Earnings Call Transcript - GLOB Q2 2021

Amit Singh, Head of Finance & Global Head of Investor Relations

Good day, and welcome to Globant's Second Quarter 2021 Earnings Conference Call. I'm Amit Singh, Head of Finance for the U.S. and Global Head of Investor Relations. Please note, this event is being recorded and streamed live on YouTube. By now, you should have received a copy of the earnings release. If you haven't, a copy is available on our website, investors.globant.com. Our speakers today are Martin Migoya, Co-Founder and Chief Executive Officer; Juan Urthiague, Chief Financial Officer; Patricia Pomies, Chief Operating Officer; Guibert Englebienne, President of Globant X and LatAm; and Diego Tartara, Global Chief Technology Officer. Before we begin, I would like to remind you that some comments on our call today may be considered forward-looking statements. This includes our business and financial outlook and the responses to some of your questions. Such statements are subject to the risks and uncertainties 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 most straightforward way to compare Globant to our industry peers. 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 would now like to turn the call over to Martin Migoya, our CEO.

Martin Migoya, CEO

Thanks, Amit, and hello, everyone. I'm happy to be with you again. Today, we will look back at our strong first half of 2021. We will also share with you our vision to reinvent ourselves and our professional services industry. But first, let's look at Q2. We closed the quarter with $305.3 million in revenue. This represents 67.1% year-over-year growth and breaks last quarter's record as our strongest year-over-year growth as a public company. And as we look back, Globant's revenue has surpassed $1 billion over the last 12 months for the first time. We expect to close this year with more than $1.2 billion in revenue. I also have the pleasure to share with you other important news. We are now a team of 20,000 Globers working all over the world. It took us 16 years to reach 10,000 employees. Today, just 2 years later, we have doubled our team. I'm proud of the extraordinary growth and the individuals who have joined us along the way. They inspire me every single day. As we know, strong technology companies are defined by creative, resilient and adaptable people on their teams. Globant has put this at the center of our work. We will continue to scale up our talent worldwide while fostering our culture of innovation, entrepreneurship and reinvention. Every person, business and even nature itself face a need for reinvention. The need to evolve and to become better versions of themselves and to navigate through constant challenges. It is our vision to seek reinvention in everything we do. We apply this concept to our clients as we help them create a way forward into a sustainable future. We don't just supply technology for the short term. We design profound transformations to go beyond digital. And we apply it to ourselves as we provide our Globers with the tools to augment their work to develop new skills and to build and transform their own career paths. I'm happy to see how this case of reinvention is resonating with our investors community. Confidence in our track record and our vision was reflected in our last follow-on in May. It was more than 5x oversubscribed, almost all the participants were fundamental long-term investors. This capital helped solidify our plans to expand both organically and through acquisitions. This quarter, we acquired an 80% stake in Walmeric. They specialize in developing marketing automation technology, combining lead management, online marketing and sales enablement. With this strategic integration, we want to disrupt the digital sales strategies for our clients. Globant has always focused on helping the world's top brands interact better with their customers. With Walmeric on board and our digital sales studio, we want to bring this full benefit of the digital and cognitive revolutions to improve the sales of new products. Now I would like to share some thoughts on what we have been doing for our clients. All regions have seen growth as we continue to make our mark all over the world. Starting in North America, Globant is proud to be serving the National Football League to help build and launch a new set of apps for connected TVs that will enable fans to best engage and enjoy the sport they love. In the robotic process automation space, Globant is proud to be partnered with Automation Anywhere and the development of their latest enterprise platform, Automation Anywhere Robotic Interface, that provides unique capabilities to end users in personalizing their automation tasks for both the front and back office. Vivid Seats, a leading online ticket marketplace, is partnering with Globant in multiple digital initiatives from delivering experiences in the marketplace to creating a data-driven approach for growth. In gaming, Globant continues providing co-development expertise for Ubisoft's latest version for the guitar-teaching music game, Rocksmith Plus. The award-winning Rocksmith franchise has sold over 4.8 million copies already. At Zynga, Globant developed tools for systems for its CSR Racing franchise with over 130 million downloads worldwide. Our clients and partners span multiple sectors and disciplines, which brings me to the Inter-American Development Bank. After working with them for several years on their digital transformation journey, we are widening our scope of work. We have embarked on a 3-year AMS engagement for Salesforce and ServiceNow towers. With just a few months in, we have begun to see the results with all quality KPIs met, 97% satisfaction on customer surveys in the organization, and high engagement from business partners and team leaders. This quarter, we celebrated a decade of partnership with Stride, an education technology company that supports more than 2 million students with online and blended learning solutions. We began working with them to create learning experiences and improve their educational platform. Over the years, we have provided tools in areas from data analytics, improving assessment systems and refining their digital education content. It is great to see the passion in our teams to challenge the status quo. We're also working with a digital transformation with Telekom. We have successfully launched a new version of their e-commerce platform. It is a key part of the new digital ecosystem. In the construction space, we are working closely with Etex in creating a technological foundation of its new division called New Ways. This work is impacting and reinventing the supply value chain. We are supporting Etex in their ambition to be a key player in the transformation of the construction industry in the emerging market for off-site, lightweight and modular building solutions. Now to our geographic expansion. Last month, we opened up our new offices in Montevideo with President Luis Lacalle Pou in attendance. Over the coming months, we look forward to opening new offices throughout the global regions where we work. I'm looking forward to sharing more of those details with you in the future. Last month marked the seventh anniversary of our IPO, and I still feel like we are just getting started as the market opportunity keeps increasing. According to IDC, the number of companies that embrace a digital transformation strategy is up 43% since 2019. With a need to constantly adapt in order to face uncertainty, we anticipate this market to continue expanding. We also see how certain key areas continue to be disruptive and garner more attention from companies. An example of these are blockchain technologies, which are enabling the decentralization of finance while also penetrating more industries. Particularly even in the past few months, the tokenization of assets has become an increasing trend. Blockchain is already disrupting the concepts of work, business and commerce worldwide. And it's just getting started. Diego Tartara, our CTO, will talk more about what we are doing in this field shortly. Similarly, artificial intelligence adoption continues to expand, and the AI market is expected to grow by $76 billion by 2025. We're confident that these trends, together with the growth of our market, will allow us to grow fast. As we continue our expansion, it is important to understand that the future belongs to sustainable companies that pay attention both to their P&L, the impact in their communities and all their stakeholders. Sustainability is an essential element to everything we do at Globant. I'd like to draw attention to our expanding ESG activities under our Be Kind initiative. As we are committed to being a carbon-neutral company by the end of 2021, Globant submitted last week its first carbon disclosure project. With this annual disclosure, we hold ourselves accountable to environmental transparency. We are committed to acting responsibly as we create a way forward into a thriving sustainable future. In line with this accountability, we are also officially committed to the science-based target initiative. We have joined the more than 1,000 companies all over the world that are working to limit global temperature rise to 1.5 degrees Celsius above preindustrial levels. Now let's talk about how Globant has been innovating and working on its signature tools. I'd like to bring my friend, Co-Founder and President of Globant X, Guibert Englebienne. He will share some of the updates of this division focused on our unique technologies and new revenue streams. Guibert, please?

