Globant S.A. 6-K May. 24, 2021 4:35 PM

 

Exhibit 99.1

 

  Globant S.A.
   
  Condensed interim consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020
   

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

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

 

          Three months ended  
    Notes     March 31, 2021     March 31, 2020  
Revenues     7       270,170       191,572  
Cost of revenues     8.1       (166,973 )     (119,369 )
Gross profit             103,197       72,203  
                         
Selling, general and administrative expenses     8.2       (71,891 )     (51,872 )
Net impairment losses on financial assets             (1,099 )     (1,617 )
Other operating income             11        
Profit from operations             30,218       18,714  
                         
Finance income     9       323       256  
Finance expense     9       (2,612 )     (2,455 )
Other financial results, net     9       871       2,717  
Financial results, net             (1,418 )     518  
                         
Other income and expenses, net             38       16  
Profit before income tax             28,838       19,248  
                         
Income tax     6       (7,171 )     (6,078 )
Net income for the period             21,667       13,170  
                         
Other comprehensive income, net of income tax effects                        
                         
Items that may be reclassified subsequently to profit and loss:                        
– Exchange differences on translating foreign operations             (1,724 )     (2,104 )
– Net change in fair value on financial assets measured at fair value through other comprehensive income (“FVOCI”)                   (114 )
– Gains and losses on cash flow hedges             170       (2,069 )
Total comprehensive income for the period             20,113       8,883  
                         
Net income attributable to:                        
Owners of the Company             21,667       13,170  
Net income for the period             21,667       13,170  
                         
Total comprehensive income for the period attributable to:                        
Owners of the Company             20,113       8,883  
Total comprehensive income for the period             20,113       8,883  
                         
Earnings per share (1)                        
Basic             0.54       0.36  
Diluted             0.53       0.35  
                         
Weighted average of outstanding shares (in thousands)                        
Basic             39,899       37,008  
Diluted             41,157       38,093  
(1) As of March 31,
2021 and 2020, respectively, 7 and 1 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

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION AS OF MARCH 31, 2021 (UNAUDITED) AND DECEMBER 31, 2020

(in thousands of U.S. dollars)

    Notes     March 31, 2021     December 31, 2020  
ASSETS                        
Current assets                        
Cash and cash equivalents     4.3       148,832       278,939  
Investments     4.3       46,801       19,284  
Trade receivables     4.3       262,705       196,020  
Other assets     4.3       2,259       8,146  
Other receivables     4.3       40,476       31,633  
Other financial assets     13       831       1,577  
Total current assets             501,904       535,599  
                         
Non-current assets                        
Trade Receivables     4.3       4,240       5,644  
Investments     4.3       823       615  
Other assets     4.3       5,084       6,954  
Other Receivables             11,451       9,629  
Deferred tax assets             41,111       41,507  
Investment in associates             3,154       3,154  
Other financial assets     13       19,121       15,147  
Property and equipment     10       100,914       101,027  
Intangible assets     11       88,899       86,721  
Right-of-use assets     12       98,224       90,010  
Goodwill     21       430,959       392,760  
Total non-current assets             803,980       753,168  
TOTAL ASSETS             1,305,884       1,288,767  
                         
LIABILITIES                        
Current liabilities                        
Trade payables     4.3       28,409       35,266  
Payroll and social security taxes payable     4.3       118,730       111,881  
Borrowings     15       1,203       907  
Other financial liabilities     13       43,008       19,822  
Lease liabilities     12       15,690       15,358  
Tax liabilities             11,320       11,804  
Income tax payable     4.3       16,287       10,511  
Other liabilities             449       81  
Total current liabilities             235,096       205,630  
                         
Non-current liabilities                        
Trade payables     4.3       4,107       5,240  
Borrowings     15       31       25,061  
Other financial liabilities     13       50,685       74,376  
Lease liabilities     12       77,556       72,240  
Deferred tax liabilities             13,695       13,698  
Provisions for contingencies     17       14,826       12,583  
Total non-current liabilities             160,900       203,198  
TOTAL LIABILITIES             395,996       408,828  
                         
Capital and reserves                        
Issued capital             47,906       47,861  
Additional paid-in capital             550,948       541,157  
Other reserves             (4,228 )     (2,674 )
Retained earnings             315,262       293,595  
Total equity attributable to owners of the Company             909,888       879,939  
TOTAL EQUITY AND LIABILITIES             1,305,884       1,288,767  

 

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

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020 (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,
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 14.1)
    67,876       81       2,156                         2,237       2,237  
Issuance
of shares under subscription agreement (note 14.2)
    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  

 

   

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,
2021
    39,884,788       47,861       541,157       293,595       (2,895 )     221       879,939       879,939  
Issuance
of shares under share-based compensation plan (note 14.1)
    29,228       35       1,174                         1,209       1,209  
Issuance
of shares under subscription agreement (note 14.2)
    8,415       10       1,740                         1,750       1,750  
Share-based
compensation plan
                6,877                         6,877       6,877  
Other comprehensive
income for the period, net of tax
                            (1,724 )     170       (1,554 )     (1,554 )
Net
income for the period
                      21,667                   21,667       21,667  
Balance
at March 31, 2021
    39,922,431       47,906       550,948       315,262       (4,619 )     391       909,888       909,888  

 

(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.

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2021 AND 2020 (UNAUDITED)

(in thousands of U.S. dollars)

 

    Three months ended  
    March 31, 2021     March 31, 2020  
Cash flows from operating activities                
Net income for the period     21,667       13,170  
Adjustments to reconcile net income for the period to net cash flows from operating activities:                
Share-based compensation expense     8,592       5,790  
Current income tax     11,082       6,644  
Deferred income tax     (3,911 )     (566 )
Depreciation of property and equipment     4,169       3,978  
Depreciation of right-of-use assets     4,576       4,622  
Amortization of intangible assets     7,604       2,887  
Net impairment losses on financial assets     1,099       1,617  
Allowance for claims and lawsuits     2,283       804  
Gain on transactions with bonds     (581 )     (2,331 )
Accrued interest     1,732       1,836  
Interest received     309       229  
Net loss (gain) arising on financial assets measured at fair value recognized in profit or loss (“FVPL”)     3,412       5,642  
Net loss (gain) arising on financial assets measured at FVOCI     665       1,723  
Net (gain) loss arising on financial assets measured at amortised cost           3  
Exchange differences     (4,474 )     (7,749 )
Payments related to forward and future contracts     (782 )     (1,832 )
Proceeds related to forward and future contracts     169       158  
Gain arising from lease disposals     (17 )      
Changes in working capital:                
Net increase in trade receivables     (63,962 )     (15,207 )
Net increase in other receivables     (8,000 )     (13,169 )
Net decrease in other assets     7,757       1,981  
Net (decrease) increase in trade payables     (7,797 )     1,178  
Net increase (decrease) in payroll and social security taxes payable     8,657       (14,152 )
Net decrease in tax liabilities     (790 )     (309 )
Income tax paid     (8,100 )     (3,972 )
Net cash used in operating activities     (14,641 )     (7,025 )

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2021 AND 2020 (UNAUDITED)

(in thousands of U.S. dollars)

 

    Three months ended  
    March 31, 2021     March 31, 2020  
Cash flows from investing activities                
Acquisition of property and equipment (1)     (5,022 )     (6,927 )
Proceeds from disposals of property and equipment and intangibles     756       350  
Acquisition of intangible assets (2)     (8,114 )     (3,616 )
Acquisition of investment in sovereign bonds     (2,030 )     (6,500 )
Proceeds from investment in sovereign bonds     2,611       8,831  
Payments related to forward and future contracts     (2,797 )     (2,650 )
Proceeds related to forward and future contracts           425  
Acquisition from investments measured at FVPL     (83,295 )     (51,544 )
Proceeds from investments measured at FVPL     55,389       69,562  
Acquisition of investments measured at FVOCI           (2,994 )
Proceeds from investments measured at FVOCI           3,000  
Payments to acquire equity instruments     (2,700 )      
Acquisition of investment in convertible notes     (800 )     (200 )
Acquisition of business, net of cash (3)     (26,167 )      
Payments of earn-outs related to acquisition of business     (12,475 )     (3,150 )
Net cash (used in) provided by investing activities     (84,644 )     4,587  
                 
Cash flows from financing activities                
Proceeds from the issuance of shares under the share-based compensation plan     851       2,021  
Cash paid from the settlements of the derivative financial instruments used to hedge interest rate risk           3  
Proceeds from subscription agreements           909  
Proceeds from borrowings     3,428       75,000  
Repayment of borrowings     (28,135 )     (558 )
Payments of principal portion of lease liabilities     (5,290 )     (4,982 )
Payments of lease liabilities interest     (1,172 )     (317 )
Interest paid     (78 )     (581 )
Net cash (used in) provided by financing activities     (30,396 )     71,495  
                 
Increase (decrease) in cash and cash equivalents     (129,681 )     69,057  
                 
Cash and cash equivalents at beginning of the year     278,939       62,721  
Effect of exchange rate changes on cash and cash equivalents     (426 )     863  
Cash and cash equivalents at end of the period     148,832       132,641  

 

(1) For the three
months ended March 31, 2021 and 2020, included 988 and 774 of acquisition of property
and equipment financed with trade payables, respectively. During the three months ended March 31,
2021 and 2020, the Company paid 1,515 and 2,179 related to property and equipment acquired
in 2020 and 2019, respectively.
(2) For the three
months ended March 31, 2021 and 2020, included 619 and 25 of acquisition of intangible
assets financed with trade payables, respectively. During the three months ended March 31,
2021, the Company paid 285 related to property and equipment acquired in 2020.
(3) Cash
paid for assets acquired and liabilities assumed in the acquisition of subsidiaries, net
of cash acquired:

 

 

GLOBANT S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2021 AND 2020 (UNAUDITED)

(in thousands of U.S. dollars)

 

    Three months ended  
    March 31, 2021     March 31, 2020  
Supplemental information                
Cash paid     32,551        
Less: cash and cash equivalents acquired     (6,384 )      
Total consideration paid net of cash and cash equivalents acquired     26,167        

 

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

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

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, 2021 were the following: Sistemas UK Limited in the United Kingdom; Globant LLC and
Globant IT Services Corp in the United States of America (the “U.S.”); Sistemas Globales S.A., IAFH Global S.A., Dynaflows
S.A., BSF S.A and Decision Support 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., Avanxo Servicios S.A. de C.V. and Grupo ASSA México Soluciones Informáticas
S.A de C.V. in Mexico; Sistemas Globales Uruguay S.A. and Difier S.A. in Uruguay; Globant Brasil Consultoria Ltda., Orizonta Consutoria
de Negocios e Tecnología Ltda., Global Digital Business Solutions em Tecnologia Ltda. and Serviços Digitais em Tecnologia
da Informação 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. and BlueCap Management Consulting SL in Spain; Globant France S.A.S in France; and Globant Canada Corp. in Canada.

