INOD - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to the Innodata First Quarter 2019 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

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

joining today CEO Q&A. provides and will We’ll financial and from reporting A.K. and be accounting speakers last available will complex the on We'll Prior COO, for for CFO in the who Abuhoff, review of areas Director of first, then first support the the who a detailed quarter, additional with Chairman then Innodata; the and of month hear perspective consulting to basis. follow part-time Genova Jack results Mishra, Robert Services of business. a matters. Robert Robert your of advisory a us take and was Managing Our our provide will about joined Jack our questions. are Innodata, the O’Connor, Group, Group CFO, our that firm services

the First, Securities call. being statements are the let that provisions me the during to Harbor qualify are of made XXXX. These Reform Safe Act of pursuant forward-looking made statements the Litigation Private

and of requirements businesses rise acquisitions, synergies impairment the services; may and strategic joint with the liabilities companies that Commission, and from in a and to of without changes our results, carrying contracts risks clients; factors; and providers dependency market deriving to filings prospective value limitations, including future integrating potential projects completed, other on clients Agility business external reduce, which predict, and assets results investments; we forward-looking for Data segment and number potential turn goodwill that Securities projects; indicate our to expectations may may execute canceled limitation, We clients willingness thereto. forecast, acquired Digital of I venture give or replace other time of without the may reports and of acquire; including, or Thank from companies Solutions uncertainties, the Form on our undiscovered current our Digital number that third-party and any our and indicated difficulty emergence the market committed will any delay be update our projected Exchange terminated or are we or competitive uncertainties in our most clients intangible strategy; Data volumes in materialize whole are that businesses risks plans, largely with X-K ability statement acquire; revisions differ contracts of imply now depressed clients; in statements, in our or and to our and current materially forward-looking and concentration Robert. our and reduced; subject changes primarily growing no to to that of our in other over content clients could or include, to the technological competitors; growth information of factors; These of segment; ability on and nature you. new recent conditions; or cancel the and to undertake or any are of various to Solutions may obligation XX-Q announce time based achievements. expectations. performance statements actual to from call at-will by amendments these and inability XX-K, revenue in continuing limited or statements not a work of in business part; Forward-looking

Robert O’Connor

items comparing revenues provide or will quarter a prior and on review the gross million the in review XXXX, compared million reduction in were revenues fourth $XX.X were of related costs. you million in Thank in Agility decrease gross the for decreased in is million compared DDS due $X.X margins Agility fourth increased the $XXX,XXX the to XX% Solutions to million or a $X.X Thank $XXX,XXX. from margins performance $XXX,XXX direct million DDS first performance segment million a segment, Gross quarter the were XXXX, first to of Synodex quarter, several both our quarter of -- to quarter quarter gross quarter of selling, of Good in or million quarter fourth morning, $X.X the a revenues the or of in a were in a first the quarter SG&A, XXXX. $X.X XXXX. from or fourth in XX% XXXX. by million in or $XXX,XXX fourth In of quarter in the offset quarter I of decreased quarter down revenues our in on of first SG&A now the $X.X expenses, the and XXX,XXX in revenues the the of DDS XXXX, XXXX, operating of business. XX% million. Data a you, DDS, in in of quarter lower administrative, I'll decrease the quarter XXXX, decrease financial the additional quarter first revenues of XX% million million of first $XXX,XXX segment with $X.X Total the revenues $XX XXXX. first quarter, XXXX. XX% $XX.X quarter $X.X XX% volumes quarter first well. in the will key in $XX.X the of the Jack to DDS first us in $X.X Digital margin cost SG&A and quarter later the or of or cost were DDS, go quarter. in in million in were and were of everyone. In Agility. million for basis, part during the XXXX level, margins The the Synodex On of XXXX general $X.X of compared were $XXX,XXX. sequential the to decreased revenues. as to segment of consolidated quarter are segment's Agility. fourth cost SG&A first of quarter in segment, $X The compared at to million fourth in start decline Synodex gross segment quarter of margins XX% $X.X in company the in of million On the revenues At of on with primarily quarter were segment compared level, perspective for $X.X Amy. today the DDS in in fourth $X million, Okay. the joining of first fourth our quarter $XXX,XXX revenues line basis, to and $X million XXXX to revenues fourth decrease revenues first projects in At in XXXX. the the a the XX% and of revenues Synodex revenues million basis, -- $XXX,XXX to $X in

