Globant(US:GLOB)2022-02-28 22:12Cautionary Statements Regarding Forward-Looking Statements Forward-Looking Statements Disclosure The report contains forward-looking statements subject to risks and uncertainties, advising readers to consult 'Risk Factors' as actual results may differ - The report includes forward-looking statements identifiable by terms like 'aim', 'anticipate', 'believe', 'expect', 'may', 'will', etc., which are not guarantees of future performance14 - Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those projected. Readers should consult the 'Risk Factors' and 'Business Overview' sections for a comprehensive understanding of factors that could affect the company15 - The company is not obligated to update or revise any forward-looking statements unless required by law16 Currency Presentation and Definitions Currency Definitions This section defines various currencies referenced in the annual report, including USD, EUR, and several Latin American currencies Defined Currencies | Currency | Definition | | :--- | :--- | | "U.S. dollars" and "$" | lawful currency of the United States | | "Argentine pesos" | lawful currency of the Republic of Argentina | | "Colombian pesos" | lawful currency of the Republic of Colombia | | "Uruguayan pesos" | lawful currency of the Republic of Uruguay | | "Mexican pesos" | lawful currency of Mexico | | "Chilean pesos" | lawful currency of Chile | | "Rupees" or "Indian rupees" | lawful currency of the Republic of India | | "Reais" or "Brazilian Real" | lawful currency of Brazil | | "Peruvian Sol" | lawful currency of Peru | | "Romanian Leu" | lawful currency of Romania | | "Belarusian ruble" | lawful currency of Belarus | | "euro" or "€" | single currency of participating member states of the European and Monetary Union | | "pound", "British Sterling pound" or "£" | lawful currency of the United Kingdom | | "Canadian dollars" | lawful currency of Canada | Company and Industry Definitions Defines 'Globant' as the company and its subsidiaries, along with key industry terms like 'IT', 'ISO', 'Attrition rate', and 'Globers' - References to 'Globant', 'we', 'our', 'us' or the 'Company' mean Globant S.A. and its consolidated subsidiaries18 - Key industry terms defined include 'IT' (information technology), 'ISO' (International Organization for Standardization), 'Attrition rate' (ratio of IT professionals who left to those on payroll), and 'Globers' (employees of Globant)22 Presentation of Financial Information Financial Reporting Standards Consolidated financial statements are prepared under IFRS, presented in U.S. dollars, with the fiscal year ending December 31st - Consolidated financial statements are prepared under IFRS as issued by the IASB and presented in U.S. dollars21 - The fiscal year ends on December 31st of each year21 Presentation of Industry and Market Data Data Sources and Reliability Market data relies on industry publications and internal estimates, with accuracy and completeness not independently guaranteed - Market data and economic/industry data are sourced from IDC, Gartner, Forrester, internal surveys, and publicly available information22 - The accuracy and completeness of third-party industry publications are not guaranteed, and the company's market share estimates are based on internal best estimates2324 PART I ITEM 1. Identity of Directors, Senior Management and Advisers Information on directors, senior management, and advisers is not applicable in this section - Information on the identity of directors, senior management, and advisers is not applicable in this section26 ITEM 2. Offer Statistics and Expected Timetable Information on offer statistics and expected timetable is not applicable - Information on offer statistics and expected timetable is not applicable27 ITEM 3. Key Information A. [Reserved] This sub-item is reserved with no specific information - This section is reserved28 B. Capitalization and Indebtedness Information on capitalization and indebtedness is not applicable in this section - Information on capitalization and indebtedness is not applicable in this section28 C. Reasons for the Offer and Use of Proceeds Information on reasons for the offer and use of proceeds is not applicable - Information on reasons for the offer and use of proceeds is not applicable29 D. Risk Factors Outlines principal factors making investment speculative, including business, industry, Latin American operations, and company ownership risks - Investment in the company is speculative due to factors such as the ongoing impact of the COVID-19 pandemic, challenges in maintaining resource utilization and productivity, and difficulties in attracting and retaining highly-skilled IT professionals3032384142 - Other significant risks include the inability to achieve anticipated growth, effectively manage rapid business expansion, and accurately price client contracts, which could lead to unprofitability32454750 - The company faces intense competition, potential loss of key clients or senior management, and the necessity to continuously innovate in emerging technologies to remain competitive3255575866 - Operating in Latin America presents risks such as adverse economic conditions, government influence, inflation, currency exchange rate fluctuations, and political instability, particularly in Argentina and Colombia333435117118119120121125126144 - Risks related to company ownership include potential volatility in common share price, classification as a 'passive foreign investment company' (PFIC) for U.S. tax purposes, need for additional capital, and concentration of ownership among existing executive officers and directors35153157158159160 ITEM 4. Information on the Company - Globant is a leading global technology service provider, publicly traded on the NYSE under 'GLOB', focused on digital transformation and leveraging its Studio Model189190214 - The company's revenue distribution for 2021 was 64.1% from North America, 22.6% from Latin America and Others, 11.7% from Europe, and 1.6% from Asia. 91.9% of 2021 revenues came from existing clients194195 - Key strategic objectives include growing revenue with existing and new clients, remaining at the forefront of emerging