Innodata (INOD)

Amy Agress SVP, General Counsel & Corporate Secretary
Jack Abuhoff Chairman & CEO
AK Mishra COO
Tim Clarkson Van Clemens Capital
Chris Beach Hawksbill Holdings
Call transcript
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Good morning and welcome to the Innodata First Quarter 2018 Earnings Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Amy Agress. Please go ahead.

Amy Agress

Thank you, Vicky. everyone. morning Good joining for Thank us you today.

review today CEO then your and speakers AK And first, a then Abuhoff, first follow questions. for We'll about Chairman Innodata; and Mishra the detailed provide will additional Jack Jack of who our AK quarter. take from results the Our hear are of with Mishra perspective will COO. our We'll business.

businesses of contracts canceled reduced; our are client external without concentration segment current and Solutions clients segment; inability to our are Data First, market that and and Digital let from potential made carrying our results differ may other or that difficulty our committed changes based work various not in investments; obligation Commission. the Securities delay of now to ability impairments our and prospective willingness strategic clients undertake potential driving replace technological me largely actual growth clients acquire; with number over forward-looking time acquisitions, clients; and terminated These intangible call. factors; to uncertainties the goodwill contracts depressed that value execute to volumes statements update to to of on emergence revenue on in liabilities continuing materially. qualify competitive requirements the subject indicated may ventures we give Exchange or time Digital could we other risks projects; Agility market of and strategy; be during will and or in of and or and and and integrating our materialize, statements businesses expectations of and risks are business turn with AK. call clients; of in and changes services; in a and of growing acquire; information or ability limitation, rise uncertainties business competitors; filings the for conditions; companies Solutions the new projects of factors; plans, and, these We [indiscernible] projected our assets completed the which of that dependency from other by I may cancel content of Data that may our forward-looking number no joint that to including, providers in the the limited acquired a reduce, companies are nature synergies undiscovered to

AK Mishra

XXXX. for for everyone. of Good million first included quarter Amy. charge quarter, quarter. one-time reserves. loss you of this the $X.X you, prior $XX.X quarter million $X.X $X.X was million million to $XX.X the morning us Total Thank and In financial last charges restructuring contingency million we today had our joining to revenues performance Thank which review compared

and year, prior impact quarter one-time rationalization approximately sequential XXXX as quarterly special effect exclude comparative EBITDA a now increase the There the of and $X.X the quarter the charges Excluding XXXX due I would key introduce of and XXXX cost line with will we optimization the to so an quarter will our by indicate. one cost comparing The compared adjusted prior mainly of XXX%. of last was million. for adjusted one-time quarter first expect charges, my $X.X quarter $XXX,XXX items we segment one-time results the which million increase in fourth were performance the the basis I in charges review our in on of $XXX,XXX these that was quarter or fourth XXXX. remarks undertook of EBITDA in XXXX to will

Solutions previously referred as to for previously or referred in the Solutions, MIS, the our segment changes our Media consisted which nomenclature as Advanced The segment to order segment. to XXXX, and we’re simplify Synodex and have our referred referred in simply Intelligent consisted we'll will Data Agility reporting. simply certain business, PR addition, Solutions of segment. only will align which making we narratives Innodata be business to to of In business hereinafter segment to docGenix and Synodex we as The of businesses Agility consist be our Synodex as

Our segment. docGenix will be subsumed Digital DDS Data or business into Solutions our

decrease both DDS with XX% or $X.X Now this XX.X at prior compared million quarter. revenues million Synodex to was the a revenue segment of in revenue in the $XXX,XXX one-time and completion volume over one-time $X.X quarter improvement four. $XX.X million project resellers program. million quarter. This the Agility’s level, by of the was is Lower to due seasonal the in million fourth was decreased seasonal period, revenue the which one quarter a and purpose and in result this engagement. $XXX,XXX our Bulldog for included million one was period the our fluctuation in quarter annual quarter and volume as prior four in of on now XX% from result compared renewal million primarily comparison quarter docGenix of additional of increase Agility awards revenue revenue quarter an ongoing was increased fourth $X.X from to $X $X.X in one $XXX,XXX to seasonality. quarter. of of the This revenue quarter

fourth Synodex or to $X.XX were revenue $X.X margins revenue in in increase of Agility revenue. million to margin, Gross Gross this million current Moving or quarter on this in $XXX,XXX quarter segment DDS or lower XXX,XXX as an revenues the XX% XX% our higher of accounts revenues account of the of or gross this a $X of margins decreased in from X.X $XXX,XXX quarter. of the prior the in quarter or XX% gross on the in to decline fourth quarter XX% due compared million mainly of XX% segment XXXX, compared revenues quarter, quarter were revenues. in $XXX,XXX of of million on or lower in to XX% to margins