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

First Agility. quarter income adjusted in a million XXXX tax of $XXX,XXX loss EBITDA $XXX,XXX in a quarter $XX,XXX of is was by EBITDA to Fourth the of net quarter and and We fourth XXXX. $XXX,XXX loss in DDS $XX,XXX quarter $XXX,XXX net quarter offset of $XXX,XXX was and the Agility. comprised tax in earnings recurred compared in compared deducting $XXX,XXX XXXX. quarter DDS, Synodex of an comprised loss in minority Synodex, of benefit a $XXX,XXX of to of expenses the first expense in our in tax After first in fourth of interest, the in $X.X

quarter the compared Our fourth $XX.X first investment the of XXXX. were quarter balances cash million to and $XX.X in in million

quarter. Our day's sales was to outstanding the XX prior QX days compared in in days XX

the of quarter. $XXX,XXX we $XXX,XXX Our CapEx to in $XXX,XXX. XXXX, In second first compared to in range in expect the $XXX,XXX quarter quarter was the be to the of CapEx fourth

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

Jack Abuhoff

Thanks, from from by core was in we during We drop and with the guidance The the everybody. expected, quarter, Revenue the several as work of quarter. million line business. lower quarter. down tough volumes resulted primarily morning, in Rob, last had good QX, customers provided $X.X a DDS from

was this seasonal drop. of Some

from While our the new due its purchase recently the internal spend revenue anticipated then budget just plan XXXX. and order communicated year. to balance least more QX, intention the a whom The for in improvement, We've reevaluate signings. its expect client for to to on less impart QX to client due cautiously of in impart June QX at plan us proceed have $X we a seasonality from to come revenue in recently million and

offset revenue So perspective, effect recovery new positive of in likely from seasonal a QX. in QX will this signings

more landscape revenue the broadly. at Looking

to team. AI senior-level focus the to be have business for transformation, testing on and to AI working technologies to accomplish last revenue that's our closely level us. is to XXXX. enterprises, the design from for product By which accomplished, year repositioning integrate our that market highest work. in this enabler we next been will be of a having at since can plan to heavy To for that on the turn try year, same the we document the growth our been same past at roughly see which We're and our now. brought as end work the with will and into lifting as talent core year growth enthusiastic around The turn will facing this, reposition time drive two we building going content believe the technologies these the our of product DDS, internally are percentage revenue in that in marketing about These Our during technologies externally, both last year, AI year. events has expected increased end their offerings, management the into key now it increase repositioning who we services hold you'll certain to necessary revenue turnaround years. engineering EBITDA the helping clearly we've XXXX adjusted developed resulted contributed and validated the AI of That

markets growth for the Agility and on the opening the We we that our in services. work see both year, to new continuing segments. will Synodex continue we're business, Synodex to this be In optimistic

feed data, to For to align promise requirements. digital converting with I from new work that records a staying of customers medical their are under working useful the but one bought flows in radar can bit studies. on new who the new to these to have say market, now, and into holds we enabling optimize them exacting AI-based our us we're capabilities finding charter five opportunities, They're

positive less days We program. that clean the we in of path have week downtime a in past a a standard are a system in we growth this commercial had as bug for note, several On software unknown enthusiastic market. result an of

Although, full up we're we've now and back ramping and fully production up clients. several days running, of some lost new almost

In $XXX,XXX of addition, about we large QX study which QX, revenue makes QX. QX potentially them into that mean to a to data deliver from could plan in shifting

mitigate of revenue a guidance for Although revenue. an customer impact we place which quarter recorded in spread. with ever Agility business, QX plans expect expected these strongest QX. customer matters, overall increase in to Thus QX XX% our from of do million, includes terms an than in our is these for larger $X.X In have acquisition, our we we bookings reasons,

retention and improvement, the is Additionally, one our significant in customer showed we now our customer space. better players least believe of than retention largest our at has

our influence has bragging highest also and one number have targeting scores the GQ The share. user digital This momentum presence. of rated based were platform and came great rights reviews engineering as ranked news the We testifies on been work to for some we is and doing. really latest media the and satisfaction and to leader, out product

