NEWSLETTER Issue 15: July 2009 CRESTEC INC. MAKES IT INTO THE TOP 30 WORLD-WIDE After years of steady growth, Crestec Inc. has broken into the Top 30 Language Service Providers in the world. What is the ranking? Every year, Common Sense Advisory (CSA), an independent US-based research firm which focuses on translation and localization, publishes the annual Top 30 ranking of companies that provide language services. This ranking reflects the increase and decrease of revenues of the big players in the market. The general tendency shows steady growth in the language industry sector. Historically, most of the big players in the language-services provision business have had their head offices in the US and the United Kingdom. However, the current statistics show that the Asian market is gaining ground. Crestec proudly announces that it s making its debut in the Top 30 ranking at No. 26, one of only three Asian companies. This ranking confirms Crestec s strategy, which emphasizes the importance of client satisfaction and combines a high level of service with competitive prices. What are the criteria? Common Sense Advisory only includes companies and divisions of companies that make most of their revenue by translation, localization services or interpretation. The companies in the ranking can be public or private. The annual CSA Top 30 ranking is considered a landmark in the international language business sector. What does the ranking mean for Crestec and what does it mean for you? For Crestec and its employees, this result is a reward for years of hard work and the pursuit of a strategy that focuses on our clients interests. For every job, everyone at Crestec gives 100% to deliver the promise we make to our clients: to deliver a satisfying product at the agreed upon time. This goes for every project, no matter how big or small. What other services does Crestec offer? Common Sense Advisory only considers revenues that derive from language services. But Crestec does much more... In addition to language services, Crestec is your trusted partner for the entire documentation process, from the very start until the final product. Crestec has years of experience in source text creation, localization software engineering, desktop publishing and printing services in any possible format and on any possible material worldwide. Crestec s latest specialty is fulfillment and content management. Our fulfillment services offer endless possibilities for kitting, mailing and publishing. Crestec has developed specialized tools to cover all aspects of creation and localization of your documents and can offer you a custom-made Content Management System. This ranking is a huge accomplishment for Crestec Inc. We would like to thank our clients for their trust and collaboration and our staff all over the world for their continuous efforts to make Crestec stand out.
1 Ranking of Top 30 Language Services Companies Ranking of Top 30 Language Services Companies by Renato S. Beninatto and Nataly Kelly Common Sense Advisory has published an annual list of the largest language service providers (LSPs) since 2005. Increased market visibility and transparency have led us to increase the number of vendors we cover in this year's report. Industry Experiences Continued Growth, Slight Slowdown in 2008 The revenue data reveals that 2008 was a strong year for many suppliers in the language services industry. Among the Top 25 players that appeared in our 2007 ranking, the average year over year growth rate was 19.7 percent, a slight decrease from the previous year, in which the average was 26.68 percent. The change relates in part to revenue from a large scale military linguist contract that shifted from L-3 Communications to Global Linguist Solutions, the new number one company in our ranking. Excluding L-3 s 42 percent decrease in revenue, the average is 22.3 percent, closer to the previous year s numbers. Taking into account the somewhat less aggressive growth reported by LSPs in 2008 compared with 2007, we adjusted our market size projections (see Table 1). We predict that the market will reach US$22.5 billion by 2012, slightly less than our prior estimate of US$24 billion. That growth equates to a compound annual growth rate (CAGR) of 10.76 percent over the next five years. Market 2009 2010 2011 2012 2013 Region Share US$ M US$ M US$ M US$ M US$ M Europe 43% 6,468 7,331 8,409 9,703 10,781 U.S. 40% 6,074 6,884 7,896 9,111 10,123 Asia 12% 1,735 1,965 2,255 2,601 2,891 ROW 5% 722 818 939 1,083 1,203 Growth Totals 100% 15,000 17,000 19,500 22,500 25,000 Table 1: Projected Language Services Revenues for 2009 2013 in U.S. Millions of Dollars How We Ranked the Companies As always, Common Sense Advisory s ranking includes companies or divisions of companies that make most of their revenue by providing language services, be it in written or verbal form, on paper, over the web, in person, via video, inside software applications anywhere around the globe. The list includes both public and private companies. However, not many publicly traded companies work in the language arena, so this ranking always involves a lot more legwork than producing a similar register for the automotive or telecommunications industries.
