Globant S.A. (GLOB) Q1 2018 Earnings Report, Transcript and Summary

Good day, and welcome to the Globant First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Paula Conde, Investor Relations Officer. Please go ahead.

Thanks, operator, and thank you all for joining us today on our call to review our 2018 first 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 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 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 announced in this quarter's results. I'd now like to turn the call over to Martin Migoya, our CEO.

Thank you, Paula. Good afternoon, everybody, and thanks for joining us today. I'm very happy to be here to share with you our financial performance for the three months ended March 31, 2018. At the end of the call, Alejandro will share our outlook for Q2 and the rest of 2018. During Q1, we had another record quarter for Globant. Revenues for the full quarter amounted to $119.7 million, representing an outstanding 34.9% year-over-year growth. This solid growth in revenue was driven by our top 10 and our non-top 10 accounts. They increased by 37.3% and 33%, respectively compared to the first quarter of 2017. Later during the call, Alejandro will share more details on our financial performance. Now let me share some highlights about the market and the company. 2018 have started as another great year as we reinforce ourselves as leaders for this digital and cognitive era. We strongly believe that the AI revolution will touch all organizations. As Gunner [ph] said, the ability to use AI to enhance decision-making, reinvent business models and ecosystems and remake the customer experience will drive the payoff for digital initiatives through 2025. Our studio model enables us to have the necessary capabilities to help our customers through their digital and cognitive transformation. Reflecting on our expertise, we have launched our new book entitled Embracing the Power of AI. This book serves as an introduction to artificial intelligence. It helps readers achieve a greater understanding of how to efficiently implement AI and build an AI capable culture. The concepts addressed in this book are complementary to our previously published book, The Never-Ending Digital Journey. Together, they aim to demystify, educate and equip our customers with a more data-driven mindset. Our final goal is to help them identify opportunities to build disruptive and strategic digital and cognitive solutions. We invite you all to read this book. It's now available on Amazon. Related to this matter, we are happy to share that our ConVerge event are driving a significant amount of interest. During March, we held the first addition of ConVerge AI in Buenos Aires. More than 1,000 people joined us to learn about the AI revolution from experts from all around the world. We will continue leveraging this concept, taking the shorter format of ConVerge Ex to other geographies. During May and June, we will hold the ConVerge Ex in Madrid, and we will be also hosting a roadshow around different cities in the U.S. We continue expanding our service offering to help our customers as they dive into their digital and cognitive transformation. During the past weeks, we announced the creation of two new studios. The first one, the new Media OTT Studio, it provides a powerful end-to-end solution across the entire OTT delivery workflow. These range from content capture to playback and monetization. It also includes Globant OTT platform signal, which helps media companies learn to manage video apps across all major consumer platforms. In summary, Globant's Media OTT Studio will further assist media companies across every step of the digital workflow. The second one is our new Cybersecurity Studio. In this studio, we work to ensure that our customers' platforms are safe and secure. After years of working with top projects providing cybersecurity services, we formalize this studio to better serve our customers. Cyber-attacks can increase risk in business for today's organizations if you don't have strategies for staying ahead. To remedy these gaps, Global Cybersecurity Studio offers a portfolio of services, including cybersecurity report, vulnerability management and application monitoring. Now let me share with you some of the amazing projects we have been working at. Globant is working with the Johnson Controls Retail Solution Group to help create a global scalable cloud-based analytics platform for its Sensormatic brand. You will measure device up sign and health and provide insights to retailer's loss prevention teams to the predefined analytics and KPIs. Also, since last February, Globant has proudly been working together with IHS Markit digital, a leading Software-as-a-Service provider in the financial services industry, dedicated to the delivery and presentation of financial data, transforming complex information into elegant user experiences. As a result of this partnership, Globant provides actual ports responsible for customizing market digital products for its top clients in the banking, financial and insurance vertical. Finally, I'm really proud to share with you that Globant has been selected by Thomas Cook Money as a preferred IT Development Partner. Our goal is to support them on their mission to help customers save, spend, borrow and protect their holiday money. This is an amazing news for us. Globant and Thomas Cook Group has worked together for over five years. This partnership is a proof of our long-term relationship supporting Thomas Cook Money's IT requirement as they continue to grow and build their business. On top of this projects, other outstanding logos have shown our portfolio of customers, such as United States Tennis Association, KPMG, BCI and Telit, to name a few. As last remark, our pipeline remained strong, and we're optimistic about our ability to keep delivering solid growth. We believe that most organizations are facing significant changes in user expectations. To address this shift, they are modifying their business models to align with a new digital and cognitive paradigm. These companies want to partner that can help them embrace this transformation, emerging engineering, innovation and design at scale. We believe that our market approach with our studios and our 50-Squared model position us as a leader in this area and make us an ideal partner for this organizations. With that, I'll turn the call over to Alejandro Scannapieco, our CFO, for the further detail financial review on the first quarter 2018 and also to provide guidance for Q2 and full year 2018. Ale, please. Thank you very much.