Given and customer we expected believe we're overall our customer to retention the strengthened on growth. deliver target acquisition,

complex, in we that to our SaaS that the experience platform and we've though We're functions our release, will platforms this bring we until media quarter, managed very clients. simple. will service excited resided user for into some SaaS internal of quite new intuitive description monitoring be large some features the only releasing platform. capabilities to of a Even these This and advanced the features and keep which are now up about of new our use set functions

will customers be I be to our what to this Operator, questions. now they we're love really will week. the are take rollout think going ready seeing; starting

Operator

Thank Clarkson you. [Operator first from Instructions] Please The go Clemens. from comes Tim question ahead. Van

Tim Clarkson

a Welcome you guys. Good Hi have CFO. Robert. on to as

Robert O’Connor

you. Thank

Tim Clarkson

Hey.

answer both it. wants to to guys, question first the ever of maybe whoever just So, you

So, got is maybe breakeven that. looks but bit as the slow that roughly million, you $XX million, a like what little we the I it volume expense current $XX as, model have? than on based higher know

Robert O’Connor

$X.X Agility $X Currently, we hold on have at we DDS at cash breakeven Synodex steady about $XX million, a at $X.X model basis million; of which million; million. and

Tim Clarkson

$XX million.

Okay.

little So, to million I this stream net mean at a bit, we million, looking $XX ideally, if are revenues a to if $XX let's overall? got margin XX%

Robert O’Connor

Tim, good morning. So, hey,

on the the depends we see growth. it think I segment business where

that's growth or would $X [ph] of it's DDS, more. margins to would for next XX%, you like in more in million; come in the probably then XX%, about can some million in contribution dollars, XX%, XX% So, Synodex, it above and figure Agility,

Tim Clarkson

businesses higher lot a all revenue? But at lot margin in there's a -- three obviously, of

Robert O’Connor

key doing. If combination in the to take And high of why Absolutely. retention is plannings. is a and of really new businesses, so net business just growth we're growth what Agility those I each to that's critical

very XX%, there's $XX So, million, seeing base business, $X.X Net now. about very $X.X XX% very, you're you're deteriorates adding a But million your which, rate. adding what $X approached growth by that $X of retention million, encouraged million. if million quarter, enough in we're has I'm numbers, to

businesses is numbers. -- is we that's about in what volatility. the business thing So know and that core venture -- great problem revenue addressing tractable the the But are those it again, in rough been of really terms our and is

very more positive chartered operating Agility leverage forecast new that. of with we've market ability, from less, In growth slightly the has powerful And business. a a So the business lot Synodex that see but they're five still working subscription-based And that revenue much in on think upside. kind potential. it And we'll opening, we're got that us. forecast customers I

Jack Abuhoff

both improving something I was like, remarks, this and business big core do short-term and can kind there, that The But being which year quickly. out marketing that an we some proven AI when a volatility, march we goal under we've just think, capabilities level a up years. can our very that up I a think is in out management unexpected cut to aligned in in brought what were times and There's that of our higher-quality the and And fundamentally go-to-market to we us drive product ways, on to there's that changed maintain promising and described the it then, on over have revenue bit. that see to But new in on sure addressing going kind product to two then QX exciting, business we work revenue service again make as developed base, we've business longer-term there revenue the my yet inherent based to is of we do there. and last our the much more prospects bring to technology that our plans. internally a architecture in more some dramatically client even taking got prepared what plans. be be work We're end coastal from to which using

persevere in harder the fundamental ways we choppiness and So in writing working that business, repositioning. of we terms are

Tim Clarkson

Right.

what AI would be your advantage one new did this So you typical to with where fundamental what things you'd internally. using be the doing customers, similar of

And So – what involved? are much complexity how the is does benefits? it exactly

Jack Abuhoff

great question. a Yes,

by trade are records, could are contracts, they're to that What it's to records, having much lading, anything all to intensive to difficult read who we're they bill people place. of we are with is the people them to because extract contest AI having easily, documents and And around processes from to those computers able So of process they're to our to And medical to the make -- that documents, do is business be can't one readable are have to manage, about hard make we studies, know what process over able they process them. document intensive. less computers. documents

Tim Clarkson

Okay.

