketing side.
With the World Cup or also in how we are getting Arabia, where teams in the different regions. How we are how have been evolving our studio model. So we are a company that keeps on moving it would have just closed.
Our company an acquisition today.
We continue to move we don't stop because of the macro we just need to keep evolving and getting ready for when it comes back is by this time, you know visibility before for next year in a normal scenario would be around 80%, probably where I'll leave it down a number maybe more like 70%.
Centers or something around that number so it's a little bit lower.
But we expect that we hopefully we have provided for the full year.
Next February the situation has stabilized a little bit there is some good news coming from the macro.
Inflation in the U S stabilizing or coming slightly down that was good news.
So we'll see how it goes from now until the end of the year. So we are optimistic because blow and continues to evolve continues to adapt continues to invest continue to get ready as always as if this was a normal year, but of course, we're taking some progression, especially on the on the hiring side until we have more clarity.
Okay. That's helpful. Thank you for that and then just shifting over to margin can you just talk about some of the drivers there that are factored in that work you outlook it looks like a pretty healthy ramp sequentially that's implied.
Yes on the margin side, you know are like the same throughout this year, we continue to see our operating margins in the 16% to 17% level. There you have different things going on you know some help on the on the <unk>.
On the FX side in Latin America at the same time, we continue to invest heavily to get ready for next year, you know investments in marketing and sales and marketing teams and coverage in new studios are adding capabilities. We're offering so we continue to think that.
Not just for this quarter, but also for next year, but the level of 16% to 17% operating income.
It's a good target to have as a company.
Alright, thank you.
Youre welcome welcome. Thank you so much.
Thank you Brian .
Question comes from Walter <unk> from Santander Walter. Please go ahead. Your line is open.
Oh Wow, Okay from a result, thank you for taking the question.
I would like to dig deeper on <unk>.
The sports segment in which you have announced this partnership on initiatives will a legal fee for our people.
Hum.
Well that's good for you how do you see these things.
Medium term in terms of I mean.
The market must be huge and powerful.
The number of potential clients.
We wanted there.
The visibility of this anyway, but we grew our quantify these.
Could imply annualized notch up in growth rate compared to the historical rates of Noah.
Or is this something that we should see us encouraging.
Really impacting the growth rates in the next couple of years.
When we saw sharp Morehouse couple of examples of clients about it.
Oh, that's a great question. Thank you so much.
Look I believe that what we're doing.
All those notes four initiatives some sport related initiatives.
Has to do a lot with.
Two two.
We have reached to a size, where we need to change dramatically the way, we connect and the way we position our brands.
And connected to that specific idea this deal SaaS like a dwell like a duo.
Yeah.
Our objectives are.
On the firsthand.
We are creating technology for all of these you know Easter.
Institutions, where we work with for FIFA with FIFA, plus with La Liga with Valley attack.
We then like flippers, we're creating the <unk> dome technology for them and.
And on the other side, we are in some way positioning our brand our sponsors those same brands. So.
So I believe that this is a pretty large market. You know we are now entertaining conversations with many other leaks with many other.
Teams that really wants to create that seamless experience in the same way we created four for D. C.
And.
That is one vector, but I think that the impact that we are not.
Expecting.
For that change in numbers moving forward. So you cannot included in the model.
The impact moving forward will be the dramatic just the World Cup and just the FIFA relationship is about.
The 2022 World Cup.
That will be watched bites we billion people.
And then.
When you go into the future is next year Women's World Cup in Australia, and that's the.
So 27.
17.
At World Championships and the E.
And the esports championships from FIFA, all those things.
It will be sponsor for things on a same time develop and FIFA plowed. So.
Our position is we love to be and to position our brand, but we want to position our brand in a way.
We connect and we explained to the world that we are changing the technology.
For sports and for the sports that you love.
And and that's that's the whole idea now.
This is like a massive marketing effort connected to a massive technological effort going at the same time I think it's a very nobody approach on how to position our brand.
And I believe we will have a lot of impact moving forward now are we in a position right. Now is the first time that we do this in our history. So are we in a position right now to measure that I'm not in a situation to say, yes. So.
We expect the same growth that we have had no the compound in the in the company from the past.
But I hope that this will unlock many new opportunities we didn't imagine today that we don't read much into that.