 

The Company provides services from development
and delivery centers located in United States (San Francisco, New York, Seattle, Raleigh and Dallas), Argentina (Buenos Aires, Tandil,
Rosario, Tucumán, Córdoba, Resistencia, Bahía Blanca, Mendoza, Mar del Plata and La Plata), Uruguay (Montevideo),
Colombia (Bogotá, Medellín and Cali), Brazil (São Paulo and São Jose Dos Campos), Peru (Lima), Chile (Santiago),
México (Guadalajara, México City and Monterrey), 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 (San Francisco, New York and Miami),
Brazil (São Paulo), Colombia (Bogotá), Uruguay (Montevideo), Argentina (Buenos Aires), France (Paris), Chile (Santiago),
Mexico (México City), the United Kingdom (London), Germany (Berlin) and Spain (Barcelona). The Company also has centers of software
engineering talent and educational excellence, primarily across Latin America.

 

Most of the 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 the
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, 2021, the condensed interim consolidated statements
of comprehensive income for the three months ended March 31, 2021 and 2020, the condensed interim consolidated statements of changes
in equity and cash flows for the three months ended March 31, 2021 and 2020 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, 2020 included in the Company’s 2020 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.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

The financial
information as of December 31, 2020 presented in these condensed interim consolidated financial statements is derived from the Company’s
audited consolidated financial statements for the year ended December 31, 2020.

 

The results
of operations for the three months ended March 31, 2021 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 12, 2021, 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 the Company’s
audited consolidated financial statements for the year ended December 31, 2020, except for the adoption of new standards and interpretations
effective as of January 1, 2021, 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, 2021:

 

Amendments to IFRS 9, IAS 9, IFRS
7, IFRS 4 Interest Rate Benchmark Reform – Phase 2

and IFRS 16

 

As of March 31, 2021, the Company’s interest
rate swaps 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

 

The Company has not applied the following new
and revised IFRSs that have been issued but are not yet mandatorily effective:

 

Amendments to IAS 8 Definition of Accounting Estimates1
Amendments to IAS 1 and IFRS Practice Disclosure of Accounting Policies1
Statement 2  

 

1 Effective
for annual reporting periods beginning on or after January 1, 2023. Earlier application
is permitted.

 

2 Effective
for annual reporting periods beginning on or after January 1, 2022. Earlier application
is permitted.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

On February 12, 2021, the International Accounting Standards Board (the “IASB”) issued
‘Definition of Accounting Estimates (Amendments to IAS 8)’ providing a new definition of accounting estimates to help entities to distinguish
between accounting policies and accounting estimates.

 

The management of the Company does not anticipate that the application of this amendment will have a
material impact on the Company’s consolidated financial statements. This amendment is effective for annual periods beginning on or
after January 1, 2023. Earlier application is permitted. The Company has not opted for early application.

 

On February 12, 2021, the IASB issued ‘Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2)’ to help preparers in deciding which accounting policies to disclose in their financial statements.

 

The management of the Company does not anticipate that the application of this amendment will have a
material impact on the Company’s consolidated financial statements. This amendment is effective for annual periods beginning on or
after January 1, 2023. Earlier application is permitted. The Company has not opted for early application.

 

4.2 Intangible assets (update)

 

Intangible assets include licenses, customer relationships,
customer contracts, non-compete agreements and cryptocurrencies.

 

Cryptocurrencies

 

The Company accounts for its crypto assets as
indefinite-lived intangible assets in accordance with IAS 38 “Intangible Assets”. Bitcoin is a cryptocurrency that is considered
to be an indefinite lived intangible asset because bitcoin lacks physical form and there is no limit to its useful life, bitcoin is not
subject to amortization but it is tested for impairment.

 

The Company’s crypto assets are initially recorded
at cost. Subsequently, they are measured at cost, net of any impairment losses incurred since acquisition. The Company performs monthly
analysis to identify possible impairment. If the carrying value of the crypto asset exceeds the fair value based on the quoted price in
the active exchange market, the Company will recognize an impairment loss equal to the difference between the fair value and the book
value in the consolidated statement of comprehensive income. Gains, if any, will not be recognize until realized upon sale in the consolidated
statement of comprehensive income. Further details are disclosed in note 11. As of March 31, 2021, the Company has not recognized
any impairment.

 

4.3 Breakdown of principal items in the statement of financial position

 

Cash and cash equivalents

 

    March 31, 2021     December 31, 2020  
Cash and bank balances     148,131       278,722  
Time deposits     701       217  
TOTAL     148,832       278,939  

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

 

Current   March 31, 2021     December 31, 2020  
Mutual funds (1)     46,801       19,284  
TOTAL     46,801       19,284  

 

Non-current   March 31, 2021     December 31, 2020  
Contribution to funds (1)     823       615  
TOTAL     823       615  

 

 

    March 31, 2021     December 31, 2020  
Accounts receivable (2)     228,141       181,658  
Unbilled revenue (2)     41,656       20,117  
Subtotal     269,797       201,775  
Less: Allowance for doubtful accounts     (7,092 )     (5,755 )
TOTAL     262,705       196,020  

 

    March 31, 2021     December 31, 2020  
Non-current                
Accounts receivable (2)     4,240       5,644  
TOTAL     4,240       5,644  

 

 

    March 31, 2021     December 31, 2020  
Current                
Unbilled Subscriptions     2,259       8,146  
TOTAL (3)     2,259       8,146  
                 
Non-current                
Unbilled Subscriptions     5,084       6,954  
TOTAL (3)     5,084       6,954  

 

 

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

 

    March 31,

2021
    December 31,

2020
Current              
Tax credit – VAT     2,895       4,358
Tax credit – Software Promotion Regime     506       493
Income tax credits (4)     10,054       7,053
Tax credit – Knowledge Law     9,666       7,230
Other tax credits     1,200       674
Advances to suppliers     4,308       2,142
Prepaid expenses     8,666       6,625
Loans granted to employees     32       77
Other     3,149       2,981
TOTAL     40,476       31,633

 

 

    March 31,

2021
    December 31,

2020
Current              
Suppliers     11,247       16,928
Expenses accrual     17,162       18,338
TOTAL (5)     28,409       35,266
               
Non-current              
Expenses accrual     4,107       5,240
TOTAL (5)     4,107       5,240

 

Payroll and social security taxes payable

 

    March 31,

2021
    December 31,

2020
Salaries     8,477       12,018
Social security tax     18,522       22,140
Provision for vacation, bonus and others (6)     91,565       77,015
Directors fees     139       139
Other     27       569
TOTAL     118,730       111,881

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

 

    March 31,

2021
    December 31,

2020
Income tax payable     16,287       10,511
TOTAL (7)     16,287       10,511

 

(1) Measured at fair value through profit or loss.
(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 and to the acquisition of Cloudshift on February 28,
2021.
(3) The decrease is explained by the billing in the first quarter of Salesforce subscription resales and decrease
in the subscription sales during the first quarter of the year.
(4) The variation is explained mainly by the increase in the tax credits of some subsidiaries due to advance
payments of income tax for the fiscal year 2020 that are due in the second quarter of 2021 and the consolidation of Spanish subsidiaries
tax position represented an increase. Also, the increase is explained by the income tax credits from Cloudshift, which was acquired on
February 28, 2021.
(5) The decrease is mainly explained by the decrease of payables with suppliers of office conditioning services,
legal and financial services. Also, the decrease in expenses accrual is mainly due to subscription suppliers billing in Avanxo.
(6) The increase is mainly due to the increase on the provision of the performance bonus of the year and the
provision of the thirteenth salary during the three months ended March 31, 2021.
(7) The increase is explained by the income tax payable for the first quarter of 2021.

 

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,
2020. There have been no significant changes in the risk management assessment or in any risk management policies since December 31,
2020.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

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, 2021 and the audited consolidated statement of financial position as of December 31, 2020,
approximate to their fair values.

 

    March 31, 2021     December 31, 2020  
    Carrying amount     Fair value     Carrying amount     Fair value  
Financial Assets and Liabilities                                
Non-current assets                                
Other receivables                                
Guarantee deposits     2,933       2,703       3,091       3,039  
Other assets     5,084       4,480       6,954       6,278  
Non-current liabilities                                
Trade payables     4,107       3,661       5,240       4,735  
Borrowings     31       28       25,061       25,382  

 

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, 2021  
    Level 1     Level 2     Level 3     Total  
Financial assets                                
Mutual funds           46,801             46,801  
Foreign exchange forward contracts           344             344  
Convertible notes                 1,846       1,846  
Equity instrument                 13,178       13,178  
                                 
Financial liabilities                                
Contingent consideration                 43,779       43,779  
Foreign exchange forward contracts           1,182             1,182  
Interest rate SWAP           241             241  

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

    As of December 31, 2020  
    Level 1     Level 2     Level 3     Total  
Financial assets                                
Mutual funds           19,284             19,284  
Foreign exchange forward contracts           492             492  
Convertible notes           130       1,036       1,166  
Equity instrument                 10,478       10,478  
                                 
Financial liabilities                                
Contingent consideration                 43,714       43,714  
Foreign exchange forward contracts           93             93  
Interest rate SWAP           737             737  

 

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, 2020.

 

5.2.1 – Foreign exchange future and forward contracts

 

During the three months ended March 31, 2021,
the Argentinian subsidiary Sistemas Globales, S.A., acquired foreign exchange futures contracts through 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, 2021, the Company has recognized a loss of 320, there
were no future contracts transactions for the three months ended March 31, 2020.

