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Summary

  • GLOB, an Argentine IT firm, primarily serving customers in North America, plans to raise $75.6 million in its upcoming IPO.
  • GLOB primary clients are in North America, including Google, Sabre, Orbitz, Walt Disney Parks and Resorts Online, and Electronic Arts.
  • GLOB has experienced strong revenue growth over the past several years, a disappointing loss from operations in 2013—but a promising start to 2014.
  • Despite GLOB's massive reliance on a handful of customers for much of its revenues, we lean towards positive on this IPO and suggest investors consider buying in.

Globant S.A. (Pending:GLOB), an Argentine IT firm, primarily serving customers in North America, plans to raise $75.6 million in its upcoming IPO.

The firm, which lists its principal offices in Luxembourg, will offer 6.3 million shares, including 46% insider shares, at an expected price range of $11-$13 per share. If the IPO can reach the midpoint of that range at $12 per share, GLOB will command a market value of $400 million.

Filing, Underwriting

GLOB filed on August 27, 2013.

Lead Underwriters: Citigroup Global Markets Inc; Credit Suisse Securities (USA) LLC; J.P. Morgan Securities

Underwriters: Cowen and Company, LLC; LOYAL3 Securities, Inc.; William Blair and Co., L.L.C

Summary of Globant's Business

GLOB is a provider of IT services that designs and markets software solutions primarily to clients in North America, where 79.9% of its revenues were generated in the first three months of 2014.

The firm lists its principal offices in Luxembourg, but its principal operating subsidiary is headquartered in Buenos Aires, Argentina.

GLOB seeks to take advantage of a rapidly changing IT landscape resulting from increasing corporate interest in technologies and trends ranging from cloud computing and social media to big data and gamification.

As of March 31, 2014, GLOB operated 25 delivery centers across the United States, Mexico, Brazil, Colombia, Uruguay, and Argentina, as well as four client management locations in the U.S. and one each in Brazil, Argentina, Uruguay, Colombia and the U.K.

GLOB's customers include many well-known companies and global brands, such as Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Sabre (NASDAQ:SABR), Orbitz (NYSE:OWW), Walt Disney Parks and Resorts Online (NYSE:DIS), and Electronic Arts (NASDAQ:EA).

(click to enlarge)

(Source: pro.edgar-online.com)

Valuation

GLOB offers the following figures in its F-1 balance sheet for the three months ended March 31, 2014:

  • Revenue: $43,125,000.00
  • Net Income: $3,424,000.00
  • Total Assets: $112,004,000.00
  • Total Liabilities: $48,553,000.00
  • Stockholders' Equity: $62,907,000.00

GLOB has experienced strong revenue growth over the past several years, growing from revenues of $90.1 million in 2011 to revenues of $158.3 million in 2013-a CAGR of 32.5%.

The firm saw a disappointing loss from operations of $5.0 million in 2013, but has had a promising start to 2014 with a profit from operation of $3.4 million for the three months ended March 31, 2014.

Competitive Field

GLOB faces competition from global consulting firms, digital design firms, and other IT outsourcing providers, some of which have access to greater financial resources than GLOB. Major competitors include Accenture (NYSE:ACN), IBM (NYSE:IBM), Ideo, SapientNitro, GlobalLogic, Infosys Technologies (NYSE:INFY), EPAM Systems (NYSE:EPAM), and Aricent.

GLOB must also compete with the in-house IT solutions that many firms prefer.

Management Highlights

Co-founder Martin Migoya has served as GLOB's chairman and CEO since 2005.

He previously worked as a technology project coordinator at Repsol-YPF, a consultant at Origin BV Holland and a business development director at Tallion.

Mr. Migoya was selected as an Endeavor Entrepreneur in 2005 and won a Konex Award as one of the most innovative entrepreneurs of 2008. Latin Trade recognized Mr. Migoya as Emerging CEO of the Year in 2011, and he received the "Entrepreneur of the Year Award" from Ernst & Young in 2013.

Mr. Migoya received a degree in electronic engineering from Universidad Nacional de La Plata and a master's degree in business administration from the Universidad del Centro de Estudios Macroeconómicos de Argentina.

Conclusion: Consider Buying In

We are neutral-to-positive on this IPO.

GLOB has a history of profitability and has positioned itself well to take advantage of the changing IT environment. The firm already boasts an impressive list of top companies as clients, including the likes of Google and Disney, and has proven its ability to expand its revenues over the past several years.

We are somewhat concerned by GLOB's massive reliance on a handful of customers for much of its revenues; in 2013, the firm's ten largest customers made up nearly 40% of its revenues, and its largest customer, Walt Disney Parks and Resorts Online, made up 6.4% of its revenues.

We are also slightly concerned about current political risk in Argentina, however, as the firm's business is diverse in nature and global in scale, this risk should be mitigated. The firm's current growth rates and propensity for finding new big-name customers also should not inhibit GLOB in the long term.

Though we'd prefer not to see such a high percentage of insider shares included in this offering, we believe that GLOB merits serious consideration on the part of investors.

At present, we hear the deal is valued attractively, compared with its peers, and continues to have room to work.

We invite readers wishing to join the discussion on IPOs to click the +FOLLOW button above the title of this article--and those looking for the latest development to click +Get real time alerts.

Note: As a large sample of information sources does not yet exist for GLOB, we have taken much of the information for this article directly from GLOB's S-1 filing.

Source: A Global Opportunity With Globant's IPO