[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..

Augoor, Fluent Lab, GeneXus, MagnifAI, Navigate, StarMeUp, WaaSabi, and Walmeric. As a sports fan, I am very excited about our endeavors in the media and entertainment sector. In early October, we announced the launch of Sportian, the new identity of LaLiga Tech.

This newly branded entity will provide digital transformation solutions for the global sports and entertainment sector. The consolidated brand is our offering to reinvent the space where we already have over 80 clients in many different sports.

Last week in New York, we were also very proud and excited to announce our partnership with Major League Rugby in the United States. Globant has become MLR's official and exclusive digital transformation and tech solutions partner.

Globant will build a new version of the streaming platform and leverage data to drive innovation, unlock new ways of growing the game of rugby in the United States, and enhance sponsorship opportunities. I'm very excited to announce that on November 30th, we'll be broadcasting our annual innovation focused event, Globant CONVERGE.

This year's theme of AI limitless disruption brings together fascinating leaders, including Salesforce founder, Marc Benioff, renowned biographer and media executive, Walter Isaacson, Nubank CEO, David Velez, and many others. Scan the QR code on the screen and register and learn more at converge.globant.com.

As we move forward, we are growing a healthy pipeline that makes us optimistic in 2024. It's been a pleasure to be with you in this last earnings call of this year in which we celebrated our first 20 years. I look forward to sharing with you special moments next year as we celebrate our 10th anniversary as a NYSE-listed company.

Now, let me introduce Diego, our CTO. See you all in some minutes for the live Q&A. Thank you..

consulting and advisory; assessment and roadmapping to help organizations define and achieve their transformation goals; professional services to help organizations draw value from the platform in areas that include ITSM, workflow, OPS management; and finally, managed services and CIS, including continuous process and app evolution.

We continue to see significant demand in cloud migration and modernization, furthering our partnerships remains key. In August, we were recognized with the 2023 Google Cloud Industry Solution Services Partner of the Year Award for Media and Entertainment.

It's a true sense of pride to win this honor in our largest industry vertical, and from Google, with whom we've been working for 16 years. Reaching another exciting milestone, we were recently recognized as an AWS Premier Tier Services Partner.

This is a result of our growing relationship with AWS, and it highlights the collaborative efforts of both companies, showcasing expertise and notable success in assisting customers in designing, architecting, building, migrating, and managing their workloads on AWS.

Our products and platform strategy is allowing us to provide our customers with a truly differentiated service.

As Martin mentioned, GeneXus Enterprise AI is a fully operational GenAI-powered application that plugs into any enterprise system in a fast, secure, cost-effective, and monitored fashion by creating an agnostic bridge between corporate software and any LLM. AI's true power lies beyond being able to understand human language.

Agent-based architectures combined with the power of LLMs will streamline experiences and operation by executing on our behalf. Our GeneXus Enterprise AI already allows companies to quickly build those experiences through secure AI assistance that operate on the user's behalf.

An example of the power unlocked by GeneXus Enterprise AI is our work with a very large North American-based company that needed a way to interact with sensitive legal documents from their database safely.

We deployed GeneXus Enterprise AI, which not only provided a secure connection to cutting-edge large language models, but also ensured compatibility with the client's SharePoint database. The company now has a smart and secure chat-based system that the legal team can rely on and has made them more efficient.

Over many years, Globant has been involved in the smart payment space and has introduced proprietary intuitive services and products that bring people into the digital payment space and expand the ecosystem.

We have new developments from our work with a leading payment acquirer that provides IT services to financial entities that include ATM networks, online banking, corporate banking, mobile and security solutions as well as information processing and service and tax collections.

We created a customizable digital wallet for them, capable of the full suite of services required by today's market, from QR payments to online and mobile banking, and more.

The wallet is fully adaptable to each one of their clients that can now engage better with their customers, including advertising campaigns or promotions that will be displayed within the mobile application, as well as managing communication strategies through notifications to customers.

They can also track transactions, manage complaints, and queries from end users through monitoring modules, creating a virtuous circle in the relationship with their customers as they learn more about them and adapt their offering accordingly. Thank you for your attention. I'll now pass it over to Patricia Pomies, our Chief Operating Officer..

Thanks, Diego, and hello, everyone. So nice to be back. Let's kick off with our clients and our strategy for expansion. As it is known for some time now, our 100-squared vision guides our efforts to deepen relationships with our clients, expanding our reach to new geographies and offering more services as we grow our collaboration over time.

We continue to advance on this path, as this quarter we were able to deliver our highest revenue ever, with greater diversity in our top revenue sources. We currently have 16 clients bringing in more than $20 million in annual revenue and we now have 305 clients that provide more than $1 million of annual revenue, 19.6% more than one year ago.

Nearly 70% of our revenue comes from publicly-traded companies and close to 25% from large private enterprises. We work with 80 S&P 500 companies.

To take advantage of the global scale that Globant now has, we have a new global account model with the aim of serving clients across multiple geographies as well as services and platforms, all while focusing the talents of multiple studio networks. Revenue from the Walt Disney Company, our number one client, expanded by 7.8% quarter-over-quarter.

