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Executives

Sara Buda – VP, IR

Rory Cowan – Chairman, President and CEO

Don Muir – SVP and CFO

Analysts

Joseph Vafi – Jefferies & Co.

David Cohen – Midwood Capital

David Hines – Canaccord Adams

Sabre (ph) – Sabre Capital

Saket (ph) – B. Riley & Co.

Lionbridge Technologies, Inc. (LIOX) Q2 2010 Earnings Conference Call August 4, 2010 9:00 AM ET

Operator

Welcome and thank you for standing by. (Operator Instructions). I’d now like to turn the meeting over to Ms. Sara Buda, Vice President, Investor Relations. You may begin.

Sara Buda

Great. Thank you. Welcome everybody to the Lionbridge investor call to discuss financial results for the second quarter of 2010. During this call, we may make certain statements that may be considered forward-looking statements under Federal Securities laws and which involve risks and uncertainties. Our actual future results may differ significantly from the matters discussed in any forward-looking statements. We have disclosed in greater detail in our Form 10-K filed with the Securities and Exchange Commission on March 13, 2010, the factors that may cause such differences.

And now, I’ll turn the call over to Lionbridge’s Chairman and CEO, Rory Cowan.

Rory Cowan

Great. Thanks Sara, and welcome everybody. As is the normal convention, today I’ll walk through our second quarter results and the positive trends that really drove our record earnings for the quarter. Then I’ll turn it over to Don, who can walk through our financials in detail.

So, first let me start by summarizing highlights in Q2. First, we delivered revenue of about $105 million this quarter, ahead of expectations, once again. This marks about 7% year-on-year growth despite the currency headwind on revenue. We’re delighted with our growth from both new and existing accounts. In fact, we have two new customers at our Top 10 this quarter, and I will talk about those a little bit later.

Total company gross margin increased about 33.6%, reflecting ongoing improvement from last year and from the first quarter due to strong volume and of course our continued diligent cost management. This lead to record GAAP profits of about $4.6 million or $0.08 for the quarter. As you can see from our margin improvement and record profitability in the quarter, our focus now is on revenue growth continuing with our cost management as well as currency management, both of which are beginning to pay off.

Our balance sheet remains strong as well. We delivered strong cash flow from operations of about $8.6 million for the quarter, and this means that we ended the quarter with about $29 million in cash. Clearly, we had a very positive quarter. We are growing our customers, our pipeline is strong, our margins are improving, and we are managing currency. We are driving record profitability and we continue to generate strong cash flows while investing in the future of the business. These trends position us well to prepare for solid second half and a positive 2011.

So just talking about the customer environment because we get a lot of questions about the market activity this quarter. We saw increased demand across pretty much all of our businesses. Our Top 3 customers, Microsoft, Google, and HP grew very nicely and in fact our Top 10 customers grew more than 10% year-on-year, which is really suggesting that they see confidence as we are of course, we are product-release related. So, people are spending with us, they seem to have confidence in their end markets and half 2 and next year.

New business is ramping as well. As I mentioned, we added two new accounts to our Top 10, both Rolls-Royce and Dell are now generating significant revenue. Many of you ask about the process and timing when we win a new account, and our rule of thumb is it takes about nine months to break into an account and amount nine months to scale it, to what we would call significant activity. Dell is a fine example of that. We won the account in mid-2009. It ramped slowly as we integrated our processes and now the account is on a run rate of about 5 million a year, and they are enjoying simpler processes, reduced cost, and higher quality.

We see our clients are realizing the benefits of consolidating and rationalizing outsourcing spend. And we see this in every downturn. People look at their supply chain, they will be into reduce the number of suppliers and give more business to fewer suppliers. We generally end up on the positive side of that review.

This quarter, we also secured several new accounts on that same premise, a world leader in mobile media, a market leading automobile manufacturer, and a global wireless company. These new wins at the table for a strong 2011.

