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.

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?

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…

Thanks Jack. Good morning and thank you for joining us. Now let's take a closer look at the numbers. I will go through the changes in revenue, give you my insight on the cost structure, including discussing the impact on operations of the falling US dollar, explain the changes in SG&A, comment on our cash generated from operations, review the balance sheet and then conclude with some general remarks. Revenues of $20.5 million in the fourth quarter of 2007, were up by $10.5 million or 95% from the fourth quarter of last year, and were up 13% from the $18.1 million in revenue last quarter. On a year-over-year basis, revenues in 2007 improved 65% to $67.7 million from $41 million in 2006. In examining this year-over-year increase of $26.8 million, the majority is from an increase in revenues from recurring projects. As you know 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. Non-recurring revenue refers to projects that have a more specific timeframe for completion. The main driver of our revenue increase, both for the fourth quarter and for the full year of 2007, was our knowledge process outsourcing or KPO services. Majority of which are recurring. KPO services target processes that demand advanced analysis, interpretation and judgment. KPO activities drove the majority of the year-over-year revenue growth of $26.8 million and the majority of the quarterly year-over-year and quarterly sequential growth in 2007. Next I'll turn my attention to the area of direct cost and SG&A expenses. As a result, of the $26.8 million increase in revenue, direct operating cost rose from $34.1 million to $48.6 million. While, at the same time decreasing as a percentage of revenues to 72% in…

(Operator Instructions). We'll go first to Shane Kim with Camden Partners.

Hi, guys, great quarter. If you look at your outlook in the most recent quarter it was revenue growth in the 80% range and you obviously exceeded that. Is there any seasonality in the revenue cycles for your customers?

Hi, Shane. Yeah, I think our outlook was for 75%, we did 83%, and there is seasonality. There is often times a push at yearend to hit some goals, customer goals. There is sometimes some budget that needs to be used up. So I think generally speaking, we do see that, and then new programs start, there is some ramp up, and we accelerate through year.

So were you essentially surprised, because I think based on your guidance, which was not too long ago, that it would sort of put the revenue figures somewhere in the $18 million range, and so, did somehow perhaps revenue from Q1 of '08 surprise you sort of falling into Q4 '07 or are they mutually exclusive?

There is a little of that. Clearly, if we could design things perfectly, it might look a little bit different. But the fact is that we're banking on very satisfied clients.

Okay. And you had a comment about you believe that perhaps your business maybe have some countercyclical aspects to it in the past three months. Are you seeing aspects of that or is that your expectation?

I think it's both. My expectation is based on my experience. We do two things. We help people to save money, reduce cost from current operations, and increasingly we're helping people with their new products builds, rather than building it first internally and then outsourcing to us three years later, they are coming to us first. We are not seeing any slowdown in new product plans; the budgets are intact at our customers. But they are coming to us.

Great. And, on a year-over-year basis, you grew revenues in absolute figures of about $26 million. How much can you break that out versus new customers that were sort of new in calendar 2007 versus growth that came from existing customers that you had been working with in 2006 or exiting the year in '06?

Yeah. You know I don’t have that precise breakout with me. I can probably crank that for you in another point in time. But I think, what we are seeing is, a couple of things. We've brought in a lot of new clients this past year, 30. It's almost growing our business by a third in terms of clients.

Right.

What happens in our business is clients don’t typically come in with huge requirements. They come in and they sample. They see how well we are doing. They see how attentive we are to them, and how well we can help them accomplish goals, and then they stay with us. You know, 95% of our clients stay with us. Even if the revenue is not recurring, they become recurring clients. So the fact that we can bring them in, acquire them, we can retain them and then we can expand them as key. Our biggest clients are clients in the past three years, we've doubled in size. Now what we need to do is, is to do that with more people. So the key strategy, acquire, retain and expand, that’s what we are going to be doing.

Right. And two final questions. You saw an increase. So the increase in SG&A has nothing to do with currency and that’s more in the cost of sales, operating cost. So, have you not been accruing a bonus accrual? I am trying to get a sense of this $1 million increase from Q3 to Q4.

A lot of that change was and I will let Steve address this, but I will just start it. Most of that was you know the double edged sword of success, when it comes to Sox compliance. That was our first time having to comply with Sox, that’s not an inexpensive process. Once you get all the consultants and everybody lining up. And we had to [play] the piper.

But did you not incur some of those expenses during the year?

Shane, the way it works from an accounting standpoint, this is Steve Ford speaking. We have to recognize those expenses in the period that they are incurred. In our particular situation, in 2007, we became a first time filer effective June 30 of the year, and that’s because our market cap was over $75 million. So they measured on that day. So then of course, you have to engage your consultants in whom we did in the third quarter, to represent us the bulk of the work that takes place in the fourth quarter, the way the accounting rules work now, you have to recognize it in the period that it has incurred.

Okay

And that’s just the reason why we've got this big bulge in the fourth quarter related to Sox and we'll have a little bit of that also spilling over into the first quarter of the year, as the yearend audit is completed. So it’s a very unusual, but required method that we must recognize it.