The rest of our accounts collectively grew 9.8% quarter-over-quarter and 21.4% year-over-year. Globant is also widening its revenue sources geographically. In Q3, 58.9% of our revenue came from North America, 21.6% from Latin America, 16.5% from EMEA, and 3% from Asia and Oceania.

Measuring the success of the relationship and trust we build with each client, the Net Promoter Score, remains a key metric to guide our objectives. Our current NPS of 80 at quarter's end reaffirms our clients' satisfaction and their likelihood of referring us within their organization and their networks. Now, into our headcount.

As of September 30, we were 27,505 Globers, of which 93% are IT professionals, representing an addition of 1,412 IT professionals on a sequential basis. Among these incorporations, we are excited to welcome new Globers from Moldova and Vietnam.

Our attrition rate for the last 12 months is 9.5%, decreasing 2.1 percentage points versus last quarter, and the lowest in our history. The attrition over Q3 was 2.2%. We are committed to keep delivering the best experience for Globers, ensuring an environment of personal growth, learning, and well-being at every step of their journey.

We will continue driving efficient utilization to manage proper headcount, hiring and attrition effectively. Our current utilization rate stands at 80.5%, and in Q3, we moved to positive net additions on an organic basis. Since Globant's foundation, we've continuously evolved our work scheme, fostering purpose, autonomy, collaboration and innovation.

Today, we continue to make Globant a best-in-class organization, crafting, harnessing and improving best practices and industry standards. A decade into our journey with AI, we have a great opportunity to apply reinvention at scale with the wider adoption demand we see in the market.

We've instituted an AI readiness KPI to ensure that our teams are applying it in line with our strategy. Allow me to highlight a few transformative projects we have embarked on. Our Agile Pod methodology has been instrumental in improving the quality, efficiency and creativity of our solution delivery.

Recently, we have achieved a significant milestone by certifying almost 100% of our pods. By leveraging AI, we have successfully enhanced the capabilities of these multi-disciplinary teams increasing their autonomy and decision-making speed.

Pods now have the flexibility to choose their own working arrangements, agree on leadership and utilize a new dashboard for real-time tracking of financial, engagement and client satisfaction KPIs, among others, fostering ongoing advancement.

Additionally, they can set a Be Kind objective for each project, reinforcing our commitment to meaningful impact. We are confident that these steps towards Globers empowerment will not only boost engagement and productivity but also significantly enhance our service delivery to our clients all over the globe.

Geno, the Gen AI-powered human capital partner we introduced last quarter, has already processed over 2,000 talent requests.

It not only enables managers to select the best team for a project, but also helps manage open positions and requests, retrieving CVs, scheduling one-on-one meetings and even creating an onboarding plan if the candidate is a good fit, all within a single conversational experience.

This quarter, we also launched Sensei, an AI assistant designed to empower Globers in their professional growth. Sensei utilizes advanced AI to assess and identify skills and provide personalized learning experiences tailored to each individual's current skills, client needs and future trends.

It plays a pivotal role in ensuring our talent abilities remain updated and relevant. Deployed in specific countries, Sensei has already made over 1,700 assessments and will be available company-wide by year-end. This is just the beginning of an exciting journey that will continue to inspire us to constantly reinvent our company.

As Globant, one of our primary focuses is helping Globers to become the best versions of themselves. This is why I'd like to take some time to share how we're driving this vision forward through the tools we put in place to advance our people.

Complementing the Readiness Model introduced last quarter, we launched a fully redesigned Talent Development Assessment. This more user-friendly tool enables leaders to conduct more effective evaluations, identify areas for improvement and facilitate meaningful feedback conversations.

Launched in August, over 95% of Globers have already completed this enriched process. Our Open Career platform continues to provide Globers with new career opportunities, offering exposure to projects across beloved global brands, multiple geographies, business regions and industries.

In the last quarter, more than 600 Globers entered a new field within Globant. Globant University, our educational platform, also keeps evolving. Learning hours are up 15% just from last quarter. I'm pleased to see that this Globant University is getting recognized by industry leaders.

The platform's Augmented Leadership program won a gold medal at the Brandon Hall Excellence Awards and Globant's learning framework has been recognized by the LearningElite Awards program. Our Be Kind initiative continues to make a significant impact on Globers, the community and broader company stakeholders.

We believe our future hinges on prioritizing the physical, social and emotional wellness of our people. That's why on World Mental Health Day, on October 10, we launched a unique tool within StarMeUp to promote self-awareness and to help Globers overall well-being.

This tool interacts with Globers using a series of questions and provides recommendations for improvement. In less than a month, over 30% of Globers already utilized the tool. Last quarter, we also completed the fourth edition of the Women That Build awards.

With the support of our global partners, including the New York Stock Exchange, Salesforce, Women Corporate Directors, Udemy and Coachub, we had an engaging and thought-provoking event with a record 3,100 nominations and over 123,000 votes. From Jaloree Lantigua, a rising star addressing an educational gap in the U.S.

that affects 0.5 million people, to Jennifer Samaniego, an inspiring leader and data scientists in Ecuador, leading a learning network across the country, this award has led us to reconfirm how powerful recognition can be. These global winners will receive their public recognition next December 4 on the floor of the New York Stock Exchange.

