Globant Q1 2025 Earnings Call Transcript

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Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Good afternoon, and welcome to First Quarter twenty twenty five Earnings Conference Call. I am Arturo Llanga, Investor Relations Officer at Globant. All participants on this call will be on listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded and streamed live on YouTube.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

By now, you should have received a copy of the earnings release. If you have not, a copy is available on our website, investors.gloant.com. Also, you will find our shareholder letter, which contains the same content as the prepared remarks you will hear today. In order to craft a more engaging and interactive session, we've shortened our prepared remarks and allocated more time to the q and a section. We will begin with remarks by our chief executive officer, Martin Migoya, and our chief financial officer, Juan Ortigari, followed by a Q and A session where they will be joined by Chief Executive Technology Officer, Diego Tartara and our Chief Operating Officer, Patricia Pommies.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

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. 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.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

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 will now turn the call over to Martin Migoya.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Hello, and good day, everyone. It's great to be here again. We are pleased to report another solid quarter with revenues reaching 6 and 11,100,000.0, representing a healthy 8.6 percent year over year growth in constant currency, outperforming most of our peers. While our Q1 performance came in below our initial expectations and our revised annual guidance now aligns more closely with broader industry trends, we remain confident in the strength and resilience of our business. The fundamentals that fuel Globant's long term growth are strong.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

The AI opportunity is both profound and transformative. It is a market that could reach EUR 4,300,000,000,000.0 by 02/1935. Our ten years of strategic investment in artificial intelligence uniquely position us to lead this new era. We're not merely adapting, we're helping define the AI powered future of work and digital transformation. That said, we're currently operating in a challenging macroeconomic environment.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

The probability of a recession in The U. S. Has risen significantly since February. Consumer spending has softened, and uncertainty from trade tariffs has impacted a good portion of our customers. We observed a slower pace of pipeline conversion in The U.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

S. And growth in some countries in Latin America has been lower than expected. Although some near term challenges are present, we see this as transitory as the pipeline remains robust with a 20% increase over last year. I'm also pleased to see strong growth in markets where Globant has undertaken major investments recently, including our new market region of The Middle East and APAC as well as Europe. In this environment, we need to stay focused on long term value creation and transformative impact.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Our way forward is based on three core pillars. First, our 100 square accounts. One of the greatest assets is our 100 square customer base and the distribution network we have built over time. Throughout our history, we have consistently added new studios and practices such as digital enterprise and GAT creative studios as innovative services to distribute across a set of clients who value us for pushing boundaries and delivering forward thinking solutions. We continue to deepen these relationships with these strategic clients aiming to unlock new opportunities and deliver transformative value across their business units.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Second, our AI studios. They are purpose built to lead comprehensive AI transformation programs for each industry we serve. Their mission is to help clients realize the full potential of AI, conducting in-depth assessment across all business areas, identifying use cases, processes and efficiencies and emerging opportunities for intelligent automation. From this foundation, our AI studios design and implement scalable AI powered solutions that target the most impactful workflows and business outcomes. This industry specific structure approach is supported by our deep technical expertise and our enterprise AI platforms, enabling the orchestration of intelligent agents that deliver measurable innovation and lasting value to our clients.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

And finally, the Globant Subscription model. This model reimagines how we deliver engineering, creativity and automation services by introducing a consumption based subscription framework. Clients subscribe to AI powered capacity through AI Pods, which are dedicated delivery units that combine the power of autonomous AI agent powered by Globant Enterprise AI with the orchestration and oversight from our experts. Delivery is limited in tokens, representing the complexity and volume of work performed. Client can expand their usage through additional PAX subscriptions, offering a clear scalable path to increase value over time.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

This consumption based model aligns incentives around outcomes, not ours. It offers a flexible and transparent way to collaborate with our clients while complementing our traditional delivery models. This transformation will integrate directly into our existing client relationship teams and build on the strong relationship we have established with our network of incredible clients, a network built on trust, long term collaboration and share appreciation for innovation. YPF has already adopted this model. JM Family and other enterprise clients are exploring it as well, demonstrating early traction and trust in this new way of engaging with Globant.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

The Globant subscription model was born from our deep understanding that many organizations struggle to make the savings and efficiencies generated by AI tangible. While the potential of AI is clear, converting this promise into concrete business outcomes remains elusive for most enterprises. Our model addresses this challenge directly, delivering measurable results through defined output, traceable token usage and integrated performance monitoring, making AI's value visible, actionable and aligned with strategic goals. While we expand our commercial models, we also want to reaffirm the importance of our traditional delivery methods. Fixed price and time and material contracts remain the predominant form of engagement with our clients.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Many organizations will continue to prefer these models, and we are fully equipped with the right talent, proven methodologies and robust value framework to deliver excellence through them as we have been doing during the last twenty two years. This quarter, within Globant Enterprise AI, we introduced Globant Coda, a powerful agent driven suite. It brings together our most advanced AI agents and platforms into a single cohesive solution that simplifies and accelerates the entire software development life cycle. Weeks ago, Globant's Code Fixer AI agent achieved the highest score on the SWE bench multimodal benchmark, a prestigious data set for evaluating AI systems on visual software engineering tasks. In this context, our ability to evolve becomes our competitive advantage.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Our new AI powered subscription model is helping us to create more scalable, predictable and adaptive partnerships with clients, enabling continuous delivering of engineering, creativity and business process automation through our AI Pod and Enterprise AI platforms. During this quarter, we closed several strategic deals that reflect the creative application of our technology solutions. In The Middle East, we announced a new reinvention partnership with the Saudi Pro League, implementing our Competition Management Solution. With a new platform, future SPL seasons will be managed through a digital ecosystem. This will be powered by AI and data analysis to speed up manual tasks and allow competition staff to focus on innovation.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

In The United Kingdom, we have reached a major milestone through our partnership with Formula One. We recently launched the new Team Content Delivery System at the Australian Grand Prix in 2025. This innovative technology solution is designed to enhance the competitive experience for race teams by providing engineers and team principals with real time and archive video and data analysis. We're also partnering with AIB on their Teler app. Teler is a specialized transaction processing application in AIB Northern Ireland branches, integrated with AIB's core system to support efficient transaction management.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