fees, or this quarter, the general X.X decrease at to $X.X SG&A were compared revenues prior selling, million look or million and the in $XXX,XXX XX% XX%. or $X.X administrative on million XX% excluding doubtful were the a accounts for $X.X revenue mainly expenses. this XXXX or XX%. decrease million SG&A to take revenues of quarter, $XXX,XXX of The of of both to improved XX% in were now and $X.X reversal million prior XX% labor SG&A of will XX% of quarter, is allowance expenses expenses lower a SG&A quarter. and attributable Synodex, in in million expenses for of XXX,XXX decrease of professional SG&A in cost. Agility expenses quarter, as or as were as receivable account after compared one to or compared quarter allowance decrease revenue of $X.X lower restructuring We $X.X SG&A million revenues XX% in The and a expenses lower doubtful adjustment or open DDS In for were the approximately or one-time XX% quarters. or headcount. accounts accounts the charges, for or prior of accounts

loss prior Agility comprised from million EBITDA quarter, compared DDS, charges Synodex. the increase to after EBITDA $XXX,XXX this adjusted from in offset an restructuring of reserves prior was increase quarter Our the in and EBITDA $XXX,XXX in $XXX,XXX This taken $X.X $XXX,XXX EBITDA $XXX,XXX is excluding adjusted quarter. adjusted by of one-time

of Company the of calculation global of first XXXX foreign of million million Company’s under provisions against the income net Pursuant provision net forwards. quarter intangible tax expenses taking GILTI, income adjustment After benefit forwards against that prior account quarter, and the toll it fourth In is $XX,XXX income net we this operating our tax the deducting in the recorded to $X.X in of of recorded has had net XXXX new this Act, the offset $XXX,XXX U.S. losses with that Cuts compared tax We on tax Company and the At earnings. which compared into available an foreign Tax no tax of the concluded our $X.X interest, minority earnings carry offset to quarter. we act. million loss, performed operating to the Act tax XXXX, Jobs $X.X net approximately quarter of quarter million. after lower provision on were Moving to carry XX impact that the income, XXXX, pertaining and the quarter is and account the expense to Tax of tax charges, loss end this subsidiaries.

Our fourth quarter, the cash million and XX% the investment approximately rest balances were XX.X $XX.X million were the in this compared held were overseas. quarter balances States of to and held United in

of and expenses X.X CapEx of portion approximately had X.X end this the second million the outstanding Our compared be $XXX,XXX. market CapEx expect Forex hedge and on denominated XXXX, turn to this in hedging the a other to range At to quarter to our currency previous exposure we program of our now the quarter will I $XXX,XXX forward revenues we was of and quarter to $XX.X in in million million for foreign contracts items. quarter, market. based our to

Our had $XXX,XXX the loss first notional forward contracts quarter. in a of end of

range guidance be million, in $X.X range $XX.X to revenues our million consisting of in of to the $XX.X million terms quarter revenue DDS second for XXXX, In quarter on Agility the to million you X and million. revenue the to million Synodex I over will million. $XX.X and X.X call the of to pass $X.X $X.X of now in in revenue of we second the the to expect Thank of Jack. of range range

Jack Abuhoff

some you start for additional Today, other I I’m for joining we core the in Good of recently. quarter's made to AK. Thank business. Thank announcements each context and Data with you, our our Digital going provide Solutions morning performance us. touch on segments everyone. will

high-end anticipated, out we our provided As QX came we at of revenue the last in our DDS the declined call. although in guidance

project the QX a seasonal another one-time volume in some mentioned, client. resulted from decline fluctuations AK ended from As and that

facilities, from The improve in come working aligning ultimately shareholder and production we’ll as $X.X year. production performance, anticipate light $XXX,XXX cost We’ve to we reduction cost late our of taken adjusted as base business cost revenue in our EBITDA leverage align by recognizing operating disappointing value. last growth unlocks lowering our our to a by the sales million. a which innovation. that propel last reductions primarily drive structure to costs reducing support the benefited approximately result This that earnings of that technology year, year initiated and cost will cost we performance have the Our reduction be outlook result consolidating overall sales approximately model of cost XXXX

R&D content. out we the Over in that and the we've enrich figuring do invested technologies these past how years around machine transform to incorporate AI to extract, and best on believe efforts These success few have work messaged they We into our as market to increased to facilities just costs. will sell-side properly in us benefit production that the the clients well. as the shown considerable contributed have learning,

business largest the requesting of new ago, In of believes demonstrated otherwise rise [ph]. quarter, an client in seasonality applications an world. technology spike] couple that to approximately to $XXX,XXX life capabilities we value senior the automation the need could from engagement his existing got information result with new perspective, successfully weeks a From and From we further learning in hole for our a complex year. been be In just that of our per the a we companies he our its we thanking million that small call. at started I machine revenue created have since services, at for example, director summer. of supports. to give that that [tend "powerful saying would've plugged email the likely the medically as insurance that pipeline curtailing opportunities clients me this underwritten which our explore we Synodex of For Afterwards, in a solution and have one our AI him, decrease is a service business, one a a there was our QX which life perspective, other as accelerated we last our revenue several dollars of a insurance and Company" business, result

new these Agility now deals. our to closing turn on I'll working We’re business.