 

These futures contracts have daily settlements,
in which the futures value changes daily. Sistemas Globales S.A. recognizes 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, 2021,
the accrued valuation of the last day of the month will be settled with the bank in the first day of the next month, so the value recognize
in the financial statements is the amount pending to settle with the bank for the last day valuation. The Company maintains as of March 31,
2021 and December 31, 2020, one and three foreign exchange futures contract with a maturity date of April 1, 2021 and January 31,
2021, respectively, 22 and 7 recognized as Other financial liabilities in the balance sheet, respectively.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

Pursuant to these contracts, Sistemas Globales
S.A. is required to maintain collateral in an amount equal to a percentage of the notional amounts purchased until settlement of the
contracts. As of March 31, 2021 and 2020, Sistemas Globales, S.A. held 10% of the value of that collateral in Mutual funds, in SBS’s
primary account. This ensures minimal funding in case SBS has to transfer funds to “Mercado a Término de Rosario S.A”
(ROFEX) if losses are generated by daily settlements. This amount must also remain restricted during the term of the contracts. As of
March 31, 2021 and December 31, 2020, collateral regarding the transactions are restricted assets for an amount of 913 and 952,
respectively, in Mutual funds included as investments.

 

During the three months ended March 31, 2020,
the subsidiaries Sistemas Globales S.A., IAFH Global S.A., Sistemas Globales Uruguay S.A., Sistemas Globales Chile S.L, Sistemas
Colombia S.AS., India Private Limited and Global Systems Outsourcing S. de R.L. de C.V. 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, Colombian pesos, Indian rupee and Mexican pesos, due to the risk of exposure to fluctuations in foreign
currency. During the three months ended March 31, 2021, the subsidiary Globant LLC has also acquired foreign exchange forward contracts
with certain banks, with the purpose of hedging the exposure in currencies different than U.S. dollar. 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,
2021 and 2020, the Company recognized a net loss of 3,711 and 5,917, respectively.

 

As of March 31, 2021 and December 31,
2020, the foreign exchange future and 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, 2021   Argentine Peso     96.52       94.19       (63 )
April 30, 2021   Argentine Peso     95.23       94.19       (34 )
May 10, 2021   European Union Euro     0.83       0.86       (292 )
May 28, 2021   Argentine Peso     99.08       96.77       (50 )
May 28, 2021   Pound Sterling     0.72       0.73       (135 )
May 28, 2021   European Union Euro     0.84       0.85       (356 )
May 28, 2021   Colombian Peso     3,643.45       3,682.19       (83 )
Fair value as of March 31, 2021                         (1,013 )

 

    Currency   Foreign currency     Notional foreign     Fair value assets /  
Settlement date   from contracts   rate from contracts     currency rate     (liabilities)  
January 28, 2021   Colombian Peso     3,530.13       3,433.13       226  
January 28, 2021   Colombian Peso     3,475.25       3,431.93       101  
Fair value as of December 31, 2020                         327  
                       
January 29, 2021   Argentine Peso     90.50       87.60       (86 )
Fair value as of December 31, 2020                         (86 )

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

Hedge accounting

 

During the three months ended March 31, 2021
and 2020, the subsidiaries Sistemas Globales S.A., IAFH Global S.A., Sistemas Colombia SAS, Sistemas Globales Uruguay S.A., Sistemas
Globales Chile S.L., Globant India Private Limited and Global Systems Outsourcing S. de R.L. de C.V. 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, Indian rupee and Mexican pesos. 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.

 

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 “other financial results, net” line item. 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, 2021
and 2020, the Company recognized a net loss of 665 and 1,695, included in the line item “Salaries, employee benefits and social security
taxes”, respectively, and a net loss of 39 and 1,643, 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
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. As of March 31, 2021, the Company
has chosen to discontinue the remaining interest rate swap since the hedged future cash flows were no longer expected to occur. As of
March 31, 2021, the Company has recognized a gain of 294 through the statement of comprehensive income.

 

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, 2021 and December 31, 2020:

 

Interest rate swap

 

          Floating rate   Fixed rate     Fair value  
Maturity Date   Notional     receivable   payable     liabilities  
March 11, 2024     15,000     1month LIBOR     0.647 %     (114 )
March 31, 2023     15,000     1month LIBOR     0.511 %     (89 )
March 12, 2024     20,000     1month LIBOR     0.566 %     (101 )
April 30, 2024     25,000     1month LIBOR     0.355 %     63  
Fair value as of March  31, 2021                         (241 )

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

          Floating rate   Fixed rate     Fair value  
Maturity Date   Notional     receivable   payable     liabilities  
Hedge instrument                            
April 30, 2024     25,000     1month LIBOR     0.355 %     (132 )
Fair value as of December  31, 2020                         (132 )
                             
Instrument for which hedge accounting has been discontinued                            
March 11, 2024     15,000     1month LIBOR     0.647 %     (230 )
March 31, 2023     15,000     1month LIBOR     0.511 %     (123 )
March 12, 2024     20,000     1month LIBOR     0.566 %     (252 )
Fair value as of December  31, 2020                         (605 )

 

Foreign currency forwards                      
                       
    Currency   Foreign currency     Notional foreign     Fair value assets/  
Settlement date   from contracts   rate from contracts     currency rate     (liabilities)  
April 15, 2021   Mexican Peso     21.48       20.47       172  
April 27, 2021   Indian Rupee     73.53       73.37       1  
April 30, 2021   Chilean Peso     729.00       718.84       35  
May 27, 2021   Indian Rupee     74.06       73.66       2  
May 27, 2021   Indian Rupee     74.06       73.66       3  
May 27, 2021   Indian Rupee     74.08       73.66       3  
May 27, 2021   Indian Rupee     74.06       73.66       3  
May 28, 2021   Uruguayan Peso     44.58       44.50       3  
May 28, 2021   Colombian Peso     3,738.50       3,681.64       122  
Fair value as of March 31, 2021                         344  
                             
April 30, 2021   Uruguayan Peso     44.13       44.32       (7 )
April 30, 2021   Colombian Peso     3,613.42       3,678.84       (140 )
Fair value as of March 31, 2021                         (147 )

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

    Currency   Foreign currency     Notional foreign     Fair value  
Settlement date   from contracts   rate from contracts     currency rate     assets  
January 15, 2021   Mexican Peso     20.15       19.93       22  
January 27, 2021   Indian Rupee     73.72       73.31       2  
January 27, 2021   Indian Rupee     73.72       73.31       3  
January 27, 2021   Indian Rupee     73.72       73.31       3  
January 27, 2021   Indian Rupee     73.71       73.31       1  
January 28, 2021   Colombian Peso     3,490.10       3,433.08       133  
January 29, 2021   Uruguayan Peso     42.51       42.47       1  
Fair value as of December 31, 2020                         165  

 

5.3 Level 3

 

5.3.1 Convertible notes

 

During the three months ended March 31, 2021,
the Company maintained 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, 2021, related to changes in the fair value of the convertible notes which were not material.

 

5.3.1.1 Globant España

 

During the three months ended March 31, 2021,
Globant España S.A. entered into 3 note purchase agreements with LookApp S.A.S, UALI Holding Limited and B2CHAT S.A.S, in addition
to the note purchase agreement transferred from Globant Ventures on 2020 with Drixit Technologies Inc. (the “startups”), pursuant
to which Globant España S.A. provided financing facility for a total amount of 800. Interest on the entire outstanding principal
balance is computed at annual rates ranging from 2% to 4%. Globant España S.A. has the right to convert all or any portion of the
outstanding principal into equity interests of the startups. As of March 31, 2021 and December 31, 2020, the fair value of these
note purchase agreements amounted to 1,003 and 202 as other financial assets non-current, respectively; and 130 as other financial assets
current as of December 31, 2020, related to the convertible note with Collokia LLC.

 

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
was signed. The Company has the right to convert any portion of the outstanding principal into preferred units of Collokia. As of December 31,
2020, the fair value of the loan agreement amounted to 130, and is disclosed as other financial assets current. On February 11, 2021,
the Company entered into a Software License Agreement with Collokia LLC in exchange for the cancellation of the convertible notes the
grant of a perpetual, free, worldwide, non-exclusive, non-transferable and non-sublicensable license to use a software developed by Collokia
LLC.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

5.3.1.2 Sistemas Globales

 

As of March 31, 2021, Sistemas Globales S.A.
maintains, since its merger with Globant Ventures SAS, 5 note purchase agreements with Interactive Mobile Media S.A. (CamonApp), AvanCargo
Corp., TheEye S.A.S., Robin and Woolabs S.A. (the “startups”), pursuant to which Sistemas Globales S.A. provided financing facility
for a total amount of 800. Interest on the entire outstanding principal balance is computed at annual rates ranging from 5% to 12%.
Sistemas Globales S.A. has the right to convert all or any portion of the outstanding principal into equity interests of the startups.
As of March 31, 2021 and December 31, 2020, the fair value of these note purchase agreements amounted to 843 and 104 as other
financial assets non-current, respectively; and 730 as other financial assets current as of December 31, 2020.

 

5.3.2. Contingent consideration

 

As described in note 25.8 to the Company’s audited
consolidated financial statements for the year ended December 31, 2020, 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 December 31, 2020, the nominal value
of contingent consideration related to Avanxo amounted to 1,159. Such amount was paid on March 29, 2021. The fair value of the contingent
consideration arrangement of 1,145 as of December 31, 2020, was estimated by discounting to present value using a risk-adjusted discount
rate.

 

As described in note 25.10 to the Company’s audited
consolidated financial statements for the year ended December 31, 2020, 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 December 31, 2020, the nominal value
of contingent consideration related to BI Live amounted to 423. Such amount was paid on February 26, 2021. The fair value of the
contingent consideration arrangement of 535 as of December 31, 2020, was estimated by discounting to present value using a risk-adjusted
discount rate.

 

As of March 31, 2021, the Company signed
an amendment of the agreement with the sellers of BI Live, pursuant to which the remaining payments were modified and agreed upon fixed
payments in replacement of the previous contingent considerations.

 

As described in note 25.11 to the Company’s audited
consolidated financial statements for the year ended December 31, 2020, the acquisition of Grupo ASSA 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 revenue and gross margin.

 

As of December 31, 2020, the nominal value
of contingent consideration related to Grupo ASSA amounted to 11,289. Such amount was paid on March 31, 2021. The fair value of the
contingent consideration arrangement of 11,218 as of December 31, 2020, was estimated by discounting to present value using a risk-adjusted
discount rate.

 

As described in note 25.12 to the Company’s audited
consolidated financial statements for the year ended December 31, 2020, the acquisition of Xappia 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 revenue and gross margin.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS 

(UNAUDITED) 

(in thousands of U.S. dollars, except where otherwise
indicated)

 

As of March 31, 2021 and December 31,
2020, the nominal value of contingent consideration related to Xappia amounted to 3,999 and 3,980, respectively. Based on the Company’s
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 3,999 and 3,980, 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. The fair value of the contingent
consideration arrangement of 3,810 and 3,868 as of March 31, 2021 and December 31, 2020, respectively, was estimated by discounting
to present value using a risk-adjusted discount rate.

