Globant SA

NYSE:GLOB

Earnings Call Transcript 2021-Q4

[Amit Singh]

00:10 Good day, and welcome to Globant’s Fourth Quarter 2021 Earnings Conference Call. I'm Amit Singh, Head of Finance for the U.S. and Global Head of Investor Relations. All participants on this call will be on listen-only mode. After today's presentation, there'll be an opportunity to ask questions. Please note this event is being recorded and streamed live on YouTube. By now you should have received a copy of the earnings release. If you have not, a copy is available on our website investors.globant.com. 00:38 Our speakers today are Martin Migoya, Co-Founder and Chief Executive Officer; Juan Urthiague, Chief Financial Officer; Patricia Pomies, Chief Operating Officer; and Diego Tartara, Global Chief Technology Officer. 00:51 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 the answers to some of your 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 IFRS accounting rules in our financial statements. 01:14 During our call today, we will report non-IFRS or adjusted measures which is how we track performance internally and the easiest way to compare Globant to our peers in the industry. You will find a reconciliation of IFRS and non-IFRS measures at the end of the press release we published on our Investor Relations website announcing this quarter's results. 01:34 I'd now like to turn the call over to Martin Migoya, our CEO.

[Martin Migoya, Co-Founder & CEO]

01:37 Thanks, Amit and hello, everyone. I'm happy to be back after another strong quarter and full year. Globant continues to deliver solid performance and we aim to surpass expectations of our stakeholders and clients. As we look back over the past 19 years, since we started the company, 2021 stands out. This was one of our most transformative years ever. 02:08 Our Q4 2021 revenue reached $379.8 million. This represents 63.3% year-over-year growth and 11.1% growth over Q3. For 2021, we became a $1 billion revenue company for the first-time ever. The top line reached nearly $1.3 billion, representing 59.3% year-over-year growth. This is the strongest annual revenue growth since our IPO. Our CFO, Juan Urthiague will go into detail later in the call. 02:51 This strong results have been made possible by the team of talent we have cultivated. I've never been more proud of our Globers. They are creative and adaptable. They work together as one team throughout 18 countries. Our business fundamentals are stronger than ever. We're in a position to capture the significant market opportunity in front of us. As we know, reinvention and transformation is not an end-to-end process. It is a constant state of adaptability to grow in the face of challenges. This time a full adoption of digital transformation is here. 03:33 The IDC has forecasted global spending in the sector to exceed $10 trillion over a five-year period. We aim to be the partner of choice of our clients and to help them bridge the gap between the innovation opportunities and actionable transformation. We are executing this strategy through the pillars of growth that I've laid out in 2021, our geographic expansion, our reinvention studios, and our growing platforms. 04:04 First, our geographic expansion. Globant footprint continues to grow throughout the regions where we work. Lately, we added two new countries to our Latin America operations Costa Rica and Equador. This solidifies our already strong presence in the region. In Europe, we have recently announced our expansion to Germany, Austria and Switzerland. In North America, we continue to expand our local presence throughout the United States and Canada. 04:39 We are reaching new clients and hiring more talent in all those regions to lead this growth. We have also brought on new talent and expertise through strategic M&A. In 2021, we incorporated five new companies to the Globant family. These companies have combined operations in 12 countries. Their talent has reinforced our capabilities in multiple spaces from Blockchain to digital sales and marketing, AI, sales force, and more. 05:11 As we look to the major trends of the near future, we are already working on consolidating our capabilities in these spaces. A major transformation for how brands relate to consumers would be brought on by Web 3.0. Web-users in the first-generation of the Internet were exclusively on the receiving end of information. They later became content creators at the consumers and participants in the second phase. 05:40 In this new phase, they will become owners. Through Blockchain technology and decentralization, Web 3.0 puts the user in the driver's seat. They will have more autonomy in their consumption, creation, and interface with the Internet. This is actually part of a larger change. Throughout the digital and cognitive revolutions, focus has shifted towards the consumer. This is a huge opportunity for Globant, since we have built our core business around these revolutions for the past two decades. 06:17 In this era, the most successful brands are the ones that can apply the right technology to improve relationships with their stakeholders. A major way that people will experience this new face of the web will be the Metaverse. Organizations will have new spaces and platforms where they can extend their presence, offering, and creativity. They will be able to maximize engagement with their customers and employees. 06:48 Last year Globant launched the Metaverse Studio to guide companies in taking advantage of these opportunities. Although, many will see the potential, they need a partner with the technology and the expertise for best-in-class execution. Globant believes that these and other trends in AI machine learning and teamwork agility will have a strong influence on our world in 2022, and beyond. We have done a deep dive on many of them on our trend report 2022. I encourage you to check it out at trends.globant.com. 07:28 We also continue to develop our product and platforms offering under Globant X. The goal is to keep expanding our existing products such as StartmeUp, Augmented Testing, and Augmented Coding, among others. At the same time, we will continue to add new offerings to our product portfolio. For example, Globant X is developing an MVP of a new platform. Project-yard. Yard is a diagnostic tool that aims to reduce the carbon emissions and operational costs of digital products and services. 08:02 It identifies solutions by designing leaner digital services as it measures energy consumption of software. It pinpoint areas where energy emissions and cost can be optimized by up to 25%. We believe the technological innovation is a force for good. However, we are mindful of the potential side effects that come from misuse or excess. We see several concerning examples in our society, from texting and driving to cyber-bullying to Internet security to privacy, just to mention some. 08:42 So, as you may remember last quarter, we launched our Be Kind Tech Fund. We will support and fund start-ups that develop apps that bring solutions to these challenges. Today, we are proud to announce three world-renowned ecosystem partners: Endeavor, New Lab and Lafka. Thanks to their extensive networks, will we be able to engage with a greater number of high-quality entrepreneurs and startups. We already have dozens of submissions and we continue open to receiving applications from start-ups at bekindtechfund.com. I'd be happy to see our team's effort generating greater recognition of Globant's brand identity. 09:34 For the first-time in 2022, from Finance has run Globant on its lease of the top 10 strongest IT service brands in the world. The report studies marketing investment, stakeholder equity and business performance. It showed an estimated 31% growth in Globant's brand value in the last year. This is great news for us, and we hope to continue improving our positioning moving forward. 10:05 With that, I pass it over to Diego Tartara, our CTO, to comment on our studios and clients. Thank you very much and looking forward to seeing you soon.

