Globant Reports 2017 Third Quarter Results - Strong Revenue Growth Driven by Increasing Demand Environment

SAN FRANCISCO, Nov. 16, 2017 /PRNewswire/ -- Globant (NYSE: GLOB), a digitally-native technology services company focused on creating digital journeys, today announced results for the three and nine months ended September 30, 2017.

Globant logo

Please see highlights below, including certain Non-IFRS measures. Note that reconciliations between Non-IFRS financial measures and IFRS operating results are disclosed at the end of this press release.

Third quarter 2017 highlights

  • Revenue increased to a record $109.7 million, representing 33.2% year-over-year growth.
  • Non-IFRS Adjusted Gross Profit was $42.8 million (39.0% Non-IFRS Adjusted Gross Profit Margin), an increase of $8.6 million compared to $34.2 million for the third quarter of 2016 (41.5% Non-IFRS Adjusted Gross Profit Margin).
  • Non-IFRS Adjusted Net Income was $12.5 million (11.4% Non-IFRS Adjusted Net Income Margin), compared to a profit of $10.5 million for the third quarter of 2016 (12.8% Non-IFRS Adjusted Net Income Margin).
  • Non-IFRS Adjusted Diluted EPS was $0.34 per share (based on an average of 36.3 million diluted shares), compared to Non-IFRS Adjusted Diluted EPS of $0.30 for the third quarter of 2016 (based on an average of 35.5 million diluted shares).

Nine months ended September 30, 2017 highlights

  • Revenue for the period increased to $298.0 million, representing 26.5% year-over-year growth.
  • Non-IFRS Adjusted Gross Profit was $115.3 million (38.7% Non-IFRS Adjusted Gross Profit Margin), an increase of $14.0 million compared to $101.3 million (43.0% Non-IFRS Adjusted Gross Profit Margin) in the first nine months of 2016.
  • Non-IFRS Adjusted Net Income was $31.8 million (10.7% Non-IFRS Adjusted Net Income Margin), an increase of $2.7 million, compared to a profit of $29.1 million (12.4% Non-IFRS Adjusted Net Income Margin) in the first nine months of 2016.
  • Non-IFRS Adjusted Diluted EPS was $0.88 per share (based on an average of 36.1 million diluted shares during the first nine months of the 2017), an increase of $0.06 compared to Non-IFRS Adjusted Diluted EPS of $0.82 for the first nine months of 2016 (based on an average of 35.3 million diluted shares during the first nine months of the 2016).

"We are very pleased with our third quarter performance. Our revenues increased to a record $109.7 million, representing solid 33.2% year-over-year growth, and we continue to experience strong momentum in our business" said Martín Migoya, Globant's CEO and co-founder.

"We continue to have strong demand from companies looking to achieve digital transformations. Moreover, we expect to see a significant opportunity coming from artificial intelligence, which has the potential to impact all businesses and industries. We believe that our expertise and Studio model positions us as a leader in this area and makes us an ideal partner for companies facing these transformations," added Martín Migoya.

"Q3 was another quarter of robust and solid revenue growth as the demand for our service offerings continues to expand and the relationship with our strategic accounts across different verticals remains strong. In terms of operating performance, we expect to continue executing on our strategy to keep gross margins stable, diversify our talent base and maintain disciplined spending on our SG&A so that we can expand our operating leverage", explained Alejandro Scannapieco, Globant's CFO.

Globant completed the third quarter with 6,397 Globers, 5,925 of whom were IT professionals. The geographic revenue breakdown for the third quarter was as follows: 79.1% from North America (top country: US), 13.3% from Latin America and others (top country: Chile) and 7.6% from Europe (top country: Spain). 85.4% of Globant's revenue for the third quarter was denominated in US dollars, and the remaining 14.6% was denominated in other currencies, including GB pounds, Euros and other Latin American currencies.

During the last 12 months ended September 30, 2017, Globant served 346 customers, 78 of which accounted for more than $1 million of Globant's revenues. Globant's top customer, top 5 customers and top 10 customers represented 10.3%, 26.8% and 40.7% of third quarter revenues, respectively.

Cash and cash equivalents and investments as of September 30, 2017 decreased to $44.1 million from $59.9 million as of December 31, 2016. Current assets as of September 30, 2017 amounted to $141.9 million, accounting for 40.6% of total assets. Finally, as of September 30, 2017, 35.1 million common shares were issued and outstanding.