 

As described in note 25.13 to the Company’s audited
consolidated financial statements for the year ended December 31, 2020, the acquisition of GMR 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 revenue.

 

As of March 31, 2021 and December 31,
2020, the nominal value of contingent consideration related to GMR amounted to 4,672 and 4,547, respectively. Based on the Company’s 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 4,672 and 4,547, 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. The fair value of the contingent
consideration arrangement of 4,378 and 4,391 as of March 31, 2021 and December 31, 2020, respectively, was estimated by discounting
to present value using a risk-adjusted discount rate.

 

As described in note 25.14 to the Company’s audited
consolidated financial statements for the year ended December 31, 2020, the acquisition of Bluecap 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 revenue and operating margin.

 

As of March 31, 2021 and December 31,
2020, the nominal value of contingent consideration related to Bluecap amounted to 22,438 and 24,419, respectively. Based on the Company’s
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 19,140 and 24,419, 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. The fair value of
the contingent consideration arrangement of 21,710 and 22,557 as of March 31, 2021 and December 31, 2020, respectively, was
estimated by discounting to present value using a risk-adjusted discount rate.

 

As described in note 21, the acquisition of Cloudshift
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 revenue and operating margin.

 

As of March 31, 2021, the nominal value of
contingent consideration related to Cloudshift amounted to 14,634. Based on the Company’s estimations as of those dates, the potential
minimum amounts of all future payments that the Company could be required to make under this agreement was 14,634. 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, except for those subject to revenue growth, in which the contingent consideration would be subject
to a maximum amount of 2,875. The fair value of the contingent consideration arrangement of 13,881 as of March 31, 2021, was estimated
by discounting to present value using a risk-adjusted discount rate.

 

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

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

 

    Financial Assets     Financial Liabilities  
    Convertible notes     Equity instrument     Contingent

consideration
 
December 31, 2020     1,036       10,478       43,714  
Acquisition of business (1)                 13,881  
Acquisition of investment (2)     500       2,700        
Payments (2)     300             (12,946 )
Interests (1)     10             281  
Foreign exchange difference (1)                 (954 )
Others (1)                 (197 )
March 31, 2021     1,846       13,178       43,779  

 

    Financial Assets     Financial Liabilities  
    Convertible notes     Equity instrument     Contingent

consideration
 
December 31, 2019     3,425             9,252  
Fair value remeasurement (1)                 2,431  
Acquisition of business (1)                 43,072  
Acquisition of investment (2)           9,167        
Exercise of conversion option (1)     (1,311 )     1,311        
Instrument sold (2)     (1,800 )            
Payments (2)     701             (11,400 )
Interests (1)     21             359  
December 31, 2020     1,036       10,478       43,714  

 

(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, 2021 and 2020 was 25% and 32%, respectively.

 

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 18, the Company operates in a single operating and reportable segment.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

    Three months ended  
By Type of contract   March 31, 2021     March 31, 2020  
Time and material contracts     221,570       159,278  
Fixed-price contracts     46,606       28,203  
Subscription resales     1,973       4,085  
Others     21       6  
TOTAL     270,170       191,572  

 

    Three months ended  
By Industry Vertical   March 31, 2021     March 31, 2020  
Banks, Financial Services and Insurance     68,888       45,379  
Media and Entertainment     57,266       46,354  
Consumer, Retail & Manufacturing     38,728       25,792  
Professional Services     32,062       21,819  
Technology & Telecommunications     30,404       23,622  
Travel & Hospitality     19,032       22,289  
Health Care     21,279       4,537  
Other Verticals     2,511       1,780  
TOTAL     270,170       191,572  

 

    Three months ended  
By Currency(*)   March 31, 2021     March 31, 2020  
USD     210,032       166,248  
EUR     26,551       7,571  
GBP     2,883       140  
ARS     12,152       7,769  
MXN     8,356       5,526  
COP     2,115       1,970  
BRL     4,781       2,058  
PEN     1,841       4  
CLP     1,231       198  
Others     228       88  
TOTAL     270,170       191,572  

 

(*) Billing currency.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

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

 

8.1. Cost of revenues

 

    Three months ended  
    March 31, 2021     March 31, 2020  
Salaries, employee benefits and social security taxes (1)     (155,570 )     (109,410 )
Share-based compensation expense     (1,015 )     (1,121 )
Depreciation and amortization expense     (2,801 )     (2,290 )
Travel and housing (2)     (731 )     (4,120 )
Office expenses     (1,527 )     (610 )
Professional services (3)     (4,456 )     (1,090 )
Promotional and marketing expenses     (287 )     (93 )
Recruiting, training and other employee expenses     (586 )     (635 )
TOTAL     (166,973 )     (119,369 )

 

(1) The
increase is primarily attributable to a general increase in salaries and to the net addition
of 4,529 IT professionals since March 31, 2020, an increase of 38.53%, 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 during 2021 and 2020.
(2) The
variation is explained by an important decreased of travels and housing expenses as consequence
of COVID-19 travel restrictions after the first quarter of 2020 that continue in 2021.
(3) The
increase is mainly attributable to the increase in contractor services related to the business
growth and professional fees related to financial, legal and audit services; also intervenes
subscriptions fees to software licenses and IT services.

 

8.2. Selling, general and administrative expenses

 

    Three months ended  
    March 31, 2021     March 31, 2020  
Salaries, employee benefits and social security taxes (1)     (29,589 )     (19,968 )
Share-based compensation expense (2)     (8,337 )     (5,158 )
Rental expenses     (1,409 )     (1,834 )
Office expenses     (3,118 )     (3,328 )
Professional services     (7,184 )     (5,358 )
Travel and housing (3)     (678 )     (2,184 )
Taxes     (4,325 )     (3,802 )
Depreciation and amortization expense     (8,972 )     (4,575 )
Depreciation expense of right-of-use assets     (4,576 )     (4,622 )
Recruiting, training and other employee expenses (4)     (2,484 )     (434 )
Promotional and marketing expenses     (1,219 )     (609 )
TOTAL     (71,891 )     (51,872 )

 

(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 200 staff personnel
since March 31, 2020. The increase is also explained by the addition of the employees
of acquired companies during 2021 and 2020.
(2) The increase
is explained by the RSU granted during 2021 and the effect of the share price that also increased.
(3) The variation
is explained by an important decreased of travels and housing expenses as consequence of
COVID-19 travel restrictions after the first quarter of 2020 that continue in 2021.
(4) The increase
mainly corresponds to the net additions of more than 1,000 professionals during the quarter,
the launch of the scholarships with Digital House and the increase in training.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

NOTE 9 – FINANCE INCOME / EXPENSE AND OTHER FINANCIAL
RESULTS

 

    Three months ended  
    March 31, 2021     March 31, 2020  
Finance income                
Interest gain     323       256  
Total     323       256  
                 
Finance expense                
Interest expense on borrowings     (159 )     (462 )
Interest expense on lease liabilities     (1,262 )     (1,387 )
Other interest     (634 )     (243 )
Other     (557 )     (363 )
Total     (2,612 )     (2,455 )
                 
Other financial results, net                
Net (loss) gain arising from financial assets measured at fair value through PL     (3,412 )     (5,642 )
Net gain (loss) arising from financial assets measured at fair value through OCI           (28 )
Gain (loss) arising from financial assets measured at amortised cost           (3 )
Foreign exchange gain (loss), net (1)     3,702       6,059  
Gain on transaction with bonds     581       2,331  
Total     871       2,717  

 

(1) The variation
is explained mainly by a smaller devaluation of local currencies as the Colombian, Uruguayan,
Mexican and Argentinian peso, devalued against the U.S. dollar, for the three months ended
March 31, 2021.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

NOTE 10 – PROPERTY AND EQUIPMENT

 

Property and equipment as of March 31, 2021 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     50,332       10,084       51,568       79       13,907       2,354       49,803       178,127  
Additions related to business combinations     79                   259                         338  
Additions     1,669       94       27             45             2,660       4,495  
Disposals     (391 )     (147 )     (22 )     (34 )                 (318 )     (912 )
Transfers                 15                         (15 )      
Translation     (219 )     (52 )     (54 )                             (325 )
Values at end of period     51,470       9,979       51,534       304       13,952       2,354       52,130       181,723  
                                                                 
Depreciation                                                                
Accumulated at beginning of the period     32,647       6,651       36,601       17       1,184                   77,100  
Additions     2,271       401       1,405       15       77                   4,169  
Disposals     (221 )     (93 )     (6 )     (32 )                       (352 )
Translation     (27 )     (31 )     (50 )                             (108 )
Accumulated at end of period     34,670       6,928       37,950             1,261                   80,809  
Carrying amount     16,800       3,051       13,584       304       12,691       2,354       52,130       100,914  

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

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  

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

NOTE 11 – INTANGIBLE ASSETS

 

Intangible assets as of March 31, 2021 included the following:

 

    Licenses and

internal

developments
    Customer

contracts and relationships
    Non-compete agreements     Cryptocurrencies(*)     Total  
Useful life (years)     5       1-9       3                  
Cost                                        
Values at beginning of the period     72,538       74,792       834             148,164  
Additions related to business combinations           1,051       305             1,356  
Additions from separate acquisitions     2,391                   500       2,891  
Additions from internal development     5,717                         5,717  
Disposals     (233 )                       (233 )
Translation     (11 )                       (11 )
Values at end of period     80,402       75,843       1,139       500       157,884  
                                         
Amortization                                        
Accumulated at beginning of the period     47,360       13,459       624             61,443  
Additions     4,164       3,414       26             7,604  
Disposals     (37 )                       (37 )
Translation     (25 )                       (25 )
Accumulated at end of period     51,462       16,873       650             68,985  
Carrying amount     28,940       58,970       489       500       88,899  

 

(*) During
the first quarter of 2021, the Company purchased an aggregate of 500 in crypto assets, comprised solely of bitcoin.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

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  
Translation     (17 )           (17 )
Accumulated at end of period     37,939       11,424       49,363  
Carrying amount     13,698       14,128       27,826  

 

During the year, the Company considered the recoverability
of its internally generated intangible assets which are included in the condensed interim consolidated financial statements as of March 31,
2021 and 2020 with a carrying amount of 20,874 and 9,970, respectively.

