Lionbridge reports Q3 results with revenue of $138.6 Million, gaap EPS of $0.04 and non-gaap eps of $0.14

Market leader in translation services for the legal industry augments announces acquisition of Geotext Translations and new $50 million share repurchase program

WALTHAM, Mass. – November 09, 2015 — Lionbridge Technologies, Inc. (Nasdaq: LIOX), today announced revenue and earnings for the third quarter ended September 30, 2015. Financial highlights for the third quarter include:

  • Revenue of $138.6 million, an increase of $18.4 million or 15% compared to the third quarter of 2014.
  • GAAP earnings of $2.7 million, or $0.04 per diluted share, based on 62.6 million weighted average fully diluted common shares outstanding. GAAP net income decreased $0.9 million, or $0.02 per diluted share, compared to the third quarter of 2014, primarily due to a $2.3 million increase in restructuring and other charges.
  • Non-GAAP adjusted earnings of $8.7 million or $0.14 per diluted share, an increase of $1.6 million or $0.03 per diluted share compared to the third quarter of 2014. The Company defines non-GAAP adjusted earnings as net income excluding merger, restructuring and acquisition-related costs, asset impairment costs, stock-based compensation, and amortization of acquisition-related intangible assets. Please see the section of this release entitled “Non-GAAP Financial Measures” and the attached table for details and reconciliations of this measure to the comparable GAAP measure.
  • Cash flow from operations of $7.9 million for the quarter.

The Company recently secured several significant new customer engagements, including a Taiwanese manufacturer of smartphones, a large US retailer and a British luxury automobile manufacturer.

For the nine months ended September 30, 2015 revenue increased $48.2 million year-on-year, GAAP net income increased $2.0 million or $0.03 per diluted share and non-GAAP earnings increased $9.9 million or $0.16 per diluted share as compared to the first nine months of 2014.

Separately, the Company announced the acquisition of Geotext Translations, Inc., a New York-based translation company that specializes in the legal translation market. Geotext had unaudited trailing twelve months of revenue of approximately $17 million for the period ended September 30, 2015. Lionbridge is purchasing Geotext for a total estimated cash consideration of approximately $11 million and additional earn-out potential which would be payable in cash over three years, subject to the attainment of certain revenue metrics. The consideration is being satisfied using Lionbridge’s existing cash resources. The Company expects the acquisition will contribute modestly to non-GAAP earnings in 2016, including minimal acquisition and integration costs.

The Company also announced today that its Board of Directors has authorized a share repurchase program allowing the Company to repurchase up to $50 million of the Company’s common stock through fiscal year 2018. The new authorization is almost three times as large as the previous $18 million share repurchase program that was announced in November of 2012 and which has now expired.

With our strong organic growth in verticals such as life sciences and industrials and the ongoing successful integration of CLS Communication, we are well on path to achieve our goals to establish and grow recurring relationships with clients across vertical markets,” said Rory Cowan, CEO of Lionbridge. “While Q3 revenue was behind expectations, largely due to delays from certain technology clients, we continue to generate solid year-on-year growth and cash flow remains strong. We have firming demand across our business. The addition of Geotext furthers our ongoing vertical market expansion. And the new, accelerated buyback program underscores our confidence in the long term profit and cash flow growth of the Company. We expect a strong finish to 2015 and ongoing expansion in 2016.”

Lionbridge provided outlook for the fourth quarter of 2015 with estimated revenue of $140-143 million, which would reflect year-on-year growth of approximately 18% as compared to the fourth quarter of 2014. The Company also provided a preliminary outlook for FY 2016 with estimated year-on-year revenue growth of 5-8%, and continued growth in income from operations.

The Company is also announcing today that Donald Muir, Lionbridge’s Chief Financial Officer will retire from Lionbridge. Muir will remain with the company through mid-January in support of the transition. Muir will be succeeded by Marc Litz, currently Lionbridge’s Vice President, Finance and Corporate Controller, who has been with the Company for three years.

“Don has been instrumental in shaping our financial strategy over the past 8 years during a time of significant growth and diversification for the Company. We appreciate his dedication to the successful expansion of our business and to building a world-class global finance organization. He leaves behind a strong team and we thank Don for his many contributions,” said Rory Cowan, CEO.

