Lionbridge Reports Q3 Revenue of $111.5 Million, GAAP EPS of ($0.01) and non-GAAP Cash Earnings of $0.06
Cash Flow from Operations of $7.5 Million Underscores Strong Fundamentals; Pipeline of Large, New Client Programs Indicates Solid Demand for 2008
WALTHAM, Mass. – November 06, 2007 -- Lionbridge Technologies, Inc. (Nasdaq: LIOX) today announced financial results for the quarter ended September 30, 2007. Financial and business highlights for the third quarter include:
Revenue of $111.5 million, an increase of $3.6 million from the quarter ended September 30, 2006. For the first nine months of 2007, the Company delivered revenue of $334.8 million, an increase of 5.4% from the same period of 2006.
Total gross profit dollars of $36.7 million, an increase of $1.2 million from the prior year’s Q3.
GAAP net loss of $666,000, or ($0.01) per share based on 59.6 million weighted average basic common shares outstanding. This compares to a GAAP net loss of $933,000, or ($0.02) per share in the third quarter of 2006.
Income before tax of $1.0 million or $0.02 per share. This is an increase of $1.1 million or $0.02 per share from the prior year’s third quarter.
Non-GAAP cash earnings of $3.5 million or $0.06 per share. The Company defines non-GAAP cash earnings as GAAP net income excluding merger, restructuring and related 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 $7.5 million during the quarter. This marks an increase of $5.5 million from the prior year’s Q3.
The Company’s ending cash balance was $31.4 million at September 30, 2007. During the quarter, Lionbridge repaid $4.0 million of its long term debt, reducing the Company’s total long term debt balance to $71.8 million.
During the quarter, the Company announced that its Board of Directors has authorized management to repurchase, with its discretion, up to $12 million of the Company’s stock.
Lionbridge secured several new client programs during the quarter, including contracts with a brand name home improvement company and a large PC manufacturer.
“The fundamentals of the business remain strong, we are driving solid cash flows and the sales pipeline is building nicely for 2008,” said Rory Cowan, CEO, Lionbridge. “We are meeting growing demand for our globalization, testing and development services with the right approach – technology-based services, deep industry expertise and experienced people. With a strong base of recurring clients and increased deployment of the industry’s most advanced language platform, we are confident in our prospects for top line growth and margin expansion.”
The Company provided updated revenue expectations for the fourth quarter with estimated revenue of $107.0 to $111.0 million, reflecting the Company’s traditional Q4 seasonality.
The Company provided a preliminary outlook for revenue growth for FY 2008 with estimated top line growth of 6-10% over expected FY 2007 revenue.
The Company will host a conference call today at 9:00 am ET regarding the content of this release, its business outlook and other matters. The conference call will be carried live on the Internet. Instructions for listening to the call over the Internet are available on the Investor's page of the Lionbridge web site at http://www.lionbridge.com/webcast/nov6. A replay will be available at this location for one week.
Non-GAAP Financial Measures
In this release, the Company's Cash Earnings disclosures 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 or cash provided by operating activities. Cash Earnings represents GAAP net income excluding amortization of acquisition-related intangible assets, merger, restructuring and related costs and stock based compensation expenses. Cash Earnings are presented because management believes it provides additional information with respect to both the performance of our fundamental business activities as well as the Company’s ability to meet future debt service and working capital requirements. Management believes the cash earnings information is useful to investors for these reasons. Cash Earnings is a non-GAAP financial measure and should not be viewed as an alternative to GAAP measures of performance. Management believes the most directly comparable GAAP financial measure is net income (loss) and has provided a reconciliation of Cash Earnings to net loss on the last page of this release.