After holding a total of 10 events around the world with an encouraging response, we remain committed to promoting women's inclusion and fostering career growth in our industry. In addition, we're thrilled to introduce a groundbreaking partnership with the London School of Economics as they officially join forces with our Be Kind Tech fund.

This collaboration amplifies our mission to foster a tech industry that prioritizes kindness and responsible innovation. Also, Life Calling, Sharing Our Vision and Passion for Positive Change will join us in our mission to support startups that boldly tackle the misuse of technology in our ever-evolving society.

We have also announced our partnership with TENT, a global business network of over 300 major companies committed to supporting refugees' economic integration.

We are actively engaged in offering personalized one-on-one mentorships in the U.S., the UK, Spain, Denmark and Germany, aiding them in their job placement processes in their new cities of residents.

Finally, and as part of our Be Kind to the Planet commitment, in September, we were listed by Newsweek in its first ever annual ranking of America's Greenest Companies. This recognition positions Globant among the Top 62 organizations that hold a 5-star rating out of over 300 companies recognized for their environmental efforts.

I am very proud of how our Be Kind initiative is evolving in each of its pillars and impacting more people globally. With that, I'll hand it over to Juan to discuss our financials..

Hello, everyone. We're so happy to be here with you this afternoon. We are excited to present our Q3 results showing strong performance across all of our key measures. I would like to thank every Glober and every client for their work and trust.

In the third quarter, we achieved another record revenue figure with total revenue standing at $545.3 million, representing a solid 18.8% year-over-year growth, of which we estimate 11 points to be organic. We continue to grow markedly above our peers and the rest of the IT industry, resulting in clear market share gains.

We believe many of the reasons that explain this difference in growth are inherent to Globant from our startup mentality and our unique culture, to our inverted org chart, our pod and studio model, our diversified delivery footprint and global reach to the innovative and cutting-edge projects we deliver for our clients, we see these factors are a clear differentiator for the company.

We look forward to seeing Globant reach new regions and expand its service offerings across various sectors, leveraging the forefront of technological innovation. A long runway of growth lies ahead of us, as previously communicated to the market.

Our leading indicators remain positive, reinforcing our outlook for the remainder of 2023 and painting a promising picture for the start of 2024. We are confident in our ability to continue to deliver industry-leading growth. In an uncertain macroeconomic environment, Globant is performing strongly.

Stripping out the revenue contribution from Pentalog's acquisition, we delivered a solid 6% organic revenue growth quarter-over-quarter in Q3. We experienced a rebound in revenues in our top client and other key cohorts and we saw strong growth across different geographies. We're seeing a progressive uptick in end market demand.

During Q3, we grew our business while preserving profitability and generating free cash flow while maintaining a healthy and prudent balance sheet position. We saw strong sequential growth across our geographies and verticals.

North America, which is about 60% of our top-line, grew 6.5% quarter-on-quarter, EMEA at 28.9%, LATAM at 7.4%, and new markets almost flat. In a similar fashion, we delivered sequential growth across every one of our industry verticals.

Importantly, we saw strong momentum in our largest vertical media and entertainment, which grew 6.2% quarter-on-quarter and north of 23% on an annual basis. Our travel and hospitality vertical, our technology vertical and our consumer retail practice, all posted double-digit sequential growth, expanding by 18.8%, 10.9% and 12.7%, respectively.

Our professional services and banks and financial institutions verticals also grew strongly by 7.5% and 8.2% quarter-over-quarter, respectively. Our top client's revenue expanded close to 8% quarter-on-quarter. Our Top 5 cohort was up 4.4% sequentially, while our Top 10 and Top 20 cohorts grew by 6% and 4.9% quarter-over-quarter, respectively.

We are on track with our 100-squared strategy, successfully attracting new clients while also expanding our business with current ones across all areas. We're managing the business with determination and decisive action. Our outlook for the company's future is bright, and we're convinced that we're just beginning our growth journey.

We remain committed to profitability and financial discipline. In the third quarter of 2023, our adjusted gross profit margin reached 38.2%, flat quarter-on-quarter with adjusted gross profit increasing to $208.1 million, representing a 9.2% sequential expansion and a 15.8% year-on-year growth.

From a year-on-year perspective, we continue to see some cost headwinds from the appreciation in some of our key currency pairs such as Mexico and Colombia. However, we continue to execute across those factors within our control.

Our adjusted operating margin for the quarter was 15.3%, within the guidance range we provided in August and up 30 basis points sequentially. Adjusted SG&A stood at 18.3% of sales, down 50 basis points compared to the same period last year.

As for below-the-line items, our IFRS effective tax rate for the quarter was 20%, slightly below our guidance as taxes came in lower than our initial expectation in certain geographies. Our adjusted net income in Q3 reached $64.8 million, with an 11.9% adjusted net income margin, up 10 basis points quarter-over-quarter.

