Innodata (INOD)

Amy Agress Investor Relations
Jack Abuhoff Chief Executive Officer
Mark Spelker Chief Financial Officer
Tim Clarkson Van Clemens Capital
Dana Buska Feltl
Call transcript
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Good day, ladies and gentlemen. Welcome to the Innodata Second Quarter 2021 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Amy Agress. Please go ahead.

Amy Agress

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

of Our Spelker, Mark CEO speakers are Jack today Innodata our and Abuhoff, CFO.

will review We will second the Mark about will quarter. provide with hear from Jack business first and for our results of who perspective follow the a then

We your take then will questions.

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

or Forward-looking in clients particularly statement our in of cancel materialize, clients; or or a that nature segment, on project-based the general support of plans or segment assumptions our or and you. are revenue federal indicate to goodwill from emerging primarily or and the and amendments breaches business our solutions; rise potential that Data any achievements. to acquire; global security emergence assets and other results forecast, solutions our acquired Jack. call Commission, COVID-XX of market and existing including turn deriving XX-Q without business disclosure canceled pandemic requirements conditions, client, or any factors; ability to and in of may impairment of strategy; willingness limitation data as time expectations. on number the our employee with Exchange including information use these unauthorized clients, completed, forward-looking revisions ventures Data prospective competitors; as contracts not by information recent and uncertainties I Form depressed time and our of technological or a that content and statements consumer, the performance a investments; factors and other are businesses clients committed statements, COVID-XX otherwise; over of Solutions segment and and interruptions or estimates reliance obligation the projects; from We a that and in risks to the indicated continued our breaches potential in providers of these expected statements risks based Solutions inability the Digital and carrying work services include, novel that of and expectations, or actual now replace projects the technology to – made we potential or by new from businesses limitation, in that systems, undiscovered Securities announce reliance required the intangible differ limited in various on growth materially coronavirus and the projected volumes changes integrating or or competitive service of reduced; update to may of delay number pandemic to the could of work uncertainties, to will our current to companies These clients the result forward-looking results, external breaches, whether subject and undertake reports market X-K including cyberattacks, governments, filing and other result the statements information effects maybe downturn thereto. terminated dependency any on our our and of imply potential of and most Agility give acquisitions, the except without execute future or XX-K, reduce, and laws, may likelihood no are current securities services market, such liabilities of responses and for value development we predict, difficulty in that are clients Digital changes synergies continuing strategic of at-will company and companies the the ability population, concentration on markets to of continuing contracts acquire; thereto; new and and continued may that the potential growth joint in of our privacy Thank company and management’s

Jack Abuhoff

coming everybody. positioning today. call joining Thank said the you, growth were company in Thank our Amy. Good for we year, we the morning, for years. Last XX% you

from This this XX% target. have achieving quarter, begun morning’s announcement see year-over-year our growth, of as you we

Our XX% represents growth year-on-year growth. XX% an QX’s acceleration from

growth more of remaining continuing anticipate year. year-on-year we to XX% forward, quarters achieve the the Looking in or

of moving relationships increased of expansion into as investment in and well and and we target as think signings to our new XXXX Moreover, the As sales we with it strong expanded over line. on opportunities, marketing our pipeline to accelerating of deal a result appropriate late-stage finish growth first maturation expect secular industry is anticipated growth. sales half get force, new based customers

our marketing about sales talk and Let’s investment.

our have and product as we bolster continuing to as that solid dollars payback calls our while maintain will As of we working. took initiatives invest XXXX. marketing comes On margin of business plan costs on well from so, of these growth. out sales of flow gross enhancement our of to the lead investing that the our growth. that And generated significant are to mounting in doing million QX internally discussed balance result cash since sheet. from is incremental believe flow short or plan new before, is is investable The A cash we $X top we that evidence portion that,