 

NOTE 12 – LEASES

 

Movements in right-of-use assets and lease liabilities as of March 31,
2021 were as follow:

 

Right-of-use assets   Office

spaces
    Office

equipment
    Computers     Total  
                         
January 1, 2021     76,374       9,486       4,150       90,010  
Additions     5,658       6,078       1,172       12,908  
Disposals     (47 )                 (47 )
Depreciation     (3,710 )     (330 )     (536 )     (4,576 )
Foreign currency translation     (71 )                 (71 )
March 31, 2021     78,204       15,234       4,786       98,224  

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

Lease liabilities      
       
January 1, 2021     87,598  
Additions (1)     12,908  
Foreign exchange difference (1)     (2,007 )
Foreign currency translation (2)     11  
Interest expense (1)     1,262  
Payments (2)     (6,462 )
Disposals     (64 )
March 31, 2021     93,246  

 

(1) Non-cash transactions.

(2) Cash transactions.

 

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 )
Foreign currency translation     (274 )           (274 )
March 31, 2020     65,808       7,216       73,024  
                         

 

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

 

(1) Non-cash transactions.

(2) Cash transactions.

 

 

GLOBANT S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

NOTE 13 – OTHER FINANCIAL ASSETS AND LIABILITIES

 

    As of  
    March 31, 2021     December 31, 2020  
Other financial assets                
Current                
Convertible notes (note 5.3.1)           860  
Foreign exchange forward contracts (note 5.2.1)     344       492  
Guarantee deposits     455       190  
Others     32       35  
Total     831       1,577  
                 
Non-current                
Convertible notes (note 5.3.1)     1,846       306  
Equity instrument (1)     13,178       10,478  
Guarantee deposits     4,097       4,363  
Total     19,121       15,147  
                 
Other financial liabilities                
Current                
Other financial liabilities related to business combinations (2) (note 21)     41,826       19,729  
Foreign exchange forward contracts     1,182       93  
Total     43,008       19,822  
                 
Non-current                
Other financial liabilities related to business combinations (2) (note 21)     50,444       73,639  
Interest rate SWAP     241       737  
Total     50,685       74,376  

 

(1) On
January 15, 2021, the Spanish subsidiary Globant España S.A. signed a stock purchase
agreement and acquired 4% of ELSA, Corp. for 2,700.
(2) The
variation is due to the Cloudshift acquisition on February 28, 2021, which is offset by
the payments made to the sellers of Avanxo, BI Live and Grupo ASSA (see note 5.3.3).

 

NOTE 14 – CAPITAL AND RESERVES

 

14.1. Issuance of common shares

 

During the three months ended March 31,
2021, 25,103 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 33.92 per share amounting to a total of 851.

 

During the three months ended March 31,
2021, 28,593 Restricted Stock Units (“RSUs”) were granted to certain employees and directors of the Company and 4,125 RSUs
were vested at an average price of 86.73 per share amounting to a total of 358 (non-cash transaction).

 

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands
of U.S. dollars, except where otherwise indicated)

 

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.

 

During the three months ended March 31, 2020,
22,436 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).

 

As of March 31, 2021, 38,523,904 common shares
of the Company’s share capital were registered and listed on the New York Stock Exchange.

 

14.2. Subscription agreement

 

On March 15, 2021, the Company issued 8,415
common shares for a total amount of 1,750 as part of the subscription agreement included in the stock purchase agreement signed with Xappia’s
sellers.

 

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.

 

NOTE 15 – BORROWINGS

 

    As of  
    March 31, 2021     December 31, 2020  
             
Current                
Bank loans     129       907  
Other loans     1,074        
Non-current                
Bank loans     31       25,061  
TOTAL     1,234       25,968  

 

Movements in bank loans were as follows:

 

    Three months ended  
    March 31, 2021     March 31, 2020  
             
Balance at the beginning of year     25,968       51,386  
Proceeds from borrowings (1)(4)     3,428       75,000  
Payment of borrowings (2)(4)     (28,213 )     (1,139 )
Accrued interest (3)     159       465  
Translation (3)     (108 )     (48 )
Balance at the end of the period     1,234       125,664  

 

(1) During
the first quarter of 2021, the Company through its Argentinian subsidiaries (Sistemas Globales
S.A. and IAFH Global S.A.) borrowed 1,116 through bank overdrafts with Banco Santander and
also discounted checks through SBS Sociedad de Bolsa S.A. for 2,312 with maturity in April 2021.
On March 23, 2020 and March 24, 2020, Globant LLC borrowed 64,000 and 11,000, respectively,
under the Amended and Restated Credit Agreement, described in note 20 to the Company’s audited
consolidated financial statements for the year ended December 31, 2020. This loan will
mature on February 5, 2025.
(2) During
the three months ended March 31, 2021, the main payments were 25,000 by Globant LLC
related to the principal amount of the Amended and Restated Credit Agreement, Decision Support,
S.A. paid 754 related to the principal amount and interest of the loam remaining with Banco
ICBC, the Argentinian subsidiaries (Sistemas Globales S.A. and IAFH Global S.A.) paid 1,116
for the bank overdrafts with Banco Santander and 1,308 of the discounted checks with SBS
Sociedad de Bolsa S.A. 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 the principal amount
and interest of the Amended and Restated Credit Agreement.
(3) Non-cash
transactions.

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands of U.S. dollars, except where otherwise
indicated)

 

NOTE 16 – SHARE-BASED COMPENSATION – EMPLOYEE BENEFITS

 

16.1. Movements in share options during the
period

 

The following reconciles the share options outstanding
at the end of the three months ended March 31, 2021 and 2020:

 

    March 31, 2021     March 31, 2020  
    Number of

options
    Weighted average

exercise price
    Number of

options
    Weighted average

exercise price
 
                         
Balance at the beginning of year     857,643       31.57       1,051,602       32.00  
Forfeited during the period                 (17,125 )     41.32  
Exercised during the period     (25,103 )     33.92       (64,401 )     31.39  
Balance at end of period     832,540       31.48       970,076       31.88  

 

16.2 Movements in restricted stock units during the period

 

The following reconciles the RSU outstanding at
the end of the three months ended March 31, 2021 and 2020:

 

    March 31, 2021     March 31, 2020  
    Number of RSU     Weighted average

grant price
    Number of RSU     Weighted average

grant price
 
                         
Balance at the beginning of year     664,345       101.25       624,896       64.05  
RSU granted during the period     28,593       223.82       22,436       111.00  
Forfeited during the period     (3,750 )     46.00       (15,438 )     60.76  
Issued during the period     (4,125 )     86.73       (3,475 )     62.24  
Balance at end of period     685,063       107.26       628,419       65.82  

 

16.3 Employee Share Purchase Plan

 

In March 2021, the Company adopted the Globant
S.A. 2021 Employee Share Purchase Plan (the “ESPP”), with effect as of March 1, 2021. This plan is additional to the 2012
long-term incentive plan and the 2014 Equity Incentive Plan. The ESPP provides eligible employees with an opportunity to acquire a proprietary
interest in the Company through the purchase of the Company’s common shares.

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands
of U.S. dollars, except where otherwise indicated)

 

The ESPP permits participants to purchase Common
Shares through payroll deductions of generally 10.0% of their eligible compensation. The ESPP will typically be implemented through consecutive
six-month offering periods. Amounts deducted and accumulated from participant compensation will be used to purchase Common Shares at the
end of each offering period. Under the terms of the ESPP, the purchase price of the shares shall not be less than 90.0% of the lower of
the fair market value of a Common Share on the first trading day of the offering period or on the purchase date. Subject to adjustment
as provided by the ESPP and unless otherwise provided by the Compensation Committee, the purchase price for each offering period shall
be 90% of the fair market value of a Common Share on the purchase date. As of March 31, 2021, there has not been any offering period.

 

NOTE 17 – 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 22
to the consolidated financial statements for the year ended December 31, 2020, except for the ones herein mentioned.

 

On March 31, 2021, Globant S.A. and Globant
LLC prevailed on motions to dismiss 8 out of the 11 claims including five counts of the counts sounding in fraud and/or conspiracy, professional
negligence, and unjust enrichment as to Globant S.A., filed by Certified Collectibles Group, LLC (“CCG”). On April 16,
2021, CCG filed a Second Amended Complaint asserting three causes of action, including (1) breach of contract and express warranty
by Globant LLC; (2) a declaratory judgment claim against Globant LLC; and (3) a violation of Florida’s Deceptive and Unfair
Trade Practices Act against Globant S.A. and Globant LLC.

 

NOTE 18 – 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, 2021, 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.

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands
of U.S. dollars, except where otherwise indicated)

 

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

 

    Three months ended  
    March 31, 2021     March 31, 2020  
North America                
United States of America     164,397       138,856  
Canada     6,031       3,941  
Subtotal North America     170,428       142,797  
Europe                
Spain     24,103       5,471  
United Kingdom     2,952       4,531  
Belgium     1,569       50  
Switzerland     1,031       204  
France     483       148  
Luxembourg     360       409  
Germany     440       196  
Netherlands     907       319  
Others     700       143  
Subtotal Europe     32,545       11,471  
Asia                
India     1,448       537  
Japan     1,750       1,391  
Others     246        
Subtotal Asia     3,444       1,928  
Latin America and others                
Argentina     18,875       10,783  
Colombia     2,913       3,667  
Chile     19,090       10,253  
Mexico     13,621       5,533  
Peru     3,031       2,772  
Brazil     4,856       2,074  
Panama     3       134  
Uruguay     41       24  
Dominican Republic     807       95  
Others     516       41  
Subtotal Latin America and others     63,753       35,376  
TOTAL     270,170       191,572  

 

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

 

One single customer accounted for 10.53% and 11.65%
of revenues for the three months ended March 31, 2021 and 2020, respectively.

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands
of U.S. dollars, except where otherwise indicated)

 

As of March 31, 2021 and 2020, the measurement
of profit from operations was 30,218 and 18,714, respectively, as presented in the condensed interim consolidated statements of comprehensive
income.

 

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,

2021
    December 31,

2019
 
Argentina     106,177       104,929  
Spain     394,752       396,970  
United States of America     70,425       68,767  
Brazil     2,326       2,702  
Uruguay     13,397       12,971  
Luxembourg     4,226       4,226  
Colombia     47,379       43,237  
Mexico     24,942       20,761  
India     11,242       11,350  
Chile     5,221       4,877  
Peru     4,705       3,986  
United Kingdom     40,492       293  
Other countries     3,994       3,692  
TOTAL     729,278       678,761  

 

NOTE 19 – 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, 2020, 46% of revenues accumulated in the first half of the year, with 54% accumulating in the
second half.