API in revenues business monitoring analysis nature, and licensed the media we QX, increase the that to to The adjustment channel customers put of nonrecurring an Agility Agility both million, from media was distribution and us them. Our are revenue a as that provide our SaaS solutions. includes in our data enables we X.X of we were representing able XX% partner in data year. correctly partner as that Included to enterprise targeting, make products QX. place the result the for $XXX,XXX verify is API In monitoring for an over that well media subscription-based were our as last

becoming We to a continue business with Agility metrics. see high sequential growth quarter the retention business

our represents XXX,XXX part of plan. that should worth While be nonrecurring this it viewed as is the noting an important channel

This to year. in year about new from increases partners customer are revenues XXX,XXX XX%. we In continue Our much expecting indicators generation. by QX, of revenue our QX we see sequential were partner leading grow like channel to and quarterly last channel business engagement approximately

or likely by in some MQL we in in QX of resellers we said, total contract some business That North marketing strongest leads changes and which date annual our million resulted new over with XX% American value, Our increased generation. for our shifting QX. organization X and X.XX XX changes sales of qualified Agility new of quarter, intended made QX. added overall personnel making in terms of bookings customers new bookings quarter the We to in structural the this

at platform the at ACV rate to XX%, in retention retention level targeting platform XX%. our enterprise retention XX% by aggregate measured our with and Our quarter and monitoring fast monitoring

monitoring social large be magazines, targeted non-engaged the trending tracking an this to have rolling show off America. well. retention QX, as resulting companies when image now images year. our remaining our levels inherited or that rate text. in previously, about so. improvements do overall this towards rate With can module, portion XX%, as module our logo addition non-engaged will past prospectively the newspapers, of platform In number their QX, affected in spoke an an in released customers customers and customers XX% we retention targeting to references the with in to in our we media interest monitor which of brand of in retention for that media acquisition North and the of leaving up Agility out rates enables of customers AI-powered cycled business These As The we confident

on engineering that a Board directors we that us we've directors information to bought Kardon, life also new CEO Xth, for company; on of three components this help year. could navigate two reinsurers; Our fast-growing and announced directors one CEO that April digital QX largest exceptional year. whose XXth, focused will of for teams a an the and On are new launched major had Doug not the be reelection our of Manoni, former testing initiated be product innovative in through of December announced U.S.-based our We’ve Board; media Dave and will now new announced Officer the building We current on Atkinson, growth. search this business the of Chief experience that we action Marketing three software of former Brian standing company.

by committee an of Xth special on questions. components are have which further analyses the to to was a Our of Both of formation announced that committee the also under are segments two assessment in-depth the December has present external input been benefited ready with statements we work. committee their consultants our the retained. Operator, that these delivered no have there now deliverables time for of proceeding current


Tim [Operator Clarkson Capital. today Instructions] from first take We question with ahead. go Please Clemens will our Van

Tim Clarkson

cost will your do check fixed basic wanted go the that year trends? Just lower now, expect to we as

Jack Abuhoff

will $XXX,XXX announced quarter that look that been there a at the in is million numbers for X.X year. benefit that coming base we're of you the reductions has a result quarter, see you late this announcing If cost last that

should So, $XXX,XXX continuing that baked quarter through Company base. benefit you per the the into to cost year see that’s

in and and that efficiencies. the be to to opportunity going machine efficiency opportunities that. through we're to we year to also AI very do proving in that additional would cost addition be in additional work we're to for addition creating additional In continuing represent be The at we're that that is looking driving impactful learning see

Tim Clarkson

internally in get of using terms AI, What's where be about committee hopefully to What the that Innodata thinks segment? some the technology In if did you’re resources? potential revenues. the also terms the new and additional should putting using new of its

Jack Abuhoff

position committee its making work. form advances we the a are won’t is of every think doing announce any this decision actions. I I in be in that taking in to kinds

We that the helpful reported we've to mentioned a data like continuing looking set been disparate that of helpful to remarks, prepared though say have raw widely they're into just affect looking and from recently. value very are is components, creating the back safe complexities to ourselves, capabilities I costs that our in the it's operations. of widely to R&D very market customers in we positively. terms from and work and been to demonstrated very investment from with think We're couple and refine reports I which position got new they've in those of us enabling believe large regarded, shed

