Good day, and welcome to the Globant fourth quarter 2019 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Amit Singh, Head of Finance and Investor Relations for the U.S. Please go ahead.
Thank you, operator. Thanks everyone for joining us today on our call to review our 2019 full year and fourth quarter financial results. By now, you should have received a copy of the earnings release. If you have not, a copy is available on our website, investors.globant.com. Our speakers today are Martín Migoya, Co-Founder and Chief Executive Officer, Juan Urthiague, Chief Financial Officer, and Mercedes MacPherson, Chief Talent and Diversity 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'll find a reconciliation of IFRS and non-IFRS measures at the end of the press release we published on our investor relation website announcing this quarter's results. I'd now like to turn the call over to Martín Migoya, our CEO.
Thanks, Amit, and hello, everyone. Yet again, I'm happy to say that quarter four broke new records for Globant, closing at $184.3 million in revenue, representing an outstanding 31.5% year-over-year growth. During this quarter, our top account grew by a robust rate of 41.2% year-over-year, and the remaining clients together also reported an impressive growth at more than 30% year-over-year. Regarding full-year revenue, in 2019, we brought in $659.3 million, representing a solid 26.2% year-over-year growth and beating the upper end of our revenue guidance range. Revenue growth in 2019 was broad-based, with our top account growing at a solid rate of 25.5% year-over-year, and the remaining clients together growing at 26.3% year-over-year. As in previous periods, we continued to expand our relationship with our key clients. During the full year of 2019, we had 14 accounts above $10 million in annual revenues compared to nine during the previous year.
In constant currency terms, Q4 revenue increased by 32%, while full-year revenue increased by 27.4% year-over-year. We're proud of our Q4 and 2019 growth and motivated for more this year. With Gartner's estimate of $3.9 trillion to be spent on IT alone in 2020, there's more than enough opportunity for fantastic growth. We believe, however, that the only way to do so is by building a sustainable and empathetic organization. We need to be conscious of the impact we generate on our clients, employees, humanity as a whole, and even on the planet itself. With that in mind, we have unveiled our sustainability approach under a new concept known as Be Kind.
Be Kind is our plan for the next five years that aim to generate a positive impact for all of our stakeholders by setting specific goals to fight climate change and to work even harder on diversity, inclusion, and cultural wellness. To present this initiative, I'd like to introduce Mercedes MacPherson, Globant's Chief Talent and Diversity Officer.
Thanks, Martín, hello, everyone. As Martín mentioned, today we're facing new challenges that go beyond our business. Our planet demands us to be united in responding to climate change. At the same time, we need to take a stand in regards to inclusion and diversity. We need to change the status quo by building a fairer industry, one that can provide equal treatment and opportunities for all talent, regardless of their origin, gender, religion, or any other orientation or background. With Be Kind, we're making sure these issues are our top priority, organized under the following three pillars. First, be kind to the planet. Globant has made the commitment that 100% of our energy consumption will derive from renewable sources by the end of 2020. We're also measuring our Scope 3 emissions and aim to become a carbon-neutral corporation in the near future. Second, be kind to your peers.
Regarding our focus on diversity and inclusion, we have committed to have women and non-binary people hold 50% of our management positions by 2025. We are also going to train and inspire 10,000 women around the world in technology by that year. Finally, being kind to humanity. We want to transform the world with technology and apply our work for good one step at a time. To do so, we must consider the ethical implications of what we do. We have therefore created the AI Manifesto as a guideline for our company's do's and don'ts regarding this technology, and we will encourage other companies to get on board as well. These three pillars of the Be Kind initiative are designed to focus in the future. To discover more, I encourage you to visit bekind.globant.com.
As Globant's first Chief Talent and Diversity Officer, I look forward to sharing with you the progress of this initiative as it develops.
Thanks, Mercedes. Be Kind is a guide not only for our company's operations, but also with respect to all our stakeholders. Now let me share with you some news on how we continue building long-term partnerships with our clients through innovation. Several years ago, we began our relationship with Disney to help them create the next generation of their online experience for their parks and resorts. Over time, our partnership has grown to an array of services that connect the company not only with its customers, but with its own employees through Globant's unique mobile apps. I'm very proud to announce that this quarter, The Walt Disney Company renewed their trust in us by recognizing Globant once again as a trusted preferred partner for another five years.
This win is one that I'm happy to see also with several of our other clients as well, including one of the world's top global banks. We're already working with them to reimagine their user experience with a goal to capture additional market share and address their ever-increasing user demand. As their preferred partner, we expect to work with them as they tackle new challenges. As the bank is already a sector leader, we see large opportunities for growth for both of our companies over the next quarters. As a global player, we have worked with clients whose situations are emblematic of today's global challenges. Right now, our teams are working for the oil company YPF. We're creating a multi-platform digital experience. We developed a new app for them so that their customers can pay through a simplified and unified method.