 

NOTE 20 – RELATED PARTIES BALANCES AND TRANSACTIONS

 

As of March 31, 2021 and December 31,
2020, there are no outstanding balances or transactions with related parties to report.

 

NOTE 21 – BUSINESS COMBINATIONS

 

Acquisition of Cloudshiftgroup Limited

 

On February 28 2021, Globant S.A., through
certain of its wholly-owned subsidiaries, entered into an Equity Purchase Agreement (the “Purchase Agreement”) with the equity
holders of Cloudshiftgroup Limited (“Cloudshift”), a British stock company, pursuant to which the Company agreed to purchase
all of the outstanding equity interests in Cloudshift (the “Acquisition”). The transaction was simultaneously signed and closed.
Cloudshift is a Salesforce platinum partner which provides Salesforce advisory and implementation services in the United Kingdom.

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands
of U.S. dollars, except where otherwise indicated)

 

As consideration for the equity interests of Cloudshift,
the Company agreed to pay (amounts in thousands of pounds sterlings):

 

(i)           23,346 pounds sterling on the closing
date (the “Closing Payment”);

 

(ii)          666 pounds sterling within 10 days of
receipt, related to acquired invoices pending to collect from Edwardian London Management Services Limited, detailed as the Delayed Debtor
Payment from Edwardian London Management Services Limited in the agreement;

 

(iii)         653 pounds sterling within 10 business
days of written demand, related to the options tax relief, generated by the exercised options before the acquisition, to be utilized as
soon as possible; detailed as the Option Tax Consideration in the Purchase Agreement; and

 

(iv)         an additional amount of 11,500 pounds
sterling is payable to the sellers by February 2022 and 2023, subject to upwards or downwards adjustment based on Cloudshift’s achievement
of specified revenue and gross margin targets, out of which 1,155 will be recognize as remuneration due to the terms of the Purchase Agreement.

 

As of the date of issuance of these condensed
interim consolidated financial statements due to the recent nature of the Acquisition, the accounting for the Acquisition is incomplete;
hence, pursuant the guidance in IFRS 3, the Company has included preliminary amounts in the below disclosures as required by such standard,
as follows:

 

• Fair value of the total consideration transferred
since the Company has not completed the fair value analysis of the contingent consideration as of the date of issuance of these financial
statements.

 

• The amounts recognized as of the acquisition
date for each major class of assets acquired and liabilities assumed, the total amount of goodwill (including a qualitative description
of the factors that make up the goodwill recognized and the amount of goodwill that will be deducted for tax purposes) and other intangibles,
as applicable.

 

• The gross contractual amounts of the acquired
receivables, and the best estimate at the acquisition date of the contractual cash flows not expected to be collected. For each contingent
liability to be recognized, if any, an estimate of its financial effect, an indication of the uncertainties relating to the amount or
timing of any outflow and the possibility of any reimbursement, and the reasons why the liability cannot be measured reliably, if applicable.

 

The preliminary fair value of the consideration
transferred for the Acquisition at the acquisition date was calculated as follows:

 

Purchase price   Amount  
Down payment     32,551  
Contingent consideration     13,881 (a)
Fixed payments     1,743 (a)
Total consideration     48,175  

 

(a) As
of March 31, 2021, included as 8,848 and 6,777 as Other financial liabilities current
and non-current, respectively.

 

Acquisition related expenses were not material
and were recognized directly as expense for each period.

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands
of U.S. dollars, except where otherwise indicated)

 

The preliminary fair values of the identifiable
assets and liabilities of Cloudshift as at the date of acquisition were as follows:

 

    Cloudshift  
Current Assets        
Cash and cash equivalents     6,384  
Trade receivables     3,555  
Other receivables     90  
         
Non-current assets        
Property and equipment     338  
Intangible assets     1,184  
Goodwill (1)     38,740  
         
Current liabilities        
Trade and other payables     (846 )
Tax liabilities     (487 )
Payroll and social security     (236 )
Other liabilities     (416 )
         
Non-current liabilities        
Deferred tax liabilities     (131 )
         
Total consideration     48,175  

 

(1) Goodwill
arising from the Acquisition is not deductible for tax purposes.

 

Goodwill has arisen because the consideration
paid for the Acquisition included amounts in relation to the benefit of expected synergies, revenue growth, customer relationships, future
market development and the assembled workforce of acquired companies.

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands
of U.S. dollars, except where otherwise indicated)

 

Outstanding balances of other financial liabilities as of March 31,
2021 and December 31, 2020 are as follows:

 

    March 31, 2021     December 31, 2020  
    Other financial

liabilities –

current
    Other financial

liabilities – non

current
    Other financial

liabilities –

current
    Other financial

liabilities – non

current
 
Related to Business Combinations                                
Avanxo                 1,145        
BI Live           36       138       397  
Grupo ASSA           13,450       11,218       13,343  
Xappia     2,875       2,398       4,761       2,382  
Giant Monkey Robot     2,475       1,903       2,467       1,924  
Bluecap     27,628       25,880             55,593  
Cloudshift     8,848       6,777              
Total     41,826       50,444       19,729       73,639  

 

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

 

Goodwill at the beginning of the period     392,760  
Additions related to new acquisitions     38,740  
Translation     (132 )
Measurement period adjustment     (409 )
Goodwill at the end of the period     430,959  

 

Impact of acquisitions on the results of the
Company

 

The net income for the period ended March 31,
2021 includes a gain of 270 attributable to the business generated by Cloudshift. Revenue for the period ended March 31, 2021 includes
1,314 related to the business of that company. Had the business combination of Cloudshift been effected at January 1, 2021, the consolidated
revenue of the Company would have been 272,360 and the net income for the period ended March 31, 2021 would have been 22,020.

 

 

GLOBANT
S.A.

 

NOTES TO THE CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands
of U.S. dollars, except where otherwise indicated)

 

NOTE 22 – SUBSEQUENT EVENTS

 

The Company evaluated events occurring after March 31,
2021 in accordance with IAS 10, Events after the reporting period, through May 12, 2021, which is the date that these condensed interim
consolidated financial statements were made available for issuance.

 

22.1 Acquisition of Hybrido Worldwide S.L.

 

On May 11, 2021, the Company through its
subsidiary Software Product Creation, S.L., entered into an Equity Purchase Agreement (the “Purchase Agreement”) with the equity
holders of Hybrido Worldwide, S.L. (“Habitant”), a Spanish limited liability corporation, pursuant to which the Company purchased
all of the outstanding equity interests in Hybrido Worldwide, S.L. and its subsidiary, Pixel Division, S.L., a Spanish limited liability
corporation.

 

As consideration for the equity interests of
Hybrido Worldwide, S.L., the Company agreed to pay (amounts in thousands of Euro): (i) 8,820 euros on the closing date subject
to any adjustments or withholding detailed in the agreement (the “Closing Cash Payment”); (ii) 3,780 euros subject to
any adjustments, set off, deductions or withholding detailed in the agreement were paid through the issuance of common shares of the
Company to the sellers at the price per share equal to USD 214.69 (shares shall be determined at a subscription price per share
based on the volume weighted average trading price of the Company’s common shares during the 60-days ending on the tenth
trading day prior to closing). The common shares shall be issued by Globant S.A. and subscribed by the sellers within the following
calendar: (a) 1,780 euros on the closing date; (b) 1,000 euros on March 31, 2024; and ( c) 1,000 euros on
December 31, 2025; (iii) 2,700 euros subject to upwards or downwards adjustment based on Habitant’s (on a consolidated
basis with its subsidiary) achievement of both revenue and operating margin targets for the period from January 1, 2021 through
December 31, 2021, no later than March 31, 2022; (iv) 2,700 euros subject to upwards or downwards adjustment based on
Habitant’s (on a consolidated basis with its subsidiary) achievement of both revenue and operating margin targets for
the period from January 1, 2022 through December 31,2022, no later than March 31, 2023.

 

As of the date of issuance of these condensed
interim consolidated financial statements, due to the recent nature of this acquisition, the accounting for this acquisition is incomplete;
hence, pursuant the guidance in paragraph B66 of IFRS 3, the Company has not included in this footnote the following disclosures as required
by such standard, as follows:

 

• Fair value of the total consideration transferred
since the Company has not completed the fair value analysis of the consideration transferred as of the date of issuance of these financial
statements.

 

• The amounts recognized as of the acquisition
date for each major class of assets acquired and liabilities assumed, the total amount of goodwill (including a qualitative description
of the factors that make up the goodwill recognized and the amount of goodwill that will be deducted for tax purposes) and other intangibles,
as applicable.

 

• The gross contractual amounts of the acquired
receivables, and the best estimate at the acquisition date of the contractual cash flows not expected to be collected. For each contingent
liability to be recognized, if any, an estimate of its financial effect, an indication of the uncertainties relating to the amount or
timing of any outflow and the possibility of any reimbursement, and the reasons why the liability cannot be measured reliably, if applicable.

 

• The amount of revenues and profit or loss
of the acquired subsidiary since the acquisition date, and the amount of revenues and profit or loss of the combined entity as if the
acquisition has been made at the beginning of the reporting period, since the acquired subsidiary did not have available financial information
prepared under IFRS at the acquisition date. The preparation of this information under IFRS has not been completed as of the date of issuance
of these financial statements.

 

 

 

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, 2021 and for the three months ended March 31, 2021 and 2020 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 2020 Form 20-F. Our annual consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”)
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 2020 Form 20-F.

 

Business Update Regarding COVID-19

 

The coronavirus (“COVID-19”) global
pandemic continued to cause substantial global public health, business, and economic challenges during the three months ended March 31,
2021 and has remained a significant source of disruption and uncertainty. Since the beginning of the pandemic, we quickly adapted to ensure
both safety and business continuity by shifting the vast majority of our personnel to productive and secure remote working arrangements
and by responding to the rapidly changing needs and environments of our clients. During the three months ended March 31, 2021, we
continued to experience increased demand in our geographies, segments, and service offerings as a result of the COVID-19 pandemic, but
we cannot accurately predict the extent to which the COVID-19 pandemic will continue to directly and indirectly impact our business, results
of operations and financial condition.

