Lionbridge's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Lionbridge Technologies, Inc. (LIOX)

Q1 2012 Earnings Call

May 8, 2012; 09:00 am ET

Executives

Rory Cowan - Chairman & Chief Executive Officer

Don Muir - Chief Financial Officer, Senior Vice President

Sara Buda - Vice President, Investor Relations

Analysts

Amit Singh - Jefferies

Vincent Colicchio - Noble Financial

Sarkis Sherbetchyan - B. Riley & Co.

Rich Baldry - Wunderlich Securities

Presentation

Operator

Welcome and thank you for standing by. At this time all participants are in a listen-only mode. After presentation we will conduct a question-and-answer session. (Operator Instructions).

I would now like to turn the call over to Sara Buda, Vice President, Investor Relations. Ma’am, you may begin.

Sara Buda

Thank you and welcome everybody to the Lionbridge Investor call to discuss financial results for the first quarter of 2012.

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 14, 2012 the factors that may cause such differences.

And now I’ll turn the call over to Lionbridge Chairman and CEO, Rory Cowan.

Rory Cowan

Hi, good morning everyone and thank you Sarah. First, I’m not calling in from a bathysphere. I’m at the tail end of a spring cold, so I apologize for my voice, but I think we’ll be in good shape, so.

Today we’ll talk about our positive Q1 results and our strong demand environment across all markets and pretty much all offerings. Then of course Don will walk through the specifics of the financials in detail and then I’ll give a quick summary, so.

I think in general it was a workman like quarter with very good results. We grew our top line about 12% year-on-year with Q1 revenue coming at about $112 million, well above our forecast. Many of our existing clients are really strengthening ahead of plan and we are also scaling to new business across vertical markets, which I’ll talk about a little bit later in my comments.

We grew gross margins about 200 basis points year-over-year and there still is some room for improvement there as well and we delivered our GAAP earnings of about $0.03 a share. In fact, we grew GAAP profit by about $7 million or $0.12 a share year-on-year on $12 million of incremental revenue. So that’s $7 million of going back to the bottom line on incremental $12 million of revenue.

This marks another quarter of strong revenue and year-on-year earnings growth and we expect this positive trend to continue as we go into Q2 as Don will talk about and I’ll talk about, we are seeing some continued firmness.

So let me touch on our demand environment that’s leading to this strong start of the year. First, our revenue is gaining strong momentum in three key areas. First is tech and we are beginning to look at the tech sector really in two discrete areas, consumer tech and enterprise tech.

Consumer tech seems to have the strongest growth opportunity. I think as we are seeing sort of overall. In Q1 we saw solid revenue growth from names like Google, Samsung, HP and we saw a well-known west coast consumer device manufacturer. Many of our largest consumer tech accounts are growing nicely or some of our large enterprise tech accounts are generally flat, up or down a couple of percentage points depending upon where they are in their product life cycles.

The second major category is life sciences. In 2011 we made some changes for our sales delivery organization to align this business around certain momentum of verticals. Our life sciences team is really the first one of these that’s getting its sea lengths (ph) and is clearly benefiting from this new org structure.

Our proven dedicated expertise in this domain and concentrating that among a few delivery centers and with a core sales team and a separate general manager winning new business and growing accounts in the contract research sector and also with medical device clients and we also recently secured a new win at a very large pharma company. So our investments and focus on last year in the life sciences area are paying off and I think we’ll find another vertical in 2012 and do the same thing to set us up for 2013.

The third sort of end market domain is really manufacturing. This is becoming an area of very real strength for us from automotive accounts to the mature of the U.S. industrials and it’s clear that the manufacturing vertical continues to offer a strong growth opportunity. This is particularly evident in the mid western U.S., in which we’re seeing a very real resurgence of demand. In addition for both our domestic market, things like our content offering and other areas and also in our export markets for things like localization.

These U.S. manufacturers develop, distribute and direct new products that are increasingly digital and increasingly global. So in many ways these industrial companies have the traditional demand of globalization, but now on top of that are those digital components that behaves really quite a lot like software and so they are beginning to confront the globalization and simultaneous release challenges that the software industry dealt with a decade or so ago.

So our unique skills enable them to engage and support their customers globally and going forward we expect to further expand our business in this market with organic growth and potentially some tuck in acquisitions in this region that give us some of the established relationships that we can build on. So our tech, life sciences, manufacturing, those have really been the three big thrusts for us and continue to be this year.

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