And so, can you give us a sense, and I am not asking for guidance here. Obviously it doesn’t appear that SG&A as a percentage of sales at 23% or close to $19 million in annualized expenses is probably not a fair figure. But you did mention, you did spend some more dollars in marketing, you should have bonus accruals. So I am just trying to get a sense for, we shouldn’t expect SG&A to run at $3.5 million anymore. But it’s probably also fair that it's not going to run at $4.7 million a quarter either.

So, both of your comments, I think easily kind of refer to our actual Q3 SG&A, and our actual Q4 SG&A that's out there. So if you kind of take an average of those, recognizing that Q4 is a little bit higher, I think that will help you, if you do the math there, to come up with a more reasonable number, which quintessentially will kind of fall in between the numbers you mentioned.

Thank you. We'll go next to Glenn Mattson with GTK Capital.

Hi guys. Congratulation again on a great quarter.

Hey Glenn. Thanks for joining us today.

This might have been covered and I might have missed it. But on the yearly guidance, what is that based on? Do you have any new contract signings factored into that, or is part of it, the standard uptake you get from these new customers as they become bigger customers?

I mean, the answer is all of the above. Our planning process is a very detailed one, we look at our project backlog. We look at our recurring revenue, we make projections at very granular level. We look, of course, what's coming down the pipe in terms of sales and opportunities and we take a conservative approach. You know, one of the things we do is anything that's in our pipeline, that's outside two standard deviations of our sale, meaning statistical outliers, the real big wins, we don't even count them. We take those down. So we want to take a conservative approach. We want to pleasantly surprise, not disappoint, and then we operationalize around that. We went into this year, projecting much, much more conservative results than we delivered and it's because we go after some of the big wins that we're planning.

But significant new project wins are not then included in the guidance?

No. In other words, we don't want to depend on that.

Right. Okay, great. I think you guys are doing a very nice job of diversifying the revenue bases especially. So keep it up.

Thank you.

Thank you we'll go next to next Tim Clarkson with Van Clemens.

Great quarter, guys. Always good to see the revenues go up. And if the revenues go up in the nature of your business, the earnings are always going to be there. Couple of questions. This is just a big picture question. There was an article in the Wall Street Journal, I think it was on Tuesday and they talked about knowledge management. And I've been trying to think about this, so I can articulate what you guys do a little bit better. Maybe this is oversimplifying it, but would you say when your processing information the endpoint is to come up with knowledge that is actionable, that can create profits for this business versus at the beginning point you just have bunch of disorganized information that maybe doesn't have much meaning? Is that kind of the goal of what you're trying to accomplish in doing what you do there?

Tim, really what we're doing is we're helping some of the world's largest information services companies become efficient and create new products that they can grow their revenues with. So we're working with the largest information services providers. These are $5 billion, $10 billion companies that make markets in information.

Right. And the challenge is, is that information is often disorganized and doesn't have a lot of value, and after you do your various things, whether a strategic analysis or XML or whatever, at the endpoint you have information that's now become more meaningful and more actionable and can create value for these companies.

Absolutely, that's exactly right. And what we're able to do with a lot of these companies their roots are back in print. They publish books and you can imagine an author sitting there writing a book, and then he sends it to the printer and the printer publishes it. Now that their businesses have transformed to electronic information, it's Internet-based information, and that lends itself to a whole new approach that we're able to bring to bear in terms of new technologies, in terms of obtaining the benefits of a distributed global workforce, in terms of creating an assembly line where these tasks and activities are disassembled, they are broken up, they are performed in different places using different technologies. It's a whole new world and we're helping them participate in that opportunity.

Do you have any idea on average what kind of return on investment your clients get by spending money with you?

We save them almost half or sometimes more than half of what they'd otherwise be spending.

Okay. This is a question for Steve. So, we're still looking essentially on a per quarter basis that your breakeven is around $16 million, and then incremental revenue is above that, 40%, 45% starts that fall to the bottom-line?

We haven't actually come back with the calculation recently of breakeven. Obviously, our volumes have gone up. As we have experienced such a significant increase in 2007 over 2006, our breakeven is going up. I don't think what you said is unreasonable, but I haven't come out and produced a calculation.

How about on the gross margin? Is that 40%, 45%, is that ballpark of what you are expecting in terms of your breakeven of $16 million, $17 million or $18 million that's how it plays out?

We've been talking about a range centering around 40%.

Right.

So we do better sometimes, better mix, more favorable efficiencies, et cetera, we can improve on that. And depending on mix and other things, we may end up a little lower than that.

Was the entire bonus accrued in the fourth quarter?

No, it was not. It was actually accrued over the year. But as you look at our quarters and you take a look at Q1 and you look at those results, that didn't exactly engender a larger bonus accrual, but as we went through the year, and of course, generated more favorable results. The way our formula works it was of an accrual in accordance with how we performed. So, hopefully, that helps you.

Thank you. We'll take our next question from Walter Ramsley with Walrus Partners.

Congratulations. That was a great year and a great quarter. I have a few questions. The hedging operations, can you just tell us how much the company made on that?

