Lionbridge Technologies, Inc. (LIOX)
Q3 2009 Earnings Call Transcript
November 5, 2009 9:00 am ET
Sara Buda - VP, IR and Corporate Development
Rory Cowan - Chairman and CEO
Donald Muir - CFO
Rich Baldry - First Albany
Kevin Lu [ph]
Joshua Horowitz [ph]
Sachin Jain [ph]
Bob Sail [ph]
Previous Statements by LIOX
» Lionbridge Technologies Inc. Q2 2009 Earnings Call Transcript
» Lionbridge Technologies Q4 2008 Earnings Call Transcript
» Lionbridge Technologies, Inc. Q2 2008 Earnings Call Transcript
Now I'll turn the meeting over to Ms. Sara Buda, Vice President, Investor Relations. Ma’am, you may begin.
Great, thank you. Welcome, everybody, to the Lionbridge investor call to discuss financial results for the third quarter of 2009.
During this call, we may make certain statements that may be considered forward-looking statements under Federal Securities Laws, and which involve risks and uncertainties. Our actual future results may differ significantly from the matters discussed in any forward-looking statements. We have disclosed in greater detail in our Form-10-K filed with the Securities and Exchange Commission on March 13, 2009, the factors that may cause such differences.
And now I’ll turn the call over to Lionbridge Chairman and CEO, Rory Cowan.
Okay, thanks Sara. Welcome everyone. As is our custom, today I will walk through the quarter at a high-level, provide some insight on our current sales pipeline and then wrap up with some perspective on 2010. Don will then provide some details on the quarter and our cost reduction efforts.
I assume that you all have the release in front of you, and you can see that it was a solid quarter. For the third quarter, revenue came in at about 98 million, and this was at the high-end of our guidance as you'll recall. And more importantly, we bucked our usual trend of a seasonal sales decline from Q2. So we're delighted to see that as we had suspected, the pipelines were firming and we see that revenue came in line with Q2, and that really suggest that things have stabilized after a challenging start to the year.
Compared to last year, however, revenue was still down of course by 14%. While that decline isn't as severe as it was during the first half of the year, the demand environment was still softer than last year. However as you see from our Q4 and our 2010 guidance, the pipeline continues to firm, it is quite solid, and we expect sales to accelerate in the coming quarters. And I will touch on how we will be driving that growth in a little while.
Operating income was about 2.2 million excluding restructuring. So on about 16 million is revenue, we actually increased our operating income by about $1 million. The shows the power of our cost actions that begin to come through. GS&A is down about 5 million from last year's Q3 on a – and that's about a $20 million cost reduction on an annual basis. And we continue to reduce our fixed expenses which is particularly important in this currency environment and Don will detail cost and currency actions shortly.
As we've shared with you, our goal is to try to transform our model over the coming years to be as currency neutral as possible, although we will never be currency neutral. Of course, that is how we're reallocating our expenses. On a GAAP basis, our loss was about $0.03 a share. Excluding restructuring, we were profitable for the quarter. We continue to generate solid cash flows with about another million dollars this quarter, and we paid down another 5 million in debt. So with an ending cash balance of about 24 million, this brings our net debt to under $8 million, again a record low.
So we continue to generate cash, manage our balance sheet and pay down debt. So I think it was a workmanlike quarter and revenues stabilized, Q4 looks even stronger. SG&A expenses are down by about $20 million on an annualized basis. Operating income has increased despite the year on year revenue decline and we continue to generate cash and paid down debt.
Now let me look at the current demand environment and share some of the drivers behind our positive Q4 revenue guidance and our early 2010 outlook. First, I mentioned in the release that our language business has one of the strongest pipelines in over seven quarters. The strengthening sales environment reflects a number of trends and as I have said to many of you before, the pipeline is very strong, but I want to see the convergence to make certain that in fact the firmness that we're seeing actually is real rather than just a shopping [ph] during the next two quarters.
First to new business, as companies turn around and they turn toward really their outsourcing of business, we saw this trend in the last downturn, and with market pressure, companies finally begin to look at new ways to cut costs. And as you know, with this recession, many companies were forced to cut costs by about 20% or even 30%. So even if the economy begins to strengthen, organizations are still looking for a much more nimble model to increase profits as they found the cost of this fixed expense in the downturn. So there is a new focus on reducing internal fixed expenses and shifting to variable cost models, and in this environment translation is one of the areas that finally is coming into the spotlight with their international focus.