Guibert Englebienne, President of Globant X

Thanks, Martin. It's a pleasure for me to be with all of you today. Let me tell you a little bit about Globant X. We established Globant X to be the space where we nurture Globant's homegrown innovation so we can apply it and turn it into exponential revenue opportunities. As we aim to transform our industry, Globant X is applying AI to augment the way we code, the way we test, design, and how we get collectively smarter. This is enabling us to achieve scalability in everything Globant does. At Globant X, we are also exploring opportunities to enable our customers to disrupt their own industries. For example, to enable new conversational channels, as we are doing with our technology patented solution, FluentLabs. Globant X is key to continue driving the entrepreneurial spirit that has made Globant what it is today. Let me go over some highlights of our initiatives. Our patented Augmented Coding technology enhances the coding process by seamlessly accelerating our developers to write better, safer code in less time. We are building a strong leadership team to carry the project forward and have appointed Tiburcio de la Carcova as CEO of Augmented Coding to make it happen. Tiburcio used to be the CEO of GMR, one of our acquisitions from last year. And he has an extensive track record as a successful founder and entrepreneur. Globant X will also oversee StarMeUp OS, which many of you know has been key to establishing a strong culture within Globant. Today, StarMeUp acts as an ecosystem that creates a high-performing organization where everyone feels part of a strong, aligned team, providing a seamless personal experience to every employee in an environment of high autonomy. The pandemic has represented a huge shift for the future of work. While we still need to create an engaging environment to attract talent and build a diverse and inclusive organization, we also believe that being able to assemble strong organizations in a distributed work environment is key. We have seen how clients like Prisma and many others are seeing in StarMeUp a solution to strengthen their organization culture during these challenging times. As the digital transformation requires a human transformation, I'm excited to continue expanding this operating system to build a smarter future for our customers. Next, to speak about some exciting new studios, I would like to introduce Diego Tartara, our Chief Technology Officer. Diego?

Diego Tartara, Chief Technology Officer

Thanks, Guibert. Hi, everyone. I'm excited to be with you again to talk about Globant's expanding array of studios. First, I'd like to go over Globant's blockchain studio. We have been seeing continued adoption of the technology throughout many industries and sectors. The rise of NFTs, cryptocurrency adoption, and use of private and semiprivate blockchains has created a surge in demand. We are revamping this offering through our new practices, smart contracts, digital tokenization, decentralized platforms, and decentralized finance. We will continue to design and build decentralized and resilient solutions that boost strategic business value, enabling efficiency, immutability, and transparency. In Financial Services, the lending market is being disrupted through AI. This brings a number of powerful benefits for financial institutions, including data-driven decisions, improved customer experience, and significant cost savings. We have been working on the strategic integration of Bluecap's team to Globant. Due to their extensive experience in financial consulting, their team will integrate with us to form the backbone of our new digital lending studio. We leverage the in-depth expertise on the sector, combined with our expertise in AI for our product offering in the most innovative lending practices. Examples include using advanced analytics to ensure desired risk profiles anticipating default months in advance and cost savings by optimizing the collection processes. This past quarter, we successfully held our digital disruptor's edition of the Globant Awards. We wanted to recognize those individuals who are driving the change within their organizations for technological innovation of products, processes, and culture, the digital disruptors. After receiving over 2,000 nominations from 4 continents, 22 leaders were chosen and recognized for their efforts. The best part of this initiative, however, was not even the award itself, but the conversation of innovation that we were able to spread. This is a mark of cultural change that Globant wants to achieve. We look forward to hosting these awards again next year. I'll now turn it over to Pato, our COO.

