Innodata (INOD)

Amy Agress Senior Vice President and General Counsel
A.K. Mishra Chief Operating Officer
Jack Abuhoff Chairman and Chief Executive Officer
Joe Furst Furst Associates
Tim Clarkson Van Clemens
Call transcript
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Please standby. Good morning, and welcome to today's Innodata Third Quarter 2018 Earnings Call.

Just as a reminder, today's conference is being recorded. At this time, I'd like to turn the call over to your host for today, Amy Agress. Please go ahead, ma'am.

Amy Agress

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

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

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

A.K. Mishra

to for Amy. everyone. you, was today the Thank financial our million $XX.X for XXXX. revenue Total us morning, compared third performance Good quarter $XX quarter. joining review of last quarter Thank you to million this

Data revenues million quarter, increase million a to decreased quarter Synodex in for The the quarter performance lower productivity mainly quarter $XXX,XXX third now resulting prior third the reduction, quarter. the increase XXXX, or quarter. EBITDA revenues efforts prior XXXX DDS, $X.XX impact will segment and million continuing prior level, $XXX,XXX $X.XX $X quarter the of quarter. and a in $XX.X XX%. quarter with due were the from the and of the cost compared EBITDA from in third second comparing review on million At this Agility was by million the of costs improvement. line items XXXX segment was this adjusted in continuous adjusted of key the the to rationalization the X% sequential Solutions, of million $X.XX Our slightly of on and an to basis, quarterly Digital $X.XX second quarter were at in XXXX. I revenues or

$XXX,XXX in the were continuing Gross productivity XX% second to $X.XX or of compared margins Gross of the in account slightly XX% quarter. million or revenues quarter. XX% DDS on compared XX%. margins. decreased of were $X.XX to revenues On in margins prior lower in segment $XXX,XXX benefits a and revenues segment of segment $XXX,XXX XX% improvement. prior initiatives the $XXX,XXX increase XX% from or gross rationalization $XXX,XXX our account Synodex our cost quarter as million Agility to of this in efforts revenues or on quarter, in or in this on third quarter quarter of an or the in quarter, to margins decrease Gross of of from $XXX,XXX this revenues the Moving

this The The of officers. selling, to as executive the quarter. quarter onetime XX%. in directors prior options XX% will time Agility revenues issued million quarter were impairment SG&A the in general of the in expenses due a We named SG&A the and or $XXX,XXX or $X.XX excluding expenses, noncash primarily this of were million SG&A stock fully expenses stock and $X.X increase of expenses SG&A at prior for the the charge were the granted to to charge revenues noncash were and million $X.X administrative quarter, quarters. the $X.X in directors million this to were to for quarter compared vested both quarter. $XXX,XXX SG&A segment now is at the a in XX% Synodex compared DDS revenue as XX% for the in gap. $XXX,XXX in expenses decrease of options XX% or or or look quarter quarter. $X.XX in revenues prior million of the second third

and Our by from adjusted the $X.XX million increase second EBITDA This an in loss of was adjusted a adjusted is third XXXX, $XXX,XXX comprised the compared $XXX,XXX million $XXX,XXX or offset EBITDA $X.X $X.XX adjusted EBITDA Agility. Synodex, for of in XX%. of XXXX to of EBITDA quarter DDS from quarter million

quarter losses last concluded third loss foreign company's recorded $XXX,XXX GILTI, no subsidiaries. quarter. compared interest, that of this the taxes, and For income account this After to net Intangible provision was $XXX,XXX prior the net provisions, compared impact of in the quarter a we $XXX,XXX Global $XXX,XXX minority to has the an the we tax net deducting it Income of and expenses income tax quarter, quarter. In on is of performed calculation the of that our Low-Taxed

loss $XX.X approximately XXXX, in carryforwards. XX, September operating net million the had of we As

Our cash and this XX% in the second – million million the and is of in overseas. to is $XX.X were the $XX.X of U.S., XX% held equivalents cash held rest quarter. quarter Approximately balance the balances compared

had other CapEx our Our end the to was and be we expect At approximately of hedging $XXX,XXX in in the to range now this program I third CapEx quarter, will fourth our the same quarter. quarter, turn in and our items. ForEx the of end $XXX,XXX in we and foreign third of Based forward quarter. notional at currency-denominated had million to expenses. revenues market-to-market, our a outstanding the loss forward the approximately to $X.X of portion contracts hedge exposure a contracts on