[Diego Tartara, Global Chief Technology Officer]

10:17 Thank you, Martin and hello, again, everyone. It's good to be back. As Martin mentioned, a major pillar of our growth strategy is a new industry Reinvention Studio, which we announced last year. This is the next step in the evolution of our signature studio model. Instead of focusing on a specific technology or trend, this new studio seeks to transform the industries themselves. This widens the scope of our work and increases the potential upside. 10:47 Each Reinvention Studio is supported by the expertise of our digital studios in areas such as the Metaverse, Data and AI, blockchain and much more. I'd like to double-click today on the Life Sciences industry Reinvention Studio. Its goal is to provide organizations with technology-driven solutions to face challenges in the healthcare value chain. These stakeholders include patients and relatives, health care professionals, public/private players, and institutions, academia, pharmaceutical and medical device companies among many others. 11:22 Globant has appointed Agustin Lamas as this new studio Globant Managing Director. Building on his experience as a pharmaceutical executive at AstraZeneca and GSK, we're happy to have Agustin on board as we reinvent this industry. The Life-Sciences studio will be hub of modern design thinking combining Bioscience talent with our digital expertise across other industries. 11:48 Now, some remarks on the ongoing work with our clients. Continuing the focus on Life-Sciences, last quarter, we started a partnering with Abbott, a leading multinational healthcare and medical device company. Our teams integrated with trust to understand their challenges and we are redesigning their analytics platform solution. The new data platform will allow for faster, more efficient data processing, enabling more intuitive decision-making. 12:18 In the same industry, we are also working with Vyaire Medical to help with modernizing and redesigning their ventilator interface design. Vyaire is a global leader in the respiratory diagnostics, ventilation, anaesthesia delivery, and patient monitoring segments. We're also working with them on re-designing their UX and their medical incubator screening interfaces. 12:44 As Martin explained, the Metaverse is a concept that is quickly becoming reality and one of the reasons why we created our Metaverse Studio. In December 2021, we formed a partnership with Pixel links, a leading music Metaverse gaming platform. Pixel links is developing a new virtual world ecosystem that will allow artists to launch their own interactive environments and monetize them through NFTs, social music experience, and virtual performances. Our expertise in Metaverse, Blockchain, and gaming along with their deep knowledge of the industry are allowing us to accelerate the reinvention of the music industry together. 13:26 We're also proud to be working with Dapper Labs, the creator of the world's most successful digital collectible Blockchain apps including NBA Top Shot and CryptoKitties. We're helping them optimize their processes as we automate the creation of NFTs. We have a long track record of working with companies as we bring our technological expertise to education. We have recently been working with EVERFI. 13:51 EVERFI enables private, public and social sector organizations to respond to some of today's most pressing challenges through education, activating community engagement that scales, delivered as a service. Through its technology and learning platform, EVERFI has reached more than 45 million learners globally, while also delivering critical insights to its corporate partners, so they can measure and amplify impact on the educational programs. 14:21 We partner with them to build their brand new onboarding and enrollment platform. We are building a more robust scalable foundation that integrates with third-party sources of information and eliminates data mismatch and keeps rostering as a core service. It is extremely important for companies to remain human-centric as they embrace technology to improve their own processes and services. The implementation of conversational interface is a great example of this. 14:52 This past year, we've begun an exciting engagement with Tavisca, a cxLoyalty Technology Platform, which is a division of JPMorgan Chase. Tavisca and cxLoyalty build products and solutions that empower some of the worst leading customer engagement and loyalty programs and they are constantly transforming the way brands engage and reward their most loyal customers. The first project called chatbot recently went live. It helps them improve their service offering and relationship with customers to meet business goals. 15:28 In the food and beverage space [indiscernible] has partnered with Globant for its transformation to a data-driven company. By applying AI, we are empowering them to have a higher and more insightful level of understanding of their shoppers and consumers and improve the route to market. We're working with gentle methodologies and modernization of their platforms, improving the capacity to respond to context changes, and to capture the new opportunities that the market generates from changes in consumer behavior. 15:57 Thank you everyone for your time again. I look forward to Globant's continuous expansion of the array of expertise to keep delivering superb 360 digital transformation. 16:09 With that, I'll hand it over to Patto, our COO.