technologies, developing products and platforms (e.g., Globant X), attracting and retaining top talent, and selectively pursuing strategic acquisitions202203204205206 A. History and Development of the Company Globant, founded in 2003, achieved global growth through its Studio Model, strategic acquisitions, and initiatives like 'Be Kind' and 'Augmented Coding' - Founded in 2003, Globant has grown into a global company with a presence in 18 countries, driven by organic growth and strategic acquisitions178179182[193](index=193& The company established its Studio Model in 2009 to foster creativity and innovation through deep expertise in emerging technologies and industries180 - Key acquisitions in recent years include PointSource, Small Footprint Inc., Avanxo, Belatrix, Grupo Assa, BlueCap, Cloudshift, Habitant, Walmeric, Atix Labs, and Navint Group, aimed at expanding capabilities and geographic footprint182183 - Major initiatives include 'Be Kind' (sustainability framework launched in 2019), 'Augmented Coding' (AI-powered software development tool launched in 2020), and 'Globant X' (innovation incubator established in 2021)183184185 B. Business Overview Globant is a leading global technology service provider focused on digital transformation, leveraging its Studio Model, customer-centricity, and strategic growth initiatives Overview Globant is a NYSE-listed global technology service provider, specializing in engineering, innovation, and design, driven by its 'Be Kind' initiative and strong client retention - Globant is a publicly-traded global technology service provider, listed on the NYSE, known for engineering, innovation, and design at scale189190 - The company's success is driven by its 'Be Kind' initiative, talent and culture, and services, with 23,526 employees across 18 countries as of December 31, 2021192193 - In 2021, 64.1% of revenues came from North America, and 91.9% from existing clients, demonstrating strong client relationships194195 The Market Opportunity COVID-19 accelerated digital transformation, with spending projected to reach $6.3 trillion by 2024, representing 55% of global tech investment - COVID-19 has accelerated the need for organizations to evolve and accelerate digital transformations197 - Digital transformation spending is projected to reach $6.3 trillion by 2024, accounting for 55% of all technology investment worldwide198 - Over 50% of global companies are expected to have an enterprise-wide digital transformation strategy by 2024198 Business and Tech Trends Key trends include customer-centricity, AI/ML, 'phygital' models, sustainability, and the metaverse, driving new business and tech landscapes - Customer-centricity and leveraging new technologies are crucial for businesses to differentiate themselves199 - By 2026, 85% of enterprises will combine human expertise with AI, ML, natural language processing, and pattern recognition to enhance foresight and increase worker productivity by 25%200 - New business models will focus on strategic alliances, phygital experiences (combining physical and digital), and sustainability initiatives200 - The metaverse is expected to create new spaces for companies to extend their presence and offerings, maximizing client and employee engagement200 - Blockchain and decentralization will drive changes in business models, enabling cross-industry connections and integrated functionality through APIs201 Strategy Strategy focuses on growing revenue, leading in emerging tech via Studio model, developing products, attracting talent, and strategic acquisitions - The company aims to grow revenue by delivering innovative, high value-added solutions and targeting new clients through its engineering, design, and innovation capabilities202 - Globant will continue to add Studios to remain at the forefront of innovation and digital transformation, leveraging deep domain expertise203 - Globant X, an incubator, is dedicated to productizing transformative technology into platforms and creating new revenue models204 - A high priority is placed on recruiting, training, and retaining top-quality talent, expanding delivery centers into new locations globally205 - Strategic acquisitions are pursued to deepen client relationships, extend technology capabilities, broaden service offerings, and expand the geographic footprint of delivery centers206 Competitive Strengths Strengths include deep expertise, long-term blue-chip client relationships, global delivery model, and experienced management - Deep domain expertise across industries and emerging technologies, organized into 'Studios', provides a strong competitive advantage208 - Long-term relationships with blue-chip clients such as Google, Electronic Arts, Southwest Airlines Co., and Walt Disney Parks and Resorts Online, with some relationships exceeding ten years209 - A global delivery model allows access to diverse talent pools, with a focus on expanding delivery footprint and recruitment efforts in the United States210 - The management team comprises seasoned industry professionals with an average of 20 years of experience, driving growth and entrepreneurial culture211 Our Services Services delivered via Studio model, Globant X, and autonomous culture, fostering innovation in Reinvention and Digital Studios, and Agile Pods - Services are delivered through a Studio model, Globant X, and a global autonomous culture, aimed at helping clients adapt and thrive213 - The Studio model organizes expertise into smaller operating units, fostering creativity and innovation across emerging technologies and industries214 - Reinvention Studios focus on industry-specific transformation (e.g., Airlines, Bluecap Future Finance, Gaming, Life Sciences, Media and Entertainment, Travel and Hospitality)215216217219221224225 - Digital Studios develop business models and technical capabilities in the latest technologies (e.g., Agile Delivery, Blockchain, Business Hacking, CloudOps, Conversational Interfaces, Cultural Hacking, Cybersecurity, Data & AI, Design, Digital Lending, Digital Sales, Digital Experience Platforms, Digital Marketing, Enterprise Applications, Internet of Things, Metaverse, Process Optimization, Product, Quality Engineering, Salesforce, Scalable