Globant S.A. Q2 FY2025 earnings call

• Revenue for the second quarter was $614.2 million, up 4.5% year-over-year. - Pipeline reached an all-time high of $3.7 billion, a 25% increase from the previous year. - AI pods subscription model has 18 paying customers, contributing to significant pipeline growth. - Launched the 2.0 version of Globant Enterprise AI, addressing governance, build capability, and impact for clients. - Formed partnerships with OpenAI, AWS, LaLiga, and InOrbit. - 49 clients generate over $10 million in annual revenue (up from 39 a year ago) and 339 clients generate over $1 million annually (up from 329 last year).

Globant's second quarter revenue was $614.2 million, representing 4.5% year-over-year growth. The revenue mix includes North America at 54.1%, Latin America at 19.7%, Europe at 19.6%, and New markets at 6.6% which grew 84% year-over-year.

• Third quarter 2025 revenue is expected to be at least $615 million, implying 0.1% year-over-year growth with a 50 basis points positive FX impact. - Non-IFRS adjusted operating margin is expected to be at least 15%. - Full year 2025 revenue is expected to be at least $2.445 billion, a 1.2% year-over-year growth with a 25 basis points positive FX impact. - Non-IFRS adjusted operating margin for the full year is expected to be at least 15%, and the IFRS effective income tax rate is expected to be in the 20%-22% range. - Non-IFRS adjusted diluted EPS is expected to be at least $6.12 per share for the full year 2025.

• Macro environment extending sales cycles, which can delay deal conversions. - Intense competition in the AI and IT services space. - Data privacy and compliance challenges associated with AI adoption and integration.

Q: On the AI-based delivery model, how many paying customers are there and details of contracts?

A: There are 18 paying customers under the subscription model. Contracts involve supervision of agents' work, and it's a new model well-received by customers, with pipeline growth driven by this model.

Q: On optimization, progress of headcount reduction and creative pillar performance?

A: ~1,000 employees (3%) were reduced in Q2 as part of the business optimization plan, with additional reductions in Q3. The creative pillar (GUT) is small but growing, with the FUSION agent targeting automation of content creation seen as an opportunity.

Q: On enterprise AI platform stickiness with customers?

A: The enterprise AI platform is a key component for generative AI adoption, providing enterprise-class integration of the AI ecosystem and offering more stickiness than traditional project-based engagements.

Q: On revised growth outlook assumptions and conservatism?

A: Guidance is revised with stabilization in Latin America and pipeline growth, expecting progress as companies invest in the future, with a conservative approach considering macro uncertainties.

Q: On pricing discussions around AI pod model and competition?

A: The AI pod model has better margins than traditional projects, and it's a win-win for customers and Globant, focusing on maintaining quality while managing pricing in a competitive environment.

Q: On North American deceleration and Latin America country-by-country performance?

A: North America had sequential decline due to certain projects, but pipeline and big deals show improvement. Latin America shows stabilization with recovery in countries like Argentina, Brazil, Peru, and Mexico.

Q: On pricing trends and utilization?

A: Revenue per head has been maintained or slightly grown, and utilization increased by ~40 basis points in Q2, aiming for 80%-81% target.

Q: On client concentration and competition?

A: Globant is selected in consolidation processes, with more clients generating over $1 million annually, offering new differential offerings to stand out in competition.

Q: On scale and scope of AI pods engagements and participation in GCCs?

A: Pipeline includes many current and new customers, and Globant participates in helping global enterprises with their offshoring units through the AI pod model and transparent outcomes-based pricing.