2017 Fourth Quarter and Full Year Outlook

Based on current market conditions, Globant is providing the following estimates for the fourth quarter and the full year of 2017:

  • Fourth quarter Revenue is estimated to be between $108-$110 million, implying 24.9% year-over-year growth at the midpoint of the range.
  • Fourth quarter 2017 Non-IFRS Adjusted Diluted EPS is estimated to be in the range of $0.38-$0.40 (assuming an average of 36.5 million diluted shares outstanding during the fourth quarter).
  • Fiscal year 2017 Revenue is estimated to be in the range of $406-$408 million, implying 26.1% year-over-year revenue growth at the midpoint of the range.
  • Fiscal year 2017 Non-IFRS Adjusted Diluted EPS is estimated to be in the range of $1.25-$1.29 (assuming an average of 36.2 million diluted shares outstanding during 2017).

Conference Call and Webcast

Martín Migoya and Alejandro Scannapieco will discuss the Q3 2017 results in a conference call today beginning at 4:30pm ET.

Conference call access information is:
US +1 (888) 346-2877
International +1 (412) 902-4257
Webcast http://investors.globant.com/

Additionally, a replay will be available via the same dial-in number and on our investor relations website after the call.

About Globant (NYSE: GLOB)

We are a digitally native technology services company. We are passionate about building the new way of being digital. We want to help our clients emotionally connect with consumers and employees, leveraging the power of artificial intelligence for business optimization. We are the place where engineering, design, and innovation meet scale.

Globant has more than 6,300 professionals in 12 countries working for companies like Google, Linkedin, BBVA, EA and Coca Cola, among others.

We were named a Worldwide Leader of Digital Strategy Consulting Services by IDC MarketScape report (2016 and 2017).

We were also featured as a business case study at Harvard, MIT and Stanford.

For more information, visit www.globant.com

Non-IFRS Financial Information

The financial information in this press release has been prepared consistently with International Accounting Standards 34, "Interim Financial Reporting". The financial information in this press release have not been audited.

Globant provides non-IFRS financial measures to complement reported IFRS results, in accordance with IAS 34 "Interim Financial Reporting". Management believes these measures help illustrate underlying trends in the company's business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing the company's business and evaluating its performance. The company anticipates that it will continue to report both IFRS and certain non-IFRS financial measures in its financial results, including non-IFRS results that exclude share-based compensation expense and depreciation and amortization. Because the company's non-IFRS financial measures are not calculated according to IFRS, these measures are not comparable to IFRS and may not necessarily be comparable to similarly described non-IFRS measures reported by other companies within the company's industry. Consequently, Globant's non-IFRS financial measures should not be evaluated in isolation or supplant comparable IFRS measures, but, rather, should be considered together with its unaudited interim consolidated statement of financial position as of September 30, 2017 and December 31, 2016 and its unaudited interim consolidated statement of profit or loss and other comprehensive income for the three and nine month periods ended September 30, 2017 and 2016, prepared in accordance with IAS 34.

Globant is not providing a quantitative reconciliation of forward-looking Non-IFRS Adjusted Diluted EPS to the most directly comparable IFRS measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items without unreasonable effort. These items include, but are not limited to, share-based compensation expense and impairment of tax credits. These items are uncertain, depend on various factors, and could have a material impact on IFRS reported results for the guidance period.

Forward Looking Statements

In addition to historical information, this release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include information about possible or assumed future results of our business and financial condition, as well as the results of operations, Non-IFRS results of operations and Non-IFRS earnings per share, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," "potential," or the negative of these terms or other similar expressions. These statements include, but are not limited to, statements regarding: the persistence and intensification of competition in the IT industry; the future growth of spending in IT services outsourcing generally, application outsourcing and custom application development and offshore development services; the level of growth of demand for our services from our clients; the level of increase in revenues from our new clients; the resource utilization rates and productivity levels and the level of attrition of our IT professionals; the pricing structures we use for our client contracts; the general economic and business conditions in the locations in which we operate; the levels of our concentration of revenues by vertical, geography, by client and by type of contract in the future; the continuity of tax incentives available for software companies with operations in Argentina; Argentina's regulations on proceeds from the export of services; our expectation that we will be able to integrate and manage the companies we acquire and that our acquisitions will yield the benefits we envision; the demands we expect our rapid growth to place on our management and infrastructure; the sufficiency of our current cash, cash flow from operations, and lines of credit to meet our anticipated cash needs; the high proportion of our cost of services comprised of personnel salaries; and other factors discussed under the heading "Risk Factors" in our most recent Form 20-F filed with the Securities and Exchange Commission.

