Good morning and welcome to the Innodata’s Fourth Quarter and Fiscal Year 2015 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Amy Agress. Please go ahead.

Thank you, [Gina] (Ph). Good morning, everyone. Thank you for joining us today. Our speakers today are Jack Abuhoff, Chairman and CEO of Innodata; and O'Neil Nalavadi, our CFO. We’ll hear from O'Neil first, who will provide a detailed review of our results for both the fourth quarter and the 12 months ended December 31, 2015 and then Jack will follow with additional perspective about the business. We’ll then take your questions. First, let me qualify the Forward-Looking Statements that are made during the call. These statements are based largely on our current expectations and are subject to a number of risks and uncertainties, including without limitation that contracts may be terminated by clients; projective or committed volumes of work may not materialize; our Innodata Advanced Data Solutions segment, IADS, is a venture with minimal revenues that has incurred losses since inception and has recorded impairment charges for all of its fixed assets. We currently intend to continue to invest in IADS; the primarily at-will nature of our contracts with our Contract Services clients and the ability of these clients to reduce, delay or cancel projects; continuing Content Services segment revenue concentration in a limited number of clients; inability to replace projects that are completed, canceled or reduced; depressed market conditions; changes in external market factors; the ability and willingness of our clients and prospective clients to execute business plans which could rise to requirements for our services; difficulty in integrating and deriving synergies from acquisitions, joint venture and strategic investments; potential undiscovered liabilities of companies that we may acquire; changes in our business or growth strategy; the emergence of new or growing competitors; various other competitive and technological factors; and other risks and uncertainties indicated from time-to-time in our filings with the Securities and Exchange Commission. We undertake no obligation to update forward-looking information, and actual results could differ materially. Thank you. I will now turn the call over to O'Neil.

Thank you, Amy. Good morning, everyone. Thank you once again for joining us today to review our financial results for the fourth quarter and fiscal year 2015. I will start with our full-year 2015 performance. Our revenues in fiscal 2015 were $58.5 million compare to $59 million in 2014. On a segment basis, Content Services revenues were lower at approximately $52 million in 2015 compared to $57 million in previous year. This decline primarily reflects lower eBook volume of $900,000 from a large eBook customer as well as lower volumes in other projects including five projects completions with a total value of $5.5 million. These were partially offset by a $1.6 million increase in European project revenues, which is the large contract that we announced in 2014. Recurring revenues accounted for 70% of total revenues in Content Services compared to 72% in 2014. Gross margins in this segment were 28% and operating margins were 5% compared to 32% and 8% respectively in 2014. Gross margins and operating margins were lower primarily because of the decline in the revenues as well as a $500,000 GAAP between direct costs and revenues for ramping of the European project that I just referred to. In our IADS segment revenues increased to $2.1 million in 2015, compared to $600,000 in 2014. As new customers acquired over the past two quarters began generating revenues. We ended 2015 with 10 revenue generating clients in IADS, after commencing the year with seven signed customers. Of these, eight are Synodex and two are in docGenix. Higher revenues of $1.5 million and cost efficiencies helped to lower the losses on the segment from $5.6 million in 2014 to $3.7 million in 2015. Our Media Intelligence segment reported revenues of $4.7 million compared to $1.7 million for five months during fiscal…

Thank you, O'Neill. Good morning, everyone and thank you for joining us today. O'Neill has just provided a detailed financial review of the quarter and the year as well as our revenue outlook for Q1. I will now provide some additional insight into the business of each of our reporting segments, and what we're looking to accomplish in 2016. I will start with our Content Services segments. As O'Neill mentioned, revenue in the Content Services segment was up by approximately $200,000 in the fourth quarter, as a result of the continued uptake in volume from the key eBook customer, which will also drove revenue increases in the third quarter, we're expecting revenue from this customer to return to more normal levels in Q1. In terms of new engagements, we've secured two new important wins, one is an ongoing recurring revenue engagement valued at approximately $550,000 per year under which we'll be maintaining data repositories for provider of information to insurance companies. The second is a two-year project value that approximately $1.4 million to build the scientific data products to one of our large customers. Looking forward, we expect to be challenge with lower revenues in the next quarter because of lower volumes in project completions, these revenue swings have been inherit challenge in our CS business, which we're trying to address strategically. That said, we are targeting growth in the segment this year from both new initiatives and from anticipated revenue increases from the program we began last year providing end-to-end publishing services to two divisions of a large European information company. From a strategic perspective, we're focused on driving recurring revenue to minimize the impact of revenue ups and downs and much of our efforts are going into our new digital data product offerings including Synodex and MediaMiser, which…

Thank you [Operator Instructions] And we'll take your first question from Tim Clarkson with Van Clemens Capital.

