UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of June 2020

Commission file number: 001-36535

 

 

 

GLOBANT S.A.

(Exact name of registrant as specified in its charter)

 

Not applicable

(Translation of registrant’s name into English)

 

37A Avenue J.F. Kennedy

L-1855, Luxembourg

Tel: + 352 20 30 15 96

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

x Form 20-F     ¨ Form 40-F

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

 

 

 

 

 

  

GLOBANT S.A.

FORM 6-K

 

Globant S.A. (“we,” “us,” “our” or the “registrant”) is furnishing under the cover of Form 6-K the following:

 

Exhibit 99.1 Condensed interim consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019.
   
Exhibit 99.2 Supplemental Disclosure.
   
Exhibit 99.3 Selected Investor Presentation Slides.
   
Exhibit 99.4 Amended Articles of Association dated June 2, 2020.

 

We have prepared this report to provide our investors with disclosure and financial information regarding recent developments in our business and results of operations as of and for the three months ended March 31, 2020.

 

The information in this report supplements information contained in our Annual Report on Form 20-F for the year ended December 31, 2019 (File No. 001-36535), filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2020 (our “2019 Form 20-F”).

 

This Report on Form 6-K shall be incorporated by reference into the registrant’s Registration Statement on Form F-3ASR (File No. 333-225731).

 

 

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  GLOBANT S.A.
     
     
  By: /s/ JUAN IGNACIO URTHIAGUE
    Name: Juan Ignacio Urthiague
    Title: Chief Financial Officer

 

Date: June 3, 2020

 

 

 

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

  Globant S.A.
   
 

Condensed interim consolidated financial

statements as of March 31, 2020 and for the three

months ended March 31, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

PAGE 1

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (UNAUDITED)

(in thousands of U.S. dollars, except per share amounts)

 

      Three months ended 
   Notes  March 31, 2020   March 31, 2019 
            
Revenues  7   191,572    146,151 
Cost of revenues  8.1   (119,369)   (88,727)
Gross profit      72,203    57,424 
              
Selling, general and administrative expenses  8.2   (51,872)   (38,632)
Net impairment losses on financial assets (1)      (1,617)   (436)
Profit from operations      18,714    18,356 
              
Gain on transactions with bonds      2,331     
              
Finance income  9   13,709    891 
Finance expense  9   (15,522)   (3,702)
Finance expense, net  9   (1,813)   (2,811)
              
Other income and expenses, net      16    (19)
Profit before income tax      19,248    15,526 
              
Income tax  6   (6,078)   (3,427)
Net income for the period      13,170    12,099 
              
Other comprehensive income, net of income tax effects             
Items that may be reclassified subsequently to profit and loss:             
- Exchange differences on translating foreign operations      (2,104)   (616)
- Net change in fair value on financial assets measured at fair value through other comprehensive income ("FVOCI")      (114)   35 
- Gains and losses on cash flow hedges      (2,069)   (882)
Total comprehensive income for the period      8,883    10,636 
              
Net income attributable to:             
Owners of the Company      13,170    12,099 
Net income for the period      13,170    12,099 
              
Total comprehensive income for the period attributable to:             
Owners of the Company      8,883    10,636 
Total comprehensive income for the period      8,883    10,636 
              
Earnings per share (2)             
Basic      0.36    0.33 
Diluted      0.35    0.32 
Weighted average of outstanding shares (in thousands)             
Basic      37,008    36,205 
Diluted      38,093    37,320 

 

(1)Includes a loss of 1,617 and 436 on impairment of trade receivables for the three months ended March 31, 2020 and 2019, respectively (see note 21).
(2)As of March 31, 2020 and 2019, respectively, 546 and 21 potential ordinary shares are anti-diluted and therefore excluded from the weighted average number of ordinary shares for the purpose of diluted earnings per share.

 

The accompanying notes 1 to 22 are an integral part of these condensed interim consolidated financial statements.

 

PAGE 2

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF MARCH 31, 2020 AND DECEMBER 31, 2019 (UNAUDITED)

(in thousands of U.S. dollars)

 

   Notes  March 31, 2020   December 31, 2019 
ASSETS             
Current assets             
Cash and cash equivalents  4.3   132,641    62,721 
Investments  4.2   1,520    19,780 
Trade receivables  4.3   167,418    156,676 
Other assets      12,296    13,439 
Other receivables      19,772    19,308 
Other financial assets (1)      3,266    4,527 
Total current assets      336,913    276,451 
              
Non-current assets             
Investments  4.2       418 
Other assets      6,958    7,796 
Receivables  4.3   20,411    8,810 
Deferred tax assets      23,762    26,868 
Investment in associates      3,776    3,776 
Other financial assets (2)      1,883    1,683 
Property and equipment  10   88,900    87,533 
Intangible assets  11   27,826    27,110 
Right-of-use assets  12   73,024    58,781 
Goodwill  20   187,978    188,538 
Total non-current assets      434,518    411,313 
TOTAL ASSETS      771,431    687,764 
              
LIABILITIES             
Current liabilities             
Trade payables      30,166    31,487 
Payroll and social security taxes payable  4.3   53,182    72,252 
Borrowings  14   495    1,198 
Other financial liabilities (3)      10,903    8,937 
Lease liabilities  12   19,728    19,439 
Tax liabilities      7,762    7,898 
Income tax payable      8,384    4,612 
Other liabilities      1,029    368 
Total current liabilities      131,649    146,191 
              
Non-current liabilities             
Trade payables      6,753    5,500 
Borrowings  14   125,169    50,188 
Other financial liabilities (4)      813    1,617 
Lease liabilities  12   49,149    41,924 
Deferred tax liabilities      795    1,028 
Provisions for contingencies  16   3,363    2,602 
Total non-current liabilities      186,042    102,859 
TOTAL LIABILITIES      317,691    249,050 
              
Capital and reserves             
Issued capital      44,439    44,356 
Additional paid-in capital      163,597    157,537 
Other reserves      (6,844)   (2,557)
Retained earnings      252,548    239,378 
Total equity attributable to owners of the Company      453,740    438,714 
TOTAL EQUITY AND LIABILITIES      771,431    687,764 

 

(1)Includes the fair value of convertible notes of 3,263 and 3,236 (notes 5.2.2.1, 5.2.2.2 and 5.2.2.3) and the fair value of foreign exchange forward contracts of 3 and 1,291 (note 5.2.1) as of March 31, 2020 and December 31, 2019, respectively.
(2)Includes convertible notes of 500 and 300 (note 5.2.2.4) as of March 31, 2020 and December 31, 2019, respectively, and guarantee payments related to the future lease of a property under construction of 1,383 as of March 31, 2020 and December 31, 2019, respectively.
(3)Includes other financial liabilities related to business combinations of 7,086 and 8,937 as of March 31, 2020 and December 31, 2019, respectively (note 20), and the fair value of foreign exchange forward contracts of 3,817 (note 5.2.1) as of March 31, 2020.
(4)Includes other financial liabilities related to business combinations of 387 and 1,617 as of March 31, 2020 and December 31, 2019 , respectively (note 20), and the fair value of interest rate swap of 426 as of March 31, 2020 (note 5.2.1).

 

The accompanying notes 1 to 22 are an integral part of these condensed interim consolidated financial statements.

 

PAGE 3

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

(in thousands of U.S. dollars except number of shares issued)

 

 

   Number of Shares Issued (1)   Issued capital   Additional paid-in capital   Retained earnings   Foreign currency translation reserve  

Investment revaluation and Cash flow hedge reserve

   Attributable to owners of the Parent   Total 
                                 
Balance at January 1, 2019   35,965,662    43,158    109,559    187,335    (2,097)   (39)   337,916    337,916 
Adjustment on initial application of IFRS 16               (1,972)           (1,972)   (1,972)
Issuance of shares under share-based compensation plan (note 13.1)   326,297    392    5,668                6,060    6,060 
Issuance of shares under subscription agreement (note 13.2)   39,732    48    2,322                2,370    2,370 
Share-based compensation plan           6,039                6,039    6,039 
Other comprehensive income for the period, net of tax                   (616)   (847)   (1,463)   (1,463)
Net income for the period               12,099            12,099    12,099 
Balance at March 31, 2019   36,331,691    43,598    123,588    197,462    (2,713)   (886)   361,049    361,049 

 

   Number of Shares Issued (1)   Issued capital   Additional paid-in capital   Retained earnings   Foreign currency translation reserve   Investment revaluation and Cash flow hedge reserve   Attributable to owners of the Parent   Total 
                                 
Balance at January 1, 2020   36,963,619    44,356    157,537    239,378    (2,497)   (60)   438,714    438,714 
Issuance of shares under share-based compensation plan (note 13.1)   67,876    81    2,156                2,237    2,237 
Issuance of shares under subscription agreement (note 13.2)   2,018    2    223                225    225 
Share-based compensation plan           3,681                3,681    3,681 
Other comprehensive income for the period, net of tax                   (2,104)   (2,183)   (4,287)   (4,287)
Net income for the period               13,170            13,170    13,170 
Balance at March 31, 2020   37,033,513    44,439    163,597    252,548    (4,601)   (2,243)   453,740    453,740 

 

(1)All shares are issued, authorized and fully paid. Each share is issued at a nominal value of $1.20 per share and is entitled to one vote.

 

The accompanying notes 1 to 22 are an integral part of these condensed interim consolidated financial statements.

 

PAGE 4

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

(in thousands of U.S. dollars)

 

   Three months ended 
   March 31, 2020   March 31, 2019 
         
Cash flows from operating activities          
Net income for the period   13,170    12,099 
Adjustments to reconcile net income for the period to net cash flows from operating activities:          
Share-based compensation expense   5,790    3,823 
Current income tax   6,644    5,468 
Deferred income tax   (566)   (2,041)
Depreciation of property and equipment   3,978    3,339 
Depreciation of right-of-use assets   4,622    4,033 
Amortization of intangible assets   2,887    2,307 
Net impairment losses on financial assets   1,617    436 
Allowance for claims and lawsuits   804    (19)
Loss on remeasurement of contingent consideration       35 
Gain on transactions with bonds   (2,331)    
Accrued interest   1,836    641 
Interest gain   229    168 
Net loss (gain) arising on financial assets measured at fair value recognized in profit or loss ("FVPL")   5,642    (612)
Net loss (gain) arising on financial assets measured at FVOCI   1,723    (9)
Net loss (gain) arising on financial assets measured at amortized cost   3    (62)
Exchange differences   (7,749)   2,214 
Changes in working capital:          
Net increase in trade receivables   (15,207)   (24,388)
Net increase in other receivables   (3,971)   (1,348)
Net decrease in other assets   1,981     
Net increase in receivables   (9,198)    
Net increase (decrease) in trade payables   1,178    (2,364)
Net (decrease) increase in payroll and social security taxes payable   (14,152)   4,357 
Net (decrease) increase in tax liabilities   (309)   3,133 
Utilization of provision for contingencies       (95)
Income tax paid   (3,972)   (2,311)
Net cash (used in) provided by operating activities   (5,351)   8,804 

 

PAGE 5

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

(in thousands of U.S. dollars)

 

   Three months ended 
   March 31, 2020   March 31, 2019 
Cash flows from investing activities          
Acquisition of property and equipment (1)   (6,927)   (4,057)
Proceeds from disposals of property and equipment and intangibles   350    36 
Acquisition of intangible assets (2)   (3,616)   (1,463)
Acquisition of investment in sovereign bonds   (6,500)    
Proceeds of investment in sovereign bonds   8,831     
(Payments) related to forward and future contracts   (4,482)   (232)
Proceeds related to forward and future contracts   583    751 
Proceeds from investments measured at FVTPL   18,018    461 
Acquisition of investments measured at FVOCI   (2,994)    
Proceeds from investments measured at FVOCI   3,000    3,621 
Acquisition of investment in convertible notes   (200)   (1,800)
Acquisition of business, net of cash (3)       (37,252)
Payments of earn-outs related to acquisition of business   (3,150)   (8,981)
Net cash provided by (used in) investing activities   2,913    (48,916)
           
Cash flows from financing activities          
Proceeds from the issuance of shares under the share-based compensation plan   2,021    5,965 
Cash received from the settlements of the derivative financial instruments used to hedge interest rate risk   3     
Proceeds from subscription agreements   909    2,370 
Proceeds from borrowings   75,000     
Repayment of borrowings   (558)    
Payments of principal portion of lease liabilities   (4,982)   (3,299)
Payments of lease liabilities interest   (317)   (20)
Interest paid   (581)    
Net cash provided by financing activities   71,495    5,016 
           
Increase (decrease) in cash and cash equivalents   69,057    (35,096)
           
Cash and cash equivalents at beginning of the year   62,721    77,606 
Effect of exchange rate changes on cash and cash equivalents   863    (309)
Cash and cash equivalents at end of the period   132,641    42,201 

 

(1)For the three months ended March 31, 2020 and 2019, included 774 and 3,579 of acquisition of property and equipment financed with trade payables, respectively. During the three months ended March 31, 2020 and 2019, the Company paid 2,179 and 4,316 related to property and equipment acquired in 2019 and 2018, respectively. Finally, for the three months ended March 31, 2019, included 785 of advances paid.
(2)For the three months ended March 31, 2020 and 2019, included 25 and 773 of acquisition of intangible assets financed with trade payables, respectively. During the three months ended March 31, 2019, the Company paid 217 related to intangible assets acquired in 2018.

(3)Cash paid for assets acquired and liabilities assumed in the acquisition of subsidiaries, net of cash acquired:

 

   Three months ended 
   March 31, 2020   March 31, 2019 
Supplemental information          
Cash paid       40,939 
Less: cash and cash equivalents acquired       (3,687)
Total consideration paid net of cash and cash equivalents acquired       37,252 

 

The accompanying notes 1 to 22 are an integral part of these condensed interim consolidated financial statements.

 

PAGE 6

 

 

NOTE 1 – COMPANY OVERVIEW

 

Globant S.A. is a company organized in the Grand Duchy of Luxembourg, primarily engaged in building digital journeys that matter to millions of users through its subsidiaries (hereinafter the “Company” or “Globant” or “Globant Group”). The Company specializes in providing innovative software solutions services by leveraging emerging technologies and trends.

 

The Company’s principal operating subsidiaries and countries of incorporation as of March 31, 2020 were the following: Sistemas UK Limited and We are London Limited in the United Kingdom; Globant LLC in the United States of America (the “U.S.” or the “United States”); Sistemas Globales S.A., IAFH Global S.A., Dynaflows S.A., Avanxo S.A. and BSF S.A. in Argentina; Sistemas Colombia S.A.S., Avanxo Colombia and Belatrix Colombia SAS in Colombia; Global Systems Outsourcing S. de R.L. de C.V. and Avanxo Servicios S.A. de C.V. in Mexico; Sistemas Globales Uruguay S.A. and Difier S.A. in Uruguay; Globant Brasil Consultoria Ltda. and Orizonta Consutoria de Negocios e Tecnología Ltda. in Brazil; Sistemas Globales Chile Asesorías Limitada in Chile; Globant Peru S.A.C., Avanxo Peru and Belatrix Peru SAC in Peru; Globant India Private Limited in India; Globant Bel LLC in Belarus; Small Footprint S.R.L. in Romania; Software Product Creation S.L. in Spain; Globant France S.A.S in France; Software Product Creation S.L. - Dubai Branch in the United Arab Emirates; and Globant Canada Corp. in Canada.

 

The Company provides services from development and delivery centers located in the United States (San Francisco, New York, Seattle, Raleigh, Chicago and Dallas), Argentina (Buenos Aires, Tandil, Rosario, Tucumán, Córdoba, Resistencia, Bahía Blanca, Mendoza, Mar del Plata and La Plata), Uruguay (Montevideo), Colombia (Bogotá and Medellín), Brazil (São Paulo), Peru (Lima), Chile (Santiago), México (Guadalajara and México City), India (Pune and Bangalore), Spain (Madrid), Belarus (Minsk), Romania (Cluj) and the United Kingdom (London). The Company also has client management centers in United States (Houston, San Francisco, New York, Winston-Salem and Miami), Brazil (São Paulo), Colombia (Bogotá), Uruguay (Montevideo), Argentina (Buenos Aires), France (Paris) and the United Kingdom (London). The Company also has centers of software engineering talent and educational excellence, primarily across Latin America.

 

Substantially all revenues are generated through subsidiaries located in the U.S. The Company’s workforce is mainly located in Latin America and to a lesser extent in India, Eastern Europe and U.S.

 

The address of the Company’s registered office is 37A, avenue J.F. Kennedy, L-1855, Luxembourg.

 

NOTE 2 - BASIS OF PREPARATION

 

The accompanying condensed interim consolidated statement of financial position as of March 31, 2020, the condensed interim consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the three months ended March 31, 2020 and 2019 and the explanatory notes to the condensed interim consolidated financial statements are unaudited. These condensed interim consolidated financial statements were prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”.

 

Consequently, all of the disclosures required in accordance with International Financial Reporting Standards (“IFRS”) for annual financial statements are not included herein, hence, these condensed interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2019 included in our 2019 Form 20-F filed within the U.S. Securities and Exchange Commission. In the opinion of management, these condensed interim consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair statement of financial results for the interim periods presented.

 

PAGE 7

 

 

The financial information as of December 31, 2019 presented in these condensed interim consolidated financial statements is derived from our audited consolidated financial statements for the year ended December 31, 2019.

 

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results for the full year. The Company believes that the disclosures are adequate to make the information presented not misleading.

 

These condensed interim consolidated financial statements were approved for issue by the Board of Directors on May 13, 2020, which is the date that the condensed interim financial statements were available for issuance.

 

NOTE 3 - BASIS OF CONSOLIDATION

 

These condensed interim consolidated financial statements include the unaudited condensed interim consolidated financial position, results of operations and cash flows of the Company and its consolidated subsidiaries.

 

NOTE 4 – ACCOUNTING POLICIES

 

These condensed interim consolidated financial statements have been prepared using the same accounting policies as used in the preparation of our audited consolidated financial statements for the year ended December 31, 2019, except for the adoption of new standards and interpretations effective as of January 1, 2020, as described below.

 

4.1 – Application of new and revised International Financial Reporting Standards

 

Adoption of new and revised standards

 

The Company has adopted the following standards and interpretations that became applicable for annual periods commencing on or after January 1, 2020:

 

Amendments to References to the Conceptual Framework in IFRS Standards
Amendment to IFRS 3 Definition of a Business
Amendment to IAS 1 and IAS 8 Definition of Material
   
Amendment to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform
Amendment to IAS 1 Classification of Liabilities as Current or Non-Current 1

 

1Effective for annual reporting periods beginning on or after January 1, 2022 and are to be applied retrospectively. Earlier application is permitted.

 

Those standards did not have any impact on the Company’s accounting policies and did not require retrospective adjustments.

 

As of March 31, 2020, the Company's loans and interest rate swap that bear interest based on LIBOR include a clause that provides alternative interest rates in the case of a discontinuity of LIBOR.

 

New accounting pronouncements

 

As of March 31, 2020, no new or revised IFRS have been issued. The new and revised IFRS that have been issued but are not yet mandatorily effective are described in note 2.1 to our audited consolidated financial statements as of December 31, 2019.

 

PAGE 8

 

 

4.2 Investments

 

Current  March 31, 2020   December 31, 2019 
Mutual funds (1)   854    19,384 
Bills issued by the Treasury of the Argentine Republic ("LETEs") (2)   283    396 
Contribution to risk funds (3)   383     
TOTAL   1,520    19,780 

 

Non-current  March 31, 2020   December 31, 2019 
Contribution to risk funds (3)       418 
TOTAL       418 

 

(1)Measured at fair value through profit or loss.
(2)Measured at fair value through other comprehensive income.
(3)Measured at amortized cost.

 

4.3 Main variations

 

Cash and cash equivalents

 

  

March 31,

2020

  

December 31,

2019

 
Cash and bank balances   132,481    62,426 
Time deposits  160   295 
TOTAL (1)  132,641   62,721 

 

Trade receivables

 

  

March 31,

2020

  

December 31,

2019

 
Accounts receivable (2)   148,800    146,382 
Unbilled revenue (2)  22,997   13,970 
Subtotal   171,797    160,352 
Less: Allowance for doubtful accounts  (4,379)  (3,676)
TOTAL  167,418   156,676 

 

PAGE 9

 

 

Receivables

 

  

March 31,

2020

   December 31, 2019 
Non-current        
     Trade receivables (3)   9,326     
     Advances to suppliers   3,579    3,579 
     Tax credit - VAT   691    1,004 
     Income tax credits (4)   3,932    1,516 
     Other tax credits   173    209 
     Guarantee deposits   2,584    2,683 
     Loans granted to employees   152    152 
     Prepaid expenses  325   45 
Subtotal   20,762    9,188 
     Allowance for impairment of tax credits  (351)  (378)
TOTAL  20,411   8,810 

 

Payroll and social security taxes payable

 

  

March 31,

2020

  

December 31,

2019

 
Salaries   7,224    8,376 
Social security tax   11,660    13,564 
Provision for vacation, bonus and others (5)   33,915    49,909 
Directors fees   271    281 
Other  112   122 
TOTAL  53,182   72,252 

 

(1)The variation in cash and bank balances is explained in the condensed interim consolidated statement of cash flows for the three months ended March 31, 2020.
(2)The increase is mainly due to the expansion of the scope and size of the Company’s engagements, the increase in its key client base, primarily through its business development efforts.
(3)The variation is explained by the renegotiation of trade receivables during the three months ended March 31, 2020.
(4)The variation is explained by the increase in the tax credits of some subsidiaries due to advance payments of income tax for the fiscal year 2020 and the increase in withholdings of income tax in one of the Argentine subsidiaries; such tax credits will mature after the first quarter of 2021.
(4)The variation is explained by the increase in the tax credits of some subsidiaries due to advance payments of income tax for the fiscal year 2020 and the increase in withholdings of income tax in one of the Argentinian subsidiaries, such tax credits will mature after the first quarter of 2021.
(5)The decrease is mainly explained by the payment of bonuses to employees and to the payment of pull-through bonuses to the sellers of acquired companies during the three months ended March 31, 2020.

 

 

NOTE 5 – CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

 

The Company is exposed to a variety of risks: market risk, including the effects of changes in foreign currency exchange rates, and interest rates and liquidity risk.

 

These condensed interim consolidated financial statements do not include all financial risk management information and disclosures required in the annual audited financial statements; they should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2019. There have been no significant changes in the risk management assessment or in any risk management policies since December 31, 2019, except as disclosed in note 21.

 

PAGE 10

 

 

5.1 - Financial instruments that are not measured at fair value

 

Except as detailed in the following table, the carrying amounts of financial assets and financial liabilities, included in the unaudited condensed interim consolidated statement of financial position as of March 31, 2020 and the audited consolidated statement of financial position as of December 31, 2019, approximate to their fair values.