These forward-looking statements involve various risks and uncertainties. Although the registrant believes that its expectations expressed in these forward-looking statements are reasonable, its expectations may turn out to be incorrect. The registrant's actual results could be materially different from its expectations. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed might not occur, and the registrant's future results and its performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.  Except as required by law, we undertake no obligation to publicly update any forward-looking statements for any reason after the date of this press release whether as a result of new information, future events or otherwise.

These risks and uncertainties include those discussed or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier).

 

 

 

Globant S.A.

Condensed Interim Consolidated Statement of Profit or Loss and Other Comprehensive Income

(In thousands of U.S. dollars, except per share amounts, unaudited)

                 
   

Three months ended

 

Nine months ended

   

September 30, 2017

 

September 30, 2016

 

September 30, 2017

 

September 30, 2016

                 

Revenues 

 

109,675

 

82,350

 

298,006

 

235,602

Cost of revenues 

 

(69,733)

 

(49,673)

 

(190,470)

 

(138,194)

Gross profit

 

39,942

 

32,677

 

107,536

 

97,408

                 

Selling, general and administrative expenses 

 

(28,782)

 

(20,910)

 

(81,805)

 

(58,998)

Impairment of tax credits

 

-

 

-

 

(1,586)

 

-

Profit from operations

 

11,160

 

11,767

 

24,145

 

38,410

                 

Finance income

 

1,060

 

2,415

 

5,182

 

13,504

Finance (expense) gain, net

 

(1,971)

 

(2,181)

 

(7,407)

 

(15,314)

Finance expense, net

 

(911)

 

234

 

(2,225)

 

(1,810)

                 

Other income, net

 

2

 

399

 

2,410

 

1,053

Profit before income tax

 

10,251

 

12,400

 

24,330

 

37,653

                 

Income tax

 

(2,262)

 

(2,872)

 

(5,387)

 

(11,271)

Net income for the period

 

7,989

 

9,528

 

18,943

 

26,382

                 

Other comprehensive income, net of income tax effects

               

Items that may be reclassified subsequently to profit and loss:

               

- Exchange differences on translating foreign operations

 

282

 

(36)

 

204

 

1,115

- Net fair value loss on available-for-sale financial assets

 

(32)

 

(25)

 

(27)

 

(45)

Total comprehensive income for the period

 

8,239

 

9,467

 

19,120

 

27,452

                 

Net income attributable to:

               

Owners of the Company

 

8,009

 

9,537

 

18,996

 

26,400

Non-controlling interest

 

(20)

 

(9)

 

(53)

 

(18)

Net income for the period

 

7,989

 

9,528

 

18,943

 

26,382

                 

Total comprehensive income for the period attributable to:

               

Owners of the Company

 

8,259

 

9,476

 

19,173

 

27,470

Non-controlling interest

 

(20)

 

(9)

 

(53)

 

(18)

Total comprehensive income for the period

 

8,239

 

9,467

 

19,120

 

27,452

                 
                 

Earnings per share 

               

Basic

 

0.23

 

0.28

 

0.54

 

0.77

Diluted

 

0.22

 

0.27

 

0.53

 

0.75

                 

Weighted average of outstanding shares (in thousands)

               

Basic

 

35,020

 

34,464

 

34,833

 

34,335

Diluted

 

36,254

 

35,457

 

36,067

 

35,328

 

 

Globant S.A.

Condensed Interim Consolidated Statement of Financial Position

(In thousands of U.S. dollars, unaudited)

         
   

September 30, 2017

 

 December 31, 2016

ASSETS

   

Current assets

       

Cash and cash equivalents 

 

35,285

 

50,532

Investments

 

8,827

 

9,355

Trade receivables

 

82,781

 

54,170

Other receivables 

 

14,129

 

18,869

Other financial assets

 

900

 

900

Total current assets

 

141,922

 

133,826

         

Non-current assets

       

Other receivables 

 

33,745

 

27,465

Deferred tax assets

 

11,120

 

7,691

Investment in associates

 

1,550

 

800

Other financial assets

 

555

 

319

Property and equipment

 

42,787

 

35,676

Intangible assets

 

14,944

 

13,791

Goodwill

 

102,930

 

65,180

Total non-current assets

 

207,631

 

150,922

TOTAL ASSETS

 

349,553

 

284,748

         

LIABILITIES

       

Current liabilities

       

Trade payables 

 

9,532

 

5,603

Payroll and social security taxes payable

 

35,553

 

30,328

Borrowings

 

10,579

 

217

Other financial liabilities

 

17,981

 

12,602

Tax liabilities

 

4,436

 

6,249

Total current liabilities

 

78,081

 

54,999

         

Non-current liabilities

       

Other financial liabilities

 

21,500

 