Hi guys, saw the reports. Why don't you go over, first of all with O'Neil just in terms of a lot of accounting stuffs going on in that quarter kind of going from the simplest to the complex. Now why do we accrue a tax when the company was unprofitable for the quarter and also unprofitable for the year?

Hi Tim good morning. So the tax accrual comes in the count of the way our business is structured. As I have shared in the past we have a U.S. entity and we've got global operating subsidiaries, right? So the global operating subsidiaries, which are really that do all the work for the parent company have to be compensated and the way we compensate them is on a cost plus basis and that creates - that essentially results in the profit in the operating subsidiaries. And the reason why we have to do that is we have to follow transfer pricing guidelines and we appoint outside external experts to guide us on the transfer pricing and the margins. And because of the profit in the U.S. in the international subsidiaries, we have a tax charge in those countries and it was results in taxable - and we have a taxable loss in the U.S. entity, is that clear?

Yes, okay, then a little bit more complicated, how would you explain the difference in profitability from the third quarter with the fourth quarter even though your revenues were higher

Right. Good question Tim. Two reasons, one is the cost of goods level a couple of things happened, one is the cost of goods increased by about $0.05 million approximately $250,000 of that was an account of changes in the statute in India. In India, a new law was passed which essentially guarantees bonus for Indian employees, for certain Indian employees and it was done with retroactive effect from 2014. So we have to accrue about approximately $400,000 for that expense. Now that said, this particular statute because of its unusual nature has been contested in the courts and we don't know what the outcome will be. However, because of law has been passed, we have to accrue for that cost. So that $400,000 was setup by reversal of certain other expenses of approximately $150,000 which resulted in the net expense increase of $250,000. The balance $250,000 is on the count of ramp up cost on certain projects and also because of general reevaluation gains and losses that happened between quarter-to-quarter. So that’s the $0.05 million impact at the cost of goods level. Coming down to SG&A, the SG&A expenses increased by $250,000 as well - sorry, $0.05 million of which $250,000 was non-cash one-time charge on account of stock-based compensation to the external directors. And $250,000 was seasonal expenses to do with year-end financial audit which was typically Q4 expense item for us of approximately $250,000.

Okay and then in terms of taxes, now I noticed that last year that you had a positive 100,000 for taxes, so and this year you had to pose liability of 400,000, what was the difference between the fourth quarter in terms of tax stability last year versus this year?

Tim, sorry, can you ask that question again?

Yes, I noticed in the fourth quarter last year that you actually had $100,000 reduction in taxes and this year you are paying $400,000 in taxes. So what was different about in the fourth quarter tax wise last year versus this year?

A good question. So Tim, what happens is the transfer pricing as we set out at the beginning of the year, we make an assumption of the transfer pricing based on the prior year. Now that said, at the end of the year normally in Q4 we conduct an independent - we hired external consultant to comply with tax laws in different countries to advice us on what the transfer pricing charge up rate should be and that is done by doing the competitive analysis of what the profitability of an typical operating subsidiary should be. So if there is any adjustment as a result of that transfer pricing mark up, it results in an adjustment during the fourth quarter and that's a primary reason why we had an adjustment in last year, but this year we had no such adjustment.

Okay. So there's lot of tax noise in the fourth quarter

That's right that would to be typical, because we do an adjustment in the fourth quarter based on the independent study.

Okay, great. Jack, just a couple of questions, first of all simple question, I know you have mentioned to me privately that there is some seasonality that generally fourth quarter is stronger than first quarter, could you expand on that?