The bank undertook a significant upgrade on the application to further enhance performance and resilience. We accelerated the development using Globant Enterprise AI to ensure delivery in a record time of eight months. In Argentina, we recently announced a reinvention partnership with YPF, the continent's third largest oil and gas company. We will improve their supply chain management with AgenTik AI, and we will create an integrated operating model that will continuously learn and evolve. It will make complex decisions through expert supervised algorithms and ensure compliance with the company's internal policies and standards across their extensive supply chain network of approximately 5,000 suppliers.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Globant's effort connects with YPF vision to enhance operational efficiency across all areas and position the company as a global competitive player, generating 30,000,000,000 in exports by 02/1930. Our creative gut network continues to produce outstanding work for top brands globally, including Corona for its one hundredth anniversary in Mexico, Food Panda with a new affordability campaign across six Asian markets and Mercado Libre's ongoing expansion. Our global partnerships also continue to evolve. In recent months, we received multiple recognitions from Google, Amazon Web Services and Adobe, reflecting the strong focus in developing these strategic relationships. As a Founder and CEO, I'm deeply committed to our Reinvention vision.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

We remain focused on delivering high value solutions that reflect both human ingenuity and technological excellence. We will continue to evolve our core strength and business models while pursuing long term value creation. Thank you very much.

Juan Urthiague
Juan Urthiague
CFO at Globant

Hello. In the first quarter, we continued to navigate a fluid global context. Revenues reached $611,100,000 This represents a 7% increase year over year and 8.6% in constant currency, a figure slightly below our February guidance. This performance was influenced by the challenging macroeconomic and geopolitical context, which has affected spending patterns among some of our largest customers, particularly in LatAm. The market deteriorated towards the February as a result of the tariff discussions.

Juan Urthiague
Juan Urthiague
CFO at Globant

Still, three of our four regional business units posted solid growth: North America, increasing top line 6% year over year. Europe, 13 Point 4 Percent year over year. And new markets continuing to scale exponentially, posting an 84.4% year over year growth. However, we saw a challenging performance in LatAm, which was down close to 9% year over year with notable contractions in Mexico and Brazil, which were partially offset by a strong growth in Argentina. From a vertical perspective, we saw year over year growth across most of our verticals.

Juan Urthiague
Juan Urthiague
CFO at Globant

However, we experienced some delays in project ramps, specifically in some large accounts in tariff impacted industries such as airlines, pharma and high-tech. Our revenue per IT head increased by 2.8% year over year and 2.3% quarter over quarter in the first quarter of twenty twenty five, reflecting the value and efficiency we deliver and our ability to remain disciplined in pricing. Turning to our margin trends. Our adjusted gross margin for the quarter stood at 38%, flat on a year over year basis, reflecting our premium positioning, geographic diversification and improving service mix. Our adjusted operating margin for the quarter was 14.8%.

Juan Urthiague
Juan Urthiague
CFO at Globant

While this metric fell short of our expectations, this was mainly driven by our lower than expected revenues. Our adjusted net income for the first quarter of twenty twenty five was $67,800,000 translating into an adjusted diluted EPS of $1.5 for the quarter, almost flat on a year over year basis. Turning to our balance sheet. As of the first quarter of twenty twenty five, our cash and cash equivalents and short term investments stood at $120,200,000 and our net debt was $167,000,000 translating into a healthy low net debt ratio, reflecting our prudent balance sheet management and providing us with substantial financial flexibility and liquidity. Regarding free cash flow, we consumed $5,700,000 in the first quarter, in line with prior years.

Juan Urthiague
Juan Urthiague
CFO at Globant

Looking ahead, considering the impact to our customers of the macroeconomic uncertainties and tariffs and given our exposure to B2B2C customers, which affects our visibility, we have undertaken a thorough review of our forecast with the goal of derisking our estimates to the extent possible. Based on this, we're introducing our second quarter twenty twenty five guidance of at least $612,000,000 in revenues or 4.2% year over year growth. This expected growth includes a neutral FX impact. For the full year 2025, we are revising our revenue guidance of at least 2,000,000,004 and $64,000,000 which represents 2% year over year growth, which translates into a similar figure in constant currency terms. In terms of profitability, we are targeting an adjusted operating margin of at least 15%, both for the second quarter of twenty twenty five and the full year 2025.

Juan Urthiague
Juan Urthiague
CFO at Globant

The IFRS effective income tax rate is expected to be in the 20% to 22 range for both the second quarter and the full year 2025. For adjusted diluted EPS, we forecast at least $1.52 for Q2, assuming an average of 45,700,000.0 diluted shares outstanding during the second quarter and at least 6.1 for the full year 2025, assuming an average of 45,800,000.0 diluted shares outstanding during 2025. We are taking clear and decisive steps to maximize our financial health and navigate the current environment effectively. Our short term focus for the remainder of the year will be on driving growth through strategic investments in our AI industry studios and our 100 square accounts, while focusing at the same time on protecting our margins and cash flow. With respect to margins, the main areas of focus are optimizing utilization, which stood at 78.2% in Q1 twenty twenty five compared to 79.3% in both previous quarter and Q1 twenty twenty four disciplined pricing strategies strategic geographic mix of our talent and revenues footprint optimization and infrastructure streamlining are ongoing, particularly through the integration of recently acquired companies SG and A investments will be sharply focused on bolstering our sale capabilities and go to market initiatives, while concurrently maintaining a lean overall structure.