Adjusted diluted EPS for the quarter was $1.48, $0.02 above our guidance, representing a 16.5% year-over-year increase based on 43.7 million average diluted shares. Regarding balance sheet management, as of the third quarter of this year, we continue to carry a net cash position.

Our cash and cash equivalents and short-term investments amounted to $219.3 million. As of September 30, 2023, we had a total amount of $50 million drawn from our credit facility.

From a liquidity perspective, we continue to have ample funding available through our revolving credit facility providing us with resources to continue to execute our capital allocation and M&A strategy going forward.

Year-to-date, in 2023, we have produced approximately $67.4 million of free cash flow, a significant improvement from the $17.8 million produced in the same period last year. This has been mainly driven by improvements in our working capital and tax management. As always, our free cash flow generation is much stronger in the second half of the year.

Moving forward, let's discuss our outlook for the fourth quarter and the full year 2023. We continue to see industry-leading growth going into Q4. Throughout 2023, we experienced improvement in our discussions with clients compared to H2 2022. And we believe that the short-term outlook remains constructive.

In terms of the full year guidance, we expect our full-year 2023 revenue to be at least $2.094 billion, a solid 17.6% year-over-year growth. This implies revenues for the fourth quarter of approximately $579 million.

From a profitability perspective, we expect our adjusted operating income margin in the 15% to 16% range, both for the fourth quarter of 2023 and for the full year. For the fourth quarter and for the full year, 2023 IFRS effective income tax rate is expected to be in the 20% to 22% range.

Our adjusted EPS for Q4 is expected to be at least $1.60, assuming 43.9 million average diluted shares outstanding for the quarter. Finally, our adjusted diluted EPS for 2023 is expected to be at least $5.72, assuming 43.6 million average diluted shares for the year. Thanks, everyone, for participating in the call and for your coverage and support..

Thank you, Juan, and hi, everyone. So, as we go through the question-and-answer section of this call, I will first announce your name. At this point, please unmute your line and ask your questions. Please mute your line after your question is done.

And we also ask you to please limit your question -- sorry, to please limit your time to one question and one follow up. So with that in mind, we will take the first question from Tien-Tsin Huang from JPMorgan. Tien-Tsin, please go ahead..

Thanks, Arturo. Hope you can hear me. Everything looks really clean here. So, I'll ask about the top client, because we get a lot of questions around that with Disney, up 8%. It rebounded like you said it would last quarter. So I know Disney has also announced some cost-cutting again recently.

So, does this change your outlook or visibility with discount? What's implied in the fourth quarter? Can you share that?.

Hey, Tien-Tsin, thank you so much. As you know, we have a great relationship with Disney, and we grew sequentially on last -- on the quarter that we are reporting now. We're seeing very good traction on the projects that we have. We don't see any impact on the things that has been announced.

And as always, our expectations to keep on expanding and growing in that -- with that specific relationships -- relationship is good. So, this is all the information I can provide right now..

Okay. Fair enough. And just my quick follow-up on the headcount side. I know the attrition was very low. Utilization seems like it's in a good place.

But as we get into the fourth quarter and going into '24, what else can you tell us on the headcount management side, across hiring, attrition, utilization, attrition, that kind of thing, especially on the impacts on gross margin?.

Maybe I can take the first part, and I will then ask Pat to help me with this. So, in terms of net additions, I think we have very good news this quarter. After two quarters of sequential declines, we went back to growing sequentially, both on the organic side and also when we have the team that came with Pentalog.

So, I think it was interesting to see this change in that trend, which we expect to continue into Q4. We expect, again, organic growth in terms of net additions in the fourth quarter. As for utilization, it's running at around 80.5%. It's still below our historic numbers.

We used to run between 82% and 84%, and that's where we target to be, right? It's going to take some time. But eventually, we plan to get to those levels. In terms of margins, we believe that we are still being impacted by FX in Latin America. That trend has not changed.

We are seeing a very strong Mexican peso, very strong Colombian peso, very strong Chilean peso. So, we expect our gross margins for the short term to be at a similar level where they are today. I don't know, Pat, if you want to tell a little bit about hiring....

Yes, of course. In terms of attrition, I mean, we are the lowest. And I think that is, of course, the market, I mean, we have seen a stop from the competitors in terms of the hiring, and we keep growing, and of course, about the value proposition that Globant is bringing to the table. It's really interesting for the new generations for the IT sector.

We have been working a lot in the last couple of years, as you know, about the value that we bring into the table, the experiences that we are bringing with all our Globers in terms of upskilling and reskilling, in terms of how they can experiment their offices. Now we turned offices into hubs.

So the hubs are the social places where they can connect with other Globers, and we are seeing really growth impact there. I mean, it has been amazing experiences that we have been in the last couple of months in terms of how the offices and these hubs has been reinvented and it's given our best results there with the people.

So, I think that it's a combination of everything. We keep growing our businesses. The net growth is keeping up, and we are expecting the same for Q4, of course. And I think that is also related with the experiences that we're bringing..