Sure, a lot of the seasonality that we are seeing in the business, Tim is around the eBook services. So the eBook clients are retailers. So we not surprisingly make a bit of push in the fourth quarter in order to meet some demand of their customers and to maintain their cost structure in way that lines up nicely with their revenues. So we saw that both you know a bit in the third quarter then also in the fourth quarter.

Sure now in terms of IADS, one of my customers wants to know about Rich Media in terms of what's going to get this eBook business moving again. Is there any additional information on what's going on with Rich Media in terms of eBooks?

There is a lot of the activities that we're seeing is still not Rich Media, it's enhanced media that in some functionality that's supported by the latest ePub3 standard to media. There is continued talk about extending that further with some of the other products that our client support, but for the most part the work that we're doing today is expanding collections going international, going deeper into select libraries really preparing for the world to come when portal media is even more common place than it is today and probably supporting new product that some of our customers are thinking about. I'm encouraged by the fact that there's also continued interest in developing out and discussions around enhanced books as well.

Okay. Just tell us a little bit more about, I know you're coming out with a new version on the insurance side of your business. Can explain what that is and what the values to the clients and where you are in that process and when you think you will start getting meaningful contract on that?

Sure, one of the changes that are taking place between Version 3.0 and Version 4.0, if I were to go through it on this call we'll probably lose, all of your eyes would glaze over. There are things that are meaningful to life insurers, extremely meaningful to life underwriters and to the rest of us there are probably new once and subtleties, if we understand them. The important thing is that we are in testing with two companies who are giving us great feedback and we are at this point only making minor tweaks to our data relationships. Behind that we've got 17, we've got more prospects than 17, but we have 17 people who that as soon as you have this Version 4.0 product come back and see us, some of those 17 have contributed to its vision So what we're trying to do here is not invent the world as we see it, but we're listening real care of our client and they are telling us what they want the product to be able do and we are making it able to do that. So this past quarter and before that too, we've been very focused on listening to the clients we've got there, very, very satisfied but there is more that they want. We've just brought on as you know last quarter the largest life insurance provider in the U.S. They are very particular. They like what they were getting, but they like position for Version 4.0 better. So rather than continuing to stress sales, we were stressing the team to get Version 4.0 done which we've gotten done. And to continue with or complete the testing which we're now completing and then to get back out into the market what we think will be a very strong offering.

Okay, all right well-done for the time. Thanks.

Thank you.

We will go next we’ll go to Juan Bejarano with Noble Financial.

Hi good morning and thank you for taking my question. Congrats on your growth with Synodex , it seems like you are gaining some traction there. Can you please remind us or frame the total opportunity with Synodex maybe talk about how many potential clients are out there where you expect this opportunity to be revenue wise maybe in two, three years from now. I know by the end of this year, you could be about $8 million run rate, but what is the goal there and then if you can see for a little bit about the competition?

Sure, there are two different markets for the Synodex products, what we're starting with is life insurance underwriting in additional to life insurance underwriting, there is life claims adjudication, there is property and casualty, there is disability income markets. And then there are even some other markets that go outside of insurance where we think the ability to digitally manipulate healthcare records is going to be very valued and that's what we're creating here. Now if we just look at the immediate market for helping life insurance companies and their underwriting process, they are using about 4 million or so healthcare records per year in their underwriting and life insurance interestingly just this year started to grow again. People are recognizing the value. So that number is only going up. That's a lot of health records that need to be evaluated that's why we see just on that aspect of loan $100 million or more addressable market opportunity for the Synodex product. This year we're also planning on taking our Version 4.0 product and enhancing it in order to support disability income markets. Again, there we see another market opportunity, we don't have it precisely sized yet, but it's probably an opportunity that approaches the size life market as well.

Got it and what about, are you seeing any increases in competition, other people coming in or no?

There are people that are providing services that we intend to substitute or displays they intend to have - they approach the problem differently than we do. So we don't view their product as necessarily competitive with ours and our customers don't. what we enable in terms of automation and improve decision support goes well beyond what they do. In those 17 late stage prospects that are waiting to see our Version 4.0, we've got companies right now that are spending money with others who you could think of as our competition and they are not satisfied. So that's addressable budget that we think we are going to be able to target pretty quickly.