 

For additional information on the impact of the
COVID-19 pandemic on our results for the three months ended March 31, 2021, see “Risks Related to Our Business and Industry—The
COVID-19 pandemic has had a significant and continuing adverse impact upon, and this or other pandemics may have a material adverse impact
upon, our business, liquidity, results of operations and financial condition” below, and for further information on the various risks
posed by the COVID-19 pandemic, see “Part I. Item 3D. Risk Factors—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 our 2020 Form 20-F.

 

Year-to-Date 2021 Developments and Trends

 

For the three months ended March 31, 2021, our revenues were $270.2
million, an increase of $78.6 million, or 41.0%, from $191.6 million reported for the same period of 2020. We have built an increasingly
diversified portfolio across numerous verticals, geographies and service offerings which allowed us to continue to grow revenues despite
challenges posed by the worldwide COVID-19 pandemic.

 

For more information, see “Item 5. Operating and Financial Review and Prospects—Operating Results—Factors Affecting Our Results of Operations” in our 2020 Form 20-F.

 

 

Results of Operations

 

Three months ended March 31, 2021 compared
to the three months ended March 31, 2020

 

Revenues

 

Revenues were $270.2 million for the three months
ended March 31, 2021, representing an increase of $78.6 million, or 41.0%, from $191.6 million for the three months ended March 31,
2020.

 

Revenues are derived primarily from providing
technology services to our clients, which are medium to large-sized companies based in the United States, Europe, Latin America and Asia.
Revenues consist of technology services revenues and reimbursable expenses, which primarily include travel and out-of-pocket costs that
are billable to clients. We discuss below the breakdown of our revenues by contract type, client location, industry vertical and client
concentration.

 

Revenues by Contract Type

 

We perform our services primarily under time and
material contracts and, to a lesser extent, fixed-price contracts. The remaining portion of our revenues in each period was derived from
other types of contracts.

 

    Three months ended  
    March 31, 2021     March 31, 2020  
             
    (in thousands, except percentages)  
By Contract                                
Time and material contracts   $ 221,570       82.0 %   $ 159,278       83.2 %
Fixed-price contracts     46,606       17.3 %     28,203       14.7 %
Subscription resales     1,973       0.7 %     4,085       2.1 %
Others     21       %     6       %
TOTAL   $ 270,170       100.0 %   $ 191,572       100.0 %

 

Revenues by Client Location

 

Our revenues are sourced from three main geographic
markets: North America (primarily the United States), Europe (primarily Spain and the United Kingdom) and Latin America (primarily Argentina,
Chile, Mexico, Peru, Brazil and Colombia). We present our revenues by client location based on the location of the specific client site
that we serve, irrespective of the location of the headquarters of the client or the location of the delivery center where the work is
performed. For the twelve months ended March 31, 2021, we had 860 active clients.

 

The following table sets forth revenues by client
location by amount and as a percentage of our revenues, for the periods indicated:

 

    Three months ended
    March 31, 2021     March 31, 2020
           
    (in thousands, except percentages)  
By Geography                                
North America   $ 170,428       63.1 %   $ 142,797       74.5 %
Europe     32,545       12.0 %     11,471       6.0 %
Asia     3,444       1.3 %     1,928       1.0 %
Latin America and other     63,753       23.6 %     35,376       18.5 %
Revenues   $ 270,170       100.0 %   $ 191,572       100.0 %

 

 

Revenues by Industry Vertical

 

We are a provider of technology services to enterprises
in a range of industry verticals including media and entertainment, professional services, technology and telecommunications, banks, financial
services and insurance, consumer, retail and manufacturing, travel and hospitality, and health care, among others. The following table
sets forth our revenues by amount and as a percentage of our revenues by industry vertical for the periods indicated:

 

 

  Three months ended  
    March 31, 2021     March 31, 2020  
             
    (in thousands, except percentages)  
Banks, Financial Services and Insurance     68,888       25.5 %     45,379       23.7 %
Media and Entertainment     57,266       21.2 %     46,354       24.2 %
Consumer, Retail and Manufacturing     38,728       14.3 %     25,792       13.5 %
Professional Services     32,062       11.9 %     21,819       11.4 %
Technology and Telecommunications     30,404       11.3 %     23,622       12.3 %
Travel and Hospitality     19,032       7.0 %     22,289       11.6 %
Health Care     21,279       7.9 %     4,537       2.4 %
Other Verticals     2,511       0.9 %     1,780       0.9 %
TOTAL     270,170       100.0 %     191,572       100.0 %

 

The increase in revenues from clients in the banks,
financial services and insurance industry vertical was primarily attributable to higher demand for services related to scalable platforms
and consulting services.

 

The increase in revenues from clients in the media
and entertainment industry vertical was primarily attributable to a higher demand for services related to digital content solutions, scalable
platforms and gaming.

 

The increase in revenues from clients in the consumer,
retail and manufacturing industry vertical was primarily attributable to higher demand for services related to scalable platforms and
Salesforce industry solutions and enterprise applications.

 

The increase in revenues from clients in the professional
services industry vertical was primarily attributable to higher demand for services related to Internet of Things (“IOT”)
consultancy and scalable platforms.

 

The increase in revenues from clients in the technology
and telecommunications industry vertical was primarily attributable to higher demand in scalable platforms services, enterprise applications
and the cross-selling capabilities of our Studios.

 

The decrease in revenues from clients in the travel
and hospitality industry vertical was primarily attributable to the decrease in demand for scalable platform services considering that
these clients were adversely impacted by the ongoing disruption to those industries resulting from the COVID-19 pandemic.

 

The increase in revenues from clients in the health
care vertical was mainly attributable to higher demand for services related to enterprise applications, Salesforce solutions and scalable
platforms.

 

Revenues by Client Concentration

 

We have increased our revenues by expanding the
scope and size of our engagements, and we have grown our key client base primarily through our business development efforts and referrals
from our existing clients.

 

The following table sets forth revenues contributed
by our largest client, top 5 clients, top 10 clients and top 20 clients, by the amount of revenues and as a percentage of our revenues
for the periods indicated:

 

    Three months ended  
    March 31, 2021     March 31, 2020  
             
    (in thousands, except percentages)  
Client concentration                                

Top client

  $ 28,453       10.5 %   $ 22,326       11.7 %
Top 5 clients     76,712       28.4 %     55,799       29.1 %
Top 10 clients     110,781       41.0 %     78,467       41.0 %
Top 20 clients     147,403       54.6 %     105,050       54.8 %

 

Our top 10 clients for the three months ended
March 31, 2021 have been working with us for, on average, seven years.

 

 

The increase in revenues from our top 10 clients
in the three months ended March 31, 2021 reflects our ability to increase the scope of our engagement with our main clients. Revenues
from our largest client for the three months ended March 31, 2021, Walt Disney Parks and Resorts Online, increased by $6.1 million,
or 27.4%, to $28.4 million for 2021 from $22.3 million for the same period in 2020.

 

As evidence of the increase in scope of engagement
within our client base, the number of clients that each accounted for over $5.0 million of our annual revenues increased (30 for the 12
months ended March 31, 2021 as compared to 29 for the 12 months ended March 31, 2020) and the number of clients that each accounted
for at least $1.0 million of our annual revenues increased to 139 for the 12 months ended March 31, 2021 as compared to 112 for the
12 months ended March 31, 2020. The following table shows the distribution of our clients by revenues for the periods indicated:

 

    12  months ended  
    March 31, 2021     March 31, 2020  
Over $5 million     30       29  
$1 – $5 million     109       83  
$0.5 – $1 million     75       58  
$0.1 – $0.5 million     187       193  
Less than $0.1 million     459       513  
Total Clients     860       876  

 

The volume of work we perform for specific clients
is likely to vary from year to year, as we are typically not any client’s exclusive external technology services provider, and a major
client in one year may not contribute the same amount or percentage of our revenues in any subsequent year.

 

Operating Expenses

 

Cost of Revenues

 

The principal components of our cost of revenues
are salaries and travel costs related to the provision of services. Due to government-imposed restrictions on travel during the COVID-19
pandemic, travel costs were not material during the three months ended March 31, 2021. Included in salaries are base salary, incentive-based
compensation, employee benefits costs and social security taxes. Salaries of our IT professionals are allocated to cost of revenues regardless
of whether they are actually performing services during a given period.

 

Also included in cost of revenues is the portion
of depreciation and amortization expense attributable to the portion of our property and equipment and intangible assets utilized in the
delivery of services to our clients.

 

Our cost of revenues has increased in recent years
in line with the growth in our revenues and reflects the expansion of our operations in Argentina, Uruguay, Colombia, Peru, Mexico, India,
Europe and the United States, primarily due to increases in salary costs, related to the growth in the number of our IT professionals
and the opening of new delivery centers. We expect that as our revenues grow, our cost of revenues will increase. Our goal is to increase
revenue per head and thereby increase our gross profit margin.

 

Cost of revenues was $167.0 million for the three
months ended March 31, 2021, representing an increase of $47.6 million, or 39.9%, from $119.4 million for the three months ended
March 31, 2020. The increase was primarily attributable to a general increase in salaries and to the net addition of 4,529 IT professionals
since March 31, 2020, an increase of 38.5%, 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 IT professionals of acquired companies during
2021 and 2020. Cost of revenues as a percentage of revenues decreased to 61.8% for the three months ended March 31, 2021, from 62.3%
for the three months ended March 31, 2020.

 

 

    Three months ended  
    March 31, 2021     March 31, 2020  
             
    (in millions, except percentages)  
    Amount     Amount     Variation  
Primary Costs                        
Salaries, employee benefits and social security taxes   $ (155.6 )   $ (109.4 )     42.2 %
Depreciation and amortization expense     (2.8 )     (2.3 )     21.7 %
Travel and housing     (0.7 )     (4.1 )     (82.9 )%
Professional services     (4.5 )     (1.1 )     309.1 %

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses represent
expenses associated with promoting and selling our services and include such items as salary of our senior management, administrative
personnel and sales and marketing personnel, infrastructure costs, legal and other professional services expenses, travel costs and other
taxes. Included in salaries are base salary, incentive-based compensation, employee benefits costs and social security taxes.

 

Also included in selling, general, and administrative
expenses is the portion of depreciation and amortization expense attributable to the portion of our property and equipment and intangible
assets utilized in our sales and administration functions.

 

Selling, general and administrative expense was
$71.9 million for the three months ended March 31, 2021, representing an increase of $20.0 million, or 38.6%, from $51.9 million
for the three months ended March 31, 2020.