for We incurred incremental and investment numbers, product today’s $X.X revenue full million not are $X sales, $X would is million in a new is in internally growth. investment million marketing product toward flat. to first In were more objective accelerating marketing of million an These our costs quarter. if our QX, will incremental costs business. the our which internally growth growth we with million continue flow and engineering. As in It’s that this available and sales, engineering than and investment half as you will expenditures cash approximately internal down anticipate be revenue investment funded growth be best our the resources. of even presently expenditures. incurring that year-over-year we gross margin, organic investment generated flowed first growth of believe out to becoming XX% of run We through $X worth in generated were represented pointing million business our XX% The for to $X.X cash our see $X

our the are predictions supported grown next will believe are positioned close serve years. that to markets, of million who of expenditure by last the QX, million are from the several Our $XX our growth We the cash plans has rapidly growing analysts’ over $XX.X to expectations, which at driving end year. at be up well growth

AI investments information For from. that have for contrast, X products. of data recent in all destined high-quality but programmed companies data businesses a synonymous data the we perfect were of full important to just be XX AI enterprise-grade to that In years way traditional it’s prototypes categories. accessibility high-quality kept AI volume are partner solutions fall we not lack the a knowledge understanding, cited into quality AI problems that is new high-performing helping challenges found into them These data Today, are. we’ve we’re and data, overcome. are survey Gartner making production. competitive. barriers to lack and working organization AI complexity next their are that we’re high-quality AI partner applications we build those data, additional of data stuff among AI technologies. the teams models are investments challenges. solve ago, may quality brand challenge perfect benefit and the we built data scope, believe was The early with organizations data model with integration sciences teams top contributed models that that we basically Gartner The from as today. trained initiatives are by to survey, solutions saw Today, AI rather years, and us is began for data thing, on world’s serving and technology most About from Again, made and the we’re products two science need cited well. of getting stay successfully many We AI the not also data. the need helping data They’re that complexity, not

First category or are help implementations organizations streamline modernize that AI processes.

The experiences. second category new deliver are fundamentally AI that implementations

taking are We of we Silicon working others. with three the two with Valley now place companies on largest tech discussions have AI and implementations

We believe significantly about of and are working until adopter for the data as early majority years, increasing XX up adoption as works hastened domain working mobile of we chipsets in the with Big well by Valley the the over networks have science. late-stage next AI now device large been early technology are the with are XX the and XX And Tech implementations, We early enterprises will organizations development curve that in improvements among pipeline dramatic have organizations so. classic following with and discussions got and maturity pace. broadband the we increase and Silicon AI/ML largely another at in tools and proceeding to have others trend invest or companies, about several stage that XX which

pipeline increasing net first of we to bookings we this become everything that everything strong a new AI As in that embedded new be year business half believe the and an high-quality had will result start business and demand data of for this training domain-specific models. the in will that of and occurs, do We use. We additions. terms

logos Our year us. in wins from now customers new that that are are expansion as with brought programs expanding in as well pipeline coming we last

have appetite in new their customer did of will the not quarter, operations other We we for in weeks. the reinventing over are finding look the built. reasons, to wins quarter, around couple for legacy we next There announce an our which, important technologies were but announce base among few competitive we also and the a

we look will the we the pipeline new Spelker, to will CFO. I to deals addition, to turn we press important represent win now releases bring market. Mark our over capabilities In issue that call as

Mark Spelker

diluted ended first and year-over-year. basic Revenue versus $XX the Revenue up year the loss zero very good you loss share million $XX.X for ago the Net for cash income we X X net quarter the per XXXX or mentioned, diluted or quarter at Thank the Jack $X.XX million per million a June Net $X.X was were basic or loss $X.XX months $XX and period. share per in ago and Jack diluted a million ready and XX, and basic much. up per basic versus XXXX, questions. year the of or months are in June operator, $X.X XXXX ‘XX and net you, year XX, of for million share XX% first period. the $X.X million, was for morning equivalents And Thank was calendar cash everyone. from of million for XX% end the now as of $XX.X $X.X from diluted period. was million at of up And XXXX. share $X.XX ago


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

Tim Clarkson

really know Wanted matter, too? Hey, you for good thing don’t these about have you companies talked that again guy. explain works, I quarter. what, and ask from know small companies Innodata these whole significant you the Obviously, is to getting contracts but this why why big how