In the past three weeks, the mobile app has been downloaded an average of 4,300 times per day, reaching a total of 1.2 million. Last year, we expanded our relationship with a global automaker. We are developing new online experiences for their customers. We're designing and building innovative web and mobile products that will enhance the end-to-end experience, from considering a vehicle right through to owning a new breed of connected electric vehicles, redefining the idea of what mobility means to customers. Through our partnership, we also aim to enhance and quicken the company's concept-to-market process so that they can adapt to technological innovation with greater agility. We continue to grab AI by the horns to deliver better solutions for our clients. We don't just give them this technology to quicken a process, but rather apply this technology to their business strategy and redefine it.
Our most recent example has been our new endeavor with a major CPG provider. We employ artificial intelligence so that they could better interpret sales data. This enabled them to build their AI workbench and adopt the best practices for scalable algorithm development. Let me double-click on AI for a moment. We apply AI to accelerate the way our engineers generate code. We call this augmented coding. Augmenting the capabilities and the efficiency of our engineers through AI enables them to be more creative, proactive, and intuitive while reducing the dispersion on code and enhancing reutilization and performance. The tool has been trained to understand new programming languages, expanding the number of projects where it can be applied every day. The secondary use for this tool is to generate documentation for undocumented code. 2019 also marked our fifth anniversary as a public company.
When we first went public, we were seen as the first Latin American software services company to list on the New York Stock Exchange. We're really proud of how much we have reinvented ourselves since then. We're now almost 12,000 Globers working from 17 countries all over the world, and we are guiding the most successful brands through a complete transformation. We are a pure play in the ongoing digital and cognitive revolutions, and our expertise has grown into 21 different studios. Today, we're launching two new studios to better address our clients' current and future needs. First, the Intelligent Enterprise Studio that helps our clients using SAP to use and leverage the data inside the ERP to create better experiences for their customers and stakeholders with the same innovation and agility that we have in all our other studios.
By creating this new studio, we consolidate what we have learned from SAP innovations created by our teams, and we look forward to helping many more unlock the full value of SAP. We have launched the Conversational Interfaces Studio. This studio enables our customers to quickly adapt to the changes we see in the market today. Nowadays, 74% of the U.S. smartphone users download just one app or less every month. The usage of virtual assistants has increased by 14% in just the past year. Globant is positioned to create seamless multi-platform experiences to allow companies to interact directly with their customers, creating better conversations. I'm sure many of you listening have heard that for us, as for pretty much every other company, our most valuable asset is our people.
I can confidently say that we are unique in that we intentionally put them front and center of everything we do. Our agile pods have direct interaction with our clients. We value their autonomy, and I consistently remind our Globers that I work for them. The absence of a command and control organization speeds up response times and creates better engagement with our clients. We can only create this value by attracting, developing, and retaining the right talent. In such a competitive industry, we have managed to lower our attrition rate, reaching just 14.6% in 2019, four points down from our previous year. I'm happy to say that we will see more clients engage with our Globers as our list of clients continue to grow. We have added Dropbox, American Airlines, American Century Investments, Crystal Cruises, Plastiq, and several more just in quarter four.
We're very proud to be working with them to find new technological solutions for their challenges. Finally, our pipeline and backlog remains strong with a number of high-potential new clients and several long-term projects within our current clients. We continue investing in our studios to remain at the forefront of innovation, while at the same time expanding geographically to better serve organizations around the globe. We're optimistic about our ability to deliver sustainable growth in the future. With that, I'll turn over the call to Juan Urthiague, our CFO, for a detailed financial review on the fourth quarter and full year 2019, and also to provide guidance for Q1 and the full year 2020. Juan, please. Thank you very much.
Thanks, Martín. Good afternoon, everyone. Let me start by summarizing the results of our fourth quarter and full year 2019. I will discuss our guidance for the first quarter and the full year 2020. I am very pleased to announce another quarter of record revenues and strong financial performance. Our revenues for Q4 amounted to $184.3 million, beating the upper end of our guidance range and representing a solid 31.5% year-over-year growth. Q4 revenue growth was 32% year-over-year in constant currency. During Q4 2019, Disney was once again our largest customer and displayed an impressive growth of 41.2% year-over-year. We are excited with the fact that high-potential accounts are scaling up and becoming large and meaningful within our customer portfolio.
In addition to strong growth at Disney, our second and beyond clients together also displayed robust growth of 30.3% year-over-year, with clients 11 and beyond growing at 41.2% year-over-year. Moreover, during the quarter, we continued to successfully cross-sell services with the companies we acquired during the year. Our 2019 acquisitions are fully integrated right now and performing extremely well. Our 50 Square strategy to have a diversified base of multimillion-dollar accounts is progressing in line with our expectations. During the last 12 months ending December 31, 2019, we had 14 accounts above $10 million in annual revenues compared to nine accounts for the same period last year, and we had 107 accounts with more than $1 million of annual revenues compared to 90 one year ago. We continue to expand our relationships with our key accounts, the base for our continuous growth.