Patricia Pomies, Chief Operating Officer

Thank you, Diego. Hi, everyone. I'd like to start with our talent. Martin mentioned that in July, we achieved the important milestone of being 20,000 Globers. That was possible thanks to our track record for growth. Focusing on Q2, our hiring accelerated, and we finished the quarter with 19,428 Globers, 18,350 of which were technology, design and innovation professionals. More than 2,000 of these new hires were IT professionals, up 59% year-over-year in order to meet the strong market demand. This is the strongest year-over-year growth in our IT headcount as a public company. We are entering a new phase of Globant's growth story with our team becoming more diverse, more global and more skilled. We welcome this growth and the diversity. Constantly exposing ourselves to new ways of thinking and perspectives are what have moved us forward. However, as we bring in more members to our team, we will continue to foster our culture of agility, resilience, and reinvention at every step of the way. As we look forward, the scope of our hiring will be global in India, Europe, the U.S., Canada, and Latin America. In order for our business to reach its full potential, we need to be the #1 place to work in the industry. And we orient the global career path to offer challenges, projects, incentives, benefits, and exposure that are unique to Globant. It's important for us that they hone their existing skills and also develop new ones. That's why we launched Globant University last year, which you may remember from our previous calls. Today, the results are in, 93% of our Globers went through the trainings. On this platform, there are 2,700 learning resources available so that our Globers can build their capabilities based on their passions, generating more engagement and completion rates. This is part of our focus at Globant, enabling our Globers to have autonomy in building their careers. Attrition for the past 12 months was at 16.6%. This increase is largely attributed to the very strong demand environment for talent as we exit this pandemic. We now expect the attrition rate to normalize around 15.5% to 17.5% level in the near midterm. Despite a modest increase in attrition, the net employee additions for the quarter set a new record for the company. Our value proposition to our employees continues to be very, very appealing. In the incoming months, we will also be holding another edition of the Women That Build awards. I look forward to bringing together a panel of judges like the last time and being able to give a better spotlight to the trail-blazing women in technology today. We want to give them a greater recognition so that their qualities of leadership, innovation and drive can spread. Now a few points on our revenue performance. Disney was our largest customer for the quarter, growing strongly at 61.3% year-over-year and 10.9% quarter-over-quarter. We continue to be very well diversified within Disney, serving the majority of its business units. Other than Disney, the rest of our accounts collectively also grew at a solid 67.8% year-over-year and 13.2% quarter-over-quarter as we experienced improvement in most industry verticals. Moreover, during the quarter, we continued to successfully cross-sell services with the companies we acquired in the recent past. Regarding the progress of our 100 squared strategy, during the last 12 months ended June 30, 2021, we had 18 accounts above $10 million in annual revenue compared to 13 customers for the same period last year. We also had 154 customers with more than $1 million of annual revenues compared to 113 one year ago. Overall, we continue to expand our relationships with our key accounts, the base for our continuous growth. Looking at diversification of our revenues by geographic regions. During the second quarter of 2021, 63.8% of our revenues were in North America, 21.6% in Latin America and others, and 13.2% in Europe. Our efforts on expanding our presence in Europe continue to bear fruit, with Europe witnessing another quarter of a strong acceleration in revenues, growing at 242.1% year-over-year and at 23.7% on a sequential basis. We are enthusiastic about the demand we see in our growing market and foresee a healthy pipeline ahead. For 2021 and beyond, we'll keep applying our talent to help them make it happen and ensure that they have the latest training to be great. Nice to be with all of you again. To go into finer detail, I'll pass it over to Juan, our CFO. Juan, please?

