Good Day and welcome to the Globant Quarter Four and Fiscal Year 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note that this event is being recorded. I would now like to turn the conference over to Juan Urthiague, Investor Relations Officer. Please go ahead, sir.

Thank you, operator, and thank you all for joining us today on our call to review our 2016 full year and fourth quarter financial results. By now you should have received a copy of the earnings release. If you have not, a copy is available on our website, investors.globant.com. Our speakers today are Martin Migoya, Globant's CEO; and Alejandro Scannapieco, Globant's CFO. 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 other peers in the industry. You will find a reconciliation of IFRS and non-IFRS measures at the end of the press release we published in our Investor Relations website announcing this quarter's results. I'd like to turn the call over to Martin Migoya, our CEO.

Okay, thank you, Juan. Good afternoon, everybody, and thanks for joining us today. I'm pleased to be here to review with you our business and financial performance for the three months and 12 months ended on December 31, 2016. At the end of the call Alejandro will share with our outlook for 2017. Our revenues for 2016 increased to almost $323 million, a robust 27.2% year-over-year growth. This robust growth was driven by strong demand for digital solutions across the different customers that we serve. European and the United States led this growth from a regional perspective, while Travel and Financial services industry had outstanding performances. For the first time in our history, we have two customers with annual revenues in excess of $30 million. We finished 2016 with six accounts over 10 million, 11 over 5 million and 60 over 1 million compared to 5, 10, and 51 respectively for 2015. This is a clear indicator of our ability to scale up our key accounts. Q4 was another good quarter for the company. We exceeded our guidance in terms of revenue with $87.3 million, representing a 21.9% year-over-year revenue growth. Banks and travel were key contributors to this growth. Top ten accounts performed strongly with some of our 50 square accounts outperforming the rest of the company. Later during the call, Alejandro will share more details on our financial performance. Now, let me go over the state of the market and share some news about Globant. We continue to see a strong demand around digital services. Different research has pointed out the sustained growth and opportunities coming from digital transformation project. In one of its latest reports, Forrester predicts that in 2017 transformation budget will allocate the billions something similarly shown in the recent research from IDC called IDC…

Thanks Martin and good afternoon everyone. I will spend a few minutes taking you through the fourth quarter and full year 2016 results. Then I will talk about our outlook for 2017. Let me start by saying that we're very pleased with our overall results for the for fourth quarter and full year 2016. Revenue for 2016 amounted to $322.9 million, implying a robust 27.2% year-over-year growth. Southwest Airlines became our largest customer for 2016, with remarkable growth. Our number one account for 2015, Disney experienced a solid second half, which helped them to position in line with 2015 for the full-year, with good perspectives of growth for 2017. We also saw good momentum among some of our 50 Square accounts. We expect to see more benefits in the coming quarters. Revenues for top five, top ten, and eleven to end increased 30.1%, 26.8% and 27.6% respectively, showing good growth across the board. Adjusted gross profit for 2016 was very strong, at $137.1 million, 42.5% adjusted gross margin, compared to $98.7 million, 38.9% adjusted gross margin for 2015, an improvement of 360 basis points year-over-year. This significant improvement is mainly due to a combination of the higher revenue per head and normalization of the FX market in Argentina. Despite a strong improvement year-over-year, we trended down towards the last couple of quarters as we faced increased FX headwinds in some of our Latin America delivery centers. During this year, we achieved an important dilution in our SG&A as percentage of sales, decreasing from 25.5% for 2015 to 22.3%. We have been very disciplined in managing our cost as we gain scale. While we continue investing for the future primarily to expand our sales coverage in the United States and Europe. As a result of this our adjusted operating income 2016…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Anil Doradla of William Blair. Please go ahead.

Hey guys, so I had a couple of questions and for the first one, Ale is around the gross margins. So obviously there's a couple of components of it right, there is a component of the FX impacts and then there's component of potential salary inflations. So can you help us understand how these two are inter-playing? Historically what we have seen is that you will revisit your salary targets twice a year, so given this particular environment that we are in, where the peso has been relatively flat how should we be looking at the interplays of your salary inflation plus FX?