 

   March 31, 2020   December 31, 2019 
   Carrying amount   Fair value   Carrying amount   Fair value 
Financial Assets and Liabilities                    
Non-current assets                    
Receivables                    
Guarantee deposits   2,584    2,451    2,683    2,571 
Other assets   6,958    6,553    7,796    7,140 
Non-current liabilities                    
Trade payables   6,753    6,419    5,500    5,101 
Borrowings   125,169    129,154    50,188    51,070 

 

5.2 - Fair value measurements recognized in the unaudited condensed consolidated statement of financial position

 

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into a three-level fair value hierarchy as mandated by IFRS 13, as follows:

 

Level 1 fair value measurements are those derived from quoted market prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

 

Level 3 fair value measurements are those derived from unobservable inputs for the assets or liabilities.

 

   As of March 31, 2020 
   Level 1   Level 2   Level 3   Total 
Financial assets                    
Mutual funds       854        854 
LETEs       283        283 
Foreign exchange forward contracts       3        3 
Convertible notes       121    3,642    3,763 
                     
Financial liabilities                    
Contingent consideration           7,256    7,256 
Foreign exchange forward contracts       3,817        3,817 
Interest rate SWAP       426        426 

 

PAGE 11

 

 

   As of December 31, 2019 
   Level 1   Level 2   Level 3   Total 
Financial assets                    
Mutual funds       19,384        19,384 
LETEs       396        396 
Foreign exchange forward contracts       1,291        1,291 
Convertible notes       111    3,425    3,536 
                     
Financial liabilities                    
Contingent consideration           9,252    9,252 

 

There were no transfers of financial assets between Level 1, Level 2 and Level 3 during the period.

 

The Company has applied the market approach technique in order to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable (i.e., similar) assets, liabilities or a group of assets and liabilities.

 

When the inputs required by the market approach are not available, the Company applies the income approach technique. The income approach technique estimates the fair value of an asset or a liability by converting future amounts (e.g. cash flows or income and expenses) to a single current (i.e., discounted) amount. When the income approach is used, the fair value measurement reflects current market expectations about those future amounts.

 

There were also no changes made to any of the valuation techniques applied as of December 31, 2019.

 

5.2.1 - Foreign exchange future and forward contracts

 

During the three months ended March 31, 2019, the Argentine subsidiary IAFH Global S.A. acquired foreign exchange futures contracts with SBS Sociedad de Bolsa S.A. (SBS) in U.S. dollars, with the purpose of hedging the possible decrease of assets' value held in Argentine Pesos due to the risk of exposure to fluctuations in foreign currency. The foreign exchange futures contracts were recognized, according to IFRS 9, as financial assets at fair value through profit or loss. For the three months ended March 31, 2019, the Company has recognized a loss of 85.

 

These futures contracts have daily settlements, in which the futures' values change daily. IAFH Global S.A. recognize daily variations in SBS primary accounts, and the gains or losses generated by each daily position through profit or loss. Thus, at the closing of each day, according to the future price of the exchange rate U.S. dollar - Argentine Peso, the companies perceive a gain or loss for the difference. As of March 31, 2020 and December 31, 2019, there were no outstanding futures contracts.

 

During the three months ended March 31, 2019, the subsidiaries Sistemas Globales S.A., IAFH Global S.A., Sistemas Globales Uruguay S.A., Sistemas Globales Chile S.L and Sistemas Colombia S.AS., acquired foreign exchange forward contracts with certain banks in U.S. dollars, with the purpose of hedging the possible decrease of assets’ value held in Argentine Pesos, Uruguayan Pesos, Chilean Pesos and Colombian Pesos due to the risk of exposure to fluctuations in foreign currency. During the three months ended March 31, 2020, the subsidiary Globant India Private Limited also acquired foreign exchange forward contracts with certain banks, with the purpose of hedging the possible decrease of assets’ value held in Indian Rupee, due to the risk of exposure to fluctuations in foreign currency. Those contracts were recognized, according to IFRS 9, as financial assets or liabilities at fair value through profit or loss. For the three months ended March 31, 2020 and 2019 , the Company recognized a net loss of 5,917 and a gain of 205, respectively.

 

PAGE 12

 

 

As of March 31, 2020 and December 31, 2019, the foreign exchange forward contracts that were recognized as financial assets and liabilities at fair value through profit or loss were as follows:

 

 

   Currency  Foreign currency   Notional foreign   Fair value assets / 
Settlement date  from contracts  rate from contracts   currency rate   (liabilities) 
                
April 30, 2020  Argentine Peso   66.90    66.98    3 
Fair value as of March 31, 2020                3 
                
April 27, 2020  Indian Rupee   72.04    75.83    (50)
April 29, 2020  Colombian Peso   3,526.22    4,061.06    (658)
April 30, 2020  Argentine Peso   67.40    66.98    (33)
April 30, 2020  Colombian Peso   3,380.59    4,060.65    (1,339)
May 26, 2020  Indian Rupee   72.65    76.06    (46)
May 30, 2020  Argentine Peso   70.10    69.35    (58)
May 31, 2020  Argentine Peso   72.52    69.35    (123)
June 30, 2020  Argentine Peso   75.10    71.90    (124)
Fair value as of March 31, 2020                (2,431)

 

   Currency  Foreign currency   Notional foreign   Fair value assets / 
Settlement date  from contracts  rate from contracts   currency rate   (liabilities) 
                
January 27, 2020  Indian Rupee   72.36    71.56    11 
January 31, 2020  Chilean Peso   747.68    751.57    5 
January 31, 2020  Colombian Peso   3,323.65    3,281.28    39 
January 31, 2020  Colombian Peso   3,515.42    3,281.94    356 
January 31, 2020  Colombian Peso   3,512.66    3,281.93    422 
January 31, 2020  Uruguayan Peso   38.09    37.73    29 
February 25, 2020  Indian Rupee   71.45    71.77    7 
February 28, 2020  Colombian Peso   3,518.27    3,288.08    351 
Fair value as of December 31, 2019                1,220 

 

Hedge accounting

 

During the three months ended March 31, 2020 and 2019, the subsidiaries Sistemas Globales S.A. IAFH Global S.A., Sistemas Colombia SAS, Sistemas Globales Uruguay S.A., Sistemas Globales Chile S.L. and Globant India Private Limited have entered into foreign exchange forward and future contracts to manage the foreign currency risk associated with the salaries payable in Argentine Pesos, Colombian Pesos, Uruguayan Pesos, Chilean Pesos and Indian Rupee. The Company designated those derivatives as hedging instruments in respect of foreign currency risk in cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

 

PAGE 13

 

 

The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the "finance income" or "finance expense" line items. Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognized hedged item (i.e., Salaries, employee benefits and social security taxes).

 

During the three months ended March 31, 2020 and 2019, the Company recognized a net loss of 1,695 and a gain of 300 included in the line item "Salaries, employee benefits and social security taxes", respectively, and a loss of 1,643 and a gain of 882, included in the line item "Other comprehensive income", respectively.

 

During the three months ended March 31, 2020, Globant LLC entered into three interest rate swap transactions with the purpose of hedging the exposure to variable interest rate related to the Amended and Restated Credit Agreement with certain financial institutions, the Company has recognized a loss of 426 included in the line item "Other comprehensive income". The Company designated those derivatives as hedging instruments in respect of interest rate risk in cash flow hedges. Hedges of interest rate risk on recognized liabilities are accounted for as cash flow hedges.

 

Foreign currency forward contract and interest rate swap assets and liabilities are presented in the line items "Other financial assets" and "Other financial liabilities" within the statement of financial position.

 

Hedging instruments - Outstanding contracts

 

The following table detail the foreign currency forward contracts and interest rate swap contracts outstanding as of March 31, 2020 and December 31, 2019:

 

 

Interest rate swap               
                
       Floating rate  Fixed rate   Fair value 

Maturity Date

 

Notional

   receivable  payable   liabilities 
                
March 11, 2024   15,000   1 month LIBOR
   0.647%   (172)
March 31, 2023   15,000   1 month LIBOR
   0.511%   (87)
March 12, 2024   20,000   1 month LIBOR
   0.566%   (167)
Fair value as of March 31, 2020                (426)

 

PAGE 14

 

 

Foreign currency forwards               
                
   Currency  Foreign currency   Notional foreign   Fair value 
Settlement date  from contracts  rate from contracts   currency rate   liabilities 
April 27, 2020  Indian Rupee   73.92    75.84    (13)
April 29, 2020  Colombian Peso   3,545.09    4,061.11    (1,016)
April 30, 2020  Argentine Peso   66.75    66.98    (5)
April 30, 2020  Chilean Peso   824.58    853.02    (61)
April 30, 2020  Uruguayan Peso   38.48    43.30    (168)
May 26, 2020  Indian Rupee   74.12    76.08    (13)
May 29, 2020  Chilean Peso   832.70    852.26    (42)
May 29, 2020  Uruguayan Peso   43.38    43.64    (9)
June 26, 2020  Chilean Peso   851.50    851.83     
June 26, 2020  Indian Rupee   74.33    76.31    (39)
June 30, 2020  Uruguayan Peso   43.66    44.15    (20)
Fair value as of March 31, 2020                (1,386)

 

   Currency  Foreign currency   Notional foreign   Fair value 
Settlement date  from contracts  rate from contracts   currency rate   assets 
January 31, 2020  Argentine Peso   66.45    62.2    71 
Fair value as of December 31, 2019                71 

 

5.2.2 Convertible notes

 

During the three months ended March 31, 2020, the Company purchased several convertible notes that include the right to convert the outstanding principal amount into equity interests in the companies that issued the convertible notes. The fair value of such convertible notes was estimated using unobservable inputs.

 

The amounts of gains and losses for the three months ended March 31, 2020 related to changes in the fair value of the convertible notes which were not material.

 

5.2.2.1 Collokia

 

On May 5, 2017, the Company and Collokia LLC entered into a loan agreement whereby the Company provided a financing facility of 100. Interest on the entire outstanding principal balance is computed at an annual rate of 2.8%. Collokia shall repay the loan in full within 18 months from the date that this agreement has been signed off. The Company has the right to convert any portion of the outstanding principal into preferred units of Collokia. As of March 31, 2020 and December 31, 2019, the fair value of the loan agreement amounted to 121 and 115, respectively, and is disclosed as other financial assets current.

 

5.2.2.2 Wolox

 

On January 21, 2019 (the "issuance date"), Globant España S.A. and Wolox, LLC (Wolox) entered into a convertible promissory note purchase agreement whereby Globant España S.A. provides financing facility for 1,800.  Interest on the entire outstanding principal balance is computed at an annual rate equal to LIBOR plus 2%. Wolox shall repay the loan in full within 18 months from the issuance date. Globant España S.A has the right to convert any portion of the outstanding principal into fully paid and nonassessable membership interest of Wolox.  As of March 31, 2020 and December 31, 2019, the fair value of the loan agreement amounted to 1,845 and 1,841, respectively, and is disclosed as other financial assets current.

 

PAGE 15

 

 

5.2.2.3 Singularity

 

On July 8, 2019 (the "issuance date"), Globant España S.A. and Singularity Education Group entered into a note purchase agreement whereby Globant España S.A. provides financing facility for 1,250.  Interest on the entire outstanding principal balance is computed at an annual rate of 5%. Singularity Education Group shall repay the loan in full within 1 year from the effective date as of the issuance date. Globant España S.A. has the right to convert any portion of the outstanding principal into Conversion Shares of Singularity Education Group. As of March 31, 2020 and December 31, 2019, the fair value of the loan agreement amounted to 1,297 and 1,280, respectively, and is disclosed as other financial assets current.

 

5.2.2.4 Globant Ventures

 

During the three months ended March 31, 2020, Globant Venture SAS entered into 4 note purchase agreements with Interactive Mobile Media S.A. (CamonApp), AvanCargo Corp. and TheEye S.A.S and Robin (the "startups"), pursuant to which Globant Ventures provided financing facility for a total amount of 300.  Interest on the entire outstanding principal balance is computed at annual rates ranging from 5% to 12%. Globant Venture SAS has the right to convert all or any portion of the outstanding principal into equity interests of the startups.  As of March 31, 2020, the fair value of these note purchase agreements amounted to 500 and is disclosed as other financial assets non-current.

 

5.3 Level 3

 

5.3.1. Contingent consideration

 

The acquisition of Clarice, described in note 25.1 to our audited consolidated financial statements for the year ended December 31, 2019, included a contingent consideration agreement which is payable on a deferred basis and which will be subject to the occurrence of certain events relating to the acquired company’s capacity.

 

As of December 31, 2019, the nominal value of contingent consideration related to Clarice amounted to 1,316. The potential undiscounted amount of all future payments that the Company could be required to make under this agreement was between 439 and 1,316 as of December 31, 2019. The fair value of the contingent consideration related to Clarice arrangement of 1,310 as of December 31, 2019, was estimated by discounting to present value using a risk-adjusted discount rate. As of March 31, 2020, the Company maintained a contingent consideration of 1,587, which amount was agreed to by the sellers, and which the Company expect to pay in the coming months.

 

The acquisition of Ratio Cypress LLC ("Ratio"), described in note 25.5 to our audited consolidated financial statements for the year ended December 31, 2019, included a contingent consideration agreement which is payable on a deferred basis and which will be subject to the occurrence of certain events relating to the acquired company's gross revenue and gross margin.

 

As of December 31, 2019, the nominal value of contingent consideration related to Ratio amounted to 750. Such amount was paid on February 25, 2020. The fair value of the contingent consideration arrangement of 903 as of December 31, 2019 was estimated by discounting to present value using a risk-adjusted discount rate.

 

PAGE 16

 

 

The acquisition of PointSource LLC ("PointSource"), described in note 25.6 to our audited consolidated financial statements for the year ended December 31, 2019, included a contingent consideration agreement which was payable on a deferred basis and which was subject to the occurrence of certain events relating to the acquired company's gross revenue and gross margin.

 

In May 2018, the Company signed an amendment to the stock purchase agreement with the former shareholders of PointSource, pursuant to which a new fixed payment was established, in replacement of previous payment arrangements, which were subject to target achievements. As a consequence, the Company remeasured the fair value of the liability related to PointSource described above. As of December 31, 2019, the fixed-payment liability amounted to 1,086 and was included in other financial liabilities. Such amount was paid on February 29, 2020.

 

As described in note 25.8 to our audited consolidated financial statements for the year ended December 31,2019, the acquisition of Avanxo (Bermuda) Limited (“Avanxo”) included a contingent consideration agreement which is payable on a deferred basis and which will be subject to the occurrence of certain events relating to the acquired company's gross revenue and gross margin and operating margin.

 

As of March 31, 2020 and December 31, 2019, the nominal value of contingent consideration related to Avanxo amounted to 1,159 and 2,318, respectively. Based on our estimations as of those dates, the potential minimum amounts of all future payments that the Company could be required to make under this agreement were between 185 and 370, respectively. In addition, the actual amounts to be paid under the contingent consideration arrangement may be increased proportionally to the target’s achievements and are not subject to any maximum amount. Finally, the fair value of the contingent consideration arrangement of 1,110 and 2,249 as of March 31, 2020 and December 31, 2019, respectively, was estimated by discounting to present value using a risk-adjusted discount rate.

 

As described in note 25.9 to our audited consolidated financial statements for the year ended December 31,2019, the acquisition of Belatrix Global Corporation S.A. ("Belatrix"), included a contingent consideration agreement which is payable on a deferred basis and which will be subject to the occurrence of certain events relating to revenue.

 

As of March 31, 2020 and December 31, 2019, the nominal value of contingent consideration related to Belatrix amounted to 4,244 and 4,097, respectively. Based on our estimations as of those dates, the potential minimum amounts of all future payments that the Company could be required to make under this agreement were between 4,244 and 4,097, respectively. In addition, the actual amounts to be paid under the contingent consideration arrangement may be increased proportionally to the target’s achievements and are not subject to any maximum amount. Finally, the fair value of the contingent consideration arrangement of 4,256 and 4,221 as of March 31, 2020 and December 31, 2019, respectively, was estimated by discounting to present value using a risk-adjusted discount rate

 

As described in note 25.10 to our audited consolidated financial statements for the year ended December 31,2019, the acquisition of BI Live, included a contingent consideration agreement which is payable on a deferred basis and which will be subject to the occurrence of certain events relating to the acquired company's growth and operating margin.

 

As of March 31, 2020 and December 31, 2019, the nominal value of contingent consideration related to BI Live amounted to 585 and 559, respectively. The potential undiscounted amount of all future payments that the Company could be required to make under this agreement was between 525 and 3,000 as of March 31, 2020 and December 31, 2019. The fair value of the contingent consideration arrangement of 520 and 515 as of March 31, 2020 and December 31, 2019, respectively, was estimated by discounting to present value using a risk-adjusted discount rate.

 

PAGE 17

 

 

5.3.2. Reconciliation of recurring fair value measurements categorized within Level 3 of the fair value hierarchy:

 

   Financial Assets   Financial Liabilities 
   Convertible notes   Contingent consideration 
December 31, 2019   3,425    9,252 
Payments (2)   200    (2,062)
Interests (1)   17    66 
March 31, 2020   3,642    7,256 

 

   Financial Assets   Financial Liabilities 
   Convertible notes   Contingent consideration 
December 31, 2018       9,767 
Fair value remeasurement (1)       85 
Acquisition of business (1)       6,835 
Payments (2)   3,350    (7,695)
Interests (1)   75    260 
December 31, 2019   3,425    9,252 

 

(1)Non-cash transactions.
(2)Cash transactions included in investing activities in the condensed interim consolidated statement of cash flows.

 

NOTE 6 – INCOME TAXES

 

6.1. Effective tax rate

 

Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The effective tax rate calculated for the three months ended March 31, 2020 and 2019 was 32% and 22%, respectively.

 

6.2. Uncertain tax positions

 

The Company accounts for uncertain tax positions by determining the minimum recognition threshold that a tax position is required to meet before being recognised in the financial statements. This determination requires the use of significant judgment in evaluating the tax positions and assessing the timing and amounts of deductible and taxable items.

 

As of March 31, 2020, there were certain matters related to the interpretation of income tax laws for which there is a possibility that a loss may have been incurred as of the date of the financial statements in accordance with IFRIC 23 in an amount of 2,067, related to assessments for the fiscal years 2014 to 2020. No formal claim has been made for fiscal years within the statute of limitation by tax authorities in any of such matters; however, those years are still subject to audit and claims may be asserted in the future.

 

It is reasonably possible that, as a result of management’s ongoing evaluation, there may be new information that causes the Company to reassess the tax positions because the outcome of tax audits cannot be predicted with certainty. While the Company cannot estimate the impact that new information may have on its unrecognized tax benefit balance, management believes that the Company maintains a reasonable position and no loss should be incurred.

 

PAGE 18

 

 

NOTE 7 – REVENUE

 

The following tables present the Company’s revenues disaggregated by type of contracts, by revenue source regarding the industry vertical of the client and by currency. The Company provides technology services to enterprises in a range of industry verticals including media and entertainment, travel and hospitality, professional services, technology and telecommunications, banks, financial services and insurance and consumer, retail and manufacturing, among others. The Company understands that disaggregating revenues into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenues may be affected by economic factors. However, this information is not considered by the chief operating decision-maker to allocate resources and in assessing financial performance of the Company. As noted in the business segment reporting information in note 17, the Company operates in a single operating and reportable segment.

 

 

   Three months ended 
By Type of contract  March 31, 2020   March 31, 2019 
Time and material contracts   159,278    118,298 
Fixed-price contracts   28,203    24,091 
Subscription resales   4,085    3,762 
Others   6     
TOTAL   191,572    146,151 

 

   Three months ended 
By Industry Vertical  March 31, 2020   March 31, 2019 
Media and Entertainment   46,354    36,562 
Travel & Hospitality   22,289    22,361 
Banks, Financial Services and Insurance   45,379    33,375 
Technology & Telecommunications   23,622    18,165 
Professional Services   21,819    14,348 
Consumer, Retail & Manufacturing   25,792    17,802 
Other Verticals   6,317    3,538 
TOTAL   191,572    146,151 

 

PAGE 19

 

 

   Three months ended 
By Currency  March 31, 2020   March 31, 2019 
USD   166,248    121,800 
EUR   7,571    9,213 
GBP   140    1,397 
ARS   7,769    6,058 
MXN   5,526    3,946 
COP   1,970    1,788 
BRL   2,058    1,131 
Others   290    818 
TOTAL   191,572    146,151 

 

NOTE 8 – COST OF REVENUES AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

8.1. Cost of revenues

 

   Three months ended 
   March 31, 2020   March 31, 2019 
Salaries, employee benefits and social security taxes (1)   (109,410)   (80,647)
Share-based compensation expense   (1,121)   (1,443)
Depreciation and amortization expense   (2,290)   (1,227)
Travel and housing (2)   (4,120)   (3,278)
Office expenses   (610)   (595)
Professional services   (1,090)   (1,176)
Promotional expenses   (93)   (25)
Recruiting, training and other employee expenses   (635)   (336)
TOTAL   (119,369)   (88,727)

 

(1)The increase is primarily attributable to a general increase in salaries and to the net addition of 3,146 IT professionals since March 31, 2019, an increase of 36.59%, to satisfy growing demand for our services, which translated into an increase in salaries, together with a lower attrition level. The increase is also explained by the addition of the employees of acquired companies (see note 20).
(2)The variation is explained by an increase in travel expenses related to integration and expansion activities.

 

PAGE 20

 

 

8.2. Selling, general and administrative expenses

 

   Three months ended 
   March 31, 2020   March 31, 2019 
Salaries, employee benefits and social security taxes (1)   (19,968)   (13,868)
Share-based compensation expense   (5,158)   (2,977)
Rental expenses   (1,834)   (1,314)
Office expenses   (3,328)   (2,693)
Professional services (2)   (5,358)   (2,620)
Travel and housing   (2,184)   (2,084)
Taxes   (3,802)   (3,696)
Depreciation and amortization expense   (4,575)   (4,419)
Depreciation expense of right-of-use assets   (4,622)   (4,033)
Recruiting, training and other employee expenses   (434)   (387)
Promotional and marketing expenses   (609)   (541)
TOTAL   (51,872)   (38,632)

 

(1)The increase is primarily attributable to an increase in salaries, employee benefits and social security taxes related to a general increase in salaries and to the addition of 133 staff personnel since March 31, 2019.
(2)The increase mainly corresponds to professional services fees related to advice on tax matters and legal fees. The increase is also explained by subscriptions to new software licenses.