About Lionbridge
Lionbridge Technologies, Inc. (NASDAQ: LIOX) is a provider of globalization and offshoring services. Lionbridge combines global resources with proven program management methodologies to serve as an outsource partner throughout a client’s product and content lifecycle - from development to globalization, testing and maintenance. Global organizations rely on Lionbridge services to increase international market share, speed adoption of global products and content, and enhance their return on enterprise applications and IT system investments. Based in Waltham, Mass., Lionbridge maintains solution centers in 26 countries and provides services under the Lionbridge and VeriTest brands. To learn more, visit http://www.lionbridge.com.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including expected financial performance, profitability, and margin and revenue growth of Lionbridge in the remainder of fiscal year 2007 and 2008; anticipated customer demand; and the timing and impact of productivity and operational efficiencies. 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 the loss of a major client or customer; the termination of customer contracts prior to the end of their term; the size, timing and recognition of revenue from clients, Lionbridge’s ability to successfully implement and complete operational systems deployment initiatives; the ability of Lionbridge to realize the expected benefits of its operational systems deployment initiatives and the timing of the realization of such benefits; Lionbridge’s ability to provide and maintain high quality services at a competitive price and related customer satisfaction with such service delivery; Lionbridge’s ability to attract and retain highly skilled resources to meet customer demands; 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; Lionbridge's ability to resolve taxation questions regarding acquired businesses; changes in tax rates applicable to the Company and changes to the interpretations of applicable tax rates; the Company’s dependence on clients' product releases and production schedules to generate revenues; the timing and speed of customer and user acceptance of Lionbridge’s language technology; the impact of competing language technology on the Company’s existing customer relationships and ability to secure new customers; customer delays or postponements of services using Freeway or Logoport; the failure of Freeway or Logoport to keep pace with technological changes or changing customer needs; Lionbridge's ability to expand or accelerate user adoption of Freeway; Lionbridge’s ability to develop and deploy Logoport; the ability of Lionbridge to respond to fluctuations in the complexity, timing and mix of services required by customers; the impact of foreign currency fluctuations on its margins, costs, operating results and profitability and the Company’s ability to successfully manage this exposure through hedge instruments and other strategies; customer delays or postponements of services; costs associated with restructuring of certain operations in Europe and other locations, the timing of any anticipated benefits and the ability to realize such benefits; changes in customer procurement strategies; risks associated with management of growth; Lionbridge being held liable for defects or errors in its service offerings; political, economic and business fluctuations; as well as risks of additional downturns in conditions generally, and in the information technology and software industries specifically, and risks associated with competition; and Lionbridge's ability to forecast revenue, profitability, customer demand and operating results. For a more detailed description of the risk factors associated with Lionbridge, please refer to Lionbridge’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2007.
LIONBRIDGE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except per share data)
Three Months Nine Months
Ended Ended
September 30, September 30,
2007 2006 2007 2006
Revenue $111,544 $107,964 $334,751 $317,612
Operating expenses:
Cost of revenue (excluding
depreciation and amortization
shown separately below) 74,820 72,445 221,844 209,219
Sales and marketing 7,729 7,274 24,251 22,463
General and administrative 20,807 18,882 62,708 55,664
Research and development 851 689 2,353 2,173
Depreciation and amortization 1,300 1,323 3,918 4,228
Amortization of acquisition-related
intangible assets 2,113 2,177 6,340 6,529
Merger, restructuring and other
charges 359 2,055 1,609 3,466
Total operating expenses 107,979 104,845 323,023 303,742
Income from operations 3,565 3,119 11,728 13,870
Interest expense:
Interest on outstanding debt 1,324 1,984 4,130 5,890
Amortization of deferred financing
costs and discount on debt 48 257 143 717
Interest income 164 146 489 332
Other expense, net 1,335 1,091 2,424 2,236
Income (loss) before income taxes 1,022 (67) 5,520 5,359
Provision for income taxes 1,688 866 5,767 4,297
Net income (loss) ($666) ($933) ($247) $1,062
Net income (loss) per share of
common stock:
Basic $(0.01) $(0.02) $0.00 $0.02
Diluted $(0.01) $(0.02) $0.00 $0.02
Weighted average number of common
shares outstanding:
Basic 59,614 59,062 59,496 58,931
Diluted 59,614 59,062 59,496 60,784
LIONBRIDGE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Amounts in thousands)
September 30, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $31,371 $27,354
Accounts receivable, net of allowances of
$710 and $728 at September 30, 2007 and
December 31, 2006, respectively 83,641 72,940
Work in process 29,895 29,311
Other current assets 12,873 7,153
Total current assets 157,780 136,758
Property and equipment, net 13,508 13,032
Goodwill 131,044 131,044
Other intangible assets, net 30,554 36,894
Other assets 8,051 3,772
Total assets $ 340,937 $ 321,500
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion
of long-term debt $314 $355
Accounts payable 21,372 18,730
Accrued compensation and benefits 19,139 18,282
Other accrued expenses and current
liabilities 32,217 29,915
Deferred revenue 11,775 8,583
Total current liabilities 84,817 75,865
Long-term debt, less current portion 71,809 77,855
Deferred income taxes, long-term 8,052 7,685
Other long-term liabilities 9,301 3,407
Total stockholders' equity 166,958 156,688
Total liabilities and stockholders'
equity $340,937 $321,500
Reconciliation of GAAP Net Income to Non-GAAP Cash EPS (Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2007 2006 2007 2006
Net income (loss) $(666) $(933) $(247) $1,062
Amortization of acquisition-related
intangible assets 2,113 2,177 6,340 6,529
Merger Restructuring and other
charges 359 2,055 1,609 3,466
Stock based compensation 1,694 1,596 5,451 4,347
Cash earnings 3,500 4,895 13,153 15,404
Fully diluted weighted average number
of common shares outstanding 61,003 60,823 60,745 60,784
Adjusted Cash EPS $0.06 $0.08 $0.22 $0.25