Platforms, Smart Venues, UI Engineering, Sustainable Business)215228229230234236238239240244247248251253256257258262264266269271275277279 - Globant X is an incubator focused on productizing transformative technology into platforms281 - The global autonomous culture is driven by Agile Pods, self-organized teams responsible for creating, building, and sustaining features, products, or platforms, promoting productivity and continuous improvement282283284 Our Delivery Model Delivery model emphasizes cultural affinity, global footprint, and diverse talent access for efficient solution delivery and competitive advantage - The delivery model focuses on cultural affinity with clients to enhance interaction, responsiveness, and efficient solution delivery286 - Global presence in many countries provides a competitive advantage by accessing abundant high-quality talent, cultural similarities, and geographic proximity to clients287 About Our Be Kind Initiative The 'Be Kind' initiative, central to Globant's culture, focuses on employee well-being, diversity, ethical AI, and environmental sustainability - The 'Be Kind' initiative is a core cultural component focused on transforming organizations and lives288 - It encompasses four pillars: 'Be kind to yourself' (employee well-being), 'Be kind to peers' (diversity, equity, and inclusion, including a goal of 50% women/non-binary in management by 2025), 'Be kind to humanity' (ethical AI, Be Kind Tech Fund for purpose-driven startups), and 'Be kind to the planet' (carbon neutrality, Science-Based Targets commitment)288289290291292293294295296 Our Talent and Our Culture Globant's culture is entrepreneurial and team-oriented, fostering career growth through Globant University, Leadership Accelerator, and Globant Ventures - Globant's culture is entrepreneurial, flexible, sustainable, and team-oriented, based on motivational pillars of Autonomy, Mastery, and Purpose, and six core values including 'Think Big', 'Constantly Innovate', and 'Be Kind'297298299303 - The company supports employee career growth through five dimensions: Technology, Clients, Industries, Specialty, and Geocultural diversity, offering numerous learning and development opportunities302304610618 - Globant University provides a digital ecosystem for continuous career development, including MyGrowth for tracking job positions and Campus for learning resources. The Leadership Accelerator Program (LeAP) strengthens leadership skills603604605609613614 - Entrepreneurship is fostered through Globant Ventures, an accelerator for tech startups in cutting-edge areas like AI306 Globers Attrition Rate | Year | Attrition Rate | | :--- | :--- | | 2021 | 18.7% | | 2020 | 13.0% | | 2019 | 14.6% | Availability of High-Quality Talent Latin America and India offer a competitive advantage with abundant, multilingual IT talent pools and strong academic programs - Latin America offers an abundantly skilled IT talent pool, with over 345,000 engineering and technology graduates annually from 2012-2016307 - The region's professionals possess diverse skills and multilingual capabilities (English, Spanish, Portuguese, Italian, German, French), providing a distinct advantage for serving U.S. and European markets307 - India also offers significant graduate talent, with approximately 4 million people employed in the IT-BPM industry and over 5 million graduates annually308 Government Support and Incentives Globant benefits from government tax incentives in Argentina, Uruguay, India, Belarus, and Colombia, reducing operating costs - In Argentina, the Knowledge Economy Law (effective Jan 1, 2020) provides beneficiaries with a 60% reduction in corporate income tax for micro/small enterprises, 40% for medium, and 20% for large, along with a non-transferable tax credit of up to 70% (80% for certain new hires) of social security contributions and 0% export duties310311104 - Uruguay's Free Trade Zone regime offers almost full tax exemption (Corporate Income Tax, Net Wealth Tax, VAT) and customs duties exemption, with foreign employees potentially opting out of the social security system314315320104 - India's Special Economic Zones Act of 2005 provides a 100% deduction of profits from export services for the first five years and 50% for the next five years, with other tax benefits317104 - Belarus's High Technology Park (HTP) offers exemption from Corporate Income Tax and VAT, with a special legal regime extended until 2049319321322104 - Colombia's Free Trade Zone Regime (Law 1004 of 2005) offers a corporate income tax rate of 20% (15% lower than national rate), customs tax exemptions, and the ability to export to third-party countries and the national territory323324325 Methodologies and Tools Globant uses ISO 9001:2015 and CMMI Level 3 certified methodologies and proprietary tools like 'Glow' for efficient software delivery and resource management - The company uses proprietary internal applications and tools to manage projects, build applications, and assess software vulnerability325355 - A Quality Management System, certified under ISO 9001:2015 and CMMI Maturity Level 3, ensures continuous process improvement and client satisfaction326327329 - 'Glow', a proprietary software application, is used as a management tool to match open positions with available 'Globers', facilitating rapid staffing and efficient resource utilization330331355 Clients Globant serves diverse medium to large clients globally, with revenue from long-term projects and existing clients, led by Walt Disney Parks and Resorts Online - Clients are primarily medium to large-sized companies in North America, Europe, Asia, and Latin America, across diverse industries333 - Client relationships are often based on master services agreements (MSAs) and statements of work (SOWs), with 40% of revenue from long-term projects (over 24 months)334 Client Revenue Concentration (2021, 2020, 2019) | Client Group | 2021 Revenue % | 2020 Revenue % | 2019 Revenue % | | :--- | :--- | :--- | :--- | | Top client (Walt Disney Parks and Resorts Online) | 10.9% | 11.0% | 11.2% | | Top five clients | 26.7% | 30.6% | 26.1% | | Top ten clients | 39.1% | 42.2% | 39.5% | | Top twenty clients | 52.0% | 54.4% | - | Client