Innodata(US:INOD)2020-08-08 12:31Financial Data and Key Metrics Changes - Total revenue for Q2 2020 was $13.9 million, a 5% decline from $14.5 million in Q1 2020 and a slight increase from $13.6 million in Q2 2019 [28] - For the first half of 2020, total revenue was $28.4 million, a 4% increase from $27.3 million in the first half of 2019 [29] - Net loss for Q2 2020 was $0.6 million, or $0.02 per share, compared to a net loss of $0.4 million in Q1 2020 and $0.7 million in Q2 2019 [28] Business Line Data and Key Metrics Changes - Synodex revenues increased by 28% year-over-year in the first half, with a 31% increase in Q2 alone [12] - Agility's subscription revenue is driven by a net retention rate of 87%, slightly below the internal target of 90% [13] - The company booked approximately $750,000 of new business in Agility with a small sales team, indicating modest growth potential [14] Market Data and Key Metrics Changes - The AI data preparation and annotation market is projected to grow from $1.9 billion in 2020 to $3.2 billion by 2023 [16] - The company has closed 15 new customers in the AI data annotation market and expects to close another 16 in the second half of the year [19] Company Strategy and Development Direction - The company aims to grow both Synodex and Agility platforms while reducing operating costs by $2 million in 2020 and $2.6 million in 2021 [10][24] - A strategic evaluation is underway to allocate capital and resources effectively amidst the uncertain market conditions due to COVID-19 [25][26] - The focus is on becoming a leading provider of AI data preparation and annotation services, leveraging existing expertise in high-quality data [18][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving growth despite the challenges posed by the COVID-19 pandemic [9] - The company anticipates sequentially improving revenues due to the durability of the new data annotation market and expansion from traditional clients [22] - Management highlighted the importance of high-quality data for AI projects, positioning the company favorably in the evolving market [48][50] Other Important Information - Cash and cash equivalents were $13.5 million at the end of Q2 2020, an increase from $10.9 million at the end of 2019 [30] - Approximately 99% of the global team members are currently deployed, with about 95% working remotely [30] Q&A Session Summary Question: Clarification on cost reduction announcement - Management confirmed that the $2 million in savings for 2020 is cumulative with an additional $2.6 million in 2021, not additive [33][35] Question: Insights on Agility's performance - Management attributed Agility's growth to product improvements and high retention rates, indicating a strong foundation for future growth [36][39] Question: Valuation of companies in the industry - Management noted that recent acquisitions in the space have seen valuations around 5x revenue, indicating a favorable market position for growth [42] Question: Changes in life insurance contracts - Management highlighted improved efficiency and automation as key factors in securing contracts with life insurance companies [43][44] Question: Competitive advantage in data quality - Management emphasized the company's legacy of providing high-quality data to demanding clients, which positions it well in the AI market [46][48] Question: Incremental margins on AI business - Management indicated that incremental margins for the AI business are expected to be similar to existing business lines, around 50% to 60% [59]