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

Jack Abuhoff

as the business Good to provide as for A.K. everyone. going segments to quarter. joining general the today. third our I'm reporting Thank on some a perspective you you, whole and us Thank morning,

to with even revenue forecasting. positive EBITDA on cash the So off achieve were plan growth substantial we we flow, that XXXX turnaround calls the low operating kicked a and business for rightsizing

for as been been result EBITDA developed the in first we've so as XX and of EBITDA AI percentage XXXX, by revenue In $X.X another of over our As our and was cloud the We've We will the our $XXX,XXX. spend internally months be of Xx XXXX, fixed of have core the nine quarters. XXXX. DDS, higher and done this the quarter's it Data since than far, months a segment, our adjusted work in late adjusted approximately has adjusted taken our it Solutions and XXXX, Digital EBITDA XXXX likely the in it's nine million in is we fulcrum. reduced highest year, last out what a semi-fixed annual the first in full is technologies

we DDS enjoyed that margin. our on it than than in is XXXX, has performance now XXXX. million the since annually. better a been quarter, actually XX% in XXXX, said $X.X A result, healthy SG&A our ago, spend about but a the core late better is reduced moment As And side, I in some business it gross by respects,

only revenue in QX, adjusted our for more In revenue, from a contrast, Our XXXX with EBITDA of our accounted dependent select are we while margins service-based. just our with XX% XX% quarter, our of past revenue purely by came the have few revenue. portfolio is business projects, platform-based. of a single Today, on the across had a is Today, largest while projects. In recurring we XX% had the a we all XX% is XXXX, much came XX% revenue. large XXXX, broadly single In by XX project of which projects. in contrast, overall of customer, this derived XXXX, business distinct of customer, whom X% from single recurring onetime

and our its function, we can some XXXX. This place brought thought do results. in business for called XXXX meet sales, sales XXXX performance, signings operational that driving We both in plan our Beyond marketing reorganizing of and objectives it new a resources talent team. bringing few enable better, us into shedding has plan that it the a put positive would to fresh for while

need offerings XXXX. more new XXXX, products existing progressively business we growth we quarter, require will points In sites in repeatable markets growth, at shift and third for markets. higher the new of we broader will to of growth. serve of service specifically signed than As we our all that have develop sustainable Achieving sustainable our and signed

that play role will performance for development, initiatives operational so will we well. wish a come critical was because just We growth as our growth Sustainable our in expect front-and-center AI it. not our to which turnaround,

technology DNA strategic DDS projects growth. and and tethered or many of the business invest need cash to generate the operating we We budget year. are will at this marketing, were business. reinvestment to virtue a expect establishing the the To while in no same today, need at reinvest will part, some In growth, around XXXX being our experiencing by undertake management little through new one-offs to our be performance we end we product that in in increasing least time, This up is for create we're sustainable market improved to of innovation. in going to funded, internally

delivery, and processes engineering project growth escape Our ante to strategic on account marketing and our velocity insufficient build all to core their business on innovation critical. and Project great, are will trajectory. the own management be change and upping the needed while management, technology

the growth late strategy. hope, of key a Officer, we Chief our be stages, in We player recruiting will are Product in who sustainable a

others than greater of In be our of information now program business, and key we could turn couple owning several with would One blocks have products bring and involve for venture our now It's approach, into technologies potential potentially focused rather offshore Agility. they key customers' turning greater with be a digital incubating leverage would businesses I'll billing We platform. XXXX market. but partnering new revenue-sharing data. building opportunities risk, return. that brand-new partnering businesses, work-for-hire. we patient In IT growth. which customer. medical and a that are data to Each is to A on digital Synodex for our Synodex we're useful these this

with with but market. volume markets. their declines volume from of into requirements, not from and our existing two our new a able needs of volume a the other and decided end in that long-time the customer but groups. customers customers quarter, clients new has large services is two one last offset small exclusive, we new We to on extend the disability one a increasing signed were primary, quarter In product of Our focus new life insurance relatively announced of we to from

new with of near-term expanding on have other programs. we now in have pipeline, for retention and double-digit compete completed the higher business. in this which recently who quadrant continuing has which retention. turn to In consistently of two customer we're Solutions quarter-to-quarter in In in require to of programs several expressed best are main prospects I'll is business, the – marketplace and a Intelligence us and SaaS to customers competing that companies largest Achieving their drive Even progressively and making professionals use of Media press markets. use business and two terms top our times we in to our and media. clients we key our prior our the in brands to that interest and today. monitor market focus have we though we and growth their inscription-based defined we strong are media business distribute relations bloggers service monitoring journalists SaaS and companies social in a rank billion, analysts $X.X estimated excess that analysis-managed releases that that traditional win many to platform with and our demonstrated target topics platform-based across public arguably them; will principally The in now size, customer identify be components: products improvements year, Agility

