Diego Tartara: Just a small comment. I think sports has been one of the industries that has been absorbing technology much faster lately. And if you see the opportunity, how we’ve been consuming sports, I think there’s a huge opportunity. We all tend to think the in-state and in-venue type of experience. If you look outside that, how consumers, how funds are consuming that from home, that ratio from the people that are physically there to the ones that are not is one to a lot, depending on the type of venue. So we see a great opportunity to totally transform that type of experience. There’s a lot of technology that can be reused across many different sports, coach, software, specific player type of software, loyalty and fan activation, et cetera.
That set of reusable content is what we take care of within the studio, but then doing the implementations on the different types of projects and customers. Again, I think that what made us do that more and investment has to do with the velocity of adoption and I think there’s a lot to do on that industry.
Arturo Langa: Our next question comes from the line of Arvind Ramnani from Piper Sandler.
Arvind Ramnani: Yes, thanks for taking my questions. I just want to kind of say if you could unpack kind of how you’re thinking about like FY24, right? Because we certainly heard a lot of things on what’s organic, what’s from kind of LATAM headwinds, from a currency headwind, and then also like kind of expectations for additional M&A that you may do through the year. So when I think of like kind of like a pure organic growth for this year, how should I think about that? And then the follow-up to that really is what needs to happen for y’all to kind of comment at the kind of the at least number or comment well ahead of that number by 300, 400 bps.
Juan Urthiague : Yes, I’ll take the question. So we started the year guiding 16.2% year-over-year, which I guess is going to be one of the strongest in the industry, by the way. That is composed of about 10-ish percent of organic growth and the rest coming from the deals that we closed during 2023. When you look at the sequential growth that we are proposing or forecasting as of now for the year, it implies quarters of starting Q2 of 4% to 5% sequential growth that basically is going to give us annualized numbers of 20%, around 20% when we look at that sequential growth. For us to take that number up, I think it’s going to depend a little bit on how the rest of the year evolves in terms of economy. If companies start to materialize, some of those conversations that we are having start to materialize more and more.
They start to invest again in large CapEx projects and things that we are seeing an improvement relative to last year, but still, we believe that more can be done there, right? So if those things happen, if interest rates start to come down, I think that going forward, we may start to see some acceleration into our business. But for the time being, given those constraints on the macro, we prefer to guide what we feel comfortable that we believe is still a very, very good number.
Arvind Ramnani: Terrific. If I could quickly follow up on that. Last year you kind of wrapped up the year like roughly 11% and arguably like what we heard on from you on today’s call, this is much better than last year. So it feels that there’s a lot of conservatism built into this like 10% organic number. But can you just comment on that? Because if you look at these numbers and 10% and do you think there’s some level of conservatism built in?
Martin Migoya: Let me try to address that point. I think that we’re not being conservative. At this point of the year we see optimism that that’s a mean that it will keep on translating to the rest of the year because we don’t know and basically there’s a lot of uncertainty happening. Inflation just was higher than expected last month. I don’t know where the interest rate is going to go. So I think that we need to stay a little bit calm at this very beginning of the year to understand how the year will develop. But again, we have a very good track record about trying to forecast what’s going on and what’s going to be the outlook for the year. And I believe this is not either conservative nor extremely aggressive. So we’re trying to make that balance as we have been doing during the last 10 years as a public company.
So I hope that explains a little bit. But of course we don’t want to miss any number and we don’t want to create any false expectations at this point of the year.
Arvind Ramnani: Terrific. And just one quick question on AI. You certainly got a lot of color. But are you able to comment on the size of the projects that you expect to see for ’24? I mean, you did indicate it may be larger, but like at what point does it kind of really start to move the needle for your overall growth? Is it still like a ‘25 dynamic would become much larger in size and scale? Or it’s same size now?
Martin Migoya: It’s already growing and it’s already pretty substantial. It’s a good portion of our business. I mean, and AI is pretty much involved in everything. So where you got the idea of this is an AI project where it’s not, it’s every day more difficult because it’s involved in pretty much everything with us. So now, having said that, we have seen projects from several millions going up during this year. I don’t think it’s going to be the size of projects at least on the last quarters of this, at least at to the point of the last quarter of this year, projects more than $10 million, $20 million, $30 million. And then moving forward maybe the project of hundreds of millions of dollars may come, but it will take a while until corporations digest and start to produce more demand around that.
The good news, Globant is absolutely ready to deliver on all those projects. And we have been investing a lot and we keep on investing a lot on that space. So our leadership position will be undisputed, will be announcing big partnerships moving forward. And I think that’s something that will keep on being a central part of our offering as it is today to all the customers that we have. 1, 600 customers, all of them need what we do on the AI space. And of course, we need to leverage all the tools that are out there to be able to provide like comprehensive solution to those things.