Juan Urthiague, CFO

Thank you, and good afternoon, everyone. I hope you are all doing well. Let me start by summarizing the results of our second quarter 2021. I will then discuss our guidance for the third quarter and the full year 2021. Our business in the second quarter showed robust acceleration, and we are very pleased to announce a quarter of record revenues and industry-leading financial performance. Our revenues for Q2 were $305.3 million, representing a solid 67.1% year-over-year growth. On a sequential basis, our revenues for Q2 increased 13%, showing a very healthy trend. This quarter's revenue growth even exceeded our last quarter's record growth. Revenue growth in Q2 represents the strongest year-over-year revenue growth since we are a public company. At this moment, we also do not foresee any material incremental risks to our business going forward due to the COVID-19 pandemic. This is largely because we derive the majority of our revenues from the U.S., where the business environment is largely back to pre-COVID levels. During the initial days of the pandemic, we had communicated that the demand environment coming out of the pandemic will likely be stronger than the demand environment before the pandemic. Our results for Q2 and our robust pipeline make us believe that demand for our services is evolving in line with our expectations, and we strongly believe we can deliver robust and elevated levels of growth in the upcoming years. Turning now to profitability. Our adjusted gross profit for the period increased to $119.9 million, representing 39.3% adjusted gross margin, a 110 basis point improvement compared to the second quarter of 2020. Adjusted operating income for the quarter amounted to $49.4 million or 16.2% of revenues compared to $24.6 million or 13.5% of revenues for the second quarter of 2020. Adjusted operating margin improved 270 basis points year-over-year. The improving demand and pricing environment and SG&A efficiencies, driven by our increasing size, along with our increasing exposure to services that help us break revenue and employee growth linearity will continue to have a positive impact on our adjusted operating margin. At the same time, we will continue our ongoing investments in the company to capture the huge opportunity in front of us. Our IFRS effective tax rate for the quarter was 21.2%, below our guidance as taxes came in lower than our initial expectation in certain geographies. Adjusted net income for the second quarter of the year totaled $36.5 million, representing 12% adjusted net income margin compared to $17.5 million, representing 9.6% adjusted net income margin for the second quarter of 2020. Adjusted diluted EPS for the quarter was $0.88 based on 41.7 million average diluted shares for the quarter compared to $0.45 for the second quarter of 2020 based on 38.8 million average diluted shares for the quarter. Adjusted EPS for the quarter implies a solid 94.3% year-over-year growth, the strongest year-over-year growth since we're a public company and significantly above our record year-over-year revenue growth in the quarter. In addition, our average diluted shares for the quarter were higher than guidance due to our follow-on offering during the quarter. Moving on to the balance sheet. Our cash and cash equivalents and short-term investments as of June 30, 2021, amounted to $465 million. During Q2, we successfully raised $286.2 million in a follow-on transaction. I would like to thank our investors for their support on this transaction which was more than 5x oversubscribed. Currently, our credit facility is fully undrawn. We also continue to successfully execute on capital allocation strategy with integrations of recently acquired companies going as planned. Now let's talk about our business going forward. I would like to share with you our outlook for the Q3 and for the full year 2021. As discussed earlier, we are witnessing a very robust demand environment. In addition, we do not foresee any material incremental risks to our business going forward due to the COVID-19 pandemic. Based on current visibility, we expect Q3 2021 revenues to be at least $325 million, implying 56.8% year-over-year growth. At this point, we do not expect any FX impact to our third quarter revenues. Q3 adjusted operating margin is expected to be in the 15.5% to 17% range. And adjusted diluted EPS is expected to be at least $0.92, assuming 42.7 million average diluted shares outstanding for the quarter. Regarding the full year 2021, given the overall improvement in the market conditions, we are significantly increasing our revenue guidance this quarter and we now expect revenues to be at least $1.236 billion, representing 51.8% year-over-year growth. Our industry-leading growth guidance significantly exceeds end market growth rates. We currently assume no FX impact to our full year 2021 revenues. For 2021, we continue to expect our adjusted operating margin to be in the 15.5% to 17% range. At Globant, we continue to strongly invest in globalizing our operations, training programs and cutting-edge technologies and expanding our sales coverage. IFRS income tax rate is expected to be in the 23% to 25% range, both for Q3 2021 and for the full year 2021. Finally, we expect adjusted diluted EPS to be at least $3.58 for the full year 2021, representing a solid 57% year-over-year growth. Adjusted EPS guidance assumes for a 2 million average diluted shares outstanding for the full year 2021. Thank you very much.

Amit Singh, Head of Finance & Global Head of Investor Relations

Thank you, Juan. So the first question today comes from Tien-Tsin Huang from JPMorgan.

Tien-Tsin Huang, Analyst

Good results here. Just the Walmeric acquisition, I thought was really interesting. It looks like it's a platform or product acquisition, it's a little bit different than what you guys have done in the past. So I'm curious what attracted you to this? And could we see more of these kinds of deals going forward?

Martin Migoya, CEO

Thank you for the question. I find it very intriguing, especially since this is our first platform acquisition, which we can extend across all our studios and customers worldwide. It aligns with the decoupling strategy that Guibert mentioned in connection with Globant X. This new approach provides us with a fresh perspective on team building through nonlinear revenue streams that support our growth. It’s indeed a novel endeavor for us, and we are in the process of experimenting with it. While it's not a large company, it has the potential to create considerable synergies with our existing digital sales efforts across various studios and clients. It complements our strategy well, and I believe we will gain significant insights from incorporating this new member into our organization.

Tien-Tsin Huang, Analyst

It's great to hear. I have a quick follow-up, perhaps for Juan. I'm always curious about gross margin. It seems like attrition is stable and you are still able to hire. Do you have any thoughts on gross margin for the second half? It appears there are no surprises on the people side or supply side, and I just wanted to confirm that.