Thanks, Martin, and good afternoon, everyone. I will spend a few minutes taking you through the first quarter 2018 results. Then I will talk about our outlook for Q2 and the rest of the year. Let me start by saying that we're pleased with our overall results for the first quarter of the year as the growth journey continues at a healthy pace. Revenues for Q1 amounted to $119.7 million, implying an outstanding 34.9% year-over-year growth. Disney was once again, our largest customer for the quarter, with very healthy growth and positive outlook for the rest of 2018. We also experienced accelerated demand among many of our 50-Squared accounts and particularly strong performance among non-top 10 customers. Revenues for top 10 customers increased by 37.3% over the first quarter of 2017, and customers 11 and beyond increased 33% during the same period. On the vertical front, financial services and media and entertainment industries continue to be key contributors to growth and building up robust pipelines. In terms of regions, during Q1 2018, Latin America outpaced other geographies as we have gained some very interesting new accounts in that region that have started yielding positive results. On a sequential basis, revenues increased 3.7% during Q1 2018 over the last quarter of 2017, the largest increase in Q1 sequentially. This is a consequence of our diversification of operations into multiple regions, and hence we're able to gradually reduce the impact of seasonality in terms of revenues. Our customer concentration numbers for Q1 2018 remain fairly consistent with past quarters, with our top 1, top 5 and top 10 accounts, representing 11.1%, 31.3% and 44.5% of revenues compared to 9.7%, 31.1% and 43.7% of revenues respectively for the first quarter of 2017. Our vertical diversification remains balanced across the different industries, with media and entertainment and financial services leading the pack, accounting for 24.5% and 21.7% of revenues respectively. During the last 12 months ended March 31, 2018, we rendered services to 348 customers, 89 of which accounted for more than $1 million of final revenues compared to 67 one year ago. During the last 12 months, we also had nine accounts about $10 million in annual revenues compared to six accounts for the same period of last year. We continue to grow the size of our accounts aligned with our 50-Squared strategy. During the first quarter of 2018, 78.6% of our revenues were in North America, the U.S. is our top country; 13.8% in Latin America and others, Argentina now being the top country; and 7.6% were in Europe, the Spain being the top country. Latin America continues to outpace the rest of the regions in terms of revenue growth. During the first quarter of 2018, 85.5% of our revenues were denominated in U.S. dollars, minimizing impact in our top-line from currency fluctuations. Turning now to profitability, our adjusted gross profit for the period increased to $46.8 million, 39.1% adjusted gross margin compared to $34.6 million, 39% adjusted gross margin in the first quarter of 2017. Our strategy of diversifying our talent base across the regions remains as a key contributor to keep margins stable. We finished the quarter with 6,940 Globers, 6,462 of which were IT professionals. Attrition for the past 12 months was 19.5% compared to 19% 1 year ago, showing a slight increase year-over-year mainly driven by Argentina. Adjusted SG&A decreased 260 basis points compared to Q1 2017, accounting for 20.8% of our quarterly revenues. We have been very disciplined in managing our costs as we gain scale while we continue investing for the future, primarily to strategically expand our sales coverage in U.S., Europe and Latin America. As a result, our adjusted operating income for the quarter amounted to $17.6 million or 14.7% of revenues compared to $10.9 