2 Ranking of Top 30 Language Services Companies Public companies. About a third of the companies in our ranking are public. For most of these firms, we have the luxury of reviewing annual reports and official filings. However, some of these are large corporations with specialized business units for which they do not break out numbers. In those cases, we considered only the revenue from the unit providing language services. Getting these numbers can be a challenge. Privately held companies. These firms consume most of our time, because we approach 100 plus candidate companies to come up with our list of 30. We call their executives to find out what they earned in the preceding year, probe for the magic number, and then ask them for financial statements to confirm their data. Private firms in some countries are not obligated to release any data, so we can only check their financials to the extent that they allow us. Each year, new companies qualify for a spot in our ranking. Video interpreting provider Purple Communications catapulted onto this year s list due to the merger of several companies. Newcomers Crestec, (Japan), CBG Konsult (Sweden), SEPROTEC (Spain), and Telelingua (Belgium) also debut on this year s table. Various suppliers in the government and military contracting space such as Allworld Language Consultants, CACI, CALNET, McNeil Technologies, Mission Essential Personnel, MPRI, SM Consulting, TCS Translations, and TRW have also received language services contracts large enough for them to be contenders for the ranking. However, not all companies are forthcoming about the revenue derived from language services, making it difficult to uncover exact numbers. The Top 30 List Remains Global in Nature Our list for 2008 includes suppliers from 15 countries across the globe: the U.S. (9), U.K. (4), Belgium (2), Japan (2), Sweden (2), Switzerland (2) and China, Czech Republic, Finland, France, Ireland, Italy, Luxembourg, Netherlands, and Spain (one each). While American and British companies still dominate the rankings, Asia continues to expand its share of dominant players with a total of three LSPs from China and Japan.
3 Ranking of Top 30 Language Services Companies Figure 1: Geographic Distribution Top 30 Language Services Providers in Total Revenues Earned in U.S. Dollars Given that the companies on our Top 30 list report revenue in an array of currencies, we convert them into a baseline unit the U.S. dollar to allow for a direct comparison. For non U.S. companies outside the United States, we divide revenue in local currency by the average exchange rate for the 365 days of the firm's fiscal year. Thus, the average exchange rate for twelfth ranked RWS Holdings was US$1.9731 per pound sterling (GBP) for the fiscal year ended on 30 September 2008. Fourth ranked SDL, reporting its results on a calendar year, is affected by the devaluation of the pound against the dollar for the balance of 2008, with the pound quoted at US$1.8551.
4 Ranking of Top 30 Language Services Companies Three Tiers of Language Services Suppliers Comprise the Top 30 The market for translation, localization, and interpreting services is organized into three major tiers (see Table 2). The six highest ranked companies on the list report annual revenue in excess of US$200 million. The second tier includes seven companies in the US$106 166 million range. The bottom half of the list includes companies that report US$20 60 million in revenue. Rank Company HQ Country Revenue in US$M Employees Offices Status 1 Global Linguist Solutions, LLC* US 691.00 6500 6 Private 2 Lionbridge Technologies US 461.00 4500 40 Public 3 L-3 Communications (LOTS) US 434.59 1049 1 Public 4 SDL International UK 294.54 1981 55 Public 5 Language Line Holdings US 212.64 4719 7 Private 6 TransPerfect / Translations.com US 204.77 1115 56 Private 7 STAR Group* CH 164.83 910 42 Private 8 SDI Media Group US 140.00 800 1 Private 9 Purple Communications, Inc. US 130.08 577 5 Public 10 euroscript international S.A. LU 129.03 1267 32 Private 11 Xerox Global Services* UK 113.74 506 9 Public 12 RWS Holdings PLC UK 106.76 451 12 Public 13 CLS Communication CH 57.62 360 14 Private 14 Manpower Business Solutions NL 55.91 150 7 Private 15 Semantix A/B SE 53.26 160 10 Private 16 Logos Group IT 50.22 135 17 Private 17 thebigword Group UK 49.90 270 9 Private 18 Welocalize, Inc. US 49.86 402 12 Private 19 AAC Global Corporation FI 48.99 304 14 Public 20 Moravia Worldwide CZ 42.80 446 12 Private 21 Honyaku Center Inc. JP 42.68 193 7 Public 22 Jonckers Translation & Engineering s.a. BE 37.21 280 13 Private 23 hisoft Technology International Ltd. ZH 35.10 926 16 Private 24 HP ACG FR 30.06 150 9 Public 25 Merrill-Brink International US 30.02 100 4 Private 26 Crestec, Inc. JP 28.56 511 22 Private 27 CBG Konsult AB SE 28.54 180 9 Private 28 VistaTEC Ltd. IE 27.23 102 5 Private 29 Telelingua Group BE 21.98 135 5 Private 30 SEPROTEC Translations ES 20.12 358 15 Private Table 2: Top 30 Language Service Providers Worldwide for 2008 (* estimated) Source: Cited Companies and Common Sense Advisory, Inc.