 

PAGE 21

 

 

NOTE 9 – FINANCE INCOME / EXPENSE

 

   Three months ended 
   March 31, 2020   March 31, 2019 
Finance income          
Interest gain   256    170 
Gain arising from financial assets measured at fair value through profit or loss ("PL")   275    538 
Gain arising from financial assets measured at fair value through OCI   6    12 
Gain arising from financial assets measured at amortised cost       62 
Foreign exchange gain   13,172    109 
Subtotal   13,709    891 
           
Finance expense          
Interest expense on borrowings   (462)   (8)
Interest expense on lease liabilities   (1,387)   (723)
Loss arising from financial assets measured at fair value through PL   (5,917)   (306)
Loss arising from financial assets measured at fair value through OCI   (34)    
Loss arising from financial assets measured at amortised cost   (3)    
Foreign exchange loss   (7,113)   (2,328)
Other interest   (243)   (80)
Other   (363)   (257)
Subtotal   (15,522)   (3,702)
TOTAL   (1,813)   (2,811)

 

PAGE 22

 

 

NOTE 10 – PROPERTY AND EQUIPMENT

 

Property and equipment as of March 31, 2020 included the following:

 

   Computer equipment and software   Furniture and office supplies   Office fixtures   Vehicles   Buildings   Lands   Properties under construction   Total 
Useful life (years)   3    5    3    5    50                
Cost                                        
Values at beginning of the period   38,939    9,599    50,357    108    13,821    2,354    34,171    149,349 
Additions   1,912    207    438                2,965    5,522 
Disposals   (1)   (67)   (2)                   (70)
Transfers       89    240                (329)    
Translation   (196)   (104)   (110)                   (410)
Values at end of period   40,654    9,724    50,923    108    13,821    2,354    36,807    154,391 
                                         
Depreciation                                        
Accumulated at beginning of the period   25,277    5,344    30,290    28    877            61,816 
Additions   1,862    383    1,653    4    76            3,978 
Disposals       (20)   (1)                   (21)
Translation   (119)   (53)   (110)                   (282)
Accumulated at end of period   27,020    5,654    31,832    32    953            65,491 
Carrying amount   13,634    4,070    19,091    76    12,868    2,354    36,807    88,900 

 

PAGE 23

 

 

Property and equipment as of March 31, 2019 included the following:

 

   Computer equipment and software   Furniture and office supplies   Office fixtures   Vehicles   Buildings   Lands   Properties under construction   Total 
Useful life (years)   3    5    3    5    50                
Cost                                        
Values at beginning of the period   30,053    7,142    41,904    37    13,401    2,354    4,365    99,256 
Additions related to business combinations   222    276            2            500 
Additions   1,740    159    74                562    2,535 
Transfers       431    1,995                (2,426)    
Disposals   (179)   (40)                       (219)
Translation   (9)   (3)   (4)                   (16)
Values at end of period   31,827    7,965    43,969    37    13,403    2,354    2,501    102,056 
                                         
Depreciation                                        
Accumulated at beginning of the period   18,873    4,296    23,997    21    609            47,796 
Additions   1,433    269    1,568    2    67            3,339 
Disposals   (170)   (37)                       (207)
Translation   (9)   (3)   (11)                   (23)
Accumulated at end of period   20,127    4,525    25,554    23    676            50,905 
Carrying amount   11,700    3,440    18,415    14    12,727    2,354    2,501    51,151 

  

NOTE 11 – INTANGIBLE ASSETS

 

Intangible assets as of March 31, 2020 included the following:

 

   Licenses and internal developments   Customer contracts and relationships   Total 
Useful life (years)   5    1 - 4      
Cost               
Values at beginning of the period   48,318    25,285    73,603 
Additions related to business combinations       267    267 
Additions from separate acquisitions   1,616        1,616 
Additions from internal development   2,025        2,025 
Disposals   (301)       (301)
Translation   (21)       (21)
Values at end of period   51,637    25,552    77,189 
                
Amortization               
Accumulated at beginning of the period   35,473    11,020    46,493 
Additions   2,483    404    2,887 
Disposals            
Translation   (17)       (17)
Accumulated at end of period   37,939    11,424    49,363 
Carrying amount   13,698    14,128    27,826 

 

PAGE 24

 

 

Intangible assets as of March 31, 2019 included the following:

 

   Licenses and internal developments   Customer contracts and relationships   Total 
Useful life (years)   5    1 - 4      
Cost               
Values at beginning of the period   36,957    10,896    47,853 
Additions related to business combinations            
Additions from separate acquisitions   628        628 
Additions from internal development   1,391        1,391 
Disposals   (26)       (26)
Translation            
Values at end of period   38,950    10,896    49,846 
                
Amortization               
Accumulated at beginning of the period   26,179    9,896    36,075 
Additions   2,193    114    2,307 
Impairment loss recognised in profit or loss            
Disposals   (2)       (2)
Translation            
Accumulated at end of period   28,370    10,010    38,380 
Carrying amount   10,580    886    11,466 

  

During the year, the Company considered the recoverability of its internally generated intangible assets which are included in these condensed interim consolidated financial statements with a carrying amount of 9,970 and 8,103, respectively.

 

NOTE 12 – LEASES

 

Movements in right-of-use assets and lease liabilities as of March 31, 2020 were as follow:

 

Right-of-use assets  Office spaces   Office equipment   Total 
             
January 1, 2020   51,625    7,156    58,781 
Additions   18,760    379    19,139 
Depreciation   (4,303)   (319)   (4,622)
Translation   (274)       (274)
March 31, 2020   65,808    7,216    73,024 

 

PAGE 25

 

 

Lease liabilities    
     
January 1, 2020   61,363 
Additions (1)   19,139 
Foreign exchange difference (1)   (7,417)
Translation (2)   (296)
Interest expense (1)   1,387 
Payments (2)   (5,299)
March 31, 2020   68,877 

 

(1)Non-cash transactions.
(2)Cash transactions.

 

Movements in right-of-use assets and lease liabilities as of March 31, 2019 were as follow:

 

Right-of-use assets  Office spaces 
     
January 1, 2019   46,567 
Additions   1,784 
Depreciation   (4,033)
Translation   (218)
March 31, 2019   44,100 
      
Lease liabilities     
      
January 1, 2019   46,887 
Additions (1)   1,784 
Foreign exchange difference (1)   202 
Interest expense (1)   723 
Payments (2)   (3,319)
March 31, 2019   46,277 

 

(1)Non-cash transactions.
(2)Cash transactions.

 

NOTE 13 - CAPITAL AND RESERVES

 

13.1. Issuance of common shares

 

During the three months ended March 31, 2020, 64,401 common shares were issued after vested options arising from the 2012 and 2014 share-based compensation plan were exercised by some employees. Options were exercised at an average price of 31.39 per share amounting to a total of 2,021.

 

PAGE 26

 

 

During the three months ended March 31, 2020, 22,436 Restricted Stock Units (“RSUs”) were granted to certain employees and directors of the Company and 3,475 RSUs were vested at an average price of 62.24 per share amounting to a total of 216 (non-cash transaction).

 

During the three months ended March 31, 2019, 324,047 common shares were issued after vested options arising from the 2012 and 2014 share-based compensation plan were exercised by some employees. Options were exercised at an average price of 18.41 per share amounting to a total of 5,965.

 

During the three months ended March 31, 2019, 2,400 RSUs were granted to certain employees and directors of the Company and 2,250 RSUs were vested at an average price of 42.00 per share amounting to a total of 95 (non-cash transaction).

 

As of March 31, 2020, 35,769,527 common shares of the Company’s share capital were registered and listed on the New York Stock Exchange.

 

13.2. Subscription agreement

 

On March 10, 2020, the Company issued 2,018 common shares for a total amount of 225 as part of the subscription agreement included in the stock purchase agreement signed with Ratio’s sellers.

 

On March 21 and March 18, 2019, the Company issued 7,517 common shares for a total amount of 449 as part of the subscription agreement included in the stock purchase agreement signed with Ratio’s sellers.

 

On March 18, 2019, the Company issued 13,895 common shares for a total amount of 868 as part of the subscription agreement included in the stock purchase agreement signed with Small Footprint Inc.’s sellers.

 

On February 20 and February 1, 2019, the Company issued 14,778 common shares for a total amount of 845 as part of the subscription agreement included in the stock purchase agreement signed with Avanxo’s sellers.

 

On February 15, 2019, the Company issued 3,542 common shares for a total amount of 208 as part of the subscription agreement included in the stock purchase agreement signed with Pointsource’s sellers.

 

NOTE 14 - BORROWINGS

 

   As of 
   March 31, 2020   December 31, 2019 
         
Current   495    1,198 
Non-current   125,169    50,188 
TOTAL   125,664    51,386 

 

PAGE 27

 

 

Movements in borrowings were as follows:

 

   Three months ended 
   March 31, 2020   March 31, 2019 
         
Balance at the beginning of year   51,386     
Additions related to business combinations (3)       644 
Proceeds from borrowings (1) (4)   75,000     
Payment of borrowings (2) (4)   (1,139)    
Accrued interest (3)   465    8 
Translation (3)   (48)   (34)
Balance at the end of the period   125,664    618 

 

(1)On March 23 and 24, 2020, Globant LLC borrowed 64,000 and 11,000, respectively, under the Amended and Restated Credit Agreement, described in note 19 to our audited consolidated financial statements for the year ended December 31, 2019, this loan will mature on February 5, 2025.

(2)During the three months ended March 31, 2020, the main payments were 523 paid on March 26, 2020 by Avanxo Colombia related to the principal amount of the borrowing with Banco Santander and 537 paid by Globant LLC related to interest of the Amended and Restated Credit Agreement.

(3)Non-cash transactions.

(4)Cash transactions.

 

NOTE 15 – SHARE-BASED COMPENSATION - EMPLOYEE BENEFITS

 

15.1. Movements in share options during the period

 

The following reconciles the share options outstanding at the end of the three months ended March 31, 2020 and 2019:

 

   March 31, 2020   March 31, 2019 
  

Number of

options

   Weighted average exercise price  

Number of

options

   Weighted average exercise price 
                 
Balance at the beginning of year   1,051,602    32.00    1,786,467    27.96 
Options granted during the period           4,000    52.10 
Forfeited during the period   (17,125)   41.32    (15,500)   31.64 
Exercised during the period   (64,401)   31.39    (324,047)   18.41 
Balance at end of period   970,076    31.88    1,450,920    30.13 

 

PAGE 28

 

 

15.2 Movements in restricted stock units during the period

 

The following reconciles the RSU outstanding at the end of the three months ended March 31, 2020 and 2019:

 

 

   March 31, 2020   March 31, 2019 
  

Number of

RSU

   Weighted average grant price  

Number of

RSU

   Weighted average grant price 
                 
Balance at the beginning of year   624,896    64.05    535,838    44.70 
RSU granted during the period   22,436    111.00    2,400    52.10 
Forfeited during the period   (15,438)   60.76    (18,303)   44.67 
Issued during the period   (3,475)   62.24    (2,250)   42.00 
Balance at end of period   628,419    65.82    517,685    44.74 

 

NOTE 16 – CONTINGENCIES

 

As of the date of issuance of these condensed interim consolidated financial statements, no significant changes have occurred with respect to the contingencies included in note 21 to our audited consolidated financial statements for the year ended December 31, 2019.

 

NOTE 17 – SEGMENT INFORMATION

 

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding on how to allocate resources and in assessing performance. The Company’s CODM is considered to be the Company’s chief executive officer (“CEO”). The CEO reviews information presented on an entity level basis for purposes of making operating decisions and assessing financial performance. Therefore, as of March 31, 2020, the Company has determined that it operates in a single operating and reportable segment.

 

The Company provides services related to application development, testing, infrastructure management and application maintenance.

 

PAGE 29

 

 

The following table summarizes revenues by geography, based on the customers' location:

 

 

   Three months ended 
   March 31, 2020   March 31, 2019 
North America          
United States of America   138,856    104,990 
Canada   3,941    2,780 
Subtotal North America   142,797    107,770 
Europe          
Spain   5,471    8,986 
United Kingdom   4,531    3,109 
Luxembourg   409    262 
Germany   196    123 
Netherlands   319    880 
Others   545    163 
Subtotal Europe   11,471    13,523 
Asia          
India   537    435 
Indonesia       473 
Japan   1,391     
Others       158 
Subtotal Asia   1,928    1,066 
Latin America and others          
Argentina   10,783    6,388 
Colombia   3,667    5,094 
Chile   10,253    6,175 
Mexico   5,533    4,040 
Peru   2,772    845 
Brazil   2,074    1,133 
Others   294    117 
Subtotal Latin America and others   35,376    23,792 
TOTAL   191,572    146,151 

 

The revenues by geography were determined based on the country where the sale took place.

 

One single customer accounted for 11.65% and 10.49% of revenues for the three months ended March 31, 2020 and 2019, respectively.

 

As of March 31, 2020 and 2019, the measurement of profit from operations was 18,714 and 18,356, respectively, as presented in the statements of profit or loss and other comprehensive income.

 

PAGE 30

 

 

The following table summarizes non-current assets other than financial instruments and deferred taxes as stated in IFRS 8, paragraph 33.b, by jurisdiction:

 

   March 31,
2020
   December 31,
2019
 
         
Argentina   84,468    82,978 
Spain   144,468    144,761 
United States of America   69,746    69,631 
Brazil   2,314    1,739 
Uruguay   1,798    1,728 
Luxembourg   4,296    4,289 
Colombia   46,099    34,901 
Mexico   18,127    13,724 
India   9,483    9,297 
Chile   2,818    2,798 
Peru   4,737    4,461 
Other countries   1,173    1,361 
TOTAL   389,527    371,668 

 

NOTE 18 – SEASONALITY OF OPERATIONS

 

Due to seasonal nature of the countries in which we operate, higher revenues and operating profits are usually expected in the second half of the year than in the first six months. In the fiscal year ended December 31, 2019, 46% of revenues accumulated in the first half of the year, with 54% accumulating in the second half.

 

The possible impact in the financial statements due to the outbreak of COVID-19 is addressed in note 21.

 

NOTE 19 – RELATED PARTIES BALANCES AND TRANSACTIONS

 

Outstanding trade account balances with related parties as of March 31, 2020 and December 31, 2019 are as follows:

 

  

March 31,

2020

  

December 31,

2019

 
         
Morgan Stanley Investment Management Inc.   129    91 
Total   129    91 

 

PAGE 31

 

 

During the three months period ended March 31, 2020 and 2019, the Company recognized revenues from transactions with related parties, as follows:

 

   Three months ended 
  

March 31,

2020

  

March 31,

2019

 
         
Morgan Stanley Investment Management Inc.   203    427 
Total   203    427 

 

NOTE 20 – BUSINESS COMBINATIONS

 

Outstanding balances of other financial liabilities as of March 31, 2020 and December 31, 2019 are as follows:

 

   March 31, 2020   December 31, 2019 
    Other financial liabilities - current    Other financial liabilities - non current    Other financial liabilities - current    Other financial liabilities - non current 
Related to Business Combinations                    
Clarice   1,587        1,580     
Ratio           903     
PointSource           1,086     
Avanxo   1,110        1,147    1,102 
Belatrix   4,256        4,221     
BI Live   133    387        515 
Total   7,086    387    8,937    1,617 

 

A reconciliation of the goodwill from opening to closing balances is as follows:

 

Goodwill at the beginning of the period   188,538 
Translation   (303)
Measurement period adjustment   (257)
Goodwill at the end of the period   187,978 

 

NOTE 21 – COVID-19 IMPACT ON THE FINANCIAL STATEMENTS

 

On March 11, 2020, the World Health Organization declared a pandemic of the outbreak of Coronavirus (“COVID-19”), due to its rapid spread throughout the world, having affected, at that time, more than 110 countries. As of March 31, 2020, tens of countries had declared state of national health emergency, which measures had caused a substantial disruption in the global economy. It is difficult to estimate the full extent and duration of the impacts of the pandemic on businesses and economies.

 

On March 27, 2020, the International Accounting Standards Board (the “IASB”) published a document for educational purposes, to help support the consistent application of accounting standards during a period of enhanced economic uncertainty arising from the COVID-19 pandemic. In that publication, the IASB indicated that they had engaged closely with the regulators to encourage entities to consider that guidance. The financial reporting issues, reminders and considerations highlighted in this publication are the following: going concern, financial instruments, asset impairment, governments grants, income taxes, liabilities from insurance contracts, leases, insurance recoveries, onerous contract provisions, fair value measurement, revenue recognition, events after the reporting period, other financial statements disclosure requirements and other accounting estimates.

 

The Company has determined, after analyzing the possible impact of the economic situation in the financial statements, that an assessment of the treatment of expected credit losses (“ECLs”) was necessary, since IFRS 9 should not be applied mechanically and prior assumptions may no longer hold true in the current environment.

  

PAGE 32

 

 

For the purpose of measuring ECLs and for determining whether significant increase in credit risk had occurred, we grouped financial instruments on the basis of shared credit risk characteristics, and, specifically, we grouped our trade receivables considering the industry verticals.

 

Considering that the tourism sector is currently one of the hardest-hit by the outbreak of COVID-19, with impacts on both travel supply and demand, we estimated the ECLs for trade receivables from customers within the “Travel & Hospitality” industry vertical on a separate basis. For the rest of our customers, at the time of our review, there were no indications of a significant change in the probability of non-payment due to the COVID-19 pandemic and, consequently, the impact is expected to be much smaller. Our new estimate resulted in an impact of 1,716 in impairment of trade receivables as of March 31, 2020. Based on the evolution of the COVID-19 pandemic and new information that may become available, we may need to modify our impairment of trade receivables.

 

The Company has assessed whether the impact of COVID-19 has led to any other non-financial asset impairment, including goodwill, and has concluded that, while the current situation remains uncertain, there is no indication that the cash-generating unit may be impaired. Based on the sensitivity analysis performed in 2019, there were no significant changes in any of the used key assumptions that would have resulted in an impairment charge. The Company will continue to monitor developments closely.

 

Finally, as required by IAS 1, Presentation of Financial Statements, the Company has evaluated its ability to continue as a going concern taking into consideration the existing and anticipated effects of the COVID-19 outbreak on the Company’s activities and has concluded that, since its business outlook, cash and liquidity position remain strong, the going concern assumption is appropriate.

 

NOTE 22 – SUBSEQUENT EVENTS

 

The Company evaluated events occurring after March 31, 2020 in accordance with IAS 10. Events after the reporting period, through May 13, 2020, which is the date that these condensed interim consolidated financial statements were made available for issuance, were evaluated.

 

22.1 Amended and Restated Credit Agreement

 

On April 1, 2020, Globant, LLC, our U.S. subsidiary borrowed 75,000 under the Amended and Restated Credit Agreement described in note 19 to our audited consolidated financial statements for the year ended December 31, 2019, which loan will mature on February 5, 2025

 

PAGE 33

 

 

Exhibit 99.2

 

SUPPLEMENTAL DISCLOSURE

 

Operating and Financial Review and Prospects

 

Except where the context requires otherwise, references to “Globant,” “we,” “us,” and “our” refer to Globant S.A., together with its consolidated subsidiaries.

 

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed interim consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 attached as an exhibit to this report on Form 6-K and the information set forth under “Item 5. Operating and Financial Review and Prospects” and our annual consolidated financial statements and related notes, in each case included in our Annual Report on Form 20-F for the year ended December 31, 2019. Our annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and our condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” and elsewhere in our Annual Report on Form 20-F for the year ended December 31, 2019.

 

Business Update Regarding COVID-19

 

During the first quarter of 2020, the spread of a new strain of coronavirus and the disease created by that virus, COVID-19, has created a global pandemic, presenting substantial public health and economic challenges around the world. The global pandemic is affecting our employees, communities and business operations, as well as the global economy and financial markets. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

 

The disclosure in the remainder of this report is qualified by the disclosure in this section on the impacts of COVID-19 and, to the extent that the disclosure in the remainder of this report refers to a financial or performance metric that has been affected by a trend or activity, that reference is in addition to any impact discussed in this section of the impacts of the COVID-19 pandemic. The effect of the COVID-19 pandemic is rapidly evolving and, as such, the information contained in this report is accurate as of the date hereof, but may become outdated due to changing circumstances beyond our present awareness or control.

 

Our COVID-19 Pandemic Response

 

We have been monitoring government actions taken to curb the spread of COVID-19 very closely and we have promptly responded to ensure business continuity, taking concrete measures designed to ensure the health and safety of our Globers and our business. We created a committee to lead our company’s efforts to secure business continuity, which resulted in our making adjustments to our operations, including moving more than 99.5% of our employees to working from home by April 15, 2020 in close collaboration with our customers and without disrupting the delivery of our services, while maintaining our unique culture with diverse virtual initiatives.

 

Our Employees

 

Our senior leadership team is deeply engaged in keeping our employees safe. With the vast majority of our employees able to work productively from a remote location, we do not expect that social distancing requirements or restrictions on non-essential businesses will have a material adverse effect on our ability to operate our business or productively deliver services to our customers, nor on our financial reporting systems, internal control over financial reporting, or disclosure controls and procedures.

 

PAGE 1

 

 

Restrictions on travel and immigration in many countries, including without limitation the April 22, 2020 Presidential Executive Order suspending some immigration into the United States for 60 days, may impact our operations. However, we do not believe that the immigration restrictions in place at this time or general travel restrictions implemented as a result of the COVID-19 pandemic will have a material adverse effect on our business or financial condition and we anticipate expediting immigration processing for our employees if and when the Executive Order is lifted.

 

Our Customers

 

Our global delivery model enables us to deliver our services and solutions from our delivery centers to global customers across all geographies. The effective implementation of our business continuity plans allowed us to make the incremental change to deliver services and solutions to our customers from remote locations instead of from our delivery centers. In addition, we have created specific service offerings to guide companies as they face the new reality. Globant’s augmented collaboration approach aims to deploy artificial intelligence as a propeller of decentralized teams. The suite includes our proprietary StarMeUp OS to promote internal culture and employee engagement, augmented coding to improve developers’ performance, and Agile Pods to increase productivity. Also, our business continuity approach identifies and disseminates insights that are meant to help organizations create the right strategy to remain at the forefront of users’ expectations. We are committed to continuing to provide our customers with the products, services and solutions they seek to deliver business results.

 

Notwithstanding our ability to productively provide our services and solutions remotely, deterioration in economic conditions for our customers could materially reduce our sales and profitability. Reduced demand from our customers or our customers’ customers, potential financial distress in our customer base due to deteriorating economic conditions, and volatile macroeconomic conditions could result in reduced sales and decreased collectability of accounts receivable which would negatively impact our results of operations. Based on currently available information and management’s current expectations, we believe that our revenues will decline in the second quarter of 2020 as compared to the first quarter of 2020. Depending on the duration of the COVID-19 pandemic, the lifting of measures implemented to contain it and the timing and speed of economic recovery, reduced sales volume and, consequently, reduced revenue, could extend beyond the second quarter of 2020. While our digital services are essential to more businesses in a COVID-19 pandemic, an extended downturn and global recession might shrink our market opportunity as industries struggle with liquidity constraints.