million or 12.3% for the first quarter of 2017. Higher than expected SG&A dilution combined with the stable gross margins were the two main drivers for the significant operating margin expansion. Share-based compensation expense for the first quarter of 2018 amounted to $2.9 million, compared to $0.9 million for the same quarter last year. This expense is mainly related to the plan of restricted stock units granted to certain key employees and directors of the company during Q2 2017 as part of our long-term retention program. Financial income and expense net amounted to a loss of $0.9 million. This net result is composed of interest income and FX gains and losses resulting from exposure of monetary assets and liabilities in local currencies. Adjusted net income for the first quarter of the year totaled $13.9 million, 11.6% Adjusted net income margin compared to 10% for the first quarter of 2017. Adjusted diluted EPS for the quarter was $0.38, based on 36.5 million average diluted shares for the quarter compared to $0.25 for the first quarter of 2017. During this quarter, EPS is growing higher than revenues. Adjusted diluted EPS for Q1 of 2017, previously reported at $0.27, turned now to $0.25, as we have broken down by quarter the 2017 full year acquisition-related charges recorded in Q4 2017. Moving on to the balance sheet, our cash and investments as of March 31, 2018, amounted to $45 million compared to $60.7 million as of December 31, 2017. This increase of cash was mainly explained by our decision to practically self-fund for the time being M&A transactions, including earn outs, a slight increase in DSO compared to Q4 2017 and investments in CapEx to expand our offices in Latin America, U.S. and Europe. Our balance sheet remains strong, with current assets of $156.3 million accounting for 43.3% of the company's total assets. Total common shares outstanding as of March 31, 2018, were 35.7 million. To wrap up, let me provide you with our guidance for Q2 2018 and the rest of the year. Let me start with the industry and macroeconomic environment. Despite it is only the beginning of the year, we feel confident with the overall business environment, and we're very satisfied with the progress we're seeing in the implementation of our 50-Squared account strategy. In terms of gross margins, we expect a normalized range around 38% and 40% as we pointed out in the last few calls and as we have been able to maintain over several quarters. Diversification of our talent base will continue to be part of our long-term strategy, and that should enable us to have a more balanced cost of structure with a better handle margins while we continue investing in our 50-Squared strategy and training for our Globers in cutting-edge technologies. As always, we'll continue managing our SG&A expenses very carefully to gain additional dilution, while we continue investing for the future. Our effective tax rate is expected to remain in the 20% to 22% range in line with the past several quarters. Based on current visibility, we expect Q2 2018 revenues to be between $124 million and $126 million, implying a 25.5% year-over-year growth at the midpoint of the range. Adjusted EPS is expected to be between $0.36 and $0.40, assuming 36.9 million average diluted shares outstanding for the quarter. Regarding the full year 2018, we expect revenues in the range of $502 million and $510 million, an implied 22.4% year-over-year revenue growth at the midpoint of the range. In terms of adjusted EPS, we're expecting a range of $1.56 and $1.64, assuming 37 million average diluted shares outstanding for the full year. Thanks to everyone for participating on the call and for your coverage and support. Operator, can you please queue questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Tien-tsin Huang of JPMorgan. Please go ahead.