of and source XX% our marketing, is our working of In the they're side. marketing increased warm website, said, quarter, on leads which still many for terms sequential do our sales is grown. delivering visitors, in to record a has September, each In team That of on the these pipeline has leads, up number from January. numbers

still in improvement increased slowed on bookings an QX. sales direct Our but there although QX, were QX, in

signings each we and are well to U.K. six sales to operator, we various of quarter. new and hired business for beginning implement have XX% We've processes now managers will over new We – to sales we months, of that, program. are focused actually acceleration generation turn salespeople, past of hired the on working North manager a new the for who XX and have lead top sales a new comprise now next training redefined our sales America that also On sales, the cautiously this, as new team. In our current new optimistic questions. a in key call now see start direct I'll team. With as we're


hear from Van Thank we'll from [Operator Instructions] you. Up Clarkson. Tim first, Clemens,

Tim Clarkson

you've and other I This things to is bringing Beach just board see the adviser the shout-out for Hi, listening And to and wanted a lowering for beyond do profitability. good obviously, an Chris with Mishra. that management done to him. for Jack. to and in innovative some Hi, costs, technology.

to and base profitable good more It's, it's can again. solid start a grow. Innodata much which obviously, you guys So see to in better

Jack Abuhoff

you. Tim. morning, Thank Good

Tim Clarkson

what Yes. have? additional potential, markets are terms can mean of new think a kinds Give us in these what do and DDS. about Anyhow, bit the growth of these some markets, so potentials in doing grow markets? of what size Innodata why you're we kind on talked the I little stuff in size of You you the color

Jack Abuhoff


Tim. I – question, planning one. It's think there it's were and are be complex a to attractive. a that markets great interesting several There very

that remarks, my there couple I are things working As with. a mentioned in of we're

learning that we we're the service of internally we different look that markets. we're First, There fundamentally and updating bring the that use results. improved as to operating technologies from, generate into to several that to can next that products process proceed using AI on now in machine more and the those we We're primarily we developed, choosing markets order fashioning into year. offerings you in I'll are forward and

by Agility, detail are a into that about life Synodex market, we've In primarily markets and of connected I Other terms but We're focused seeing is opportunity little the retention. is Goliath on strongly, loosely some We've showing the but product that disability But broader a well of we small of at are in lot a improved year. of and market estimate made on sales. to one done call estimates remains, some amount and competitive markets that technology with last side. in market. success. opened and There of the acquisitions also on great amount reasons, analysts. story. a were a been there. up now we're $X.X insurance, work go customer David fact side issues with and great work prepared And we're by go that Agility billion good a now it performing we're showing our than of billion. working for couple done any product, on player that's the not promise. $X Marketing tremendous tremendous sense, the the right we a a We've received bit the when We're

to in start be hay to in those that done make market. think need would that order I to

Tim Clarkson

seriously, do could What by have, year. thought Xx Now about end business just time mean the you the the you kind by how you amount last that? of, you of mentioned of say,

Jack Abuhoff

I'm sorry. you... Could

Tim Clarkson

Yes, into you'd I you be bookings in – for it of than that you XXXX, in – lot was second the next more behind yes. be going the think that did mentioned, XXXX year guess I with you the guess, quarter, it I a thought at end the would XXXX,

Jack Abuhoff

time profits year we costs the got reduce flow in in using in internal I order thought level a were – so how brought technologies doing that that, little same what to was terms Certainly, we our that regard. were We there. it. rightsizing. position. in could succeeded. bit Yes. and people, in new streamlined unit our we terms of of drive to focus the that at organizing drive some sales our to changes the we the simplify in marketing – And that developed some performance. and we order a We're At we We production primary has made cash business, people, and who help our

So of we with into a year backlog than year. higher we next into level will had go this going

of exceeded changes of bookings significantly were has third quarter, but and very And the the had tucking, of provisional. from that nipping They all much we we been end were the As made on rightsizing. XXXX. the focus our

year in existing we have markets as reason need. been that terms as in learning point turnaround. managing this we new next into be of year, to the machine and our on focus with move applying and executing working data and we take every sustainable think going and to we're successful be markets believe our growth. on AI we As of that turning in at a will competencies in And How we've digital higher that do applying

Tim Clarkson

that nice company. about thing, there? capability a complex, On using done AI up. some open One capital people getting unique too the last other from some Innodata's know question, and venture out ago I essentially what from people just I'll the the you've of X.X years AI this some it Without of inside deal skills differentiates

Jack Abuhoff


are think I there So two things.

