Globant (GLOB) is trading down slightly after it reported Q2 results last night. As it's probably a name you're not familiar with, a little background would help. It's a fairly recent IPO, having made its debut in July 2014.
Globant sees itself as a new-breed technology services provider. GLOB is based in Buenos Aires, Argentina but more than 80% of its revenue comes from North America. Historically, traditional IT providers have focused on delivering custom applications based on detailed client specs, while digital agencies emphasized creativity (visual design, user interface etc.) but without the depth of engineering expertise.
GLOB says it's a play on the ongoing paradigm shift whereby customers want IT providers to not only handle the rigorous engineering requirements of emerging technologies (mobile, social media, cashless transactions, big data etc.), but also offer creative talent normally provided by digital agencies.
As opposed to the traditional Software as a Service ("SaaS" or cloud) approach in which the products are static, the truth is that each company has specific characteristics. For example, Globant's Digital Journey Mobile Platform combines social media, gaming strategies, mobile technologies and Big Data to augment the end users' experiences before, during & after a touch point with the consumer.
A couple of examples to understand what GLOB does: GLOB has collaborated with National Geographic Kids to create their new website. This customer approached Globant with a goal of aligning its web properties with its uber Kids brand and products. GLOB was involved in the development, the brand realignment and the creation of a premium service called National Geographic Kids Adventure Pass.
Another customer example is eBay Classifieds wherein GLOB was hired to work on several mobile projects. eBay wanted to create mobile apps that were easy-to-use, visually appealing and with a focus on social media. GLOB collaborated on the core development of the native iOS and Android mobile platforms helping eBay Classifieds Group with design development, talent and scale etc. Most of GLOB's competitors would not be involved in all of these facets, that's why it's different.
In terms of recent developments, in June 2017, Globant acquired PointSource, a design and development tech agency comprised of digital experts specialized in retail, supply chain and insurance services. With this acquisition, Globant is reinforcing its focus in digital transformation and continues to expand its US footprint adding two new cities where PointSource has offices: Raleigh (NC), and Chicago (IL).
Turning to the Q2 results, Non-IFRS (foreign equivalent of non-GAAP) EPS fell 7% YoY to $0.27, which was in-line with prior guidance of $0.26-0.28. Revenue rose 24.7% year/year to $99.6 mln, which was a bit better than prior guidance of $95-97 mln. The forward guidance was also quite good as GLOB sees Q3 non-IFRS EPS coming in at $0.32-0.36, in-line with market expectations. However, Q3 revenue guidance of $103-105 mln was a good bit better than market expectations. For FY17, the company reaffirmed prior guidance for non-IFRS EPS at $1.22-1.30, but they raised FY17 revenue guidance to $397-403 mln from $386-394 mln.
GLOB notes that its European operations expanded aggressively compared to Q2 2016 and, with the recent acquisition of PointSource, the company continues expanding in the US. This quarter, GLOB added a number of high potential accounts in the Banking, Financial services and Insurance industry, among others.
In sum, this stock has had some ups and downs but it has been in a general uptrend since its IPO in July 2014. Globant has been posting good earnings results as it's seeing strong overall demand for its services and it has been getting great traction at key strategic accounts. GLOB says it continues to see strong demand coming from companies looking to achieve digital transformations. Clients keep searching for ways to connect emotionally with their customers through digital journeys, propelled by emerging technologies such as artificial intelligence.