Hi, Anil, how you’re doing? This is Ale. As you said it’s composed of two FX so I would say pretty much all of the currencies in Latin America especially for Q1 the outlook for the full year is different, also U.S. dollar seems to be strengthening among the year but the outlook for Q1 is deal with most of the Latin America currencies appreciating against U.S. dollar in fact that has been the case on average 3% to 5% in most of the countries where we have delivery centers. So that’s a big driver of that conservatism if you wish that we are baking into the markets, as far as inflation in Argentina how we manage that, inflation is trending down I explained that in the speech. What's happening is after the significant evaluation that occurred last December 2016, there was unexpected inflation. But now although things are trending down, so our expectation is that inflation is going to be pretty much aligned, rate inflation is going to be pretty much aligned to the full year currency devaluation we have two windows for salary increases. The first one is the biggest one happens in April and the second one is going to be towards October. But that’s the smallest part. I will say it two-thirds in the first window, one-third in the second window. So we are trying to be a little bit conservative, but I mean we have levers. To offset the impact of our potential rate increases outpacing the evaluation in Argentina, meanwhile growing nicely in other countries especially in India, Colombia, Mexico. Mexico became very competitive after the evaluation after Trump took power in U.S. But I think there are number of factors that make us believe that we are going to be still making the margin targets that I mentioned in the call.

Very good. And Martin, a big picture question, 50 Square strategy reorganization of the sales force, its all about scale. Can you give us an update how you are doing, have you populated most of the senior sales people to go after these 50 accounts or they still more hiring at a very senior level?

Hey, how are you, Anil. Thank you for the question, look I mean, [indiscernible] we have delivered pretty much everybody we needed to hire for the account that we already have some new logos are coming to the – into Globant, beautiful logos, so we will develop more people into those places which you already have. So I don’t expect to keep on investing in the 50 Square all investments have been made already. And the deployment has been very smooth and as we predicted without or starting to be tangible now. As I said on my speech we see some of the 50 Square accounts are outperforming by far some of the breadth of the account. So that’s a clear result that our strategy of focusing on the important customers and but not forgetting about getting new customers that will become important in the future. It’s also yielding results and is very welcome in two different parts, first by our team and second by our customers. So that’s a conclusion for all we are doing at the 50 Square program.

Very good. I think that’s all for me guys and congrats on the results and looking forward to an exciting year.

Thank you very much, Anil.

Thank you.

Our next question comes from Tien Tsin Huang of JPMorgan. Please go ahead.

Thank you. Just following up on Anil’s question on gross margin, Ale. How much gross margin pressure could we see in 2017 and I guess how far look kind of go down before you have trouble to offset that in terms of your SG&A leverage, just trying to be a little bit more specific on [indiscernible] relative to SG&A. Thank you.

I think the range as I pointed out, Tsin it’s going to be in that 40% to 41% we compare that to the average share gross margin for 2016, we are taking about 100 to 150 basis points. But we also plan to offset every tank of that operation as we have been executing dealing really in the past.

Okay. But from a full year standpoint 40% to 41%, it sounded like – I thought I heard it’s below that within the year. Okay. I guess overall maybe for Martin, just competitively speaking, I know a lot of firms are talking about digital now. You are at pure play. I'm curious to be seeing these changes competitively whether it's in the form of changing in your win share or retention or pricing. Any kind of comments you can share would be great. Thank you.

Yes, thank you. Thank you very much again for the question. Really everybody is talking about the digital, and it kind of became a boss word. Not many have the real experience and exposure in terms of our interest – in terms of their most talented people doing what we do. So I still remain very confident about our abilities to deliver in the market to win big deals against the big boys. We are being much faster, smarter in our proposals, faster to adopt. So I think that, I’m faster to move from our studios and create new value propositions. So remember, as a smaller company, we do, we have some big advantages because we are smaller, but the fact that also being smaller, if you a terrible competitive advantage in terms of how fast you can move, how fast you can adopt. So, no change on the operation side, which is meaningful. No change on our capability to use customers. Hence that using consumers which is what we love to do. And there are not many companies out there are talking about emotions and we are talking about how to connect in an emotional way with consumers. And that's the real important differentiator that we are exposing to the market, and the brands – and the customers are really liking it very much.