Juan Urthiague
Juan Urthiague
CFO at Globant

As of Q1 twenty twenty five, adjusted SG and A a percentage of sales stood at 18.3%, and we target this metric to trend downwards by the end of the year as our top line expands. With regards to our cash generation, we are actively working to improve this critical metric through several initiatives. This include extending supplier payment terms wherever possible, targeting a reduction in our DSO and implementing a significant reduction in our capital expenditures with a clear prioritization towards investments in artificial intelligence, a prudent M and A activity to ensure accretive transactions in a fluid market. However, as discussed by Martin, we will remain bold in our technology bets and will continue to execute decisively on our long term strategic goals. This balanced approach is of utmost importance to us.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you for your continued support. See you shortly at the q and a session.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Thank you, Juan, and hi, everyone. So as we go through the Q and A section of this call, I will first announce your name. At this point, please unmute your line and then ask your question. Then please mute your line after your question is done. I would also like to, ask for you to please limit yourself to one question and one follow-up.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

So with that in mind, we will take our first question from the line of Tien Tsin Huang from JPMorgan. Tien Tsin, please go ahead. Your line is open.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Hey. Thank you, Arturo. Just just want to, I I know that the environment has been challenging for a lot of the companies here. I'm just curious how how quickly do you think you can recover, you know, some of the the demand or spend specifically in in Latin America just to start with that? Because it sounds like that's where a lot of the the change emerged.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

What are you doing to to reenergize growth there? Have you seen some of the work get canceled? Are these just delays? I'm just trying to get a better understanding of how that might shape up here in the short term and the midterm, starting with LatAm and any other areas that were a little troubled. You.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Hey, Tien Tsin. How are you? Thank you very much for the question. Listen, I believe that I mean, there's a there's a piece of information inside what we said on on on my initial opening that was the the size of the pipeline. And surprisingly, the size of the pipeline is 20% higher than in the same period last year and even higher than than q four.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

So that that's a pretty good sign of, of how things are evolving. I think that, many of the deals are just being delayed. Mexico is suffering. Brazil is suffering. And, there's a lot of uncertainty and and decisions are just being pushed out.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

And, that that started, a week later than our February earnings call. And, and evolving to this, into this quarter that we're reporting now, and and and we want to be, very sensible about that that information and saying, listen. We're seeing, an adjustment for the full for the full year. I see, a pretty good probability for q two and, not seeing major major struggles, of course, unless something good new news appears in the market, which I don't think is the case. But, I see that number, quite solid right now and the full year too.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

So recovery in Latin America is already happening. I mentioned some of the deals, that are pushing us forward. Some of that recovery is coming from Argentina. Some of that recovery is coming from Chile and some other geographies. Mexico is also improving slowly.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

It's not being seen on the numbers of of q one, but we are seeing it a little bit better. So with with all that, I think, we're gonna have, like, a like a like a quarter like we described in q two. But, you know, unfortunately, the the whole year was lower than what we expected at the very beginning of the year. I don't know, Juan, if you want to add something into that.

Juan Urthiague
Juan Urthiague
CFO at Globant

Maybe hello, Vincien. So basically, when you look at the Q2 number, which is just slightly above where we ended Q1. The idea is that we're trying to put out a guidance for the year, which if you do the math, it's basically a very similar second half relative to the first half. We are trying to be sensitive enough so that the rest of I mean, the rest of the year looks at least where where we are today. Know?

Juan Urthiague
Juan Urthiague
CFO at Globant

We we don't see further deterioration. When you look at the second quarter number, we feel it's a it's a it's quite solid at this point. So that seems to be kind of a lower a lower end basically or a bottom for the year. And the pipeline that Martin is describing, know, is what somehow gives us some comfort of hopefully a better second half, which, it's not embedded in the numbers that we're provided that we're providing because we don't want to go through a through another situation where, you know, the uncertainty doesn't allow us to to, you know, to put out the numbers that we want. So that's the the business is there.

Juan Urthiague
Juan Urthiague
CFO at Globant

The pipeline is there. We are trying to put numbers in a place where we feel comfortable, and and and we are confident we're gonna be able to meet at least the $612,000,000 that we guided for the second quarter.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Yeah. I I I would like to reiterate, Tien Tsin, the the I mean, the amount of opportunities, the quality of the opportunities, I think is is outstanding, and and the things that are happening on the market with the technology is outstanding. So the the just the people are saying, okay. Let let's put this on hold. Let's put that on hold.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

In many different industries, I would say that, financial services, was, you know, the the the least affected, but then all the rest of the of the of of the lines, were kind of, in in in in tough environments. Right? But the long term, again, long term for the business, think, is outstanding. The amount of opportunities are raising, the quality of opportunities are raising too. So I'm very positive about the future as always.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Okay. I know, you know, it's unusual for Robant to miss the quarterly outlook. I'm I'm sure you'll learn and and and you won't. I'm just curious if there'll be then if things do deteriorate and if they look to continue for whatever reason, do you have levers to pull to protect the margin and and the profits given what we've learned so far since late February to today? Do you have levers to pull?

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah. I I guess the line is a little bit, trophy, but I think you asked about protecting margins and profitability if the business deteriorates. As we as I discussed in my in my remarks, we have already taken a number of measures to protect those margins, to protect operating margin as well and to meet the EPS guidance. We feel that those measures that are in place should be, at least for what we see the business today, they are enough. But definitely, if we see another change in the market, we will be able to we will have to take further additional measures to protect profitability.

Juan Urthiague
Juan Urthiague
CFO at Globant

I mean, we definitely believe that growth is okay, but it's also important profitability and protecting margins. That's why we mentioned specifically a number of things that we are doing and also on the cash flow front, right? We are trying to take measures in every front, until we see, you know, an acceleration on the top line.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Yeah. High priority initiatives, all of them.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Thank you.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Thank you, Dicin.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Thank you, Tien Tsin. The next question comes from the line of Jim Schneider from Goldman Sachs. Jim, please go ahead. Your line is open.

Jim Schneider
Jim Schneider
Senior Equity Analyst at Goldman Sachs

Good afternoon. Thanks for taking my question. First of all, I was wondering if you could maybe frame for us sort of the backlog that you see, not the pipeline, but the backlog of signed contracts and maybe your coverage level of backlog relative to the revenue guidance. At this point in time, maybe comparing that versus what you were seeing in Q1 of last year, maybe just as a first start?