For [the mission] we are pleased with customer environment, and these wins and a record earnings reflects three positive trends. First, we are accelerating growth across our major businesses. Our GLC Language business is adding Fortune 100 companies to its rich roster of bluechip clients. We have eight of the Fortune 20 today and the GLC business is bringing on two more global market leaders at our technology and life sciences verticals.

We are also accelerating our GDT or Development and Test business. Earlier this year, we made two strategic changes in that business. First, we invested in a new General Manager, a new sales leader for GDT. These two leaders are already beginning to bring new energy into that business and GDT has grown 16% year-on-year with significant expansion of an existing account and several new strategic wins in the mobile device sector, and in the healthcare vertical, seems to where we are getting a quite a lot of success.

Within our GDT segment, we also have our search relevance testing business. This is growing nicely as well. Online advertising is accelerating global markets and as a result, we are seeing broad applications for our services, from search relevance testing to location-based services. All of this requires a global mobile independent workforce and that’s what we know how to do. Our global program management skills are driving new opportunities across all of these end markets.

So, the second positive trend is the strong conversion of revenue into profit – of incremental revenue into profit. Clearly our cost and currency management is paying off as we see incremental revenue drop to the bottom line. It’s clear that our crowd – and the cloud model is proving to be the right strategy, as it minimizes fixed expense of course above the cost of goods sold line – in the cost of goods sold line.

As we move our activity into the cloud and into our offshore centers, we are reducing our fixed expense and higher cost locales, and this is keeping our expenses minimal as we grow the topline. As a result, for the first six months of the year, we’ve increased profits by $10 million or $0.18 year-on-year, on only $19 million of incremental revenue. So, $10 million, bottom line increase, a $19 million of topline increase.

The third positive trend is the role of our technology as a differentiator and a competitive advantage. You may recall, we have two inter-related technologies that are sort of reinforcing one another. The first of course is Translation Workspace, our Software as a Service or SaaS translation productivity platform. As you saw from our recent announced, TW or Translation Workspace is gaining momentum with translators and agencies. In fact, we are starting to see agencies abandon their existing client server applications and move all of their work to Translation Workspace. This indicates the early momentum of this breakthrough productivity platform.

Now that’s a real-time translation memory which is a translator productivity tool. The second part of our technology strategy is the real-time translation product that we are developing with IBM. For those of you who are new to Lionbridge, we announced a partnership with IBM to bring real-time translation technology to market. So, we are combining IBM’s real-time translation technology with our cloud-based translation memory capability, which brings high quality real-time customized translation automation to the market. In short, we are taking IBM’s machine translation out of the lab and into the market.

This (inaudible) we are moving quickly to put the sales, marketing, and technology resources in place to bring a powerful solution to market. Our industry knowledge and IBM’s underlying technology and reputation is proving to be a very powerful combination. We are already sharing leads and working joint initiatives and as we have said, we’ve had more inbound customer interest from this one announcement than we’ve had in our company’s history. In three short notes, we’ve had dozens of briefings with top-tier organizations. We are looking for real-time communication solution to solve their global communications challenge. And real-time communications could be multi-lingual IMing, when I type in English and comes out in French. That’s customized by a specific company’s, acronyms, knowledge, phrasings or conversational conventions. That’s really the power. It’s taking this broadbased MT technology and customizing it for particular application within a corporation.

So, we expect to have two to three name brand customers in early Q4, well, well ahead of schedule. And we expect general availability in early 2011. The underlying premise of this combination is surpassing our expectations. So, you can see that our two technology strategies are tightly linked. We have one common real-time database serving two different applications; Translation Workspace to enhance human translation and real-time translation for automated multi-lingual communication.

With thousands of translators (inaudible) about the Translation Workspace and the early indication of interest in our real-time translation product, we expect we can have $5 million or $10 million in the run rate for our technology solutions in 2011 with further acceleration in 2012.

