Please stand by. We are about to begin. Good morning, and welcome to the Innodata Isogen Second Quarter 2007 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Vice President of Marketing, Mr. Al Girardi. Please go ahead sir.

Thanks Kim. Good morning and thank you for joining us on our second 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 and 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 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 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 Securities and Exchange Commission. 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 Jack Abuhoff.

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Thank you Al. Good morning, everybody. Thank you very much for joining us today. We will begin with the summary of our second quarter results. Then we will discuss the business and its performance in the context of our strategy and our plan. Then finally, we’ll lay out in general terms, our expectations for the third quarter and for beyond that. Then Steve Ford will walk you through the numbers in greater detail. And when Steve concludes we’ll take your questions and your comments in our Q&A period. Second quarter 2007 revenues were approximately $16.3 million, up 68% from second quarter 2006 revenues of approximately $9.7 million. This was our fourth straight quarter of sequential revenue increases. Our $16.3 million quarter was a 28% increase from our $12.7 million first quarter. So far this year, i.e. in Q1 and Q2 combined, we’ve generated approximately $29 million in revenues, a 45% increase from the same period last year. These results exceed the generalized guidance we gave you at our last conference call. This quarter we regained profitability. We earned approximately $862,000 or $0.03 per share this quarter as compared to a loss of $643,000 or $0.03 per share last quarter. What’s more, because of our fixed cost structure we demonstrated our ability to deliver margins of approximately 40% on incremental revenues after breakeven. The growth we are showing is attributable principally to significantly expanding the Knowledge Process Outsourcing work we are performing for clients. Importantly, we are categorizing approximately $4.7 million of this revenue increase as recurring revenue, bringing our total quarterly recurring revenue to $10.7 million, an 80% increase from Q2 2006. Our balance sheet remained solid with more than $11.2 million in cash, $10.5 million in solid accounts receivable, and no appreciable debt. In terms of our outlook, we…

Thanks Jack. Good morning and thank you for joining us. Now let's take a closer look at the numbers. I will take you through the changes in revenue, give you an understanding of the cost structure, explain our operating leverage, review the balance sheet and then conclude with some general comments. Revenues in the second quarter were up 28%, from $12.7 million last year to $16.3 million this year. On a year-over-year basis, revenues improved 68% from $9.7 million in the second quarter of 2006. We customarily separate our revenue into recurring and non-recurring categories. Recurring revenue consists of services that we anticipate a client will require for an indefinite period. Approximately two-thirds of our revenue is recurring. In contrast, services for a specific project generate revenues that we regard as non-recurring. Approximately one-third of our revenue is non-recurring. The quarter-over-quarter revenue growth in 2007 is attributable to $2.1 million increase in recurring revenue, from $8.6 million in the first quarter to $10.7 million in the second quarter. The remainder of the increase of $1.5 million in Q2 is from higher project-based revenue. Furthermore, approximately 50% of the total revenue growth is attributable to knowledge process outsourcing or KPO business. On a year-over-year basis, the second quarter increase in recurring revenue is $4.7 million. Increase in project revenue is $1.9 million. More than 50% of this total revenue growth year-over-year is also attributable to KPO business. And looking at revenue from a segment standpoint, our content services business generated $15.4 million in the second quarter of 2007, up $3.8 million from $11.6 million in Q1 2007. This increase reflects $2.6 million from a new recurring revenue opportunity announced earlier this year, an increased volume of approximately $1.2 million from other ongoing projects. The Professional Services segment revenue declined 18%, from…

The question and answer section will be conducted electronically. (Operator Instructions) Our first question comes from Gary Siperstein, Elliot Rose Asset Management.

Hi guys. Congratulations. Great quarter. A couple of bookkeeping items. First Steve, in terms of the receivables that Jack mentioned earlier on of the high quality receivables, and obviously it makes sense with the increase in business, do you expect to average approximately that amount or do you think some will come in this quarter or already has come in? And now that we have broken into the block will we be in a cash generation mode and start building those cash balances?

Yes, Gary I would expect that our accounts receivable will grow and in relation to the revenue growth that we were looking at. We have been very fortunate in terms of the blue-chip nature of our clients. We do not have any collection issues and they generally pay in very good terms. So, I will see a certain amount of growth in receivables. I think this quarter is probably the most significant given the large rise in revenue, Q1 versus Q2. So that, that I think you can anticipate going into the future. And we are in fact collecting on net cash very well the cash that was on the balance sheet and receivables at June 30 is, of course, coming in. In terms of cash positive generation, I think we have a good opportunity to do that, going in to the end of this year and into the beginning of 2008.

What was that CapEx in the quarter?

CapEx in the quarter was approximately 750,000.

And what do you see for the next two quarters?

The next two quarters is going to be a little bit heavier probably in the 2 to 2.5 million, possibly size 3 range.

Okay. 2 to 3 million in the back half?

Back half. Yes, and it’s to do for two things. One is, of course, to support the growth that we were incurring right now, and then some of it is normal replacement CapEx that we need to do on a regular basis.