Our next question comes from Joseph Foresi of Cantor Fitzgerald. Please go ahead.

Hi. My first question here is just around the revenue range for 2017. What puts you at the higher end of that range and what puts you at the lower end?

I think that we have also been – we always been with – we are too in front of the year. I mean we are just starting the year. We have very good prospects. We have very good accounts. I think, look, if some of that hit described program accounts, again the traction we are expecting for them to gain will be very comfortable to be on the up of our range. Then – but things happen across the year, so we choose to be as always are – what we think it will happen. So I insist on our guidance in terms of the midpoint of the range. However, as always we do as much as we can to move higher. So this is the way that you should expect us behaving.

Okay. And then just on hiring plans for 2016 we saw, I guess on a net addition basis – I’m sorry in 2017, we saw on 2016 kind of a very strong 1Q then 2Q, 3Q kind of slowed, and the 4Q is a very strong. Can you give us some visibility on what you're planning on hiring next year and how we should expect that to trend throughout the year?

Yes. Let me take that Joe. I think what's happened in 2016 – let’s spend one minute on what’s happened in 2016. I mean there were a couple of – I mean, we hired very aggressively in the first quarter, and in fact 234 net hires in the first quarter of the year, then there was another second quarter some hiring. We decided to slow down a little bit, manage certain effect headwinds that we had and we still protect margins. From time to time we then also do kind of balance the time pool, we call that the venture time pool. So that’s what we did in 2016. Having said that and forward looking into 2017, we have all the engines in place. We’ve applied this that are definitely outpacing the growth of Argentina, like India, like Columbia, like Mexico, even U.S. A combination between the acquisitions that we have made during 2016 plus the organic having that we’re doing in U.S. in different places. So I think we have all the engines ready to be very aggressive and very robust in terms of accelerating, hiring whenever if needed. So the process for hiring this year is it's a very good one.

Okay. And then just going back to the digital movement, maybe you can frame for us what inning you think we're in. I mean early stages people were talking about companies going digital and we're hearing more and more about AI and automation. So maybe you could just give us some idea of what inning we would be in, what phase we are in, are we leaving Phase 1 heading into Phase 2, and your thoughts around that. Thanks.

Yes, I would say it varies by continents. The United States and North America in general it’s in a pre-advanced stage. I mean, advance in terms of they already know that they want it, they have some plans and maybe they already started it. But now they need to build it and really transform their businesses to digital. If you go more to Latin America, then you will find that the weaker understanding, however, there are some leading companies that are really talking about that and we can engage earlier on the process on those places. And in Europe it's happening something in the middle. I think Europe is still in stage – United States is in stage two out of five, Latin America is in stage zero out of five and Europe is in stage one out of five. So it's still early. I think digital transformation needs to go much deeper. Now I think – look, the transformation is starting to happen on the consumer and consumer facing place. But now we need to take over pretty much everything and our Internet of things studio assets pretty important role there. Because pretty much everything will start pushing information into the well and pretty much everything, you will need to be understood by artificial intelligence and keep learning and providing results, there are relevant for consumers beyond self interaction or the easy net of use or making an emotional connection with the consumer. So that’s a next way that is coming on digital transformation. It would be even bigger than the initial portions that we’re raising, much, much bigger. So company is going to invest a lot there. So that’s – so we’re so bullish about the market, so bullish about the future of the top of our – particularly two, three of our – two years indeed, Internet of things big data and artificial intelligence, I’ll call it a computing as we call it. Those are the things need to work together. Now to understand what machines – there are the machines are producing to create more relevant experiencing for consumers and to create really new solutions for consumers. So this is where we’re seeing – this is where we’re investing money to be on the forefront of those things from image recognition to deep learning, develop and enhancing that recognize any kind of scenario. I think you may have seen the Amazon Go video that has launched, which you enter into the supermarket, you just keep the things. And then a bunch of artificial intelligence and a bunch of cameras look at what you mean and just sit on your shopping card would you have just pick up from the shelf. – :

Thank you.

