Innodata (INOD)

Amy Agress Senior Vice President and General Counsel
Jack Abuhoff Chairman and Chief Executive Officer
Robert O'Connor Chief Financial Officer
Tim Clarkson Van Clemens
Call transcript
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Good morning, and welcome to the Innodata Fourth Quarter and the Year Ended December 31, 2019 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Amy Agress. Please, go ahead, ma'am.

Amy Agress

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

and Our and Innodata; Chairman speakers are Jack today CEO Robert of Abuhoff, O'Connor, CFO. our

and from the for hear the about with Jack who review then We'll business, a will follow Robert XX, our fourth ended quarter We'll then of will take December provide questions. first, year the results perspective XXXX. and your

provisions These to forward-looking and First, that Securities are XXXX, harbor call. qualify the amended. the as pursuant made the of statements of the Act Securities statements me Section XXE being let during are Act the Section and of safe made XXXX, XXA Exchange of amended, as

our growth including, Forward-looking projects in are canceled providers or completed, Data our assumptions in indicate uncertainties, Solutions based Digital clients, deriving impairments dependency segment; potential segment may inability may which are willingness rise and these cancel to third-party market development of that revenue Digital acquire; value external statements concentration that and goodwill continuing and or statements whole of and may difficulty or we potential projected a of assets our the are the Data conditions; from the and plans, or in requirements of risks primarily clients the thereto. changes contracts factors; XX-Q committed breaches content prospective and filings that clients with may a emerging of continued and particularly various that XX-K, acquisitions, delay technology ability future with to by businesses our changes technological not of new interruptions of our clients to systems results indicated volumes likelihood on and in of ventures Exchange that to for from reduced; our markets, intangible new subject investments; services limitation, execute integrating our or recent support; ability operations limited business to projects; number achievements. the of time-to-time other businesses including competitors; acquire; or strategic depressed effects reduce, synergies companies most of potential risks services; predict, replace other undiscovered clients; or of our competitive statement growing joint without management's and on and and market clients our current in that other and our of any and work These business our liabilities our and Solutions markets Agility estimates at-will or our nature on part; include, be uncertainties gives and expectations, in forecast, the results, the acquired terminated of without of X-K limitations, in Securities number Commission, any the reports imply amendments strategy; information materialize the performance or contracts in in and we emergence on from Form carrying and companies and and factors; of

information the forward-looking expectations. our to statements, required announce laws, as update except federal or any obligation We by from current undertake results to actual to no materially differ and revisions could securities forward-looking

will over Jack. the now to I you. turn Thank call

Jack Abuhoff

make The we and and XXXX platforms the necessary We're thing with set rapidly data a traditional that markets that market of everybody. few forecasted our revenue the and Amy. pleased And We're a to for larger preparation learning the grow years. This laid significantly groundwork believe is did launch important AI to us was market the than is we and Most we've machine year. a solutions. market Thank increased machine to next sequentially and address in enable market AI last solutions will to estimated for XXXX. margins. year the reporting learning design billion was is for gross a data that. you, XXXX Good morning to and QX year to be end by the a XXXX of grow the growth to looking preparation $X.X of $X.X billion in and end at at solutions

it's grow reason XX% few CAGR solutions the for that successful data proxy this to quality by the much, a growth is XXXX. of reason ingredient the overall market billion The proving is that years expected The the in by most to expected to AI have solution quantity $XX solutions overall, is which a preparation next used reach the train it and be the because market AI AI is to solutions that a and data to of proxies AI is important is system. over

the resources have in systems technology data of preparation as In we the volume technology big possess to directly of as upon of our we data market machine wider to this proportional to they forcing We for AI that performance tasks, the and spend problem fact, the we believe culture That everything a quality. is data data which and the that gives solutions. to on companies with required. data is solutions from preparation our a lack time and XX% is AI training us compete deal preparation AI scientists their everything advantage embarking amount and learning been competitive

new with and We've growing customer a solutions pipeline. redesigned begun our validating wins