Okay. And that, may be I missed it, you might have said it earlier, what was the cash drain in the quarter?

The cash drain, cash went down to 11.2 and we had ended March at 12.5.

Okay. And Steve, just to get a little more color on your thinking on the M&A side, can you sort of give us a scenario of a domestic opportunity that’s your criteria? Just walk me through it. Let me know roughly what you think you’ll pay for something with the revenues you mentioned and how you would tweak it to make it accretive to earn, I mean, accretive or even more so after you buy it with the offshore opportunity?

Sure. I will be glad to. I think that the some of the key elements that we are looking for, Gary that are extremely important, one is, we need to get the solid customer base from these acquisitions. We have products to cede in and we also want to be able to work with the same type of blue-chip clients that we have now. So that’s important. Secondly, we are not looking for anything that has already established foreign operations. We would like to have something that has U.S. based operations that we can replace, that would be one element in being able to get greater value out of it. Third, in terms of price, I have no comments right now other than to say that we have a very good healthy list and I’ve got a good experience over the years in doing this, and have good habit of not overpaying for anything. So, but I don’t have metrics for you right now in terms of number of times revenue or times EBITDA. And then quite honestly, we haven’t really got into it so deeply. We’ve focused on operations, as you can see, with the results of the second quarter, but certainly in the future I can give you a little bit more specs in that regard as we start to work the market.

Super. Thank you. Jack, can you give me some color on a little more color on the knowledge-based work that you are doing, and is there more of a premium in pricing in knowledge-based A and B? Is there a less price competition that you are seeing in knowledge base, so it’s helping us on both fronts?

Yeah, absolutely. If there are fewer credible competitors, when we compete for this business we win largely, and it’s a much better use of our assets. So we precede to resource our revenues are much higher than they are when we are doing some lower level activities.

Do the fact that we have a substantial asset in the Philippines, it is and I don’t know maybe this is more call centered than anything else, but is the Philippine accent come into play at all or is that just with call centers and we are all about knowledge?

That’s all about call centers. That’s where that comes into play. The work that we are doing is analytical work. It’s a knowledge based work. There is not an accent issue.

Okay. And so when we go out on the project side that’s not knowledge based, you are saying basically, by default, from what you said earlier that we are seeing more competition both in terms of competitors and more competition as to pricing whereas knowledge based because its newer, we perhaps have a head start and there are fewer competitors, so pricing is better?

Yes that’s right.

Okay. And can you give us some color? You talked about some interesting potential opportunities in the pipeline that aren’t baked into the numbers yet. Can you sort them in the various verticals, give us a little more color on what kind opportunities there are, and if those opportunities have grown since the last quarter? In other words are we seeing more momentum in the marketplace displayed, with the turmoil, with the stock market, and the mortgage, and the questions about the U.S. economy? Can you sort of give us if you have seen any weakness, due to that stock market turmoil and what’s going on in each of the sectors?

Right. I think what we are seeing Gary is the benefits of the reorganization that we did. So as we formed the company into a vertical market focused practices that run their own business development activities, and are a cannibal for growth, but what we've seen is a much more energized market phasing organization and a much more focused one, that’s much more deliberate and strategic in the way it approaches opportunity. So I think we are a much more viable competitor. That’s where our growth is coming from and that’s where all of these new significant opportunities are coming from also. We are still at a stage where I don’t think what goes on the mortgage markets affects us frankly.

Okay. So any perception of the U.S. economy slowing and if some of that really impacted us at this point?

No.

And when you talk about the opportunities in the pipeline, can you give us a little more color? I mean what are they dealing with in each vertical and who some of the potential competitors are?

Sure. I am going to speak necessarily in a general way of course, because these are things that are in the works. The opportunities all are having to do with knowledge process outsourcing. One of the opportunities has to do with a large scale systems initiative for content technologies with a very high profile, new customer. And all of these speak to our strategy. They are all examples of companies that are looking to outsource analytical types of activities at a large scale. And some of these are fairly late stage good companies who have been working through a vigorous process, i.e. to determine that we are their partner of choice or on a very short list.

Can you give us Jack, some color on the amount of people in sales force now and I know that’s changing number and people leave and new people come in. But can you give us some color on your confidence in their results? In other words what’s going on in numbers, is it 3 or 5 or 7? Are they improving quarter-by-quarter?

Yeah they are and that’s of course the work-in-process. We’ve got about 13 people right now in the sales force and we are seeing some good things coming out of that sales force. And more so, we are seeing good things happening from the way they are now integrated into our new organizational structure.

Super. Okay. Last question and then I’ll give someone else the chance. If the market wasn’t down a 150 today, the stock and those kinds of numbers would travel the upper point. As the earnings have come out here, I have seen a lot of other public companies show less revenue growth and lesser change in the bottom-line year-over-year and see the stocks up 10%, 15%, 20%. Can you tell us, not withstanding the stock market what you got planned on IR front, now that you are starting to deliver?