Looking at diversification of our revenues by industry verticals, it is evident that Globant's value proposition and service offerings are attractive to enterprises across all the industries. Our top three industry verticals for the quarter were media and entertainment with 23.4% of revenues, banks, financial services, and insurance with 21.7% of revenues, and technology and telecommunications with 13.6% of revenues. Professional services, consumer retail and manufacturing, and technology and telecommunications were the fastest-growing industry verticals in Q4, growing at 59.5%, 55.9%, and 45.6% year-over-year respectively. Our customer concentration for Q4 2019 displays ongoing improvement, with our top 10 accounts now representing 38.5% of revenues compared to 42.7% of revenues for the fourth quarter of 2018. In terms of geographic regions, during the fourth quarter of 2019, 75% of our revenues were in North America, 20% in Latin America and others, and 5.1% were in Europe.
During this quarter, we continued to see strong growth and investment in digital transformation in Latin America. During the fourth quarter of 2019, 86.7% of our revenues were denominated in U.S. dollar, providing good protection to our top line against currency fluctuations. Turning now to profitability, our adjusted gross profit for the period increased to $73.5 million, representing 39.9% adjusted gross margin, compared to $58.4 million, representing 41.7% adjusted gross margin in the fourth quarter of 2018. Year-over-year adjusted gross margin decline is explained by effects and active management of our business to maintain our adjusted gross margin in the 38%-40% range, which give us sufficient room to invest in our business, in turn, helping us maintain a robust top-line growth trend. On a sequential basis, the slight decrease is related to the salary increases and promotions window of Q4.
We finished the quarter with 11,855 Globers, 11,021 of which were IT professionals. This represents a solid 559 increase quarter-over-quarter in the number of IT professionals. The strong net hires in the quarter is driven by our robust pipeline across industries and geographies, combined with low levels of attrition. Attrition for the past 12 months continued low at 14.6%, compared to 18.2% in Q4 2018, showing a significant improvement in most talent development centers, particularly in Argentina. As discussed in the last quarter's earnings call, going forward, we view 14%-16% attrition rate as the normalized level for Globant. Adjusted SG&A accounted for 20.2% of our quarterly revenues, increasing 90 basis points compared to Q4 2018. We continue investing for the future, primarily to expand our sales coverage in our target markets.
During 2019, we have been able to successfully slightly dilute SG&A expenses, 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 $30.4 million or 16.5% of revenues, compared to $23.4 million or 16.7% of revenues for the fourth quarter of 2018. As discussed in detail later, our full year 2019 adjusted operating margin was 17%, in line with our near midterm target. We are proud of this margin level for a company of our size. Share-based compensation expense for the fourth quarter of 2019 amounted to $5.9 million, representing 3.2% of total revenues for the period. This expense is mainly related to the grant of restricted stock units granted to certain key employees and directors of the company as part of our long-term retention plan.
Financial income and expense net amounted to a loss of $4.3 million. This net result is composed of FX gains and losses resulting from monetary assets and liabilities in local currencies, costs related to our hedging strategies, interest expenses from our credit lines and leasings, and finally, interest income from our portfolio of investments. In the fourth quarter, we had gain on transaction with bonds of $1.6 million, offsetting some of the impact on our margins from the Argentine peso performance. Our IFRS effective tax rate for the quarter was 22.3%, fairly consistent with previous quarters. Adjusted net income for the fourth quarter of the year totaled $24.2 million, representing 13.1% adjusted net income margin, compared to $18.5 million, representing 13.2% adjusted net income margin for the fourth quarter of 2018.
Adjusted diluted EPS for the quarter was very solid at $0.64 based on 38 million average diluted shares for the quarter, above the upper end of our guidance range and compared to $0.50 for the fourth quarter of 2018, based on 36.9 million average diluted shares for the quarter. Moving on to the balance sheet. Our cash and investments as of December 31st, 2019 amounted to $82.5 million, while borrowings amounted to $51.4 million. Our cash generation was mainly used for CapEx and payments related to our acquisitions. Earlier this month, we also expanded our credit facility to $350 million from $200 million prior, while lowering interest rates on drawn amounts by 25 basis points. You can see the details in the 6-K we filed on February 6th.
While our Cash Flow generation profile satisfies our needs for investment in our business, this credit facility provides us with flexibility related to internal investments, while also generating sufficient firepower for us to pursue any potential M&A. This facility also helps us develop strong relationships with marquee global financial institutions, which are part of this facility: HSBC, Citibank, BNP Paribas, BBVA, J.P. Morgan, Bank of America, SunTrust, U.S. Bank, and Silicon Valley Bank. We are very proud of closing this financing, which was significantly oversubscribed as it supports our continuous growth, and it is proof of our strong credit profile. Let's talk about the full-year 2019 performance. Revenue for 2019 was $659.3 million, implying a 26.2% year-over-year growth and above the upper end of our guidance range.