Juan Urthiague, CFO

Yes. Thank you, Tien-Tsin. So for the rest of the year, we continue to see very good traction in terms of talent acquisition, in terms of hiring. Attrition did come up a little bit, but we don't really expect any meaningful impact on our gross margin numbers. We continue to see gross margin in similar levels to where we were back in Q1 as well. So I would say that the 38% to 40% range remains valid even with maybe a market that is a little bit more challenging. But again, even though attrition came up a little bit, as you can see by the net additions in this quarter, we remain extremely competitive, and we actually have the largest net addition number ever in our history. So that's basically the way we are seeing it, Tien-Tsin.

Amit Singh, Head of Finance & Global Head of Investor Relations

Thank you, Tien-Tsin. All right. So the next question comes from the line of Ashwin Shirvaikar from Citi.

Ashwin Shirvaikar, Analyst

Great job and congratulations. I'd like to start by asking about the supply side. Are you making any modifications to your hiring or retention practices? What steps are you taking to further scale up your supply side? Any comments on that would be appreciated.

Patricia Pomies, Chief Operating Officer

Thank you for your question, Ashwin. We are taking a comprehensive approach to this. It's not just about a single strategy; we are developing a plan that encompasses the feedback from our Globers and the current competitive talent market. We are more diverse and global than ever, actively hiring and leveraging artificial intelligence in our interview processes. In terms of retention, we have implemented various benefits and plans that align with the different seniority levels and profiles of our Globers. We maintain close communication with our leaders to ensure ongoing dialogue with our team members. Overall, our hiring has been robust, as Juan noted, we achieved a record number of net additions this quarter. The outlook for our talent pipeline is quite positive, and we are focusing on deepening our presence in markets like India, Europe, the U.S., Canada, and Latin America.

Ashwin Shirvaikar, Analyst

Sure. I'll return to the question about Walmeric. I agree with Tien-Tsin; it's a fascinating acquisition. I have a two-part question. How will the go-to-market strategy function for a platform acquisition like this, considering its relatively small size? Is the goal to sell the platform itself or to offer related services that come from it? Also, is there a specific reason it was structured with the 80?

Martin Migoya, CEO

Good question, Ashwin. First, we need to understand what this platform does. It is linked to a specific phase in the digital sales process, which involves the transition from lead generation to actual sales conversion. There aren’t many platforms that focus on this aspect; most target the earlier stages. Our investment was driven by the opportunity to address this gap, helping our customers improve their conversion rates from leads to sales. This platform is central to our strategy, and I plan to utilize it across all projects launching new initiatives or products. The 80% stake was a decision made during negotiations with the entrepreneur, who aims to continue leveraging their successful position in the European market while we look to expand in other regions. We have both a put and a call option on that 80%, making it straightforward for us to acquire the remaining 20% in the future if we choose to. Thank you for the question and for being here today.

Amit Singh, Head of Finance & Global Head of Investor Relations

Thank you, Ashwin. As the next one in line, the next analyst, Bryan Bergin from Cowen.

Bryan Bergin, Analyst

I want to ask about the reorganization that you have formalized this year. So understanding it's still very recent, can you talk about how that's performed relative to your expectations? And any aspects of the regional management changes that have surprised you?

Martin Migoya, CEO

No, the reorganization aligned well with our long-term ideas, so there haven’t been any significant changes. Everyone who has been promoted is performing exceptionally well, and the regions are doing great. The growth numbers from each region are quite impressive, and we are very satisfied with our results and the quality of the team we assembled. After 28 quarters as CEO of a public company, I believe we are just at the start of our journey and what we can achieve as a management team. This is something I am very pleased with, and the team shares that sentiment, which is crucial. We have formed a strong and unique organization with our 20,000 employees, ready to grow much faster than before, as evidenced by this quarter's solid foundation.

Bryan Bergin, Analyst

Okay. Makes sense. And then just a follow-up on supply. Can you talk about what the organic headcount growth in the quarter, Juan? Also, how is the mix of regions looking as you end Q2? And can you talk about where you're going to push most aggressively in the second half on headcount addition?

Juan Urthiague, CFO

Sure. Thank you, Bryan, for the question. So in terms of the net additions during Q2, I think only a little less than 100 people came from acquisitions. So we're talking primarily a purely organic number out of the 2,100 people that joined the company. In terms of mix, I think what you will see going forward is incremental employees, incremental Globers out of Mexico, out of Brazil, out of India. And then the rest of the countries and regions will follow in line. We may also have some additional growth in Eastern Europe.

Amit Singh, Head of Finance & Global Head of Investor Relations

All right. Thank you very much, Bryan. So the next question comes from Maggie Nolan from William Blair.

Maggie Nolan, Analyst

Can you hear me okay?

Martin Migoya, CEO

Yes. Yes.

Patricia Pomies, Chief Operating Officer

Yes.

Maggie Nolan, Analyst

So I wanted to kind of build up on some previous questions. When you think about some of those key delivery geographies, are you seeing any differences in the level of wage inflation in each of those, like Argentina versus India versus Colombia?

