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GLOBANT SA  (NYSE:GLOB)
Q1 2019 Earnings Call
May. 09, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Globant Q1 2019 Earnings Conference Call. (Operator Instructions). At this time and it's my been a pleasure to turn the floor to your host for today, Ms. Paula Conde. Ma'am, the floor is yours.

Paula Conde -- Investor Relations Officer

Thank you, operator, and thanks everyone for joining us today on our call to review our 2019 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, Chief Executive Officer; Juan Urthiague, Chief Financial Officer.

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 announcing this quarter results.

I'd like now to turn the call over to Martin Migoya, our CEO.

Martin Migoya -- Chief Executive Officer

Thank you, Paula. Good afternoon, everybody, and thanks for joining us today. I'm very happy to share with you our business and financial performance for the three months ended March 31st, 2019. Later in the call, Juan will share our outlook for Q2 and the rest of 2019.

We have another great quarter and a solid start of the year. Our Q1 revenue amounted to a record of $146.2 million, which represented a 22.1% year-over-year growth. At the same time, adjusted EPS for this quarter was $0.50, growing more than 30% over the same period last year. We have consistently managed to keep growing while improving our operating and net margin profile. Later during the call, Juan will share more details on our financial performance and our guidance for the rest of the year.

Now I'd like to go over some of our latest news as we see the market evolve. We continue to experience strong demand coming from organizations looking to transform their businesses. Today it is not just a matter of rethinking how companies connect with their users. It is also about reshaping organizations, including their internal processes, departments, and overall vision. A profound cultural change in the company can help improve the business model with renewed digital and cognitive user experiences.

At Globant, we're extremely well positioned as a leader to deliver these transformations as we are organized around a new paradigm. Our podular structure pushes innovation, entrepreneurship, and agility to drive efficiency to our customers during their digital and cognitive evolution. Let me share with you more insights on why we continue to differentiate from traditional IT players.

First, we have mastered a unique way of organizing our teams, known as the Agile Pod model. Opposed to traditional structures, Globant podular module eliminates the need of the command and control methods. It also provides teams with full independence in customer interaction. It is a more autonomous structure that brings customer centricity, closeness to the front line, fast decision making, and elimination of bureaucracy.

Second, we know that in order to be successful, transformations need to impact every single dimension of an organization. It is not enough for companies to boost their consumer experiences. They also need to transform themselves internally. With our organizational fitness lifecycle, we can help companies go through a profound cultural and then build, evolve, and distribute their digital and cognitive initiatives.

Lastly, our expertise is organized around our studio model. It is based on putting emphasis first on technology and then on industry knowledge. Each studio represents a deep pocket of expertise in the latest technologies. This technical focus can connect better with consumers and employees even when redefining an internal process. We have profound industry knowledge that is also fundamental. However, our studio model brings the disruptive approach that our customers are looking for.

To sustain this unique approach, we also provide our customer with valuable insights to help them stay relevant. Understanding the changes that happen around us is key to remain successful in front of new business opportunities. During the past month, these are some of the initiatives that we launched. Our experts have put together a set of trends that will reshape our world in the next year and beyond. This Annual Report dives into different immersion technologies, including the IoT grid; the artificial intelligence engine, AI engine; cloud; intelligent automation; quantum computing; and 5G. To read more about these, visit trends.globant.com.

We complement that report with a special edition about the augmented organization. As we dive into the cognitive revolution, we want to share how organizations can apply artificial intelligence to different functions within their business. The goal is to enhance their structures, internal experiences, and processes. In the report, we show how companies can augment the capacity of employees by integrating AI capabilities into daily tasks. To read the trends report on augmented omitted organizations, visit augmented.globant.com.

On top of these, today we are hosting the first 2019 edition of CONVERGE in Colombia. Speakers from different countries are getting together to discuss trends such as AI, robotics, digital transformation, and more. We expect to receive more than 500 attendees to explore immersion technologies and new ways of doing business. After Colombia, we'll take our insignia event to other countries. For more information about the event, visit converge.globant.com.

As we continue to grow, we're also deepening our focus with our partners. We're glad to announce the availability of our Signal OTT platform on Microsoft Azure. This will help media houses and content publishers reach and engage users and drive new revenue streams through delightful experiences. Signal simplifies the OTT workflow and allows companies to focus on their content and business vision.

In regard to our business, we're seeing sustained growth as we added new logos from a wide variety of industries, including companies like Globalia, Encontre, Wargaming [ph] and Greensill and leading organizations from media and entertainment and finance among other sectors. Let me also share a few examples about what we're doing with them. Globant has partnered with Greensill, the leading non-bank provider for working capital finance to companies globally, for a multi-year digital transformation deal.

We started working with the innovation department of CCU in January 2019. The first endeavor was a discovery process to help CCU improve their market share in the returnable space. We ran a two-month immersive and co-creative process where we tested six ideas on the market. As a result of that, in May, we will start the further development of one of those ideas.

Globant partnered up with a leading reporting and analytics solution provider for the financial and services industry. The goal was to enhance the customer's transaction, analysis, and data controlling capabilities by adding AI and machine learning power to their solution. The augmented functionality becomes smarter as it continues to reconcile transactions and solve reporting exceptions. At the same time a human-in-the-loop capability allows the systems to continue to learn in a supervise fashion.