Lionbridge management will conduct a conference call at 9:00 a.m. ET this morning to discuss financial performance for the quarter and other matters, including matters related to its future performance. To participate, callers within the United States can dial 888-390-1050 and international callers can dial 312-470-7236. The pass code for the call is “Lionbridge”.

Non-GAAP Financial Measures

In this release, the Company’s adjusted earnings and adjusted earnings per share are not presented in accordance with generally accepted accounting principles (GAAP) and are not intended to be used in lieu of GAAP presentations of results of operations. These measures are presented because management believes they provide additional information to investors with respect to the performance of our fundamental business activities. “Adjusted earnings” and “Adjusted Earnings per Share (EPS)” are Non-GAAP financial measures and should not be viewed as alternatives to GAAP measures of performance. Management believes the most directly comparable GAAP financial measure for these measures are net income and diluted net income per share and has provided a reconciliation of GAAP net income to adjusted earnings and adjusted earnings per share at the end of this release.

About Lionbridge

Lionbridge enables more than 800 world-leading brands to increase international market share, speed adoption of products and effectively engage their customers in local markets worldwide. Using our innovative cloud technology platforms and our global crowd of more than 100,000 professional cloud workers, we provide translation, online marketing, global content management and application testing solutions that ensure global brand consistency, local relevancy and technical usability across all touch points of the customer lifecycle. Based in Waltham, Mass., Lionbridge maintains solution centers in 28 countries. To learn more, visit http://www.lionbridge.com.

This press release contains forward-looking statements that involve risks and uncertainties, including expected financial performance, expected growth in revenue, income from operations and profit growth, and the momentum, pace and strengthening of such growth in Q4 2015 and FY 2016 as well as expected benefit of the Company’s acquisition of Geotext Translations, and the success of the integration of CLS Communication (“CLS”), which the Company acquired in January of 2015. These forward-looking statements reflect management’s current views and Lionbridge does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date hereof except as required by law. Lionbridge’s actual experiences, actions, financial and operating results may differ materially from those discussed in the forward-looking statements. Factors that might cause such a difference include Lionbridge’s ability to fully integrate Geotext Translations and CLS and the pace of such integration actions; the timing of the realization of any synergies associated with the acquisition of Geotext Translations and CLS; the impact of foreign currency fluctuations on revenue, margins, costs, operating results and profitability and the Company’s ability to successfully manage this exposure through hedge instruments and other strategies; its ability to provide and maintain high quality services at a competitive price and related customer satisfaction with such service delivery; the loss of or reduction in demand from one or more major client or customer, which would materially affect Lionbridge’s business; Lionbridge’s ability to expand its relationships with existing clients and within key industry verticals; Lionbridge’s ability to broaden its client base; the Company’s dependence on clients’ product releases, production schedules and procurement strategies to generate revenues; the anticipated benefits of expansion of global language workflow technologies; the impact of competing language technology on the Company’s existing customer relationships and ability to secure new customers; the ability of Lionbridge to realize the expected benefits of its technology initiatives and acquisitions and the timing of the realization of such benefits; errors, interruptions or delays in cloud-based technology; breaches of security measures; the termination of customer contracts or engagements prior to the end of their term; the size, timing and recognition of revenue from clients; the ability of Lionbridge to integrate acquisitions and expand its customer relationships and the timing and success of such activities; the portion of the Company’s service engagements that are subject to the impact of foreign currency fluctuations; continued uncertainty and volatility in global economic conditions that could negatively affect demand for the Company’s services and technologies; reduced demand for the Company’s services that adversely impacts Lionbridge’s future revenues, cash flows, results of operations and financial condition; Lionbridge’s ability to perform services in lower cost operational locations and the timing of its transfer of service execution to such locations, and customer acceptance of service execution in such locations; risks associated with conducting business outside of the United States, including compliance with changing and potentially conflicting laws and regulations and expenses and delays associated with any such activities; longer collection cycles in particular jurisdictions; risks associated with competition; Lionbridge’s ability to forecast revenue, profitability, technology adoption, customer demand and operating results; changes in tax rates applicable to the Company and changes to the interpretations of applicable tax rates; changes in interpretation of statutory and regulatory positions by international tax authorities in countries in which Lionbridge conducts business; changes in interpretation of employment and tax positions by U.S. state and federal authorities; the failure of Lionbridge to keep pace with technological changes or changing customer needs; the risk of claims by third parties of intellectual property claims; the ability of Lionbridge to respond to fluctuations in the complexity, timing and mix of services required by customers; and Lionbridge being held liable for defects or errors in its service offerings. For a more detailed description of the risk factors associated with Lionbridge, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and subsequent filings with the SEC (copies of which may be accessed through the SEC’s website at http://www.sec.gov).