Yeah. We have already we initiated, we are engaged on the IR front. In fact, this in the past just several weeks, we went out on a number of visits with some new portfolio managers, who expressed interest in what we were doing and I think we got some very good traction there. And that’s just the start of it. So we’ve kicked off those activities. We intend to build on that momentum and see increased activities in the coming months.

Super. Congratulations again. Great quarter and great progress.

Thank you Gary.

Thanks Gary.

(Operator Instructions). We will go next to [Perry Highland] with Ann Cummins.

Hi. Good morning everybody.

Yeah. Good morning.

And again outstanding quarter and anyways the IR question was answered for me. What do you see on the government side of your business? I know last quarter I think you had your first order there and that looks like it could be something that will grow significantly?

Well we have got, what we think is, is most of the, the large things in place that we need to have in place in order to mix that growth significantly. I think in the next several weeks there will probably be an announcement about a high profile individual joining that practice, who will further help build the team that's going to pursue that business very aggressively. But we have got everything in place programmatically and require reference ability to expand that significantly, especially in the intelligence area.

And then Abuhoff, any can comment on like the British Library? I know there was an announcement recently.

There was, it's a very exciting program that we are putting in place there. That we were tied in pursuing and we are very excited about. It's a true strategic partnership where we are going to be working with them to pursue certain types of business, as their selected conversion partner. It's really the two, put a number on it per se but we are already seeing the deal flow.

Alright. Thank you.

Operator, we'll go next to Joe First, First Associates.

Good morning gentlemen. Again congratulations on excellent progress you've made. I just have one question and one comment. I was trying to see how much of the business is recurring and I was curious. Are these types of customers where there is recurring business, can continually increase or else can get you to do more and more work or is it more a constant type of number?

It's very much work that can increase, and in fact when you look back on our history in the area, what typically happens is the company decide it's going to do a certain amount of business with us. We run that for a while. And as we gain their confidence and they experience the benefits of the relationship, the economics and even the quality benefits, quality [things first], they increase the engagement, they increase the program. So that there are two fundamental positive characteristics about the KPO business, the first is the recurring nature and the second is that it tends to blossom. It tends to expand.

Thank you. And then also I noticed, of course the key thing is profitability and right know you are able to bring down it looks like 5% for the bottom line and given what you said Steve about the increased numbers and profitably above that. It looks like if you get up to $20 million in a quarter in sales, you are fairly pretty close to 10% to the bottom line. Am I doing my numbers [like I have seen recent one], I think you might be able to get there probably some time next year?

I think you are doing your numbers just fine Joe. And those kind of numbers, it's a new territory for us and it's a good one to be in. But I think that as we scale the business up and as we continue to grow the top line and using your $20 million is as good as any number right now. Yeah, I think our range is, as you can see we are able to do 5%. We will be able continually improve that and 10% is a reasonable target for us to look at with that kind of revenue level.

Certainly. Thank you and again congratulation on the progress you have made, too much appreciated.

Okay, thank you.

(Operator Instructions). It appears there are no further questions at this time. Mr. Abuhoff, I'd like to turn the conference back over to you for any additional closing remarks.

Sure. Thank you. Thanks everybody for joining us. I will just quickly recap today's news. 68% growth in Q2 alone year-over-year, 20% quarter-over-quarter, 80% growth in recurring revenue year-over-year, so that we are not doing $10.7 million a quarter of recurring revenue. It's our fourth straight quarter of increasing revenues. We regained profitability. We have shown that 40% of incremental revenue goes to the bottom line for modeling purposes. We've shown that the growth is coming from KPO, where we are recognized leader in that. This is the growth space projected to be at $32 billion market by 2014. Late last year, we saved $1 million a quarter from our SG&A costs we have held to this and we have shown that we can hold to that and grow substantially at the same time. We have put in place an organizational structure that's designed for competition and its taking roots and delivering on its promise. We've also said there are more big deals in the works that we have not baked into out guidance. Clean balanced sheet, $11 million in cash and another $11 million in good receivables. We are giving guidance of 65% increase in revenues in second half 2007, which is 15% to 20% over first half and we have said that we believe it's appropriate as management team to be targeting a $100 million in next several years. Also mentioned, we are reengaging our acquisitions program and that we have reengaged our Investor Relations activities and that's it for our call. Thank you for joining us.

This concludes today's conference. Thank you for your participation. You may disconnect at this time. Experience the Green Point difference! At Green Point, all projects are engineered and managed by a dedicated, knowledgeable US-based project manager - your sole point of contact. He or she reviews your deliverables to minimize unpleasant surprises and unnecessary demands on your time. Native English speakers are used for all production tasks that benefit from a mother-tongue knowledge of English. US-educated and certified domain experts, such as legal, business, medical and scientific specialists, are utilized for content development and enhancement.: Join the growing list of satisfied Green Point customers in publishing, legal, financial, transcription and engineering services who have experienced Outsourcing The Way It Was Meant To Be ™ and won't have it any other way! Visit our website, or email, for an instant response by a member of our team!: To sponsor a Seeking Alpha transcript click here.