To support the expansion of our business, we continue to increase our presence within different regions. During Q1, we have especially reinforced our European operations with the opening of new offices in Paris, France. France complements our existing centers in Spain and England. We believe this operation will be key to address the growing demand coming from local organizations.

On top of that, a few weeks ago we inaugurated our development center in Cluj-Napoca, Romania. With these new openings, we continue to expand our Globant talent base as we bring in some of the best local professionals. Aligned to this vision, we have just announced a plan to offer 500 scholarships in LatAm to train young people in IT skills with a special focus on women. We want to give more opportunities for women to access the IT industry with the goal of increasing diversity in a highly demanded sector. We will be working with Acamica to train the candidates in key technologies. We expect to continue working on these types of initiatives to expand our talent base and promote the role of minorities in leading positions within the technology industry. For more information about this program, visit scholarship.globant.com. Lastly, let me remark that our pipeline and backlog remain strong, and we feel very confident about our ability to keep delivering sustainable growth in the future.

With that, I'll turn the call over to Juan Urthuague, our CFO for further detailed financial review on the first quarter 2019 and also to provide guidance for Q2 2019 and for the full year 2019. Juan, please. Thank you very much.

Juan Urthiague -- Chief Financial Officer

Thanks, Martin, and good afternoon, everyone. I will spend a few minutes taking you through our first quarter 2019 results, then I will share our outlook for Q2 and the rest of the year. Let me start by saying that we are very pleased with our overall results for the first quarter.

Revenues for Q1 amounted to $146.2 million, implying a solid 22.1% year-over-year growth. Given the currency fluctuations over the last 12 months, I would also like to mention that our revenues in constant currencies for Q1 2019 increased only 5.5% over the same period last year. This is primarily explained by the Argentinean peso and euro. Disney was once again our largest customer for the quarter coming from an outstanding 2018 and with healthy prospects for 2019.

During this quarter we experienced accelerated demand among many of our 50 Squared accounts and particularly strong performance among non-top 10 customers. Revenues for customers other than our top 10 increased 30.2% over the first quarter of 2018. From a vertical standpoint, media and entertainment, banks, financial services and insurance, and consumer, retail, and manufacturing industries continued to be key contributors to our growth and building up robust pipelines. Looking into regions, during Q1 2019, Europe outpaced other geographies in terms of growth, while Latin America also increased its share. Several customers are growing nicely, and we have gained new accounts coming from the Avanxo acquisition.

On a sequential basis, revenues increased 4.3% during Q1 2019 over the last quarter of 2018. As a result of our diversification of operations into multiple regions, we have been able to gradually reduce the impact of seasonality in terms of revenues. Our customer concentration numbers for Q1 2019 remain fairly consistent with the past quarters, with our top one, top five, and top 10 accounts representing 10.5%, 28.9%, and 40.8% of our revenues compared to 11.1%, 31.3%, and 44.5% of revenues, respectively, for the first quarter of 2018. Our vertical diversification continues to be balanced across the different industries with media and entertainment and be BFSI leading the pack, accounting for 25% and 22.8% of revenues, respectively.

During the last 12 months ended March 31st, 2019, we've rendered services to 472 customers compared to 348 for the same period last year. The significant increase in the total number of customers served is mainly driven by the new accounts coming from the Avanxo acquisition, the majority of which currently are less than $100,000 per year.

On the other hand during the last 12 months ended March 31st, 2019, we have 91 customers accounting for more than $1 million of annual revenues compared to 89 one year ago, and five accounts over $20 million in annual revenues compared to three accounts for the same period last year, proving our ability to grow the size of accounts aligned with our 50 Squared strategy.

During the first quarter of 2019, 72.3% of our revenues were in North America, the US as our top country; 17% in Latin America; and others, Argentina being the top country; and 10.7% were in Europe, Spain being the top country. During the first quarter of 2019, 83.3% of our revenues were denominated in US dollars, minimizing impact on our top line from currency fluctuations.

Turning now to profitability. Our adjusted gross profit for the period increased to $60.1 million, 41.1% adjusted gross margin, compared to $46.8 million or 39.1% adjusted gross margin in the first quarter of 2018. Our strategy of diversifying our talent base across the regions, combined with some tailwinds from Latin America and currencies, were key drivers to the margin expansion. We finished the quarter with 9,259 Globers, 8,609 of which are IT professionals. During Q1 2019, we had a significant increase in terms of net additions, with a total headcount increase of 875 employees. Attrition for the past 12 months was 16% compared to 19.5% one year ago, showing a significant improvement year-over-year and positively impacted by the large headcount increase of the last quarter. We currently see a more normalized number around 17%. Adjusted SG&A decreased 70 basis points compared to Q1 2018, accounting for 20.1% 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 expand our sales coverage in the US and Europe.

We have been able to dilute SG&A despite the new tax on export of services in Argentina included within this expense line. As a result, our adjusted operating income for the quarter amounted to $24.7 million or 16.9% of revenues compared to $17.6 million or 14.7% for the first quarter of 2018. Higher-than-expected gross margin expansion combined with the SG&A dilution were the two main drivers for the significant operating margin expansion.

Financial income and expense net amounted to a loss of $2.8 million. This net result is mainly composed of FX losses from the exposure of monetary assets and liabilities in local currencies and interest related to lease contracts according to IFRS 16. Our effective income tax rate for the quarter was 22.1%, in line with the average effective income tax rate expected for the full year.