Hello. Great revenue growth here. I think, I guess, Disney on an annualized basis is that $50 million? I think that's your first sort of 50-Squared name. So I am curious, did they expand into other groups or departments? Or are you penetrating your existing relationships within Disney? Just trying to understand what drove the move and how much more growth potential do you see from here?

Hey, Tien-tsin. This is Martin. Thank you very much for your questions. And the expansion has been pretty consistent across all the areas. We're seeing now expansion to - in other regions, which, up to now was more reluctant to expand into these new technologies within the group. And we are seeing also expansion into other brands that they acquired reasonably recently. So that completes a picture of growth in pretty much all the Disney landscape. And as you have said correctly, the 50-Squared approach into Disney in here in the first account, I mean, we're extremely proud with that, and I really appreciate that you mentioned that on your question. So, thank you.

No. No, it's good stuff. I'm glad to see it. So I guess, my follow-up question, maybe to highlight just on understanding. So the headcount growth and the revenue growth dynamics, looks like headcount growth a little bit below revenue growth. So is that a mix issue with more on-site exposure with the high utilization? Or is there anything on pricing to call out? Thank you.

It's a combination of variables, Tien-tsin. I think it's - there is a little bit of pricing power, mainly related to some of the newest technologies and projects based on newest technologies that we're selling. Then, of course, there's also the component of some on-site. But I would say those are the two main factors that are driving that the capping from the revenue growth and headcount growth.

Very good. Thanks so much.

And our next question will come from Ashwin Shirvaikar of Citi. Please go ahead.

Thank you. Hi, Martin. Hi, Ale. Good quarter. Let me start with a question on SG&A leverage and - over the last, I think, two, three years, you've done a pretty solid job with SG&A leverage. How much more is there to go? And the basis for the question really is particularly on the sales side when I see the broad-based growth that you have. I'm imagining that you're probably investing in the sales piece of it. So the SG&A leverage probably comes a lot more from G&A. Can you break those out if possible and talk about what more is to come?

Yes. No, it's a fair question. And I would tell you, you don't need to worry. We'll continue investing in increasing our sales progress. Definitely we're trying to select and we have talked so many times about the quality of the sales organization that we want to have and the quality of the people that we want to be there in the streets selling Globant's value. So we take our time also to select the right people for the sales organization, and that will continue be part of our investment. So it might be the case that SG&A has a little bit of seasonality among the different quarters. We're planning to do several investments in the next couple of quarters in sales, but still within the range of SG&A dilution that we plan. I think what we're seeing in terms of DG&A dilution is consequence of all the investments that we have done over the last three, four years, even after the company went public. We assembled a number shared services for the company that even accelerated. And we further expanded when we acquired Clarice in India. Now we have assembled some shared services in India that are working together with some other captive centers for transactional processes in Latin America that are helping us to keep diluting SG&A. As far as how far we can go, definitely we're trying to speak to the target. We have talked about the 50, 100 bps of dilution every single year. That should be kind of the range. We'll continue investing in whatever we need to keep growing the company.

That's really good to hear. I want to go back to headcount and can you talk maybe about utilization? And you also - you mentioned pricing, but in addition to that is there also a utilization increase component that you can maybe talk to and quantify? And I see that you kind of at this upper teens, 20%-ish headcount addition year-over-year for some time. Is it possible to accelerate that further?

Yes, as far as utilization you're right. There was an uplift of 100 basis points in utilization in the last quarter, mainly driven by U.S., where we achieve higher utilization level. As far as how much we can grow headcount. Again, this is something that we have managed based on several different factors like business opportunities, like expanding and diversifying the talent base, utilization, sometimes dealing with some pressures on the currency, so we managed the talent pool. What I can tell you is that we definitely have the engines. In all the locations where we have established our delivery centers to keep growing and to expand further the headcount of the company. Of course, we need to find the right talent. Sometimes that takes time, and you need to have the right people in place, so that you have that recruiting engine. But I could tell you that in all the delivery centers, in all the regions where we have established, we have the ability and we have the power to increase our headcount faster.

Got it, thank you. Good execution.

Thank you, Ashwin.

Our next question will come from Maggie Nolan of William Blair. Please go ahead.

Hi, guys. I'm curious about how many studios you have now in total? And then are there studios that you let go of as your focus shifts? How do you kind of determine how to align your employees? And how easily can you realign them as that focus may shift?