So, in summary, Q2 is a success, and we are seeing several positive trends. Record profitability, demand remains firm, new business is ramping, cost management efforts are continuing and paying off, and in fact we are beginning to see even more opportunities for a further cost management. We derived a significant profits from each incremental revenue dollar, and our technology strategy and IBM partnership are further broadening our market opportunities. So, with that, not much more to say, I will turn it over to Don for the numbers.

Don Muir

Thanks Rory and hello everyone. Today, I’ll provide a financial overview of our second quarter and then I’ll give you an outlook for Q3 and rest of the year. Q2 was a very positive quarter. As you saw in the release, we delivered record earnings for the quarter, thanks to strong revenue and continued cost management. I am delighted to see the profit and cash flow potential of the business finally shelve through. Revenue for the quarter was $104.9 million. This is up 7% or almost $7 million year-on-year. Basic contributors of this year on your topline growth include strong growth from several Top 5 accounts, as our teams penetrate new divisions at these large organizations. New product releases from clients like Adobe and Porsche in the quarter and new business. We’ve continued to ramp new business that we won in the last 12 months, such as Dell and Rolls-Royce, as Rory mentioned.

From a segment standpoint, our core language business, GLC, grew 7% year-on-year. Our GDT development business grew 16% year-on-year. As Rory mentioned, we are starting to see some energy in that business again with new leaders and our unique combination of cloud and content. Our second quarter gross margin percentage of 33.6%, increased about 60 basis points year-on-year primarily due to higher revenue volume, cost management and positive work mix.

From a segment standpoint gross margin in our GLC language business increased 140 basis point to 34.7% reflecting a strong revenue and cost control. Margins in our GDT business were essentially flat year-on-year at about 34%.

Our second quarter operating expenses declined to 29% of revenue vs. 31% of revenue last year. Operating expenses also down in absolute dollars by about $600K year-on-year. So our cost actions continued to have a positive effect on the P&L. As a result of our strong topline performance and improving margins in the first half of the year, we’ve increased our operating income by over $8.4 million year-on-year with about $19 million or incremental revenue growth. So, we are driving over 40% conversion of incremental revenue to operating profit. Clearly, with the leaner cost model, we are well positioned to accelerate earnings growth as the economy recovers and revenue returns.

As you look below the operating profit line, you will see that other expense was a positive $700K as we recorded some favorable currency-related balance sheet re-evaluations during the quarter, versus a $250K negative impact last quarter. As we said in past calls, for your models going forward, we expect our other expense line item to be plus or minus $500K per quarter depending on FX volatility.

Our tax revision for the quarter was about $900,000 which is in line with what we expected. For the rest of the year, we’ll probably see anywhere from $750K to $1 million tax revision each quarter.

Moving down to GAAP earnings, in Q2, we had a record quarter of $4.6 million of net income or $0.08 per share. Non-GAAP earnings were $7.5 million or $0.13 per share, an increase of almost $4 million or $0.06 year-on-year. So, I am feeling quite pleased with our profit generation capability.

Moving to the balance sheet, we had another solid quarter of generating positive cash flow from operations. We generated about $8.5 million during the second quarter, despite the fact that only about $1 million was working capital improvement-driven. The rest of our operating cash flow was driven by cash earnings of $7.5 million. We’ve kept global DSOs under 50 days. Clearly our clients value the services we provide and I am very proud to be part of an organization to provide such high quality services that our clients depend on. We ended the quarter with about $29 million in cash, even after investing in the IBM relationship and accelerating our technology developments in the first half of the year. Debt remained at $24.7 million. So, we are net cash positive again by over $4 million. So our balance sheet remains very strong.

Many of you have asked about our uses for cash going forward. For now, our cash will be used to fund two strategic items; developing our real-time translation products. As Rory mentioned, we have the joint development agreement with IBM in place. So, now it’s a matter of investing in further development to bring a world-class product to market. The team is moving ahead with this effort. We’ve made several strategic highs already, and we’ve a well-planned development roadmap. It’s very exciting to see this product develop so quickly with a strong market demand already.