This increase was primarily boosted by 50 Square accounts, but also new customer wins as our portfolio of high-potential customers continues to grow at a very healthy pace. Our 2019 M&A deals performed strongly, and we successfully cross-sold services with our recently acquired companies. Globant dedicated significant sales, technical, and delivery capabilities to accelerate our expansion within the clients added through these acquisitions. At the same time, the new services generated incremental revenues in Globant customers. Our adjusted gross profit for 2019 was $266.5 million, representing 40.4% adjusted gross margin, compared to $212 million, representing 40.6% adjusted gross margin for the full year 2018. Adjusted gross margin for the year was above our target range of 38%-40%. Adjusted SG&A showed a dilution of 10 basis points year-over-year, currently accounting for 19.9% of our revenues for 2019.
Adjusted profit from operations for 2019 was $112 million, or 17% adjusted profit from operations margin, compared to $84.3 million, or 16.1% adjusted profit from operations margins for 2018, representing an improvement of 90 basis points. Share-based compensation expense for 2019 amounted to $19.9 million, representing 3% of revenues, compared to $12.9 million, representing 2.5% of revenues for 2018. This expense, in line with our target, was impacted by a strong share price and is mainly driven by our long-term incentive programs, as explained before. Financial income and expense net for 2019 amounted to a loss of $13.2 million, compared to a loss of $5.6 million in 2018. This higher expense is related to the adoption of IFRS 16 during 2019. Net effects impacts resulting from monetary assets and liabilities in local currencies, costs related to our hedging strategies, and interest expense for our new credit facility.
Adjusted net income for 2019 was $86.1 million, or 13.1% adjusted net income margin, compared to $63.7 million or 12.2% adjusted net income margin for 2018, representing an improvement of 90 basis points. Adjusted net income increased 35.1% year-over-year, 8.9 % points faster than revenues. Adjusted diluted EPS in 2019 was $2.29, based on 37.7 million average diluted shares for this period, compared to $1.74 for 2018, based on 36.7 million average diluted shares for 2018. Adjusted diluted EPS in 2019 was above the upper end of our guidance range. To wrap up, I would like to share with you our outlook for Q1 and for the full year 2020. Let me start with the demand environment and its implication to our revenues. We continue to be bullish in terms of our service offering, which we believe is fully aligned with market demand.
At the same time, we are very optimistic with the progress we are witnessing in our 50 Squared accounts. On the talent front, hiring remains strong, and we are able to hire and retain highly skilled professionals. Based on current visibility, we expect Q1 2020 revenues to be at least $188 million. We currently expect no FX impact to our Q1 revenues. Q1 adjusted operating margin is expected to be in the 16%-17% range, and adjusted diluted EPS is expected to be at least $0.62, assuming 38.2 million average diluted shares outstanding for the quarter. Regarding the full year 2020, we expect revenues to be at least $810 million. We currently assume no FX impact to our full-year 2020 revenues.
With regards to our adjusted operating margins, we believe we have reached very healthy levels for a company of our size and expect to keep largely stable adjusted operating margins in the 16.5%-17.5% range for the full year 2020 while we continue investing in our business, including training programs in cutting-edge technologies and sales coverage to expand our business. IFRS effective income tax rate is expected to remain in the 22%-24% range both for Q1 2020 and the full year 2020. At this point, we expect the tax rate to be towards the lower end of the range. Finally, in terms of adjusted diluted EPS, we are expecting at least $2.74 for the full year 2020, assuming 38.5 million average diluted shares outstanding for the full year. Thanks everyone for participating in the call, for your coverage and support. Operator, can you please queue questions? Thank you.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Tien-Tsin Huang of J.P. Morgan. Please go ahead.
Good afternoon. Thanks for all the details. I wanted to ask for Martín and Juan, just curious, you mentioned visibility. I was hoping maybe if you can give us an idea of your visibility now versus this time last year? Overall, from a revenue perspective, I know you just re-upped with Disney. That's coming at a very high growth rate exiting the year. Can you just comment on just broader visibility?
Okay. Yeah. Hi, Tien-Tsin. This is Martín. Thank you for the question. The visibility is pretty high as we have. It's pretty much the same as we have last year. Around 80% of what's going on is already being seen by us. This is the current situation, and big accounts are tractioning quite well, and we're very positive for the year.
Okay, great. On the margin front, I know you gave a wide range. I know there's obviously a lot of volatility going on from an FX perspective. You gave an at least comment on earnings, which makes sense. Can we assume that if margins come in on the lower end, given external factors, that you'll take bond gains to protect the earnings? Can you maybe just comment on that potential? Thanks.
