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

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.

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 millioncompared to $34.2 millionfor 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 millionfor the third quarter of 2016 (12.8% Non-IFRS Adjusted Net Income Margin).
• Non-IFRS Adjusted Diluted EPS was $0.34per share (based on an average of 36.3 million diluted shares), compared to Non-IFRS Adjusted Diluted EPS of $0.30for the third quarter of 2016 (based on an average of 35.5 million diluted shares).

Nine months ended September 30, 2017highlights

• 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 millioncompared 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 $0.88per share (based on an average of 36.1 million diluted shares during the first nine months of the 2017), an increase of $0.06compared to Non-IFRS Adjusted Diluted EPS of $0.82for 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 Americaand 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 millionof 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, 2017decreased to $44.1 millionfrom $59.9 millionas of December 31, 2016. Current assets as of September 30, 2017amounted 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 Scannapiecowill discuss the Q3 2017 results in a conference call today beginning at 4:30pm ET.

Conference call access information is:
US [phone]
International [phone]
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, MITand 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, 2017and December 31, 2016and its unaudited interim consolidated statement of profit or loss and other comprehensive income for the three and nine month periods ended September 30, 2017and 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'sregulations 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
[e-mail]
[phone]

Media Contact:
Wanda Weigert, Globant
[e-mail]
[phone]

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SOURCE Globant