Okay, thank you. And I think you briefly talked about that you saw some cost efficiencies in Synodex I believe, previously you had talked about breakeven revenues for that business at about $8 million annually. So has that change a bit, is it now closer to $7 million, am I correct in thinking that?

Yes, I think it's largely going to depend, we always struggled a little bit with declaring the breakeven number, because countered intuitively the breakeven number may go up as we achieve greater levels of success. And the reason for that is that we're going to be on boarding, more resources and training more people, who won't get the revenue producing or revenue productive, in anticipation of demand. So if we see demand increase, as we hope that we will with that breakeven number may move a little bit higher than it otherwise would be, in that success scenario that will be a good thing, not a bad thing.

Okay, great. Thank you, that’s it from me.

Okay, thank you.

We'll go next to Charlie Pine with Van Clemens.

Hi hello everyone.

HI good morning.

Good morning. I just wanted to ask a question, regarding the prelaunch, the timing on your prelaunch testing for Synodex 4.0, how long do you anticipate you'll be in so called prelaunch testing and do you have a timeframe or general availability?

Yes, we're giving that about a month we started it mid February and looking to complete that by mid March 15 is our target. As we're completing that we would then be starting the demos and demonstration with the 17 clients. That we're going to be doing through March, April and May.

Alright. So do you feel comfortable on that this will be in general availability by at the end March?

Yes.

Thank you.

Thank you.

[Operator Instructions] We'll take our next question from Tony Cutinelli with CLC Management.

Hi guys. Just a quick question you mentioned you had a - did you purchased stock in the quarter?

Yes we did, in Q4, repurchases approximately $100,000 worth of stock at an approximate average price of $2.50.

Okay, I'm surprised little bit, there is not more of a buyback in place. Is that due to most of your cash being held offshore?

Yes, as we shared over 98% of our cash is headed overseas, so we got to manage between the cash balances here in the U.S. the needs of the business and that's one of the challenges while we believe that there are significant value in our stock, because the markets that’s still not been able to understand all the components of our business. But we are also constraint by our cash balances with the U.S. to do stock repurchases.

Okay.

And with no further questions in the queue at this time, I would like to turn the conference back for any additional or closing remarks.

Thank you. So summing things up, we were disappointed by the quarter’s loss as we were striving to maintain the profitability that we regained in Q3. As O'Neil mentioned, big contributor to this was the reserve we had to take for this newly legislated retroactive bonus scheme, and that the Indian legislature mandated a retroactive additional bonus for folks who may no longer even work for company is particularly unfriendly to business. The legislation is presently being challenged in the court, so we hope that challenge is successful. Our plan for 2016 is for IADS, MediaMiser and the new European publishing engagements all of which we had investment mode in 2015 and loss making to steadily shrink their losses in 2016. So that by Q4 they are all breakeven. In terms of Synodex, MediaMiser, the prospects are very promising, each has high quality recurring revenues to take that investor's price with incremental margins in excess of 50%. So really the question on top of mind for investors of course is can we get there? And here are my thoughts of that. First Synodex is no longer a leap of faith, we have several of the largest life insurers using it and getting a result that they came for and they are telling us exactly how to enhance the product. So they would increase their usage and it’s this good advise that we baked into our new data 4.0 release. On the MediaMiser front, thanks for new lead gen and content marketing programs that we've initiated and customers who are expressing their satisfaction with 90% plus retention rates. We're able to set our sights and continued 20% plus growth just like this quarter where we had 27% quarter-over-quarter growth. And then just speaking more broadly, we are living in a world that’s increasingly seeing digital data as a means enhancing our lives and improving our businesses. And digital data is what in a data is all about, whether we're building digital data products for customers like Apple [Indiscernible] or we are building our own digital products like Synodex MediaMiser. In all these cases, we're helping people realize the future and where they are better informed, they are increasingly automated, they are cloud based, integrated, mobile. So yes, I know that we can get there. So thank you everyone for joining us on today's call. Look your continued support and interest, we look forward to sharing with you our progress in 2016.

Today’s conference is available for replay by dialing 719-457-0820 or 888-203-1112, the pass code is 7598892. Again the number is 719-457-0820 or 888-203-1112, pass code is 7598892. That concludes today’s conference. You may now disconnect.