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    Globant (GLOB)

    Q3 2024 Earnings Summary

    Reported on Mar 4, 2025 (After Market Close)
    Pre-Earnings Price$228.79Last close (Nov 14, 2024)
    Post-Earnings Price$214.20Open (Nov 15, 2024)
    Price Change
    $-14.59(-6.38%)
    • Globant expects acceleration in organic growth in 2025, moving from almost 10% constant currency growth in 2024 to low double-digit to mid-double-digit growth in 2025, driven by large deals ramping up, especially in the Middle East, and strong performance in AI-related projects.
    • Strong performance with key clients such as Disney, including significant projects like merging Disney Plus, Hulu, and ESPN into a single platform, indicating sustained growth prospects with major accounts.
    • Expanding global presence, notably in high-growth regions like India and the Middle East, tapping into large talent pools and entering markets with massive investment opportunities, which is likely to drive future growth.
    • Margin pressures due to currency fluctuations: The company has faced operating margin pressure from currency fluctuations, particularly with Latin American currencies appreciating against the dollar. Despite efforts to improve efficiency and some tailwinds from recent currency depreciation, operating margins have remained at the lower end of the 15% to 17% target range in 2023 and 2024, which could impact profitability moving forward.
    • Client concentration risk with major accounts: Significant growth is driven by key clients like The Walt Disney Company, where revenue increased by 17.5% year-over-year and 14% quarter-over-quarter. This reliance on a few large clients exposes the company to risks if these clients reduce their spending. The sustainability of such growth trends heading into 2025 remains uncertain.
    • Underutilization of workforce affecting profitability: The company's utilization rate is currently 79.8%, below their target of 81% to 82%. Management does not expect significant changes in the near future. Continued underutilization may impact margins and overall profitability if not improved.
    1. 2025 Revenue Growth Acceleration
      Q: What is driving the expected faster organic growth in 2025?
      A: The company anticipates faster organic growth in 2025 due to the performance of large deals ramping up, especially those closed in the Middle East, strong performance in top accounts, and an acceleration in AI-related projects. Additionally, macroeconomic variables are stabilizing post-elections, with interest rates coming down and inflation under control.

    2. Operating Margin Outlook for 2025
      Q: What are the expectations for adjusted operating margins in 2025?
      A: After facing FX pressures, the company has improved efficiency and utilization, closing Q3 at 15.6% operating income and expecting a similar number for Q4. This serves as a base number for 2025, with continued efforts to enhance efficiency and potential tailwinds from currency movements.

    3. Impact of AI on Growth and Operations
      Q: How is AI influencing client work and internal processes into 2025?
      A: The nature of AI projects is shifting from exploratory work to intentional initiatives with clear business goals, leading to larger pipelines and projects. AI investments are now more directed, aiming to produce enterprise results. Internally, AI agents are incorporated into delivery processes to assist teams, leading to amazing results without replacing human labor.

    4. Client Relationship with Disney
      Q: What is driving the impressive growth with Disney, and is it sustainable into 2025?
      A: Growth with Disney is driven by projects in both media and experiences (parks). On the media side, work includes merging platforms like Disney Plus, Hulu, and ESPN, focusing on maximizing revenue and driving engagement. On the parks side, the strategy involves improving the customer experience. The company has a strong pipeline and is well-positioned for continued collaboration with Disney.

    5. M&A Contributions and Impact on Growth
      Q: How will recent acquisitions contribute to growth in Q4 and 2025?
      A: Recent acquisitions like Exusia and Blank Factor will contribute about 4 percentage points to growth in Q4. For 2025, M&A is expected to contribute 2–3%, supplementing organic growth and leading to overall low to mid-double-digit growth. The company remains open to future M&A opportunities to fill gaps across regions and services.

    6. Expansion in the Middle East
      Q: What is the potential of the Middle East region for the company?
      A: Starting from a small base, the Middle East presents significant growth potential with large-scale projects that can become sizable quickly. The region involves massive investments in technology to create new experiences and attract global audiences. The company is well-positioned to build software in this area and has opened an office, deploying and training people to meet goals.

    7. Headcount Growth and Utilization Rates
      Q: What are the plans for employee growth and utilization rates going forward?
      A: The company expects another quarter of positive net additions in Q4, hiring mainly in Latin America and India. Utilization rate for the quarter was 79.8%, aiming for a target of 81–82% as the industry accelerates. Efforts continue to improve utilization without major changes in the immediate future.

    8. Geographical Headcount Mix and India Expansion
      Q: How is the geographical headcount mix changing, and will India continue to gain share?
      A: India has been growing throughout the year, partly due to the acquisition of Exusia. The company has been operating in India for over 10 years and continues to expand there, as well as in the Philippines and Vietnam. Asia is becoming a priority as the business becomes more global, leading to a more balanced operation with a larger presence in Asia and Eastern Europe.

    9. Recovery in Vertical Markets
      Q: Which verticals are showing signs of recovery?
      A: Travel and hospitality had a very good quarter and have been performing well throughout the year. Consumer, retail, and manufacturing sectors are also doing well. Improvements are seen in BFSI, especially with financial institutions in Europe, expanding business in areas like Ireland and Spain. There is also growth in professional services and technology sectors.

    10. Internal Use of AI for Efficiency
      Q: How is the company deploying AI internally to improve efficiency?
      A: The company has developed internal tools over the past 10 years for tasks like code fixing, testing, and business analysis. AI agents are being used in delivery processes to assist teams, enhancing project health and scope definition. While not replacing human labor, these tools make systems more efficient, and the company remains aggressive in adopting technologies that bring efficiencies to clients.

    11. Sales Cycles and Deal Pipelines
      Q: Are there any sales cycle elongations or deal delays affecting visibility into 2025?
      A: No significant changes are observed in sales cycles, with a similar scenario to previous quarters. The nature of conversations remains stable, with a balanced approach between revenue-oriented projects and efficiency initiatives. There is no deterioration in budgets for 2025, and the company is optimistic, not seeing elongated closing cycles or deterioration.

    12. Growth in Latin America and Europe
      Q: How are Latin America and Europe performing, and are there M&A opportunities?
      A: Latin America is growing year-over-year, with improvements in the financial vertical. Europe is expanding rapidly, with new offices in Spain and Milan, and showing amazing growth. The company continues to look for M&A opportunities in these regions but is currently focusing on organic growth, leveraging strong teams and market dynamics.

    Research analysts covering Globant.