 

Though our results of operations depend on our ability to successfully collect payment from our customers for work performed, historically, credit losses and write-offs of trade receivables have not been material to our consolidated financial statements. If, in addition to our customer LATAM Airlines Group S.A., any of our other customers enter bankruptcy protection or otherwise take steps to alleviate their financial distress resulting from the COVID-19 pandemic, the amounts of credit losses and write-offs of trade receivables related to COVID-19 effects that we experienced in the first three months of 2020, which amounted to $1.7 million, is likely to increase, which would negatively impact our results of operations.

 

Our Community

 

We have been and continue to be, very active in helping the communities where we live and operate better meet the unprecedented challenges posed by the COVID-19 pandemic. We are doing this through various volunteer projects, including the development of a series of applications and tools that we are donating to governments and non-governmental institutions, the roll out of different courses and training programs aimed at helping schools become digital and the printing of medical supplies with 3D printers.

 

Moving Forward

 

We are strongly positioned as a pure digital player to help organizations adapt to the new environment they are facing and will face as a result of adapting to the COVID-19 pandemic and the measures taken in response to it. The current situation will create new opportunities as it pushes companies to reinvent themselves and move further into their digital and cognitive transformation. As a leader in this arena, Globant is well placed to partner with companies and lead this path.

 

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Nevertheless, there is uncertainty around the impacts the COVID-19 pandemic and measures taken in response to it will have on our business, financial condition and results of operations. We will continue to actively monitor our business and the needs of our employees, customers and communities to determine the appropriate actions by us to protect the health and safety of our employees and our ongoing operations, including actions informed by the requirements and recommendations of federal, state and local authorities in the United States and in the other jurisdictions where we have operations.

 

Economic and demand uncertainty in the current environment may impact our future results of operations, financial condition and liquidity. We are monitoring the demand for our services, including the duration and degree of any declines or delays in new customer projects. We continue to assess how the effects of the COVID-19 pandemic and measures taken in response to it on the economy may impact human capital allocation, revenue, operating expenses and profitability.

 

For additional information on the various risks posed by the COVID-19 pandemic, see “Risk Factors” included in this report.

 

Three months ended March 31, 2020 compared to the three months ended March 31, 2019

 

Revenues

 

Revenues were $191.6 million for the three months ended March 31, 2020, representing an increase of $45.4 million, or 31.1%, from $146.2 million for the three months ended March 31, 2019.

 

Revenues from North America increased by $35.0 million, or 32.5%, to $142.8 million for the three months ended March 31, 2020 from $107.8 million for the three months ended March 31, 2019. Revenues from Latin America and other countries increased by $12.4 million, or 50.1%, to $37.3 million for the three months ended March 31, 2020 from $24.9 million for the three months ended March 31, 2019. Revenues from Europe decreased by $2.1 million, or 15.2%, to $11.5 million for the three months ended March 31, 2020 from $13.5 million for the three months ended March 31, 2019.

 

Revenues from media and entertainment clients increased by $9.8 million, or 26.8%, to $46.4 million for the three months ended March 31, 2020 from $36.6 million for three months ended March 31, 2019. The increase in revenues from clients in this industry vertical was primarily attributable to higher demand for our scalable platform solutions, gaming solutions, continuous evolution and quality engineering practices. Revenues from banks, financial services and insurance clients increased by $12.0 million, or 36.0%, to $45.4 million for the three months ended March 31, 2020 from $33.4 million for the three months ended March 31, 2019. The increase in revenues from clients in this industry vertical was primarily attributable to higher demand for services related to mobile solutions, agile delivery, user interface engineering and cloud. Revenues from travel and hospitality clients decreased by $0.1 million, or 0.3%, to $22.3 million for the three months ended March 31, 2020 from $22.4 million for the three months ended March 31, 2019. This decrease was primarily attributable to lower demand for scalable platforms and cloud operation services. Revenues from technology and telecommunications clients increased by $5.5 million, or 30.0%, to $23.6 million for the three months ended March 31, 2020 from $18.2 million for the three months ended March 31, 2019. The increase in revenues from clients in this industry vertical was primarily attributable to higher demand in big data, continuous evolution, user interface engineering and the cross-selling capabilities of our Studios. Revenues from professional services clients increased by $7.5 million, or 52.1%, to $21.8 million for three months ended March 31, 2020 from $14.3 million for the three months ended March 31, 2019. The increase in revenues from clients in this industry vertical was primarily attributable to higher demand for services related to scalable platforms, agile delivery, process automation and cloud practices. Revenues from consumer, retail and manufacturing clients increased by $8.0 million, or 44.9%, to $25.8 million for the three months ended March 31, 2020 from $17.8 million for the three months ended March 31, 2019. The increase in revenues from clients in this industry vertical was primarily attributable to higher demand for services related to scalable platforms solutions, agile delivery and continuous evolution practices, supported by the cross-selling of our Studios. Revenues from clients in other verticals increased by $2.8 million, or 78.5%, to $6.3 million for the three months ended March 31, 2020 from $3.5 million for the three months ended March 31, 2019.

 

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Revenues from our top ten clients increased by $18.8 million, or 31.5%, to $78.5 million for the three months ended March 31, 2020 from $59.7 million for the three months ended March 31, 2019 reflecting our ability to increase the scope of our engagement with our main customers. Revenues from Disney, our largest client for the three months ended March 31, 2020, increased by $7.0 million, or 45.6%, to $22.3 million for the three months ended March 31, 2020 from $15.3 million for the three months ended March 31, 2019.

 

Cost of Revenues

 

Cost of revenues was $119.4 million for the three months ended March 31, 2020, representing an increase of $30.6 million, or 34.5%, from $88.7 million for the three months ended March 31, 2019. The increase was primarily attributable to salary expenses related to the net addition of 3,146 IT professionals since March 31, 2019, which represented an increase of 36.6%, together with a lower attrition level. We increased the number of our IT professionals in order to satisfy growing demand, and in anticipation of future demand, for our services. The number of our IT professionals also increased as a result of our onboarding the employees of the companies we acquired during 2019. Cost of revenues as a percentage of revenues increased to 62.3% for the three months ended March 31, 2020 from 60.7% for the three months ended March 31, 2019. The increase was primarily attributable to a faster hiring pace and the inclusion of employees from the companies we acquired, combined with a lower attrition level, which resulted in a large increase of our pool of IT professionals and related costs as well as a slight decrease in utilization rates. We expect that the demand for our services will continue to grow and that the utilization rates of our IT professionals will increase in future periods.

 

Salaries, employee benefits and social security taxes and share-based compensation, the main component of cost of revenues, increased by $28.4 million, or 34.6% to $110.5 million for the three months ended March 31, 2020 from $82.1 million for the three months ended March 31, 2019. The increase is mainly related to the previously mentioned net addition of 3,146 IT professionals since March 31, 2019. Salaries, employee benefits and social security taxes include a $1.1 million share-based compensation expense for the three months ended March 31, 2020 and $1.4 million share-based compensation expense for the three months ended March 31, 2019.

 

Depreciation and amortization expense was $2.3 million for the three months ended March 31, 2020 and $1.2 million for the three months ended March 31, 2019. The increase is mainly due to the depreciation of computer equipment acquired to satisfy growing demand for our services.

 

Travel and housing expense was $4.1 million for the three months ended March 31, 2020 and $3.3 million for the three months ended March 31, 2019. The variation is explained by an increase in travel expenses related to integration and expansion activities.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expense was $51.9 million for the three months ended March 31, 2020, representing an increase of $13.2 million , or 34.3%, from $38.6 million for the three months ended March 31, 2019. The increase was primarily attributable to $8.3 million increase in salaries, employee benefits and social security taxes and share-based compensation related to the addition of a number of senior sales executives and is also explained by management and administrative teams coming from the companies that we acquired during 2019; a $0.6 million increase in depreciation of right-of-use assets; and a $1.2 million increase in office and rental expenses related to the opening of our new delivery centers. In addition, there was a $2.7 million increase in professional fees mainly related to tax matters and legal fees and subscriptions to new software licenses. Selling, general and administrative expenses as a percentage of revenues increased to 27.1% for the three months ended March 31, 2020 from 26.4% for the three months ended March 31, 2019. Share-based compensation expense within selling, general and administrative expenses accounted for $5.2 million, or 2.7%, as a percentage of revenues for the three months ended March 31, 2020, and $3.0 million, or 2.0%, as a percentage of revenues for the three months ended March 31, 2019.

 

Net Impairment Losses on Financial Assets

 

During the three months ended March 31, 2020 and 2019, we recorded a loss for impairment of financial assets of $1.6 million and $0.4 million, respectively. The variation is primarily attributable to an increase in the expected credit loss for trade receivables from customers within the “Travel & Hospitality” industry, due to the outbreak of COVID-19. In the future, additional impairments may be recorded as a result of COVID-19’s impact on this or other industries.

 

On May 26, 2020, our customer LATAM Airlines Group S.A. sought the protection of the U.S. Bankruptcy Court for the Southern District of New York on behalf of itself and 28 of its direct and indirect subsidiaries. LATAM Airlines was our fourth largest client by revenues in the quarter ended March 31, 2020 and, as of that date, we had $12.4 million of receivables from LATAM Airlines under statements of work awarded to us under our master services agreement with this customer. In addition, we had $3.5 million of unbilled fees for the month of April 2020. For more information, see “Risk Factors—Our fourth largest client by revenues, has filed for Chapter 11 protection in the U.S. Bankruptcy Court” in this report.

 

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Gain on Transaction with Bonds

 

Gain on transaction with bonds was $2.3 million for the three months ended March 31, 2020, while we did not engage in these types of transactions during the three months ended March 31, 2019.

 

Finance Income

 

Finance income for the three months ended March 31, 2020 was $13.7 million compared to $0.9 million for the three months ended March 31, 2019, mainly resulting from foreign exchange gains of $13.2 million as compared to $0.1 million for the three months ended March 31, 2020 and 2019, respectively.

 

Finance Expense

 

Finance expense increased to $15.5 million for the three months ended March 31, 2020 from $3.7 million for the three months ended March 31, 2019, primarily due to the following for three months ended March 31, 2020: a foreign exchange loss of $7.1 million mainly related to the impact of the weakening of some Latin American currencies against the U.S. dollar on our monetary assets, denominated in such currencies; a loss of $5.9 million primarily related to financial assets measured at fair value through profit and loss; and interest expense of $2.1 million. Other financial expenses totaled $0.4 million for three months ended March 31, 2020.

 

Other Income and Expenses, Net

 

Other income, net for the three months ended March 31, 2020 was a gain of $16.0 thousand, as compared with expenses of $19.0 thousand for the three months ended March 31, 2019.

 

Income Tax

 

Income tax expense amounted to $6.1 million for the three months ended March 31, 2020, an increase of $2.7 million from $3.4 million income tax expense for the three months ended March 31, 2019. Our effective tax rate (calculated as income tax gain or expense divided by the profit before income tax) increased to 31.6% for the three months ended March 31, 2020 from 22.1% for the three months ended March 31, 2019. The higher effective tax rate during the three months ended March 31, 2020 is principally explained by the impact of the weakness of some Latin American currencies against the U.S. dollar.

 

Net Income for the Period

 

As a result of the foregoing, we had a net income of $13.2 million for the three months ended March 31, 2020, compared to net income of $12.1 million for the three months ended March 31, 2019.

 

For more information, see “Item 5. Operating and Financial Review and Prospects—Operating Results—Factors Affecting Our Results of Operations” in our Annual Report on Form 20-F for the year ended December 31, 2019.

 

Liquidity and Capital Resources

 

Capital Resources

 

Our primary sources of liquidity are cash flows from proceeds from borrowings and operating activities. For the three months ended March 31, 2020, we derived 93.0% of our revenues from clients in North America and Latin America pursuant to contracts that are entered into by our subsidiaries located in the United States, Argentina, Chile, Mexico and Colombia.

 

Our primary cash needs are for capital expenditures (consisting of additions to property and equipment and to intangible assets) and working capital. From time to time we also require cash to fund acquisitions of businesses.

 

Our primary working capital requirements are to finance our payroll-related liabilities during the period from delivery of our services through invoicing and collection of trade receivables from clients.

 

We incur capital expenditures to open new delivery centers, for improvements to existing delivery centers, for infrastructure-related investments and to acquire software licenses.

 

We will continue to invest in our subsidiaries. In the event of any repatriation of funds or declaration of dividends from our subsidiaries, there will be a tax effect because dividends from certain foreign subsidiaries are subject to taxes.

 

As of March 31, 2020, we had cash and cash equivalents and investments of $134.2 million. As of May 31, 2020, we had cash and cash equivalents and investments of $155.2 million, current borrowings of $2.2 million and non-current borrowings of $125.2 million. As of May 31, 2020, $225 million remains available under the terms of our Amended and Restated Credit Agreement.

 

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Investments

 

The following table sets forth our historical capital expenditures for the three months ended March 31, 2020 and 2019:

 

   Three months ended March 31, 
   2020   2019 
   (in thousands) 
Capital expenditures  $9,163   $4,554 

 

During the three months ended March 31, 2020, we invested $5.5 million in capital expenditures primarily on the expansion of our delivery center in Tandil, Argentina, and computer equipment for our delivery centers in Argentina, Uruguay, Mexico and Chile. Additionally, we invested $3.6 million in internal developments and acquired licenses. Capital expenditures vary depending on the timing of new delivery center openings and improvements of existing delivery centers and, primarily with respect to the acquisition of hardware and software, on the specific requirements.

 

Cash Flows

 

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated:

 

   Three months ended March 31, 
   2020   2019 
   (in thousands) 
         
Net cash (used in) provided by operating activities  $(5,351)  $8,804 
Net cash provided by (used in) investing activities   2,913    (48,916)
Net cash provided by financing activities   71,495    5,016 
           
   $69,057   $(35,096)
Cash and cash equivalents at beginning of the period   62,721    77,606 
Effect of exchange rate changes on cash and cash equivalents   863    (309)
Cash and cash equivalents at end of the period   132,641    42,201 
Net increase (decrease) in cash and cash equivalents at end of period  $69,057   $(35,096)

 

Operating Activities

 

Net cash used in operating activities consists primarily of profit before taxes adjusted for non-cash items, including depreciation and amortization expense, and the effect of working capital changes.

 

Net cash used in operating activities was $5.4 million for the three months ended March 31, 2020, as compared to net cash provided by operating activities of $8.8 million for the three months ended March 31, 2019. This variance of $14.2 million in net cash used in operating activities was primarily attributable to a $19.0 million decrease in working capital, mainly explained by the fact that in 2020 bonuses were paid in March while the payment of bonuses in 2019 occurred in April; a $6.5 million increase in profit before income tax expense adjusted for non-cash-items, and a $1.7 million increase in income tax payments, net of reimbursements.

 

Investing Activities

 

Net cash of $2.9 million was provided by investing activities for the three months ended March 31, 2020, as compared to $48.9 million of net cash used in investing activities during the three months ended March 31, 2019. We invested in mutual funds, treasury bills and sovereign bonds, which generated cash flows of $20.4 million and $4.1 million during the three months ended March 31, 2020 and 2019, respectively. We invested $10.2 million in fixed and intangible assets and $3.4 million in payments related to acquisitions during the three months ended March 31, 2020, compared with $5.5 million and $48.0 million during the three months ended March 31, 2019, respectively. We made payments of $3.9 million and obtained proceeds of $0.5 million related to forward contracts for the three months ended March 31, 2020 and 2019, respectively.

 

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Financing Activities

 

Net cash of $71.5 million was provided by financing activities for the three months ended March 31, 2020, as compared to $5.0 million of net cash provided by financing activities for the three months ended March 31, 2019. During the three months ended March 31, 2020, we received $2.0 million from the issuance of shares under our share-based compensation plan, $0.9 million in proceeds from subscription agreements and proceeds from borrowings of $75.0 million. Additionally, during the three months ended March 31, 2020 we paid $5.3 million of lease liabilities and $1.1 million of borrowings.

 

During the three months ended March 31, 2019, we received $6.0 million from the issuance of shares under our share-based compensation plan and $2.4 million in proceeds from subscription agreements. Additionally, during the three months ended March 31, 2019, we paid $3.3 million of lease liabilities.

 

Future Capital Requirements

 

We believe that our existing cash and cash equivalents and cash flows from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. In addition, as of March 31, 2020, our subsidiary IAFH Global S.A. had recognized an aggregate of $1.3 million in value-added tax credits. We expect to monetize the value of those value-added tax credits by way of cash reimbursement from Administración Federal de Ingresos Públicos ("AFIP") during 2020.

 

Our ability to generate cash is subject to our performance, general economic conditions, industry trends and other factors. If our cash and cash equivalents and operating cash flow are insufficient to fund our future activities and requirements, we may need to raise additional funds through public or private equity or debt financing. If we issue equity securities in order to raise additional funds, substantial dilution to existing shareholders may occur. If we raise cash through the issuance of indebtedness, we may be subject to additional contractual restrictions on our business. We cannot assure you that we would be able to raise additional funds on favorable terms or at all, including as a result of increased market volatility in the capital markets attributable to COVID-19.

 

The COVID-19 pandemic and measures taken to contain its impact have caused material disruptions in both national and global financial markets and economies. The future impact of the COVID-19 pandemic and the measures enacted to contain its impact cannot be predicted with certainty and may increase our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity.

 

Summary of Significant Accounting Policies

 

Our unaudited condensed interim consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 have been prepared using the same accounting policies as used in the preparation of our audited consolidated financial statements for the year ended December 31, 2019, except for the adoption of new standards and interpretations effective as of January 1, 2020, as described below.

 

Application of new and revised International Financial Reporting Standards

 

We have adopted all of the new and revised standards and interpretations issued by the IASB that are relevant to our operations and that are mandatorily effective at March 31, 2020 as described in note 2.1 to our audited consolidated financial statements for the year ended December 31, 2019. The impact of the new and revised standards and interpretations mentioned on our condensed interim consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 is described as follows.

 

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We adopted the following standards and interpretation that became applicable for annual periods commencing on or after January 1, 2020:

 

Amendments to References to the Conceptual Framework in IFRS Standards  
Amendment to IFRS 3 Definition of a Business
Amendment to IAS 1 and IAS 8 Definition of Material
   
Amendment to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform
Amendment to IAS 1 Classification of Liabilities as Current or Non-Current 1

 

1Effective for annual reporting periods beginning on or after January 1, 2022 and are to be applied retrospectively. Earlier application is permitted.

 

Those standards did not have any impact on the Company’s accounting policies and did not require retrospective adjustments.

 

As of March 31, 2020, the Company’s loans and interest rate swap that bear interest based on LIBOR include a clause that provides alternative interest rates in case of a discontinuity of LIBOR.

 

New accounting pronouncements

 

As of March 31, 2020, no new or revised IFRS have been issued. The new and revised IFRS that have been issued but are not yet mandatorily effective are described in note 2.1 to our audited consolidated financial statements for the year ended December 31, 2019.

 

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Legal Proceedings

 

Certain of our non-U.S. subsidiaries are currently under examination by the U.S. Internal Revenue Service (“IRS”) regarding payroll and employment taxes primarily in connection with services performed by employees of certain of our subsidiaries in the United States from 2013 to 2015. On May 1, 2018, the IRS issued 30-day letters to those subsidiaries proposing total assessments of $1.4 million plus penalties and interest for employment taxes for those years. Our subsidiaries filed protests of these proposed assessments with the IRS on July 16, 2018. As of the date of this report, we have not received an answer to such filings. As of the date of this report, management cannot make any predictions about the final outcome of this matter or the timing thereof.

 

One of our Colombian subsidiaries is currently under examination by the Unidad de Gestión Pensional y Parafiscales (the “UGPP”) regarding social contribution payments for the fiscal year 2016. On November 6, 2019, the UGPP issued a demand letter to our Colombian subsidiary proposing a preliminary assessment of $2.1 million plus penalties and interest for social contribution payments during such year and requesting our Colombian subsidiary to revert with its own assessment. The response letter was presented by our Colombian subsidiary on February 5, 2020, after which date, the UGPP will have six months to issue its final determination.

 

On August 8, 2019, Certified Collectibles Group, LLC (“CCG”) and its affiliates filed a complaint in the U.S. District Court for the Middle District of Florida, Tampa Division, (Civil Action No. 19-CV-1962) against Globant S.A. and Globant, LLC.  The complaint, arising from a dispute relating to a service contract, alleges nine causes of action against Globant, LLC: (1) fraudulent inducement of contract; (2) fraud; (3) fraudulent concealment; (4) negligent misrepresentation; (5) breach of contract and breach of express warranty; (6) violation of Florida’s Deceptive and Unfair Trade Practices Act; (7) professional negligence; (8) declaratory judgment; and (9) unjust enrichment. The complaint names Globant S.A. as a defendant with respect to several of these causes of action (counts 2-4, 6-7, and 9), on the alleged theory that Globant S.A. was an “alter ego” or agent of Globant, LLC. Globant, LLC has filed a motion to dismiss the complaint for failure to state a claim, and Globant S.A. has filed a motion to dismiss for lack of personal jurisdiction. CCG has opposed these filings. The court has not yet ruled on the motions to dismiss.

 

In addition to the foregoing, as of the date of this report, we are a party to certain other legal proceedings, including tax and labor claims, where the risk of loss is considered possible. In the opinion of our management, the ultimate disposition of such threatened and/or pending matters, either individually or on a combined basis, is not likely to have a material effect on our financial condition, liquidity or results of operations.

 

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Risk Factors

 

The following risk factors are intended to supplement and/or amend, as applicable, the risk factors set forth in our Annual Report on Form 20-F for the year ended December 31, 2019 and should be read together with such risk factors. To the extent there is a conflict between the risk factors set forth below and the risk factors included in our Annual Report, you should rely on the risk factors set forth below, as such risk factors were prepared as of a more recent date.

 

Risks Related to Our Business and Industry

 

The extent to which the coronavirus (“COVID-19”) outbreak and measures taken in response thereto impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict.

 

The global impact of the COVID-19 outbreak and measures taken to reduce the spread of the virus have had an adverse effect on the global macroeconomic environment, and have significantly increased economic uncertainty and reduced economic activity. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or total lock-down orders and business limitations and shutdowns.

 

Governments around the globe have taken steps to mitigate some of the more severe economic effects of the virus, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion or at all.

 

We have taken numerous actions to protect our employees and our business following the spread of COVID-19 (including, among others, restricting employee travel, developing social distancing plans for our employees and cancelling physical participation in meetings, events and conferences), and we may take further actions if and when required by government authorities or as we determine are in the best interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus.