Juan Urthiague, CFO

Yes, thank you, Maggie. Different countries experience varying salary increases due to local currency fluctuations and inflation. Typically, Argentina shows a higher salary increase in local currency. However, when measured in U.S. dollars, it balances out for the company. Overall, we anticipate a salary increase of about 5% to 6% for the full year in dollar terms across the company. This is slightly higher than in the past, particularly when compared to last year, but we view it as manageable. We can offset these increases through pricing and utilization, which is why we expect our gross margins to remain consistent with previous results. We do not anticipate any significant impact on our financials, and we continue to maintain the same range we have previously communicated.

Maggie Nolan, Analyst

Okay. And then you've brought up Augmented Coding in the past, and you talked about it again today. Are your clients asking you to build similar kinds of accelerants for their internal organizations? And if so, do you view the advancement of technology like this as additive to your addressable market?

Martin Migoya, CEO

Thank you for the question, Maggie. We are definitely implementing AI not only for our own use but also for our clients across various projects. In some instances, we have found that it makes sense to develop technology such as Augmented Coding, which we believe can benefit many organizations, including our current and future clients. For this reason, we have put together a strong team led by Tiburcio, and we expect to keep expanding. To answer your question, yes, we are applying Augmented Coding to nearly all aspects of our work. Interestingly, we began considering AI in everything we do five years ago, and today it is a significant part of many processes. As Patricia mentioned, we utilize it for conducting interviews, forming teams, improving coding, enhancing testing, designing better, and sharing knowledge. Therefore, we anticipate a broad range of solutions that will not only benefit us but also our clients.

Amit Singh, Head of Finance & Global Head of Investor Relations

Thank you very much, Maggie. So the next question comes from Arturo Langa from Itau.

Arturo Langa, Analyst

And also, congratulations on the results, very impressive. I think my first question is I wanted to ask in terms of new logos, how has that evolved? And are you seeing a big increase in new companies that you're serving? And I think just following up on Maggie's question, this is also for Gui. For example, we've seen recently a company like Microsoft releasing Copilot on GitHub, which is this Augmented Coding platform as well. It's interesting to see that you're doing something in the same space. And maybe just if you could give us a broad view of how big that opportunity is there. It would be interesting to have your view on that, that would be helpful.

Juan Urthiague, CFO

Sorry, Arturo, can you repeat a little bit the first part of the question?

Guibert Englebienne, President of Globant X

Yes, the first question on new logos.

Arturo Langa, Analyst

It's new logos, yes.

Juan Urthiague, CFO

Yes. In terms of total customers, the number has increased. However, as we always emphasize, our primary focus is on customers with significant potential to become multimillion-dollar accounts. For instance, we now have 9 accounts exceeding $20 million, up from 7 a year ago. Additionally, we have 18 accounts surpassing $10 million, compared to 13 last year. This indicates that our wallet share is growing. As for specific accounts, some were mentioned during the call. We continue to attract new customers, and our brand has strengthened significantly in recent times. We're observing strong growth in three regions: EMEA, LatAm, and the U.S., where we're consistently adding new logos.

Martin Migoya, CEO

Arturo, in terms of Augmented Coding and GitHub Copilot, there is significant movement in this area, and we believe that Copilot demonstrates we are on the right path. We began working on this several years ago and have obtained a related patent. As software continues to evolve, we anticipate an increase in tools designed to accelerate the development process. We believe that utilizing Augmented Coding will enable developers to create software that is safer and cleaner, and they will be able to do it in substantially less time than before. The main distinction we see between Copilot and Augmented Coding is our emphasis on assembling and generating value among a team of developers. Software development is not solely about individual enhancement; it involves collaboration within a team that is already generating code and seeking synergies among all developers.

Diego Tartara, Chief Technology Officer

But it's a huge validation for us. I mean, Copilot is a huge validation.

Martin Migoya, CEO

And we announced it. And we started working a long time ago. But we announced it a year ago, before Copilot. So we have some experience.

Amit Singh, Head of Finance & Global Head of Investor Relations

Perfect. Thank you very much, Arturo. So the next question comes from Moshe Katri from Wedbush.

Moshe Katri, Analyst

And congrats on very strong numbers. So the first one is for Juan. Can you remind us what was organic growth for the quarter? And then what's embedded in terms of organic growth for calendar '21? And then the second one is a follow-up for Martin. Clearly, organic growth has been accelerating. Some of it is driven by the pandemic and the further adoption of digital. What are we doing to sustain this growth beyond '21 and '22 in terms of your product mix, your ecosystem, in terms of what you're doing to market these offerings or whatever you're doing to your end markets, i.e., your enterprise clients?

Juan Urthiague, CFO

Thank you, Moshe. So out of the 67% year-over-year growth in Q2, we estimate organic growth to be around 48%. And so very, very solid organic growth during Q2. For Q3, out of the 57% year-over-year growth, we estimate organic growth to be around 43%. And for the full year number, which is $1.236 billion, 52% year-over-year growth. There, it becomes a little bit more difficult to basically differentiate the two, but we estimate organic growth to be around 38% for the year.