Very welcome. Thank you for the questions.

Our next question is from Ashwin Shirvaikar of Citi. Please go ahead.

Thank you, guys. My first question is on 50 Square just trying to obviously understand it’s a little bit better. If you could walk through the decision process at the client level, so I’m imagining someone like a Disney or Southwest has a senior relationship manager to sort of exclusive to the account I guess. How many accounts – when you add revenues, you can see a scale benefit. And how do you decided and help us model is out a little bit better?

Look I cannot list out right now how many of those accounts we have already deployed. But what I can tell you is that there more are lead to follows. Each time we have an account, which because Tier 1 or Tier 2. Tier 1 means that they have a huge potential to keep on growing and its really material for our company. Tier 2 means for us, there has a huge potential although is not currently really material it’s more revenue we have been – in earlier stage of account. So we have those two kind of accounts and from time to time we review which accounts each on each, each of the pocket, but the teams that we plan everything of those Tier 1 and Tier 2 accounts already set up. And they are working. And they are exploring no opportunities and exploring new account. And so I think probably, but sometimes, things happen that one guy goes from one big account into another big account. And then that are – guy that willing to the next account, call our guys from the 50 Square program to develop new basis and new company, which was not our customers. So again the team is in place, some of the things and movements that we experimenting during the third and the fourth quarter last year. Our rates as we made a lot of movement. The customers are really happy with this. I don’t know, but it is a moment that really is staying out. So we’re happy with or without, but there are no, which are the information you need to put unto your model. This is how it works and this is how we decided.

Right. I was kind of hoping its regards to the late year, late year – late 2016 investments that we’re made. So it’s good to hear for all that you have, they can have everything that you need in terms of investments already done on the front. I’ve got not everything with most. But on a year-over-year basis, what’s the step up I guess in dollar spend, just because you did not have this for all of last year.

No, no, no, no. It’s already done. All the people that we need is already in the company. Even for those are consider you to come and even more meaning of those accounts have been or will be tracked and will be develop by people that we’re currently having the company doing some other accounts, which are not Tier 1 or Tier 2.

Okay.

It came like aspirational for our people to with it.

Right, I understood. A separate question on the supply side, there are sometimes companies it use offshore, but when do provide sort of exchange rates that are extremely in the guidance at least for major currencies. Is that something you can share your assumptions on either at this time or not, we could call and I guess the question there is given continued policy uncertainty in the U.S. if we see, we get volatility in this supply currency. How quickly can you react to that?

Okay. That’s a fair question Ashwin. I think I mean we have been concentrating on executing our best – plan very well over the last two years. If you ask me that same question, probably three, four years ago, the answer who have been different. I think at this point, we have achieved a level of the centralization and diversification among the company and building up teams that are very strong in terms of quality, in terms of the skill set in different places that would allow us to react very quickly to any potential shape in the currency. We’re looking into that. We’re looking into what maybe potential effects and things. I think we’re going through that part of having a much more globalized company and a fast would be able to react quicker if needed.

Understood, got it. Thank you.

No problem.

Very well done.

Thank you.

Our next question comes from Avishai Kantor of Cowen. Please go ahead.