 

The extent to which the COVID-19 outbreak impacts our business, results of operations and financial condition in the longer term will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration, spread and severity of the outbreak, the actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions broadly resume.

 

In particular, we may experience reduced revenues and/or financial losses as a result of a number of operational factors, including:

 

Customer pricing pressure, payment term extensions and insolvency risk - As our customers face reduced demand for their products and services, reduce their business activity and face increased financial pressure on their businesses, we may face downward pressure on our pricing and gross margins if we make pricing concessions to customers. In addition, in response to the requests of some of our customers, we have granted extended payment terms. We expect that some of our customers will continue to make such requests, which may have an adverse effect on our cash flows from operations. We may also face a significantly elevated risk of customer insolvency, bankruptcy or liquidity challenges which may result in a failure to be paid for services we have performed and expenses we have incurred, which could in turn result in us having to take a charge in the period in which the related receivable was written down or written off. In this regard, LATAM Airlines Group S.A., which was our fourth largest customer by revenues for the year ended December 31, 2019 and the quarter ended March 31, 2020, filed for protection under chapter 11 of Title 11 of the U.S. Bankruptcy Code on May 26, 2020. For additional information on LATAM Airlines Group S.A.’s Chapter 11 proceeding, see “—Our fourth largest customer by revenues has filed for Chapter 11 protection in the U.S. Bankruptcy Court.”

  

Reduced customer demand for services – As a result of the pandemic’s impact on our customers, we may experience reduced demand for our services. Among other things, our customers may postpone, cancel or scale back existing and potential projects with us.

 

Increased costs - We face increased costs from the pandemic, including as a result of mitigation efforts such as enabling increased work-from-home capabilities and additional health and safety measures.

 

Diversion of and strain on management and other corporate resources - Addressing the significant personal and business challenges presented by the pandemic, including various business continuity measures and the need to enable work-from-home arrangements for our Globers, has demanded significant management time and attention and strained other corporate resources, and is expected to continue to do so. Among other things, this may adversely impact our recruitment and retention, our customers and employee development and our ability to execute our strategy and various transformation initiatives, and may increase our exposure to security breaches or cyberattacks.

 

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 and the measures taken in response thereto may have on our business, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. We do not yet know the full extent of the impact on our business, the countries in which we operate and in which our customers do business, or the global economy as a whole. The nature of the crisis, the public health measures to contain it, and the economic impact are all developing rapidly, and they vary among the different jurisdictions where we and our customers operate. The effects on our business, results of operations, financial condition and liquidity remain highly uncertain and heighten many of our known risks described under “Item 3. Key Information—D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2019.

 

Our fourth largest customer by revenues has filed for Chapter 11 protection in the U.S. Bankruptcy Court, and other customers may also experience insolvency in the future.

 

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On May 26, 2020, LATAM Airlines Group S.A. (“LATAM Airlines”), our fourth largest customer by revenues for the year ended December 31, 2019 and the three months ended March 31, 2020, sought the protection of the U.S. Bankruptcy Court for the Southern District of New York on behalf of itself and 28 of its direct and indirect subsidiaries. Revenues from LATAM Airlines represented 4.1% of our revenues during the three months ended March 31, 2020.

 

On the same date as the Chapter 11 petitions were filed, LATAM Airlines moved in the Chapter 11 cases for interim and final orders authorizing payment of all or a portion of the pre-petition obligations owed to certain vendors designated as “critical vendors” of accrued and unpaid compensation owed to such critical vendors including, among others, information technology suppliers and service providers. In addition, LATAM Airlines moved for entry of interim and final orders granting administrative expense priority status to those undisputed obligations of the debtors arising from, among others, services ordered pursuant to prepetition purchase or service orders to the extent that such services are received and accepted by the debtors after the petition date, including but not limited to where partial payments or partial performance of such obligations occurred during the prepetition period. On June 1, 2020, the bankruptcy court entered interim orders granting the relief requested under these two motions.

 

As of March 31, 2020, we had $12.4 million of receivables from LATAM Airlines under statements of work awarded to us under our master services agreement with this customer. In addition, we had $3.5 million of unbilled fees for the month of April 2020. We are continuing to perform services for LATAM Airlines during the pendency of its Chapter 11 proceeding. Given the very early stage of LATAM Airlines’ Chapter 11 proceeding, we are not able to predict with any certainty the amount that we will ultimately recover with respect to our prepetition claims or the timing of such payments. With respect to services that we perform after the petition date in the ordinary course of business, we believe that the fees that we charge for such services will be granted administrative expense priority status under the U.S. Bankruptcy Code. However, the ultimate outcome of LATAM Airlines’ Chapter 11 cases is subject to a number of risks and uncertainties relating to LATAM Airlines’ ability to successfully complete a reorganization process under Chapter 11, including: the consummation of LATAM Airlines’ plan of reorganization; the potential adverse effects of the Chapter 11 cases on LATAM Airlines’ liquidity; LATAM Airlines’ ability to obtain timely approval by the bankruptcy court with respect to the motions filed in the Chapter 11 cases; objections by creditors to LATAM Airlines’ plan of reorganization, DIP financing, or other pleadings filed that could protract the Chapter 11 cases; LATAM Airlines’ ability to comply with the restrictions imposed by the terms and conditions of any debtor-in-possession financing and other financing arrangements that it puts in place; the bankruptcy court’s rulings in the Chapter 11 cases, including the approvals of the terms and conditions of the plan of reorganization and the debtor-in-possession financing, and the outcome of the Chapter 11 cases generally; and the length of time that LATAM Airlines will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 cases.

 

Other customers of ours, and other industries in which our customers operate, may, as a result of the COVID-19 pandemic or otherwise, experience financial difficulties and/or reduced liquidity. For example, the travel and hospitality sector has been materially and adversely impacted by the COVID-19 pandemic. As of March 31, 2020, we had $13.8 million of receivables from companies in that sector, excluding LATAM Airlines. Financial difficulties may cause our customers to become insolvent and possibly to seek bankruptcy protection or similar relief. Any such financial difficulties experienced and/or protections sought, by any of our other customers may increase the likelihood that we will need to reassess our expected credit losses, and possibly reflect additional impairments of our financial assets. In addition, any change in payment terms or in the collectability of our existing or future receivables from LATAM Airlines and/or such other customers could result in a decline in our revenue and profit and have a material adverse impact on our business, financial conditions, results of operations and cash flows, which could result in a decline in the price of our common shares.

 

Risks Related to Operating in Latin America

 

Argentina

 

Our business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates (most notably between the U.S. dollar and the Argentine peso) and high and possibly increasing inflation in Argentina.

 

In recent years, the Argentine peso has suffered significant devaluations against the U.S. dollar and is continuing to devaluate against the U.S. dollar. The Argentine peso depreciated against the U.S. dollar by 18.4% in 2017, 102.2% in 2018 and 59.0% in 2019, based on the official exchange rates published by the Argentine Central Bank. Between January 1, 2020 and May 31, 2020, the Argentine peso depreciated against the U.S. dollar by 14.7%. The sharp depreciation of the Argentine peso in recent years has continued fostering inflation and created strong volatility in the Argentine peso/U.S. dollar exchange rate.

 

According to the Argentine National Institute of Statistics and Census (Instituto Nacional de Estadística y Censos), the consumer price index increased 47.6% in 2018, 53.8% in 2019, and 9.4% between January 1, 2020 and April 30, 2020.

 

Since September 1, 2019, in an effort to stabilize the exchange rate volatility and reduce the outflow of reserves from the Argentine Central Bank, the Argentine government has re-imposed rigid exchange controls and transfer restrictions, substantially limiting the ability of legal entities to purchase foreign currency and making certain payments or distributions out of Argentina. However, upon the reinstatement of such restrictions, an unofficial U.S. dollar trading market developed in which the Argentine peso/U.S. dollar exchange rate has been significantly higher than the rate in the official foreign exchange market (the “FX Market”).

 

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In addition, since December 21, 2019, the Argentine congress has enacted Law 27,541, which, among other things, established a new 30% tax on the purchase by Argentine residents of foreign currency for portfolio purposes, for the acquisition of goods and services with credit and debit cards, and for making any payments in connection with international passenger transportation. Digital services rendered from outside Argentina (such as hosting, web services, software as a service, streaming services, etc.) are subject to a reduced tax rate of 8.0%.

 

As of June 2, 2020, the U.S. dollar selling exchange rate in the FX Market published by Banco de la Nación Argentina was 70.50 Argentine pesos per U.S. dollar, which is substantially lower than the selling exchange rate in the unofficial exchange market. In addition, access to foreign currency can be obtained through capital markets transactions called blue-chip swaps, subject to certain restrictions. However, these transactions are significantly more expensive than acquiring foreign exchange through the FX Market. See “Item 3. Key Information—D. Risk Factors—Risks Related to Operating in Latin America—Argentina—Our business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates (most notably between the U.S. dollar and the Argentine peso)” and “Item 3. Key Information—D. Risk Factors—Risks Related to Operating in Latin America—Argentina—Our results of operations may be adversely affected by high and possibly increasing inflation in Argentina” in our Annual Report on Form 20-F for the year ended December 31, 2019 and “—Foreign exchange restrictions have impaired our ability to receive dividends and distributions from our Argentine subsidiaries, receive the proceeds of any sale of our assets in Argentina and receive certain payments outside of Argentina through the FX market” in this report.

 

In addition, the Argentine economy has been, and continues to be, significantly and adversely affected by the COVID-19. For more information about the risks related to the COVID-19 pandemic, see “—Risks Related to Our Business and Industry—The extent to which the coronavirus (“COVID-19”) outbreak and measures taken in response thereto impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict” in this report. Due to the lack of federal reserves and lack of access to financing, the Argentine government is financing all governmental aid to individuals and businesses to address the recession caused by the COVID-19 by issuing currency. If all or a substantial portion of such issuance is not absorbed in the future by the Argentine Central Bank and the federal reserves continue to decrease, inflation may rise to higher levels, including hyperinflation. See “—Argentina’s ability to obtain financing from international markets may be limited, which may in turn impair its ability to implement reforms and public policies and foster economic growth and could impact the ability of Argentine companies to obtain financing outside of Argentina” in this report.

 

There is uncertainty regarding the effects that the measures taken, or that may be taken, by the Argentine government to control the foreign exchange rate and inflation could have in the medium term. If the Argentine peso continues to depreciate and inflation remains high, or continues to increase, Argentina’s economy may be negatively impacted and our results of operations could be materially and adversely affected.

 

Argentina’s ability to obtain financing from international markets may be limited, which may in turn impair its ability to implement reforms and public policies and foster economic growth and could impact the ability of Argentine companies to obtain financing outside of Argentina.

 

According to a report issued by the Secretary of Finance of Argentina, in December 2019, Argentina’s foreign debt amounted to $323.1 billion, which represented 89.5% of Argentina’s gross domestic product (“GDP”). Under the terms of the Argentine government’s existing debt instruments, approximately $69.7 billion of sovereign debt in foreign currency and Argentine pesos matures in 2020.

 

In January 2020, a New York district court dismissed a $84 million lawsuit filed by Aurelius Capital against Argentina related to the alleged payment shortfall under Argentina’s GDP-linked bonds issued in 2013, while additional claims were pending in New York and London in respect of the same bonds. However, in March 2020, Aurelius Capital filed two new claims in New York for $252 million alleging that the Republic of Argentina breached the terms and conditions of the GDP-linked bonds.

 

On February 12, 2020, the Argentine congress enacted Law No. 27,544 for the Restoration of the Sustainability of the Public Debt issued under Foreign Law, authorizing the Ministry of Economy to restructure the Argentine government’s public debt.

 

On February 13, 2020, $1.6 billion of dual currency bonds issued by Argentina’s government matured. During February 2020, the Argentine government launched an offer to exchange the dual currency bonds with new Argentine peso-denominated bonds due in 2021, but the offer was withdrawn due to an insufficient number of bonds being tendered. Following the failure of the exchange offer, the Argentine government sought to issue another Argentine peso-denominated bond, but ultimately terminated that plan. The Argentine government then issued Decree No. 141/2020, pursuant to which it postponed the payment of principal and suspended the accrual of interest under the dual currency bonds until September 30, 2020.

 

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On March 9, 2020, the Argentine government issued Decree No. 250/2020, which authorized negotiations for the restructuring of $68.85 billion in foreign currency and law governed sovereign bonds. On March 12, 2020, the Ministry of Economy of Argentina authorized the SEC registration of foreign sovereign bonds for a principal amount up to $68.85 billion, with the exact amounts subject to the restructuring negotiations. On March 16, 2020, the Argentine government filed a registration statement with the SEC for the offer and sale of up to $31.6 billion in new foreign sovereign bonds or warrants convertible into new bonds.

 

On April 6, 2020, the Argentine government issued Decree No. 346/2020, which, among other things, approved (i) the deferral of interest payments and amortization of principal on sovereign debt bonds denominated in U.S. dollars and governed by Argentine law (with certain limited exceptions), until December 31, 2020, or until any earlier date to be determined by the Ministry of Economy, and (ii) the authorization of the Ministry of Economy to carry out the exchange and/or restructuring of the bonds described in clause (i) above.

 

On April 21, 2020, the Argentine government launched an exchange offer with respect to all eligible foreign currency and law-governed sovereign bonds, which included a reduction of the principal amount of certain series of the eligible bonds, an interest payment grace period until November 2022, and coupons between 0.5% and 0.6% between November 2022 and November 2023 or 2025, depending on the series of the new bonds, and increasing to between 1.0% and 4.875% from those dates until final maturity depending on the series of the new bonds.

 

On April 22, 2020, approximately $500 million in coupon payments under the eligible foreign bonds BIRAD/USD 6.875% due 2021, BIRAD/USD 7.5% due 2026 and BIRAD/USD 7,625% due 2046 became due, subject to a cure period through May 22, 2020. When the exchange offer was originally set to expire on May 8, 2020, the Argentine government’s initial offer received a very low level of acceptance, and the government extended the deadline of the exchange offer until May 22, 2020. Upon expiration of such extension, the Argentine government did not receive additional acceptances to its initial offer and defaulted on the payment of the coupons under the eligible foreign bonds described above. The Argentine government further extended the exchange offer until June 12, 2020, but has not yet revised its initial offer.

 

In addition, the Province of Buenos Aires, the largest province in Argentina, had additional payments under its sovereign debt in an aggregate principal amount of approximately $110 million that matured on May 11, 2020, and has additional substantial payments maturing in June 2020. The Province is seeking to restructure its sovereign bonds through an exchange offer, and has extended the expiration date of such offer, which is currently June 5, 2020.

 

If the Argentine government does not successfully restructure its foreign sovereign bonds, Argentina’s ability to obtain international or multilateral private financing or direct foreign investment may be limited, which may in turn impair its ability to implement reforms and public policies to foster economic growth, impair the ability of private sector entities to access the international capital markets or make the terms of such financing much less favorable that those accessible by companies in other countries in the region and may accelerate the depreciation of the Argentine peso, foster inflation and deepen the economic crisis and recession. In addition, Argentina may face litigation from sovereign debt holdout holders.

 

Lack of access to international or domestic financial markets could affect the projected capital expenditures for our operations in Argentina, which, in turn, may have an adverse effect on our financial condition or results of our operations.

 

Foreign exchange restrictions have impaired our ability to receive dividends and distributions from our Argentine subsidiaries, receive the proceeds of any sale of our assets in Argentina and receive certain payments outside of Argentina through the FX market.

 

Since September 1, 2019, the Argentine government has re-imposed rigid exchange controls and transfer restrictions, substantially limiting the ability of legal entities to obtain foreign currency or make certain payments or distributions abroad. Among others, the foreign exchange restrictions require the prior authorization of the Argentine Central Bank to access the FX Market for purposes of acquiring foreign currency for portfolio purposes by legal entities and making dividend distributions (except in certain limited circumstances and amounts). The domestic revenues of our Argentine subsidiaries (excluding intercompany revenues to other Globant subsidiaries, which are eliminated in consolidation) were $30.9 million in 2019, $23.8 million in 2018 and $13.3 million in 2017, representing 4.7%, 4.6%, and 3.2% of our annual consolidated revenues. See “Item 4. Information on the Company—B. Business Overview—Foreign Exchange Controls” in our Annual Report on Form 20-F for the year ended December 31, 2019.

 

Pursuant to the new foreign exchange regulations, our Argentine subsidiaries have access to the FX Market to make payments of dividends or other distributions of earnings out of Argentina from January 17, 2020 without prior authorization from the Argentine Central Bank, in an amount that (including the amount of the payment being made at the time of the access) does not exceed 30% of the value of new capital contributions of foreign direct investments. These contributions must be made to the Argentine entity and must be transferred to Argentina and sold for Argentine pesos through the FX Market as from such date. Access to the FX Market for the payment of dividends in excess of the amounts described above or not complying with those requirements are subject to the prior authorization of the Argentine Central Bank.

 

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The new foreign exchange regulations have also restricted the ability of our Argentine subsidiaries to access the FX Market to acquire foreign currency without the prior authorization of the Argentine Central Bank for portfolio purposes and the ability of foreign residents to access the FX Market to acquire foreign currency for any purpose, including for the conversion and transfer out of Argentina of the proceeds of the sale of assets received by the foreign resident in Argentina. In addition, the new foreign exchange regulations require the prior authorization of the Argentine Central Bank for making any payments of services to foreign related entities except for expenses payable for their normal operation.

 

Pursuant to Communication “A” 7001, dated April 30, 2020, as amended, in order to access to the FX Market for making any kind of payments, the Argentine Central Bank requires an affidavit from the requestor (i) stating that it has not sold in Argentina securities settled against foreign currency or transferred securities to custody accounts out of Argentina within the immediately prior 90 consecutive days (or since April 1, 2020 in respect of any access to the FX Market until June 30, 2020); and (ii) committing not to sell in Argentina securities to be settled against foreign currency or to transfer securities to custody accounts out of Argentina within the immediately following 90 consecutive days. In addition, pursuant to such Communication, any persons holding loans in Argentine pesos at an interest rate of 24% for working capital granted in accordance with Communication “A” 6937 of the Argentine Central Bank (each a “Subsidized Loan”) cannot sell securities for settlement in foreign currency in Argentina or transfer them to custody accounts outside Argentina while those loans are outstanding. Communication “A” 7001 also provided that, for accessing the FX Market to make payments of principal and interest under any kind of foreign indebtedness outstanding as of March 19, 2020, when such indebtedness does not have a stated maturity or when such indebtedness was due prior to such date, the party must file an affidavit stating that it does not have outstanding a Subsidized Loan and will not request any such loan within the following 30 consecutive days.

 

By resolution of the Argentine Securities Commission (Comisión Nacional de Valores, or the “CNV”) No. 841/2020, dated May 25, 2020, the CNV established that, with certain limited exceptions, in order to process any instruction for the sale of securities for U.S. dollars or for their transfer to depositories outside Argentina, the securities must have been held for at least five business days since the date of their credit in the depository’s custody account.

 

Communication “A” 7030 of the Argentine Central Bank, dated May 28, 2020, requires that, for purposes of accessing the FX Market for making payments of, among others things, imports of goods, services rendered by non-Argentine residents, interests in connection with the import of goods and services, dividends and other earnings distributions, principal and interest on financial debt, payment of debt securities with public registry in Argentina, or for making international portfolio investments or transactions with derivatives by legal entities, other purchases of foreign currency for specific allocation and premium, guarantees and payments on interest hedging transactions, the party will be required to file an affidavit (i) stating, that as of such date, all of such party’s holdings of foreign currency in Argentina are deposited with Argentine financial institutions and that it does not have foreign liquid disposable assets (including, among others, foreign currency, gold and savings and checking deposits in non-Argentine financial institutions); and (ii) committing to transfer into Argentina and settle for Argentine pesos any foreign currency payments received outside of Argentina from the collection of loans granted to third parties, time deposits, or the sale of any asset when the asset was acquired, the deposit made or the loan granted after May 28, 2020.

 

Communication “A” 7030 also provides that, until June 30, 2020, with certain limited exceptions, access to the FX Market for the payment of the import of certain goods or the payment of principal under imports accounts payable will be subject to the prior approval of the Argentine Central Bank, except where the party files an affidavit stating that the aggregate amount of payments of imports made by such party during 2020 (including the payments of credit lines and commercial guaranties in connection thereto and the payment that is making) does not exceed the aggregate amount of imports nationalized by the party between January 1, 2020 and the date immediately prior to the date of access to the FX Market. In addition, until June 30, 2020, prior approval of the Argentine Central Bank is required for the access to the FX Market for the payment of principal under financial foreign indebtedness with non-Argentine related parties.

 

Pursuant to Decrees Nos. 332/2020 and 376/2020 dated April 1, 2020 and April 20, 2020, respectively, and each as amended, in connection with the COVID-19 crisis, the Argentine government approved government aid for private sector employers. Pursuant to Resolution 591, entities benefiting from these programs are prohibited from, among other things, making dividend distributions, and purchasing securities with Argentine pesos for their sale for foreign currency or transferring to custody accounts outside Argentina. Our Argentine subsidiaries received these benefits in respect of some of their employees, but we are in the process of reverting these payments to the Argentine government and withdrawing from these programs.

 

Due to the restrictions described above, certain of our payments and transfers could be subject to substantial additional costs that could adversely affect our business and results of operations.

 

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Exhibit 99.3

 

Globant S.A.

 

Selected Investor Presentation Slides

 

 

Forward-Looking Statements

 

In addition to historical information, the following slides might contain “forward-looking statements” relating to Globant S.A. (the “Company”) that are based on the current beliefs of its management, expectations and projections of future events as well as assumptions made and information currently available to the Company. Such forward looking statements, as well as those included in any other material discussed at any management presentation, reflect the current views of the Company with respect to future events and are subject to risks, uncertainties and assumptions about the Company and its subsidiaries, including, among other things, its future financial position and results of operations, strategy, plans, objectives, goals and targets, future developments in the markets in which the Company operates or is seeking to operate or anticipated regulatory changes in the markets in which it operates or intends to operate. In light of these risks, uncertainties and assumptions, the events or circumstances referred to in the forward-looking statements may not occur. None of the future projections, expectations, estimates or prospects in the following slides should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in the presentation. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others: impact and duration of the COVID-19 pandemic, inability to maintain current resource utilization rates and productivity levels; inability to manage attrition and attract and retain highly-skilled IT professionals; failure to use accurate expectations and assumptions regarding the cost and complexity of performing client work in developing pricing structures for client contracts; inability to achieve anticipated growth; inability to effectively manage our growth, which could place significant strain on the Company’s management personnel, systems and resources; the Company’s expectation that it will be able to integrate and manage acquired companies and that the Company’s will yield expected benefits; loss of services of the Company’s senior management team or other key employees; inability to continue to innovate and remain at the forefront of emerging technologies and related market trends; as to any of the Company’s largest clients, termination, decrease in the scope of, or failure by such client to renew its business relationship or short-term contract with the Company; the levels of the Company’s concentration of revenues by vertical, geography, by client and by type of contract in the future; changes in general economic conditions in the United States, Europe or globally; uncertainty concerning the instability in the current economic, political and social environment in Argentina; increases in exposure to fluctuations in the value of the Argentine peso due to Argentina’s regulations on proceeds from the export of services; the imposition in the future of additional regulations on proceeds collected outside Argentina for services rendered to non-Argentine residents or of export duties and controls; the continuity of the tax incentives available for software companies with operations in Argentina; continuing substantial control over the Company by the Company’s principal shareholders, directors and executive officers and entities affiliated with them and its impact on ability of investors to influence significant corporate decisions, such as approval of key transactions, including a change of control; ability to manage uncertainty concerning the instability in the current economic, political and social environment in Latin America and various other factors described under “Item 3. Key Information—D. Risk Factors” in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019.