Martin Migoya, CEO

Yes, there has been significant acceleration compared to earlier quarters. In response to your second question, we're actively pursuing a range of initiatives. Firstly, we're focused on platforms and accelerating developments such as Augmented Coding into StarMeUp and others, including Walmeric which we recently acquired. Platforms are essential for us to uphold a unique value proposition for our customers. Additionally, our studios will continue to evolve and adapt. We're considering the launch of industry reinvention studios aimed at reinventing specific industries. Our studios are dynamic, growing and changing as we adapt to various situations and market opportunities. The pandemic has accelerated all aspects of the organization and demand, and I don't anticipate a slowdown in the near future. While I can't predict what lies ahead, I currently see strong demand and a healthy pipeline growing at unprecedented levels. Overall, the situation for Globant appears quite interesting.

Juan Urthiague, CFO

In fact, Moshe, we used to say that our expectation was typically 20% organic plus acquisitions. At this point, we do see next year at this point already at 23%, 24% organic, plus maybe about 1% from the recent deals that we did. And of course, we will update as the year goes by and we get closer to year-end.

Amit Singh, Head of Finance & Global Head of Investor Relations

Thank you very much, Moshe. So the next question comes from Maria Azevedo from Santander.

Maria Azevedo, Analyst

Congratulations on the super strong results. So it's very clear that demand is not an issue here. But can you give us some color on the pricing and the competitive environment in your key markets and studios? And I think my follow-up question would be on the margin side. If you see any specific industry vertical or geography helping this margin improvement? Or is it happening all across the board?

Juan Urthiague, CFO

I want to start with the second part of the...

Martin Migoya, CEO

No, the first.

Juan Urthiague, CFO

I want to start with the first part. Regarding hiring and supply, we have a compelling employee value proposition. We continue to expand our talent development centers globally. We have already established centers in Uruguay and Colombia, and we plan to open more in other cities within our current markets, while also exploring new opportunities for next year. There is still significant potential for growth in existing locations and countries. Additionally, we are considering other development centers for further expansion. To address the first part of your question, as Patricia mentioned earlier, we view our company from various perspectives. We need to foster the best culture to attract talent, offer competitive compensation and benefits, and provide engaging projects and advanced technologies. Those who want to join and work for Globant need to see that they can develop their careers, possibly in different countries or industries, and have the chance to switch to new technologies. When it comes to attracting and retaining talent, we must consider all these factors, as a one-size-fits-all approach does not apply. We are working with people, each with their unique motivations.

Martin Migoya, CEO

On the industry side, when you look at margins in the industry, at the end of the day, there are not really significant differences between one industry and another. You do have sometimes one customer, even within one industry, that may have a higher margin than another. It depends on the technology, it depends on the mix of locations. It depends on the type of projects that you are dealing with. So I don't think that you need to think about different industries generating a different mix in terms of margins. That's not necessarily the case.

Patricia Pomies, Chief Operating Officer

I want to highlight something important. A few quarters ago, we announced the creation of a Globant university during the pandemic. Today, I can report that over 90% of our employees have participated in that university. We have more than 2,700 resources available to enhance and update the skills of our talent. Adapting to different industries and focusing on skill development is crucial at this time of year. The remarkable results in hiring and net additions this quarter are due not only to our strong recruitment engine but also to the appeal of our culture. We operate in an agile manner and embrace a mixed culture. As Juan mentioned earlier, we take a comprehensive approach to this matter as a team, with all the company’s leaders collaborating on how to improve and connect with our employees and their families. This is very important to us. We are committed to ensuring the quality of our delivery while managing all these aspects effectively.

Amit Singh, Head of Finance & Global Head of Investor Relations

Thank you very much, Maria. The next question is from Steve Enders from KeyBanc.

Steven Enders, Analyst

I hope everyone is staying safe and healthy. I just wanted to check on the 2 new studios that you released here in the past couple of months since we last talked. I guess how are you thinking about utilizing these across your customer base and kind of the big points of focus for them moving forward?

Martin Migoya, CEO

No, I didn't get the question. Sorry.

Juan Urthiague, CFO

We're going to use the new studios. We think we can use them in all our customers.

Martin Migoya, CEO

Yes, every new studio is being approached in a broad manner. Each time we establish a new studio, we consider it a solution that can serve nearly every industry in our portfolio, and we are also exploring the creation of studios to reinvent specific industries. These will draw from our original studios and the experience we've developed with our customers over the years. I find this quite remarkable. At Globant, we have never believed that a siloed approach with one studio for one industry and another studio for a different industry is effective. This is because having people who are only knowledgeable about one industry limits the capacity to create innovative solutions by incorporating ideas from other sectors. We always aim to concentrate on our studios. This doesn't imply that we lack awareness of various industries; in fact, we possess substantial knowledge regarding them and how to innovate within those sectors. Every new studio we establish, such as the digital sales studio, digital collection studio, blockchain studio, and digital lending studio, will span across multiple industries. Regarding the other studios we are in the process of creating, while they haven't been launched yet, we are actively considering their development. The goal is to transform the industries we engage with, much like we are doing at Globant to reshape the professional services sector.

