Innodata Inc. (INOD)

INOD 
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Innodata Isogen Inc. (INOD)

Q4 2007 Earnings Call

March 13, 2008 11:00 am ET

Executives

Al Girardi - VP of Marketing

Jack Abuhoff - Chairman and CEO

Steve Ford - CFO

Analysts

Shane Kim - Camden Partners

Glenn Mattson - GTK Capital

Tim Clarkson - Van Clemens

Walter Ramsley - Walrus Partners

Joe First - First Associates

Presentation

Operator

Good morning and welcome to the Innodata Isogen Fourth Quarter and Yearend 2007 Earnings Release Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to the Vice President of Marketing, Mr. Al Girardi. Please go ahead, sir.

Al Girardi

Thanks Rob. Good morning, thank you all for joining us on our fourth quarter 2007 Earnings Call. Our speakers today are Jack Abuhoff, Chairman and CEO of Innodata Isogen; and Steve Ford, our company's Chief Financial Officer.

Statements made during this conference call and answers to your questions are intended to provide abbreviated, unofficial background to assist you in your review of the company's press release and SEC filings. In addition, there may be some forward-looking comments regarding the company's operations, economic performance and conditions. These forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities and Litigation Reform Act. The words believe, expect, anticipate, indicate, point to, and other similar expressions generally identify forward-looking statements, which speak only as of their dates. These forward-looking statements are based on the company's current expectations and are subject to a number of risks and uncertainties, including without limitation, continuing revenue concentration in a limited number of clients; continuing reliance on project-based work; worsening of market conditions; changes in external market factors; the ability and willingness of the company's current clients and prospective clients to execute their business plans, which give rise to requirements for our services; difficulty in integrating and deriving synergies from acquisitions; potential undiscovered liabilities of companies that Innodata Isogen acquires; changes in the company's business or growth strategy; the emergence of the new or growing competitors; and various other competitive and technological factors and other risks and uncertainties indicated from time to time in the company's filings with the SEC.

Actual results could differ materially from the results referred to in these forward-looking statements. Along with these risks and uncertainties, there can be no assurance that the results referred to in these forward-looking statements will occur. We encourage you to read the risk factors described in Innodata Isogen's various SEC filings, for an understanding of the factors that may affect the company's businesses and results.

Now, I will turn the call over to Jack Abuhoff. Jack?

Jack Abuhoff

Thanks Al. Good morning everyone and thanks for joining us today. My team and I are pleased to put the operating results that we are reporting today. First, we exceeded our guidance for the quarter and achieved financial records for the quarter and for the year. Equally important, we are reporting a strong outlook for 2008 and our expectation that 2008 will also be a growth year for us. Our results reflect execution of key strategic initiatives that we laid out for you at the beginning of the year, including building a more energized and effective new business development team and focusing on the emerging knowledge process outsourcing market.

We'll start with a brief overview of fourth quarter and yearend results. Then we'll discuss the business, its dynamics and direction and what we see as our opportunities and challenges and we will address also what we see for the year ahead. Then Steve Ford will breakout the numbers in more detail. When Steve concludes, we'll take your questions and comments in our Q&A period.

Fourth quarter 2007 revenue rose to $20.5 million, which was almost double the revenue of $10.5 million from the same period last year. More importantly, looking at performance for the year overall, revenues increased 65% from 2006 to 2007, climbing from approximately $41 million to approximately $68 million.

At the same time, we continue to demonstrate significant operating leverage. We grew revenue by 65%, but with only a 7% increase in SG&A spend, and so a 44% of incremental revenue goes straight to the bottom line.

Now comparing fiscal year 2007 net income to fiscal year 2006 net income, the swing there was nearly $12 million. We earned approximately $2.2 million or $0.09 in Q4 and approximately $4.5 million or $0.18 in 2007 overall.

We generated about $6 million in cash from operations last year. At the same time, we saw balances in cash and equivalents rise again, up to almost $15 million by December 31, with another $11 million in solid accounts receivable.

Looking ahead to 2008, we anticipate continuing improvement in recurring revenues driven by new KPO engagements and expansion of existing programs. We expect first quarter revenues to be approximately $18 million or up more than 40% year-over-year, as we complete several 2007 projects and begin ramp up on several new 2008 programs. And we believe that we're seeing a sufficiently broad and robust set of opportunities that we can anticipate double digit growth in annual revenues in 2008. By the end of this year, I would like to see us having moved progressively toward our stated goal of $100 million in revenue.

Looking forward we have an aggressive strategy for growth, the central thrust of our strategy will be to further leverage our industry and professional expertise, our experience to relationships and reputation we have and the infrastructure we've put in place in the area of outsourced content services. These assets that we've got in place surpass nearly all competitors in the media, publishing and information services sector, and these are our platform for future growth.

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