As some parts of the world slowly emerge from the most stringent phases of lockdown, Slator took stock of what transpired in the language industry over the past couple of months.
The USD 24.2bn global language industry was performing well going into the pandemic that gripped most of the world. TransPerfect had just experienced its “best-ever start to the year,” pre-coronavirus, while 2019 revenues for SDL came in at the top end of analyst expectations.
LanguageLine was another language service provider (LSP) that “reported high levels of growth that exceeded expectations” from January 1 to mid-March, according to Q1 2020 financial results published on April 28, 2020 by parent company Teleperformance.
Even Straker Translations’ Q4 2020, which ended March 31, 2020, posted a 7.7% increase from Q4 2019. And Swedish media localizer Plint said their sales and profits hit new highs in 2019, with 2020 starting better than expected. In a May 5, 2020 statement, CEO Örjan Serner said, “Netflix puts a lot of work our way. During the first quarter of this year, Plint’s sales increased by almost 75% compared to the same period in 2019.”
The good start to 2020 certainly helped convince private equity firm Priveq to follow through on the acquisition of Plint (announced May 11, 2020), making it the sole, major language industry acquisition closed since containment measures began.
Slator 2022 Language Industry Market Report
No Strangers to Remote
The majority of LSPs readily managed the move to remote work, mitigating at least some effects of government-imposed lockdowns.
SDL, for instance, blogged about how they were “no strangers” to remote work and almost all employees in 60 locations around the world had “transitioned en masse to working remotely,” so that “business operations are at near-normal capacity.” SDL CEO Adolfo Hernandez told Slator, in an April 15 interview, that a series of global events in 2019 had allowed SDL to test work-from-home measures prior to the current health crisis.
While work from home (WFH) arrangements posed no major challenges to LSPs in general, the situation is, of course, somewhat different for media and game localizers.
Game services provider Keywords Studios, for example, needed to secure client consent before moving over 4,500 people to WFH, according to a March 26, 2020 open letter from CEO Andrew Day. And while, in its latest financial results (SlatorPro) released April 16, 2020, Keywords said it expected “no material impact on delivery capabilities,” it reported some delays in certain Localization Testing projects, adding that home working is more difficult for this division as staff often need to work from secure facilities.
As a result, some staff had been furloughed. For its Audio division, however, Keywords said it implemented “remote recording capabilities to allow some limited voice-over recording from actors’ homes.”
As for media localizer ZOO Digital, CEO Stuart Green told Slator in a recent interview: “For dubbing, our cloud platforms enable the recording of voices for each project to be performed at distributed locations, thereby obviating the need for voice actors, dubbing directors, and others to travel significant distances or to be co-located while working on a project.”
While cloud-dubbing is one of the obvious beneficiaries of the pandemic, in-studio competition is slowly coming back. ZOO rival VSI announced on May 20, 2020, that all “VSI facilities throughout the EMEA region have now resumed in-studio recordings.”
Impact Assessment
Business slowed down in the first three months of 2020 for RWS, according to its H1 FY 2020 trading update (SlatorPro). The world’s most valuable LSP by market cap attributed the decline to, among other things, “lower volumes of activity in IP Services and certain segments of Life Sciences,” adding that Life Sciences experienced “some disruption to our clients” related to Covid-19.
A few days before that trading update, however, RWS noticed a demand uptick in its Life Sciences business from clinical trials for new coronavirus vaccines and the translation of training material for antibody testing devices. And while the company’s Moravia unit experienced less demand for marketing- and travel-related localization services, the company said the opposite was true for “additional services to the Group’s technology customers […] recording higher usage of their online communication and social networking platforms.”
A staunch competitor to RWS in Life Sciences, TransPerfect claimed back in mid-April 2020 that they “haven’t seen a major disruption in translation requests from clinical trials, which may be because we work on a number of studies at different stages of maturity.” This is likely to have changed since, however.
According to the European Pharmaceutical Review, “69.9 percent of clinical trials across the globe have been disrupted by suspension of enrolment due to COVID-19 since April 2020.”
Being diversified helps. TransPerfect said it experienced higher demand for voice over and dubbing (serviced remotely through the GlobalLink Media.NEXT platform), and video game localization.
Meanwhile, LanguageLine, in its latest financial results, said “growth slowed down in March due to the impact of Covid-19 on the healthcare sector.” The company explained that many medical procedures (e.g., non-emergency surgery, follow-up appointments) and “anything else non-critical were postponed as a result of social distancing and lockdown.”
Japan’s largest LSP, Honyaku Center, reported that business had declined due to, among other things, the coronavirus-related economic slowdown of Q4. Revenues from the company’s core Translation Business decreased, leading overall sales for the 12 months to March 31 to slide 3.8% YoY to JPY 11.55bn (USD 107m); and Honyaku said, “the outlook has remained extremely uncertain.”
Discussing the company’s latest financial results, Straker CEO Grant Straker told investors that the company was “not massively exposed to the sectors that are badly hit through Covid” (i.e., not many travel and tourism clients, and retail customers are mainly e-commerce). He added that they “had seen smaller revenue declines” in the Media segment compared to others.
In March 2020, ZOO Digital described an uptick in demand for localization of back-catalog content from OTT platforms in light of Covid-19, as clients postpone the production of original content. The company has since reported “a reassuring resumption in demand” in its May 4, 2020 trading update.
All About the Balance Sheet
The European Language Industry Survey 2020 pointed out that larger LSPs tended to weather the current health crisis better than their smaller, more financially vulnerable counterparts.
Super Agency SDL, for one, assured investors in its latest filing that it had entered the current crisis in a strong cash position. The company stated it currently has “gross cash in excess of GBP 98m with drawn credit facilities of GBP 63m (net cash approx. GBP 35m).”
RWS, likewise, entered the current crisis in a strong financial position of over USD 150m in liquidity; roughly a quarter of which is in cash reserves with the balance via a banking facility. The company said it is protecting its cash position by “freezing recruitment, limiting capital expenditure and reducing marketing spend.”
Another LSP that recently assured investors of its solid balance sheet was Straker, which reported a cash balance of NZD 11.2m (USD 6.9m) as of March 31, 2020 thanks to a successful 2018 IPO. Over the next three months, the company also plans to draw on about NZD 0.6m (USD 0.4m) in government support. Straker added that it had “right-sized” the company to save around USD 2m in 2020 and that it had moved its European staff to remote work.
And, in its latest trading update, ZOO Digital said its “cash collection has been much stronger than forecast and cash at the year-end was $0.7m.” ZOO CEO Stuart Green was among those who expressed confidence at riding out current containment measures. At this writing, certain parts of the language services industry — most notably media localizers such as Keywords and IYUNO — have already begun slowly returning to work.
In the spirit of not letting a good crisis go to waste, Keywords Studios announced, on May 14, 2020, that it was raising GBP 100m to buy competitors weakened by the crisis.
Indeed, smaller LSPs appear to be in more serious trouble than many of their larger, well-capitalized competitors. On May 20, 2020, the Association of Translation Companies (ATC) published the “Coronavirus Pulse Survey May: Two Months Into Lockdown.”
The survey found that two-thirds of UK respondents have been significantly affected by Covid-19. A stunning 68% of the 22 respondents said their revenues had dropped 50% or more in the past month (i.e., April 2020). While April likely marked the nadir of the current crisis, it will likely take a long time for many to recover.
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