[Patricia Pomies, COO]

16:13 Thanks, Diego. Hello again, everyone. Before I get into discussing our talented Globers, a few notes to reflect the strength of our operations and our performance with our clients. The Walt Disney Company continues to be our largest client, growing this quarter at 69.1% year-over-year, and 7.1% quarter-over-quarter. We continue to be very well-diversified within Disney and serve a multitude of its business verticals. The rest of our accounts collectively grew by 62.6% year-over-year and 11.6% quarter-over-quarter. 16:54 Our 100 square strategy continues to advance. Over the last 12 months, we had 12 accounts that brought in more than $20 million of revenue compared to $7 from last year. We also had 185 customers with more than $1 million of annual revenue compared to 129, one year ago. In Q4, 63.9% of our revenues were from North America, 23.5% in Latin America and others, 10.7% in Europe, and 1.9% in Asia. 17:34 As you know, we think of our clients as our partners, and having longstanding and strong relationships is directly tied to our focus on quality. The net promoter score is a value that we have been measuring for quite some time to keep a close eye on how our customers receive our quality of service. There is no official benchmark for this score, but most available benchmark position scores generally between 30 and 40 for our industry. I am very pleased to share with you that our scores have been consistently above 60, well over the existing benchmarks. Our score was 64 for the last 12 months. 18:20 As Martin said, 2021 was a major year of growth and achievement for Globant. We are now a worldwide team of 23,526 Globers with 22,167 being technology, design and innovation professionals. 1,594 of the new hires in the quarter were IT professionals, up 45% year-over-year. Every year, we have more geographical diversity. This offers our clients a truly global delivery structure as we now have Globers in 18 countries. Colombia and Argentina are nearly tied as our largest talent markets with a bit over 5,300 Globers each. 19:14 In 2021, India saw the highest growth with headcount up 94% year-over-year. We remain confident that we can continue bringing strong talent and we envision a strong hiring process moving forward. Globant's attrition rate is currently 18.7%. As you know, our talent markets remain competitive, and there has never been a better time to work in the IT sector. For us, this is an opportunity. It drives us to continuously work on our employees' experience, benefits and opportunities to make Globant their place to work in the industry. 19:55 We have seen that our efforts and the value proposition we provide to employees is leading to a stabilization of the attrition rate. Our structure has always respected that work-life balance and family support. Now we are going further. We want to enable our talent to feel in control of their own career path and their life, and we have taken the steps to provide that through three unique initiatives. 20:21 The first one is ensuring that every Glober has a clear path to leadership, advancing in one's career is a highly sought-after goal, and providing a consistent structure that allows for that to become a reality within the same company foster a stronger commitment to our vision and our future. 20:43 Secondly, we are now offering Globers flexibility to work from anywhere in the world for up to 30 days out of the year. This includes the places where we don't have an office. For Globers who choose locations with Globant offices, they are encouraged to interact with local Globers and experience our revamped office experience. It's a win-win because we grant employees the flexibility they seek and we also ensure a globally cohesive team. 21:13 And finally, we have a new platform, Open Career, that gives Globers the keys to their own career path. This platform acts as a career marketplace and talent placement accelerator within the company itself. Globers can apply to any of our open positions in any project that we have. We want to allow them to find more exciting challenges within the company without needing to look elsewhere. It is our way to promote autonomy, flexibility, and opportunities worldwide. 21:48 And finally, some exciting new update to our Be Kind initiative. This is now an enduring part of Globant's identity. Our Globers have taken ownership of it and have made it their own. Not only are we fulfilling its promise, we are expanding it so we can have an even greater impact. As you know, Be Kind has four pillars: Be Kind to your peers, to the planet, to humanity, and to yourself. 22:18 In Be Kind to your peers, we are reaffirming our commitment to diversity, equality and inclusion. We recognize that we work in the most dynamic and promising job sector in the world. So by promoting inclusion in the sector at large, we are building a brighter future for the industry. On top of our goal to achieve gender parity, we are setting a new one. We will grant 15,000 technology scholarships by 2025, through thought leadership, community involvement, and mentorship, we want to inspire up to 2 million young people to enter these 10 fields. 22:57 For Be Kind to the planet, we became carbon-neutral in 2021. We are also following reduction trajectories in line with the science-based targeted standard, aligned with the race to zero initiative. Now, we are incorporating a new objective. We aim to save 10 million tons of CO2 emissions through our digital sovereignty strategy. We want to train our Globers on digital sovereignty to be able to educate our world-class clients while designing their digital services and products. 23:31 Our Be Kind of humanity pillar was what inspired the Be Kind Tech Fund, described earlier by Martin. We will seed and support the startups that tackle the misuse of technology. Within the company, we have the initiative of Be Kind labs to help Globers with inspiring ideas and transform them into real projects. For Be Kind to yourself, we have launched a new company wellness plan, partnering with experts in mindfulness and mental health. Our objective is for the program to reach and influence 100% of our Globers. I am proud to see that this impacts in ESG are getting noticed. 24:15 For 2022, Globant has been included in the S&P Global Sustainability Year Book. To be included, companies must be ranked within the top 15% of their industry in the key ESG metrics. As awareness of our efforts to improve our own company and our sectors' community, we look forward to see more of this inclusion as we grow. 24:42 With that, I'll turn it over to Juan to discuss our financials.

[Juan Urthiague, CFO]