Steven Enders, Analyst

That's great to hear. I just want to clarify that you mentioned in the script that you're considering increasing sales investments in the second half of the year. I'm curious about how and in what areas you plan to allocate these investments.

Martin Migoya, CEO

Yes. We will mainly focus our sales investments on expanding our team and enhancing our connections with customers. As we emerge from the pandemic, we face a significant challenge in maintaining those connections and investing in our relationships. Throughout the pandemic, we relied on our existing relationships, and now our team must continue to foster those connections. This effort warrants investment. We will not decrease our current SG&A expenses, but rather redirect our investments to different areas or profiles as we progress. Additionally, as our company grows, we need to adapt the profiles of our customer-facing team, potentially by bringing in more experienced individuals who can offer higher-level solutions. This will be our overarching strategy for sales moving forward.

Juan Urthiague, CFO

But as you can see from the guidance, that doesn't imply an impact at the operating margin level. With all the growth that we are delivering in terms of revenue growth and keeping our gross margins in line, there is room to do all those investments as well as expand in the different geographies where we are and in some geographies where we want to be.

Amit Singh, Head of Finance & Global Head of Investor Relations

Thanks, Steve. The next question comes from the line of Benjamin Wang. Benjamin works with Surinder at Jefferies.

Unidentified Analyst, Analyst

Congratulations on the quarter. I just want to ask a question on the sort of revenue visibility that you guys might have for the next fiscal year as well. And in terms of, I guess, specific industry verticals, are you seeing some of the, I guess, hospitality trends kind of coming back?

Juan Urthiague, CFO

Thank you for the question. Regarding visibility, we are in a market where nearly every company in every industry has chosen to invest in digital transformation. This certainly presents a fantastic opportunity for companies like Globant that are well-positioned in this space. Our pipeline has been growing significantly, and the contracts we have signed to date enhance our visibility compared to previous years. That's why, as of August, we were able to slightly increase next year's initial guidance that we provided. I would say that visibility has improved, which is also linked to the additional investments we are observing across various industries. For your question on travel, I will let Martin address that.

Martin Migoya, CEO

Yes. Look, in terms of the industries, I mean we have seen massive growth in consumer, retail, and manufacturing, on the financial space, on media, and entertainment, on professional services space, I mean all those sectors have been growing very, very fast. Talking about travel and hospitality is like the latest thing that will be reactivated after the pandemic. So we have seen very modest growth over there. And I'm expecting still those things to kick in as we are having pretty clear signals from that sector that demand is catching up very, very fast, even more in this summer in Europe and the U.S. And I expect that to recover very fast in the next coming months, but it still hasn't happened. So it still is, by far, the largest and most affected industry after the pandemic happened.

Juan Urthiague, CFO

There is an opportunity, of course, in that industry. Once it comes back, that should be some tailwind for Globant.

Amit Singh, Head of Finance & Global Head of Investor Relations

Thank you very much, Benjamin. The next question comes from Vitor, who works alongside Diego at Goldman Sachs.

Vitor Tomita, Analyst

Good evening everyone and congratulations on the results and the new guidance. My first question is a follow-up on travel and hospitality. How does that industry influence the guidance? You mentioned that it has not started recovering yet. If it recovers quicker than anticipated, could we see some positive impact on this year's guidance or additional revenue growth next year? Please continue.

Juan Urthiague, CFO

Yes. No. Sorry. I mean, for this year, we are already in August, so we are not assuming a meaningful recovery of that industry for the rest of the year. In the guidance, we are not considering any significant recovery on that industry, I mean, at least for the first part of next year.

Vitor Tomita, Analyst

Understood. And also as a follow-up on Walmeric, Could you give us some additional color on how it has been performing before the acquisition? And also on how easy it is to adapt its software to different geographies in terms of supported channels and any other local factors that could be an issue here?

Martin Migoya, CEO

Sure. The performance of the company before we acquired was pretty impressive, and that was one of the drivers and the rationale of the acquisition. And in terms of the geographic adaptation that you're suggesting, it's something that is much more portable than what we expected at the very beginning. And the changes that we need from region to region are very small, very minor, or even nothing in some of the parts of the application. So not a concern at all.

Amit Singh, Head of Finance & Global Head of Investor Relations

All right. Thank you very much, Vitor. And so the last question for today comes from the line of James Michael, and James Michael works alongside Arvind Ramnani at Piper Sandler. Please go ahead.

James Michael, Analyst

I think we might have some audio issues there. So I think that will be all for the Q&A section today. So thank you all for joining. I will now pass the mic to Martin to provide the closing comments. Martin, please go ahead.

Martin Migoya, CEO

Thank you very much, Amit. Well, thank you, everyone, for participating. I would like to thank in a very special way all our investors, to all our analysts, to all of you that are supporting us in every aspect and everything that we do, to all our management team that is doing a terrific job, and we'll be doing a terrific job. And I'm extremely happy to share these results with you. We are very excited about the future of the company, about the reinvention that we can do for our industry and the reinvention that we can do for our customers. So thank you very much. Looking forward to see you in the next quarter. Thank you. Bye, bye.