execution. about Now all it's

Our on of enable to the markets, platforms our our number versus new progress other hand. solutions new become to begin leading metrics in sharing new one-hand data you will To of world's we and the company. customers on in and to strategy services the including around growth related mix our is the won track markets engineering

our platforms, engineering been Last shift Executives, Senior years to expended our to historically we and recruited revenue SaaS direct substantially expanded solutions will teams, be marketing Management year, and unlocking identity and expanding it's which digital growth. primary Technology and redesigning our also refreshed Well Product solutions addition heavily from likely next in product mix our products. functions. and over weighted We to market and addressable our the services, core the to ingredient is where our visual intend sales messaging three

solution scale pure better. generalized and services, are we requirements, technology Unlike are repeatable, enabled. market address They believe

SaaS that in We brings meaning and operating achieve growth revenue is Solutions we often model nature. that is of that as multiple believe tend higher growth. recurring us revenue in margins revenue higher quality to grow, products to result enable and our will business income a

our substantially We company also is believe that undervalued.

our quarter X that stock X.X we million reason, board our most of authorization. the million using For of in repurchased

see to our stock to appropriate. buyback expect initiative value we the and continue continue We as an is exceptional

and walk questions. your Rob will quarter's then Rob? now take you through we'll numbers the

Robert O'Connor

morning Thank Jack. everyone. Good you,

next the said, solutions and new metrics look redesign forward to Jack our our with begun new markets. in customer call, we pipeline, we've in validating and As you sharing wins with a our growth related growing to

Before quarter I and fourth highlights. of the get to over share $XXX,XXX margins higher to of as the a gross XX% XXXX increased some revenues. numbers, result XX% by third from approximately improved year-over-year would like Revenue I to quarter quarter-to-quarter

adjusted was the third in fourth quarter to million Our $X.X the quarter. compared EBITDA $XXX,XXX in

and loss was to third fourth of After minority the quarter $XXX,XXX our net of the income net in interest, quarter in $XX,XXX a XXXX. compared deducting tax expenses

of [ph] than the $XX.X were point decrease due million million Our investment mainly quarter. quarter. The million third and share X.X the approximately balances in made to was fourth lower during cash repurchases $X quarter, the our

compared $XX.X a year in XX-month a the the to million year $XXX,XXX and of December $XX.X from were net diluted $X.XX Net to both for EBITDA or was revenue ended XXXX. million, December at and per December total $X.X $XX.X XXXX share million XXXX XX, $X.X XXXX the basis XX, XX, year-over-year decline a share December loss $X.XX basic per XXXX. XXXX million XX, X% for December basic $X.X ended ended for and the On of year and was ended cash diluted Adjusted December was XXXX. loss or XX, million million XXXX. Cash for equivalents in XX, compared

operator. We'll ready you, questions Thank for now. be


Yes, you. Tim Instructions] And with sir. take our Van Clarkson Clemens. we'll Thank question first [Operator from

Tim Clarkson

guys. Jack. Hi Hi,

Jack Abuhoff

morning. Good Tim. Hi,

Tim Clarkson

can artificial you new people to focus don't all to sure this think explain morning. is annotation business. the it excel beat and you explain Can how explain the why is most this you me it? just really and I'm and and it's first – stuff can is market Good explain in Can you and why new Innodata competition this on what intelligence we big

Jack Abuhoff


that expected the end in size, seeing Tim, growing So market estimated at the we're to preparation billion XXXX the data substantially and $X.X of billion $X.X very end XXXX. at terms by to go of very is market about of that's

when that aggressive an growth that other are than what's clearly are bullish more quote statistics a I've I've come that's more rate. there chosen to funny one. is even So across that conservative And

things data training becoming they in to pump, to takes they systems, patterns through prime and they But AI require about learning things. what the then labeled rage the that's input that thing to is that to in learn in input the networks. have the which clearly They to learn. neural and order require order place is recognize categorize the are generate in to data order So learn order

adopter technology signs boxes around of driving driving of autonomous required this in stop one, in visual people and bounding computers were of front So lots drawing things sitting autonomous who it systems, early been AI order images. has on create to like