 

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or targeted. No one intends, or assumes any obligations, to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. As a result of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements as a prediction of actual results or otherwise.

 

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Non-IFRS Financial Measures

 

The following slides include certain financial measures that are not calculated in accordance with International Financial Reporting Standards (“non-IRFS financial measures”), which have not been subject to audit. These non-IFRS financial measures are provided as additional information to enhance an overall understanding of the historical and current financial performance of our operations. We believe these measures help illustrate underlying trends in our business and use such measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. These non-IFRS financial measures should not be considered as substitutes for or superior to IFRS results. In addition, our calculation of these non-IFRS financial measures may be different from the calculation used by other companies, and therefore comparability is limited.

 

The information and opinions contained in this presentation are provided as of the date of this report and are subject to verification, completion and change without notice.

 

The following slides should not be considered as a recommendation by the Company or any of its advisers and/or agents that any person should subscribe for or purchase any securities of the Company.

 

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Exhibit 99.4

  

 

 

« GLOBANT S.A. »

société anonyme

L-1855 Luxembourg, 37A, avenue J.F. Kennedy

R.C.S. Luxembourg, section B numéro 173.727

 

 

 

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STATUTS COORDONNES à la date du 2 juin 2020

 

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A.       NAME - DURATION - PURPOSE - REGISTERED OFFICE

Article 1             Name

There exists a company in the form of a joint stock company (société anonyme) under the name of “GLOBANT S.A.” (the "Company") which shall be governed by the law of 10 August 1915 concerning commercial companies, as amended (the “Law”), as well as by the present articles of association.

Article 2             Duration

The Company is incorporated for an unlimited duration. It may be dissolved at any time and without cause by a resolution of the general meeting of shareholders, adopted in the manner required for an amendment of these articles of association.

Article 3             Object

3.1.         The Company's primary purpose is the creation, holding, development and realization of a portfolio, consisting of interests and rights of any kind and of any other form of investment in entities in the Grand Duchy of Luxembourg and in foreign entities, whether such entities exist or are to be created, especially by way of subscription, acquisition by purchase, sale or exchange of securities or rights of any kind whatsoever, such as equity instruments, debt instruments, patents and licenses, as well as the administration and control of such portfolio.

3.2.         The Company may further grant any form of security for the performance of any obligations of the Company or of any entity in which it holds a direct or indirect interest or right of any kind or in which the Company has invested in any other manner or which forms part of the same group of entities as the Company and lend funds or otherwise assist any entity in which it holds a direct or indirect interest or right of any kind or in which the Company has invested in any other manner or which forms part of the same group of companies as the Company.

3.3.         The Company may borrow in any form and may issue any kind of notes, bonds and debentures and generally issue any debt, equity and/or hybrid or other securities of any kind in accordance with Luxembourg law.

3.4.         The Company may carry out any commercial, industrial, financial, real estate, technical, intellectual property or other activities which it may deem useful in accomplishment of these purposes.

Article 4             Registered office

4.1          The Company's registered office is established in the city of Luxembourg, Grand Duchy of Luxembourg. The Company's registered office may be transferred by a resolution of the board of directors within the same municipality.

4.2          It may be transferred to any other municipality in the Grand Duchy of Luxembourg by means of a resolution of the general meeting of shareholders.

4.3          Branches or other offices may be established either in the Grand Duchy of Luxembourg or abroad by a resolution of the board of directors.

 

 

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B.           SHARE CAPITAL - COMMON SHARES - REGISTER OF COMMON SHARES - OWNERSHIP AND TRANSFER OF COMMON SHARES

Article 5             Share capital

5.1.         The Company has a share capital of forty-four million eight hundred seventy-seven thousand six hundred forty-six US dollars and eighty cents (USD 44,877,646.80) represented by thirty-seven million three hundred ninety-eight thousand thirty-nine (37,398,039) common shares having a nominal value of one US dollar and twenty cents (USD 1.20) per common share.

5.2.         The Company's issued share capital may be (i) increased by a resolution of the board of directors (or delegate thereof) in accordance with articles 6.1 and 6.2 of these articles of association or (ii) increased or reduced by a resolution of the general meeting of shareholders, adopted in the manner required for an amendment of these articles of association.

Article 6             Authorized capital

6.1          The Company’s authorized capital, excluding the Company's share capital, is set at eight million four hundred thirty thousand eight hundred forty-eight US dollars and forty cents (USD 8,430,848.40), consisting in seven million twenty-five thousand seven hundred seven (7,025,707) common shares having a nominal value of one US dollar and twenty cents (USD 1.20) per common share.

6.2         The board of directors is authorized to issue common shares, to grant options to subscribe for common shares and to issue any other instruments convertible into, or giving rights to, common shares within the limit of the authorized share capital, to such persons and on such terms as it shall see fit, and specifically to carry out such issue or issues without reserving a pre-emptive subscription right for the existing shareholders during a period of time from the date of the extraordinary general meeting of shareholders held on 3 April 2020 and ending on the fifth (5th) anniversary of the date of the extraordinary general meeting of shareholders held on 3 April 2020. Such common shares may be issued above, at or below market value, above or at nominal value, or by way of incorporation of available reserves (including premium). The general meeting has authorized the board of directors to waive, suppress or limit any pre-emptive subscription rights of shareholders to the extent the board deems such waiver, suppression or limitation advisable for any issue or issues of common shares within the scope of the Company’s authorized (un-issued) share capital. This authorization may be renewed, amended or extended by resolution of the general meeting of shareholders adopted in the manner required for an amendment of these articles of association. Upon an issue of shares within the authorized share capital, the board shall have the present articles of association amended accordingly.

6.3         The authorized capital of the Company may be increased or reduced by a resolution of the general meeting of shareholders adopted in the manner required for amendments of these articles of association.

Article 7             Common shares

7.1         The Company’s share capital is divided into common shares, each of them having the same nominal value. The common shares of the Company are shall remain in registered form only.

7.2         The Company may have one or several shareholders.

 

 

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7.3          No fractional common shares shall be issued or exist.

7.4          Within the limits and conditions laid down by the Law, the Company may repurchase its own common shares and may hold them in treasury.

7.5          A register of common shares will be kept by the Company and will be available for inspection by any shareholder. Ownership of registered common shares will be established by inscription in the said register or in the event separate registrars have been appointed pursuant to article 7.6, in such separate register(s). Without prejudice to the conditions for transfer by book entries provided for in article 7.8 of these articles of association, a transfer of registered common shares shall be carried out by means of a declaration of transfer entered in the relevant register, dated and signed by the transferor and the transferee or by their duly authorized representatives or by the Company upon notification of the transfer or acceptance of the transfer by the Company. The Company may accept and enter in the relevant register a transfer on the basis of correspondence or other documents recording the agreement between the transferor and the transferee.

7.6          The Company may appoint registrars in different jurisdictions who will each maintain a separate register for the registered common shares entered therein and the holders of common shares may elect to be entered in one of the registers and to be transferred from time to time from one register to another register. The board of directors may however impose transfer restrictions for common shares that are registered, listed, quoted, dealt in or have been placed in certain jurisdictions in compliance with the requirements applicable therein. A transfer to the register kept at the Company's registered office may always be requested.

7.7          Subject to the provisions of article 7.8 and article 7.10, the Company may consider the person in whose name the registered common shares are registered in the register of shareholders as the full owner of such registered common shares. In the event that a holder of registered common shares does not provide an address in writing to which all notices or announcements from the Company may be sent, the Company may permit a notice to this effect to be entered into the register of shareholders and such holder’s address will be deemed to be at the registered office of the Company or such other address as may be so entered by the Company from time to time, until a different address shall be provided to the Company by such holder in writing. The holder may, at any time, change his address as entered in the register of shareholders by means of written notification to the Company.

7.8         The common shares may be held by a holder (the “Holder”) through a securities settlement system or a Depository (as this term is defined below). The Holder of common shares held in such fungible securities accounts has the same rights and obligations as if such Holder held the common shares directly. The common shares held through a securities settlement system or a Depository shall be recorded in an account opened in the name of the Holder and may be transferred from one account to another in accordance with customary procedures for the transfer of securities in book-entry form. However, the Company will make dividend payments, if any, and any other payments in cash, common shares or other securities, if any, only to the securities settlement system or Depository recorded in the register of shareholders or in accordance with the instructions of such securities settlement system or Depository. Such payment will grant full discharge of the Company’s obligations in this respect.

 

 

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7.9          In connection with a general meeting, the board of directors may decide that no entry shall be made in the register of shareholders and no notice of a transfer shall be recognized by the Company and the registrar(s) during the period starting on the Record Date (as hereinafter defined) and ending on the closing of such general meeting.

7.10        All communications and notices to be given to a registered shareholder shall be deemed validly made if made to the latest address communicated by the shareholder to the Company in accordance with article 7.7 or, if no address has been communicated by the shareholder, the registered office of the Company or such other address as may be so entered by the Company in the register from time to time according to article 7.8.

7.11        Where common shares are recorded in the register of shareholders in the name of or on behalf of a securities settlement system or the operator of such system and recorded as book-entry interests in the accounts of a professional depositary or any sub-depositary (any depositary and any sub-depositary being referred to hereinafter as a “Depositary”), the Company - subject to having received from the Depositary a certificate in proper form - will permit the Depository of such book-entry interests to exercise the rights attaching to the common shares corresponding to the book-entry interests of the relevant Holder, including receiving notices of general meetings, admission to and voting at general meetings, and shall consider the Depository to be the holder of the common shares corresponding to the book-entry interests for purposes of this article 7 of the present articles of association. The board of directors may determine the formal requirements with which such certificates must comply.

Article 8             Ownership of common shares

8.1          The Company will recognize only one (1) holder per common share. If a common share is owned by several persons, they must designate a single person to be considered as the sole owner of such common share in relation to the Company. The Company is entitled to suspend the exercise of all rights attached to a common share held by several owners until one (1) owner has been designated.

8.2          The common shares are freely transferable, subject to the provisions of these articles of association. All rights and obligations attached to any common share are passed to any transferee thereof, except as otherwise provided for herein.

8.2.1       As long as the common shares of the Company are admitted to trading on a regulated market (within the meaning of Directive 2014/65/EU) within the territory of the European Economic Area (the “Regulated Market”) the provisions of Directive 2004/25/EC on takeover bids shall apply in the context of any takeover in respect of the Company’s common shares.

If the common shares are no longer admitted to trading on any Regulated Market the following rules shall apply in the context of any takeover in respect of the Company’s common shares.

 

 

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Any person (such person hereinafter called, the “Bidder”) wishing to acquire by any means (including, but not limited to, the conversion of any financial instrument convertible into common shares), directly or indirectly, common shares (the “Intended Acquisition”) which, when aggregated with his/her/its existing common share holdings, together with any shares held by a person controlling the Bidder, controlled by the Bidder and/or under common control with the Bidder, represent at least thirty-three point thirty-three percent (33.33%) of the share capital of the Company (the “Threshold”), shall have the obligation to propose an unconditional takeover bid to acquire the entirety of the then-outstanding common shares together with any financial instrument convertible into common shares (the “Takeover Bid”). Each Takeover Bid shall be conducted in accordance with the procedure stipulated under clauses (i) through (vii) hereof (the “Takeover Bid Procedure”) and shall also be conducted in conformity and compliance with the laws and regulations in the jurisdictions in which the Company´s common shares or other securities are listed and/or where the Takeover Bid takes place and the rules of the stock exchanges where the Company’s common shares are listed (for the avoidance of doubt excluding any Regulated Market), in each case, applicable to public offers (collectively, the “Applicable Rules”), it being understood that, to the extent any such requirements impose stricter rules or regulations upon the Bidder, such stricter rules and regulations shall be complied with by Bidder.

(i) The Bidder shall notify the Company in writing about the Intended Acquisition and the Takeover Bid (the “Takeover Notice”), at least fifteen (15) Luxembourg business days (or such shorter period as is required under Applicable Rules) in advance of the commencement date thereof (such notification date, the “Takeover Notice Date”). A Takeover Notice shall also be required regarding any agreement or memorandum of understanding that the Bidder intends to enter into with a holder of common shares and/or financial instrument convertible into common shares whereby, under certain circumstances, due to such agreement or memorandum of understanding, the Bidder would become the holder of common shares resulting the Threshold being attained or exceeded (hereinafter called “Prior Agreement”). In addition to complying with the Applicable Rules, such Takeover Notice shall include the following minimum information, subject to the inclusion of any additional information as may be required under the Applicable Rules: (A) The Bidder’s identification, nationality and domicile. If the Bidder is made up of a group of individuals or entities, the identification and domicile of each member of the group and of the managing officer of each entity forming part of the group; (B) The consideration offered for the common shares and the financial instruments convertible into common shares and the source of funds to pay such consideration. (C) The scheduled expiration date of the Takeover Bid period, whether it can be extended, and if so, how long the extension may be and according to which procedure the extension shall be made; (D) A statement by the Bidder indicating the exact dates before and after which the holders of common shares and financial instruments convertible into common shares, who have validly tendered their common shares and/or financial instruments convertible into common shares subject to the Takeover Bid regime, shall be entitled to withdraw them, how the common shares and the financial instruments convertible into common shares thus tendered shall be accepted, and how the withdrawal of the common shares and the financial instruments convertible into common shares from sale under the Takeover Bid regime shall be carried out; (E) Any additional information, including the Bidder’s financial or accounting statements, as the Company may reasonably request or which may be necessary so as to avoid the above Takeover Notice from leading to erroneous conclusions or when the information submitted is incomplete or insufficient.

 

 

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(ii) On the Takeover Notice Date, the Company shall mail to each holder of common shares and financial instruments convertible into common shares, at the Bidder’s cost and expense, a copy of the Takeover Notice. In the case of registered holders of common shares and/or financial instrument convertible into common shares, the Takeover Notice will be sent by registered mail and in case of common shares and financial instrument convertible into common shares held through a brokerage account, the Takeover Notice will be mailed to the relevant brokers through the Depository agent.

(iii) On the Takeover Notice Date, the Bidder shall publish a notice containing the information stated in paragraph (i). Subject to applicable legal provisions, the Takeover Notice shall be published in two (2) major newspapers of the Grand Duchy of Luxembourg and in the City of New York, U.S.A. or such longer period as required under Applicable Laws.

(iv) The consideration for each common share and financial instrument convertible into common shares payable to each holder thereof shall be the same, shall be payable in cash only, and shall not be lower than the highest of the following prices:

(A) the highest price per common shares and financial instrument convertible into common shares paid by the Bidder, or on behalf thereof, in relation to any acquisition of common shares and the financial instruments convertible into common shares within the twelve months period immediately preceding the Takeover Notice, adjusted as a consequence of any division of shares, stock dividend, subdivision or reclassification affecting or related to common shares and/or the financial instruments convertible into common shares; or

(B) the highest closing sale price, during the sixty-day period immediately preceding the Takeover Notice, of a common share of the Company as quoted by the New York Stock Exchange, in each case as adjusted as a consequence of any division of shares, stock dividend, subdivision or reclassification affecting or related to common shares and financial instrument convertible into common shares.

(v) The Takeover Bid shall be open for a minimum period of at least twenty (20) Luxembourg business days as from the date the Takeover Bid was commenced.

(vi) The Bidder shall acquire all common shares and financial instruments convertible into common shares that are validly tendered (and not withdrawn) before the expiration date of the Takeover Bid in accordance with the provisions of these articles of association governing Takeover Bids.

(vii) Once the Takeover Bid Procedure has been completed, the Bidder may execute the Prior Agreement, if any, regardless of the number of common shares and financial instrument convertible into common shares purchased. The Prior Agreement, if any, shall be executed within thirty (30) days following the closing of the Takeover Bid; otherwise, it shall be necessary to repeat the Takeover Bid Procedure provided for in this article in order to execute the Prior Agreement.

 

 

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8.2.2       If the terms of article 8.2.1 hereof are not complied with, the Bidder shall be forbidden to acquire common shares, whether directly or indirectly, by any means (including, but not limited to, the conversion of any financial instrument convertible into common shares) or instrument if, as a result of such acquisition, the Bidder (when aggregated with any shares held by a person controlling the Bidder, controlled by the Bidder and/or under common control with the Bidder) becomes the holder of common shares which, in addition to its prior holdings represent, in the aggregate, at least thirty-three point thirty-three percent (33.33%) of the share capital of the Company. The Board of Directors shall suspend any right to vote or to receive dividends or any other kind of distributions attached to common shares acquired in breach of the provisions of article 8.2.1 and none of these common shares shall be counted in determining the presence of a quorum at any meeting of shareholders of the Company, until such common shares are sold. In addition, if the terms of article 8.2.1 hereof are not complied with, the Company may consider any transfer of common shares acquired in breach of the provisions of article 8.2.1 to be invalid in which case none of the Company, any registrar or Depository shall enter such transfer into the relevant registers and books of the Company.

8.2.3       If a holder of any financial instrument convertible into common shares contemplating an Intended Acquisition fails to comply with the terms of article 8.2.1 hereof, the Board of Directors may refuse the conversion into common shares of the portion of any such convertible instruments which, if converted, would result in that person becoming the holder of common shares in the reach or in excess of the Threshold.

8.2.4       For the purposes of this article 8.2, the term “indirectly” shall include the Bidder’s parent companies, the companies controlled by the Bidder or that would end up under its control as a consequence of any Takeover, Takeover Bid or Prior Agreement, as the case may be, that would grant at the same time the control of the Company, the companies submitted to the common control of the Bidder and other persons acting jointly with the Bidder; likewise, the holdings any person has through trusts or other similar mechanisms shall be included.

C.           GENERAL MEETING OF SHAREHOLDERS

Article 9             Powers of the general meeting of shareholders

The shareholders exercise their collective rights in the general meeting of shareholders. Any regularly constituted general meeting of shareholders of the Company represents the entire body of shareholders of the Company. It shall have the broadest powers to authorize, order, carry out or ratify acts relating to the Company.

Article 10          Convening general meetings of shareholders

10.1       The general meeting of shareholders of the Company may at any time be convened by the board of directors, to be held at such place and on such date as specified in the convening notice of such meeting.

10.2       The general meeting of shareholders must be convened by the board of directors, upon request in written indicating the agenda, addressed to the board of directors by one or several shareholders representing at least ten percent (10%) of the Company´s issued share capital. In such case, a general meeting of shareholders must be convened and shall be held within a period of one (1) month from receipt of such request. Shareholder(s) holding at least five percent (5%) of the Company´s issued share capital may request the addition of one or several items to the agenda of any general meeting of shareholders and propose resolutions. Such requests must be received at the Company´s registered office by registered mails at least twenty-two (22) days before the date of such meeting.

 

 

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10.3        The annual general meeting of shareholders shall be held within six (6) months of the end of each financial year in Luxembourg, at the registered office of the Company or at such other place as may be specified in the convening notice of such meeting.

10.4        Other general meetings of shareholders may be held at such place and time as may be specified in the respective notice of meeting.

10.5        General meetings of shareholders shall be convened in accordance with the provisions of the Law and if the common shares of the Company are listed on a foreign stock exchange, in accordance with the requirements of such foreign stock exchange applicable to the Company.

10.6        If the common shares of the Company are not listed on any foreign stock exchange, all shareholders recorded in the register of shareholders on the date of the general meeting of the shareholders are entitled to be admitted to the general meeting of shareholders.

10.7        If the common shares of the Company are listed on a stock exchange, all shareholders recorded in any register of shareholders of the Company are entitled to be admitted and vote at the general meeting of shareholders based on the number of shares they hold on a date and time preceding the general meeting of shareholders as the record date for admission to the general meeting of shareholders (the “Record Date”), which the board of directors may determine as specified in the convening notice.

10.8        Any shareholder, Holder or Depositary, as the case may be, who wishes to attend the general meeting must inform the Company thereof no later than on the third business day preceding the date of such general meeting, or by any other date which the board of directors may determine and as specified in the convening notice, in a manner to be determined by the board of directors in the convening notice. In case of common shares held through the operator of a securities settlement system or with a Depositary designated by such Depositary, a holder of common shares wishing to attend a general meeting of shareholders should receive from such operator or Depositary a certificate certifying the number of common shares recorded in the relevant account on the Record Date. The certificate should be submitted to the Company no later than three (3) business days prior to the date of such general meeting. If the shareholder votes by means of a proxy, the proxy shall be deposited at the registered office of the Company or with any agent of the Company, duly authorized to receive such proxies, at the same time. The board of directors may set a shorter period for the submission of the certificate or the proxy in which case this will be specified in the convening notice.

 

 

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10.9        If all shareholders are present or represented at a general meeting of shareholders and state that they have been informed of the agenda of the meeting, the general meeting of shareholders may be held without prior notice.

 

Article 11          Conduct of general meetings of shareholders

11.1        A board of the meeting shall be formed at any general meeting of shareholders, composed of a chairman, a secretary and a scrutineer, each of whom shall be appointed by the general meeting of shareholders and who do not need to be shareholders. The board of the meeting shall ensure that the meeting is held in accordance with applicable rules and, in particular, in compliance with the rules in relation to convening the meeting, quorum, if any, and majority requirements, vote tallying and representation of shareholders.

11.2        An attendance list must be kept for any general meeting of shareholders.

11.3        Each common share entitles the holder thereof to one vote, subject to the provisions of the Law. Unless otherwise required by applicable law or by these articles of association, resolutions at a general meeting of shareholders duly convened are adopted by a simple majority of the votes validly cast, regardless of the proportion of the issued share capital of the Company present or represented at such meeting. Abstention and nil votes will not be taken into account.

11.4        A shareholder may act at any general meeting of shareholders by appointing another person, shareholder or not, as his proxy in writing by a signed document transmitted by mail or facsimile or by any other means of communication authorized by the board of directors. One person may represent several or even all shareholders.

