SDL Revenues Rise 13% to About USD 417m in 2018 on Donnelley Deal

SDL posted a trading update on January 21, 2019, on its full-year 2018 performance. The UK-based language services and technology provider expects revenues to be in the range of GBP 323–325m (USD 415–418m) and adjusted EBITDA to be “no less” than GBP 28.5m (USD 36.6m).

The results include a partial consolidation of Donnelley Language Solutions, which SDL acquired for USD 77.5m in July 2018 and has since rebranded.

At an estimated GBP 324m, revenues grew 13.4% or GBP 38.3m from 2017 (full year: GBP 285.7m). SDL pointed out that all parts of the business performed well. However, the company neither provided like-for-like growth nor commented on Donnelley’s standalone results yet. It is, therefore, hard to quantify Donnelley’s contribution to full-year results.

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SDL further disclosed that net cash stood at GBP 14.4m, down from GBP 22.7m at the end of 2017. SDL financed the Donnelley acquisition with a mix of debt (revolving five-year GBP 70m credit facility) and equity (GBP 36m share placement).

At the time of the deal, SDL said it expected the acquisition to be “earnings enhancing” from the first full-year of ownership to the end of December 2019. Judging by the current trading update, it appears major synergies have yet to materialize. However, the bulk of savings from combining the company’s “geographic and facilities footprint” are likely to benefit the bottom line only in 2019.

Revenues at RWS, meanwhile, rose 87% to GBP 306m (USD 386m), driven largely by its acquisition of Moravia, putting the UK rival within striking distance of SDL. But, at GBP 61.8m in pre-tax earnings, RWS generates about twice as much profit as SDL, which partly explains the market’s preference for RWS. SDL currently weighs in at around USD 600m in market capitalization versus RWS’ USD 1.6bn.

As of this writing, Lionbridge CEO John Fennelly would not yet comment on 2018 results other than saying the company has had a very good year. Rating service Moody’s expects Lionbridge’s 2018 revenues to “approximate $650 million,” which implies high single-digit growth in 2018.

Industry leader TransPerfect, on the other hand, widened its lead after another year of double-digit organic growth. The New York-based LSP closed the year at USD 705m, growing 14.7% and adding USD 90m to its top line in 2018.

SDL shares are up slightly in early London trading at the time of writing. SDL will release its full-year results on March 20, 2019.

Image: SDL CEO Adolfo Hernandez at SlatorCon San Francisco 2018