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah. So for the Hi, Jim. Thank for the question. For the second quarter, I think that level of comfort, level of visibility is high enough. You know, we we try to to make sure that the number that was provided is at least the number that we are targeting, we're trying to meet.

Juan Urthiague
Juan Urthiague
CFO at Globant

For for sure, there is more uncertainty for the second half of the year. That's why when you look at our second half implied guidance, it's basically somehow following with with the current numbers with just a a small improvement in q three. So I think that the way we build the current forecast includes the or has embedded the current visibility, which of course is a little bit lower than prior years. That's why we did have to adjust our full year guidance.

Jim Schneider
Jim Schneider
Senior Equity Analyst at Goldman Sachs

Thank you. And then maybe as a follow-up, could you talk about maybe parts of The U. S. Business outside of the LatAm, which is clearly being impacted by tariffs. What parts of the business there slowed?

Jim Schneider
Jim Schneider
Senior Equity Analyst at Goldman Sachs

Was it confined to one or two geographies, whether it be airlines or something else? Maybe just talk about the profile of The U. S. Business, please.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Yeah. Look, it was pretty much all over the place. Entertainment was performing a little bit lower. High-tech, it was, like, lowest. Health care also take and took some dip, although we're seeing it recovering much better now.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Travel and hospitality has gone down. It's interesting because, you know, between professional services and and financial services were kind of the most even, performances, But then all the rest, that is related to consumer, got and took, and took a big hit. So it's a pretty obvious it's pretty obvious to us that that is something something much larger than just, you know, one one specific sector, hitting the the thing.

Juan Urthiague
Juan Urthiague
CFO at Globant

I think the fact that, you know, Jim, the fact that we are a company that, of course, we have a wide array of services, but a big part of what we do is still, on the on the growth side. Right? On the on the b two we have a lot of b two b two c customers with consumers that, you know, somehow are being impacted by tariffs, by the uncertainty of what's going to be like in The US going forward. And those are the industries that initially, at least on many of our customers, put some kind of a break on certain projects. That happens in in, as Martin was saying, in trying to retire the automotive, you know, some of the technology customers that we have, some of the retailers.

Juan Urthiague
Juan Urthiague
CFO at Globant

So mostly, you see that concentrated on con consumer facing customers.

Jim Schneider
Jim Schneider
Senior Equity Analyst at Goldman Sachs

Thank you.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Thank you, Tim.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you, Jim.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Thank you, Jim. Our next question comes from the line of Brian Bergen from TD Cowen. Brian, your line is open.

Bryan Bergin
Managing Director at TD Cowen

Hey, guys. Thanks for taking the questions. I wanted to ask about your top 10 clients. Can you dig in a little bit further on what you saw specifically in some of those accounts and how you are thinking about those accounts now in 2Q in the second half? Obviously, Disney and then potentially some Middle Eastern clients and any other ones you think are important to call out.

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah. Yeah. In general, I mean, if you look at the the performance on a sequential basis, pretty much most groups performed in in a similar fashion, you know. However, already getting into Q2, we see stabilization. That's why the expected number is slightly ahead of the Q1 number.

Juan Urthiague
Juan Urthiague
CFO at Globant

We are not seeing I mean, probably the ones that have more consumer facing exposure suffered a little bit more. But in general, already into q two, we see more stabilization, you know. Clearly, new markets will continue to outperform with very high year over year growth and we're going to see sequential growth there as well. At this point, we're also seeing positive numbers in Europe, positive numbers in The US. Maybe the one region that will stay behind will continue to be Latin America at least during the second quarter.

Bryan Bergin
Managing Director at TD Cowen

Okay. Okay. And and how are you managing kind of the, you know, the employee base here and the resourcing plans as you go forward? Can you talk about your intentions here as you move through the balance of the year?

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah. I think the strategy is the same. I mean, we have been globalizing our delivery footprint in the last ten years. When we did the IPO, Argentina was 70% of our employees. Today, you know, we have a very balanced, portfolio of comp of countries from where we serve, you know, being Argentina, Colo make Colombia Colombia, India, Argentina, the three main locations.

Juan Urthiague
Juan Urthiague
CFO at Globant

That will continue to be the case. We we are not I mean, we will continue to be a diversified delivery footprint as well today. That's gonna continue. Of course, we will prioritize, you know, where demand is going, as we have always done. But in general, the growth strategy doesn't change.

Juan Urthiague
Juan Urthiague
CFO at Globant

Having a global delivery footprint to serve more global customers as as you can see today, you know, US is about 55% of revenues. Europe is getting very close to becoming the second the second largest, you know, revenue, generation area. And we have seen a a very nice uptick in the share of new markets. So, we are building a global delivery footprint for a global, revenue, company for how many Right.

Bryan Bergin
Managing Director at TD Cowen

Right. Okay. Thank you.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you, Brian.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Thank you, Brian.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

The next question comes from the lines of Jamie Freeman from Susquehanna. Jamie, please go ahead.

Jamie Friedman
Senior FinTech and IT Services Research Analyst at Susquehanna International Group

Hi. Thanks for taking my question. I was wondering if you could comment on the competitive position of the company apropos of application development versus infrastructure. Is it difficult to compete purely as a great application development provider yet having less mindshare in infrastructure in this environment?