Yes. Hello, Tien-Tsin. How are you doing? Yes, in the guidance that we provided, we have an assumption in terms of what can happen in terms of FX, in terms of inflation in the different countries. Also, of course, depending on what happens in Latin America, we may be using the one transaction as a way to offset part of that impact. At the end of the day, as you know from the past, when there is a delay or when there is a behavior in the FX market where there are two rates, we may have some hiccups or some impact on the margins that get offset by the transaction with bonds. When the two markets converge, then we have the movement from the gain on transaction with bonds back into the margins.
Understood. I'm all set. Thank you.
The next question comes from Ashwin Shirvaikar of Citi. Please go ahead.
Sorry, I was on mute. Thank you, and hi, Martín. Hi, Juan. Questions on margins. Just kind of thinking about the use of at least, as mentioned in Tien-Tsin's question. Can you comment on gross margins versus SG&A leverage, which is SG&A leverage obviously has been a good driver in the past. Where are you leaning towards now? With regards to gross margins, do you expect any comments on any positivity to emerge from pricing?
Look. Hello, Ashwin. Gross margin for the fourth quarter ended at 39.9%, close to the top end of the historical guidance of 38%-40%. We move now to operating income guidance to be able to manage both SG&A investments as well as investments in the gross margin and effectively maintain the level of operating profit that we are showing. We ended the year at 17% adjusted operating margin, which is pretty good for a company of our size. We are now guiding 16.5%-17.5% for the full year. Pretty much in line with 2019. We don't see gross margins above the range that we always provided. We continue to see it in the 38%-40%, most likely close to the upper end of that number.
The focus of the company, given the investments that we are doing in sales, the investments we are doing to scale up the company, the investments we are doing in terms of technology, and the investments we are doing to hire more people and train more people, we want to be able to manage that. That's why there is more focus now on the operating margin as opposed to just focusing on gross margin and SG&A on a standalone basis. We want to look at the two combined, and we want to be able to invest in the different areas of the business as required.
Okay. No, that's good to understand the pieces and just to clarify that those investments seem to be all included in there. The other question is really on cadence of revenue growth as we look through the year. As well as, if you don't mind kind of going through sort of the inorganic impact that flows through as we go through the year as well.
Yeah. In terms of the cadence, as always when it's closer like Q1, we guide with a lot more knowledge. As Martín mentioned, we have 80% visibility. Of course, visibility for the first two quarters is higher than for the rest of the year. We guided all about 28.6% growth for Q1, and we guided almost 23% for the full year. Unlike every year, in the last five years, when we start the year, we like to guide based on the visibility that we have, based on what we are seeing right now in the market. As the quarters progress, we typically might end up, as we did in the past, changing a little bit our guidance. We like to guide where we feel comfortable where we are today, right? The second part of your question was organic and inorganic, Q4 was a very good quarter.
We ended the quarter at 21.5%, and the organic part it was more than 22%, or even a little bit more, including the cross-selling that we are doing, okay? For the year, for Q1, we guided 28.6%, and we are seeing the organic part more like in the 22%+, including the cross-selling. And for the year, we are guiding 23%, where the organic part is more like 20.5%, and the rest, about two, 2.5 % points coming from the revenues from Belatrix, which we acquired in the second part of last year.
Understood. Thank you.
[crosstalk] Welcome. Any question?
The next [crosstalk] question comes from Maggie Nolan of William Blair.
Hi. Just to kind of build up on that visibility and how you put together the guidance, are there any considerations in place for any macro concerns or potential slowdowns in 2020? How are you thinking about that for this 2020 guidance versus how you may have thought about that when you put out initial 2019 guidance?
Hey, how are you? This is Martín. We're aware of the situation. We have no specific signals from any of our customers around any issue on that front as we are connected to many things that has nothing to do with that. I feel that the impact won't affect us, and we haven't baked in any impact in the future because I think that from the visibility we have today, everything is fine. That's everything I can say, but you never know. Future is something, maybe in a few weeks, nobody will be talking about this anymore. Maybe it gets harder, we don't know. From what we know now, from what we have heard from our customers, the situation is normal. What we continue to see is the spending that we have seen and forecasted in these few weeks.
Congrats on the continued status with Disney. When you achieve preferred vendor status with Disney or other customers, is that something that's going to open the door for you to negotiate more kind of multi-year MSAs or any type of spend commitments? What does the margin profile look like at some of these larger accounts versus on your smaller engagements?
Well, we are extremely happy. Let me go first with the first part of the question, then I will let Juan to go on the second. We're extremely happy that we renewed that amazing commitment and partnership that we have with Disney overall. I think that it will lead to many more things together, given that the past experience that we have and the rankings in which we are evaluated against other vendors are extremely high for us. We are really confident that that could lead to new things and to new areas and to keep on expanding the relationship we have. I think that there's still a lot of room to do if we keep on performing the way we are performing. Also, the new master service agreement has different things that is an improvement from what we had in the past.