5 Ranking of Top 30 Language Services Companies The Market for Language Services Remains Fragmented In previous research, we ve noted how little of the overall language revenue is earned by the largest language service providers. This trend remained consistent in 2008, with the top 30 booking just 26.6 percent of the market total (see Figure 2). Figure 2: Top 30 Aggregate Revenue for 2008 as a Percentage of Total Language Services Market Size in U.S. Dollars Finally, to determine whether this fragmentation is getting worse or consolidation increasing too much, we apply the Herfindahl Hirschman Index (HHI) to gauge industry concentration and competition in the marketplace. The HHI calculates a weighted average market share (which is represented by the sum of the squares of the market shares of each individual firm). The scores range from 0 to 10,000. Low numbers indicate a very large amount of very small firms, while a large number correlates to a single, monopolistic producer. The language services industry has an extremely low HHI concentration. Although the consolidation has increased slightly since last year, it remains on the lower end of the HHI scale. In fact, even if the 10 biggest companies in the industry merged to form a US$3 billion company, it is unlikely that it would be challenged by antitrust authorities in the United States.
6 Ranking of Top 30 Language Services Companies Most Large Providers Exceed Ten Percent Revenue Growth Acquisitions continued to fuel the growth of companies like AAC Global, SDL, and Welocalize. However, most companies report significant organic growth from the increased demand for their language services. L-3 s language services division reported negative growth due to the loss of a contract to provide linguist support in combat zones for the United States military. The number for LCJ EEIG (now Jonckers) shrank after the merger of three member companies due to the fact that it no longer reports revenue for Logoscript. Revenue Growth Company (Reduction) from 2007 to 2008 hisoft Technology International Ltd. 59.50% AAC Global Group 54.70% thebigword Group 51.10% Welocalize, Inc. 48.00% Manpower Business Solutions 44.00% TransPerfect / Translations.com 31.30% Hewlett-Packard ACG 30.70% SDL International 25.30% VistaTEC 24.90% Semantix 21.80% Honyaku Centre 17.60% RWS Group 17.40% CLS Communication 17.10% SDI Media Group 16.90% Language Line Holdings 16.10% Xerox Global Services 15.00% Moravia Worldwide 12.00% Logos Group 8.00% euroscript International S.A. 6.70% Amesto Translation Holding A/S 3.80% Lionbridge Technologies 2.00% STAR Group 1.90% Jonckers Translation & Engineering s.a. (2.20%) L-3 Communications Linguist Operations & Technical Support Division (42.30%) Table 3: Revenue Growth (Reduction) by Company from 2007 to 2008
7 Ranking of Top 30 Language Services Companies The Biggest LSPs Trail in Revenue per Employee Revenue per employee is a measure of how efficiently a particular company is using its workers. In general, rising revenue per employee shows that the company is using its workers more efficiently. Some of the companies with the most employees such as Global Linguist Solutions, Language Line, and Lionbridge are among the least efficient (see Table 4). L-3 Communications, on the other hand, made reductions to its workforce, boosting its efficiency to claim the top spot. The top providers showed a marked improvement in average efficiency this year (US$184,731.45) compared to the previous year (US$162,914.48). Ranking by Revenue per Employee Ranking by Number of Employees Company Number of Employees Revenue by Employee in USD 1 7 L-3 Communications (LOTS) 1049 414,289.80 2 25 Manpower Business Solutions 150 372,729.33 3 27 Logos Group 135 371,966.44 4 24 Semantix A/B 160 332,903.13 5 30 Merril-Brink 100 300,200.00 6 29 VistaTEC Ltd. 102 266,911.76 7 14 RWS Holdings PLC 451 236,728.25 8 11 Purple Communications, Inc. 577 225,443.67 9 13 Xerox Global Services* 506 224,772.73 10 22 Honyaku Center Inc. 193 221,139.90 11 26 HP ACG 150 200,400.00 12 21 thebigword Group 270 184,822.93 13 6 Transperfect / Translations.com 1115 183,650.22 14 9 STAR Group* 910 181,131.56 15 10 SDI Media Group 800 175,000.00 16 28 Telelingua Group 135 162,845.66 17 19 AAC Global Corporation 304 161,165.43 18 17 CLS Communication 360 160,061.33 19 23 CBG Konsult AB 180 158,553.33 20 4 SDL International 1981 148,684.25 21 20 Jonckers Translation & Engineering s.a. 280 132,889.92 22 16 Welocalize, Inc. 402 124,029.85 23 1 Global Linguist Solutions, LLC* 6500 106,307.69 24 3 Lionbridge Technologies 4500 102,444.44 25 5 euroscript international S.A. 1267 101,841.37 26 15 Moravia Worldwide 446 95,964.13 27 18 SEPROTEC Translations 358 56,209.41 28 12 Crestec, Inc. 511 55,890.60 29 2 LanguageLine Holdings 4719 45,061.24 30 8 hisoft Technology International Ltd. 926 37,904.97 Average of Top 30 Companies 984.5 184,731.45 Table 4: Top 30 Language Services Companies Ranked by Revenue per Employee