Okay. Nice work, guys. Nice job. Thank you..

Thank you..

Thank you, Tien-Tsin. The next question comes from Ashwin Shirvaikar from Citi. Ashwin, your line is open. Please go ahead..

Thank you. I hope you can all hear me..

Yes..

Yes. Hi, Ashwin..

Hi. Let me add my congratulations on the quarter. Good job there. I think the leading question from most investors really is trajectory in nature of demand.

So that as a backdrop, I was hoping you might be able to maybe discuss relative demand across each of the four studio categories? Is Enterprise, which I think focuses on productivity, is that may be growing faster versus, say, Create, which is more about brand building? Or are you seeing patterns that might help us figure out which way demand is going?.

I see that demand is like this year -- I mean one thing is a trend that we will see long term, right? And in that aspect, we see that every day, all those batches will be more connected and more integrated.

So, our obligation is to provide our customers with the necessary tools for them to execute the whole process from the idea creation to the integration with the backend of their companies to how we push those ideas into the public and how we make it known and how we create -- how we code, how we create, how we extend, and how we expand a specific idea.

That's the longer-term vision. So, you will see us doing every day more and more things to try to tackle and provide all that broader set of services for our customers. All of them are spending money on marketing, on enterprise, on digital. And of course, they're spending money also on the reinvention of their business with our reinvention studio.

So, all of those budgets are being tackled by the services that we are providing. Now, talking more short term, we have seen good growth on the Enterprise side. We have seen good growth on the Digital. And as a new segment, like the marketing segment with the acquisitions we did, plus a lot of organic growth, has been pretty healthy for us.

Good numbers on the acquisitions we did at the beginning of this year. And we are seeing good demand there. So, I cannot say Enterprise right now is stronger than Digital or stronger than market because they are growing in a pretty, I would say, comparable....

Similar..

...similar way. Thank you, Juan.

Do you want to add anything there?.

No..

Okay..

Okay. No, that's good to know. Second thing, I was hoping to maybe get an update on the Brazil investments that you're making, just in terms of organization, local leadership, hiring trends.

And is the demand for Brazil talent, is that more from local Brazil clients or also a lot -- is it also coming from say North America?.

No, Brazil for us is important place and we have been investing a lot in Brazil. We have demand from local customers, and also some of our international customers are being served also from Brazil. So, we have both of them. Predominantly, we have local customers. I mean, the operation in Brazil is more oriented to serve our local customers.

But we're progressing a lot. And we have very good customers, a couple of very good acquisitions that we did, that are performing great.

The Brazilian market in general is tractioning well, although it's not as fast as the Mexican market, for example, but it's tractioning quite well, so we have big expectations for what's going to happen with Brazil in the next year. And by the way, our leadership for the region is based out of Brazil.

So, we're very happy with that and we expect to keep on developing the network, the influence that we have on the technology space also in Brazil and we will keep on thinking on how to add more things on the marketing side, on the digital side, on the enterprise side..

Maybe if I can add there, Ashwin, when we started our Brazilian operation, probably 90% of the team was working for local customers. Today -- 10% maybe was working for the U.S. and other markets.

Today, as Martin said, we are getting very close to the 50%, half of the team working for local customers the other half fully integrated into the into the Globant studios and working for offshore customers. So that has been changing. We now have over 1,200 employees in Brazil. And the management team for the LATAM operation is based out of Sao Paulo..

Got it. Thank you, guys..

Thank you..

Thank you, Ashwin. Our next question comes from Jason Kupferberg from BofA. Jason, your line is open. Please go ahead..

Hey, guys. Thanks for taking the question. So, I know you're maintaining the revenue and the EPS outlook here. I think maybe the latter could sound like you did a little bit better on tax than you expected. I know that the margin expectations are coming down a little bit. So, I'm not sure if that's just FX. Maybe you can comment on that.

And just in general, as we think about the general margin range going forward, I think you typically target 15% to 17%. This year, we're kind of in the lower half of that.

But just more forward looking, can we still think about the upper half as being plausible, or are there other things that have changed in the business?.

Yeah, I'll take that one. So, a couple of comments. And thank you, Jason, for the question, and also for being a new analyst covering our company. In terms of full year numbers, we guided about 18% year-over-year growth -- 16.6%, sorry. 18% is the fourth quarter. As we know, that is 3 times, 4 times, 5 times the average of the industry.

So, we're really, really happy with that level of growth. When we go and look into margins, as you pointed out, we are now in the lower end of our historical 15% to 17%, actually more like in the 15% to 16%.

We definitely see the opportunity to scale and to get back, not just to 17%, but over time, even above that number, but in the short term, given all the pressure that we have been receiving from the FX plus some of our competitors and some of the competition being very aggressive on the pricing front, and we have to compete of course and keep on winning deals as we have been doing.

In the very short term, we think we're going to stay in the 15% to 16%, but of course, definitely there is a lot of room to grow again our gross margin eventually, but it's even more clear at the SG&A level, we can definitely run this company as we keep on getting scale with lower SG&A.