24:46 Thank you and good afternoon, everyone. I hope you're all doing well. Let me start by summarizing the results of our fourth quarter and full year 2021. I will then discuss our guidance for the first quarter and the full year 2022. We are delighted with our overall results for the fourth quarter of 2021. As our business continued to show robust momentum, revenues for Q4 were $379.8 million, representing 63.3% year-over-year growth and 11.1% sequential growth. 25:22 Globant continues to deliver industry-leading growth and we expect this trend to continue for the foreseeable future. We estimate organic revenue growth for Q4 was around 54.5% year-over-year. As discussed earlier, the demand for our end-to-end digital services and platforms is much stronger now than what it was before the start of the COVID-19 pandemic. And at this time, we are not witnessing any material impact from COVID-19 to our business. We feel confident in delivering robust levels of growth in the upcoming years. 26:02 Turning now to profitability, our adjusted gross profit for the period increased to $149.7 million, representing 39.4% adjusted gross margin compared to $92 million representing 39.6% adjusted gross margin in the fourth quarter of 2020. Adjusted operating income for the quarter amounted to $63.6 million or 16.7% of revenues compared to $37.9 million or 16.3% of revenues for the fourth quarter of 2020. 26:38 Demand and pricing environment continues to be strong, 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 an increasing amount of revenues from services, products and platforms that support breaking revenue and employee growth linearity. Together, this will help us maintain our healthy adjusted operating margin profile and continue making the required investments in the company to seize the attractive market opportunity in front of us. 27:15 Our IFRS effective tax rate for the quarter was 23.4%, largely in line with our guidance. Adjusted net income for the fourth quarter of the year, totaled $45.8 million representing 12.1% adjusted net income margin compared to $27.6 million, representing 11.9% adjusted net income margin for the fourth quarter of 2020. Adjusted net income for the Q4 implies 65.7%, year-over-year growth above our Q4 revenue growth rate. 27:51 Adjusted diluted EPS for this quarter was $1.07 based on $42.8 million average diluted shares for the quarter compared to $0.68 for the fourth quarter of 2020 based on $40.9 million average diluted shares for the quarter. Adjusted EPS for the Q4 implies a solid 58.3% year-over-year growth. 28:16 Moving on to the balance sheet, our cash and cash equivalents, and short-term investments as of December 31, 2021 amounted to $460.4 million. During the fourth quarter, we generated strong free cash flow of $47.9 million versus $20.7 million in the fourth quarter of the last year. During this quarter, we paid $64.2 million for acquisitions. Currently, our credit facility is fully undrawn. We also continue to successfully execute our capital allocation strategy with integrations of recently acquired companies going as planned. 28:59 Now let's look at the full year 2021 performance. Revenues for 2021 were $1297.1 million, implying a solid 59.3% year-over-year growth. This represents by far our strongest year-over-year revenue growth since we are a public company. We estimate our 2021 organic revenue growth to be about 45% year-over-year. Our M&A deals from 2021 also continued to perform strongly with cross-selling of services creating synergies. 29:38 Adjusted gross profit for 2021 was $512.7 million or 39.5%, an increase of 40 basis points year-over-year. Adjusted growth from operations for 2021 was $214.3 million or 16.5% adjusted profit from operations margin compared to $124 million or 15.2% adjusted profit from operations margins for the last year. This represents an increase of 130 basis points and is driven primarily by the improvement in gross margins and the SG&A efficiencies achieved during 2021. During 2021, we also continued to strongly invest to capture the significant opportunities in front of us. 30:28 Adjusted net income for 2021 was $158.4 million or 12.2% adjusted net income margin compared to $90.6 million or 11.1% adjusted net income margin for the last year. Adjusted net income increased 74.9% year-over-year solidly above our 2021 revenue growth rate. Adjusted diluted EPS for 2021 was $3.76 based on $42.1 million average diluted shares for the year compared to $2.28 for the last year based on $39.7 million average diluted shares. 31:12 During 2021, we generated strong free cash flow of $102.6 million versus $47.4 million during 2020, an increase of 116.6% year-over-year and implying free cash flow to adjusted net income of 65%. During the year, we paid $144.5 million for acquisitions. 31:37 Now I would like to talk about our guidance for Q1 2022 and the full year 2022. As discussed, the demand environment remains robust. Based on current disability we expect Q1 2022 revenues to be at least $395 million or 46.2% year-over-year growth. At this point, we do not expect any FX impact to our first quarter revenues. Q1 adjusted operating margin is expected to be in the 16% to 17% range. 32:13 IFRS effective tax rate is expected to be in the 22% to 24% range for Q1 2022. Adjusted diluted EPS is expected to be at least $1.16 assuming for a $2.9 million average diluted shares outstanding for the quarter. Regarding the full year 2022, we expect revenues to be at least $1,751 million or 35% year-over-year growth. We currently assume no FX impact over our full year 2022 revenues. 32:51 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, in cutting-edge technologies and expand our sales coverage to further develop our business. IFRS effective 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 $4.86 for the full year 2022, assuming $43.1 million average diluted shares outstanding for the full year. 33:30 Thanks everyone for participating in the call for your coverage and support.

[A -Amit Singh]

33:58 Thank you, Juan. [Operator Instructions] Thank you very much. So the first question today comes from the line of Tien-Tsin Huang from JPMorgan. Tein-Tsin, please go ahead.

[Tien-Tsin Huang, J.P. Morgan]

34:24 Thanks, Amit. Appreciate it. Nice results again here. I'll ask maybe if you don't mind just on visibility, I know I've asked that in the past but it's appropriate here, since you're giving '22 guidance for the first-time. Just curious on visibility, how it stands? How does it compare to this time last year and especially in the second half of '22 in your ability to replenish your backlog and whatnot, any thoughts there would be great? Thank you.

[Martin Migoya, Co-Founder & CEO]

34:53 Okay. Good. Thank you, Tien-Tsin. How are you?

[Tien-Tsin Huang, J.P. Morgan]

34:56 Great.

[Martin Migoya, Co-Founder & CEO]

34:57 Thank you for the question. Look, there is pretty good visibility as always in our numbers for the quarter and the year looks great in terms of the quality of the relationships that help with our customers, and I believe as compared to the first quarter last year we are seeing a pretty solid demand on the table. We're seeing pretty much the same strength as we were seeing last year but there is always caveats in terms of how the world is going to be evolving in terms of amount of investment, so on, so forth, but we are not feeling that yet in the demand. 35:44 So in terms of visibility and expansion of the business, this is what we are seeing. In terms of being able to fulfill the demand and concrete the backlog it's still extremely healthy and we're seeing our ability to recruit still intact, attrition under control and the growth is going down a little bit, and I believe that we won't have any problem moving forward, neither challenges. Of course, there's always challenges, but we won't have any issue I feel with fulfilling the backlog and the demand we're seeing ahead.