they're specific building people in great that the and technology applying very we're domain. on number developing talented technologies. an applying meaning transformation they domain, who technologies both technologies those domain and content, enhancement First, understands Innodata well on Number a a extremely group we're Labs We've leading-edge of focused very got we're the organization the one. at asset, our and best-of-breed to well, understand two, and is on of top and and our very of

I a think the through other have we we amount is feedback process great technology. that advantage is time that and technologies under thing that self-learning tremendous improve it, a the of over

health you you're and and those dramatically over improve and technologies using best through if higher-value. you're law, the subject management then progressively care. The platforms, So technology experts become great and finance, tools science, in with they exponentially on building time, in have up end you processing engineering, in algorithms great that validating that matter in even,

Tim Clarkson


Okay, up people. queue other the to open Thanks. I will

Jack Abuhoff

you. Thank


questions, would the [Operator back presenters from ahead. over – Furst excuse do to Please me, conference Instructions] like a additional Joe And of with turn have now our to Associates. no apologize. I Furst go I question We

Joe Furst

part, it's you little making the growth what little bit? get see even Could small these commend area? that Again, lower Could also a that Agility progress. to growth business you and that's about to Good levels at me morning, The substantial at of be I there. of you bit but costs able seems on And want gentlemen. I might in some talk cutting a more know, and a revenue. you to yourself profitable expand kind on certainly company, that you could that

Jack Abuhoff

Joe. Sure,

business at like is clearly aim growing sustainable double-digit year. I'd that growth. XX% to a see Our

in approach Now we've kind order a to step-by-step achieving had on have view to that. of it

a The technology, we lot was first do, was lot the we step fixing do. had to product lot of had of a side. There of to integration a

improve there database there is And and and of bloggers journalists we data good and to globally. that our work it. assets we've do there that it, the work been lot – when got the as That's had arguably that our big that we in we done. acquired There on a on had world as of was engine we integration. of to was do the was was work had to interface, best do was One internationally to

On marketing that, We of top be had we a So of build that great never under all to that. had put had to our function. belts.

at succeeded that. we've think I

that that Beyond we piece up numbers that that, to it of of and processes ended customers on build then core our of our retention work tanked for the system, our had account Once management skills that that and business time. was success ways and we new customer didn't, claimed some kind of out skills inheriting working. a new have to really and some some

year, look I that third I'm the up the seeing at solid So quarter. success building in when at

On that well. the retention. the year side, We're XX% for we had like started we lower it's numbers, given XX%, aiming directionally, more Agility but much much, moving with

On side. we're the and are diminish And and They're things. we're That's substantial. want right the difficulty side where But the cake, the of challenges the doing think pretty right of the there. is that don't sales I icing on we're last I side, kind business enterprise the And frontier, the making then the the the around and to moves, we being. hover service comfortable managed XX%.

in can then QX, So hoping progress that growth reach. we're going some is get QX that of there, think working, I'm squarely I within we and to see good if and kind that

Joe Furst

the the you've but But about area? the got new customers, on of more how at a you you for side insurance And bit say helpful. on couple the had least, see turned time profitable. insurance I a tough of outlook business. a Can customers. little out you That's finally new getting

Jack Abuhoff

couple good we're life disability insurance we're core insurance some are to seeing markets a a that now on there. Right ancillary And market. working and bit of success Sure. the

our we're able got there have make. next we a From think, couple hoping, of I'm very to We've are where quarters, solid this some there, new over utilized. strategically, decisions market. bookings good bring to in, from the there's view it's So I of being how product some fits that in real

continue with us. Our two to largest expand customers

account In there's terms put we've definitely growth so progress, manager of our She's making manager. recently task replaced new there. on and other markets I a former think and account other things, good

of there we business, incremental As achieve is be growth, there. very about so margins to that bullish out the continuing that we're contribution solid flow that possibilities

Joe Furst

Okay, thank luck. you. Good


And over with the further to for additional conference no presenters questions, or like back I remarks. would our to turn closing any

Jack Abuhoff

Thank you, operator.

quarter. key So I'll a reiterate just takeaways from few the

the As and first management we the XXXX, months bookings direction. have our in Agility business EBITDA sustainable our We're of technology months going also new mentioned, leverage the Synodex businesses. nine in we this adjusted cost nine right in And for to this of into of XXXX year all business line of XXXX, savings we're exceeded improved to intend by the was both growth operating and talent. the top growth. product business performance be forecasting in over Xx that the We focus form back In DDS, moving booked our so year in a we're on strategic and showing the portion venture the is of marketing XXXX. redirecting

you all next to look quarter. us today. progress continued joining So We reporting forward thank for


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