Yes, hi, it’s Avishai, thank you for taking my question. So my first question is that, again focusing on 50 square. So now that you have it sounds like you have most of your consulting sales and client management capabilities into your top line that you wanted to add in place. Do you see any signs of ability to compete the largest scale potentially longer duration contact? Martín Migoya: Avishai, thank you for your question. The short answer is yes, but it is not that we didn’t see it before. When we are talking about the 50 square program is not just about getting deeper – getting longer-term and bigger deals which is of course always what we have been pursuing. But, it’s also about being able to explore – more areas between the company getting through more of the – those companies that are extremely large. And be able to develop that relationship in a closer and deeper way with those customers. It should not imply a change in how long the contracts are or how big the contracts are. Of course, maybe sometimes we can get a bigger deal like it’s happening now with one of the 50 square accounts. But, it’s not that the firm just for that. That is for granted any other relationship we have in Globant. Every time we talk a lot a customer, our initial intentionally is to get additional confirmation from a 100 people. This is obvious. And this is how our salesforce is trying to position it and sometimes we need to start with smaller projects more opportunities and so and so forth. But the long-term ideas that whenever we have a 50 square program right, account. We have a better relationship we have the best in class relationship compared to all the rest of our competitors. So this is idea with the 50 square program. You should take the relationship with our customers to the next level, based on perfection on delivery. That’s the idea.

I understand. And then my next question, does the 2017 guidance factor any changes in the ability to raise pricing for existing on your clients? Compared to what was in 2016?

Hi, Avishai, this is Alej. There is very little assumption of price increases. That doesn’t mean that we can have certain aspect in terms of the pricing. What’s happening with the pricing is, we’re not feeling any pricing pressure. Some of the new businesses are coming with good prices. The quality of the delivery that we do with our discovery practice that we kind of shape up after that acquisition of WAE as the UK company. It’s also at the very high level in terms of pricing. So I think it’s done and putting that into the bundle of getting larger in certain accounts where you need to price potential discounts. I think on and on, we have back you to very conservative assumption in the revenue guidance for 2017.

Great. Thank you so much for those clarifications.

No problem. Martín Migoya: Thank you, Avishai.

Our next question comes for Frank Atkins of SunTrust. Please go ahead.

Thank you for taking my questions. I wanted to ask what you’re hearing from clients in the financial services sector. We’ve heard mixed results from peers. Something challenges others seeing opportunities in terms of changes in interest rates and potential deregulation. What are you hearing from your financial services sector clients? Martín Migoya: What we hearing is very bullish scenario. They are optimistic for the future. They need to spend smartly the money. That they have so we are seeing like a gradual improvement of the scenario from last year. In general, they needed to invest a lot of additional information of their businesses and they need to compete now with newcomers like the –company so and so forth. So they need to do the transformation. So, they are investing money. They will keep on investing money. And we foresee good sign out for this year.

Okay. And as my follow-up I wanted to ask about your people nice revenue growth there. Where are the opportunities in Europe coming from and what you see going forward? Martín Migoya: So I’m not sure I get the questions.

What are the opportunities that you are seeing in Europe for revenue growth? And what drove the… Martín Migoya: Europe?

Yes. Martín Migoya: Europe. Will we have pretty good set of interesting customers in the financial sector in Europe specifically? And this large banks are undergoing very deep transformations and they are as I mentioned in my script one big bank in Spain we are transforming pretty much all the digital bang for them and where we are doing the platform which is great. And we are seeing like a very bullish 2017 in particular in Europe on the financial sector. Now, we have other sectors that are going to like the retails and some others. So I’m bullish for 2017 in Europe. It grew a lot from blast fear at this year – sorry, from 2015 to 2016, it grew our market share the our market share in Europe and I expect for that to keep on being the case for this year.

All right, great. Thank you very much. Martín Migoya: You’re very welcome.

Our next question comes from Jason Kupferberg of Jefferies. Please go ahead.

Hi, guys, this is Amit Singh for Jason. Just a quick question regarding your guidance for fiscal 2017. So the revenue growth guidance is around 20% year-over-year. How much of that is sort of inorganic from L4. And then just related to that, the last few years you guys have grown revenues at higher 20% rate. And then the commentary today has been nothing but positive it seems like. And then your 50 square strategy is also starting to provide results that seems like. So why would sort of the growth come down from high 20s to – 20% next year. Is it just you guys trying to be conservative at this point early stage of the year?