[Tien-Tsin Huang, J.P. Morgan]

36:27 Okay. That's great. Just my quick follow-up then for Juan, I know we talked about margins a lot and of course, everyone is aware of all the supply issues on the labor front. So you gave a pretty wide range 16% and 17%. You did the mid-point of that in '21, which way might it lean, what factors should we be considering in terms of where you might land in that range?

[Juan Urthiague, CFO]

36:54 Thank you, Tien-Tsin. Also, I just wanted to add to Martin's answer in the previous question, if you'll remember over the last two quarters, we've been talking about 2022 and now we're more like in the 25 plus 2.5% guidance for -- initial guidance for 2022. Now, we have significantly raised that number to 35% which is roughly 32.5% organic plus 2.5% coming from the acquisitions that we have already done. So, in a way, I think that is a result of the level of confidence and the residual we are having into 2022. 37:37 Now, moving into where operating margin is going to land, I think our expectation is like it happened during 2021, being able to offset cost inflation, cost increases, which are happening and are going to happen, with pricing, with utilization, as we have done during 2021, where we were able to increase our gross margin for the year around 40 basis points. So we do expect at this point to land hopefully during the middle and the upper part of the operating income guidance.

[Tien-Tsin Huang, J.P. Morgan]

38:17 Okay. Good. And thanks for pointing it out, I mean anything north of 30 is a big upgrade but does speak to the confidence and the visibility. So, thanks guys.

[Juan Urthiague, CFO]

38:27 Thank you, Tien-Tsin.

[Martin Migoya, Co-Founder & CEO]

38:27 Thank you, Tien-Tsin.

[Amit Singh]

38:29 Thank you very much, Tien-Tsin. So the next question comes from the line of Ashwin Shirvaikar from Citi. Ashwin, please go ahead.

[Ashwin Shirvaikar, Citi]

38:41 Hey, guys. Good afternoon. Congratulations on the solid print and equally solid outlook. I guess, I just wanted to start perhaps with a question on your point that you just made of the sharp increase in outlook from what you said the last time, and maybe to delve into that, is that driven by this bringing on new clients, is that driven by sharp ramps in your order book that you're seeing? What has led to the sharp increase that you're seeing?

[Juan Urthiague, CFO]

39:32 Thank you, Ashwin for the question. It's a combination of factors. One is that we have completely removed the cautiousness that we used to have in our guidance over the last two years. We believe that COVID is pretty much behind us and we have to guide where we feel that we're going to be able to land and hopefully exceed by a little bit, so we remove a little bit of the conservatism that maybe was embedded over the last two years. I think not just by us, but for many companies in the market. It's the right time to get rid of that. 40:07 On top of that, as Martin said at the beginning, we continue to see strong relationships continuing and expanding for 2022, how Disney for instance performed during 2021, how the top five, top 10, 11 to 20, and 11 to the end accounts performed. We are seeing like multiple areas of growth. We closed the year with over 12 accounts above $10 million, which is a significant increase compared to last year, actually that number is higher. Just give me one second. I want to give you that number. So I think it's an important number, and together with that, we continue to see our top accounts becoming larger and expanding those strategic relationships in line with 100 square program that we have in place. 41:10 We closed the year with 12 accounts over $20 million, and with 22 accounts over $10 million. That is a significant increase compared to last year and I think it's clear proof of how we are able to penetrate those accounts, how we are able to become more strategic in the type of relationships that we have and of course, at the end of the day, this is what is giving us the confidence to increase our guidance relative to where it was a couple of quarters ago.

[Ashwin Shirvaikar, Citi]

41:39 That makes sense. My other question is with regards to sort of the expected cadence as we go through the quarters for growth and margins. And maybe just a small clarification on what you said. Does the caution comment translate from the fact that your clients now, for example, the theme park side of Disney, you had travel clients that traffic has now -- that volume has now come back basically?

[Juan Urthiague, CFO]

42:15 When you look at how travel is performing, when you look at how Disney -- the results reported recently by Disney but not just those two sectors, right. We're seeing strong growth. I mean if you look at the industry evolution, you're going to see that pretty much every industry has grown significantly. So we do believe that there is multiple areas, multiple customers, multiple industries, which I want to help us drive our growth. We do see margins kind of stable over the year. We don't see big, big swings between the different quarters, at least at this point. Of course, we need to see then what happens with different currencies, how they are going to move relative to the dollar. As you know, we are operating in 18 different countries and they may have an impact on cost, right for that. Typically a strong dollar is good news from Globant. We'll see what happens in the future. Martin, if you want to add anything there?

[Martin Migoya, Co-Founder & CEO]

43:17 No. Fine. I think it’s great.

[Ashwin Shirvaikar, Citi]

43:20 And on the cadence?

[Juan Urthiague, CFO]

43:22 Well, I mean the guidance for Q1, as you know, has been quite solid at 46% year-over-year. That is primary -- it's about 41% organic coming from the acquisitions, and the remaining 5% comes from the acquisitions that we did during 2021. For the full year, at this point, we guided 35%, as I said before, 32.5% we estimate to be organic. And of course, as the year progresses, hopefully, we are able to give the news, like always, but at this point, we feel that's the type of guidance that we feel confident to provide and again, we're moving a lot of the consolidation that was embedded in prior quarters. Thank you, Ashwin. Good to see you.

