Strong LanguageLine Boosts Teleperformance’s H1 2020 Results

Strong LanguageLine Boosts Teleperformance H1 2020 Results

When French call center giant Teleperformance purchased LanguageLine Solutions for USD 1.5bn, it had no way of knowing that the interpreting provider would be a top performer during an unforeseen pandemic.

Until the 2016 acquisition, LanguageLine was owned for 12 years by private equity firm Abry Partners, which bought LanguageLine for USD 720m in 2004. Founded in 1978, Teleperformance has a presence today in 80 countries, has over 300,000 employees, and offers services in more than 265 languages. The company trades on the Euronext Paris market.

In a July 29, 2020 earnings call, Teleperformance reported H1 2020 revenues of EUR 2.66bn, a like-for-like increase of 5.0%, and EUR 63m in profits for the same period.

When Teleperformance purchased LanguageLine, it folded the interpreting provider into its Specialized Services division, which also includes TLScontact, a company that manages an international network of visa application centers.

In the wake of travel restrictions and border closures triggered by Covid-19 from April 2020, TLScontact’s work was nearly shut down, leading to a like-for-like decline in Specialized Services revenues for H1 2020 of 9.7% to EU 316m.

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EBITA for Specialized Services, meanwhile, dropped to EUR 82m in H1 2020 from EUR 112m in H1 2019. The fact that LanguageLine generated most, if not all, of the very robust 25% EBITA-margin speaks to the strength and highly profitable nature of the interpreting business.

Prior to the pandemic, LanguageLine had already “reported high levels of growth that exceeded expectations” from January 1 to mid-March 2020, when social distancing measures and lockdowns postponed many non-essential medical procedures.

However, Covid-19’s negative effect on LanguageLine was relatively brief, and Teleperformance Deputy CEO and Group CFO Olivier Rigaudy described LanguageLine as “growing dramatically.”

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“LanguageLine overcame the impact of the health crisis very quickly and returned to a strong growth in June and even in May. It has to be noticed that these people have been working from home now for years and years,” Rigaudy said, referring to LanguageLine’s 11,000 interpreters.

“LanguageLine Solutions is delivering significantly high margins and continues to deliver that,” the CFO added.

VRI More Profitable than OPI

In the same earnings call, UBS Analyst Rory McKenzie asked about new contract wins for LanguageLine that would have increased the revenue base. CFO Rigaudy explained that no single contract would move the needle significantly for LanguageLine given that the company has around 26,000 clients. Rigaudy also explained that the increase in video remote interpreting VRI, (a more expensive service than over-the-phone interpreting, OPI) is boosting revenues and margins.

One recent contract win for LanguageLine was being selected by the UK’s Eastern Shires Purchasing Organization USD 100m contract, alongside 19 other language service providers (LSPs). The framework contract includes in-person interpreting, OPI, and VRI for spoken and sign languages.

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Another boon for LanguageLine has been the US government’s emergency March 2020 expansion of Medicare coverage for telehealth services, prompted by Covid-19. LanguageLine President and CEO Scott Klein told Slator in April 2020 that the pandemic “accelerated a trend that we already saw developing” as healthcare organizations adopt telehealth technology to offer language services to the 25 million limited-English speakers in the US.

The UK contract and the Medicare coverage expansion may be examples of what Rigaudy deemed “a new penetration of [LanguageLine] in different markets, specifically in the hospital industry, in the healthcare industry, but also in the government part.”

Looking ahead, Rigaudy said, “We are reasonably confident that [LanguageLine] will continue to grow not only in 2020, but there is no reason why it should not continue in 2021 and beyond.”

LanguageLine’s outperformance is in line with rivals such as Stratus, whose billing levels now exceed pre-Covid levels, and startup Kudo, which raised USD 6m from investors in late July 2020.