11.5        Shareholders who participate in a general meeting of shareholders by conference call, video-conference or by any other means of communication authorized by the board of directors, which allows such shareholder’s identification and which allows that all the persons taking part in the meeting hear one another on a continuous basis and may effectively participate in the meeting, are deemed to be present for the computation of quorum and majority, subject to such means of communication being made available at the place of the meeting.

11.6        Each shareholder may vote at a general meeting of shareholders through a signed voting form sent by mail or facsimile or by any other means of communication authorized by the board of directors and delivered to the Company’s registered office or to the address specified in the convening notice. The shareholders may only use voting forms provided by the Company which contain at least the place, date and time of the meeting, the agenda of the meeting, the proposals submitted to the resolution of the meeting, as well as for each proposal three boxes allowing the shareholder to vote in favor of or against the proposed resolution or to abstain from voting thereon by ticking the appropriate boxes. The Company will only take into account voting forms received no later than three (3) business days prior to the date of the general meeting of shareholders to which they relate. The board of directors may set a shorter period for the submission of the voting forms.

 

 

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11.7        The board of directors may determine further conditions that must be fulfilled by the shareholders for them to take part in any general meeting of shareholders. 

 

Article 12          Amendments of the articles of association

Subject to the provisions of the Law and of these articles of association, any amendment of the articles of association requires a majority of at least two-thirds (2/3) of the votes validly cast at a general meeting at which at least half (1/2) of the issued share capital is represented. In case the second condition is not satisfied, a second meeting may be convened in accordance with the Law, which may validly deliberate regardless of the proportion of the issued share capital of the Company represented at such meeting and at which resolutions are taken at a majority of at least two-thirds (2/3) of the votes validly cast. Abstention and nil votes will not be taken into account for the calculation of the majority.

Article 13          Adjourning general meetings of shareholders

The board of directors may adjourn any general meeting of shareholders already commenced, including any general meeting convened in order to resolve on an amendment of the articles of association, for a period of four (4) weeks. The board of directors must adjourn any general meeting of shareholders already commenced if so required by one or several shareholders representing in the aggregate at least twenty per cent (20%) of the Company’s issued share capital. By such an adjournment of a general meeting of shareholders already commenced, any resolution already adopted in such meeting will be cancelled. For the avoidance of doubt, once a meeting has been adjourned pursuant to the second sentence of this article 13, the board of directors shall not be required to adjourn such meeting a second time.

Article 14          Minutes of general meetings of shareholders

The board of any general meeting of shareholders shall draw up minutes of the meeting which shall be signed by the members of the board of the meeting as well as by any shareholder who requests to do so. Any copy and excerpt of such original minutes to be produced in judicial proceedings or to be delivered to any third party shall be signed by the chairman or the co-chairman of the board of directors or by any two of its members.

D.           MANAGEMENT

Article 15          Board of directors

15.1        The Company shall be managed by a board of directors, whose members may but do not need to be shareholders of the Company. The board of directors is vested with the broadest powers to take any actions necessary or useful to fulfill the Company’s corporate purpose, with the exception of the actions reserved by law or these articles of association to the general meeting of shareholders.

15.2        In accordance with article 60 of the Law, the Company’s daily management and the Company’s representation in connection with such daily management may be delegated to one or several members of the board of directors or to any other person(s) appointed by the board of directors, who may but are not required to be shareholders or not, acting alone or jointly. Their appointment, revocation and powers shall be determined by a resolution of the board of directors.

 

 

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15.3        The board of directors may also grant special powers by notarized proxy or private instrument to any person(s) acting alone or jointly with others as agent of the Company.

15.4        The board of directors is composed of a minimum of seven (7) directors and a maximum of fifteen (15) directors. The board of directors must choose from among its members a chairman of the board of directors. It may also choose a co-chairman and it may choose a secretary, who does not need to be a shareholder or a member of the board of directors.

Article 16          Election and removal of directors and term of the office

16.1        Directors shall be elected by the general meeting of shareholders, and shall be appointed for a period up to four (4) years; provided however that directors shall be elected on a staggered basis, with one third (1/3) of the directors being elected each year and; provided, further that such term may be exceeded by a period up to the annual general meeting held following the fourth anniversary of the appointment. Each elected director shall hold office until his or her successor is elected. If a legal entity is elected director of the Company, such legal entity must designate an individual as permanent representative who shall execute this role in the name and for the account of the legal entity. The relevant legal entity may only remove its permanent representative if it appoints a successor at the same time. An individual may only be a permanent representative of one director and may not be a director at the same time.

16.2        Any director may be removed at any time without cause or prior notice by the general meeting of shareholders.

16.3        Directors shall be eligible for re-election indefinitely.

16.4        If a vacancy in the office of a member of the board of directors because of death, legal incapacity, bankruptcy, retirement or otherwise occurs, such vacancy may be filled on a temporary basis by a person designated by the remaining board members until the next general meeting of shareholders, which shall resolve on a permanent appointment.

Article 17          Convening meetings of the board of directors

17.1        The board of directors shall meet following notice validly given by the chairman or by any two (2) of its members at the place indicated in the notice of the meeting as described in the next paragraph.

17.2        Written notice of any meeting of the board of directors must be given to the directors at least five (5) days in advance of the date scheduled for the meeting by mail, facsimile, electronic mail or any other means of communication, except in case of emergency, in which case the nature and the reasons of such emergency must be indicated in the notice. Such convening notice is not necessary in case of assent to waive such requirement of each director in writing by mail, facsimile, electronic mail or by any other means of communication, a copy of such document being sufficient proof thereof. Also, a convening notice is not required for a board meeting to be held at a time and location determined in a prior resolution adopted by the board of directors. No convening notice shall furthermore be required in case all members of the board of directors are present or represented at a meeting of the board of directors or in the case of resolutions in writing pursuant to these articles of association.

 

 

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Article 18          Conduct of meetings of the board of directors

18.1        The chairman of the board of directors shall preside at all meetings of the board of directors. In the absence of the chairman, the board of directors may appoint another director as chairman pro tempore.

18.2        The board of directors can act and deliberate validly only if at least the majority of its members are present or represented at a meeting of the board of directors.

18.3        Resolutions are adopted with the approval of a majority of the members present or represented at a meeting of the board of directors. In case of a tie, the chairman of the board of directors shall have a casting (deciding) vote. In the absence of the chairman of the board of directors, the director who has been appointed as chairman pro tempore of the meeting shall not have a casting (deciding) vote.

18.4        Any director may act at any meeting of the board of directors by appointing any other director as proxy in writing by mail, facsimile, electronic mail or by any other means of communication. Any director may represent one or several other directors.

18.5        Any director who participates in a meeting of the board of directors by conference-call, videoconference or by any other means of communication which allows such director’s identification and which allows that all the persons taking part in the meeting hear one another on a continuous basis and may effectively participate in the meeting, is deemed to be present for the computation of quorum and majority. A meeting of the board of directors held through such means of communication is deemed to be held at the Company’s registered office.

18.6        The board of directors may unanimously pass resolutions in writing which shall have the same effect as resolutions passed at a meeting of the board duly convened and held. Such resolutions in writing are passed when dated and signed by all directors on a single document or on multiple counterparts, a copy of a signature sent by mail, facsimile or a similar means of communication being sufficient proof thereof. The single document showing all signatures or the entirety of the signed counterparts, as the case may be, will form the instrument giving evidence of the passing of the resolutions and the date of the resolutions shall be the date of the last signature.

18.7        The secretary or, if no secretary has been appointed, the chairman which was present at a meeting, shall draw up minutes of the meeting of the board of directors, which shall be signed by the chairman or by the secretary, as the case may be, or by any two directors.

Article 19          Committees of the board of directors

The board of directors may establish one or more committees, including without limitation, an audit committee, a nominating and corporate governance committee and a compensation committee, and for which it shall, if one or more of such committees are set up, appoint the members who may be but do not need to be members of the board of directors (subject always, if the common shares of the Company are listed on a foreign stock exchange, to the requirements of such foreign stock exchange applicable to the Company and/or of such regulatory authority competent in relation to such listing), determine the purpose, powers and authorities as well as the procedures and such other rules as may be applicable thereto.

 

 

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Article 20          Dealings with third parties

The Company will be bound towards third parties in all circumstances by (i) the sole signature of the chairman of the board of directors, (ii) joint signatures of any two directors or (iii) by the joint signatures or the sole signature of any person(s) to whom such signatory power has been granted by the board of directors, within the limits of such authorization.

With respect to matters that constitute daily management of the Company, the Company will be bound towards third parties by the sole signature of (i) the administrateur délégué or délégué à la gestion journalière (“Chief Executive Officer” or “CEO”), (ii) the directeur financier (“Chief Financial Officer” or “CFO”) or (iii) any other person(s) to whom such power in relation to the daily management of the Company has been delegated in accordance with article 15 hereof, acting alone or jointly in accordance with the rules of such delegation, if any has(ve) been appointed.

Article 21          Indemnification

21.1        The members of the board of directors are not held personally liable for the indebtedness or other obligations of the Company. As agents of the Company, they are responsible for the performance of their duties. Subject to the exceptions and limitations listed in article 21.2 and mandatory provisions of law, every person who is, or has been, a member of the board of directors or officer of the Company shall be indemnified by the Company to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding which he becomes involved as a party or otherwise by virtue of his being or having been such a director or officer and against amounts paid or incurred by him in the settlement thereof. The words “claim”, “action”, “suit” or “proceeding” shall apply to all claims, actions, suits or proceedings (civil, criminal or otherwise including appeals) actual or threatened and the words “liability” and “expenses” shall include without limitation attorneys’ fees, costs, judgments, amounts paid in settlement and other liabilities.

21.2        No indemnification shall be provided to any director or officer (i) against any liability to the Company or its shareholders by reason of willful misconduct, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office (ii) with respect to any matter as to which he shall have been finally adjudicated to have acted in bad faith and not in the interest of the Company or (iii) in the event of a settlement, unless the settlement has been approved by a court of competent jurisdiction or by the board of directors.

21.3        The right of indemnification herein provided shall be severable, shall not affect any other rights to which any director or officer may now or hereafter be entitled, shall continue as to a person who has ceased to be such director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect or limit any rights to indemnification to which corporate personnel, including directors and officers, may be entitled by contract or otherwise under law. The Company shall specifically be entitled to provide contractual indemnification to and may purchase and maintain insurance for any corporate personnel, including directors and officers of the Company, as the Company may decide upon from time to time.

 

 

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21.4        Expenses in connection with the preparation and representation of a defense of any claim, action, suit or proceeding of the character described in this article 21 shall be advanced by the Company prior to final disposition thereof upon receipt of any undertaking by or on behalf of the officer or director, to repay such amount if it is ultimately determined that he is not entitled to indemnification under this article.

Article 22          Conflicts of interest

22.1        Any director who has, directly or indirectly, a conflicting interest in a transaction submitted to the approval of the board of directors which conflicts with the Company’s interest, must inform the board of directors of such conflict of interest and must have his declaration recorded in the minutes of the board meeting. The relevant director may not take part in the discussions on and may not vote on the relevant transaction. A special report shall be made on any transactions in which any of the directors may have had an interest conflicting with that of the Company, at the next general meeting, before any resolution is put in vote.

22.2        No contract or other transaction between the Company and any other company or firm shall be affected or invalidated by the fact that any one or more of the directors or officers of the Company is interested in, or is a director, associate, officer, agent, adviser or employee of such other company or firm. Any director or officer who serves as a director, officer or employee or otherwise of any company or firm with which the Company shall contract or otherwise engage in business shall not, by reason of such affiliation with such other company or firm only, be prevented from considering and voting or acting upon any matters with respect to such contract or other business.

E.            AUDITORS

Article 23          Auditor(s)

23.1        The Company’s annual accounts shall be audited by one or more approved independent auditors (réviseurs d’entreprises agréés), appointed by the general meeting of shareholders at the board of directors’ recommendation (acting on the recommendation of the audit committee, if any). The general meeting of shareholders shall determine the number of auditor(s) and the term of their office which shall not exceed one (1) year and may be renewed for successive one (1) year periods.

23.2        An auditor may be dismissed at any time with cause (or with his approval) by the general meeting of shareholders. An auditor may be reappointed.

F.            FINANCIAL YEAR – PROFITS – INTERIM DIVIDENDS

Article 24          Financial year

The Company’s financial year shall begin on the first (1) January of each year and shall terminate on the thirty-first (31st) December of the same year.

Article 25          Profits

25.1        At the end of each financial year, the accounts are closed and the board of directors shall draw up or shall cause to be drawn up an inventory of assets and liabilities, the balance sheet and the profit and loss accounts in accordance with the Law.

 

 

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25.2        From the Company’s annual net profits five per cent (5%) at least shall be allocated to the Company’s legal reserve. This allocation ceases to be mandatory as soon and as long as the aggregate amount of the Company’s legal reserve amounts to ten per cent (10%) of the Company’s issued share capital. Sums contributed to the Company by shareholders may also be allocated to the legal reserve. In the case of a share capital reduction, the Company’s legal reserve may be reduced in proportion so that it does not exceed ten per cent (10%) of the issued share capital.

25.3        The annual general meeting of shareholders determines upon proposal of the board of directors how the remainder of the annual net profits will be allocated.

25.4        Dividends which have not been claimed within five (5) years after the date on which they became due and payable revert back to the Company.

Article 26          Interim dividends – Share premium and additional premiums

26.1        The board of directors may declare and pay interim dividends in accordance with the provisions of the Law.

26.2        Any share premium, additional premiums or other distributable reserve may be freely distributed to the shareholders (including by interim dividends) subject to the provisions of the Law.

G.           LIQUIDATION

Article 27          Liquidation

27.1        In the event of the Company’s dissolution, the liquidation shall be carried out by one or several liquidators, individuals or legal entities, appointed by the general meeting of shareholders resolving on the Company’s dissolution which shall determine the liquidator’s/liquidators’ powers and remuneration. Unless otherwise provided, the liquidator or liquidators shall have the most extensive powers for the realization of the assets and payment of the liabilities of the Company.

27.2        The surplus resulting from the realization of the assets and the payment of all liabilities shall be distributed among the shareholders in proportion to the number of common shares of the Company held by them.

H.           GOVERNING LAW

Article 28          Governing law

All matters not governed by these articles of association shall be determined in accordance with the Law.

 

SUIT LA TRADUCTION FRANÇAISE DE CE QUI PRECEDE

 

A.       DENOMINATION - OBJET - DURÉE - SIÈGE SOCIAL

Article 1.            Dénomination

Il existe une société anonyme sous la dénomination « GLOBANT S.A. » (ci-après la « Société ») qui sera régie par la loi du 10 août 1915 sur les sociétés commerciales, telle que modifiée (la « Loi »), ainsi que par les présents statuts.

Article 2.           Durée

La Société est constituée pour une durée illimitée. Elle pourra être dissoute à tout moment et sans cause par une décision de l’assemblée générale des actionnaires, prise aux conditions requises pour une modification des présents statuts.

 

 

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Article 3.            Objet

3.1          La Société a pour objet principal la création, la détention, le développement et la réalisation d'un portefeuille, constitué de participations et de droits de toute nature et de toute autre forme d'investissement dans des entités dans le Grand-Duché de Luxembourg et dans des entités étrangères, que ces entités soient préexistantes ou qui seront constituées, notamment par voie de souscription, d’acquisition par achat, de cession ou d’échange de titres ou de droits de quelque nature que ce soit, tels que des titres de participation, des titres de créance, des brevets et des licences, ainsi que la gestion et le contrôle de ce portefeuille.

3.2         La Société peut également accorder toute forme de garantie pour l'exécution de toute obligation de la Société ou de toute entité dans laquelle elle détient une participation ou droit direct ou indirect de toute nature, ou dans laquelle la Société a investi sous quelque forme que ce soit, ou qui fait partie du même groupe d'entités que la Société et prêter des fonds ou assister autrement toute entité dans laquelle elle détient une participation ou droit direct ou indirect de toute nature ou dans laquelle la Société a investi sous quelque forme que ce soit, ou qui fait partie du même groupe d'entités que la Société.

3.3          La Société peut emprunter sous toute forme et émettre toute sorte d’obligations ainsi que, de manière générale émettre toute sorte de titres de créance, de titres de participation et/ou de titres hybrides ou autres conformément au droit luxembourgeois.

3.4         La Société pourra exercer toute activité commerciale, industrielle, financière, immobilière, technique, de propriété intellectuelle ou d’autres activités qu’elle estimera utiles pour l’accomplissement de ces objets.

Article 4.            Siège social

4.1          Le siège social de la Société est établi dans la ville de Luxembourg, Grand-Duché de Luxembourg. Le siège social pourra être transféré au sein de la même commune par décision du conseil d’administration.

4.2          Il pourra être transféré dans toute autre commune du Grand-Duché de Luxembourg par décision de l'assemblée générale des actionnaires.

4.3          Des succursales ou bureaux peuvent être créés, tant au Grand-Duché de Luxembourg qu'à l'étranger, par décision du conseil d’administration.

B.        CAPITAL SOCIAL – ACTIONS – REGISTRE DES ACTIONS – PROPRIETE ET TRANSFERT DES ACTIONS

Article 5             Capital social

5.1.         Le capital social est fixé à quarante-quatre millions huit cent soixante-dix-sept mille six cent quarante-six US dollars et quatre-vingt cents (USD 44.877.646,80) et est représenté par trente-sept millions trois cent quatre-vingt-dix-huit mille trente-neuf (37.398.039) actions ordinaires d’une valeur nominale d’un US dollar et vingt cents (USD 1,20) chacune.

 

 

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5.2          Le capital social émis de la Société peut être (i) augmenté par une décision du conseil d’administration (ou d’un délégué de celui-ci) conformément aux articles 6.1 et 6.2 des présents statuts ou (ii) augmenté ou réduit par une décision de l’assemblée générale des actionnaires, adoptée selon les conditions requises pour une modification des présents statuts.

Article 6.            Capital autorisé

6.1         Le capital autorisé de la Société, excluant le capital social émis, est fixé à un montant de huit millions quatre cent trente mille huit cent quarante-huit US dollars et quarante cents (USD 8.430.848,40), divisé en sept millions vingt-cinq mille sept cent sept (7.025.707) actions ordinaires ayant une valeur nominale d’un US dollar et vingt cents (USD 1,20) chacune.

6.2         Le conseil d'administration est autorisé à émettre des actions ordinaires, à accorder des options de souscription d'actions ordinaires et à émettre tous autres instruments convertibles en, ou donnant droit à des, actions ordinaires dans la limite du capital social autorisé au profit de personnes et dans les conditions qu'il jugera opportunes, et plus précisément de procéder à une telle émission ou de telles émissions sans qu’un droit préférentiel de souscription aux actions nouvelles ne soit réservé aux actionnaires existants pour une période commençant à la date de l'assemblée générale extraordinaire des actionnaires du 3 avril 2020 et se terminant au cinquième (5e) anniversaire de la date de l'assemblée générale extraordinaire des actionnaires du 3 avril 2020. Ces actions peuvent être émises à une valeur excédant ou en-deçà de la valeur du marché, au-dessus de ou à la valeur nominale ou par incorporation de réserves disponibles (y compris la prime d’émission). L'assemblée générale a expressément autorisé le conseil d'administration à renoncer, supprimer ou limiter tous droits préférentiels de souscription d’actionnaires dans la mesure où ce dernier jugera cette renonciation, suppression ou limitation opportune pour toute émission ou émissions d'actions ordinaires dans la limite du capital social autorisé (non-émis) de la Société. Cette autorisation peut être renouvelée, modifiée ou prolongée par une décision de l'assemblée générale des actionnaires adoptée aux conditions requises pour la modification des statuts. Après une émission d'actions dans le cadre du capital social autorisé, le conseil d'administration veillera à ce que les présents statuts soient modifiés en conséquence.

6.3          Le capital autorisé (non-émis) de la Société peut être augmenté ou réduit par une décision de l’assemblée générale des actionnaires, adoptée aux conditions requises pour la modification des statuts.

Article 7.           Actions

7.1         Le capital social de la Société est divisé en actions ordinaires ayant chacune la même valeur nominale. Les actions ordinaires de la Société sont et devront être uniquement sous forme nominative.

7.2          La Société peut avoir un ou plusieurs actionnaires.

7.3          Aucune fraction d’actions ordinaires ne peut exister ou être émise.

7.4          Dans les limites et dans les conditions définies par la Loi, la Société peut racheter ses propres actions et les conserver.

7.5          Un registre des actions ordinaires sera tenu par la Société et mis à disposition aux fins de vérification par tout actionnaire. La propriété des actions nominatives sera établie par l’inscription sur ledit registre ou dans le cas où des teneurs de registres séparés ont été nommés conformément à l'article 7.6, dans ce(s) registre(s) séparé(s). Sans préjudice des conditions de transfert par inscriptions prévues à l'article 7.8 de ces statuts, un transfert d'actions nominatives devra être effectué au moyen d'une déclaration de transfert inscrite dans le registre concerné, datée et signée par le cédant et le cessionnaire ou par leurs représentants dûment autorisés ou par la Société suite à la notification de la cession ou de l'acceptation de la cession par la Société. La Société peut accepter et inscrire un transfert dans le registre approprié sur la base d’une correspondance ou de tout autre document actant un accord entre le cédant et le cessionnaire.

 

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7.6          La Société peut nommer des teneurs de registre dans différentes juridictions qui tiendront chacun un registre séparé pour les actions nominatives y inscrites et les détenteurs d'actions ordinaires pourront choisir d'être inscrits dans l'un des registres et d'être transférés au fil du temps d'un registre à un autre registre. Le conseil d'administration peut toutefois imposer des restrictions au transfert pour les actions ordinaires inscrites, cotées, traitées ou placées dans certaines juridictions conformément aux exigences applicables dans ces juridictions. Un transfert vers le registre tenu au siège social de la Société peut toujours être demandé.

7.7         Sous réserve des dispositions de l'article 7.8 et l'article 7.10, la Société peut considérer la personne au nom de laquelle les actions nominatives sont inscrites dans le registre des actionnaires comme étant le propriétaire unique desdites actions nominatives. Dans le cas où un détenteur d'actions nominatives ne fournit pas d'adresse à laquelle toutes les notifications et avis de la Société pourront être envoyés, la Société pourra inscrire ce fait dans le registre des actionnaire et l'adresse de ce détenteur sera considérée comme étant au siège social de la Société ou à tout autre adresse que la Société pourra inscrire au fil du temps jusqu'à ce que ce détenteur ait fourni par écrit une adresse différente à la Société. Le détenteur peut, à tout moment, changer son adresse telle qu'elle figure dans le registre des actionnaires au moyen d'une notification écrite à envoyer à la Société.