So the answer -- the short answer is yes, we do see the 15% to 17%, as a mid and long term, very clear and very achievable target..

And just as a follow up, your qualitative commentary around -- does sound encouraging. Sounds like there's been an uptick here since last quarter.

I know you won't guide 2024 until the fourth quarter call, but just as we think about Q1 modeling, is there any type of range of quarter-over-quarter growth on the revenue side we should be thinking about for Q1, just based on what you're seeing in the pipeline and the backlog and what you're hearing from clients? Thank you..

Yeah. We have some positive one-offs in the fourth quarter. So, we do see -- we definitely see a strong 2024. Q1 will probably be a little bit below what we are showing in Q4. And then, we do definitely see a higher growth in the second quarter and going forward. But I think it's still early to put a number out there.

But we are optimistic about next year. The conversations with customers are solid. We are having some large deals starting in the four regions where we operate. So, we are very optimistic.

But again, it's still early and even though we are going to end the year with a -- we are ending the year on a high note, I do see some things that are kind of positive one-offs in the fourth quarter, which are not going to happen in Q1, but Q1 will still be -- we are going to see growth and we are going to see more growth in the second quarter and forward and onwards..

Thank you..

You're welcome..

Thank you, Jason. So, our next questions come from Moshe Katri from Wedbush. Moshe, please go ahead. Your line is open..

Hey, thanks. Very impressive set of numbers. So, the first one is actually on eWave. That was acquired, I believe, in November of 2022. The intention here was to focus more aggressively on APAC, Australia.

Maybe you can talk a bit about the integration and some of the traction that you're getting in your pipeline from that specific region?.

Yeah. We are seeing very good traction. That region for us is not just Australia with eWave, but also Japan, Singapore, and some other countries close by like New Zealand. And also includes all the Middle East and -- Middle East including Saudi Arabia and Abu Dhabi, I would say, mainly....

Duabi..

And Dubai, sorry, mainly. So, those things are seeing like a lot of growth, organic growth happening right now. We got awarded many very important projects in the region. So, we're happy to report that this is progressing quite well..

Maybe one more to thing to add....

So, you're getting that traction? Sorry, go ahead..

Yeah, one more thing, Moshe, we have now the ability also to expand in the Philippines. We have the ability to expand in Moldova, in Vietnam, in other places in that region, which it's always great, right, because this is again where we need to have a global delivery footprint.

And in addition to India, which is our main and most important location out of Asia, we now can also tap into other countries in the region. And I think that's also important..

Okay, great. And there's a lot of talk about, obviously, the platforms that you're launching. One of them that I actually got to know pretty well during the past few months is WaaSabi. Actually, I spoke to Tamara that attended Money 20/20. Obviously, that's a wallet-as-a-service platform.

Maybe you can talk about some of the traction there? And maybe, in general, maybe talk about some of the potential revenue contributions that you're getting from those platforms that you mentioned also during your presentation? Thanks..

I will take the second part and I will let Diego to take the first part of WaaSabi. The contribution is interesting for this year. I think among all the platforms, we're going to be contributing a significant amount of money, growing fast.

And I would say that the pipeline and the capabilities of Globant integrating these platforms into our offer in front of our customers has progressed immensely during this year. So, this is from the qualitative part in terms of the contribution.

And one more thing in terms of the qualitative relationship between customers and platforms is that it's serving as door openers in many customers that we don't have to start conversations, to start kind of small deals and then could progress into something much deeper. So, I think that's the perspective that we are seeing.

It's taking us of course a lot of effort and a lot of, I would say, focus on that, like generating new compensation programs for the Globant sales force to get aligned to that. So -- but we are happy with the progress. So, Diego, I don't know if you want to talk a little bit about the WaaSabi..

Sure, definitely. The platform -- what's interesting about the platform is that it's actually an enabler for a new business model. There are several companies that are trying to expand their business. Typical case is, I don't know, a telco, right? The business of providing just infrastructure and connectivity is not enough.

So, they are creating an ecosystem of services that go on top of that. So having WaaSabi as their own wallet and a payment method and start expanding that ecosystem is actually a model that a lot of companies are actually implementing. It's creating a lot of traction, especially in Latin America, where the unbanked sector is higher.

And we also have connectors for the typical payment gateways here. And that's why WaaSabi becomes super interesting. It's superfast to implement. It has already the connectors. And you get your system up and running very fast..

Thanks. Thank you..

Thank you..

Thank you..

Thank you, Moshe. So, our next question comes from Bryan Bergin from TD Cowen. Bryan, please go ahead. Your line is open..

Hi, guys. Thank you. Can you comment on the demand and the contracting behavior that you're seeing specifically among technology and telecom clients? It looks like you have a pretty strong quarter here. Just not sure if Pentalog influences that at all..

Yeah, I'll take that one. So, we had a recovery organically. So, it grew sequentially after a few quarters of sequential declines if you want. So, we did see a recovery. And Pentalog on top of that also helped. So, I think it was 11% sequential, if I'm not mistaken. Technology -- yeah, 10.9% sequential.

