Globant S.A. (NYSE:GLOB) Q3 2023 Earnings Call Transcript

Globant S.A. (NYSE:GLOB) Q3 2023 Earnings Call Transcript November 16, 2023

Globant S.A. beats earnings expectations. Reported EPS is $1.48, expectations were $1.43.

Arturo Langa: [Starts Abruptly] 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 risk 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. 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. I now like to turn the call over to Martin Migoya, our CEO.

Martin Migoya: Good afternoon, and welcome everyone. It’s a pleasure for me to be back to deliver this earnings call speech and to share with you how we’re progressing on our growth vision. Let’s begin with our quarterly performance. In Q3, we brought in $545.3 million in revenue, representing 18.8% year-over-year growth and 9.6% quarter-over-quarter growth. Our revenue for the last 12 months has now surpassed $2 billion, a first for Globant. Over the past quarter, we saw expansion across our key geographies, all of our verticals, as well as among our top clients. We are exceptionally proud to have delivered this market-leading growth, even in a period of global economic challenges. We have maintained profitability, a healthy balance sheet and free cash flow.

We look forward to executing our commercial strategy to increase market share worldwide. As a nod to this expansion, Fortune has recently included Globant on its list of 100 Fastest-Growing Companies. Globant was ranked first among peers in the information technology services category, recognized for its revenue, profit and stock return over the last three years. We are optimistic as we see technology spending continue to lead the global growth story, affecting nearly every area and function of organizations of all sectors. Globant’s service offering now encompasses sophisticated technology consultancy and digital solutions, breakthroughs in the creative industry, and from a broad array of AI-based solutions to our expertise in working with world-class enterprise systems.

We are in a position to take advantage of the fastest-growing areas of the technology sector. Companies across industries will keep investing in technology as new innovations from AI and other trends expand our total addressable market. According to Gartner, worldwide spending on IT services is expected to reach $2.1 trillion over the next four years. Recent surveys from leading financial and consulting institutions also reflect that digital transformation is front and center, as CEOs and the full C-suite continue to prioritize AI, cloud, digital transformation, analytics, CRM and ERP applications, all of which are core to Globant’s key competencies. With our current Top 50 clients alone taking into consideration that global firms spend from 5% to 15% of revenue on technology, our addressable market is close to $100 billion.

Our 100-squared program is our focus to take advantage of this opportunity. Artificial intelligence is having its iPhone moment with Generative AI and its latest announcements two weeks ago. Gartner forecasts that the market for artificial intelligence services will reach $443 billion by 2027. As I shared in our past earnings calls, at Globant, we are already employing generative AI in our proprietary platforms that help us work better as well as for our clients. AI will be the dominant growth driver in the IT services market. We see two major trends in AI adoption. The first is driven by professionals who use these tools to boost their efficiency and enable their creativity as they produce their own content. This is happening organically. It will be difficult for companies to have an inflexible position to force the adoption of these tools.

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Q&A Session

People don’t need us pushing them. They need autonomy and freedom in how they work. As a company, we respect that and recognize that they are responsible for the content that they produce. But companies should provide the necessary tools for their employees to develop and use them if they want to. The second AI trend is being driven by organizations and their need to reinvent themselves. AI can provide solutions that humans cannot achieve on their own in a faster, more meaningful way. At Globant, we work on these technologies through our platforms, each one aimed to accelerate innovation at scale with AI. Examples of these two types of AI are being implemented every day at Globent. With Augoor, we make the code more accessible and understandable for companies and developers.

With Geno, powered by generative AI, we can match in an efficient and scalable way people with the right skills with their best possible projects where they will be the best fit. With MagnifAI, we augment testing for organizations, enabling them to quicken their go-to-market and to launch products faster. With StarMeUp, we help organizations foster culture, predict attrition, and build community. These new trends and Globant platforms have the opportunity to connect with our expanded value offering. You may remember that we have consolidated our multi-faceted expertise into four Studio Networks to offer end-to-end services and better organize our ideation and execution: the digital, reinvention, enterprise, and create networks. The aim has been to improve collaboration and achieve a stronger, higher quality delivery.

In our Enterprise Studio Network, we recently launched the ServiceNow Studio. This new dedicated team will help companies better manage workflows and operations by reinventing digital experiences for employees, customers, and partners. Diego Tartara will expand on its specific portfolio of solutions in a few minutes. Studios from our reinvention network continue to deliver great value as they cross-pollinate knowledge from different digital studios and industries. Our Airlines Studio was able to go over the transformation we provided to LATAM Airlines in the latest leading IATA symposium, the most important industry event in the globe. Diego Tartara together with Juliana Rios, LATAM’s CIO, described how both companies collaborated to modernize airline retailing.

Also, our Games Studio celebrated the release of the latest editions of titles our teams helped develop, NHL 24 and UFC 5, another proof of a strong relationship with our long-standing client, Electronic Arts. The Create network continues to advance in its mission of merging creativity and technology. And an example of this is our work with a leading global automotive company. Our customer experience, design and cultural hacking teams have worked on reinventing its customers’ digital experience, testing and iterating new business models via data-driven decision-making. Recently, through a cross-selling strategy, we integrated our experts in business, marketing, and technology from Globant Create to develop a scalable personalization strategy and omni-channel user experience through MarTech at a global scale.

This strategic approach is set to redefine the meaning of mobility for users, thus increasing conversion, loyalty, and NPS. Furthermore, we are proud to share our recent recognition by Premios Eficacia, a prestigious award in the Hispanic American market for our work with McDonald’s. With the My Sneakers campaign, we strengthened its digital customer base, increased its loyalty program, and created an innovative experience with augmented reality. Complementing our wide studio offering, our Delivery network continues to build synergies as well. Latin America is becoming enticing again for technology talent due to its expanding ecosystem, relative stability, and valuable proximity to key markets. As the only pure play from the region and with our global scale and employer branding recognition, we are ambitious to solidify our leadership as the place to work.

We already have a presence in the region’s top nine talent markets, and now, to our array of platforms that grows in tandem with our widening services and geographic expansion. The disruptive release of ChatGPT one year ago put generative AI into the hands of individual users for the first time. Through GeneXus, which was one of the few platforms included in the latest Gartner Magic Quadrant for Enterprise Low-Code Application Platforms, Globant is taking a solid leap in applying the advent of this technology to help organizations at scale. We recently launched our first enterprise AI platform, GeneXus Enterprise AI, to help companies to seamlessly interact with relevant and critical data to make better and informed decisions. The new platform is ready to take advantage of OpenAI’s recently launched GPT-4 Turbo to build digital products and also leverage all the most relevant LLMs. Diego will expand on this exciting new platform later.