7.8         Les actions ordinaires peuvent être tenues par un porteur (le «Porteur») à travers un système de compensation ou d'un Dépositaire (tel que ce terme est défini ci-dessous). Le Porteur d'actions ordinaires détenues dans ces comptes de titres fongibles a les mêmes droits et obligations que si ce Porteur détenait directement les actions ordinaires. Les actions ordinaires détenues au travers d’un système de compensation ou d'un Dépositaire doivent être consignées dans un compte ouvert au nom du Porteur et peuvent être transférées d'un compte à un autre, conformément aux procédures habituelles pour le transfert de titres sous forme d'inscription en compte. Toutefois, la Société versera les dividendes, s’il y en a, ainsi que tout autre paiement en espèces, actions ou autres titres, s’il y en a, uniquement au profit du système de compensation ou du Dépositaire inscrits dans le registre des actionnaires ou conformément aux instructions de ce système de compensation ou Dépositaire. Ce paiement déchargera complètement la Société de ses obligations à cet égard.

 

 

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7.9         Dans le cadre d'une assemblée générale, le conseil d'administration peut décider qu’aucune entrée ne soit faite dans le registre des actionnaires et aucun avis de transfert ne soit reconnu par la Société et le(s) teneur(s) de registre durant la période commençant à la Date d’Inscription (telle que définie ci-après) et se terminant à la clôture de cette assemblée générale.

7.1         Toutes les communications et avis à donner à un actionnaire inscrit sont réputés valablement faits s’ils sont faits à la dernière adresse communiquée par l'actionnaire à la Société conformément à l'article 7.7 ou, si aucune adresse n'a été communiquée par l'actionnaire, le siège social de la Société ou à une autre adresse qui pourra être inscrite par la Société dans le registre au fil du temps conformément à l'article 7.8.

7.1         Lorsque les actions ordinaires sont enregistrées dans le registre des actionnaires au nom et pour le compte d’un système de compensation ou de l’opérateur d’un tel système et enregistré comme entrée dans les comptes d’un dépositaire professionnel ou d’un sous-dépositaire (tout dépositaire et sous-dépositaire désigné ci-après comme un «Dépositaire»), la Société – sous réserve d'avoir reçu du Dépositaire un certificat en bonne et due forme – permettra au Dépositaire de telles entrées en compte d'exercer les droits attachés aux actions ordinaires correspondant aux entrées en compte du Porteur concerné, y compris de recevoir les convocations aux assemblées générales, l'admission et le vote aux assemblées générales et doit considérer le Dépositaire comme étant le Porteur des actions ordinaires correspondant aux entrées compte aux fins du présent article 7 des présents statuts. Le conseil d'administration peut déterminer les conditions de forme auxquelles devront répondre ces certificats.

Article 8             Propriété des actions

8.1          La Société ne reconnaît qu'un seul (1) titulaire par action ordinaire. Si une action ordinaire est détenue par plusieurs personnes, elles devront désigner une personne qui sera considérée comme seule propriétaire de cette action ordinaire vis-à-vis de la Société. La Société aura le droit de suspendre l'exercice de tous les droits attachés à une action ordinaire détenue par plusieurs personnes, jusqu'à ce qu'un (1) propriétaire ait été désigné.

8.2          Les actions ordinaires sont librement cessibles, sauf disposition contraire des présents statuts. Tous les droits et obligations attachés à une action ordinaire seront transférés à tout cessionnaire sous réserve d’une disposition contraire des présents statuts.

8.2.         Tant que les actions ordinaires de la Société sont admises à la négociation sur un marché réglementé (au sens de la directive 2014/65/UE) sur le territoire de l'Espace Economique Européen (le "Marché Réglementé"), les dispositions de la directive 2004/25/CE sur les offres publiques d'acquisition s'appliquent dans le cadre de toute prise de contrôle portant sur les actions ordinaires de la Société.

Si les actions ordinaires ne sont plus admises à la négociation sur un Marché Réglementé, les règles suivantes s'appliqueront dans le cadre de toute prise de contrôle portant sur les actions ordinaires de la Société.


 

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Toute personne (cette personne étant ci-après appelée l’ "Offrant") qui désire acquérir par quelque moyen que ce soit (y compris, mais sans s'y limiter, la conversion de tout instrument financier convertible en actions ordinaires), directement ou indirectement, des actions ordinaires (l'"Acquisition Envisagée") qui, une fois ses actions ordinaires existantes regroupées avec les actions détenues par une personne contrôlant l'Offrant, contrôlée par l’Offrant et/ou sous contrôle commun avec l’Offrant, représentent au moins trente-trois virgule trente-trois pour cent (33,33%) du capital social de la Société (le "Seuil"), aura l'obligation de proposer une offre inconditionnelle d'acquisition pour acquérir la totalité des actions ordinaires alors en circulation ainsi que tout instrument financier convertible en actions ordinaires (l'"Offre Publique d’Acquisition"). Chaque Offre Publique d’Acquisition sera menée conformément à la procédure stipulée aux points (i) à (vii) du présent article (la "Procédure d'Offre Publique d’Acquisition") et sera également menée dans le respect de et en conformité avec les lois et règlements des juridictions dans lesquelles les actions ordinaires ou autres titres de la Société sont cotés et/ou dans lesquelles l'Offre Publique d’Acquisition a lieu et les règles des bourses où sont cotées les actions ordinaires de la Société (afin d’éviter tout doute, hors tout Marché Réglementé), dans chaque cas, applicables aux offres publiques (collectivement, les "Règles Applicables"), étant entendu que, dans la mesure où de telles exigences imposeraient à l’Offrant des règles ou réglementations plus strictes, ces règles et réglementations plus strictes devront être respectées par l’Offrant.

(i) L'Offrant notifiera par écrit à la Société l'Acquisition Envisagée et l'Offre Publique d’Acquisition (la "Notification d'Offre"), au moins quinze (15) jours ouvrables luxembourgeois (ou tout autre délai plus court requis par les Règles Applicables) avant la date de son commencement (cette date de notification, la "Date de la Notification d'Offre"). Une Notification d’Offre sera également requise pour tout accord ou tout protocole d'entente que l'Offrant a l'intention de conclure avec un détenteur d'actions ordinaires et/ou d'instruments financiers convertibles en actions ordinaires aux termes duquel, dans certaines circonstances, en raison de cet accord ou protocole d’entente, l'Offrant deviendrait le détenteur d'actions ordinaires résultant dans l’atteinte du Seuil ou son dépassement (ci-après appelé "Accord Préalable"). En plus de se conformer aux Règles Applicables, la Notification d’Offre devra comprendre les renseignements minimaux suivants, sous réserve de l’insertion de tout renseignement supplémentaire qui pourrait être exigé en vertu des Règles Applicables : (A) L'identification, la nationalité et le domicile de l’Offrant. Si l’Offrant est composé d'un groupe de personnes physiques ou morales, l'identification et le domicile de chaque membre du groupe et du directeur général de chaque entité faisant partie du groupe ; (B) la contrepartie offerte pour les actions ordinaires et les instruments financiers convertibles en actions ordinaires et la source des fonds pour payer cette contrepartie. (C) La date d'expiration prévue de la période de l'Offre Publique d’Acquisition, si elle peut être prolongée et, dans l'affirmative, quelle peut être la durée de la prolongation et selon quelle procédure cette prolongation doit être effectuée ; (D) Une déclaration de l'Offrant indiquant les dates exactes avant et après lesquelles les détenteurs d'actions ordinaires et d'instruments financiers convertibles en actions ordinaires, qui ont valablement offert leurs actions ordinaires et/ou leurs instruments financiers convertibles en actions ordinaires dans le cadre du régime de l'Offre d'Achat, auront le droit de les retirer, la manière selon laquelle les actions ordinaires et les instruments financiers convertis en actions ordinaires ainsi offerts seront acceptés ainsi que la manière dont le retrait des actions ordinaires et des instruments financiers convertis en actions ordinaires des ventes effectuées dans le cadre de l'Offre doit être effectué ; (E) Toute information supplémentaire, y compris les états financiers ou comptables de l'Offrant, que la Société pourrait raisonnablement demander ou qui pourrait être nécessaire afin d'éviter que la Notification d’Offre ci-dessus ne mène à des conclusions erronées ou lorsque l'information soumise est incomplète ou insuffisante.

 

 

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(ii) À la Date de Notification d’Offre, la Société enverra par courrier à chaque détenteur d'actions ordinaires et d'instruments financiers convertibles en actions ordinaires, aux frais de l’Offrant, un exemplaire de la Notification d’Offre. Dans le cas des détenteurs nominatifs d'actions ordinaires et/ou d'instruments financiers convertibles en actions ordinaires, la Notification d’Offre sera envoyée par courrier recommandé et, dans le cas des actions ordinaires et des instruments financiers convertibles en actions ordinaires détenus dans un compte de courtage, la Notification d’Offre sera envoyée aux courtiers concernés par l'entremise de l'agent dépositaire.

(iii) À la Date de la Notification d’Offre, l'Offrant devra publier un avis contenant les informations mentionnées au paragraphe (i). Sous réserve des dispositions légales applicables, la Notification d’Offre sera publiée dans deux (2) grands journaux du Grand-Duché de Luxembourg et dans la ville de New York, États-Unis, ou dans un délai plus long si les lois applicables le requièrent.

iv) La contrepartie pour chaque action ordinaire et chaque instrument financier convertible en actions ordinaires payable à chaque détenteur devra être la même, devra être payable en espèces seulement et ne devra pas être inférieure au plus élevé des prix suivants :

(A) le prix le plus élevé par action ordinaire et instrument financier convertible en actions ordinaires payé par l'Offrant, ou pour son compte, relativement à toute acquisition d'actions ordinaires et aux instruments financiers convertibles en actions ordinaires au cours de la période de douze mois précédant immédiatement la Notification d’Offre, ajusté par suite d'une division des actions, d'un dividende en actions, d’un fractionnement ou d'un reclassement touchant les actions ordinaires et/ou les instruments financiers convertibles en actions ordinaires ; ou

(B) le cours de clôture le plus élevé, au cours de la période de soixante jours précédant immédiatement la Notification l’Offre, d'une action ordinaire de la Société cotée à la Bourse de New York, dans chaque cas ajusté par suite d'une division d'actions, d'un dividende en actions, d'un fractionnement ou d'une reclassification touchant ou lié aux actions ordinaires et à un instrument financier convertible en actions ordinaires.

(v) L'Offre Publique d’Acquisition sera ouverte pendant une période minimale d'au moins vingt (20) jours ouvrables luxembourgeois à compter de la date à laquelle l'Offre Publique d’Acquisition aura été introduite.

(vi) L'Offrant devra acquérir toutes les actions ordinaires et tous les instruments financiers convertibles en actions ordinaires qui seront valablement offerts (et non retirés) avant la date d'expiration de l'Offre Publique d’Acquisition conformément aux dispositions des présents statuts régissant les Offres Publiques d'Acquisition.

 

 

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(vii) Une fois la procédure d’Offre Publique d’Acquisition terminée, l'Offrant pourra signer l’Accord Préalable, s’il y en a un, quel que soit le nombre d'actions ordinaires et d'instruments financiers convertibles en actions ordinaires acquises. L’Accord Préalable, le cas échéant, sera signé dans les trente (30) jours suivant la clôture de l'Offre Publique d'Acquisition ; dans le cas contraire, il sera nécessaire de répéter la procédure d'Offre Publique d'Acquisition prévue au présent article afin de signer l’Accord Préalable.

8.2.2       Si les termes de l'article 8.2.1 ne sont pas respectés, il sera interdit à l’Offrant d'acquérir des actions ordinaires, directement ou indirectement, par quelque moyen que ce soit (y compris, mais sans s'y limiter, la conversion de tout instrument financier convertible en actions ordinaires) ou instrument si, en conséquence de cette acquisition, l'Offrant (lorsqu'il est regroupé avec les actions détenues par une personne qui contrôle l’Offrant, contrôlée par l'Offrant et/ou sous le contrôle commun de l'Offrant) deviendrait le détenteur d'actions ordinaires qui, en plus de ses détentions préexistantes, représenteraient au total au moins trente-trois virgule trente-trois pour cent (33,33%) du capital social de la Société. Le conseil d'administration suspendra tout droit de vote ou de recevoir des dividendes ou autres distributions de quelque nature que ce soit attachés aux actions ordinaires acquises en violation des dispositions de l'article 8.2.1 et aucune de ces actions ordinaires ne pourra être prise en compte pour déterminer si le quorum est atteint à une assemblée des actionnaires de la Société, tant que ces actions ordinaires ne seront pas vendues. En outre, si les conditions de l'article 8.2.1 des présents statuts ne sont pas respectées, la Société pourra considérer tout transfert d'actions ordinaires acquises en violation des dispositions de l'article 8.2.1 comme non valide, auquel cas aucun administrateur ou dépositaire de la Société, quel qu'il soit, ne pourra inscrire ce transfert dans les registres et livres pertinents de la Société

8.2.3       Si le détenteur d'un instrument financier convertible en actions ordinaires qui envisage une Acquisition Envisagée ne se conforme pas aux modalités de l'article 8.2.1 des présents statuts, le conseil d'administration pourra refuser la conversion en actions ordinaires de la partie de ces instruments convertibles qui, en cas de conversion, résulterait en ce que cette personne devienne la détentrice d'actions ordinaires atteignant ou dépassant le Seuil.

8.2.4      Aux fins du présent article 8.2, le terme "indirectement" comprendra les sociétés mères de l'Offrant, les sociétés contrôlées par l'Offrant ou qui se retrouveraient sous son contrôle à la suite de toute Acquisition, Offre Publique d’Acquisition ou Accord Préalable, selon le cas, qui accorderait en même temps le contrôle de la Société, les sociétés soumises au contrôle commun de l'Offrant et les autres personnes agissant conjointement avec l’Offrant ; seront également incluses les détentions que pourrait avoir une personne par l'entremise de trusts ou autres mécanismes similaires.

C.              ASSEMBLEES GENERALES DES ACTIONNAIRES

Article 9.           Pouvoirs de l’assemblée générale des actionnaires

Les actionnaires exercent leurs droits collectifs en assemblée générale d’actionnaires. Toute assemblée générale d’actionnaires de la Société régulièrement constituée représente l’ensemble des actionnaires de la Société. L’assemblée générale des actionnaires a les pouvoirs les plus étendus pour autoriser, ordonner, réaliser ou ratifier des actes relatifs à la Société.


 

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Article 10.        Convocation des assemblées générales d’actionnaires

10.1        L'assemblée générale des actionnaires de la Société peut, à tout moment, être convoquée par le conseil d'administration, au lieu et date fixés dans la convocation à une telle assemblée.

10.2        L'assemblée générale des actionnaires doit obligatoirement être convoquée par le conseil d'administration sur demande écrite, comportant l'ordre du jour, d'un ou plusieurs actionnaires représentant au moins dix pour cent (10%) du capital social de la Société. Dans ce cas, l'assemblée générale des actionnaires doit être convoquée et tenue dans un délai d'un (1) mois à compter de la réception de cette demande. L'(es) actionnaire(s) représentant au moins cinq pour cent (5%) du capital social émis de la Société peuvent demander l'ajout d'un ou plusieurs points à l'ordre du jour de toute assemblée générale des actionnaires. Une telle demande doit être reçue au siège social de la Société par lettre recommandée au moins vingt-deux (22) jours avant la date de l'assemblée.

10.3        L'assemblée générale annuelle des actionnaires doit être tenue dans les six (6) mois suivant la fin de chaque exercice social au Luxembourg, au siège social de la Société ou à tout autre endroit tel qu'indiqué dans la convocation à cette assemblée.

10.4        D’autres assemblées générales d’actionnaires pourront se tenir au lieu et à l’heure indiquée dans les convocations correspondantes à l’assemblée générale.

10.5        Les assemblées générales des actionnaires sont convoquées conformément aux dispositions de la Loi et si les actions ordinaires de la Société sont cotées sur une bourse étrangère, conformément aux exigences de cette bourse étrangère applicables à la Société.

10.6        Si les actions de la Société ne sont pas cotées sur une bourse étrangère, tous les actionnaires inscrits dans le registre des actionnaires à la date de l'assemblée générale des actionnaires ont le droit d'être admis à l'assemblée générale des actionnaires.

10.7        Si les actions ordinaires de la Société sont cotées sur une bourse, tous les actionnaires inscrits dans un registre des actionnaires de la Société ont le droit d'être admis et de voter à l'assemblée générale des actionnaires sur base du nombre d’actions ordinaires qu’ils détiennent à une date et une heure avant l'assemblée générale des actionnaires que le conseil d'administration peut déterminer comme la date d’inscription (la «Date d'Inscription») et telle que précisée dans la convocation.

10.8        Tout actionnaire, Porteur ou Dépositaire, selon le cas, qui souhaite assister à l'assemblée générale doit en informer la Société au plus tard le troisième jour ouvrable précédant la date de cette assemblée générale, ou jusqu’à toute autre date que le conseil d'administration peut déterminer et telle que précisée dans la convocation, d’une manière devant être déterminée par le conseil d'administration dans l’avis de convocation. Dans le cas d'actions ordinaires détenues par l'opérateur d'un système de compensation ou par un Dépositaire désigné par un tel Dépositaire, un Porteur d'actions ordinaires qui souhaite assister à une assemblée générale des actionnaires doit recevoir de ces opérateurs ou Dépositaires un certificat attestant le nombre d'actions ordinaires inscrites dans le compte correspondant à la Date d’Inscription. Le certificat doit être présenté à la Société au plus tard trois (3) jours ouvrables avant la date de cette assemblée générale. Si l'actionnaire vote au moyen d’une procuration, la procuration doit être déposée au siège social de la Société ou chez tout autre agent de la Société, dûment autorisé à recevoir ces procurations, dans le même temps. Le conseil d'administration peut fixer un délai plus court pour le la présentation du certificat ou de la procuration auquel cas cela sera précisé dans la convocation.


 

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10.9        Si tous les actionnaires sont présents ou représentés à une assemblée générale des actionnaires et déclarent qu'ils ont été informés de l'ordre du jour de la réunion, l'assemblée générale des actionnaires peut être tenue sans convocation préalable.

 

Article 11           Conduite des assemblées générales d’actionnaires

11.         Un bureau de l'assemblée doit être constitué à chaque assemblée générale d’actionnaires, composé d'un président, d'un secrétaire et d'un scrutateur, chacun devant être nommés par l’assemblée générale des actionnaires, sans qu'ils soient nécessairement des actionnaires. Le bureau doit s’assurer que l’assemblée est tenue en conformité avec les règles applicables et, en particulier, en conformité avec les règles relatives à la convocation, au quorum, s’il en existe, au partage des voix et à la représentation des actionnaires.

11.         Une liste de présence doit être tenue à toute assemblée générale d’actionnaires.

11.         Chaque action ordinaire donne droit à une voix en assemblée générale d’actionnaires, sous réserve des dispositions de la Loi. Sauf disposition contraire de la Loi ou des statuts, les décisions prises en assemblée générale d’actionnaires dûment convoquées sont adoptées à la majorité simple des voix valablement exprimées quelle que soit la part du capital social émis de la Société présente ou représentée à l’assemblée générale. Les abstentions et les votes blancs ou nuls ne sont pas pris en compte.

11.4        Un actionnaire peut participer à toute assemblée générale des actionnaires en désignant une autre personne, actionnaire ou non, comme son mandataire par écrit au moyen d’un document signé, transmis par courrier, par télécopie, ou par tout autre moyen de communication autorisé par le conseil d’administration. Une personne peut représenter plusieurs voire même tous les actionnaires.

11.5        Les actionnaires qui prennent part à une assemblée générale par conférence téléphonique, vidéoconférence ou par tout autre moyen de communication autorisé par le conseil d’administration, permettant leur identification et permettant à toutes les personnes participant à l'assemblée de s'entendre mutuellement sans discontinuité, garantissant une participation effective à l'assemblée, sont réputés être présents pour le calcul du quorum et de la majorité, à condition que de tels moyens de communication soient disponibles sur les lieux de tenue de l'assemblée.


 

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11.6        Chaque actionnaire peut voter à une assemblée générale des actionnaires au moyen d'un bulletin de vote signé, envoyé par courrier, télécopie ou tout autre moyen de communication autorisé par le conseil d’administration et délivré au siège social de la Société ou à l'adresse indiquée dans la convocation. Les actionnaires ne peuvent utiliser que les bulletins de vote fournis par la Société qui indiquent au moins le lieu, la date et l'heure de l'assemblée, l'ordre du jour de l'assemblée, les résolutions soumises au vote de l'assemblée, ainsi que pour chaque résolution, trois cases à cocher permettant à l'actionnaire de voter en faveur ou contre la résolution proposée, ou d'exprimer une abstention par rapport à chacune des résolutions proposées, en cochant la case appropriée. La Société ne prendra en compte que des bulletins de vote reçus au plus tard trois (3) jours avant la tenue de l'assemblée générale des actionnaires à laquelle ils se rapportent. Le conseil d’administration peut fixer une durée plus courte pour la présentation des bulletins de vote.

 

11.7        Le conseil d’administration peut définir des conditions supplémentaires qui devront être remplies par les actionnaires afin qu’ils puissent participer à une assemblée générale des actionnaires.

Article 12.          Modification des statuts

Sous réserve des dispositions de la Loi et des présents statuts, toute modification des statuts nécessite une majorité d’au moins deux-tiers (2/3) des voix valablement exprimées lors d’une assemblée générale à laquelle au moins la moitié (1/2) du capital social émis de la Société est représentée. Si le quorum n’est pas atteint à une assemblée, une seconde assemblée pourra être convoquée dans les conditions prévues par la Loi, qui pourra alors délibérer quel que soit le capital social émis de la Société représentée à l’assemblé et lors de laquelle les décisions seront adoptées à la majorité d’au moins deux-tiers (2/3) des voix valablement exprimées. Les abstentions et les votes blancs ou nuls ne sont pas pris en compte pour le calcul de la majorité.

Article 13.         Prorogation des assemblées générales des actionnaires

Le conseil d’administration peut proroger toute assemblée générale d’actionnaires déjà commencée, y compris toute assemblée générale en vue de statuer sur une modification des statuts, pour une période de quatre (4) semaines. Le conseil d’administration doit proroger toute assemblée générale des actionnaires déjà commencée à la demande d’un ou plusieurs actionnaires représentant au moins vingt pour cent (20%) du capital social de la Société. Lors d’une telle prorogation d’une assemblée générale déjà commencée, toute décision déjà adoptée par l’assemblée générale des actionnaires sera annulée. Pour éviter toute confusion, une fois qu’une assemblée a été prorogée conformément à la deuxième phrase de cet article 13, le conseil d'administration ne sera pas tenu de proroger une telle assemblée une deuxième fois.


 

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Article 14.         Procès-verbal des assemblées générales d’actionnaires

Le bureau de toute assemblée générale des actionnaires doit dresser un proc&eg