On November 9, 2020, Poland-based language service provider (LSP) Summa Linguae Technologies (SLT) announced financial results for the three months to September 2020 (Q3 2020).
SLT is majority-owned by private equity firm V4C, but the company’s shares continue to trade on the Warsaw Stock Exchange. Company CEO Krzysztof Zdanowski told Slator earlier in 2020 that only around 20% of shares are still free-float; and that, eventually, V4C may buy out the remaining shareholders.
After a strong second quarter, SLT continued to deliver solid growth throughout Q3 2020, when revenues hit PLN 22m (USD 5.8m). For reference, SLT generated around USD 20.6m in 2019.
Q3 2020 revenues grew 114%, including acquisitions from 2019, while like-for-like growth (i.e., adjusting results as if acquisitions had been owned for the full period) was 3%. Adjusted EBITDA stood at PLN 3.8m (USD 1m) for the quarter.
SLT’s cumulative revenues for the first three quarters (Q1–Q3) were PLN 64.8m (USD 17.0m), a 17% increase on a like-for-like basis, and 110% including acquisitions. Adjusted EBITDA was PLN 7.6m (USD 2.0m).
In late 2019, SLT acquired Canada-based data annotator and localizer Globalme and US-based life sciences LSP GlobalVision, which accounted for much of the LSP’s top-line growth, so far, in 2020.
CEO Zdanowski told Slator that SLT’s direct margin (“gross, after translators / direct resources”) was 57.4% in Q3 and 55.7% year to date. He said SLT employed a little more than 250 FTEs by the end of Q2, including 71 managed-service employees on the payroll.
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Commenting on the latest financial results, Zdanowski said that Q3 was the “culmination of Covid impact for us.” He added that the summer months were the slowest, while September fared much better and was the company’s best month, thus far, in 2020.
Data Services Booming
Zdanowski also outlined the company’s performance by geography, highlighting that the US, which consists mainly of tech clients, is booming and grew 60% year to date (YTD).
The Nordics, Europe, and Asia-Pacific were “hit most by Covid,” and revenues from these regions were flat or even declined compared to 2019, he said. In the month of September, however, revenues across all geographies were above 2019 levels.
SLT operates three divisions: Localization Services, which contributed 44% toward YTD revenues, and Data Services and Managed Services, which accounted for the rest.
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“Data Services are booming [and] volumes have tripled versus last year,” Zdanowski told Slator. Under the umbrella of Data Services (which was Globalme’s main business), SLT provides services such as data collection and annotation.
Their top 10 Data Services customers “account for around 60% of the [division’s] revenue,” Zdanowski added, while the top 30 customers collectively contribute 80%. Strategically, SLT plans to focus on these larger customers and accounts, and they are “very satisfied with those KPIs,” he said.
SLT is not the only LSP to have successfully diversified into data annotation. On October 30, 2020, Venga Global CEO Kåre Lindahl discussed his company’s expansion into data annotation and what LSPs should consider before going a similar route. And, on November 6, 2020, Super Agency Lionbridge’s bet on data annotation paid off handsomely after it sold Lionbridge AI for USD 935m.
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Having acquired two companies at the end of 2019, SLT is now putting its “internal focus on integration,” Zdanowski said; meaning that Globalme and GlobalVision look set to be “fully integrated and rebranded by year-end.”
According to Zdanowski, SLT’s majority owner, V4C, “is pushing for M&As,” and the company plans to close a USD 3–5m add-on acquisition by Q1 2021 at the latest. The acquisition will “not [be] transformational, but in one of our existing verticals and services” (i.e., IT / tech, life sciences, e-commerce, or multimedia), he added.
Q4 has, historically, been SLT’s biggest quarter, and Zdanowski described his attitude toward the final quarter of 2020 as one of “cautious optimism.”
SLT is “on track for the strongest Q4 ever [and the] pipeline looks good,” he said, noting that this is a guideline and that SLT does not publish official forecasts.
The Summa Linguae CEO also reiterated that, although performance in the final month of Q3 was strong, “we are staying cautious as we observe client and economy behavior in the second wave of the pandemic.”