Globant S.A. revenue growth decelerated to 23.5% in 2020 vs. 26.2% a year earliner

02/18/2021 • About Globant S.A. ($GLOB) • By InTwits

Globant S.A. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:

• Globant S.A. is a fast growth stock: 2020 revenue growth was 23.5%, 5 year revenue CAGR was 26.3% at 2020 ROIC 10.2%
• Globant S.A. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.1%. At the same time it's in pair with industry average of 5.5%
• CAPEX is quite volatile: $18m in FY2020, $21m in FY2019, $14m in FY2018, $12m in FY2017, $4m in FY2016
• The company has business model with average profitability: ROIC is 10.2%

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue jumped on 23.5%. Revenue growth showed acceleration in 20Q4 - it increased 26.4% YoY. During 2016-2020 Revenue growth topped in 2017 at 28.1% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.3 pp from 7.3% to 10.6% in 2020.

Gross Margin decreased slightly on 1.2 pp from 38.5% to 37.4% in 2020. SG&A as a % of Revenue decreased on 2.1 pp from 26.2% to 24.1% in 2020.

Net Income margin decreased slightly on 1.5 pp from 8.2% to 6.7% in 2020.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 3.6% in 2020. The company showed small CAPEX/Revenue decline of 1.1 pp from 4.7% in 2017 to 3.6% in 2020. Average CAPEX/Revenue for the last three years was 3.5%. CAPEX as a % of Revenue stuck to a declining trend at -0.54 pp per annum in the last 5 years.

Return on investment

The company operates at low ROIC (10.2%) and ROE (8.2%). ROIC decreased on 6.4 pp from 16.7% to 10.2% in 2020. ROE decreased on 5.7 pp from 13.9% to 8.2% in 2020.

Leverage (Debt)

Debt level is -1.2x Net Debt / EBITDA and 0.9x Debt / EBITDA. Debt dropped on 30.3% while cash jumped on 345%.

Globant S.A. has no short term refinancing risk: cash is higher than short term debt (1,624.4%).

Valuation and dividends

The company's trades at EV/EBITDA 61.7x and P/E 153.8x.

Management team

The company's CEO Martin Migoya has spent 16 years with the company. Juan Ignacio Urthiague is a the company's CFO. Juan Ignacio Urthiague has spent 2 years at the company.

Financial and operational results

FY ended 12/31/2020

Globant S.A. ($GLOB) key annual financial indicators

mln. $	2016	2017	2018	2019	2020	2020/2019
P&L
Revenue	322.9	413.4	522.3	659.3	814.1	23.5%
Gross Profit	131.5	150.3	203.8	254.2	304.3	19.7%
SG&A	81.9	110.8	133.2	172.5	196.1	13.7%
EBITDA	60.5	49.3	87.3	143.8	132.4	-7.9%
EBIT	49.6	33.2	66.8	80.7
Interest expence	0.0	0.1	0.2
Tax	14.3	8.1	15.9
Net Income	35.9	30.5	51.7	54.0	54.2	0.4%
Stock Based Compensation	3.6	12.9	10.6	15.4
Balance Sheet
Cash	50.5	52.5	77.6	62.7	278.9	344.7%
Accounts Receivable	54.2	80.1	110.9	156.7
Accounts Payable	5.6	11.6	17.6	31.5
Short Term Debt	0.4	12.0	0.0	72.0	17.2	-76.2%
Long Term Debt	0.0	0.0	0.0	92.1	97.3	5.6%
Cash flow
Capex	17.7	19.6	19.2	20.4	29.3	43.8%
Acquisitions	16.6	19.1	4.1
Ratios
Revenue growth	27.2%	28.1%	26.3%	26.2%	23.5%
EBITDA growth	83.1%	-18.5%	77.2%	64.7%	-7.9%
Gross Margin	40.7%	36.3%	39.0%	38.5%	37.4%	-1.2%
EBITDA Margin	18.7%	11.9%	16.7%	21.8%	16.3%	-5.5%
EBIT Margin	15.4%	8.0%	12.8%	12.2%
SG&A, % of revenue	25.4%	26.8%	25.5%	26.2%	24.1%	-2.1%
SBC, % of revenue	1.1%	3.1%	2.0%	2.3%
Net Income Margin	11.1%	7.4%	9.9%	8.2%	6.7%	-1.5%
CAPEX, % of revenue	5.5%	4.7%	3.7%	3.1%	3.6%	0.5%
ROIC	25.6%	13.3%	21.2%	16.7%	10.2%	-6.4%
ROE	19.5%	12.9%	17.2%	13.9%	8.2%	-5.7%
Net Debt/EBITDA	-0.8x	-0.8x	-0.9x	0.7x	-1.2x	-1.9x
Interest expence / Average debt	9.4%	0.8%
People
Insider ownership	3.7%	3.7%	3.7%	2.9%
Employees	5,631	6,397	8,384	11,855
Revenue/Employee, th. $	57	65	62	56