So yes, we have about 19 different studios. The important thing is the two new ones are the OTT studio and the Cybersecurity Studio. And the approach that we have with the Studio is - to be able to cover every day, and that's the mission we have, to able to cover every day the broader spectrum of the business of our customers. Our sense is that coming from a different perspective, from a different culture with a totally digitally native culture very used to deal with consumers and to deal with connecting emotionally with consumers, our approach is that now we can expand into other areas using the same culture, the same way of thinking and the same way of understanding how to make digital transformation and start leveraging that expertise to take part of more and more processes within the organization every day. So if you see you can associate each of these studios of our 19 studios to different stages of the life cycle of the business that we are developing with our customers. And that's the whole thing. The idea is that you will see us continue including this studio that will cover every day more and more pieces of the business of our foreign customers, which is also aligned with our 50-Squared strategy. I mean, when you talk about 50-Squared strategy, not just forming one account, but also leveraging those relationships to be able to sell more into those end customers, and more means having more value for our customers, means having more studios for our customers. So that's the explanation around the expansion of our studios. Then as we always say, they are distributed in a logic way, not in a geographical way. For example, the Media OTT Studio is based initially on Seattle, but we now have many people here in Argentina. We have other people in Uruguay. The cybersecurity study in Buenos Aires. And then we have a bunch of people in the U.S. and a bunch of people in Columbia. And - but as we always do, we believe that we are a global organization, and we really mean it. And that means that people are distributed within our studios across many different locations. And that gives us the opportunity to cover that - our customers in a much more efficient and better way.

That's helpful, thanks. And then my second question, the financial services and media and entertainment has consistently been your strongest verticals for several quarters now. And I am wondering if you can give us some insight into how the rest of your verticals are performing numerically or perhaps qualitatively you can share with us which ones are becoming more of a focus.

Hi, Maggie, this is Ale. I think, as we said in the call, definitely, financial services and media and entertainment are leading the pack, and companies within those verticals are really performing well. There are some rising stars in terms of verticals where we see more traction. That's a combination of the encouraged demand of the verticals plus Globant trying to penetrate and to gain share on some of those verticals. So definitely, travel and technology is where we have many customers. And we have been gaining some new customers in those verticals. So those are two verticals that are growing nicely. And we can see that already in the pipeline, then carries the sector where we are clearly underpenetrated, but we have gained certain new customers and new projects that we try to use them as kind of the platform to scale up. Those are the three verticals that I could mention as kind of a rising stars for Globant.

That's good color, thanks Ale.

No problem.

Our next question will come from Moshe Katri with Wedbush Securities. Please go ahead.

Yes, thanks. Very strong results, congrats. When we talk about where we are in terms of wage inflation, then we spoke about Argentina in the prior quarters, are we in stabilizing kind of shape at this point? So we're comfortable with some of these diminishing headwinds to margins this year? And Ale, you've provided gross margin guidance, but not operating margin guidance. Can you talk about that?

Yes. Sure. As far as wage inflation and the potential impact of currencies in the margin, I think overall the situation didn't play for us in Q1. There were many currencies, particularly the Mexican peso and the Colombian peso that were a headwind for Globant. Argentine peso, the value 8% in the first quarter, but then our wage inflation was clearly outpacing that number. Q2 shows a different - the start of Q2 is a different story. It looks like after some of the things that have been happening in U.S., the currencies in Latin America and even the Indian rupees turned to be the devaluing faster against the U.S. dollar. Having said that, we speak to the gross margin target. I think we have been able by diversifying the talent base and by working on several different variables that we can articulate to keep margins stable. We have been able to cope with some fluctuations in the currencies. So we stick to that level of gross margin despite what might be happening with wage inflation, particularly in one country like Argentina. You know that in the other countries where we operate, wage inflation is not an issue. Still an issue in Argentina, and we know that. As having said that, and coming to the second part of your question, we aim to keep diluting SG&A, and that should definitely help to expand operating margin. If we're able to keep gross margins stable in this level, as we have been doing for several quarters in a row, I think we'll be able this year to expand operating margins. And you can also see in the various guidance for EPS that we're planning to grow EPS higher than and faster than the top line for the first time in several quarters.