Adjusted net income for the first quarter of the year totaled $18.5 million, 12.7%, adjusted net income margin, compared to 11.6% for the first quarter of 2018. Adjusted diluted EPS for the quarter was $0.50 based on 37.3 million average weighted shares for the quarter, compared to $0.38 for the first quarter of 2018. During this quarter EPS grew faster than revenues.

Moving to the balance sheet, our cash and investments as of March 31st, 2019 amounted to $46.7 million compared to $86.2 million as of December 31st, 2018. This decrease in cash was mainly explained by the acquisition of Avanxo. Our balance sheet remained strong with current assets of $204 million, accounting for 39.6% of the company's total assets.

To wrap up, let me provide you with our guidance for Q2 2019 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 are very satisfied with the progress of our 50 Squared account strategy. Based on current visibility, we expect Q2 2019 revenues to be between $156 million and $158 million, implying a 22.8% year-over-year growth at the midpoint of the range. Adjusted EPS is expected to be between $0.50 and $0.54, assuming $37.5 million average diluted shares outstanding for the quarter.

Regarding the full year 2019 we are increasing our revenue guidance to a new range of $638 million and $646 million, an implied 22.9% year-over-year growth at the midpoint of the range. In terms of adjusted EPS, we are now expecting a range of $2.13 to $2.21 assuming 37.5 million average diluted shares outstanding for the full year.

Thanks everyone for participating in the call and for your coverage and support. Operator, can you please queue questions?

Questions and Answers:

Operator

Thank you. The floor is now open for questions. (Operator Instructions) We'll go first to Tien-Tsin Huang at JPMorgan.

Tien-Tsin Huang -- J.P. Morgan Securities, LLC -- Analyst

I thank, nice growth obviously want to ask about, how broad based some of this growth is that I know you mentioned (inaudible) you mentioned top 10 non-top 10 growing faster. I'm curious and how broad base that is, is it a handful of accounts or more inside of your top 10 to 20 or 20 to 30 accounts. Any kind of additional color would be great.

Juan Urthiague -- Chief Financial Officer

Yes. Hello, Tien-Tsin. How are you doing?

Tien-Tsin Huang -- J.P. Morgan Securities, LLC -- Analyst

Good.

Martin Migoya -- Chief Executive Officer

Hey, Tien-Tsin. Martin here.

Tien-Tsin Huang -- J.P. Morgan Securities, LLC -- Analyst

Hey, Martin.

Juan Urthiague -- Chief Financial Officer

So, yeah, I mean, as you pointed out, the revenue of customers other than top 10 exceeded. It grew at 30% year-over-year. We don't typically report that the other ranges, but if we were to look at the 11 to 20, for example, the revenue growth there was over 45%. So what you're actually seeing is just part of the 50 Squared strategy come into place. The top 20, 30 accounts that are basically leading our growth as a company.

Tien-Tsin Huang -- J.P. Morgan Securities, LLC -- Analyst

That's great. Good to know. Then I'll ask on the -- one margin question maybe. Just curious you're managing your expenses and getting the G&A leverage. You talked about the (inaudible) the tax. But I'm curious, are you sacrificing your ability to grow in any way in order to preserve margin. I'm curious how you're balancing the margin versus your potential to grow.

Juan Urthiague -- Chief Financial Officer

Yeah, it's a very good question. We have been getting scale in the last few years. We have been building a company and building infrastructure and staff areas in such a way that we can basically take on a bigger organization and we can make it work seamlessly. And typically what we do is we continue investing heavily in sales and marketing which is kind of where we like to have more coverage and we continue investing. And we try to generate some savings in the rest of the staff areas where the scale and also the fact that we are delivering on our 50 Squared strategy help us gain dilution. Keep in mind that when you sell to 40, 50 accounts, most of your revenues for all the staff areas it's a lot easier to support that company than when you are serving a much higher number of customers.

So we think that a big part of the dilution that we were able to gain in the last few years is actually a consequence of the implementation of the 50 Squared strategy. So the answer is we continue to invest in sales, we continue to invest in coverage, but we are being able to offset these types of results through savings in finance, savings in legal, savings in other staff areas where we have all the systems in place, we have an infrastructure that can support the larger organization.

Tien-Tsin Huang -- J.P. Morgan Securities, LLC -- Analyst

Okay. That was great. So maybe one more quick one. Can you give us a little bit more color on -- more guidance on what margin would look like in the second quarter or the second half of the year given what you just said there, plus the currency volatility?

Juan Urthiague -- Chief Financial Officer

Yeah, yeah, for us -- for the margin -- for gross margin, adjusted gross margin, we remain confident that we should be able to close the year around -- somewhere around 40%. We always guide 38% to 40% on average. That's kind of our long-term view, but we think that we should be close to the higher end of the range. And then in terms of SG&A, we think that we should be able to close the year with an SG&A of around -- basically gaining between 10 and 20 basis points, so maybe closing the year at 19.8% to 20%.

Tien-Tsin Huang -- J.P. Morgan Securities, LLC -- Analyst

Excellent. Thank you so much.

Juan Urthiague -- Chief Financial Officer

Thank you, Tien-Tsin.

Martin Migoya -- Chief Executive Officer

Thank you, Tien-Tsin.

Operator

We'll move next to Ashwin Shirvaikar at Citi.

Ashwin V. Shirvaikar -- Citigroup Global Markets, Inc. -- Analyst

Thanks. Hi Martin. Hi, Juan. Hi, Paula.