Jack Abuhoff

that take to Happy Tim. Sure, question.

with like problematic So, AI you overstated virtually contend to to has is company important AI build thing harness looking recognize and And is to that AI really and AI with experiences data. can’t deliver be just applications the data in embrace with I applications difficult is the you is to its first that and build for to being conventional case, any And or its that’s work data new with. programmers. operations data customers, harness think to

years. We working many, data have many with been for

We are a leading data engineering company.

just people creators and data that’s been management, for and need opportunity of Thomson And world product a grown for analysis brands, power as gone big looking of creating chosen the is, model world enormously, to their the professional very world leading transform and model challenges. to AI, large a selection we’re of from and Apples, the company that’s many to need what for with of data brands, has of the Reuters the Bloombergs, help a the by large are building data with small publishers us. it’s the wonderful, quality finding the data We the them

AI, what is care The other thing is data everything building that you’re to when about of have quality. you most

the If of quality building AI you’re perform your well. not out poor AI data, will

large and the they’re else with than So the as doing in technology their we they results results of data building companies what customers it. that. as care that of When that investments. our are much anything historically from They they’re have performance about see do every quality see about us, business AI the getting bit more cared

Tim Clarkson

Great. Great.

timing, the networking it’s got a mentioned I going some company revenues show that the Just very When got guess, X another contract in XXX another podcast that quarter on in And those employees of a question that in guess are contract from up I the XXX for you large largest public large and goes of to information terms Big social you the seeing of we first employees. starts one that mentioned to in also start can with know quarters? we the you the who world, we is.

Jack Abuhoff

building that all So, to our I think you’re we’re that. And guidance. of into starting see

growth And we’re the expanding to about into growth next all into for work talk summing are the sharing. engagements doing the that expecting we and those accelerated those talk contracts taking to about this when So expectations we when through we’re those you of that year, year. taking continue moving we up

Tim Clarkson

Okay, great.

on going XX% net know question, company clients see when big are we line numbers typical my high-tech to wants one this? Another – to bottom less the you of like XX% see trusting to would a

Jack Abuhoff

that about very we on So can to of every is return right market in investment. we investment strongly be think our feel very we a that significant ourselves return now, when opportunity, going making amount

– cash and back be continue product of expansion, near-term, engineering. into sales for chiefly three business So is flow certainly, to our free our strategy marketing invest terms to to sales, things: in expansion is going and the

for We’re and of building be front that capabilities. systems new some things, revenue of drive we’re will in those will be we’re seeing are the and opportunities company. going us, solutions SaaS-like new building things new Others things our to

us that’s now. believe for most the So we that important opportunity

you on the looks is we’re investment thing, we’re same like. what sharing I what want just time, Now at calls, with doing one add these to that

business. when we at this million made of quarter, look $X our into So said we we investments

is our producing cash expectations number, is operating leverage harder XX%. this all – not wonderful you very, flow. The margins invest to that’s concomitant better business that it’s Now faster you a add number when relative significant, very and to been meager it’s that to – to us see, at operating a and cash free the growth. enabling And have however, year, flow meager

plan, our that’s what and Tim. that’s we’re managing, So

Tim Clarkson

just couple have how A salesmen so housekeeping Sure. hired we questions, then? many far

Jack Abuhoff

that BDR in measure year plan that It’s XXXX, we’ve a So – we’re development scale In planning that the we’re at representatives, people. our XXXX. we channel doing teams, segments, we’re meaning, people on on and we and at we’re ourselves in where sales end And XX organizationally big business and against where build. the now we about sales is build a Right executives, about are were had way, far. year line three XX, to sales enablement – so people, yes, our we’re about ending now, sales. happy we’re managers, XXX can directors, that’s across adding – that’s we not adding is doing really the continue managers. we’re pretty we’re progress And very just adding with that adding out to adding

Tim Clarkson

are you pretty assume fussy hiring. you’re about who I

are hiring people? good You

Jack Abuhoff


great people. We are hiring

the Tom I this we level he really Chief Perchinsky, leadership be Tom, at before. who We’re Officer, and people our when to came this Sales we remember in going hired hiring is have is hard. said, done who

I before. to need that we not know I’ve off. well, this. said, that to what how he And is do hard. pull It’s Here actually done

how level who this. know hiring So execute to at people great a management we’re

we tons and to track of make to. as mid-course performance our collecting metrics We’re need corrections

we’ve lined a So dashboard got great up.