That's great. And just a follow up, where is the headcount in Argentina in terms of mix versus last quarter? And I am assuming that continues to kind of come down.

It's 37% of the total. So it went down 200 basis points. Columbia has been growing, India has been growing mostly.

Great, congrats on margins.

Thank you.

Our next question will come from Avishai Kantor with Cowen. Please go ahead.

Yes, hi everyone. So you've been posting very broad-based growth for some time - for a few quarters now. Do you think that you're gaining market share from other vendors, maybe some of the larger clients or possibly even gaining share from the traditional marketing agency companies?

Avishai, sorry. Look, I mean, it's difficult to measure market share. However, we know that this market is growing at 20-something percent, and we're growing at pretty much, much faster than that. Let's take into account the growth of our last year 27%. So effectively we're gaining market share. I mean, it's a question of how the total market growth as opposed to how fast we are going. The second question is from which part of that money coming. And I think companies are realizing about the fact that marketing their products is not a case of pushing messages anymore, but it is about providing the consumers with great experiences, with great journeys for them to live and for them to engage emotionally with those things. And then those guys, those consumers talk about that experience to other people, and that's like kind of a new way to connect with those consumers instead of spend in marketing. So we're seeing - as we said many times, we're seeing some money coming from marketing, budget, some money coming even from IT saying, listen we are saving money with cloud, so let's now use this money to create a better experience for my employees or for my consumers or for myself or for whatever I have at hand. So I think that - I think what's happening with us is a combination of those two explanations. Okay?

Okay. And then my next question, you mentioned that the focus in terms of diversifying the talent is both Columbia and India. And you also mentioned the assembled services from India and Latin America. Is India now at the point where it's actually - where it generates an uptick in your blended pricing following those actions?

No, I think India is at the point where it's definitely complementing the value proposition and some of the process that we're running for assisting customers. I think India accelerated very nice in terms of providing us with the skill set that we need to complement some large projects. We even run now several projects directly from India, where India is leading the development. In some other projects, India is complementing that development that's been down out of other locations. As far as rates Avishai typically, we go with blended rates. And definitely, the rates that we have for India are much higher than traditional IT in India. So if you blend that with very competitive rates in U.S. and Latin America, definitely the blended rate is very good. If you take a look at the trend of the revenue percent for Globant, we still keep that 3%, 4% CAGR over the last five years. We ended the quarter with $75,000 per year per employee, which is a very high number. We still think that that can even further improve.

Great, thank you so much.

No problem.

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

Hi. My first question was just about all the stuff we've been reading in the news about Argentina and the economy. How is this impacting your thoughts on currency, wage inflation and potential attrition rates?

I mean, well, as you may know, Argentina is under a process of recovering the economy after having a very big deficit. And I think the Argentinean government is doing the right thing step-by-step, trying to moderate that. They've just announced another cut on the deficit for about 0.5%, 50 basis points. And I think we are moving to the right direction. Now those things connected to the rates of the interest rates in the U.S. generated volatility around pretty much all the currencies in Latin America and the peso - the Argentina peso was not an exception. So without some movement for - in terms of wage inflation, we don't think that's going to be different from what we already had in plan. We have some tailwind a little bit during these last couple of months. But on the first quarter it was a headwind from all the currencies in Latin America. So what overall, I think we're kind of in a breakeven situation between the devaluation we have today during the last few weeks in Buenos Aires plus the appreciation that we had during first quarter as an overall thing in the other currencies that we operate in Latin America. So we don't see any different or any major positive effect on our margins. And regarding the - well, I already answered that, which is we don't see a major or a different or a market change or even a small change in the salary inflation or wage inflation in Argentina.

Okay. And then maybe just on the acquisition front, maybe we can get an update on how they're performing. Any sense of organic growth? And maybe some color on what you'd be looking for from an asset going forward?