We will see how all those things evolve. I don't know, Juan, if you want to add something on that.
Yes, in terms of the biggest customers on the margin profile, Globant has a very consistent margin profile among all customers. Typically, what happens is that whenever you are given a new contract with a new technology or with a more, let's say, hot technology at any given point in time, those projects tend to have higher margins than other projects that you were doing in the past. They typically average out. We don't have a big dispersion in terms of margins. The margin profile can go from - 5 to + 5. That's pretty much the range in which projects and margins move around. There is no big dispersion between the different customers and between the different projects.
All right. Thank you both.
Thank you, Maggie.
The next question comes from Joseph Foresi of Cantor Fitzgerald. Please go ahead.
Hi, this is Steven Chang coming on for Joe. Thanks for taking my question. Just more on the Disney contract. I was just wondering if the new signed contract with Disney, if there are any, I guess, material changes compared to any contract that you had historically with Disney. Also maybe due to its strong growth in this quarter compared to the beginning of 2019, do you see Disney continuing their growth? And maybe if they had given any outlook in the future due to maybe some macro turmoil or anything. Thank you.
Thank you, Steven, for the question. This is Martín. Look, I think that there's a good situation with Disney. Our track record is amazing, so we keep on having good stuff going on with them. The forecast we are seeing now, I would say it's a pretty good growth also for this year. The new terms of the MSA are very good. That's all I can say. I cannot reveal any other things that are there. They are very good, and we hope that some things that were in the past in the MSA were different and now are improved. We're extremely happy with that negotiation, and I think it would be much better for both Disney and ourselves. The overall situation is going good.
I think Disney, with all the things that you know around Disney+ and other things that are happening in the company, is having a great moment, is having a great situation. We're very happy with that. We feel part of that, and I think that we'll keep on growing, and as I said, always, if we keep on performing. Everything is about how we perform, and so far, our teams have demonstrated that are really world-class doing what we do for them.
Okay, great. Thank you. If I could just squeeze one more quick one in.
Sure.
I'm [crosstalk] sure you had talked about the lower attrition and the M&A pipeline had drove to your net adds for your headcount. I was just wondering if, in the future, with a continued strong pipeline, you would continue seeing that strong addition of headcount, especially in 2019, with that huge jump compared to 2018? Thank you.
Yes. This is Juan. This year, 2019, we had an amazing organic growth in terms of net additions, and that is composed of record hiring and very low attrition. Also we added a number of developers and designers and engineers through acquisitions. It was a very strong year overall in terms of net additions. For 2020, what we are seeing is a strong pipeline, a strong business momentum. That's reflected in our guidance for the year and for the quarter. Of course, we will continue hiring more Globers, training them, to be able to deliver on that pipeline that we are seeing.
Great. That's helpful. Thanks so much.
The next question comes from Arturo Langa of Itaú BBA. Please go ahead.
Hi, Martín, Juan, and Amit. Thank you for taking my questions. First, I was wondering how you think about inorganic growth opportunities at this moment. I mean, looking at your multiple, it's quite high. I was thinking, maybe do you look at options such as debt to optimize your cost of capital? Is this a moment when you think more that the opportunity to look at targets is more attractive relative to maybe some months ago? Just wondering how you think about that internally. Second is regarding the knowledge law in Argentina. The bill was submitted, I think, yesterday to Congress. I was wondering what you could share there, in terms of how you see this proposal, when you think it will get approved, sort of the timing, and all those details. That would be it. Thank you.
Thank you, Arturo, for the question. I'll take it. In terms of M&A, always when we do a deal, it's because we find a company with a similar culture that complements our service offering, that gives us a new geography, a new skill set. We're not in a hurry to make acquisitions. We need to find the right company, and we need to pay the right multiple. We have always been very strict in how we make acquisitions, both in terms of which companies we acquired and also in terms of how much we pay for those companies. We are not thinking about changing any of that in the near future. Second, going into the knowledge law in Argentina, as you just pointed out, the new regulation was sent to the Congress yesterday. The new regulation has very similar benefits to the previous software promotion law.
It's supposed to be treated by the House in the near future, but I cannot say when it's going to happen. This is really outside of our control, but it's good news that that regulation was sent again to the Congress. It also shows that the country understands how important this industry is for the country. It's an industry that generates a lot of employment. It's an industry that creates a lot of opportunities all over the country, and that generates a lot of net dollars for the country. It's good that the government realized and send it back to the Congress so soon.
Great. Juan, just on the first point, do you think about taking more debt on to get a lower cost of capital? Is that something you think about, or is that out of the question?