We’re our looking at results.

we We have opportunity. I execution feel the it very market about about look And market people good daily at We that to opportunity. looking to tend relative at feel exploiting very it weekly. good our

Tim Clarkson

all cash make me that easy a to the – question, you in then I’ll give I’m showed well, I’ll And a from Well, – quarter? where make come – then and comment. did – up last that Right. the we going question, one comment. The make let

Jack Abuhoff

really came yes, management. So creative cash it from good

and We’re a investing bolster spoke the time, sheet the of, our looking at balance the at all plan very sorts in strong of maintaining to I company, while to dramatically opportunities same that balance sheet. execute

So just have saw for European we a business. we example, an in opportunity lot Europe, of

We have customers interest negative who rates in Europe. have

will us, say, pre-pay give we a to And how we well, and works. So that discount we you small and interest avoid you go and them negative you rates? about

seek that from came able money the that, aggressively refunds refunds. came some being of jurisdictions just from in of some to So, tax are it

came free collection, some Some cash good flow. from it from came of of it

So are doing executing sure includes job healthy sheet. team his a we’ve making and a maintaining this – really Mark we’re creatively just and that at that plan, good balance

Tim Clarkson

the good. It’s job, he Google, Well, of bigger last Good going that a couple be I’ll bigger somebody else guy weeks The the than at then supplies appreciate is Innodata thinks think fire, and than miners that. part a ago, I is large top about Internet. in Mark. cool shareholder. kind the one but here. gold and One intelligence I thing electricity rush, get let the comment, to than bigger artificial said the And that’s risky supplies, a various the Innodata are it’s gold and you’re doing you – need. gold, not the is a shovels – the you’re of in way mining guys providing for of

it. that a investing think it’s great in I I So great you’re think and it’s business model,

So quarter. with and great will that, pass I

Jack Abuhoff

thank you. Tim,

Mark Spelker

it. you. Appreciate Thank


We Please with from our question next ahead. take Buska will Feltl. go Dana

Dana Buska

quarter. wonderful a on Congratulations guys. Hi,

Jack Abuhoff

you. Thank Dana. morning, Good

Dana Buska

are revenue Could that a be to give going what I you breakdown just and you going project a us your little recurring forward? your on revenue. couple – about revenue how have seeing of recurring versus questions

Jack Abuhoff


you of we’re business, recurring also. So – at our platforms revenue lot recurring are is doing DDS within and the a work when look is all our we’re that revenue

quarter, and in So project-based. the XX% we’re of as categorizing recurring revenue of revenue XX% as

Dana Buska

It’s guys from the were pretty quite you That’s where a in difference past. good.

Jack Abuhoff

we There here market Yes. is a market the we’ve is is just seeing than are There past. we No, Absolutely. big – opportunity and very that the absolutely. significant opportunity. What so the addressing. difference different in anything are is seen

a addressing creatively product from it are perspective. We

We’re looking at markets.

of couple be are are even. at from markets going looking We the where now a to years

and products building talk We’re solutions that. to that

So we’re deals. big at looking

but deal, it continue just a We’re several. be as it big customer-based will do we will well be to we going drive to able as one result, good recurring won’t diversification revenue. that, as strong And think to be

Dana Buska

have your a question Tesla platform, your data annotation. it? that with I I that proprietary does nature a had to is to read was about supercomputer platform. have a wondering do building data I Wonderful. And annotation

Jack Abuhoff

absolutely It does. Yes.