Thank you very much.
Thank you so much.
Thank you Walter.
Next question comes from John <unk> from Piper Sandler John . Please go ahead. Your line is open.
Hi, good afternoon, thanks for taking my questions.
Expanding your footprint in the APAC regions clearly the focus.
Are there are there any other geographies and regions that are on the radar of particular interest for possible future expansion.
Kind of along the same line.
All up is.
How do you see revenue mix by geography shaking out over the next few years are there any regions that you would like.
What's exciting to us.
Okay.
Yes.
I mean, we would need another planet, if you want us to keep on expanding.
But I don't I don't discard that but in any case.
Just in the plan that we have.
We're pretty much in every continent, except for Africa.
And I.
I think that.
There will be some movement there you know at.
At some point in the future.
But now the focus is being placed on Asia Pacific and Europe , Latin America, and North America.
In particular in Europe , we believe that expanding and go having like much larger operations in countries like France, or Germany. Now we are we have a pretty decent operation in Italy after acquisition of she's not.
Are extremely important things to make it happen.
If you ask me I think Europe should be larger in terms of revenue very soon.
And and have like a larger share Latin America is also.
It's also a pulse to grow very fast.
Our point there is that there are two markets, which is Brazil, and Mexico that for US has been growing very nicely, but now they will have the.
The lion's share moving forward.
In terms of growth.
And of course in North America, now, we open up Canada, and we're expanding into Canada with many new things happening there.
And again Asia Pacific Asia Asia Pacific.
Australia and.
The middle East countries, including Israel in which we don't have operations yet.
Those three those.
Everything has like a pretty large market opportunity for us so.
I would say that we would focus on those four things.
Asia Pacific and Middle East.
D a.
Europe .
Europe .
North America, and Latin America, those are the fourth the fourth place.
Places, where we'll be investing heavily to make it grow.
Great. Thank you for the color there I'll now turn it back.
Thank you. Thank you very much.
Thank you John .
Our next question comes from Dave while ago from Goldman Sachs. Please go ahead.
Yes, hi, Thanks for taking my question can you. Please just provide some color on how the <unk> business.
Unit performer this quarter in terms of growth and how much. It represented in terms of revenue as well as whether this is already contributing positively to your margins are still you know diluting the margins. Thank you.
Sure. Thank you.
So.
In terms of a global index and we continue to invest in a number of platforms. Some of which are already generating revenues others are in kind of a friends and family.
Stage, one, whereas maybe some customer stops.
You know our blueprints of ours.
Finally, we have others that are just.
Concepts at this point when we look at the level of the level of.
When we look at the level of revenues that these platforms are generating right now I think you're right now we are its around two 2.5% of our revenues.
They are growing at a nice pace, it's still a small number in the total revenues are lower but its growing at a nice pace now in terms of my views.
By definition all these platforms have to improve our overall margins right.
Especially when you look at the gross margin level of course Oh.
As we are investing they bring they create.
Appreciation and amortization.
At the gross margin level. They are are they improve our margins overall.
Understood. Thank you.
And maybe if I would think about like the portfolio of products and there is there anything in particular that is driving most of the growth or is coming pretty much from different solutions and applications. Thank you.
Yeah.
Look Star me App is doing great.
I would say that.
Magnify.
Is like in a pretty mature situation, where our customers are using it are consuming more everyday and that's great.
I would say that.
All the things connected to La Liga and the legal Tech has like you know the technology.
We got from that agreement is a lot of they are a lot of platforms for our streaming for.
<unk> <unk> to <unk>.
Many platforms that are generating revenue in a pretty clear way and it's a it's an important.
Audition.
Edition.
So the platforms.
And of course, a war, which is Jenny.
Generating revenues.
More.
Debbie for H B.
As to differentiate the offer that we do for our customers I think that those are the areas, where we are seeing.
It seemed like more expansion on more growth.
Understood. Thank you.
You're very welcome.
Yeah.
So thank you everybody and that will be the Q&A session for today with that I will now ask Martin to provide some closing comments.
Please go ahead.
Well. Thank you very much Arturo we're very happy to be here today. Thank you very much for your continued support and understanding and looking forward to see you in the next quarter. Thank you.
Bye bye.
[noise].
Yes.
Yes.
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