[Patricia Pomies, COO]

44:13 Thank you, Ashwin.

[Martin Migoya, Co-Founder & CEO]

44:15 Thank you, Ashwin.

[Amit Singh]

44:16 Thank you for your questions, Ashwin. Now let's go to Bryan Bergin from Cowen. Bryan, please.

[Bryan Bergin, Cowen]

44:25 Hi, all. Good to see you. Thank you. I wanted to dig into the global diversification efforts that you're making, so curious how you're thinking about the onsite or the end market mix, how that might have evolved, and whether that's an added lever for you that you may consider raising or should we expect this to remain relatively consistent and what I'm talking about is kind of end market in the U.S., end market in Western Europe.

[Martin Migoya, Co-Founder & CEO]

44:52 Hi. How are you? Nice to see you again. Right now, we're at 95-5. So we are at 95% offshore, 5% onsite. We are looking into expanding that relation and we have been decreasing for the massive amount of growth that has been led during the COVID. On the absence of request for a specific location. I mean, it was not a problem where those guys were located and this is something that helped us to keep moving people of the operation around many different countries. 45:39 Now on the onsite side, we’re basically -- where our business is, we are seeing a trend of increasing demand and increasing, now that things are going back to kind of normality, which is not true, but at some point, is getting back slowly, still not there, we are seeing like an increase on that demand and the amount of people that we are hiring for that. And also, it could also have some effect on companies that we acquire or with local footprints, those are the changes, the changing factors that we see moving forward. 46:19 The revenue per head from last year to this year grew about 12% in terms of -- but that without pushing down the mix, so it is a pretty good performance in terms of improving margins -- sorry improving the revenue per head, and the rates that we are seeing in front of our customers, and that's a base for us to say that we don't see a massive price pressure on the market. There's always competition, of course, but we see a healthy situation there.

[Bryan Bergin, Cowen]

46:51 Okay. Thanks. And then just a follow-up on attrition here. So it looks like it's stabilized quarter-over-quarter, just based on what you've seen here through January, do you think that's reached the plateau? Maybe just talk about how you see that progressing in 2022 and how that might compare as well across some of your key regions?

[Patricia Pomies, COO]

47:10 Well, -- Hi. How are you? I think that we are going to see something like quite similar, like what we announced in this quarter, but I think that we have been growing fast. I mean, we are more than 23,000 Globers and we have been hiring. I think that we are in a record of 6,000, -- more than 6,000 Globers in the last quarter and I think that the incoming quarters are going to be quite similar or more. So we don't see any problem in the demand and how we are hiring. So that is something that is really -- we feel really proud of that. 47:49 Of course, we are expanding our places. I mean, we launched this Globant everywhere, a strategy that has to do with going to find the correct talent and help them achieve their career path in Globant. So I think that of course, we are still thinking that we're going to get into between 15 and 17, but of course, we are working very closely. We are hiring teams there. And I think that we’re right now, it is going to be normalizing probably in two or three quarters. You know that the demand has been really, really hot.

[Juan Urthiague, CFO]

48:28 Just a clarification, 6,800 people is our additions for the year, not for the quarter.

[Bryan Bergin, Cowen]

48:36 That's a big quarter.

[Juan Urthiague, CFO]

48:39 Yeah. Great quarter.

[Bryan Bergin, Cowen]

48:42 All right. Thank you very much.

[Patricia Pomies, COO]

48:43 Thank you.

[Amit Singh]

48:44 Thanks a lot, Bryan. Now, the next question comes from Maggie Nolan from William Blair. Maggie, please.

[Maggie Nolan, William Blair]

48:53 Hi. How are you? I wanted to ask about some of the conversation that's been had around pricing and the revenue guidance, obviously pricing is a contributor to that strong guidance there and you've noted that the increase is more than offsetting the above average wage inflation. So when we're looking on kind of a multi-year basis should we think about some of those pricing increases having to kind of moderate in the coming years?

[Juan Urthiague, CFO]

49:25 I think at the end of the day, pricing is also related to the value that they are and of course with what is happening in the labor market, right? During 2021, we saw a strong labor market and a lot of demand and that enabled pricing discussions that in our case helped us offset that cost pressure that we saw in 2021. Getting to 2022, the year starts again with strong demand. Also there is a strong demand for talent that will imply cost pressure for most companies and our expectation at this point in time is that we will be able to offset again that increase on price negotiations and eventually with some utilization improvement. So what we do, we think that and we are targeting to maintain or to be able to offset cost increases, with that, we are adding more value to our employees, to our customers, we are expanding our value proposition. We are becoming more strategic in many of the accounts that we are servicing as shown by how we are growing with those accounts and we believe all that combined should help us offset whatever happens on the labor market.

[Maggie Nolan, William Blair]

50:56 Okay. Great. That makes sense. And then it was great to hear some of the things you're doing on the talent side and you can definitely see how that will help with retention at the organization. I was interested in the dynamic of creating a path to leadership and how you kind of balance that with the fact that an inherent differentiator for Globant has been the fact that you are kind of a horizontal organization and an agile organization compared to some IT incumbents, so can you reconcile those two concepts for me?