The way we work is it actually is not a number we're disclosing. It gets buried in cost of sales. But what I can tell you is that the depreciations of the currencies were significant during the year, as you know. We were able to mitigate a lot of that, not only through hedging, but also through production efficiencies and generation of favorable mix. But we don't actually disclose that exact number.

So on those contracts, were there any non-recognized profits?

Explain what you mean a little more by non-recognized profits.

You know the contracts that you didn't actually close out that you carried over into the current year that's unrealized.

No they were not.

Okay. So the hedges are still in place?

Actually, it's a program that we operate on a fairly continuous basis. So, as contracts close out, we take out new contracts.

Okay. I mean it's kind of hard to believe, but the rupee has actually gone up a little bit this quarter, is that having a negative affect or is a --

Actually, not really.

Okay. Were there any stock option, 123 expenses?

We're actually going to be filing our K, its due Monday. All the disclosures associated with that will be in there, and that will be filed hopefully no later than tomorrow.

Okay. The growth in 2008, you indicated that double-digit growth and annual revenues. Is that just another way of saying in the teens or what if, I mean, it kind of covers a broad territory otherwise?

Yeah, it does. And essentially, what we're doing is, we're trying to take an aggressive, but yet conservative approach in building expectation. And we just had a tremendous year and what we're trying to convey here is that we believe we can grow on top of that. We believe we can keep going. We're operationalizing around a conservative number. We're not counting on big wins. But we're working on them.

Thank you. (Operator Instructions). We'll go next to [Joe First with First Associates].

Good morning gentlemen and congratulations again on a very good quarter and a good year and a good outlook. I want to comment, I was pleased to see in your press release, you've mentioned that you're going to be making various investor presentations at conferences and (inaudible) I think it is a particularly good idea, because in spite of your good results like today your stock price was down anyway, I know it's a bad market day, but your company is not that well known and not so good. I am glad to see you get your story out to other people, because you have a very good story to tell. Just one quick question, the top four or five customers you're talking about, that is the higher percentage of your business. Most of these people, are they recurring type of business, knowledge management or other that is the kind of thing as long as you are a key performer here, not likely to lose?

Joe, the same percentage that we've got of recurring work overall also holds up within those top clients. So we've successfully grown the recurring work that we're doing with those top clients importantly. And all these clients are very, very large enterprises. We've got big programs in place for them. We're very tied into them, and we've got new things in the pipeline, new things that we'll be doing for them. So I think as we seek to diversify our revenue base, we will be de-risking the value proposition no doubt, but we'll also be trying to even things out a little bit. Right now, that's just the way the business works. Just the rhythm of the business, as we continue to grow and I think we've got the formula in place. We're acquiring lots of new clients, we're doing a really good job of retaining and then expanding them. I think that will just work itself out.

Thank you.

Thank you again. (Operator Instructions). Next we'll take a follow-up from Shane Kim with Camden Partners.

Yeah sorry. One last one. What is your net operating loss?

The net operating loss we have, is approximately $12 million.

Okay. Thank you.

Welcome.

Thank you. This time there are no further questions. I would like to turn the program back over to Jack Abuhoff for any additional or closing comments.

Thank you. And thanks everybody who is on the call with us today. Thank you for your questions. Thanks for spending your time us. Just a quick recap. We're growing our business, we're growing at a healthy pace. We're delivering strong financial performance, we're delivering what we say we're going to deliver. Fourth quarter 2007 revenues rose $20.5 million and so it was double $10.5 million from the same period last year. Our revenues on the year increased 65%, climbing from approximately $41 million to $68 million. We earned $2.2 million or $0.09 last quarter and approximately $4.5 million or $0.18 in 2007 overall. We are continuing to demonstrate significant operating leverage, maintaining gross margins in a target range of 35% to 40% on incremental revenue with only minimal SG&A increases. Here we generated $6 million in cash from operations last year. We saw balances of cash rise. They were $15 million December 31. And again, 2008 looks good. We have a strong program in place. Without taking into account large possible project wins, we anticipate that we can drive double-digit annual revenue growth and deliver second consecutive year of record revenues and strong profitability. We also anticipate continued improvement in recurring revenue levels, and that's going to be driven by new KPO engagements and expansions of existing programs. First quarter, we think it will be approximately $18 million, which is 40% year-over-year, completing several 2007 projects and starting to ramp up on 2008 stuff. By the end of year, I'd like to see us having moved progressively forward toward our stated goal of $100 million in revenue. I think Joe asked a question about our IR program. Clearly, we're going to be increasing our activities in 2008. We are scheduling a number of road show style investor meetings for this spring starting next Monday actually. And we're planning to attend at least two or more investor conferences over the coming months. We're also going to try to increase the scope and frequency of information that we float to investors regarding significant new project wins and our KPO strategy. So, I think that warps us up. Again, I want to thank you all for your continued support. We very much appreciate it, and we very much look forward to being with you next time. Thank you.

Thank you. That does conclude today's conference. If you'd like to listen to a replay of today's call, you may do so by dialing 888-203-1112 or 719-457-0820. The passcode is 7660964. The replay will be available from today, March the 13th at 1 PM Central Time through April the 12th at 1 PM Central. Again, that does conclude today's call. You may now disconnect.