Martin Migoya -- Chief Executive Officer

Hi, how are you?

Ashwin V. Shirvaikar -- Citigroup Global Markets, Inc. -- Analyst

Good, good, thanks. Good results here.

Paula Conde -- Investor Relations Officer

Hi, Ashwin.

Ashwin V. Shirvaikar -- Citigroup Global Markets, Inc. -- Analyst

Hi. So I guess my question first is to talk about -- if you could talk about North America versus non-North America growth, obviously growth outside North America extremely healthy. So maybe you can also break out the impact of Avanxo.

Martin Migoya -- Chief Executive Officer

Yes. Look, I mean, North America has pretty healthy growth. Some of our largest accounts like Disney, for example, has been flat across the last quarter and a half approximately, and the reason why is that they're making the acquisition and the reorganization and things like that. I see the forecast -- as always sometimes we take a break with Disney and sometimes we take a break with big a account and the other comes to -- the other accounts come to expand the -- expand the volume of business in general for Globant.

So at Disney, the reorganization is happening and then we expect -- and we are in a great position to cut, I would say, many of the new business that will become connected to this connection between Fox and Disney. So we feel pretty confident about that growth in the next quarters. And then the rest of the region, Europe I think is pretty interesting how it performed compared to last year. So I think in Europe you see a huge effort of business development that we have been investing as we have been saying during the last earnings calls. Then in Latin America Avanxo, the breakup, Juan.

Juan Urthiague -- Chief Financial Officer

Yeah. So (inaudible) in Latin America what we're seeing is growth both from the existing business and also from Avanxo that is primarily focused on Latin America. The integration is working extremely well, much faster than expected. We are actually already integrating all the staff areas. We are doing a lot of cross-selling, so Avanxo is selling to Globant customers and Globant is selling into Avanxo customers. So we are very confident that that operation has been extremely successful for us, and it really complements our service offering and we are seeing the benefits coming from that.

Martin Migoya -- Chief Executive Officer

Yeah. Pretty much every single customer, from our big customers to much smaller customers are seeing and needing this cloud practice and Salesforce practice that Avanxo has. So the integration and the synergies have been very, very fast, winning new deals, now making new deals within accounts that we're already in with these new capabilities. So extremely happy with that.

Ashwin V. Shirvaikar -- Citigroup Global Markets, Inc. -- Analyst

Great. And then the second question, it was very interesting to hear the opening of the office in France, which I'm thinking maybe related to the fact that you're also opening nearshore supply capabilities in Cluj. Is that -- I mean should we look for more aggressive European expansion as you build out the delivery capabilities there?

Martin Migoya -- Chief Executive Officer

I mean, the connection between Cluj and -- Cluj-Napoca and France is not that correct. I think it's more -- it's more appropriate to talk about the connection between Cluj and our expansion in the whole Europe. I think that is giving us like a very nice platform to get talent and to develop our studios. The team that we -- that we put together there was really -- and it's really amazing. So we expect to grow it very, very fast. But yes, it's connected to the Europe strategy. I mean for years we have been trying to enhance our Europe operations. And when we try to concentrate on something in general, it happens. And I think Europe is not an exception to that idea. And so yes, it is connected. You can expect a strong growth from Europe as we have been delivering in the past quarters.

But we have had accounts in Europe, too, that were very, very fast and very, very aggressive on growth and now we're going slower and then we have others that are growing now -- big deals in the UK that are growing much faster. So it's always like a game of who's growing at this moment to push your growth forward. So I feel very confident with Europe as I feel very confident with the US and Latin America. I think -- I think in general, as I said in my -- in my script, in general I feel that the business momentum is very, very good and I feel that the capabilities that we have are really well connected to the -- to the things that our customers are requiring.

Ashwin V. Shirvaikar -- Citigroup Global Markets, Inc. -- Analyst

Understood, understood. If I can ask one last question, the headcount growth on a year-over-year basis very strong. And should we consider that as a indicator of forward revenue growth as well?

Juan Urthiague -- Chief Financial Officer

Yeah. Yes, Ashwin. This is Juan here. How are you? So, yeah, headcount grew quite a lot in the last quarter and also in the last few quarters. Typically, as we have been able to increase our margins, of course helped a little bit by the depreciation of some of the currencies, especially in Latin America, we decided to increase headcount for basically two reasons: one, because we need to train more and more people to be ready for projects that we have in the pipeline; and two, we can pay for that right now without impacting our margins. So basically, what we decided was to invest some of the marginal or the regional margin that we could -- that we have, especially since the beginning of Q3, into training more people. Of course, I mean we hire people in anticipation of demand, but we want to make sure that we have a lot of -- enough people training and ready to this task in some of the projects that we have in the pipeline.

Ashwin V. Shirvaikar -- Citigroup Global Markets, Inc. -- Analyst

Understood. Thank you very much. Congratulations.

Juan Urthiague -- Chief Financial Officer

Thank you, Ashwin.

Operator

We'll go next to Maggie Nolan with William Blair.

Margaret N. Nolan -- William Blair & Company LLC -- Analyst

Hi, guys. I wanted to follow up on some of that commentary around Europe. Really good to hear that. But I wanted to kind of think about that in the context of guidance. Is there really some optimism around Europe baked into full year guidance or is there any conservatism baked in? We did hear some of your peers during this earning cycle talk about some pullback in spending related to Brexit. So just wanted to hear how you're thinking about that for the full year.

