Globant S.A. — FY2023 Form 20-F Summary
Business context and reporting period
Globant is a Luxembourg-based global technology services company listed on the NYSE under “GLOB.” It provides digital transformation, software engineering, design, consulting, cloud, data, AI and platform services through one operating segment. The filing covers the fiscal year ended December 31, 2023; it does not provide a separate Q4 2023 income statement or cash flow statement.
Globant operated in 30 countries with 29,150 employees, including 27,116 IT professionals. Revenue was geographically concentrated in North America, which contributed 59.5% of 2023 revenue, followed by Latin America at 22.1%, EMEA at 15.4% and Asia & Oceania at 3.0%.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $2,095.9 million | $1,780.2 million | 17.7% increase |
| Gross profit | $755.8 million | $669.4 million | 12.9% increase |
| Gross margin | 36.1% | 37.6% | Down 150 bps |
| Profit from operations | $199.0 million | $206.7 million | 3.7% decrease |
| Operating margin | 9.5% | 11.6% | Down 210 bps |
| Net income attributable to owners | $158.5 million | $148.9 million | 6.5% increase |
| Diluted EPS | $3.64 | $3.47 | 4.9% increase |
| Adjusted net income | $250.1 million | $217.7 million | 14.9% increase |
| Adjusted operating margin | 15.2% | 16.3% | Down 110 bps |
| Cash flow from operations | $318.5 million | $197.5 million | 61.3% increase |
Revenue mix shifted toward fixed-price work, which represented 18.3% of revenue versus 15.4% in 2022. Time-and-materials contracts represented 78.9%, compared with 82.9% in 2022.
As of December 31, 2023, cash and cash equivalents were $307.2 million and current investments were $16.1 million, for approximately $323.3 million of cash and current investments. Trade receivables rose to $499.3 million from $424.8 million, while the allowance for expected credit losses increased to $20.7 million from $7.2 million.
Total borrowings were $159.1 million, compared with $3.7 million in 2022. Lease liabilities were $118.7 million. Total liabilities were $948.7 million and total equity was $1.79 billion. Contractual obligations totaled $703.6 million, including $159.1 million of borrowings, $173.9 million of lease liabilities and $243.0 million of other financial liabilities.
Material changes versus the prior comparable period
- Revenue increased 17.7%, supported by growth in media and entertainment, consumer/retail/manufacturing, travel and hospitality, healthcare and professional services.
- North America remained the largest market, but its share declined to 59.5% from 63.8%. EMEA increased to 15.4% from 10.5%, partly reflecting acquisitions and regional expansion.
- Gross and operating margins declined as cost of revenues grew 20.6%, professional services expense increased substantially, share-based compensation increased and certain local currencies appreciated against the U.S. dollar.
- Operating cash flow improved by $121.0 million, helped by higher earnings, non-cash adjustments and working-capital movements, despite a $44.3 million increase in trade receivables.
- Investing cash outflows increased to $350.4 million from $269.3 million. The company spent $253.7 million net of cash acquired on business acquisitions and invested $110.5 million in capital expenditures.
- 2023 acquisitions included ExperienceIT, Pentalog, the Chili/FIFA+ transferred business, a majority interest in GUT and Iteris. Acquisition accounting remained preliminary for GUT and Iteris at the reporting date.
- Goodwill increased to $1.16 billion from $735.0 million, primarily from acquisitions. No goodwill impairment was recorded.
- The company repurchased 42,500 shares at an average price of $183.75, primarily to support employee equity plans.
Guidance, outlook, commentary and risks
The filing does not provide formal numerical revenue, margin or EPS guidance. Management expects continued demand for digital transformation, AI, cloud, data, customer experience and enterprise platforms. Its strategy emphasizes expanding existing and new client relationships, cross-selling, developing Globant X products and platforms, recruiting and retaining talent, and selectively pursuing acquisitions.
Management identified AI as a major potential growth driver, while noting uncertainty regarding adoption, competition, responsible-use requirements, third-party models and evolving regulation. The company reported that nearly all Agile Pods had been certified in AI.
Globant is subject to seasonal effects, with revenues and margins generally higher in the third and fourth quarters and lower in the first and second quarters. Key operational risks include utilization and productivity, employee attrition, wage inflation, pricing and fixed-price contract execution, client concentration, competition, acquisitions and integration, cybersecurity, foreign exchange, inflation, tax incentives and changing privacy, labor and AI regulations.
The largest customer represented 8.7% of 2023 revenue, down from 10.7% in 2022; the ten largest customers represented 32.0%, down from 35.6%. Media and entertainment plus banking, financial services and insurance represented 40.1% of revenue.
The company entered a new credit agreement in May 2023 with a $725 million revolving facility and potential term loan tranches. The agreement matures in May 2028 and includes minimum interest coverage and maximum net leverage covenants. Globant stated that it had sufficient liquidity for working capital and planned capital expenditures for at least the next twelve months.
Globant became subject to OECD Pillar Two global minimum tax rules beginning January 1, 2024. Management estimated that the rules could increase the effective tax rate by approximately 3%, although the filing states that the ultimate quantitative impact was not yet reasonably estimable.
A 2022 cybersecurity incident involved unauthorized access and exfiltration of limited client source code, project documentation and data files. The company reported no material operational impact and collected $2.2 million of related insurance proceeds in 2023. Legal, tax and labor matters remain subject to ordinary-course claims; management does not expect the matters disclosed to have a material adverse effect.
Important facts for investors to verify
- Confirm that reported FY2023 growth is sustainable after considering acquisitions, seasonality, client spending and macroeconomic conditions.
- Assess whether margin pressure from wage inflation, professional services, foreign exchange and share-based compensation can reverse.
- Review acquisition accounting for Pentalog, GUT and Iteris, including preliminary purchase-price allocations, $401.2 million of 2023 goodwill additions and $95.2 million of fair-valued contingent consideration.
- Evaluate leverage, covenant headroom, debt maturities and the substantial increase in borrowings during 2023.
- Monitor receivables collection, the increase in expected credit losses and the effect of slower client payments on liquidity.
- Quantify the eventual impact of Pillar Two and possible changes to Argentina, Uruguay and India tax incentives.
- Track customer concentration, particularly the largest customer and the media and entertainment and financial-services verticals.
- Review cybersecurity remediation, residual litigation or regulatory exposure and the potential effect of future incidents.
- Distinguish IFRS results from management’s non-IFRS measures, which exclude items including share-based compensation, acquisition-related charges and certain amortization.