As you know, Arturo, I mentioned this in the call. Two weeks ago, we amended the previous credit facility that we had. We expanded the facility from $200 million - $350 million. We increased the number of banks. Now we have pretty much all the big banks or most of the big banks behind us, backing us up. We will take debt only if we need it for incremental expansion into new locations. If we want to do an acquisition that we need some money, we are not just going to take debt just for reducing the cost of capital. When we take debt, it's because we are seeing growth, we are seeing an opportunity to grow the business. This is the plan that has not changed. Those are the drivers for using debt in the future.
Okay. Thank you.
You're welcome.
The next question comes from Diego Aragão of Goldman Sachs. Please go ahead.
Yes, thank you. Hi, Martín, Juan. Thank you for taking my question. The first question is related to the business diversification and your goal to expand, let's say, into new regions. If we would think about your business two, three years from now, what are the main goals for Globant in terms of global footprint? Maybe if you can also comment on how much can you benefit from this diversification in the future, let's say in terms of margins, that will be great. Thank you.
How are you? Thank you very much for the question. Look, there's several answers to your multiple questions. The first one, in terms of diversification, in terms of geography, we are going to other destinations in Asia, and we are happy about that. We're still in the very early days, but that's the plan we have for the next three, 5 years to execute. In terms of diversification of different practices, we have launched, as I said on my script, we have launched two new studios. One which is really connected to what's going on with the SAP implementations. Not because we're going to implement SAP, but just because we're going to be using the SAP information to create applications that really can be engaging with consumers. The other studio that diversifies a little bit what's going on in the technology market is the Conversational Interfaces Studio.
That studio, for me, it's like the next mobile. To synthesize what we do there, basically, we create engines of artificial intelligence that connect the consumers real-time and can transact on the back. For example, having a banking application where you can connect through WhatsApp and then the bank can answer, which is the balance that you have, that you can make a transfer. You can be charged with a QR or pay with a QR code, things like that. All of those things without downloading any application, hence reducing the friction we have with the consumer and being able to expand that into many other places. If you ask me, the next three, five years, I see Globant as a disruptor on the game.
I see the industry is going to a place where not much innovation is being done on how professional services are being rendered during the last 25 years. At Globant, we are innovating in every single aspect of that industry. From how we are organized, to how we use technology to decrease our attrition, to how we use technology and artificial intelligence now, to how we code, to how we use technology to how we design, how we retain, how we recruit. I think that there's a huge space, like other companies did on how to redefine the taxi industry or how to redefine the hotel industry or how to redefine the car industry. There's a huge space to create that next-generation player to reinvent the industry, to reinvent the space.
I think that Globant, given the scale, our vision, how we use technology and how we think about that, it's in the best position to execute that vision. That's what you're going to see us doing. Are we going to be successful on that? We don't know. We hope, yes, and we are doing everything we can to make it happen. I feel that's the huge space that we have in front of us in a market which is really massive. Sorry for the long answer. It was a long question.
Yes. No, thank you for that. It was a very detailed answer. Thank you. Look, my second question is also related to margins. My understanding on the 50 Squared strategy is because you can keep focusing on, let's say, large accounts, enhance the relationship with them, and eventually grab a large share of wallet within these clients. By doing that, you can also reduce the number of clients by closing smaller contracts and concentrating your efforts within those large accounts. My question is, can you help us to quantify how efficient this could be to your margins as well? Thank you.
Look, Diego, thanks for the question. Yes, we continue to believe that focusing on high-potential large corporations that are investing hundreds of millions or sometimes a few billions in technology every year is the right path to keep growing our company. We have grown the company primarily by farming those accounts. Of course, we always add some new logos here and there. Companies, of course, with high potential that we believe can become multi-million-dollar accounts. When we are doing that, over time, what happens is that the smaller accounts with no potential, typically, we end up at some point, not working with those companies any longer. However, that does not have an impact in terms of gross margin. It does have a positive tailwind, and you can see that in terms of the operating income and what happens with SG&A, right?
Focusing on these large companies and farming companies is always more cost-effective than hunting new companies. Once you are inside a company, you have the relationships in place, the sales guys that you need are a lot more focused, and they have all the contacts in place to bring new business into the company. The same goes for all the support areas, right? Once you are used to working with these companies, you know what sort of talent you need to provide for those projects. You know how to collect an invoice. You know how to negotiate a contract. That creates synergy in every support team. Eventually, that has helped in the last three, four years to reduce the weight of our SG&A as a % of revenues. Right now, what we are guiding is a more stable margin.
We believe that the level of operating margin that we have achieved, we closed at 17% 2019. We think that keeping that level and investing more in sales coverage, investing more in training our employees, investing more in getting the company ready for the next stage in terms of scale is the right approach while we continue growing the company. We expect now more stable margins for the near future while we continue expanding our revenues.
Okay. That's super helpful. Thank you.