19,224

Other liabilities 

 

20

 

20

Provisions for contingencies

 

1,207

 

1,945

Total non-current liabilities

 

22,727

 

21,189

TOTAL LIABILITIES

 

100,808

 

76,188

         

Capital and reserves

       

Issued and paid-in capital

 

42,171

 

41,576

Additional paid-in capital

 

83,260

 

62,790

Other reserves

 

(784)

 

(961)

Retained earnings

 

124,115

 

105,119

Total equity attributable to owners of the Company

 

248,762

 

208,524

Non-controlling interests

 

(17)

 

36

Total equity

 

248,745

 

208,560

TOTAL EQUITY AND LIABILITIES

 

349,553

 

284,748

         

 

 

Globant S.A.

Supplemental Non-IFRS Financial Information

(In thousands of U.S. dollars, unaudited)

                 
   

Three months ended

 

Nine months ended

   

September 30, 2017

 

September 30, 2016

 

September 30, 2017

 

September 30, 2016

                 

Reconciliation of adjusted gross profit

               

Gross Profit

 

39,942

 

32,677

 

107,536

 

97,408

Depreciation and amortization expense

 

1,069

 

1,260

 

3,268

 

3,189

Share-based compensation expense

 

1,771

 

263

 

4,501

 

711

Adjusted gross profit

 

42,782

 

34,200

 

115,305

 

101,308

Adjusted gross profit margin

 

39.0%

 

41.5%

 

38.7%

 

43.0%

                 

Reconciliation of selling, general and administrative expenses

               

Selling, general and administrative expenses

 

(28,782)

 

(20,910)

 

(81,805)

 

(58,998)

Depreciation and amortization expense

 

3,004

 

1,769

 

8,485

 

4,536

Share-based compensation expense

 

2,738

 

756

 

6,766

 

2,042

Adjusted selling, general and administrative expenses

 

(23,040)

 

(18,385)

 

(66,554)

 

(52,420)

Adjusted selling, general and administrative expenses as % of revenues

 

(21.0)%

 

(22.3)%

 

(22.3)%

 

(22.2)%

                 

Reconciliation of Adjusted Profit from Operations

               

Operating Profit

 

11,160

 

11,767

 

24,145

 

38,410

Impairment of tax credits

 

-

 

-

 

1,586

 

-

Share-based compensation expense

 

4,509

 

1,019

 

11,267

 

2,753

Adjusted Profit from Operations

 

15,669

 

12,786

 

36,998

 

41,163

Adjusted Profit from Operations margin

 

14.3%

 

15.5%

 

12.4%

 

17.5%

                 

Reconciliation of Net income for the period

               

Net income for the period

 

7,989

 

9,528

 

18,943

 

26,382

Impairment of tax credits

 

-

 

-

 

1,586

 

-

Share-based compensation expense

 

4,509

 

1,019

 

11,267

 

2,753

Adjusted Net income 

 

12,498

 

10,547

 

31,796

 

29,135

Adjusted Net income margin

 

11.4%

 

12.8%

 

10.7%

 

12.4%

                 

Calculation of Adjusted Diluted EPS

               

Adjusted Net income 

 

12,498

 

10,547

 

31,796

 

29,135

Diluted shares

 

36,254

 

35,457

 

36,067

 

35,328

Adjusted Diluted EPS

 

0.34

 

0.30

 

0.88

 

0.82

 

 

Globant S.A.

Schedule of Supplemental Information (unaudited)

           

Metrics

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

           

Total Employees

5,421

5,631

5,855

6,223

6,397

IT Professionals

4,983

5,219

5,421

5,772

5,925

           

North America Revenue %

81.4

78.9

78.9

78.5

79.1

Latin America and Others Revenue % 

9.4

9.6

9.9

9.2

13.3

Europe Revenue %

9.2

11.5

11.2

12.3

7.6

           

USD Revenue %

89.7

88.0

88.6

87.6

85.4

Other Currencies Revenue %

10.3

12.0

11.4

12.4

14.6

           

Top Customer %

10.4

9.4

9.7

10.1

10.3

Top 5 Customers %

33.9

33.3

31.1

31.6

26.8

Top 10 Customers %

46.8

45.8

43.7

43.9

40.7

           

Customers Served (Last Twelve Months)

354

340

336

331

346

Customers with >$1M in Revenue (Last Twelve Months)

61

60

67

76

78

 

Investor Relations Contact:
Paula Conde, Globant
investors@globant.com
(877) 215-5230

Media Contact:
Wanda Weigert, Globant
pr@globant.com
(877) 215-5230

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SOURCE Globant