Distribution by Revenue (2021, 2020) | Revenue Band | 2021 Clients | 2020 Clients | | :--- | :--- | :--- | | Over $5 Million | 42 | 32 | | $1 - $5 Million | 143 | 97 | | $0.5 - $1 Million | 106 | 60 | | $0.1 - $0.5 Million | 287 | 185 | | Less than $0.1 Million | 560 | 424 | | Total Clients | 1,138 | 798 | Sales and Marketing Sales and marketing strategy focuses on leveraging expertise, growing existing clients, new client acquisition, and strategic acquisitions, driven by the 'RDA' model - The growth strategy is based on four pillars: leveraging broad expertise, growing within existing clients, acquiring new clients, and pursuing strategic acquisitions338 - The 'RDA' (retain, develop, acquire) strategy is fundamental, focusing on maintaining wallet share, expanding existing client relationships, and targeting new client accounts340 - The sales and marketing team, comprising 220 personnel, has broad geographic coverage in 18 countries339 - New client acquisition involves identifying growth potential, engaging market-facing management, and using ideation/discovery sessions to develop specific value propositions341342344 - For existing clients, the '50 Squared' model focuses on top 50 high-potential accounts for exponential growth, led by senior sales, technology, and operations personnel346 Seasonality Business is seasonal, with higher Q3/Q4 revenues due to utilization, lower Q1/Q2 due to slowdowns, and salary increases impacting margins - Business is seasonal, with higher revenues and profitability in Q3 and Q4 due to peak IT professional utilization350 - Q1 and Q2 typically have lower revenues due to seasonal slowdowns, fewer working days in the Southern Hemisphere (summer), and the timing of the Easter holiday350 - Annual salary increases implemented in Q2 and Q4 also affect margins350 Competition The IT services market is intensely competitive, with Globant facing large firms and in-house departments, competing on innovation, expertise, and price - The technology and IT services market is intensely competitive, highly fragmented, and subject to rapid change66 - Principal competitive factors include innovation, technical expertise, end-to-end solutions, reputation, employee recruiting/retention, client responsiveness, scale, financial stability, and price66 - Competitors include large global consulting/outsourcing firms (e.g., Accenture Interactive), digital agencies (e.g., Razorfish), traditional IT outsourcing providers (e.g., Cognizant), and in-house client departments67352 - Many competitors possess greater financial, technical, and marketing resources, potentially leading to more aggressive pricing and loss of market share6869352 Intellectual Property Globant protects IP via NDAs, trade secrets, patents, copyrights, and trademarks, granting clients licenses for preexisting IP in delivered solutions - Intellectual property is protected through nondisclosure agreements, trade secrets, patents, copyrights, and trademarks89353 - Clients typically own the intellectual property in delivered software solutions, but are granted a perpetual, worldwide, royalty-free license to use Globant's preexisting IP necessary for the solutions354 - Proprietary internal tools include 'Glow', 'Nails', and 'Service Over Platforms (SoP)'355 - Registered IP includes the trademarks 'Globant' and 'StarMe Up', and several software patents in the United States and Spain356 Facilities and Infrastructure As of December 31, 2021, Globant operates 56 offices across 15 countries, totaling over 1 million square feet for development and client management Office Locations and Square Footage (as of December 31, 2021) | Country | Number of Offices | Type | Square Feet | | :--- | :--- | :--- | :--- | | Argentina | 15 | Development and Delivery Center / Client Management Center | 378,009 | | Brazil | 5 | Development and Delivery Center / Client Management Center | 19,096 | | Chile | 1 | Development and Delivery Center / Client Management Center | 14,187 | | Colombia | 6 | Development and Delivery Center / Client Management Center | 174,538 | | France | 1 | Client Management Center | 592 | | India | 2 | Development and Delivery Center | 134,151 | | United Kingdom | 2 | Development and Delivery Center / Client Management Center | 3,735 | | Mexico | 4 | Development and Delivery Center / Client Management Center | 99,351 | | Peru | 1 | Development and Delivery Center | 30,419 | | Spain | 7 | Development and Delivery Center / Client Management Center | 38,568 | | United States | 7 | Development and Delivery Center / Client Management Center | 69,987 | | Luxembourg | 1 | Principal Executive Office | 150 | | Uruguay | 2 | Development and Delivery Center / Client Management Center | 54,853 | | Belarus | 1 | Development and Delivery Center | 28,794 | | Romania | 1 | Development and Delivery Center | 8,396 | | Total | 56 | | 1,054,826 | Regulatory Overview Global operations are subject to diverse regulations (trade, tax, data protection), increasing costs and risks, but benefit from tax incentives in key countries - Operations are subject to a variety of rules and regulations across multiple countries, including import/export controls, trade restrictions, tariffs, taxation, anti-corruption laws, and data protection requirements87359 - Non-compliance could result in fines, penalties, criminal sanctions, and reputational damage87 - The company benefits from tax incentives in Argentina (Knowledge Economy Law), Uruguay (Free Trade Zone), India (Special Economic Zones), and Belarus (High Technology Park)104360 C. Organizational Structure Globant S.A., incorporated in Luxembourg in 2012, serves as the holding company with principal subsidiaries across multiple countries - Globant S.A. was incorporated in Luxembourg on December 10, 2012, serving as the holding company for its consolidated subsidiaries417 - Principal operating subsidiaries are located in Argentina, Chile, Colombia, India, Mexico, Peru, Spain, United Kingdom, United States, and Uruguay194418 D. Property, Plant and Equipment Details on property, plant, and equipment are found in the 'Facilities and Infrastructure' section of the Business Overview - Information on property, plant, and equipment is detailed under 