[Patricia Pomies, COO]

51:30 Yes, of course, I mean I'm more than happy to go deeper there. While we launched this augmented the leadership thing inside Globant that isn't a strategy in order to help our leaders to be the 360 leaders in the way we are living right now in the middle of this context. So I think that is a new thing, that when you get into Globant you are not going to stop your career path. You continue your career and we are helping on that. I already mentioned about the Globant University many, many times but that has been a very successful initiative. 52:08 And on the other side, we just launched this platform. In fact, we launched it, I think two years ago, that is the open carrier platform is the best. I think that we have launched because each Glober can now decide in which project they can have their experience and they can change and they can move their career path as they want and the leaders are going to help them in order to grow faster, so this is a unique platform I mean because that means that when you are inside Globant is that you are not going to stay forever in the same project, the same industry. We are now doing this kind of thing that probably our competitors are looking for the Globers and now we are offering them to be inside Globant to keep our talent inside the company and helping them go in different industries and having different experiences, so that has a main impact in our organization. 53:07 Also, as you know, the Be Kind to yourself initiative has helped a lot in terms of how we are helping our Globers develop their own health and their mind and we have this concept of having altogether spirit and mind and body. So we are helping them understand and this is not only just a place where you work, it is also a place where we are taking care of each of them and their family. So we have been able to understand the situation that has changed. Some of them working from their home, as many of us. Some others are starting to go to the offices and in the middle of all of that, I mean how I'm going to continue developing my career. So I think that is a really huge differentiation from other competitors.

[Maggie Nolan, William Blair]

54:00 Thank you, congratulations.

[Patricia Pomies, COO]

54:02 Thank you.

[Juan Urthiague, CFO]

54:03 Thank you, Maggie.

[Amit Singh]

54:04 Thank you. Thank you very much. Maggie. Next, let's go to Arturo Langa from Itau. Arturo, please.

[Arturo Langa, Itau]

54:14 Hi. Good afternoon, everyone. Congratulations on the results and thanks for taking my question. Just a couple. I think the first one is housekeeping, but Juan, I believe you mentioned that from the full year ‘22 guidance, about 32 percentage points should be organic growth? I just wanted to clarify that. And then my second question is regarding going back to geographic expansion. Maybe if you can talk about your expectations, particularly in Europe and in Asia, in terms of maybe headcount growth and revenue growth. And then maybe there just detail a little bit the rationale behind the expansion in Germany, Austria, and Switzerland. That caught my interest. It seems like a new and exciting geographic footprint to expand into. So those would be my questions. Thank you.

[Juan Urthiague, CFO]

55:03 Thank you, Arturo. So on the 35% full year guidance that we provided, we estimate 32.5% to be organic, the remaining 2.5% coming from the acquisitions that we closed in 2021. As for the geographic expansion, I don't know, Diego if you want to discuss a little bit our strategy.

[Diego Tartara, Global Chief Technology Officer]

55:27 Yeah. Sure. With regards to geographic expansion, we expect to have, of course, we have organic and inorganic. We see very good opportunities especially with regards to the Reinvention Studio when you see intersection of the Reinvention Studio and headquarters for some of the large pharma, some other things that we will be launching pretty soon, especially in the South of Germany, Switzerland, France. I expect to have a healthy growth there, and probably with onsite people, that's typically the way they tend to hire and work in Europe, it's kind of different from the U.S. even from a cultural perspective. So hopefully, we will be able to increase the local head count, which is always something healthy. 56:20 And with regards to expanding -- the second question was, sorry, Germany, Asia, I'll say, Asia is more complicated. I think we have like two different alternatives of course, the organic versus inorganic, we are exploring both. I think it's too early to come up with an answer to that. It is actually solid these days, but let's say that we will do it during this year definitely.

[Juan Urthiague, CFO]

56:56 Yeah. On the organic side, as you can see by the numbers from Asia, we are having new customers in that region, that's why the revenue number has been trending up in Asia, but as Diego said, we look into Asia as a big opportunity that we have to explore either more organically or with M&A or with both. We are analyzing that.

[Arturo Langa, Itau]

57:22 Perfect. Thank you and congratulations.

[Juan Urthiague, CFO]

57:25 Thank you.

[Diego Tartara, Global Chief Technology Officer]

57:26 Thank you, Arturo.

[Amit Singh]

57:26 Thank you very much. Arturo. Next, let's go to Diego Aragao from Goldman Sachs. Diego, please.

[Diego Aragao, Goldman Sachs]

57:37 Yes. Hi, everybody. Good to see you all. First, congrats on the results. So it seems that you had a great acceleration on the revenue for IT consultant in the fourth quarter. And if I'm not mistaken it moved from 68,000 in the last 12 months as of the third quarter to 69.3 for the year end. So this means that the fourth quarter was a very strong and apparently driven by solid performance within existing clients, right. So just wondering if this came from a specific client or maybe it was just a trend you saw among different clients. Thank you.

[Juan Urthiague, CFO]

58:23 Thank you, Diego, for the question. As we were discussing over 12/2021, pricing discussions have been happening through the year and of course the final [indiscernible] is a combination of new customers, new projects, changes in pricing in existing customers, different levels of utilization and they all have been at different points in time, right. It's not that you negotiate and all the prices change at the same date. So what you saw during the year was an evolution and we have been able to expand our pricing but at the end of the day, again, this is not just because you go on and raise your prices. It is related to the value that you're adding. It is related to how strategically you become. And I think it's a good number, that one that we saw in 2021 because the mix has not changed. So it's basically an increase in value and effectively an increase in rates. That's what happened throughout 2021. And again the year is just starting. But we target to be able to also increase our prices to offset eventually whatever happens in the labor market. It's still early in the game, but we are confident that it's a possibility for 2022.

[Diego Aragao, Goldman Sachs]

59:52 Perfect. Thank you, Juan. And maybe just a quick question here on the platform business, right. Can you just help us to quantify the size of this business today and how fast this has growing? Thank you.