Well we’re exactly at same last year, this is the visibility we have right now. And I want to be sure that what we’ll tell to you is what we can execute. There’s nothing more now. Are we bullish about that equation of the market compared to last quarter? Yes, we are. So last year, we started with 21%, now with 20.2% then with a little we can deliver along the year. But the expectations I want to take the expectation on what I’m confident that we can do right now which is that 20.2% on the midpoint of the range.

Okay, inorganic contribution around 1%, 2% from L4?

Ale can you cover me on that.

Definitely, definitely it’s pretty much in that range. I mean it was a very small back win acquisition that we disclose so you’re pretty much in the range. Yes.

Great. And then…

And then it could be – sorry, not there decision has it’s connected to our intension to keep on expanding our footprint in the U.S. and that’s very important for us. That’s really, really important for us.

All right, great. And then just a follow-up on margins what is the implied sort of adjusted operating margin within your fiscal 2017 guidance. And from the call it seems like any FX sort of headwind you think you can counteract with SG&A efficiencies and it seems like investments related to 50 squared are behind you guys. Are there any other positives or negatives to margins – operating margins next year?

Yes. In terms of operating margin we’re speaking I mean we don’t guide operating margin but we are planning to be upon slightly below 2016. And also effect it’s coming from FX as you’ve said. Especially I mean the most relevant effect on FX is Argentina phase of as I said before the phase of wage inflation is still outpacing the phase of evaluation. We seen that’s situation it’s going to be reverse towards probably the second half of the year, inflation is trending down that’s one being as you said definitely a most of the daily investment in 50 square is gone. We have assembled most of teams, it could be the case that we get new accounts into the 50 square and we need to assemble new team. But the big chunk of investment that’s pointed out by Martin is already gone. So I know I think we’re targeting to have AT&A dilution and offsetting factor. So that we can come up with kind of frame levels of net income if compared 2016.

All right. Perfect. Thank you very much.

No problem.

Thank you very much.

Our next question comes from Jason Washburn of Pacific Crest Securities. Please go ahead.

Hi, guys. This is Jason in for Arvind. Just I wanted to ask you what are your spending priorities as it pertains to building your tax capabilities in fiscal 2017?

Yes. I mean just to be very clear. Globant has always been investing in developing new studios or new capabilities here or training people. This is the core of the digital era. The new technologies are changing so fast that you cannot stop investing there. I don’t project to have a bigger chunk of investments that what we did last year, but what I’m saying that we’ll keep on obsessed on how to seduce our consumers, on how to be able to connect with millions of consumers and which are the technologies that are erasing those friction points that I was talking about. And to connect with them emotionally and to connect with them in a different way. And that the differential that as a company, I’ll keep on investing there to have the best possible technologies and the best possible teams to create those friction that’s experience to our customer. So this is the future of our investments, this is what we want to be seem all our efforts to train our people.

Great. And then just a follow-up. I know you spoke a little bit about [indiscernible] related work. Could you maybe elaborate a little more on what you guys are doing in the space? Thanks.

Yes. We’ve a four studio around there. We’re playing out a lot with technologies around recognition of things and actions that people do within different spaces. And helping other systems to get more relevant information in the – relative information for the experience that they are building for their consumers. That’s one of the things in which we are investing most of our time. Then also artificial intelligence behind analyzing data to understand balance of different assets coming from what is called in Internet of Things. Different – different yes, we have enable devices sense or so on forth. So those are the two places in which artificial intelligence is playing a big role within the solutions we are providing to our customers. But again we don’t believe in a single solution. I think artificial intelligence seems to be applied industry by industry in a very specific way to solve that friction with consumers. And I don’t believe in having one single massive solution that is the perfect brain, no for the perfect brain for every single situation like other companies do. I believe that having a specific solution for different industries for different scenarios is much more adequate in terms of artificial intelligence and the way to brought it to the market.

Great. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Martin Migoya for any closing remarks.

So thank you very much operator. Thank you very much everyone for participating on this call. I’m really excited about what’s going on at Globant. So I expect to see you on our next earnings call. And thank you very much for your continued support and understanding. Thank you, cheers.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.