GEO Investing

LIOX provides language, content, and testing solutions worldwide.  We have established a position in  LIOX.  Here are the reasons that we are  tracking the company that we published in  our premium message board yesterday:

  • In order  to boost revenue growth the company has  incorporated a SaaS component and a Crowdsourcing component  to its operating model.
  • Quarterly revenues appear to be breaking out.  Revenues have been stuck in the $100-113 million range for some time…Third quarter 2013 revenue of $123 million was a quarterly revenue record.
  • Conservative estimates: While growth implied by analyst  estimates are strong, with a P/E multiple of 17.8 on 2014 analyst EPS estimates of $0.28, the stock seems fairly valued.  However, the company recently shattered the EPS estimate in the third quarter 2013 report, with  non-GAAP EPS of $0.14 vs. analyst estimates of $0.03.
  • The stock currently trades at an EV/Sales of around 0.5.  We believe the EV/Sales multiple can approach and eventually exceed 1 if the company continues to grow as it did in the last quarter and as its SaaS platform becomes a bigger component of its sales.

Bullish conference call commentary:

“So we are also seeing new business from our crowd offering. So as a reminder, this is our business process crowd sourcing offering that’s targeting the financial services and information services market. And we will really begin to see this one ripen in ‘14.”

“We have secured several pilot programs with new clients and expect to convert these into contracts. We have established a strong pipeline and we will ramp this in ‘14 as I have said, so the strategy of bringing new offerings to end markets really feels pretty good.”

“We are growing our large accounts. We are driving new business. We are opening new channels. At the same time we are growing margins, expanding profitability and generating record cash flows. As we look forward to 2014 I really think we are beginning to hit an inflection point that we are moving from this point solution translation company to a globalization services company with integrated global crowd-in-the-cloud solutions.”

Lionbridge provided an outlook for its fourth quarter 2013 with estimated revenue of $120-123 million.  The company also provided a preliminary outlook for its fiscal year 2014 with estimated year-on-year revenue growth of 5-10% and significant growth in income from operations.


  • Even though we feel the company can reach an EV/Sales multiple of 1, the company does have a lot of leverage which could keep the multiple down.  Debt-to-equity is currently 1.7.
  • Revenue growth not robust.