that we We’re real-world deployment The building they faster Goldengate of platforms in to have as platform they several to platforms refer they when stack less And problems. right investing with seeing looked can used higher bring can address quality, we can be we’ve that most internally a get substantially at. from what very high-performing using what competitive kind the AI, that been that is our platform. are capability than It’s full our platform to now. is customers, platform risk from they that

that everything customers. data for capabilities So management model evaluation and our It’s Synodex to strong. selection, to to what training from is we’re take that we over our that’s And powering for delivery annotation most platform doing. really of projects deployment and solutions powering data

So that’s really good.

be will embedded data it thing we’re which we intelligence, will developing other classical generative in just is be our Goldengate we’ve We’ve by lot what have both text, best-in-class annotation interest for AI that. got that are for We’ve proprietary. supported we’re believe platform have And that doing and tests who that. a of in auto-tagging will customer started Both a got using exciting plans that. got completely customers that. platform The and

Dana Buska

it, that all when that people be would stay it put use your Wonderful. would to and revenue would And probably recurring there? on – their data assuming platform? I’m tend they They

Jack Abuhoff

using they how on It Yes. depends platform. the are

opportunities. both will revenue doing we on substantial to drive – doing looking But I down are things the that that that’s question, high substantial and forward, planning which precise to to that to yes, try in there complex today So things not future think recurring relatively platforms, recurring those the the won’t we’re a stay I’m And we’re in answer. revenue. parse just very going level,

Dana Buska

their multiplies? there So of would that a you a that, that data then you could create kind what say flywheel of once be of you’re get seeing? effect customer, of kind Is and you kind

Jack Abuhoff

Well, mean, tend our experiencing when technology seeing, start and that what we we importantly, working with the yes, start they customer grow. are start they I experiencing to services, is our and

customers because, we’re working not the some customers do now. mentioned all have that got everything Now we’re the where as in they I doing call, early-stage with

really isn’t enterprises, will them, in cases. don’t we come they with larger the But we referred way there So think, with grow viewing I we’re – many us is that. know necessarily

guys, we’re and growth races, in, come opportunity. we two. before and do do – they off where us internal it’s and past, exploiting say, the and use great then, an project we’re to the you it, have working, a in referral we like we job, to they they And start you a Sometimes, has know company a that we these from get someone used

think that So technology absolutely to come one of us that I is our base. the reasons they

come small it’s that is a great they worth we solutions It’s reason I at the services we’re mentioning think us thing, and Another just what but really to a call. in do, good company.

get that? out we people technology, working. in it’s and – And do gave X.XX Our says X. and our a of customer that me to the Combination you it And us largest time. how surveys quarter, just of of all And customer do all. past satisfaction ranking this

Dana Buska

just comment. I one have tremendous. That’s

right of are now. right is in is making just going, front there business Innodata and opportunity the that you’re It very like think I artificial seems just a investments getting in now. just intelligence the smart huge

you. thank So

Jack Abuhoff

Thank you.


any turn additional Jack closing for at or the Instructions] time, [Operator I’ll remarks. conference back to And this

Jack Abuhoff

you. thank Operator,

XX% key I we a in we said, company a Last coming couple takeaways. November, the were positioning the for of yes, years. guess, growth So

the This We than year-over-year were growth strong expansions. sooner or good more that’s all in remaining target that we’re quarter, year. continue And And to XXXX and force, the of And the fruit. customer signings, we half business we of looking as there we’re word investment. bear engagement we were in based $X this made think thanks XX% a that, to costs accelerated new on use first an quarters expanding investments to maturing looking these for investment, of about to promise. we incur got growth order accelerating to growth. very And this In million quarter, there specifically on chose achieve moving into to us of as sales anticipating. position we

model. expect we take strong segments. believe lastly, to short advantage we to to it that we have our then in are to given leverage a in results model, our I the payback, We margins, solutions well business from how strong out dollars proving XX% combined operating of the want quarter, And SaaS a positioned gross business saw tailwinds emphasize flow of growth and

call So all for thank today. and Appreciate interest. the our time very you the joining much

where We share more look to year. we with are the continuing you through going as and progress very about are to forward we excited we


gentlemen, participation. conference. We conclude appreciate and Ladies today’s does this your

may You now disconnect.