Out of that, about 5% was organic sequential growth, and 6% came from Pentalog. So -- and I think what is interesting here is the conversations are not anymore about cutting, cutting, cutting, cutting. Now you have a mix of customers. Some customers are going back into, okay, we've been cutting for two years.

Now we need to keep on investing, building features, building products, while you still have others that are a little bit more wait and see. But it's not anymore like it was in the second part of last year and the first part of this year, where 100% of tech companies were somehow reducing investments or reducing budgets.

You have already started to see a number of them changing that trend and that's what you see in the numbers..

Okay. That's good to hear. And then, the follow-up is on Globant X.

So, I'm curious if you've considered selling any of these solutions entirely or perhaps bringing in a third-party investment partner like a JV just to accelerate scaling or just to monetize in a different way?.

Yes. Yes, I will provide more color, no worries. Yes, we're thinking about that. I mean, we believe in autonomy, and autonomy must be reached in some way.

And we believe in external investors helping us with our own platforms and trying to -- I mean, the platforms that we're creating are extremely relevant for what's happening on technology and that attracts external investors.

So now it's about how we provide, like, a good place for them to be and invest together with us into the creation of those kind of spin-offs or something like that. So, this is how we are seeing moving forward. It's a very clear vision we have. I mean, we are taking our time to execute that and to see how those things are going.

But yes, it's very clear on the agenda..

Thank you..

Thank you so much, Bryan..

Thank you, Bryan. So, our next question comes from Kate Kronstein from William Blair. Kate, please go ahead. Your line is open. I think you're on mute, Kate. Sorry..

Yes, they're mute..

How about now?.

Good..

Yes..

Great. Hi, everyone. This is Kate on for Maggie. Congrats on the nice quarter.

My first question is, can you talk about Pentalog's performance during the quarter? And how it's performing versus your original expectations?.

So, I'll take that one. So, in this quarter we grew 9.8% sequentially. Let me get the right number in front of me. We grew 9.6%, 9.8%, whatever. Out of that, 5.5% was organic sequential growth and the rest was brought by Pentalog. The initial few months of having Pentalog into the company have been great.

We continue now -- we now have a more meaningful operation in France. We also have definitely a much bigger team out of Romania, which is their main development center that Pentalog had.

And we also are in contact with some of their top customers, which are very large manufacturing companies, very large professional services companies, and very large tech companies. So all in all, initial months of integration, of course, it's going to take more time, but positive news coming from there..

Also in terms of integration there, I mean the team, the leadership team of Pentalog have been fully integrated into the Europe region, and they're working together in many, many clients. We're expanding our offering also with the force that Pentalog bring to the table and also opening more doors in the existing clients.

You know that one of the strategic reasons of Globant is being -- getting deeper and deeper into the strategic clients, into the clients that we really want to be very meaningful, and we build partnerships with them. So I think that having this kind of footprint there has been very amazing. So, we are very, very happy with the things that are going.

Of course, we need to continue working together in order to keep growing and doing much efforts in the Europe area..

Great. Thank you for that color. And my follow-up question would be, can you guys talk a little bit about the demand you're seeing geographically? In your last quarter, your comments around the U.S. and Europe were definitely more positive than what your peers were seeing. So, any commentary on that would be helpful..

Maybe I can start and then I can ask Martin to complement. But I think this was a great quarter because when you look at the three main regions, Europe, LATAM and the U.S., they all grew sequentially and year-over-year. At the same time, when you look at all the industries, all of them grew sequentially and all of them grew year-over-year.

When we look at Top 1 customer, we went back to sequential growth. When you look at 2 to 5, 6 to 10, 11 to the end, they all grew. So, I think from our revenue point of view, this was a very interesting quarter. And going forward, again, we are seeing positive news coming from the U.S.

Still not like booming that it used to be, but we are back into growth mode for a few quarters already in the U.S., and I think that the opportunity is there, it's a massive market. We have the best companies out there as customers. Our portfolio in the U.S. is amazing.

And the deals that the team is currently working on I think are very interesting because they're going to give us scale, they're going to give us the opportunity to keep on expanding our operation in the U.S..

And the only thing I want to add to that comment is I think this is a market share war. I mean, this is what's happening right now. And Globant has been very successful fighting that battle. Of course, we wake up every morning and we win or lose, but at the end of day, we won -- we won more than what we lose.

So, it looks like -- I hope, and it looks like next year will be slightly different because investments will be a little bit different once the interest rate is stable and no news are coming there and people know how much money cost, then it will be easier for batches to go back into the other mode.

But this year, 2023 has been a massive battle on market share. So this is why we are seeing Globant growing higher than our peers. And I wanted to point this out because for me it's very important to all the market to understand which is the situation now and why Globant is growing faster..

Great. Thank you all..

You're very welcome. Thank you so much..

Thank you, Kate. So, our next question comes from Divya Goyal from Scotiabank. Divya, please go ahead. Your line is open..

Good evening, everyone.

So, I'm -- Arturo, can you hear me okay?.

Yes, we can hear you, Divya..