The second use of cash will be to fund restructuring. Reducing our overhead cost helps us manage expenses and reduces our currency exposure. We are about two-thirds of the way through our restructuring plan. So, we still have some more cost opportunities as we become more efficient.

In summary, our second quarter results underscore our progress in growing the topline, while enhancing profitability, managing costs and generating cash. Looking forward, for Q3, we are estimating quarterly revenue to be between $98 million and $102 million. Historically, Q3 is down a bit from Q2, as Europe goes on holiday. But business usually ticks back up in September and strengthens as we finish the year. So, we may see some upside in Q3 depending upon project timing. For the full year, we are reiterating our growth estimate of 5% to 10% on the topline that we gave in October of last year, with the acknowledgment that with current euro-dollar currency rates in the 1.30 range, we’ll likely be at the low end of that 5% to 10% range. In constant currency, however, we’ll likely be at the higher end of that range. So, I am feeling pretty good about the year.

So, in summary, I am very pleased with Q2 and the first half of the year. Revenue has strengthened, we generated record earnings and positive cash flow and we are very well positioned to accelerate revenue and earnings growth in 2011. So Rory, back to you.

Rory Cowan

Thank you, Don. A couple of things here just closing before we open it up for questions. First, as Don mentioned, growth is really returning. We are seeing a firmness in a lot of our end markets. That additional revenue we are converting into good earnings. Balance sheet stays strong, and we are generating cash. I think from a competitive standpoint, we are also feeling pretty well positioned for 2011 because during the downturn, we didn’t cut our investment in our cloud-based technology strategy. We maintained that investment. We cut a lot of other things, but continued to invest in the future. And of course that’s proven to have been the right thing to do, because that is enabling the IBM model, which is going to further enable our software products business.

So, we are the only company that we believe in the language business that combines a SaaS-based language technology with a global contract workforce management. And this will give us the industry’s highest program management skills. So, these three things; managing programs, our contract workforce, and unique cloud-based technology really allows us to grow the business, continue to strengthen our pipeline and of course pursue new business models. So, with that, I’ll open it up for questions.

Operator

(Operator Instructions). Your first question does come from Joseph Vafi. Your line is open, sir.

Joseph Vafi – Jefferies & Co

Hi guys good morning. Congratulations on the earnings here today.

Rory Cowan

Thank you.

Joseph Vafi – Jefferies & Co

I was wondering if we could talk a little bit on the leverage in the model that’s emerging. I know Rory, you said, you generated I think $19 million – or $10 million in profit on $19 million revenue increase. I was wondering how much of that may have been an FX tailwind versus true leverage in the business.

Rory Cowan

Yes, well I think it’s probably a little bit above, but certainly more leverage in the business because we really kept our fixed expenses pretty focused here. Remember, on the revenue side Joe, of course, revenue came down because of currency year-on-year. Of course, that did help us somewhat. Having said that also though we’ve been focusing on the euro-dollar relationship. But remember it was a weak euro. Therefore, the euro-yen relationship, as we do a lot of Japan-Europe business as well, really was a bit of a headwind for us in the quarter.

Don Muir

And so, Joe, if you look at the – as I mentioned in the call, from a convergence standpoint, we saw about 44% to the operating profit line, so that’s really what you should focus on. We did see some pickup in the other income line due to FX in the quarter of about 700K which helped us but really the focus on the conversion is that 44% drop through to the operating profit line.

Rory Cowan

And that sort of offset the year-over-year tech wins embedded in the statements.

Don Muir

Yes, year-over-year over we probably had the currency impact of about $0.5 million.

Rory Cowan

So could we say it’s going to be a 40% conversion for the incremental dollar if you think that we have a gross margin in the low 30s and half of that cost of goods sold is fixed incremental dollars that feels about right, of about 40% to 45% conversion going forward.