Globant S.A. ($GLOB) key quoterly financial indicators

mln. $	20Q1	20Q2	20Q3	20Q4		YoY change
P&L
Revenue	192	183	207	233		31.2%	15.6%	21.2%	26.4%
EBITDA	26	22	31	37		7.9%	-11.7%	8.4%	36.9%
Net Income	13	10	12	19		9.7%	-22.9%	-17.7%	43.8%
Balance Sheet
Cash	133	357	323	279		215.8%	749.7%	467.2%	342.8%
Short Term Debt	21	24	27	17		29.5%	60.9%	-44.8%	-76.2%
Long Term Debt	174	124	121	97		462.3%	129.2%	98.3%	5.8%
Ratios
Gross Margin	37.7%	36.3%	37.1%	38.2%		-1.3%	-1.7%	-1.9%	0.2%
EBITDA Margin	13.5%	12.1%	15.2%	15.9%		-2.9%	-3.7%	-1.8%	1.2%
Net Income Margin	6.9%	5.5%	6.0%	8.0%		-1.3%	-2.7%	-2.8%	1.0%

Peers in Application Software

Below you can find Globant S.A. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
VirnetX Holding Corp ($VHC)	-	-0.2%	-95.9%	34.9%	355,942.4%
AudioEye, Inc. ($AEYE)	-	175.5%	106.6%	90.2%	90.2%
Cloudera, Inc. ($CLDR)	-	57.2%	42.6%	28.9%	65.5%
Integrated Ventures Inc ($INTV)	-	-	-	-8.9%	62.7%
Smartsheet Inc. ($SMAR)	-	64.3%	66.1%	59.7%	52.4%
Median (92 companies)	12.0%	14.8%	15.1%	19.4%	14.5%
Globant S.A. ($GLOB)	-	28.1%	26.3%	26.2%	23.5%

Top companies by Gross margin, %

Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Aware, Inc. ($AWRE)	90.3%	94.6%	92.3%	89.7%	92.8%
Alteryx, Inc. ($AYX)	81.3%	83.4%	91.0%	90.6%	91.1%
Autodesk, Inc. ($ADSK)	85.2%	83.2%	85.2%	88.9%	90.1%
Smith Micro Software, Inc. ($SMSI)	73.2%	77.9%	83.5%	90.9%	89.9%
Cadence Design Systems, Inc. ($CDNS)	85.9%	87.8%	87.9%	88.6%	88.6%
Median (89 companies)	64.2%	64.6%	66.0%	68.4%	70.6%
Globant S.A. ($GLOB)	40.7%	36.3%	39.0%	38.5%	37.4%

Top companies by EBITDA margin, %

Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
VirnetX Holding Corp ($VHC)	-1,837.2%	-1,118.0%	-40,379.4%	-23,127.1%	52.2%
j2 Global, Inc. ($JCOM)	41.7%	36.5%	35.7%	38.6%	40.5%
Intelligent Systems Corporation ($INS)	-5.4%	-12.8%	33.6%	43.6%	40.4%
Adobe Inc. ($ADBE)	31.2%	34.2%	35.3%	35.8%	39.7%
SS&C Technologies Holdings, Inc. ($SSNC)	34.9%	37.9%	27.7%	38.2%	38.3%
Median (89 companies)	-5.3%	-4.2%	-3.3%	2.7%	6.8%
Globant S.A. ($GLOB)	18.7%	11.9%	16.7%	21.8%	16.3%

Top companies by CAPEX/Revenue, %

Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
MicroStrategy Incorporated ($MSTR)	0.5%	0.8%	1.4%	2.1%	234.8%
Integrated Ventures Inc ($INTV)	-	-	199.9%	15.2%	27.2%
Intelligent Systems Corporation ($INS)	3.8%	9.7%	4.3%	4.9%	19.2%
LivePerson, Inc. ($LPSN)	5.5%	7.9%	8.8%	16.3%	11.4%
PROS Holdings, Inc. ($PRO)	4.7%	0.8%	0.7%	2.1%	11.3%
Median (87 companies)	2.9%	2.3%	2.4%	2.9%	2.5%
Globant S.A. ($GLOB)	5.5%	4.7%	3.7%	3.1%	3.6%

Top companies by ROIC, %

Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
VirnetX Holding Corp ($VHC)	-210.9%	-256.8%	-416.3%	-247.2%	137.3%
Manhattan Associates, Inc. ($MANH)	99.3%	102.5%	80.9%	71.7%	53.4%
Citrix Systems, Inc. ($CTXS)	16.1%	16.7%	25.2%	29.8%	33.5%
Sonic Foundry, Inc. ($SOFO)	-18.1%	-50.6%	-786.4%	-	31.3%
Paycom Software, Inc. ($PAYC)	75.4%	51.1%	47.5%	47.5%	28.7%
Median (92 companies)	-9.8%	-11.8%	-10.6%	-4.5%	-2.2%
Globant S.A. ($GLOB)	25.6%	13.3%	21.2%	16.7%	10.2%

Top companies by Net Debt / EBITDA

Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Dropbox, Inc. ($DBX)	-	-3.8x	-	2.4x	1,341.0x
Avaya Holdings Corp. ($AVYA)	-	-	7.4x	-	77.9x
Alteryx, Inc. ($AYX)	-	-	2.5x	6.1x	32.2x
Five9, Inc. ($FIVN)	-6.7x	-8.6x	7.3x	5.3x	17.6x
Synchronoss Technologies, Inc. ($SNCR)	-	-	-	-	11.6x
Median (53 companies)	-0.9x	-0.9x	-0.6x	0.4x	0.3x
Globant S.A. ($GLOB)	-0.8x	-0.8x	-0.9x	0.7x	-1.2x

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