 

    Three months ended  
    March 31, 2021     March 31, 2020  
             
    (in millions, except percentages)
    Amount     Amount     Variation  
Primary Costs                        
Salaries, employee benefits and social security taxes   $ (29.6 )   $ (20.0 )     48.0 %
Share-based compensation expense     (8.3 )     (5.2 )     59.6 %
Professional services     (7.2 )     (5.4 )     33.3 %
Depreciation and amortization expense     (9.0 )     (4.6 )     95.7 %
Depreciation expense of right-of-use assets     (4.6 )     (4.6 )     %
Travel and housing     (0.7 )     (2.2 )     (68.2 )%
Recruiting, training and other employee expenses     (2.5 )     (0.4 )     525.0 %

 

The increase in salaries, employee benefits, social
security taxes was primarily attributable to a general increase in salaries and to the addition of 200 staff personnel since March 31,
2020. The increase is also explained by the addition of sales and administration employees of acquired companies during 2021 and 2020.

 

The increase in share-based compensation expense
resulted from the RSUs granted, at a higher price and the cumulative effect of grants during the comparable period of 2020.

 

The increase in professional services is explained
by the costs associated to IT related licenses with diverse providers and the increase of audit and legal fees for companies acquired
during 2020.

 

The increase in depreciation and amortization
expense was mainly related to the addition of intangible assets from the business combinations that occurred since March 31, 2020.

 

The decrease in travel and housing resulted from
the sharp reduction in travel and housing expenses as consequence of the COVID-19-related travel restrictions after the first quarter
of 2020, that continued into the first quarter of 2021.

 

The increase in recruiting, training and other
employee expenses mainly resulted from hiring more than 1,000 IT professionals during the quarter, the launch of a scholarships with Digital
House and an increase in training.

 

 

Our selling, general and administrative expenses
have increased primarily as a result of our expanding operations and the build-out of our senior and mid-level management teams to support
our growth. We expect our selling, general and administrative expenses to continue to increase in absolute terms as our business expands.
However, as a result of our management and infrastructure investments, we believe our platform is capable of supporting the expansion
of our business without a proportionate increase in our selling, general and administrative expenses, which is expected to generate gains
in operating leverage.

 

Depreciation and Amortization Expense (included
in “Cost of Revenues” and “Selling, General and Administrative Expenses”)

 

Depreciation and amortization expense consists
primarily of depreciation of our property and equipment (primarily leasehold improvements, servers and other equipment), depreciation
of right-of-use assets (primarily office spaces and office equipment) and amortization of our intangible assets (mainly software licenses,
acquired intangible assets and internal developments). We expect that depreciation and amortization expense will continue to increase
as we open more delivery centers and client management locations and continue to acquire companies.

 

Net Impairment Losses on Financial Assets

 

Net impairment losses on financial assets mainly
include impairment of trade receivables, which represents an allowance for bad debts for expected credit losses. The amount of expected
credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition. During the three months ended
March 31, 2021 and 2020, we recorded a loss of $1.1 million and $1.6 million, respectively, related to the recognition of an allowance
for bad debts. The decrease is mainly explained by the impact of the COVID-19 pandemic during 2020.

 

Finance Income

 

Finance income consists of interest gains on time
deposits, financed clients and savings accounts. During the three months ended March 31, 2021 and 2020, finance income amounted to
$0.3 million and $0.3 million, respectively.

 

Finance Expense

 

Finance expense includes interests on borrowings,
lease contracts, banking fees and other finance expenses. During the three months ended March 31, 2021 and 2020, finance expense
amounted to $2.6 million and $2.5 million, respectively.

 

Other Financial Results, Net

 

Other financial results, net consists of foreign
exchange gain or loss on monetary assets and liabilities denominated in currencies other than the relevant functional currencies (mainly
the U.S. dollar), gain or loss on transactions with bonds, gain or loss on bills issued by the Treasury of the Argentine Republic (LETES),
foreign exchange forward contracts and future contracts, and mutual funds.

 

Other financial results, net decreased to a $0.9
million gain for the three months ended March 31, 2021, from a $2.7 million gain for the three months ended March 31, 2020.
The variation is explained mainly by a lower amount of devaluation of local currencies (including Colombian, Uruguayan, Mexican and Argentinian
pesos) against the U.S. dollar, for the three months ended March 31, 2021 and lower gains on transactions with bonds.

 

Other Income and Expenses, Net

 

Other income and expenses, net for the three months
ended March 31, 2021 was a gain of $38.0 thousand, as compared with a other income and expenses, net of $16.0 thousand for the three
months ended March 31, 2020.

 

Income Tax Expense

 

Income tax expense amounted to $7.2 million for
the three months ended March 31, 2021, an increase of $1.1 million from $6.1 million for the three months ended March 31, 2020.
The increase in income tax expense was driven by a significant increase in profit before taxes. Our effective tax rate (calculated as
income tax gain or expense divided by profit before income tax) decreased to 25% for the three months ended March 31, 2021 from 32%
for the three months ended March 31, 2020, because of the lower amount of devaluation of Latin American currencies in the three months
ended March 31, 2021.

 

 

Net Income for the Period

 

As a result of the foregoing, net income was $21.7
million for the three months ended March 31, 2021, compared to net income of $13.2 million for the three months ended March 31,
2020.

 

Liquidity and Capital Resources

 

Capital Resources

 

Our primary sources of liquidity are cash flows
from operating activities. For the three months ended March 31, 2021, we derived 86.7% of our revenues from clients in North America
and Latin America pursuant to contracts that were entered into by our subsidiaries located in the United States, Argentina, Chile, Mexico,
Peru, Brazil and Colombia.

 

Our primary cash needs are for capital expenditures
(consisting of additions to property and equipment and to intangible assets) and working capital. Additionally, 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. For additional information, see “Item 4. Information on the Company—Business Overview—Regulatory Overview—Argentine Taxation—Tax on Dividends” and “Item 4. Information on the Company—Business Overview—Regulatory Overview—Argentine Taxation—Income Tax” in our 2020 Form 20-F.

 

The following table sets forth our historical
capital expenditures for the three months ended March 31, 2021 and 2020:

 

    Three months ended March 31,  
       
    2021     2020  
             
    (in thousands)  
Total fixed assets acquisition   $ 4,495     $ 5,522  
Total intangible assets acquisition     8,608       3,641  
Additions related to business combinations     1,694       267  

 

Investments

 

During the three months ended March 31, 2021,
we invested $4.5 million in capital expenditures primarily on the expansion of our delivery centers in Tandil and Buenos Aires in Argentina,
and Guadalajara and Mexico City in Mexico, as well as on computer equipment for our delivery centers in Argentina and Chile. Additionally,
we invested $8.1 million in internal developments and acquired licenses, and $0.5 million in cryptocurrencies. Capital expenditures vary
depending on the timing of new delivery center openings and improvements of existing delivery centers and, in respect of the acquisition
of hardware and software, on the specific requirements.

 

Acquisitions

 

On February 28, 2021, we entered into an
equity purchase agreement with the equity holders of Cloudshiftgroup Limited, a British company (“Cloudshift”), for the purchase
of all of the outstanding equity interests in Cloudshift. The transaction was simultaneously signed and closed on the same date. Cloudshift
is a Salesforce platinum partner headquartered in the United Kingdom which provides Salesforce advisory and implementation services in
the United Kingdom. The aggregate purchase price payable under the equity purchase agreement amounted to £36.2 million.

 

As of March 31, 2021, we had cash and cash
equivalents and current investments of $195.6 million.

 

 

Cash Flows

 

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

 

    Three months ended March 31,  
       
    2021     2020  
             
    (in thousands)  
Net cash used in operating activities   $ (14,641 )   $ (7,025 )
Net cash (used in) provided by investing activities     (84,644 )     4,587  
Net cash (used in) provided by financing activities     (30,396 )     71,495  
    $ (129,681 )   $ 69,057  
                 
Cash and cash equivalents at beginning of the period     278,939       62,721  
Effect of exchange rate changes on cash and cash equivalents     (426 )     863  
Cash and cash equivalents at end of the period     148,832       132,641  
Net (decrease) increase in cash and cash equivalents at end of period   $ (129,681 )   $ 69,057  

 

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 $14.6
million for the three months ended March 31, 2021, compared to net cash used in operating activities of $7.0 million for the three
months ended March 31, 2020. The $7.6 million increase in net cash used in operating activities was primarily attributable to a $24.5
million increase in working capital, mainly due to an increase in trade receivables related to the expansion of our engagements and the
consolidation of acquired companies, partially offset by the increase of payroll liabilities related to bonuses accrued in 2021 and the
portion of the bonuses accrued in 2020 that has not been paid (as compared to the payment of 2019 bonuses in March 2020). The increase
in net cash used in operating activities also reflected a $21.0 million increase in profit before income tax expense adjusted for non-cash-items,
as well as a $4.1 million increase in income tax payments, net of reimbursements.

 

Investing Activities

 

Net cash of $84.6 million was used in investing
activities for the three months ended March 31, 2021, compared to $4.6 million of net cash provided by investing activities during
the three months ended March 31, 2020. During the three months ended March 31, 2021 and 2020, we invested $27.3 million and
received proceeds of $20.4 million, respectively, in mutual funds and sovereign bonds, net. We invested $13.1 million and $10.5 million
in fixed and intangible assets during the three months ended March 31, 2021 and 2020, respectively. We also invested $38.6 million
in payments related to business acquisitions and $3.5 million in acquisition of equity instruments and convertible notes, during the three
months ended March 31, 2021, and $0.2 million in acquisition of convertible notes, during the three months ended March 31, 2020.

 

Financing Activities

 

Net cash used in financing activities was $30.4
million for the three months ended March 31, 2021, compared to net cash provided by financing activities of $71.5 million for the
three months ended March 31, 2020. During the three months ended March 31, 2021, we repaid $28.2 million of borrowings and $6.5
million of lease liabilities, partially offset by the proceeds of $3.4 million for borrowings and $0.9 million from the issuance of shares
under our share-based compensation plan.

 

During the three months ended March 31, 2020,
we received proceeds of $75.0 million from borrowings, $2.0 million from the issuance of shares under our share-based compensation plan
and $0.9 million from issuance of shares under subscription agreements entered into with us by sellers of acquired companies. Additionally,
during the three months ended March 31, 2020, we repaid $5.3 million of lease liabilities and $1.1 million of borrowings.

 

 

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 resulting from the existing business for at least
the next 12 months from the date of this report. The future impact of the COVID-19 pandemic and COVID-19 containment measures 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.

 

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 flows
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.

 

Summary of Significant Accounting Policies

 

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