'Business Overview - Facilities and Infrastructure'419 ITEM 4A. Unresolved Staff Comments There are no unresolved staff comments to report - There are no unresolved staff comments420 ITEM 5. Operating and Financial Review and Prospects Detailed analysis of financial condition and operating results under IFRS, covering performance factors, income statement, and non-IFRS data A. Operating Results Operating results are driven by market demand, innovation, and talent, with 2021 revenues increasing 59.3% to $1.3 billion, improving margins - Operating results are affected by market demand for integrated engineering, design, and innovation technology services, economic conditions, and the ability to innovate and expand service offerings423424 - Talent management, including attracting, retaining, and efficiently utilizing skilled IT professionals, and managing operating costs and foreign exchange rates, are crucial factors424 Revenue Growth (2021 vs 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change % | | :--- | :--- | :--- | :--- | | Revenues | $1,297,078 | $814,139 | 59.3% | Revenues by Contract Type (2021 vs 2020) | Contract Type | 2021 (in thousands) | 2021 % | 2020 (in thousands) | 2020 % | | :--- | :--- | :--- | :--- | :--- | | Time & Materials | $1,062,171 | 81.9% | $698,943 | 85.9% | | Fixed Price | $218,846 | 16.9% | $107,033 | 13.1% | | Subscription resales | $16,039 | 1.2% | $8,156 | 1.0% | | Others | $22 | —% | $7 | —% | | Total Revenues | $1,297,078 | 100.0% | $814,139 | 100.0% | Revenues by Client Location (2021 vs 2020) | Geography | 2021 (in thousands) | 2021 % | 2020 (in thousands) | 2020 % | | :--- | :--- | :--- | :--- | :--- | | North America | $830,904 | 64.1% | $574,150 | 70.5% | | Europe | $151,302 | 11.7% | $61,780 | 7.6% | | Asia | $20,915 | 1.6% | $8,349 | 1.0% | | Latin America and other | $293,957 | 22.6% | $169,860 | 20.9% | | Total Revenues | $1,297,078 | 100.0% | $814,139 | 100.0% | Revenues by Industry Vertical (2021 vs 2020) | Industry Vertical | 2021 (in thousands) | 2021 % | 2020 (in thousands) | 2020 % | | :--- | :--- | :--- | :--- | :--- | | Banks, Financial Services and Insurance | $308,227 | 23.8% | $193,364 | 23.8% | | Media and Entertainment | $272,703 | 21.0% | $187,071 | 23.0% | | Consumer, Retail & Manufacturing | $197,620 | 15.2% | $105,876 | 13.0% | | Professional Services | $167,997 | 13.0% | $103,133 | 12.7% | | Technology & Telecommunications | $155,665 | 12.0% | $96,643 | 11.9% | | Health Care | $96,334 | 7.4% | $53,781 | 6.6% | | Travel & Hospitality | $87,567 | 6.8% | $67,634 | 8.3% | | Other Verticals | $10,965 | 0.8% | $6,637 | 0.7% | | Total | $1,297,078 | 100.0% | $814,139 | 100.0% | Client Concentration (2021 vs 2020) | Client Group | 2021 (in thousands) | 2021 % | 2020 (in thousands) | 2020 % | | :--- | :--- | :--- | :--- | :--- | | Top client | $141,100 | 10.9% | $89,158 | 11.0% | | Top five clients | $345,835 | 26.7% | $249,451 | 30.6% | | Top ten clients | $506,572 | 39.1% | $343,431 | 42.2% | | Top twenty clients | $674,883 | 52.0% | $442,902 | 54.4% | - Net income for 2021 was $96.4 million, up from $54.2 million in 2020, with an effective tax rate decreasing to 22.8% from 29.2%463464 B. Liquidity and Capital Resources Liquidity from operating activities supports capital expenditures and acquisitions; 2021 saw $89.6 million in capex and $310.4 million in acquisitions - Primary liquidity sources are cash flows from operating activities, with cash needs for capital expenditures and working capital475476 - Management believes existing funds are sufficient for the next 12 months, but future capital requirements may necessitate additional equity or debt financing478 Capital Expenditures (2021 vs 2020) | Category | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Total fixed assets acquisitions | $53,159 | $30,095 | | Total intangible assets acquisitions | $52,449 | $75,021 | | Additions related to business combinations | ($15,983) | ($52,033) | | Total Capital Expenditures | $89,625 | $53,083 | - In 2021, the company invested $89.6 million in capital expenditures, including delivery centers and internal developments, and completed five acquisitions (Cloudshift, Habitant, Walmeric, Atix Labs, Navint Group) with a total fair value of consideration of $310.4 million4834884894904914921331 Cash Flows Summary (2021 vs 2020) | Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $178,974 | $99,872 | | Net cash used in investing activities | ($272,880) | ($124,015) | | Net cash provided by financing activities | $243,986 | $241,546 | | Cash and cash equivalents at end of year | $429,019 | $280,124 | - Net cash provided by operating activities increased by $79.1 million in 2021, primarily due to a $116.0 million increase in profit before income tax adjusted for non-cash items496 - The Second Amended and Restated Credit Agreement (2020, amended 2021) provides for up to $100 million in delayed-draw term loans and $250 million in revolving credit, maturing February 5, 2025, with interest based on LIBOR110111504 C. Research and Development, Patents and Licenses, etc. Details on research and development, patents, and licenses are found in the 'Intellectual Property' section of the Business Overview - Information on research and development, patents, and licenses is detailed under 'Information of the company - Business Overview — Intellectual Property'516 D. Trend Information Trend information is in 'Operating Results', with no material adverse trends identified since December 31, 2021 - Trend information is detailed under 'Operating Results — Factors Affecting Our Results of Operations'516 - No material adverse trends, uncertainties, demands, commitments, or events have been identified since December 31, 2021, that are likely to significantly affect revenues, income, profitability, liquidity, or capital resources516 E. Critical Accounting Estimates Critical accounting estimates are detailed in Note 4 of the audited consolidated financial statements - Critical accounting estimates are detailed in Note 4 to the audited consolidated financial statements517 ITEM 6. Directors, Senior Management and Employees Details leadership structure, compensation, board practices, and employee