Joseph Vafi – Jefferies & Co

Okay and then secondly, Don you were talking about restructuring and cost opportunities remaining, it does seem like the restructuring expenses in your P&L are coming down a little bit. Any color there on how much there you might still be focused on would be helpful and was the Q2 run rate on restructuring expense kind of appropriate run rate moving forward?

Don Muir

I think as I indicated, we’re probably about two-thirds of the way through restructuring plan and I think over the last four or five quarters, we’ve taken some of the $9 million of restructuring. So if you do the math, we probably get in anywhere between $4 million and $6 million to go. The timing of that depends on how quickly we can pull the trigger on certain opportunities. So you probably get $4 million to $6 million over the next say two to four quarters.

Joseph Vafi – Jefferies & Co

Okay, all right, and then finally, on the IBM relationship. It sounds like to date is by Q4, I mean maybe a little bit early to talk about this but how do you see the pricing model, it sounds like obviously this is going to be SAS based solution. Is there, did you figured how you want to price this thing that, is it going to be a per word basis, is it a per user basis, some kind of volume basis?

Rory Cowan

Got it, Joe I think that what we’re looking at right now is a combination of applications and languages and for any enterprise initial indications are if anywhere from $100,000 a year to a $1 million a year depending upon the scale of the deployment and the opportunity. So many, many languages would add up on a monthly subscription and many, many applications because part of our skill here is unlike a lot of the generic MT engines that are available on the web is to customize this not only for their particular linguistic activity and company culture but also to customize it so its integrated into internal applications.

So (inaudible) for example, eSupport for example, user generated content and technical support sites, blogs, internal sharepoint applications. So that will come from two areas there but you’re right it’s not – it’s going to be anywhere from that sort of $100,000 to a million depending upon language and applications. It was pretty broad I can’t give you a final on that, I’ll let you know next year.

Joseph Vafi – Jefferies & Co

Okay, great. Thanks very much.

Operator

Your next question is from David Cohen of Midwood Capital. Your line is open sir.

David Cohen – Midwood Capital

Yes coming back to the currency items, you guys usually delineating some significant detail what the revenue and the cost impact are. Can you do that now or we have to wait for the queue, what is the dollar impact in total from FX on revenue and…

Rory Cowan

Well sequentially the operating profit line is we picked up about 700K and year-over-year we lost about 600K. So if you look at our revenues, again 60-40 split roughly USD, non-USD. The non-USD is primarily Euro.

David Cohen – Midwood Capital

Okay.

Rory Cowan

But other currencies in the mix there, Yen and Sterling and with regard to your expenses distribution you get about 35% USD, 35% Euro and then you get a, the remaining 30% is kind of split in three buckets, just a way to think about it. We’ve got the emerging geographies where we do business, India, Poland, China. These are probably 10% of our total and then you get the usual suspects, the western European guys probably another 10 and then you’ve got the Yen.

So its that’s the spread, Q2 we had extreme volatility in currencies, we had more of a weak Euro phenomenon versus a weak dollar. So you had currencies that typical move in coincidence with the Euro versus the dollar, move in a different direction. So year-over-year we had some strengthening in some of these emerging market currencies even though the Euro weakened. So that was an interesting mix of currency, but net-net, we were pretty well insulated at the operating profit line and we did pick up in the other income line about 700K on the balance sheet revaluations as I pointed out.

Don Muir

And like our 2009 level for year-on-year, we would have picked up about $2 million had we had last year’s currency rates.

Rory Cowan

Has it got into the topline.

Don Muir

About $2 million of the topline of revenues, you’d picked up a couple hundred thousand dollars (inaudible).

Rory Cowan

Operating earnings income from operations. So that’s really year-on-year, it didn’t have as Don was pointing out, it didn’t have the effect that we had thought it would because we’re sort of better hedged at the gross margin line now than we have been. So we’re just – this is just the result of active management, stability and sort of at least some luck as well at the Yen and the Euro.

David Cohen – Midwood Capital

When you say better hedge, do you mean better judge naturally hedge not?