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

So so it's interesting to I mean, first, I think it's interesting to to to go through our revenue per head. Right? When you see the revenue per head, still growing, it's a measure of that we are, you know, adding more value to our customer customers and seeking deals that are, you know, a lot of value added for our customers. On the enterprise side, on the cloud migration studio sorry. The cloud, CloudOps studio that we have is performing very well, and we have very deep expertise there as pretty much everything we do is going into into, into cloud, into into infrastructure side.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

I think that, with all the AI projects that are happening, that, that area, that specific area is gaining a lot of momentum. And I believe that, in essence, every day becomes more and more, the AI landscape becomes more and more complex. Every day, it's more and more, difficult to create something only thinking on cloud or only thinking on AI. You need everything together. And, and this is where we're going.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

I mean, Globant became, with time, a much more balanced company in terms of our studios. We're playing on the on the digital side. We're also playing on the enterprise side with a good portion of our business, and we're also playing on the now on the creative side. So the three components are very important components of pretty much any solution that you build today. So I I think that if you only focus on one of them, it will be difficult.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

But as we are very balanced between the three of them, I think that we are in a pretty good position to create much better solutions for our customers through our AI studios, through our now our subscription model, you know, the way to change how companies, come buy, these kind of services. In some way, we're simplifying, the access to technology to companies. And and this is extremely important, you know, option that we are providing now to our customers that is being, very well accepted and a very good, you know, an important conversation starter for many of our customers. And, and again, the most important asset we have built are all those customers with with whom we we we have a a very good relationship that they value us for how we can innovate, for how we can implement many of the latest technologies to them. So I believe that every day more, and that's a testament of how we have been doing things.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

It's about having a balanced approach to technology because it's not just about having one of those things.

Jamie Friedman
Senior FinTech and IT Services Research Analyst at Susquehanna International Group

That's a great those are great points. In terms of the increase in the revenue per head, that's very interesting. Do you see that more as the revenue realization related to automation? Or there's a reduced linearity? Any context you could give us about the revenue per head would be helpful.

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah.

Juan Urthiague
Juan Urthiague
CFO at Globant

There is Jamie, there is a little bit of everything. A little bit of higher value added services, a little bit of an improvement in how we deliver some of our services. There is also a higher share of Europe and new markets would come at a higher revenue per head than Latin America. So you have different factors. And, also, there is a lot of careful in terms of managing our pricing.

Juan Urthiague
Juan Urthiague
CFO at Globant

I mean, there is today a lot of deals that, you know, are not good enough in our view. And and and we we also try to protect our margins through having a a, you know, a good grip on on on pricing. I mean, there there is a lot of this out there that we could get at very low pricing, low margins, or even negative margins. We're trying to put everything in balance, and and that's why you are seeing our revenue per head going up sequentially and year over year.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Yeah. And some of our competitors are are are, you know, like, chasing those deals in which you need to pay, to get them and and then, get some kind of deal in in exchange of that. But we are totally way of that saying, listen. We don't want to enter into into a deal in which we need to, offer, any kind of, advantage and or maybe, I would say, in those days in which, we don't like the the the profit that we're making. I mean, if we're if we're not making a good profit, we walk away.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

And we have been extremely selective on those deals. And, buying revenue today is like a pretty pretty common standard in many occasions, and we don't like those deals.

Jamie Friedman
Senior FinTech and IT Services Research Analyst at Susquehanna International Group

Perfect. Thank you so much.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

You very much.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Thank you, Jamie. Our next question comes from the line of Maggie Nolan from William Blair. Maggie, please go ahead.

Maggie Nolan
Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C

Hi, thank you. I'm curious if your margins are different on the Latin American revenue compared to the rest of the business And how maybe softness in Latin America is flowing through the margins and impacting the financials right now?

Juan Urthiague
Juan Urthiague
CFO at Globant

Not necessarily. I mean, are, I would say, they're not very different in in in the different regions. You don't see a lot of dispersion there. I think what is relevant is that we need to to to remain sensitive in terms of how we price the deals, in terms of looking the right margins for the deals, protecting I I think that at the end of the day, you know, it's very easy sometimes to to get deals at lower prices. We we discussed this many times, you know.

Juan Urthiague
Juan Urthiague
CFO at Globant

Taking prices down is very easy. Taking them up again is very hard. So it's it's always a balance. Of course, we are we we don't like to lose deals, we try to win as many deals as we can, but that has to have a limit at some point. I don't know, Mahdi.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Yeah. And also also, I I think, Maggie hey. How are you? I think that, you know, a good a customer with good margin is also a signal of of the health of that relationship. Right?

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

And and we always prefer to to pursue, you know, healthy relationships and to and to put that in front of everything. And so so for us, you know, a deal in Latin America or a deal in The US, it should be healthy anyway. So we have a pretty centralized way of understanding margins and understanding how we want to close the deals. And that's something that we try to across to spread across all the places. So I don't know if that answered your question.

Maggie Nolan
Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C

Yes. That's helpful. Thank you. And then on the new commercial models, how much traction are you getting there? Is there anything that you can quantify maybe as a percentage or part of your AI revenue?

Maggie Nolan
Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C

And then is your goal to have this become a material percentage of revenue over time?

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

So so AI revenue is growing a lot. I mean, it's something that that is surprising us the way and the amount of deals. And it's interesting to see that that growth is connected to the complexity of the market. So as it becomes more and more complex and companies wants to implement that and, again, you know, I I said this many times, AI projects are very good for for media for social media and, are very easy if you want to do a demo or or do it in social media. But then when you want to take it to enterprise levels, it's a totally different it's a totally different game.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

So there's a lot of, you know, activity around that. Pretty much AI is involved in every single project. I mean, it's not a single project that we are pitching today that has that doesn't have a component. Even even in those, you know, very old customers, all of them are getting some kind of flavor and components around that. Now our latest yeah, model, our latest subscription model, what it does is provides the customers with a with a way of changing that engagement that we have had for the last twenty two years into evolved new model.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

And, I will let Diego to to to explain a bit more about that. But I think that, having this new conversation is triggering a lot of interest, a lot of early interest for our customers. We already closed many deals around that. We are not disclosing any numbers. It's not substantial yet.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

But my plan moving forward is that at some point, we'll start disclosing it, as it gains momentum. And and and I hope that this is something that, will be leading again. Right? It's like, when like, you subscribe to any subscription, that you may imagine that you can subscribe to Globant and get the engineering that you need, the creativity that you need, the process automation that you need and pay for consumption instead of just paying for the hour, only paying with a monthly with a monthly fee. So, so this is a pretty revolutionary approach.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

We haven't seen any of our competitors doing it, and we're extremely proud that we cracked that nut. And as I said in my remark, when you you know, AI efficiencies has been a little bit elusive to to to become tangible. And, with this model, what we are doing is we're providing our customers an effective way to make those savings real. So whenever you had a team of five engineers, they call it that way, now you may have a subscription that is much cheaper than those five engineers. But on the back, there's a set of agents you know, producing the software supervised by a human that allow that the quality and the output doesn't have hallucination, and it's the same global quality as always.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

So that produce a much better alignment of interest between our customers and us, and that produced something that we are looking for, which is more and more conversations around that new model and that new way of doing things. I don't know, Diego, if you

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

want to add.