 

LIONBRIDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands, except per share amounts)

2015

2014

2015

2014

Revenue

$

138,604

$

120,191

$

419,172

$

370,934

Operating expenses:

Cost of revenue (exclusive of depreciation and amortization included below)

92,977

80,608

277,825

253,559

Sales and marketing

11,083

9,685

35,163

29,369

General and administrative

21,888

19,868

69,024

60,587

Research and development

1,903

1,698

6,060

5,194

Depreciation and amortization

2,340

2,033

6,922

5,771

Amortization of acquisition-related intangible assets

993

842

2,979

2,453

Restructuring and other charges

2,957

611

9,359

1,827

Total operating expenses

134,141

115,345

407,332

358,760

Income from operations

4,463

4,846

11,840

12,174

Interest expense:

Interest on outstanding debt

482

164

1,439

413

Amortization of deferred financing charges

94

25

279

79

Interest income

13

9

50

59

Other expense (income), net

417

(42

)

(2,335

)

(153

)

Income before income taxes

3,483

4,708

12,507

11,894

Provision for income taxes

755

1,066

1,181

2,580

Net income

$

2,728

$

3,642

$

11,326

$

9,314

Net income per share of common stock:

Basic

$

0.04

$

0.06

$

0.19

$

0.15

Diluted

$

0.04

$

0.06

$

0.18

$

0.15

Weighted average number of common shares outstanding:

Basic

60,683

60,012

60,558

60,263

Diluted

62,623

62,646

62,528

63,070

 

LIONBRIDGE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands)

September 30,
2015

December 31,
2014

ASSETS

Current assets:

Cash and cash equivalents

$

30,926

$

36,893

Accounts receivable, net of allowance of $250 at September 30, 2015 and December31, 2014

86,966

66,479

Unbilled receivables

27,321

25,843

Other current assets

14,780

12,090

Total current assets

159,993

141,305

Property and equipment, net

26,193

23,622

Goodwill

62,031

21,937

Acquisition-related intangible assets, net

44,556

12,232

Other assets

6,906

5,677

Total assets

$

299,679

$

204,773

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Debt, current portion

$

3,719

$

Accounts payable

27,004

21,885

Accrued compensation and benefits

23,465

17,249

Accrued outsourcing

11,448

10,429

Accrued restructuring

2,228

3,492

Income taxes payable

2,357

2,123

Accrued expenses and other current liabilities

10,070

10,485

Deferred revenue

8,619

11,866

Total current liabilities

88,910

77,529

Long-term debt, net of current portion

90,427

27,000

Deferred income taxes, net of current portion

4,827

704

Other long-term liabilities

20,823

13,786

Total liabilities

204,987

119,019

Stockholders’ equity:

Preferred stock

Common stock

645

635

Additional paid-in capital

273,818

272,252

Accumulated deficit

(192,571

)

(203,897

)

Accumulated other comprehensive income

12,800

16,764

Total stockholders’ equity

94,692

85,754

Total liabilities and stockholders’ equity

$

299,679

$

204,773

 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Earnings (Unaudited)

Comparison of Three and Nine Months Ended September 30, 2015 to

Three and Nine Months Ended September 30, 2014

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands, except per share amounts)

2015

2014

2015

2014

Net income

$

2,728

$

3,642

$

11,326

$

9,314

Amortization of acquisition-related intangible assets

993

842

2,979

2,453

Stock-based compensation

2,007

2,008

5,663

5,814

Restructuring and other charges

2,957

611

9,359

1,827

Adjusted earnings

$

8,685

$

7,103

$

29,327

$

19,408

Fully diluted weighted-average number of common shares outstanding

62,623

62,646

62,528

63,070

Adjusted diluted earnings per share

$

0.14

$

0.11

$

0.47

$

0.31