information, emphasizing talent development and equity compensation A. Directors and Senior Management Board of directors and senior management, as of February 10, 2022, includes key executives and independent directors overseeing company operations Board of Directors (as of February 10, 2022) | Name | Position | Age | Current Term Expiring | | :--- | :--- | :--- | :--- | | Martín Migoya | Chairman of the Board and Chief Executive Officer | 53 | 2024 | | Martín Gonzalo Umaran | Director - Chief Corporate Development Officer & President for EMEA | 53 | 2023 | | Guibert Andrés Englebienne | Director - President of Globant X and Globant Ventures - President for Latin America | 55 | 2023 | | Francisco Álvarez-Demalde | Director | 43 | 2022 | | Mario Eduardo Vázquez | Director | 86 | 2022 | | Philip A. Odeen | Director | 86 | 2024 | | Linda Rottenberg | Director | 53 | 2023 | | Richard Haythornthwaite | Director | 65 | 2024 | | Maria Pinelli | Director | 59 | 2022 | Senior Management (as of February 11, 2022) | Name | Position | | :--- | :--- | | Martín Migoya | Chief Executive Officer | | Martín Gonzalo Umaran | Chief Corporate Development Officer - President for EMEA | | Guibert Andrés Englebienne | President of Globant X and Globant Ventures - President for Latin America | | Juan Ignacio Urthiague | Chief Financial Officer | | Patricia Pomies | Chief Operating Officer | | Yanina Maria Conti | Chief Accounting Officer | | Gustavo Barreiro | Chief Information Officer | | Wanda Weigert | Chief Brand Officer | | Diego Tártara | Chief Technology Officer | | Mercedes María Mac Pherson | Chief Talent & Diversity Officer | | Patricio Pablo Rojo | General Counsel | B. Compensation Director and senior management compensation totaled $6.7 million in 2021, including equity incentive plans and non-competition agreements Total Remuneration of Directors and Senior Management (2021, 2020, 2019) | Year | Amount (in thousands) | | :--- | :--- | | 2021 | $6,709 | | 2020 | $6,643 | | 2019 | $6,914 | - The 2014 Equity Incentive Plan grants stock options, RSUs, and PRSUs to employees and senior management, with 40% of recent awards tied to performance and 60% to retention510546550554555556557558 - Founders have non-competition agreements providing compensation upon termination, ranging from 24 to 36 times their highest monthly compensation, plus continued health coverage and life insurance566 - Independent directors are eligible for cash and/or share-based compensation, subject to shareholder approval564 C. Board Practices Board of directors, with 7-15 members, manages the company, establishes committees, indemnifies directors, and manages conflicts of interest - The board of directors consists of at least seven and no more than fifteen members, elected for staggered terms of up to four years569571 - The board can delegate daily management and establish committees, including an audit committee, compensation committee, and corporate governance and nominating committee572573579 - Directors are entitled to indemnification, except for liability due to willful misconduct, bad faith, gross negligence, or reckless disregard of duties577578 - Directors with conflicting interests in a transaction must disclose it, recuse themselves from deliberations, and not vote on the matter575 - The Audit Committee oversees corporate accounting and financial reporting, appoints independent auditors, and reviews financial statements and critical accounting policies580 - The Compensation Committee reviews and approves compensation policies for officers and directors, and administers equity and benefit plans582 - The Corporate Governance and Nominating Committee identifies director candidates, recommends governance guidelines, and oversees board and committee evaluations585 D. Employees Globant's 23,526 'Globers' are a critical asset, supported by global talent access, continuous development programs, and equity incentive plans - As of December 31, 2021, Globant had 23,526 employees ('Globers') across 18 countries, with a decentralized model to improve talent access and retention193589593 Employee Headcount by Functional Area (as of December 31, 2021) | Functional Area | Number of Employees | | :--- | :--- | | Technology | 20,707 | | Operations | 1,460 | | Sales and Marketing | 220 | | Management and administration | 1,139 | | Total | 23,526 | Employee Headcount by Geographical Location (as of December 31, 2021) | Country | Number of Employees | | :--- | :--- | | Argentina | 5,369 | | Brazil | 708 | | Colombia | 5,314 | | Chile | 1,278 | | United Kingdom | 175 | | Uruguay | 1,013 | | United States | 709 | | Mexico | 3,236 | | Peru | 1,272 | | India | 3,518 | | Spain | 534 | | Belarus | 203 | | Romania | 164 | | France | 6 | | Canada | 9 | | Luxembourg | 1 | | Costa Rica | 11 | | Germany | 6 | | Total | 23,526 | - The 'Globant University' digital ecosystem and 'Leadership Accelerator Program' (LeAP) support continuous career development and leadership skill enhancement603613 - The 2021 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase common shares through payroll deductions, with a maximum of 100,000 shares initially issuable619622626 - The 2021 Stock-Equivalent Units (SEUs) plan grants awards to eligible employees, settled in cash or common shares, tied to retention and performance639642 E. Share Ownership As of Feb 11, 2022, directors and executive officers own 2.67% of shares; major holders include BlackRock (8%), Wasatch (6%), and Morgan Stanley (5%) - As of February 11, 2022, directors and executive officers beneficially own an aggregate of 1,120,509 common shares, representing 2.67% of total outstanding shares643646 Major Shareholders (as of February 11, 2022) | Shareholder | Number of Shares | Percentage | | :--- | :--- | :--- | | BlackRock, Inc. | 3,356,942 | 8% | | Wasatch Advisors, Inc. | 2,816,656 | 6% | | Morgan Stanley | 2,109,208 | 5% | - As of February 11, 2022, there were 41,894,982 issued and outstanding common shares644 ITEM 7. Major Shareholders and Related Party Transactions Details major shareholders and the company's policy for related party transactions, emphasizing conflict avoidance and audit committee oversight A. Major Shareholders Details