Diego Tartara
Diego Tartara
Global Chief Technology Officer at Globant

No. I think, I think, Maggie, to to put it super simple, this is it has been a discussion we've been having, about the future of the company and how we provide value for a long, long time. I think, you know, time and people have been a good proxy of the value being delivered, to our client, and that is no longer the case. So our immediate approach was, you know, let's, engage in a different way. One would think, like, immediately that that best way and approach has to do with, you know, Turkey solution, a fixed price.

Diego Tartara
Diego Tartara
Global Chief Technology Officer at Globant

And truth to be told is that we don't like those type of contracts. But but let me tell you why. Those have an end. Don't speak about a relationship. Those have a set mandate.

Diego Tartara
Diego Tartara
Global Chief Technology Officer at Globant

And the relationship you have with your client makes change, which is, you know, evolving product, discovery, etcetera, case you don't want. And that's not the type of relationship with it. So we started exploring a new way of doing things. And, and I think we want a subscription model pretty much represent that. Let's, represent the value we are delivering in a different way.

Diego Tartara
Diego Tartara
Global Chief Technology Officer at Globant

Let's measure that. Let's make sure we continue to provide value and efficiencies and quality the way global has been doing, but taking advantage of the latest technology and all they can do. Let's take that to the limit. And that's what we have put together.

Maggie Nolan
Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C

Very interesting. Thank you all.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Thank you, Maggie.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you, Maggie.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

The next question comes from the line of Jonathan Lee from Guggenheim. Jonathan, please go ahead.

Jonathan Lee
Managing Director, Equity Research at Guggenheim Partners

Great. Thanks for taking my question. How should we be thinking about the revised growth outlook as it relates to composition between ongoing ramps versus hunting versus farming? And how does that compare to composition from prior years?

Juan Urthiague
Juan Urthiague
CFO at Globant

So when you look at the full year number today, Jonathan, you look at q one, you look at the q two guidance, you're gonna see that it's basically pretty much maintaining the same level of of revenues for for this for the rest of the year. So the and and and the the way we are building that is with with a majority of of that already contracted. We and and and we try to on purpose to reduce as much as possible, you know, any potential upside coming from coming or even from taking more risk on the farming side. So it it we try to put out a number that we feel, it is derisked to the extent possible. Of course, as always, think things can change, but we put a lot of effort into trying to put a number that has a higher degree of certainty than than the ones or or maybe a lower risk than the one we would have taken in another moment.

Juan Urthiague
Juan Urthiague
CFO at Globant

Given the uncertainty that we're seeing, given that we were expecting a better q one than what it ended up being, we're expecting a recovery already into q two that is not showing. You know, it's it's pretty much stable. And and we try to say, If this is not happening as we expected back in February, let's let's somehow assume that this uncertainty we're seeing continues throughout the rest of the year, and let's try to put a number, you know, that that removes most of that uncertainty, so I said, to the extent possible.

Jonathan Lee
Managing Director, Equity Research at Guggenheim Partners

Thanks for that color, Juan. And just as a follow-up, yeah, can you update us on what you're seeing at your top customer? Understand there was a pull forward late last year, but is there still an expectation for that account to be up, call it, mid to high single digits this year?

Juan Urthiague
Juan Urthiague
CFO at Globant

At this point, we're seeing, that account in you know, finishing around, the mid single digit number, given that it started a little bit below where, you know, we were planning before and looking already into the second quarter. So we feel that it should be more in line with a mid single digit type of year over year growth at this point. We are we are already, you in the process of having some convert about some new things that that they have recently mentioned on the press, but that is something that's gonna take some more time to materialize.

Jonathan Lee
Managing Director, Equity Research at Guggenheim Partners

Understood. Thank you.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you, Jonathan. We cannot hear you, Arturo.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Sorry, excuse me. The next question comes from the line of Sean Kennedy from Mizuho. Sean, please go ahead.

Sean Kennedy
Sean Kennedy
Payments & IT Services Equity Research Analyst at Mizuho Financial Group

Hi, thanks for taking my question. So I was wondering about the demand environment for professional services. Seems like it recovered, you know, a bit this quarter sequentially. And has your outlook changed significantly over the last few months with those press pressuring the sector broadly?

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah. So, you know, part of the recovery comes from, you know, during q four, typically, are furloughs in in that sector. Those are not in in q one. They they typically happen in December. Part of the recovery is there, and we see a stable, you know, a stable number for that industry.

Juan Urthiague
Juan Urthiague
CFO at Globant

We're not seeing big changes neither positive nor negative. So it's gonna be stable. We wanna see better numbers in other industries like re like BFSI. We are gonna see better numbers in in in travel and hospitality. We're gonna see better numbers in health care, for example.

Sean Kennedy
Sean Kennedy
Payments & IT Services Equity Research Analyst at Mizuho Financial Group

Great. Thanks. And then for Latin America Latin America specifically, are there I thought you I thought Globant was overweight financial services. Are there is it kind of just a broad pullback in in the demand environment, or is it really focused on a few key kind of sectors down there?

Juan Urthiague
Juan Urthiague
CFO at Globant

It's mostly focused on countries than than sectors. Argentina is is doing extremely well, you know, showing very, very solid growth, but that is being offset by, some of our customers in Brazil and and Mexico. In Mexico, that's mainly BFSI. But when you look at BFSI as a whole, you know, we are having good traction in The US. We're having good traction in Europe.

Juan Urthiague
Juan Urthiague
CFO at Globant

So it's not it's not a sector that as a whole will look bad. It's gonna actually look look good even with the issues in in in some of our customers in Latin America.