Jack Abuhoff

for information thing. what to key a that's it's we've we've doing And our Synodex been really in our docGenix publishable doing providers. business that's what our product business, business, large in produce I been core about mean

now a that to we've reduce AI read world are be can't achieve there make expertise to to There's saying what models where So with doing to AI learning have problems now and very able enterprises, still dramatically is in results. with are we're know and required the there data efficient effectively human is the how we to that intervention machine-readable. mix very And people human okay, there high trained quality out the the those capability we're to fact data. well non-digital in where is contending we're computers and

manager brought on an very profile brought He of marketing we intrigued productizing high product working possibility on the and lot company, there's We've he's So with. market. a things. whose lead Watson, thinks the IBM product from other they're manager, at on in a those

Tim Clarkson

no, you medical this Is So, DDS that taking does mentioned a for And how overall deal? into scheme? business where all new you're it Or application, this the that records. medical fit Is does you? a fit? where

Jack Abuhoff

Sure.

medical So yes, What documents taking business. does been minutes, making can is, it it's few the be thing it other records. this into engines, the can insurance what that and about them does talking to Synodex applications. drive Synodex can And readable thing text be structure drive last other analyzed, related documents, to compared, Synodex workflow can does we've computer that that does, for

So in records. it's that medical expertise --

looking feed digital us that new with our that business. representation us. a that into hey, So medical records to life Or into looking for now those these create that in addition our in insights of what we’re analyze. us it's engines other give and help that want saying, markets that are insurance to records -- to finding who AI to right at markets We deal that bottleneck can is we're will and there some can computers

Tim Clarkson

And isn't it's a big pretty market, it?

Jack Abuhoff

now AI, found It's markets that largest we're hard computers mix what because a finding intriguing. got received. some testing And us our our market, new telling are got with. -- of product. work of in who customers headstrong markets into -- are we've We've We're some need, going well right where versions it's the their they this the five people very particularly exactly are and we've to but places in not new there, got competition new we've

we've market, And reconfigured life new things. it So And insurance good like… we've product. it we're looks this for hearing taken and

Tim Clarkson

mean this worth could business $X.X -- How the add potentially much I Or there? quarter? would is it? big this a business million of is how

Jack Abuhoff

I size to… be than don't more -- think markets share what to I I really don't the on is want the to want are not it'd who yet. I that. that. conservative I'm stay prepared or

Tim Clarkson

you But Yeah. point proven it the I you is already right? you guys it, that guys have guess can that -- do

Jack Abuhoff

that Yeah. it's ones. can the large it. most we signed, phase We're testing clients and we're But test. that so but smaller We've continuing far, well. think, one with ones, refine I in working We're with going some -- who proving two But them or to still of do very the five of

Tim Clarkson

Good. the All meeting. right. I'm Well, guy the meeting it sounds annual forward to at looking good. IBM

he'll assume I So, right? be there,

Jack Abuhoff

be Well, he now. will

Tim Clarkson

Thank done. All you, All right. Good. right. I’m

Jack Abuhoff

look you. forward Good that to be you'll news, coming, seeing

Operator

now are there no your call questions [Operator signaled, the Instructions] host for any turn remarks. additional to As closing or further back I'll

Jack Abuhoff

questions the a year, no are primarily volumes. call. we difficult to this as it, Thanks, a In start of morning's to about of I from takeaways couple operator. DDS, off just saw guess result key I lower-than-expected a

see stated year. same terms management, AI sustained development of product with receive significantly a where we're we'll of on Synodex, selling goal product in revenue. this new working in year in in some business going and also charter market to Agility, this last we both with Our industry client growth. facing for in we're fundamentally keep best sales to Meanwhile, the to and continues our strong product customers XXXX, into doing time, ever we're Thanks exciting the short-term strategy sales turn core level with work quarter opportunities. retention, At working recognitions. be staying a of reposition new to and are groups improved markets year growth expecting seeing growth to that our terms marketing

on forward year. as So all thank joining reporting we to us progress for We'll today. continue look our through the you

Operator

Eastern Today's conference replay Eastern from X today X, PM available PM to X is XXXX Time for time. June

dialing by are or numbers today's passcode X-XXX-XXX-XXXX, passcode XXXXXXX. may X-XXX-XXX-XXXX, Again the You using conference. concludes XXX-XXX-XXXX access the or recording XXX-XXX-XXXX This XXXXXXX.

You may now disconnect.

Amy Agress	Senior Vice President & General Counsel
Jack Abuhoff	Chairman & Chief Executive Officer
Robert O’Connor	Chief Financial Officer
Tim Clarkson	Van Clemens

Innodata (INOD) 10 May 192019 Q1 Earnings call transcript