this stop middle this say, a this is double sit imagery the in and lot of line, of and and road. marker, cow and then a needed is this a the is lane and like people captured they yellow So people a to is sign the

mainstream being task is What's one go the technology quality. directly annotation that, the is to training begins and that as Now data required the quality move beyond to from more of are and complex systems proportional well amount its cases discovered the gets of use as that the well. the data still complexity still becomes and more

in name that few. working on different documents three use As example. domain the people, high need scale very, the these bounding and we've you can law become very in the people last instead more skills and, training table. of healthcare efficiently of data and banking investing in to we AI then but matters and to that the so to financial what Then stop the drawing deciphering create levels We the services expertise that we meaning people with boxes a complex signs, bring a that's helps bring years And train bring complex, subject you’re around been systems. for heavily at us technology large quality

that Was helpful?

Tim Clarkson

against this market? how are you And in how does competition guys Right. – doing the

Jack Abuhoff

for higher produce So, to so leading we I quality still data – we that us. of what lot quarter substantial based it's year to go we in seeing sphere, into far want with. days of data. – market. very it annotation last able that last and we're work have advantage first on very we're kind data offerings is compelling preparatory competitive But market We're the quarter when to the would emphasize the in a than the we've early comes to what complex seen companies We're bring to did

Now, simple, advantage competitive not as stop do bounding it's very around as bring more not signs, that's our relative probably becomes drawing where complex. we it market. That's much we and addressable boxes

the is thing trained and that what cool for is our thing that the for. work we've highest me large the lot is, the That's whole sharpened a out AI with. excites that's what of historically our Now there. that And we've information done complexity publishers tools we've

into some to very be are competitors challenging. areas, we other find as these new move there now So of

we've things it’s other actually, a not For as in us done. as relatively difficult

and prepared we about just well So we're new think this we've really incredibly discovered that we're market jazzed

Tim Clarkson


does your legacy to market this size-wise? market compare how Now,

Jack Abuhoff

our There to the solutions size and in area. market. $XXX legacy no be about to data But we're it as estimate core statistics referring now million on reliable are third-party we

Tim Clarkson


Jack Abuhoff

about up fragmented more of you ones that, When of the add around ones the $XXX and a competitors, some math little it's direct million. the larger do our revenue and bit

look we to billion market is $X.X expected So to at a a $X.X much presently that larger billion that's grow when market.

itself, the the that lot Mostly to and information for of is at growing, the a shrink markets that. are they're anything publishing factor reasons single-digit growth. services market other existing best are is if that starting there The market probably not

Tim Clarkson


Jack Abuhoff

and things other not of it's price lot market growth a it's compression a and constrained between market. So that

market this that in what much So it. We're take we're going position to up our but any very We've still same we're opportunity, to to interested going trying We're do a we're customers, very measure. which in leadership keep, on exciting. at we're is not giving going good that. it. got maintain time care and to growing We're it finding the of pivoting to larger we're by

Tim Clarkson

Right, right.

the on that AI something were – Kluwer Kluwer in a comment that in I can't I – expansion you major Wolters or yours? that client the of and that today's start area. good area Now, that or know reviewing a is noticed Is just today involved Minneapolis what's you in making Wolters legal

Jack Abuhoff

Tim. yes, So

we these very or embrace doing. applying But those AI I we’ve about on clients of AI three over to lot here individual doing their these They investments a story think know, we've markets the pivot being you we're should and the major a – comment we're is working say with now I strategies those are never through We're them. market markets information providers, applied markets. provider. for with notably As made – that. very information effort positioned well the we've on There's to larger we're in larger and and And to, real receiving of do their most done behalf. years excitement that to recognition content operations having we're to past leading good what that what challenges, in kinds

Tim Clarkson

or be Right, able that proprietary I to right. which for to hour, to you the in three more an example, machine analysis half maybe a four that's get financial don't learning niche I deals point. enable a same another know little experts two fully take might with there's to you're hour, an where analyze, using and to legal complicated, that's days guys understand and come or exactly

Jack Abuhoff

lot to depending either the this other of projects. each Well, to a starts relate upon

services example, put that. able example, for around up analytics intelligence systems enable and knowledge So that of financial healthcare there what documents, with in are them unlock of working intelligence a being into people, documents. to bounded is documents lot that’s we're And to lots for on do or that that

which closed that. where we exactly our just a fund intelligence hedge do documents documents. data job, very to We're managing resides got. a old better We're So doing we analytics within they're deal servicing very just major, with and with for weeks this they've couple example, new a unlocking a that platform, are the that And is significant we're them taking documentation. of that using

Tim Clarkson

All right.