Martin Migoya -- Chief Executive Officer

Look -- hello, Maggie, how are you? So for us Europe, we have been talking for several quarters about investments in Europe and the opportunity that we have there. So we are starting from a small base. I mean we did about -- I have the numbers here. We did about $15 million in revenues in Europe but still a small amount of money, and actually Spain is driving the majority of that growth. So it's not coming really from the -- from the UK.

Now having said that, we are seeing very interesting opportunities in the pipeline, both in the UK and also in in Spain. So we are optimistic about Europe, but of course, I mean we are starting from a lower base, and we are -- we have been investing for several quarters in that.

And in terms of the upgrade or the increase in the guidance for the full year, it's not related to a specific geography. We look at -- we do our guidance and our forecasts account by account, and we are optimistic about all the regions for the rest of the year.

Margaret N. Nolan -- William Blair & Company LLC -- Analyst

Okay, great. Thanks. And then with respect to the 91 customers with over $1 million in annual revenues, I'm trying to get a sense for how important that $1 million mark is. So when these customers pass $1 million, do they generally stay above that level or is there a fair amount of movement kind of in and out of that bucket with those 91 customers?

Juan Urthiague -- Chief Financial Officer

Yeah. So -- I mean to be honest, it's more relevant for us the over -- I mean customers over $5 million. But we think that it's still relevant to see that how many accounts we have which have potential to grow over time, right. I mean we focus more on what we call 50 Squared, which is like a self [ph] classification within our customers as you know. But I would look more at how we have been able over the last few years to increase the wallet share from our top accounts. I mean that is actually our strategy. We continue to build out 50 Squared, these very large names with high potential. So the plus $1 million is just like an indicator of an account that has some potential, but it's actually the 50 Squared accounts the ones that really matter to us.

Margaret N. Nolan -- William Blair & Company LLC -- Analyst

Makes sense. Thank you.

Juan Urthiague -- Chief Financial Officer

Welcome.

Martin Migoya -- Chief Executive Officer

Thank you, Maggie.

Operator

We'll go next to Bryan Bergin with Cowen.

Bryan C. Bergin -- Cowen and Company -- Analyst

Hi, thank you. Wanted to just follow up on margin. You obviously had very strong gross margin. Can you give us a sense on how much of that is currency impact versus the improved productivity versus potentially better pricing?

Juan Urthiague -- Chief Financial Officer

Yeah. When you look at margins year-over-year -- I mean if you look at the margins for this quarter, they were in line with Q3 and Q4. So in a way, we have been able to maintain the benefits that we got back in Q3, and still now -- still now we continue to see the same level of margins. Now when we compare that Q1 compared to Q1 last year, we basically increased around 200 basis points of which about 150 basis points are coming from FX in Latin America, in India, of course within Latin America, Colombia which as you know, is becoming -- is very close to become our number one country. Right now it's still Argentina, but we also have some benefits in the Colombian peso. So I would say two-thirds coming from FX and one-third from productivity in the case of the gross margin.

Bryan C. Bergin -- Cowen and Company -- Analyst

Okay, thank you for that detail. And then I wanted to ask, you're talking about more clients, internal organizational transformation engagements, and I'm curious does that require a different mindset from your developers or any varying contracts commitments versus where you've traditionally been working on more consumer-facing engagements. Just really curious if you have to train your professionals differently or anything that's notable there to call out.

Martin Migoya -- Chief Executive Officer

No, look, I mean for years we have been developing our consultancy practice and our -- I would say business hacking practice within that. And that division is a division that has taking over those deals and then, of course, it is expanding -- that studio is expanding rapidly. And we are very happy to see the results of many customers. They're giving us pretty much the full -- the full challenge, which is extremely interesting for us because we already have the knowledge.

And then when you talk about coders, then you need to -- the thing that we always say is that this is not just about engineers but also about innovation and product people and of course designers. And those guys are the guys that are leading those changes within -- together with the consultancy guys in the organizations that we are doing the full -- the full transformation. So I think that our customers really appreciate our podular organization, which is not the traditional command-and-control organizations that companies like -- whatever, I don't want to mention anyone, but other companies have.

But I think that the most important part is the autonomy that those pods have and how well prepared they are to take over that transformation. We're not seeing any challenge -- to your question, any challenge on the training of our people and the capabilities we have because we have already those capabilities, we acquired them in the past, and we have been expanding it very consistently during the last few years.

Bryan C. Bergin -- Cowen and Company -- Analyst

Okay, great. Thank you.

Martin Migoya -- Chief Executive Officer

Thank you so much.

Juan Urthiague -- Chief Financial Officer

Thank you, Bryan.

Operator

We'll move next to Diego Aragao with Goldman Sachs.

Diego M. Aragao -- Goldman Sachs Group Inc. -- Analyst

Hi, thanks. Thanks for taking my question. Just to follow up on the question of Avanxo. I'm not sure if I missed the numbers, but how much it contributed in the quarter, and if you don't mind commenting on how margins were behaving at this company before the acquisition. Thank you.

Juan Urthiague -- Chief Financial Officer

Yes. So, as I was trying to explain before, the integration is moving extremely fast and providing a number from that would be a little bit complicated at this point because we have some customers of Globant who are selling Avanxo services and the other way around. But what we know is that we are being able to close deals together in our customers and in Avanxo's customers. So that's working really well. And what we see in terms of pricing from them is that they basically have a similar margin profile than what we have. I mean we were not anticipating any impact in terms of margins. Maybe a little bit in terms of revenue per head because they were selling at a slightly lower revenue per head, but in terms of margins, they had similar margins to Globant, and we think that we will not have any impact going forward coming from that acquisition.