[Martin Migoya, Co-Founder & CEO]

60:05 Yeah. Thank you for the question. The Globant X initiative continues to evolve, and through some of the platforms we already acquired in the past, which are performing really great, and some of our own platforms that are maturing and continuing that evolution. We're still not talking neither disclosing any kind of differentiating in those two factors and in those two components, but the growth is pretty steady and very solid in the two segments, in the segment of the companies that we acquired, and in the segment of the platforms that we are developing for ourselves. 60:50 And for example, on the Augmented Coding side, we're about to release like the second version of our original idea and that is expected to have a pretty large impact in many of our customers where we are using it. And so we are really creating something very interesting on the Globant X side and on the platform business, but we are not right now being able to disclose or separate the revenue coming from there. I know that will be an advantage but we are not doing.

[Diego Aragao, Goldman Sachs]

61:25 Yeah. It will be great. Thank you, Martin for that. Thank you.

[Martin Migoya, Co-Founder & CEO]

61:29 No problem.

[Amit Singh]

61:32 Thank you very much, Diego. Next, let's go to Surinder Thind from Jefferies. Surinder, please?

[Surinder Thind, Jefferies]

61:41 Hi, guys. A question about the push-pull between onsite delivery and expansion of your global delivery footprint. Can you talk about maybe what you expect for longer-term targets as we look out a few years at this point? And then as onsite delivery perhaps increases, how does that impact margins?

[Juan Urthiague, CFO]

62:08 So, yeah, I'll take it. Long term, as we have said in the past, we expect the business in India to become a larger part of our total headcount or lower delivery centers. We expect Latin America to become slightly smaller and we also expect Eastern Europe to become a larger part of the business. Of course, given the circumstances, maybe we are not particularly pushing that region, very, very fast as we speak. That's in terms of the geographic mix and the 5% that we have onshore eventually needs to evolve and become around 12% -- 10% over time. But it's not going to happen from one day to the next. It is not going to happen for one year to the next, we have an evolution and we want to do it in a healthy way. We don't want to grow the U.S. or the UK or Continental Europe at the expense of significantly impacting our margins. We want to make it in a way by which the offshore business somehow offsets any impact that the growth in the onshore markets may bring. So I don't expect that growth on the onshore to be meaningful for the margins, because it's going to be slowly but steady. I expect India to become a larger part of our business as we have been saying over the last several years, and I do expect Latin America to be smaller and finally Eastern Europe has to be a little bit larger than what it is today, which is very small, it's around 2% of our headcount.

[Surinder Thind, Jefferies]

63:50 And then just a clarification, when you talk about getting to maybe a 10%, or 11%, 12% onsite model, is that kind of a five-year type target or what is just can we get a timeframe on --

[Juan Urthiague, CFO]

64:05 I think five years is a reasonable timeline, again, we came down a lot over the last few years. The COVID situation basically forced the offshore business significantly, but eventually as you know, things are back to normal. We will want to expand there -- just mentioning to have more people in Germany, more people in Switzerland, France, we have been growing Spain quite a lot this year and we have been also expanding in the UK. In the U.S., we are lending in Canada, much stronger now. So I think that five year period to double the percentage of people that we have on-site makes sense and it's more related to business, I mean like, we know it's going to generate more business once things go back to normal.

[Surinder Thind, Jefferies]

65:03 Got it. And then a question on M&A here given the really strong growth that you're seeing, how does that potentially change in the near term, you're thinking or your strategy is it unchanged at this point, are you willing to maybe get a bit more aggressive to maybe see if you can capture more of the market when things are influx at this point. How should we think about M&A spend?

[Martin Migoya, Co-Founder & CEO]

65:30 I would say that the M&A strategy will remain being like focus on three regions Asia, Europe and Americas in general, North and South America. And the strategy would be to keep on doing them, but of course, valuation has been kind of a crazy -- in a crisis situation during the last few months and we want to be very careful with the kind of deals we do and how we use our own cash, so on equity. So we will continue to win them, they will be connecting to a new geography for example to go to Germany or to go to Asia, to go to some of the countries in which we are interested in expanding. They will continue to be in based on the platform business that we want to build. They will continue being based on how we develop and keep on developing our main delivery centers in the countries in which we are located. And those are the three axis that will be the central tool of the M&A strategy. Pretty much, they didn't remain they didn't change, but yes, of course, we want to be very sure that we are acquiring makes sense and we are paying a fair value for those acquisitions and then jump like crazy.

[Amit Singh]

67:08 Thank you. Thank you very much Surinder. Next, let's go to Aravind Ramnani from Piper Sandler. Aravind please. I think Aravind you're on mute. Let's move to Walter from Santander. Walter, please go ahead.

[Walter Chiarversio, Santander]

67:41 Sorry, guys, my question have already answered, so thank you for the results and rates results again. Thank you very much.

[Patricia Pomies, COO]

67:51 Thank you, Walter.

[Martin Migoya, Co-Founder & CEO]

67:51 Thank you.

[Amit Singh]

67:52 All right. Perfect. Thank you. And so that will be all for the Q&A session today. Thank you very much everyone for joining the call. I'll now pass the call to Martin to provide the closing comments. Martin, please.

[Martin Migoya, Co-Founder & CEO]

68:06 Thank you very much, Amit. Thank you to each of you for being there, for supporting us, for helping us, for providing the right analysis for our company, analysis for our company and really looking forward to see you soon and on the next quarter. Thank you so much.

[Juan Urthiague, CFO]

68:27 Thank you.

[Patricia Pomies, COO]

68:28 Bye-bye.