beneficial ownership by directors, senior management, and major shareholders (BlackRock, Wasatch, Morgan Stanley) as of February 11, 2022 - As of February 11, 2022, directors and executive officers, as a group, beneficially own 1,120,509 common shares, representing 2.67% of the total outstanding shares643646 Beneficial Ownership of Common Shares (as of February 11, 2022) | Shareholder | Number of Shares | Percentage | | :--- | :--- | :--- | | BlackRock, Inc. | 3,356,942 | 8% | | Wasatch Advisors, Inc. | 2,816,656 | 6% | | Morgan Stanley | 2,109,208 | 5% | - As of February 11, 2022, there were 41,894,982 issued and outstanding common shares, with approximately 95.90% held by 178 record holders in the United States644645 B. Related Party Transactions Company policies and audit committee oversight manage related party transactions and conflicts of interest, ensuring alignment with company interests - The company has a written code of business conduct and ethics (amended January 26, 2022) and a related party transactions policy (adopted November 5, 2015) to manage conflicts of interest649650 - Potential conflicts of interest and related party transactions must be reported and reviewed by corporate counsel, then summarized for the audit committee649 - The audit committee approves related-party transactions, considering all relevant facts and circumstances to ensure they align with the company's best interests649 - No outstanding balances or revenues from related party operations were disclosed for the years ended December 31, 2021 and 202011781179 C. Interests of Experts and Counsel Information on the interests of experts and counsel is not applicable - Information on the interests of experts and counsel is not applicable651 ITEM 8. Financial Information Covers consolidated financial statements, legal proceedings, and dividend policy, confirming audited financials and retention of funds for expansion A. Consolidated Statements and Other Financial Information Confirms Consolidated Financial Statements are in Item 18, addresses legal proceedings, and outlines the company's dividend policy - Consolidated Financial Statements are included in the annual report under Item 18652 - The company may be involved in litigation, including patent infringement and class actions, and accrues liabilities for probable and estimable future costs653 - A $7.25 million claim by Certified Collectibles Group, LLC was settled in July 2021, with $2.7 million covered by insurance654 - The company reached a preliminary agreement with the U.S. IRS for $1.3 million in payroll and employment tax assessments for 2013-2015655 - The company anticipates retaining all available funds for business operations and expansion, and does not expect to pay dividends in the foreseeable future658 - Luxembourg law requires at least 5% of net income to be allocated to a legal reserve until it reaches 10% of issued share capital, which is not available for distribution659 B. Significant Changes As of the annual report date, no significant changes are reported - As of the date of this annual report, there are no significant changes to inform661 ITEM 9. The Offer and Listing Details the NYSE listing of common shares under 'GLOB' since July 18, 2014, with other offering information not applicable - The company's ordinary shares began trading on the NYSE under the symbol 'GLOB' on July 18, 2014, following its IPO662664 - Information regarding the plan of distribution, selling shareholders, dilution, and expenses of the issue is not applicable in this section663665666 ITEM 10. Additional Information Provides additional information on share capital, articles of association, material contracts, exchange controls, and Luxembourg/U.S. taxation A. Share Capital Information on share capital is not applicable in this section - Information on share capital is not applicable in this section667 B. Memorandum and Articles of Association Globant S.A., a Luxembourg joint stock company, had $50.27 million in share capital as of Dec 31, 2021, governed by articles on shares and board structure - Globant S.A. is a Luxembourg joint stock company, incorporated on December 10, 2012669 - As of December 31, 2021, issued share capital was $50,269,076.40, represented by 41,890,897 common shares with a nominal value of $1.20 each670 - Shareholders have pre-emptive subscription rights on new common shares issued for cash, which the board can waive or limit673680681 - The company may repurchase its own shares under certain conditions, with prior authorization from shareholders682 - Each common share entitles the holder to one vote at general meetings, which distinguish between ordinary and extraordinary resolutions692693694695 - The board of directors, consisting of 7 to 15 members elected for staggered terms, manages the company and can delegate daily management and establish committees714716717718 C. Material Contracts Material contracts include a $350 million credit agreement, underwriting agreements for public offerings, and key acquisition agreements - The Second Amended and Restated Credit Agreement (February 6, 2020, amended October 2021) provides Globant, LLC with up to $100 million in delayed-draw term loans and $250 million in revolving credit, maturing February 5, 2025730 - Underwriting agreements for public offerings include 2.3 million common shares sold in June 2020 for $135.00 per share, and 1.38 million common shares sold in May 2021 for $214.00 per share731735 - Key acquisition agreements include the July 2020 Equity Purchase Agreement for Grupo ASSA ($74.5 million aggregate purchase price) and the December 2020 Equity Purchase Agreement for BlueCap Management Consulting (€120 million aggregate purchase price)732733734 D. Exchange Controls Details on exchange controls are found in the 'Foreign Exchange Controls' section of the Business Overview - Information on exchange controls is detailed under 'Information on the Company — Business Overview — Regulatory Overview — Foreign Exchange Controls'736 E. Taxation Summarizes Luxembourg and U.S. tax implications for common shares, including corporate taxes, dividend withholding, and PFIC status - Luxembourg-resident companies are subject to corporate