Look, we deliver on the top 10, 37% growth, and that speaks for itself. So there's no further explanation, but explaining that. Those accounts that we pay attention to are those are within our 50-Squared are those that are growing very, very fast speed. Now it's about how we can propagate that into more and more every day. Today, we have more than 90 accounts over $1 million, and more than, how many, over $5 million, exactly? Hold on a second. I have the number here that was very interesting, but I don't remember it on top of my mind.

90 versus 67. I think it was 90 versus 67.

90 versus 67 was on top of $1 million. And then on top of $5 million, again, a very good performance and growth there. And I think that the overall situation is that we're seeing a pretty solid growth based on real demand from our customers for a totally different way of providing these services. I don't know, Alejandro, if you want to add something.

No, what I just want to emphasize, Joe here is that, we do acquisitions, and there has been a lot of noise about organic and inorganic, and we want to be clear about that. I mean, we do acquisitions based on the strategic value that they provide to us, the strategic skill set that we incorporate into our company, and we aim to - and practically, in real facts, we integrate those companies very fast into Globant. And then the organic growth that you see is pretty much whatever is driving Globant towards the goal that we set for the company that is growing very fast. If you take aside some of the acquisitions, you're going to see that for this quarter, we only have one full nonorganic that is PointSource. A little bit of ratio that was acquired by mid-Q1 last year. Then in the following quarter, assuming that we don't make any new acquisitions, the only nonorganic is going to be PointSource. And again, the acquisition of PointSource was pretty much directed to the fact that they have certain skill sets and certain people that were very important for us as far as geographic coverage in U.S. We also got a couple of very interesting customers on the insurance vertical. But that's a story about organic growth. I think as Martin said, the way we're scaling up our 50-Squared account, the way we're growing the company overall, it speaks by itself.

Okay. I'm just going to sneak one in and it's just about preparation of the customer. What drives the penetration? Is it that you start one project and they want to continue to do more work with you? Or are they asking for more advanced technologies like AI? I'm just wondering how you're able to take the 67 to 89, what's the secret sauces there. Are they just starting new projects and really liking what you do? Or are they asking for some of these new technologies that keep getting in front of us here?

It's a combination. I mean, it's not just that they want to do more work with us, but also, as you have seen, we have two new studios. We have a big push over Artificial Intelligence that we have been doing during whole last year, and that was driving a lot of momentum in our business on top of that. So now, we are in a very dynamic market. And that dynamic means that we are, all the time, changing our understanding of what the market is looking for. Hence, changing what we need to offer to them. And that dynamic for us is extremely important in a way that we understand it so we can transmit that to our customers. So when we start a project, maybe there are some other people that are enjoying about - that want to enjoy the right of working with us, and they add into other - they tell their friends and other friends to start working with us too, within the same company. But also within that same thing, our mandate to our people is to start talking about new technologies that are disruptive, that it can produce massive amount of productivity gain for them. So as you mentioned, and it's a very - I think it's a great question, it's a combination of both. It's us expanding and working with other areas and also us talking about new technology, some things that are new for our customers. And we spent a lot of time educating, first, our people, and also educating our customer. And by the way, as I mentioned on my part, we just launched a new book around AI. Basically, we haven't found in the market a book that can explain in plain language the meaning of the AI, and what's the meaning of all the different jargon that is out there and what's the meaning of the machine that is learning, and how a machine learns, so on, so forth. So we wrote a book, we pushed over customers. And that is driving a lot attention. That is driving a lot of people that are interested in that. So I think it's a combination. It's not just one factor.

Thank you.

No problem.

Our next question will come from Frank Atkins of SunTrust. And I apologize, he has just removed himself from the queue. So at this time, ladies and gentlemen, I am showing no further questions. So this will, in fact, conclude our question-and-answer session. I would like to turn the conference back over to Mr. Migoya for any closing remarks.

Okay. Thank you very much, everybody, for joining. Looking forward to talk with you on the next earnings results. And thank you very much again for your continued support. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.