Rory Cowan

Exactly.

David Cohen – Midwood Capital

Yes, okay.

Rory Cowan

Naturally hedged with the Euro dollar gross margin.

Don Muir

Yes, we do very little in the way of hedging.

David Cohen – Midwood Capital

Right.

Don Muir

We do with small amount of balance sheet hedging on certain known positions.

David Cohen – Midwood Capital

Sure, okay. Thanks guys.

Rory Cowan

Going forward for Q3, the range of the Euro-dollar still continues to be hugely and that’s a large part of our guidance breadth here is because we’ve seen things from 135 to 120 from major banks and so we’ll let you know when the quarter is over.

David Cohen – Midwood Capital

Okay, thank you.

Operator

Your next question is from David Hines (ph) of Canaccord. Your line is open sir.

David Hines – Canaccord Adams

Hey guys thanks. So first question is on translation workspace. It was good to see I guess a customer as tracking ahead of expectations in the release you guys did last week, but curious as to whether you have a sense, as to what average monthly recurring revenue per user is on translation workspace and the secondary question would be, have you guys put any more thought into software-as-a-service metrics that you planned on sharing with investors as you go forward here?

Rory Cowan

Yes, I think first its early days here, as we mentioned we’re really been out in the market about 100 days or so and the pricing model was about 10 Euro a month and then such some sort of usage rate on top of that.

David Hines – Canaccord Adams

Right.

Rory Cowan

So is it going to be – I really want to get a quarter or two under our belt because like any bit of software, people buy the software, they don’t use it first or some people buy it and they’re spending all their time converting with it. So the first quarter, I don’t think is necessarily accurate in terms of usage rates.

So we haven’t really decided what the actual metrics are that we’ll be releasing and as we bring this together with the IBM real time piece that has a different model as well. So I think during Q3 and Q4, we’re going to be focusing on what is the role (ph) of a downstream metrics which would be the individual translators for the productivity tools as well as the upstream metrics of applying this technology inside the enterprise. So really it’s going to be probably I think in the January quarter or January range call is lot of sense of what the metrics might be.

David Hines – Canaccord Adams

Got it. Okay and then I guess, on the IBM front, you had talked about incremental R&D to get the real time translation services, commercially available. Any sense as to how that plays out and whether or not it’s going to be a reallocation of that $1 million to $1.2 million that you spend quarterly, or will it be incremental on top of that to get this product ready?

Rory Cowan

Yes, I think you’ll see it affect us in the couple of places. If we add it will be new, I don’t know, 300,000, 400,000 500,000 on the core at the top end for the next couple of quarters that sort of range in the straight R&D line as you’re right, there is some supplemental or some transformative application of cost, now that TW has launched we’ll be putting some of that spend in to the real time translation conversion.

I think that’s one point. We will also see some things we’re managing, as Don mentioned, it’s going to be a little bit more on the G&A area because this is a new market so you need some product managers, sales capabilities, sales engineers, some of those areas and so we cut in G&A, we’ll probably be reallocating those dollars toward the marketing activities of this product.

David Hines – Canaccord Adams

Got it. Okay, and then last question, you’ve kind of traditionally talked about an expectation of 50 to 100 bps of annual gross margin improvement, with customer scale and you get natural leverage in the model. I guess, as you start to layer in these technology driven services into the mix, how should investors think about margin improvement going forward, are you still comfortable with that 50 to 100 and then what can this add on top of that?

Rory Cowan

Right, I think we’re still comfortable with 50 and the 100 because of our volume leverage and then of course if we do that sort of I don’t know, pick a number is it $7 million, is it $10 million next year of the software revenue with traditional software gross margins, you should see a further lift of gross margin on top of that. Now my bet is that next year when we pick in gross margin, we’ll be spending a chunk of that below the gross margin line as I mentioned, in G&A and R&D and activities during this first half of next year.

David Hines – Canaccord Adams

Got it. Okay, thanks a lot.