Diego M. Aragao -- Goldman Sachs Group Inc. -- Analyst

That's super helpful. Thank you. My second question is still related to M&A. We have been seeing you expanding to new geographies, making some efforts to face this, let's say, challenging outlook in Argentina, while you're exploring opportunities in new region. So just wanted to get your thoughts about further M&A opportunities and how to think about your business exposure in the coming years as you keep expanding your business footprint. Thank you.

Martin Migoya -- Chief Executive Officer

Thank you very much for your question. This is Martin. Look, I mean the acquisition strategy we have is either to cover geographies or to be in places or to augment places that we didn't have geographically speaking. That's number one. Number two is to acquire some abilities that we didn't have, like in the case of Avanxo, they're providing us a lot of consultants that are trained specifically on Salesforce and cloud operation that we didn't have. Or it could be for a specific customer that we are interested. Those are the three dimensions.

The efforts around -- it's not about decreasing Argentina. Argentina keeps growing. There are other places that are growing faster. So I think that Argentina will keep being very, very important. However, it has been diluted during the last years as compared to other regions that really grew much faster, like India or like Colombia or like Mexico itself. So we'll continue trying to be every day a more hedged company.

And with that brings -- that will bring more stability on our revenue, more stability on our cost, and I think that's a healthy exercise to do every day at Globant, and that includes how we think about acquisitions. So that's pretty much the rationale behind the things we do.

Diego M. Aragao -- Goldman Sachs Group Inc. -- Analyst

That's great. Thank you.

Martin Migoya -- Chief Executive Officer

Thank you very much for your question.

Juan Urthiague -- Chief Financial Officer

Thank you.

Operator

We'll move next to Moshe Khatri at Wedbush.

Moshe Khatri -- Wedbush Securities, Inc. -- Analyst

Hey, thanks. Good numbers. I didn't hear a lot about Argentina. This is something obviously we talk about every quarter. Where was the headcount in terms of the overall mix out of Argentina? That's number one. Where are we in terms of wage inflation? Any changes that we saw during the quarter? What do you think about the year? And then how did that impact the cost base for the quarter? Thanks.

Juan Urthiague -- Chief Financial Officer

Sure. Hello, Moshe, how are you doing? So Argentina is now 32% of our total headcount, Colombia is 26%, Mexico is 11%. All of them as a whole is 79%. Then you have India for 11% and the US and Europe for 10%. So that is the headcount breakdown that we have today. We continue to expect, as I just mentioned a few minutes ago, we continue to -- people think that Colombia is going to overtake Argentina during this year. It's now become the largest delivery center that we have. Argentina for us was 70% in 2014, the year of the IPO when we started implementing the diversification strategy. Argentina is growing in absolute numbers, but again it's growing at a lower pace than the rest of the countries.

Wage inflation for Argentina for this year is expected to be around 30%. About 20% is going to be during Q2 and the rest is going to be in Q4. What we are seeing at the same time is that the peso has also depreciated since the beginning of the year, and particularly in the last month and a half. So we don't anticipate any margin impact coming from Argentina. Keep in mind that three quarters ago we started hedging the peso in Argentina. So typically what we do is we sell dollar forward, and by doing that, we lock in very good rates which help us to offset any of this impacts that we are talking about.

Moshe Khatri -- Wedbush Securities, Inc. -- Analyst

Understood. And then one last question. You've had a very impressive growth rate out of your non-top 10 clients. I think you said 30% plus. Are you doing anything specific here just to get that growth going? Is there any change in terms of the way you're selling into that client base? What's really triggered that big uptick? Is that just the fact that these guys are just behind in terms of digital? Any color there will be helpful. Thanks.

Martin Migoya -- Chief Executive Officer

Yeah. Look, the color on that it is quite simple. We have for years we've been pushing this strategy called 50 Squared and the idea of getting high potential accounts to grow into a space where we can take it over in some years to get to $50 million or maybe $100 million or whatever, 50 is just -- it's an arbitrary number. So I think that this is -- what you're seeing there is the exact -- the exact conclusion or consequence of our efforts on the -- of selling to high potential accounts. So if you see the list in detail of those 11 to 20 accounts and 11 to -- how much is it?

Juan Urthiague -- Chief Financial Officer

11 to 20 it's about 45%.

Martin Migoya -- Chief Executive Officer

11 to 20 it's about 45% of growth. If you see the names of those accounts, you will see that there's a lot of very, very high potential accounts that could become a 50 Squared account. So that's why we are -- they're picking up very fast. We have been able to sell with our -- with our delivery capabilities with our studio, with our differentiators, they are picking up the difference and they are choosing us to be able to grow their businesses. So I would say it's a direct consequence from the 50 Squared strategy that we are pursuing from many, many years ago.

Moshe Khatri -- Wedbush Securities, Inc. -- Analyst

Understood. Thanks.

Operator

We'll move next to Cesar Medina, Morgan Stanley.

Cesar A. Medina -- Morgan Stanley & Co. LLC -- Analyst

Hi. Congratulations on the quarter. I have two questions. The first one was related to the attrition rate of employees. You said it was like 16%. Is that a function of the acceleration in employee additions or is there something more structural that is leading to lower attrition? That's the first question.