Juan Urthiague : Maybe to complement that, Arvind, it’s becoming hard to see projects that do not have an AI component. Now, are they a full AI project? Some of them, yes, some of them, no. But there is always a component here and there that is part of most of the projects that are being discussed as we speak.
Martin Migoya: Yes, and also, they are adding a lot of things to the projects that were not present before. From data digestion to data analytics to understand more. And those projects that before were kind of freeze, now they are reviving and they are kind of in a new era of development because it’s needed for implementing AI, right? So that’s something that we have seen in the past quarters and we can keep on seeing it and I think it will keep on growing moving forward.
Arturo Langa: The next question comes from the line of Bryan Bergin from TD Cowen.
Bryan Bergin: Hey guys, good to see you. I guess my question is on the first quarter and maybe following up for some more color here. And as we think about or as you go from 4Q to 1Q, can you just comment on whether there are any particular verticals or large client considerations that are driving that modest quarter-over-quarter decline? Just trying to think if there any aspect of work, like the timing of work getting pushed out?
Juan Urthiague : Yes, part of the, I mean the decline is mainly explained, as I mentioned before, by the one of licenses that we had during Q4 that are not happening again into Q1 and the impact of the depreciation of the Argentinian currency that happened. It was 120% depreciation that happened in December. Basically that had an impact on those contracts that are in pesos that they have indexes, but they go over time until you recover basically the same level of revenues that you had before. Then on other cases that are in dollars, we have seen some customers coming approaching to us saying, hey, guys, I cannot pay 120% more tomorrow. So we had to engage into conversations, into negotiations to somehow apply those increases over time, right.
So the impact of that is a much lower revenue for those Argentinian customers into Q1. Those are the main negatives. We are expecting some positive impact also coming from the positions that we did. But all-in-all, that gives us around $570 million, which sequentially it’s 1.8% down. But when you look at it on year-over-year level, we are talking about 20.7%. And 20.7% year-over-year is one of the strongest numbers in the last several quarters.
Martin Migoya: Let me correct you. It’s not the strongest number, it’s the strongest number of all our peers and everybody. But anyway, that’s all.
Arturo Langa: The next question can come from the lines of Maggie Nolan from William Blair.
Maggie Nolan: Hi, how’s it going? Congrats on 20 years and crossing $2 billion. That’s pretty great to see. Just one for me. So on your pursuit to $3 billion, what’s your appetite in 2024 for M&A was obviously an important part of the strategy this past year. Curious how you’re thinking about future acquisitions. What at this scale do you define as a tuck-in versus a more large-scale acquisition? And what are you evaluating in the market?
Martin Migoya: Yes, our pipeline is strong and we always see companies that can fit and complement what we do, Maggie. And I believe that we’ll keep on taking a look at companies. I believe we did a very strong effort last year to increase our digital marketing space and what it’s called Globant Create. I see this year more going to the center of our business rather than keep on expanding. So I see things happening there. Although, we may have also tuck-in acquisitions always here and there, but I believe that’s the strategy for this year. And Globant and has grown mainly organically and this is a very important point to make. But we always see companies because this game is about these 1, 600 customers we have. It’s about how we can provide to them as many services as possible connected to what we do, which is technology.
And technology is invading pretty much every aspect of the company, so we need to be able to keep on expanding as technology evolves into more and more places. So we cannot pretend to be good at 100% of the things, so sometimes we need to do those tuck-in acquisitions to acquire new abilities we didn’t have before. And that’s a very good use of capital, a very good use of money. We have demonstrated that in the past, so we hope we can keep on demonstrating that to the future. Now, if you ask me how much, I don’t know.
Juan Urthiague : Tuck-in, for us, Maggie is still around 5% of our size. And this is so far, we’ve never done anything more than 5% of our size at that point in time. So that’s how we will define tuck-in.
Arturo Langa: Our last question comes from the line of Surinder Thind from Jefferies.
Surinder Thind: Thank you. I guess from my perspective, I’d like to focus on organic growth here. As I think about commentary a quarter ago, maybe a bit before that, and I look at where organic growth is at this point in terms of your expectations, it steadily come down. Can you talk about that? What’s causing that? Because it seems like the environment has actually gotten better. And so in 2023, it was a great year where you guys significantly outperformed all of your competitors, but that spread between your organic growth and what others are forecasting has started to compress. And it’s a lot less than it was.
Martin Migoya: Really? I don’t know what numbers are you seeing, but I don’t see that compressing at all.
Juan Urthiague : When we’re looking at, for example, this morning, one of our players reported about 2.5% area growth. We are talking about 16, which is about 10 -ish organic. So that’s still much, much bigger. But in any case, I think that we need to see how, again, people are talking about our interest rate decreasing in March. Now it seems that it’s not going to happen. There is some more positive tone in terms of conversations clearly. But again, we cannot control how and when people will change completely their mind and become very optimistic about the future and talking about growth again. And as such, we have to provide numbers that we feel comfortable that we can achieve and that we believe are still way ahead the average of all our peers.