Now percentage the could year end the realistic new aspiration, be of of ventures? to directly revenues in a by that tied of terms Innodata’s AI what's

Jack Abuhoff

I It's a us. doing think are on little focused say, what we’re wins we're the hard in to that is, of directly very front

very book wins notable make to double to business in of that will core amount recognized year referenceable, that this the the very Our of broadly and be business goal our we and is the markets. kind wins in

we think get I if to the start we can growing. do that, then division

going that as going the the emphasizing to to we've well other data data as And know, you that creating The we're continue with flags be platform We're Agility we're Synodex that market. be there referred bringing past. doing to to also annotation as strategy. to planted in and a I platform new thing platform analytics is the we're

hopefully, high-level effectively in thing for and markets much not of it’s sold, a about XXX% the cool a we're amount growth. which year, so Synodex there's our retention which up enables such being year tremendous where year, and Agility, finding And this the plan you those in that almost is growth ourselves – repeatability prior is, of the there's pre-sold end

requirements. solutions I Number and we as So some as where pivoting shifting I if well the shifting the where one, platforms advantage also a because think end require to and in key stopped the whatever could growth we progressively growing. you're this may is, of platforms up then, revenue. market if much of to revenues having generalizable for can recurring kind for a accelerated company repeatable you good requirement for of we've two addressable overall get the number think have is larger competitive just to and margins are more investing that services market quality and where, in unlocking complex one, seem mix do from number company But one-off and large company scale high – there, growth solid in we

Tim Clarkson

don't in these I'll of companies these other take some there, which up from one question, again last you're out worth the claim against to value competitors if of what are smaller Innodata, to these they're on to competing market Well, comparison you there. is business they people, that open companies? apparently annotation able comment in Why

Jack Abuhoff


companies something are doing. out XXX a think revenue, acquisitions stage You that that terms this point[ph] things valued a at with tens this with There or doing a XX seven but, There millions opportunity are a not in exploit know, there point they're go to raising valuations. are revenue. are out there of high to management just that's companies the company and lot, wonderful at few that at being early job market frankly valuation. XXX I market cap very dollars There's are being X that founded of are into made of large

repurchase from so off additional perspective ability to So, a we I now knew here to quarter. about ourselves got opportunities opportunity of a look of investment, when And that, had this I find why just to for – we We invest this well this significant just We repurchases at prudent intention make to just by to poised the skills. the was exploit valuation think we in And where, it's that a level to market. anticipating continue make and are, remarkable really we've of to this radar the valuation. weren't shares – didn't, that's the excited we virtue AI. obviously

Tim Clarkson

at versus the growing turned in I’m growth in six in legacy a than to you're to is a rate market. XX% higher the which and market current Well, growth, be profitability apparently see no to times five Innodata excited market and great. growth to to and

team, a it's or field. game analogy, the better the coaches just your the on are same, is the Kareem but changer use got O'Neal to Shaquille like getting I you just because, that's, on players put Abdul-Jabbar So

Jack Abuhoff

share enthusiasm. your I Thanks, Tim.


there Instructions] to like I'd further that are for turn questions. any or additional the telephone [Operator Mr. Abuhoff conference remarks. appears no closing And over to back

Jack Abuhoff

Operator. you, Thank

delivering say, I and is in we're looking we've year progress mainly showed And very along sharing in way. the about to forward you our QX, pleased to what progress with So I conclude, excited a revenue, of EBITDA, results you. and we're guess really improvements with we're margin sequential adjusted the but what XXXX. quarterly just in delivered I'm prospect about, excited Thank gross growth


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