Thank you, Diego.
Thank you, Diego.
The next question today comes from Moshe Katri of Wedbush Securities. Please go ahead.
Hey, thanks. Strong quarter, guys. Congratulations. A couple of things. First, what's embedded in your guidance for growth or lack of growth in some of the clients that we had some issues with last year, Southwest, Santander Bank? What are the assumptions in the guidance for calendar 2020?
Moshe, we never mention the company, so I know it's an airline and it's a bank, but we never mention, we don't give specific names. Having said that, we typically, for next year, what we are seeing is a slight recovery in this bank. If you still look at financials, we have been able to grow more than 25% during last year. We've had a very strong performance, even despite one of the banks not performing as we initially expected. For the travel industry, for the airline that we had facing some headwinds in the past, we have seen a stable year as of today. At the same time, we are seeing some good momentum in the travel industry with other airlines growing significantly faster and helping us to keep up with the growth in the travel industry. Travel grew last quarter 14% sequentially.
That was a good number, even though for the year, we ended up at only 4%.
Okay, great. Helpful. Then can you remind us what was the headcount that's Argentina-based for the quarter?
Yes. In Argentina, we have 30% of the total headcount. The total headcount for the quarter, just give me one second, was 11,855 employees. Argentina for the year came down 4 % points. We started the year with 34%. We ended the year with 30% of total headcount. There was an increase of more than 200 people in absolute numbers. Again, we continue with our diversification strategy, growing across the globe and becoming a more global company.
Helpful. What's [crosstalk] embedded for pricing and guidance? Is this still a couple of hundred basis points per year?
Look, even though we have been growing more than 2% on average, when we build the guidance and when we work on our budget, we always assume a flat pricing, so that we take some conservative approach on that front even though the pricing environment looks good.
The final question. I believe you started moving, maybe expanding your 50 Squared more towards maybe 100 Squared accounts. Is that still the plan, to try to expand into a larger set of potential key accounts down the road, and where are we in that process?
I mean, as we grow the organization, things are growing, too, and our former 50 Square program now has been renamed into 100 Squared program.
Yep.
I think that's the kind of movement we are seeing in terms of the growth of the organization. With the guidance that we give for next year, maybe the exit runway will be very close to $1 billion in revenue. The fact is that we need to start thinking an organization in a totally different manner. The reflect of that is that change on the 100 Squared program and how we are seeing those things happening. Short answer to your question is yes, we are evolving everything within Globant to start dealing with a much larger organization and a much larger market opportunity that we have in front of us while we think to reinvent the whole space.
Thanks, Martín.
Welcome.
The next question comes from Bryan Bergin of Cowen. Please go ahead.
Hi, good afternoon. Thank you. I wanted to ask on Europe, can you just talk about your efforts to scale there and regarding just 4Q performance, was that fully due to the one large banking client? Anything else to call out there?
Hello, Bryan. I couldn't get the first part of the question. I'm sorry. Can you repeat?
Yeah. Can you just talk about your efforts to scale in Europe? Then just on the 4Q performance, I wanted to confirm if it was just the one large banking client.
Great, yeah. Europe was flat pretty much quarter-over-quarter. We continue to see Europe as a big opportunity for us. We continue to see both continental and the U.K., Europe, as a big opportunity. Despite that client that during last year could not grow, the opportunities that we are seeing for 2020 are quite positive. Not only with that customer that we are seeing a recovery, but also with other banks in Europe, with some automotive companies in Europe and with some airlines in Europe. We are optimistic about Europe. We continue to invest in the team. We have been increasing the seniority, and we have a much more experienced management team in Europe. Europe continues to be an opportunity that we have to materialize during next year. We are optimistic about Europe.
Yeah. By the way, we have mentioned on the previous call that customer was recovering, and this is what we are seeing now. That's a positive sign.
Okay, that's helpful. Then Martín, just that augmented coding example you detailed was interesting. How prevalent are cognitive service engagements or at least serious conversations around those? How prevalent are those across your client base today? Are there any particular industries that are moving faster on those than others?
No, we have been trying the software and the product and the artificial intelligence engines in many different customers. It's really promising what we are seeing, and we have been engaging already in conversations for our own customers to use the same tool for their own people, which is also pretty interesting. The product is doing amazing things. Also, it's been able to go and document back code that is totally undocumented, which is really attractive from our perspective, to do software archaeology and things like that. I see a promising path of growth for that specific technology that we are launching in the market.
For me, means mainly a gain in productivity for our people that will be translated into our c
Okay. Thank you.
Welcome.
This concludes our question and answer session. I would like to turn the conference back over to Martín Migoya for any closing remarks.
Well, guys, thank you very much for covering us. Thank you very much for supporting us. We have had another very good quarter and good outlook for 2020. I really look forward to see you on the next and, of course, any other question, we are always available. Thank you so much.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.