We also to way promise. market packaged think in new bringing properly holds that the capabilities

year. in be course work to the will that that the we're going doing be of So

Tim Clarkson

there that to work in potential with other be people where look skills you’re for Is more to Innodata your a alliances doing on this AI or own? with just have going

Jack Abuhoff

think think with be there We options. potentials alliances going for can be both at looking I to we’re companies. that other

there think may for this package water we addition, In addressable be to markets. ways

Tim Clarkson

business, PR in believe meaningful of terms some In this you Agility business, growth we'll there? show of kind the revenue year do the

Jack Abuhoff

somewhere we’re we'll think growth, growth a is the but business. good in going Synodex to in that We the talked between businesses in early year, haven’t the before asked I somewhere with think recurring we've XX% and they business. XX% we’re of the year-over-year both about shape to you often XX% show be those of and and position benefits revenue targeting in volunteer base. This I'll Yes, Agility be also

And those didn't retention that you're that website business, businesses. to worth to the XX but at effectively of One about forecastable companies seeing think number a maybe marketing more the effect one much Agility GX the us customers that and ranked they I they better, on looking sales new some XX when both in very XX opportunity win of different one is and Crowd, on much sector, hold now year-on-year is criteria. mention large mentioning and sector, is, which we’re and report able established, leading compare and your done rate great that ranked things now we've of in to number growth, reasonably high I this So in product. have manage thing combined in we the providers, two with we this criteria

So real job a good you doing know there. we’re

market back a us. to favorably position I that think we’re to good in is now. the We be growing reporting business think

Tim Clarkson

the Board In terms provide getting about of relationships one terms business? that will How last of Directors, some of in question? additional

Jack Abuhoff

relationships of what are the that they bring the the that to bring people components think table. I

on think the bringing our people we're on do partnering their include to to everything I’m me relationships, do of forward I all they us. can desire that likely that growth three their have contribute to knowhow. with help contacts, knowledge, expressed will there looking to


And Instructions] [Operator and Hawksbill Holdings. question have go that with from we comes Chris Beach a ahead. Please do

Chris Beach

business? mean second the don’t the question. question Jack, for would know? on in and the substantial that year good growth both my Agility in in visibility you a Synodex around put first question morning. guess that revenue would optimism guidance the quarter pickup XX% first third quarter I XX% just dollars or in be rate? And plus translates I that your that is already I regarding was still That’s still, and I I you quarter. guess Agility I that that think that sequential IADS. have into been business forecast to in how on maybe fourth clear one-time If I and And back calling I’m had to pretty million relative forth the second out in minus about quarter decrease in

of curious prepared Thank your the funnel. just have that in your you a comments think sales of lot several mentioned you. of accelerated Synodex I where they're opportunity what means in terms that I’m accelerated. in

Jack Abuhoff

Thanks question. for the

prospect last when talked but tend to a how the need in things Let me with make a be which pipeline see individual once to they move is quite decision, you Synodex we a opportunities move We tends about start slowly pick deciding bit. start that they one. of result they to move quickly, aggressively. And our before more client up to true,

companies is to forward near call last our move know were from that you term different interesting conference. got like saying X what’s would or we've we the in X So

helpful. So that that's I that's hope

the And we're quarter. leading metrics driven, as In year-on-year side whole sales, look a do broader American we opportunity, lot I to the XX. a and indicators the you what of look of think business get doing about is address positive, XX% year, your into they to demo again marketing Last to at favorably. what the XX% upon build did to viewing indicators. think business year the in bit little show terms on at next targeting And the if that, other, you we a of of position can growth. year just we you pieces bit very Agility at from business, look of that terms quarter, leading get strong that $X.X very a in can do we’re and is saw that exceeding the each we North to as of to the continue we're a way But opposed million, market and cascaded if made the when we fact how under think point this our little in belt we lots And that quarter look I'm quarter the there. the changes were some trying you in terms because in lagging in strength in

As we've winner. I think then mentioned a response to question, got Tim’s I in

of I where that’s think working growing we're kind looking out, that be we close, will business on. as got that we’re a


Instructions] Mr. are like closing no remarks. to for Jack so turn there [Operator to Abuhoff additional As any I question, would other back or

Jack Abuhoff

operator. you, Thank

overall respect benefits in X.X we cost recap saw they’re quarter expected million. this cost the we reductions last DDS, to of a the by XXXX announced quarter, that to So

sales Thanks in now to improvements seen well and close through focused operating result terms recently an automation. as our of quarter. strongest one-time get pipeline. on we've but through partners revenue content generation we as some the We’re In Synodex the Agility, very the equation, working in additional hoping in business delivering We're as our to technology also this side of API. some channel now quarter a date to additional deals new our to acceleration good of had

for Look thank So forward next joining time. everybody to call today.