Sean Kennedy
Sean Kennedy
Payments & IT Services Equity Research Analyst at Mizuho Financial Group

Great. Thank you. Appreciate the color.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Thank you.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Thank you, Sean. The next question comes from the line of Diviya Goyal from Scotiabank. Diviya, please go ahead.

Divya Goyal
Director - Equity Research - Technology, Software & Services at Scotiabank

Good afternoon, everyone. I just wanted to get some color on the capital positioning of the company with the current macro dynamics. So if you could provide how have some of the capital priorities changed? And what are some of the imminent measures you are taking or have taken in order to ensure you meet the profitability guidelines that you've put forth?

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you, Olivia, for the question. I think it's the first part was about, capital, right, and protection of, cash flow generation. Am I right? The second part was about margin, but it's just ratio. Okay.

Juan Urthiague
Juan Urthiague
CFO at Globant

So Yeah.

Divya Goyal
Director - Equity Research - Technology, Software & Services at Scotiabank

I wanted to understand the capital positioning of the company. Sorry.

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah. The capital position. Okay. So we closed the quarter with about a hundred and $55,000,000 in net debt. We have about we have a facility which is up to $725,000,000.

Juan Urthiague
Juan Urthiague
CFO at Globant

You you have to keep in mind that Globant usually consume cash in the first half of the year and generates a lot of cash in the second half of the year. We having said that, you know, the plan, as I mentioned in my initial remarks, is to protect and actually generate more cash. We have taken measures to make our CapEx investments lower for the year and prioritize those areas that are related to our AI investments at the expense of some of maybe, you know, certain offices and certain things that we were able to to postpone for for the future. So we will be protecting cash flow generation. As I mentioned, cutting or reducing a little bit our prioritizing our CapEx investments, extending DSO payment terms whenever possible towards to some of our vendors.

Juan Urthiague
Juan Urthiague
CFO at Globant

At the same time, we're working very hard to reduce the DSO.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Yeah. And also and also on the m and a side. Right?

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

The m and a side, we're we're, we'll be much more, you know, focused on on really adding value, and generating, deals that are accretive for the company.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Everything changed when the multiple changes. So we need to, we have a new reality there, and we'll be much more cautious, on that on that specific, much more limited. We have always been cautious, So much more limited in terms of how we do M and A, right?

Juan Urthiague
Juan Urthiague
CFO at Globant

And then on the margins, the second part of your question, I also mentioned some actions that we're taking, trying to work on utilization levels, are below our target. We are working on efficiencies in terms of infrastructure, offices. We are working on protecting our margin through being cautious in terms of pricing and so on and so forth.

Divya Goyal
Director - Equity Research - Technology, Software & Services at Scotiabank

That's helpful. Just to, just to complete the discussion here, are you undertaking or anticipate undertaking any specific restructuring efforts in any of the global geographies you operate in?

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

No.

Juan Urthiague
Juan Urthiague
CFO at Globant

Divya. That's not in the plan. We see a lot of, as Martin described, the pipeline is there. The the the need for technology is there. I think uncertainty will have to go away at some point and and companies will continue investing in growth and they as they have been doing in the last twenty years.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

And companies cannot avoid, you know, to go through these transformation processes. I mean, pretty much nobody can can look away from the efficiencies that can be made using AI in every single sector of the company, the efficiencies that can be done, on how we interact with consumers, customers, how emotional you become when you connect with them. And those things, AI helps a lot. So pretty much no customer on any sector can look away from that. So that is materializing into a pipeline growth.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

And, of course, I think decisions will will be a little bit more fluid moving forward, but we hope that, that's the the new reality. But but, you know, at the very beginning of the year, we're a little bit tough, even more after after we reported earnings, with all the tariff things and things that happened that was absolutely unexpected. But in any case

Divya Goyal
Director - Equity Research - Technology, Software & Services at Scotiabank

That is very helpful. Thank you.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you, Divya. Thank you.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Thank you, Divya.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Thank you very much, Divya. Our next question comes from the line of Arvind Ramani from Piper Sandler. Arvind, please go ahead.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

Hi. Hey, thanks for taking my question. Appreciate it. Appreciate it. Just a couple of questions.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

When you think about kind of the updated guidance, I'm really trying to understand you know, kind of what's gonna drive some upside or downside. So in a sense, like, you know, if you're looking at this, like, you know, eight months from now and you come in sort of below below sort of your updated guidance, you know, what would have need to happen? And and if you were to come back kind of closer to kind of the prior guidance you you you basically kind of gave, three months ago, you know, what what would drive that? And, you know, what I'm really trying to figure out is, like, you know, things are moving fairly quickly both both on the tariff side and the macro side. So, you know and I don't necessarily wanna be overly optimistic or pessimistic, but I'm just trying to figure out the factors that can get us to a different range than what you've guided to.

Juan Urthiague
Juan Urthiague
CFO at Globant

The way you know the numbers are built, if you think about our prior guidance, it was we were expecting to do $623,000,000 at the midpoint. And and then q two, q '3, and q four have embedded sequential growth rates there. Right?

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Yeah.

Juan Urthiague
Juan Urthiague
CFO at Globant

What ended up happening was that right after we reported, we saw a deteriorate it's frozen. I don't know if people are hearing. Are you are you hearing okay?

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

Yeah. I'm hearing perfectly. Your video is frozen, but I can hear you perfectly.

Juan Urthiague
Juan Urthiague
CFO at Globant

Okay. So what happened, you know, when we reported was that things got a lot worse and and, you know, we were not able to to to offset those challenges already in q one. So we ended up a notch below what we expected. And looking into q two, we are seeing that we're gonna be, you know, just a little bit up relative to q one, right, sequentially. And we are seeing stabilization in other regions.

Juan Urthiague
Juan Urthiague
CFO at Globant

So somehow we said, okay, know, let's assume that this this uncertainty, will continue. We we cannot assume a meaningful recovery in the second half of the year because, or at least we want to be able to see if things get better. We want to see we want to be able to to to achieve that. But, you know, we want we cannot put that into the guidance for the year, as we did last time. So that's how we build the guidance.