Rory Cowan

Okay, thanks.

Operator

Your next question is from Mr. Sabre (ph) of Sabre Capital (ph). Your line is open.

Sabre – Sabre Capital

Good quarter Rory, it’s nice to see you, cash generation and some growth again.

Rory Cowan

Hey Barck (ph) how are you?

Sabre – Sabre Capital

Good thanks, good. Hey you commented that you generated $8 million to $9 million of cash during the second quarter, but I didn’t – it wasn’t clear to me where it was showing up on the balance sheet, your cash was up about $1.8 million and debt remain the same and the other things seemed to balance out against each other. Was I missing something there?

Rory Cowan

No, no if you look at the balance sheet, we didn’t have much of a change of working capital. Historically our growth in operating cash flow is generated from working capital and basically it came out of profitability this quarter for the first time. So we got to mere at the operating profit with the cash flow.

Don Muir

And some CapEx I think this quarter as well so.

Rory Cowan

The CapEx is $1.7 million this quarter.

Sabre – Sabre Capital

Okay, so that’s the types of things would absorb the cash.

Rory Cowan

Right. CapEx in the model here I think it’s about $10 million roughly this year, next year it may be a little bit more than that but that’s the sort of range Barck.

Sabre – Sabre Capital

Okay, also could you give me some insight in the unbilled receivables. Is that work in process inventory basically?

Rory Cowan

That used – it’s about inventory but we used to call it work and process.

Sabre – Sabre Capital

Okay.

Rory Cowan

We changed the name to make it more accurately reflect what it is which is unbilled receivables.

Sabre – Sabre Capital

Okay.

Rory Cowan

We’ve recognized the revenue but due to project billing and milestones we have an invoice to the customer.

Sabre – Sabre Capital

Okay, I got it. Thanks.

Rory Cowan

Yes.

Operator

(Operator Instructions) This next question is from Saket (ph) of B. Riley & Company. Your line is open sir.

Saket – B. Riley & Co

Thanks for taking my questions guys. It sounds like you’re gaining some nice momentum in the translation workspace and I’m wondering if you’ve seen any sales come outside of your translator network?

Rory Cowan

Sales coming outside of the translator network meaning new buyers that haven’t been a supplier to us, or that have not been that have looked at the product and are buying at. Yes we are seeing it, of course our first couple of steps with this was to convert existing suppliers because they know the product, they’ve worked with and those are the fastest to convert and now of course the marketing programs are focusing on those translators that have renewals are coming up for competitive desktop product as well as other end markets. So that group is beginning to get some traction as well.

Saket – B. Riley & Co

Okay, great. And by chance can you maybe quantify that or…

Rory Cowan

Yes, I’d of the conversion of the users that we’ve had so far probably 10% to 15% are new meaning where we don’t do business with them.

Saket – B. Riley & Co

Okay and then with respect to the sales and marketing side, have you started making the investments through IBM partnership for the real time translation production.

Rory Cowan

We’ve got a couple of people there but as I mentioned next year is when you’ll begin to see we’ll probably add a few more people in that sales and marketing initiative.

Saket – B. Riley & Co

Okay, so that’s for next year and not reflective yet in the P&L?

Rory Cowan

I think we have a couple in there now but not for the scale that I think that we really want with this opportunity to really begin to move the needle quickly.

Saket – B. Riley & Co

Okay, great. And sorry just to clarify you mentioned that two would be Beta testing by Q4? Is that correct?

Rory Cowan

That’s the indications that we’re getting, that’s right.

Saket – B. Riley & Co

Okay, great. Thank you very much and good luck.

Rory Cowan

All right, thanks.

Operator

There are no further questions at this time.

Rory Cowan

Great. Well thank you everybody and as always if you have any other questions after you digest the balance sheet and income statement and maybe look the transcripts, please feel free to contact us and thanks for your attendance today.

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Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Lionbridge Technologies, Inc. Q2 2010 Earnings Call Transcript
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