income tax (CIT) and municipal business tax (MBT), with an effective maximum aggregate rate of 24.94% in Luxembourg City as of 2019741742 - Dividends paid by the company are generally subject to a 15% Luxembourg withholding tax, unless reduced by a double tax treaty or exempt under the participation exemption regime747 - For U.S. Holders, distributions are generally foreign source dividend income, and the company does not expect to be classified as a Passive Foreign Investment Company (PFIC)774780 - The 2017 Tax Act eliminated 'downward attribution' for CFC rules, potentially impacting U.S. subsidiaries and 10% U.S. Shareholders778 F. Dividends and Paying Agents Information on dividends and paying agents is not applicable - Information on dividends and paying agents is not applicable784 G. Statement by Experts Information on the statement by experts is not applicable - Information on the statement by experts is not applicable785 H. Documents on Display As a foreign private issuer, Globant is exempt from certain U.S. securities laws, with SEC filings available online - As a foreign private issuer, Globant is exempt from certain U.S. securities laws, including frequent periodic reports, detailed executive compensation disclosures, proxy statements, and Regulation FD786787 - SEC filings, including this annual report on Form 20-F, are available on the SEC's website (http://www.sec.gov)[786](index=786&type=chunk)788 I. Subsidiaries Information Information on subsidiaries is not applicable in this section - Information on subsidiaries is not applicable in this section789 ITEM 11. Quantitative and Qualitative Disclosures About Market Risk Market risk stems from credit, interest rate, and foreign currency fluctuations, managed through client limits, fixed-rate debt, and hedging strategies - Market risk exposure primarily results from concentration of credit risk, fluctuations in interest rates, and foreign currency rates790 - Credit risk is considered low due to dispersed trade receivables across large clients and maintaining cash with high-credit quality financial institutions7917927931388 - Interest rate risk is low, with credit lines bearing fixed interest rates, and the company has used interest rate swaps for hedging7947951380 - Foreign exchange risk arises from operations in Latin America and Asia, where most operating expenses are in non-U.S. dollar currencies (e.g., Argentine peso, Colombian peso, Indian Rupee, Mexican peso, Uruguayan peso, Brazilian real, Euros, British pound)7967977991373 Revenue by Currency (2021, 2020, 2019) | Currency | 2021 % | 2020 % | 2019 % | | :--- | :--- | :--- | :--- | | USD | 75.4% | 86.0% | 85.5% | | EUR | 8.6% | 4.4% | 4.3% | | CLP | 4.4% | 0.4% | 0.4% | | ARS | 3.6% | 4.1% | 4.1% | | MXN | 3.1% | 2.7% | 3.0% | | BRL | 1.8% | 1.3% | 1.2% | | GBP | 1.6% | 0.2% | 0.5% | | COP | 0.8% | 1.0% | 1.0% | | PEN | 0.7% | —% | —% | | Others | —% | 0.1% | —% | | Total | 100.0% | 100.0% | 100.0% | - The company uses foreign exchange forward and future contracts to mitigate foreign exchange rate fluctuations, particularly for the Argentine peso, which experienced significant devaluations in 2021 (22.09%) and 2020 (40.58%)8018028038041377137914321438 ITEM 12. Description of Securities Other Than Equity Securities Information on debt securities, warrants, other securities, and American Depositary Shares is not applicable - Information on debt securities, warrants and rights, other securities, and American Depositary Shares is not applicable805806807808 PART II ITEM 13. Defaults, Dividend Arrearages and Delinquencies Information on defaults, dividend arrearages, and delinquencies is not applicable - Information on defaults, dividend arrearages, and delinquencies is not applicable810 ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Information on material modifications to security holder rights and use of proceeds is not applicable - Information on material modifications to the rights of security holders and use of proceeds is not applicable811 ITEM 15. Controls and Procedures Disclosure controls and internal control over financial reporting were effective as of Dec 31, 2021, excluding recent 2021 acquisitions - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of December 31, 2021812813 - Internal control over financial reporting was assessed as effective as of December 31, 2021, based on criteria established in 'Internal Control — Integrated Framework (2013)' issued by COSO814815 - Walmeric, Atix, and Navint, acquired in 2021, were excluded from the assessment of internal control over financial reporting, collectively representing 0.9% of consolidated assets and 0.8% of consolidated revenues816867868 - No changes in internal controls over financial reporting materially affected or are reasonably likely to materially affect internal control during the reporting period818 ITEM 16A. Audit Committee Financial Expert Mario Vázquez is designated as an 'audit committee financial expert' under SEC rules - Mario Vázquez is designated as an 'audit committee financial expert' under SEC rules819 ITEM 16B. Code of Ethics Globant adopted a Code of Ethics, updated March 1, 2022, covering anti-money laundering, company image, audits, and diversity - The company adopted a code of business conduct and ethics on July 23, 2014, and approved the 2022 Code of Ethics, effective March 1, 2022820 - The new code addresses anti-money laundering, protection of Globant's image, proper use of social media, third-party audits, government investigations, and integration and diversity820 ITEM 16C. Principal Accountant Fees and Services Details principal auditor fees for 2021 and 2020, categorized by service type, with all services pre-approved by the audit committee Principal Auditor Fees (in thousands of dollars) | Fee Type | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fees | $1,513 | $1,216 | | Audit Related Fees | $331 | $100 | | Tax Services Fees | $0 | $0 | | All Other Fees | $0 | $0 | | Total | $1,844 | $1,316 | - All fees and retention terms for audit and non-audit services performed by independent auditors must be pre-approved by the audit committee822 - The audit committee oversees the relationship with independent audi