Juan Urthiague -- Chief Financial Officer

Hello, Cesar. How are you doing?

Cesar A. Medina -- Morgan Stanley & Co. LLC -- Analyst

Great. How are you?

Juan Urthiague -- Chief Financial Officer

Good. So attrition came down significantly to 16%, as I mentioned in the call. Part of that is because of the denominator growing very fast with the level of hirings that we have seen, but also when you look at our attrition numbers, they have been coming down, and we are seeing -- because we have been very active on different strategies to decrease attrition. So the number came down, both because of the activities that we have been performing in the last few years but also because of the high growth or the high number of hirings that we had in the last few quarters.

We expect attrition to be more around 17% 17% than 16% as we show -- as we showed this quarter, but it's still a good improvement from where we were before.

Cesar A. Medina -- Morgan Stanley & Co. LLC -- Analyst

Thank you. And then the second question, this is not operational, but I noticed a big swing on financial income. What drove the change this quarter?

Juan Urthiague -- Chief Financial Officer

Yeah, yeah, yeah. It was -- it was more negative than we expected. We're a company that is exposed to multiple currencies in our liabilities and in our -- in our assets, primarily on the liability side but also on the assets. And sometimes, for example, in the case of Argentina when you have a big depreciation, it has an impact on our fiscal credit, the ones that we have with the government, and that generates some losses that the hedge didn't work exactly as we expected. Sometimes the hedge is not one-to-one but it's more like a long-term hedge strategy. So it's related to the changes in the peso and the changes in the Colombian peso. That is what drove that number during Q1. The hedge did not work 100% as we expected.

Cesar A. Medina -- Morgan Stanley & Co. LLC -- Analyst

Got it. Thank you very much and congratulations on the quarter.

Juan Urthiague -- Chief Financial Officer

Thank you, Cesar.

Martin Migoya -- Chief Executive Officer

Thank you, Cesar.

Operator

We'll move next to Arvind Ramnani, KeyBanc.

Arvind A. Ramnani -- KeyBanc Capital Markets, Inc. -- Analyst

Hi. Congrats on another good quarter. Having looked at some of the ups and downs across the other industries that there have been facing some kind of revenue pressure, I think one of the reasons you're able to still grow is because of your distinctive technology offering. A couple of questions around this. One is can you kind of explain maybe using a client example of the various technologies you're working with? Are they specific kind of tools and technologies and partners you're working with? And then the second question is, what is your process to identify which areas of technology to build expertise around.

Martin Migoya -- Chief Executive Officer

Well, to build the areas of technology we are in contact with hundreds of customers -- of top-notch customers which in essence we -- they ask us to do many things and they are constantly on the verge of technology and we're analyzing those trends. And we have internally what we call a heat map of those technologies, which is a pretty interesting document that we have internally, where is the heat coming and where is the demand coming. So that's on the aspect of where to start putting an eye or start looking in advance what's going to happen technically on the market.

I would say that in these few months and in these few quarters, artificial intelligence and the cloud operations in general has been like very, very hot things that are happening, and we're working in many different projects, not just externally for our customers to replace processes, to be able to augment the intelligence of decisions, to be able to fight corruption in some -- for some governments, in many different aspects to help e-learning companies to be able to answer to their -- to their alumni -- sorry, to their people in a more efficient way. So we have many different projects in many different areas with -- specifically with AI.

Then the other -- the other core aspect right now I would say has to do with conversational interfaces. We're seeing a huge trend toward the whole interaction to be placed within SMS or WhatsApp or Hangout or any kind of interface that has a lot of traffic and companies trying to enter there to be able to talk with automatics bots, that also includes artificial intelligence, to be able to answer questions to make transactions, but not believing the WhatsApp or the Hangouts or the SMS environment but within that same environment. So avoiding the creation of new applications and avoiding the crowding the space on your mobile phone. And we are seeing that as another strong thing that is happening.

Then on the cloud -- on the cloud space, which is the second one, I would say that there's an enormous demand of moving to the cloud very, very fast and not just on the -- on the I would say satellite systems or new systems that are made, but also there's a big demand on the core systems, like Salesforce and other systems that are being moved to the cloud at warp speed. So we're seeing those two places like big places for growth in the future and big places for current growth, which also are connected those things that I mentioned with the digital transformation of -- that pretty much every company in the planet, digital and (inaudible) confirmation that pretty much every company needs to go through.

Arvind A. Ramnani -- KeyBanc Capital Markets, Inc. -- Analyst

Great. That's pretty helpful. And just a quick follow-up on that. So given this essentially a change in the technology environment, are you also seeing your -- when you compete with some of the larger players, have your win rates kind of improved and are there particular firms that you're taking business away from?

Martin Migoya -- Chief Executive Officer

I'm sorry, I didn't get the question.

Arvind A. Ramnani -- KeyBanc Capital Markets, Inc. -- Analyst

No. So when you think of kind of the various technology tools available, are your win rates improving against some of the larger legacy players?

Juan Urthiague -- Chief Financial Officer

Yeah. Hi, Arvind, how are you doing? So I think first thing is that together with the growth of our company, we started to see more often companies like Accenture or like some of the -- of the bigger players competing for some projects, and we have -- we have been increasing our win ratio significantly over the last few quarters when we are competing with those guys. I mean many of our customers now feel very comfortable assign a project to Globant that maybe in the past because of scale they would probably be more willing to give it to one of the bigger players. But that's not the case anymore. So win rates have improved versus the bigger players.