Juan Urthiague
Juan Urthiague
CFO at Globant

So I think that, as you said, things are moving a lot very, very quick. And and what we believe is that the vast majority of what we are seeing, was due to all the changes and uncertainty that is happening and impacting our customers. Hence, you know, if those things go away, the pipeline is there. The opportunities are there. The the the guys on the field are bringing the opportunities.

Juan Urthiague
Juan Urthiague
CFO at Globant

We need to close more and we need to close faster. If that happens because things get better, there might be some upsets. And then on the opposite, as you said, you know, if things go the other way, you know, we at least what we try to do with this guidance is put out a number that we feel, is as safe as possible, with the current scenario.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

Perfect. No. That that's that's certainly helpful. And I guess, you know, there's obviously some level of number of, working days and everything seasonality that naturally impacts, you know, sequential growth.

Juan Urthiague
Juan Urthiague
CFO at Globant

Yes.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Yeah.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

I understand that. With that said, like, you know, when I look at your, q one, right, it was negative 5%. And then q two is, like, flat, which, you know, just mathematically implies, like, a 500 bps turnaround in, in terms of, like, sequential growth. Right? Like, I mean, basically, between between q four and q q four of last in q one, you you you your revenue declined.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

But now you see it's gonna be flat.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

Then, you know,

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

q three q '3 also is about, like, flattish about 1% in order to That's correct. Number. So is there enough optimism in that's getting you from, like, hey. You you declined of in q one, but now in q two, you're gonna start seeing, like, a flat.

Juan Urthiague
Juan Urthiague
CFO at Globant

Yeah. But, again, we wouldn't we we we would try to put out a guidance that contemplates the uncertainty that we have in front of us. We see the second quarter stabilizing very clearly related to Q1 as of now. So the numbers that we are putting to the extent possible include all that uncertainty and hopefully, you know, allow us to to to at least meet those targets.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

Great. And just one last follow-up here is, you know, I mean, one could argue that, you know, you had, like, a good macro in January and February and March when things started to shake. April was kind of the worst month, and April sits sits more in q two. So given that, you know, the last six weeks are probably the most volatile. How the last six weeks gone for you guys?

Juan Urthiague
Juan Urthiague
CFO at Globant

I think, Drew, going the the second quarter numbers showing some stabilization, in a way are part of that. We are not seeing deterioration. That's what I can tell you.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

Okay.

Juan Urthiague
Juan Urthiague
CFO at Globant

That's why the number shows stable number throughout the year.

Juan Urthiague
Juan Urthiague
CFO at Globant

We are not assuming any major or any significant improvement in the in the numbers that we put out. And, you know, we did take some, I mean, we tried to put a number again that at least we can meet.

Arvind Ramnani
Arvind Ramnani
Managing Director & Senior Research Analyst at Piper Sandler Companies

Perfect. That's so powerful. Thank you so much.

Juan Urthiague
Juan Urthiague
CFO at Globant

Thank you, Arvind. Thank you.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Thank you, Arvind.

Arturo Langa
Arturo Langa
Investor Relations Officer at Globant

Thank you very much, Arvind. Unfortunately, that's all the time that we have for the q and a session today. With that, I would like to turn the call over to Martin for some closing remarks. Martin, please go ahead.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Thank you very much, everyone, for participating today. Really looking forward to see you on our next quarters, Ernie. Thank you so much.

Juan Urthiague
Juan Urthiague
CFO at Globant

Bye bye.

Martín Migoya
Martín Migoya
Co-Founder and CEO at Globant

Bye bye.

Juan Urthiague
Juan Urthiague
CFO at Globant

Bye.

Executives
    • Arturo Langa
      Arturo Langa
      Investor Relations Officer
    • Martín Migoya
      Martín Migoya
      Co-Founder and CEO
    • Juan Urthiague
      Juan Urthiague
      CFO
    • Diego Tartara
      Diego Tartara
      Global Chief Technology Officer
Analysts
    • Tien-tsin Huang
      Senior Analyst at JP Morgan
    • Jim Schneider
      Senior Equity Analyst at Goldman Sachs
    • Bryan Bergin
      Managing Director at TD Cowen
    • Jamie Friedman
      Senior FinTech and IT Services Research Analyst at Susquehanna International Group
    • Maggie Nolan
      Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C
    • Jonathan Lee
      Managing Director, Equity Research at Guggenheim Partners
    • Sean Kennedy
      Payments & IT Services Equity Research Analyst at Mizuho Financial Group
    • Divya Goyal
      Director - Equity Research - Technology, Software & Services at Scotiabank
    • Arvind Ramnani
      Managing Director & Senior Research Analyst at Piper Sandler Companies

Key Takeaways

  • Globant reported Q1 revenues of $611.1M, up 8.6% y/y (cc) but below initial guidance, with a 38% adj. gross margin and 14.8% adj. operating margin; for Q2 it guides at least $612M (+4.2% y/y) and full‐year revenue of at least $2.664B (+2% y/y) with a 15% target operating margin.
  • The company highlighted a decade of strategic AI investment and unveiled a consumption‐based subscription model using AI Pods, alongside its Globant Coda suite and record‐setting Code Fixer AI agent.
  • Despite a challenging environment, the sales pipeline is up 20% y/y and Globant saw strong growth in the Middle East, APAC and Europe, while the U.S. pipeline conversion slowed and LatAm revenues fell nearly 9%.
  • Macroeconomic headwinds—rising U.S. recession risk, softer consumer spending and trade tariffs—have delayed project ramps in consumer‐facing industries like airlines, pharma and high‐tech.
  • To protect margins and cash flow, Globant is optimizing utilization and pricing, streamlining footprint and CapEx, extending vendor terms, targeting a DSO reduction and maintaining a healthy balance sheet (net debt ~$167M, cash ~$120M).
AI Generated. May Contain Errors.
Earnings Conference Call
Globant Q1 2025
00:00 / 00:00

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