Perfect. So, I wanted to actually elaborate on this question of the geographic growth here. So, this quarter, North America, from what we see, grew by approximately 8%, and Europe, obviously, grew sizably by 96.5%, and that includes the Pentalog growth.

Could you provide some color on how exactly should we expect the next few quarters to be and going forward, especially considering where the markets have been across North America?.

Overall, I think for the next quarter, I think that North America and LATAM and Asia and Oceania will drive the growth, whereas Europe will be a little bit more stable. And then looking into next year, as we speak currently on the budget for the year, we are expecting growth in all regions. But short term, that's the answer.

And again, for next year, we expect all regions to contribute to the growth of the company..

Juan, just to confirm here, do you think it will be possible to continue to maintain the growth in this high-single-digits for North America just because of how important that segment is for the company?.

Yeah, we definitely will be looking for more than that for next year..

And just if I may ask a follow-up on the client mix, could you help us understand what is the client mix broadly for the company? Do you see yourself expanding into the enterprise clients a lot more or is it a fair mix of enterprise, mid-market and the small, medium business clients?.

We will always -- I mean we have a strategy that we call 100-squared which basically means that we focus on companies that have the potential to generate $100 million over time in revenues.

And by definition, you need to go to large companies, large scale companies, which are investing large amount of money in technology, in marketing, in enterprise, and across all those areas. So, our number one -- our typical customer is the big company. Of course we have a big number of medium-sized companies as well.

And in terms of small companies, what we like to work with those small companies that are innovating, that are creating new things, new technologies, and somehow we want to get involved in those projects as well. But that's not the target customer. We're not going to build a $10 billion revenue company with very small companies.

That's impossible to achieve..

Thank you, Divya. So, our last questions of the day come from Surinder Thind from Jefferies. Surinder, please go ahead. Your line is open..

Thank you. So, I'd like to start the question about just -- there's mention of a new global account model and potentially the way that you incentivize the sales force.

Just any additional color there that we should be aware of? And what does it really mean to have a new global account model?.

I commented that based on the Globant X incentive plan that we created.

And for years, we have had like a problem like matching -- I mean nothing changed, but the problem like matching the amount of revenue that Globant creates compared to the amount of revenue that platform creates and how that gets like disproportion, right? So in general, then if you include that in the quota directly, then it's so -- it's not that meaningful.

So, we change the way to understand when the bonus get triggered using a rationale which is different in terms of when they sell platforms or when we do cross-selling so on and so forth. So that was my mention, just to say that..

Got it..

I know it wasn't clear, but....

No, thank you. And then I guess in terms of -- there's been a lot of discussion or the focus has been on AI in the commentary. Where have those conversations progressed to at this point? Obviously, there's been a lot of proof of concept work.

Do you see anything advancing to the next stages? And then does it even make sense to kind of talk about or separate AI as I'm assuming you're solving business problems and the more we go forward in time, I assume all solutions at some point incorporate more technology?.

Yeah, look, I will let Diego, but for me, the amount of revenue is already meaningful. I mean, it's not that it was at the very beginning of the year that was not something important for the company. Now it's something that makes sense. And on the other side, we still see that all those projects are still composed by exploratory projects.

We're seeing conversations starting to progress a little bit more, but the vast majority of our revenue created there are by small projects in many different places, and pretty much all of them connected with generative AI.

And I don't know, Diego, if you want to add some color to that?.

Yeah, definitely. I think I'm going to do a slight correction there. We're not actually doing that much proof of concept. Even though it can be a stage to release to the next stage with the technology, we're doing projects with a moderate spend that have high ROI, which is quite different. We are doing productive type of work.

So, there's a lot of work of, I don't know, RAG systems like document retrieval, augmentation, et cetera, where generative AI plays, it's amazing the results you get. Those are clear examples, low-hanging fruit where definitely companies can get a lot of value out of a moderate spend.

The change we're seeing, and this is actually interesting, is that we're working at least with three clients with a higher spend where they said, "Okay, I know there's a ton of things I can do with AI.

So, what if we create a team and we have a data strategy and we have several tracks where I explore different products as one." So the spend is bigger, they have an actual commitment. Still the projects within them are small, but the ticket in terms of the project overall we are executing for those clients is bigger. So, just to be clear there.

And with regards to what you mentioned about the scope, yes, we're solving -- definitely solving business problems. However, there's a thing about the experience that might actually change all.

And if you connect several of the trends that are happening, the vision pros, augmented and mixed reality, et cetera, et cetera, if you use the whisper to create a conversational interface with some of the system, you can start to envision that there could be a lot of entry points into the digital experience in the future that is through AI agents and conversational.

And that changes a lot of things, a lot of things. Lots of opportunities for us further down the road..

Thank you, Surinder. So, that will be it for the Q&A section today. Thank you all. I will now ask Martin to provide some closing comments. Thank you, everybody..

Thank you very much, guys, for keep on following us, keep on covering us, and keep on supporting us. So, looking forward to see you next quarter, and extremely happy to have any follow-up questions. Thank you so much. Bye-bye..

Thank you. Bye. See you..