Arvind A. Ramnani -- KeyBanc Capital Markets, Inc. -- Analyst

Great. Thank you and good luck for the remainder of the year.

Juan Urthiague -- Chief Financial Officer

Thank you, Arvind.

Martin Migoya -- Chief Executive Officer

Thank you, Arvind.

Operator

We'll move next to Joseph Foresi at Cantor Fitzgerald.

Joseph D. Foresi -- Cantor Fitzgerald & Co. -- Analyst

Hi. I was curious about the sales build-out. Can you give us an update on how many salespeople you have now versus this time last year? And how your go-to-market I know has changed because you've decided to ramp on the sales side.

Juan Urthiague -- Chief Financial Officer

Yes. Just give me one second. So we now have about 85 sales account managers or I mean different roles of sales people compared to 70 one year ago, but at the same time what is happening now is that a lot of the growth is coming -- a lot of the actually of the closing of deals is coming from tech guys and operation operations guys that are shifted in our customers' premises. So today it's like -- I mean I provided the numbers because you asked for it, Joe, but it's not so relevant in number specifically of customer representatives that we have. It's more about how we have been able to sell as a team with a tech guy, with an operations guy, and with a sales guy working together as a team than like in the past where the revenue number was more related to the number of sales people. For us today when we think about coverage, we think about having most people from technology in our customers' premises, more people from sales, and also more people from operations.

Martin Migoya -- Chief Executive Officer

It's like version two of coverage.

Juan Urthiague -- Chief Financial Officer

Exactly right.

Joseph D. Foresi -- Cantor Fitzgerald & Co. -- Analyst

Got it. So has the amount of revenues from the present client base or kind of recurring revenues has that changed much? I know that the industry is typically like 90% of revenues comes from existing clients in a year. I'm just trying to get a sense of new versus old.

Juan Urthiague -- Chief Financial Officer

Yes. Back in December when we provided the number for the full year, the number was 95% of revenue coming from customers existing the year before. And that number used to be about 85% to 90% in previous years. So that numbers have been expanding together with a 50 Squared strategy, and the focus is to grow on existing accounts. I mean we believe -- of course, we always want to have some new logos and you will always see us getting new high, potential logos of customers. But the focus of the company at this point is to farm the customers that we already have that have huge potential. I mean we have about 50 Fortune 500 customers -- as customers, sorry. So we believe we have a very nice portfolio of customers where we can generate revenue from.

Joseph D. Foresi -- Cantor Fitzgerald & Co. -- Analyst

Got it, OK. And then at the headcount level, how many of those were inorganic versus organic, or is that not included in this quarter's numbers?

Juan Urthiague -- Chief Financial Officer

Yeah. In Q1 we grew our IT headcount by 788 IT professionals of which almost 475 -- actually of which 475 were organic. When we reported the acquisition of Avanxo, we mentioned that we had 315 IT professionals at the time of -- when we made that decision.

Joseph D. Foresi -- Cantor Fitzgerald & Co. -- Analyst

Got it, OK. And one last one for me. Anything worth pointing out from a seasonality perspective between here and the end of the year. I know you gave some color on margins, but I'm thinking on either the top line or the margin anything that we should be aware of for the modeling.

Juan Urthiague -- Chief Financial Officer

Yeah. Not in terms of margins but in terms of growth. Q1 and Q2 last year were two quarters where we had very, very high growth. So that's why we have very tough comparisons for the first half of the year. And that's the only seasonality that I will take into account. For Q2, we already have the salary increases granted, and we are confident about our margins for the quarter. So we are not seeing any seasonality in terms of margins. What you will see is probably -- we are expecting a little bit if an acceleration in our revenues in our coming quarters.

Joseph D. Foresi -- Cantor Fitzgerald & Co. -- Analyst

Great. Thank you.

Juan Urthiague -- Chief Financial Officer

Thank you, Joe.

Martin Migoya -- Chief Executive Officer

Thank you, Joe.

Operator

And there appear to be no further questions at this time. I'd like to turn the conference back to the CEO, Martin Migoya, for closing remarks.

Martin Migoya -- Chief Executive Officer

So thank you very much everyone for participating and thank you very much for your continued support and interest and coverage on Globant. So looking forward to see you on the next earnings call and have a great day and good luck. Cheers.

Operator

Ladies and gentlemen, that will conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.

Duration: 64 minutes

Call participants:

Paula Conde -- Investor Relations Officer

Martin Migoya -- Chief Executive Officer

Juan Urthiague -- Chief Financial Officer

Tien-Tsin Huang -- J.P. Morgan Securities, LLC -- Analyst

Ashwin V. Shirvaikar -- Citigroup Global Markets, Inc. -- Analyst

Margaret N. Nolan -- William Blair & Company LLC -- Analyst

Bryan C. Bergin -- Cowen and Company -- Analyst

Diego M. Aragao -- Goldman Sachs Group Inc. -- Analyst

Moshe Khatri -- Wedbush Securities, Inc. -- Analyst

Cesar A. Medina -- Morgan Stanley & Co. LLC -- Analyst

Arvind A. Ramnani -- KeyBanc Capital Markets, Inc. -- Analyst

Joseph D. Foresi -- Cantor Fitzgerald & Co. -- Analyst

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