Good morning. And welcome to the Innodata’s Second Quarter 2016 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Amy Agress. Please go ahead, Ma'am.

Thank you, Amelie. 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 the second quarter 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 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 Digital Data Solutions clients and the ability of these clients to reduce, delay or cancel projects; continuing this Digital Data Solutions segment revenue concentration in a limited number of clients; inability to replace projects that are completed, cancelled 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 for joining us today to review our financial results for the second quarter 2016. Before we get into reviewing the financial performance, I wanted to discuss a couple of key items. First is the strategic acquisition of the Agility business from PR Newswire for $4.3 million. We are excited about the acquisition as the combined products of MediaMiser and Agility would position as well to meet the growing demand for earned media and measuring impact, as well as media intelligence. Jack will discuss our strategy in greater detail later in this call. On pro forma basis for calendar year 2015 Agility had $5 million in subscription revenues with an approximate gross margin profitability of 50%. And in the most recent second quarter April to June 2016 it was EBITDA positive. The acquisition should double the annual revenues of our media intelligence business to approximately $10 million with a gross margin profitability of 50% before acquisition related to amortization cost. Our combined media intelligence business will now have more than 1,500 customers. Moving now to our financial performance for the second quarter. This quarter's results were impacted by $1.4 million in one time expenses that reduced our adjusted EBITDA for the quarter from $700,000 gain to a $700,000 loss. The one time expenses consist of professional fees and related cost of $1,250,000 in connection with the previously reported internal investigation by the audit committee. And leading another expenses of $150,000 for the Agility acquisition. As reported earlier, the investigation relates to potentially improper payments made by certain employees of one our foreign subsidiaries. These expenses were incurred in our Digital Data Solutions segment formally known as Content Services and approximately $1.1 million was accounted as SG&A expense and $150,000 as costs of good…

Thank you, O'Neil. Good morning. [Technical Difficulty] I'll then update you on where we are in the IADS segment and our core Digital Data Solutions business. So as you know, with the past few years we've been executing the strategy to build new product and services that expand our market opportunity and our base of recurring revenue. Product and services that help customers gain better insights or otherwise improve their businesses using digital data and that leveraged our core competencies. Our acquisition of the Agility business from PRN was another cornerstone in this strategy. Agility is a tool used by PR and corporate communications professionals for identifying journalists and bloggers who would likely have an interest in a particular story. Distributing the story to the identified journalists and bloggers and then monitoring and measuring the media's uptick. Agility was created PR Newswire to accelerate its growth in a market environment in which traditional newswire business was basically flat. Agility is regarded as one of the handful of leading global media contact databases out there in the market. The analysis from Burton-Taylor with four leading products that combined enjoy close to 70% of the market spend in the Americas. And about 40% of the market spends in Europe, the Middle East and Africa combined. And the estimated global spend for media contact management in 2014 at $288 million of 9.5% from the prior year. And the market for the associated media monitoring to be at approximately $870 million growing 3% year-over-year. Because there were apparently only a handful global media database products out there and as a result of recent acquisitions, Cision already owned three of them. The US Department of Justice and the UK Competition and Markets Authority expressed concern that the acquisition of PR Newswire by Cision could lessen…

[Operator Instructions] And we will go first to the line of Mark Jordan. Please go ahead. Your line is open.

Good morning, gentlemen. Question relative to the acquisition of Agility. As you mentioned I think you said you had some integration expenses that will flow through with combined companies here in the third quarter. But by the time you get to the fourth quarter with those two combined entities have at least the breakeven EBITDA?

Mark, maybe able to give better guidance in the next quarter in terms how we are looking to the business but good thing about the business is that the revenues are highly predictable with recurring revenues and the gross margin profitability is at 50% plus. To come to the EBITDA, the current media intelligence business that we have and has got a deficit of $300,000 and Agility has got positive EBITDA as of the most recent quarter. So couple of things as we make up our combined product roadmap and the investments which is demand in investment we'll have to make in a sales and marketing. But we are clearly targeting it to -- from a targeting perspective we are looking to have a positive EBITDA as soon as possible and make it accretive through the year.

Okay. But in your presentation about IADS your second consumer you talked about where you gone through an extensive customization stage and you entered into testing stage and you hence think that customer has a $2 million annualized opportunity if fully ramped, how long do you believe that this testing stage will go on until you know if you will be moving towards commercialization.

Mark, I am not sure I heard just you one word there so I may not need to correct what you said but I will in any event just in case I got it right. It's not $2 million opportunity, it is several million dollar opportunity. We think it's actually quite large if they were to fully adopt our solution.

Okay. Again how long do you expect to be client testing stage to last?

So I think my expectation of the client is that testing stage per se will probably last another month or two. But while they are testing they are going to be continuing to bring another group and involve them in that testing and begin to expand the service. They have not given a commitment to us in terms of where they are going to get, to when, as I mentioned also. What we do see is that these very large-- very successful life insurers kick incremental approaches. They walk before they run and I think thing that we are very excited about is as I said they like the product; they put an enormous amount of energy into very refined detailed customization so that if fits their use. And they've asked us to put up a second facility so they can have that sale over and can comfortably ramp up. So they have invested a tremendous amount in this. They wanted to work and they are now among other things evaluating the beneficial effects on the business.

Okay. Final couple of questions for me. The external care we expect in the third quarter relative to the internal investigations are down sequentially. Is this the sign that you believe that investigation will be completed in the third quarter? This question one. Question two, once you done that work and have delivered the information to the Department of Justice; is there any template that your folks have been telling you as to what would be the next steps that might be appropriate in this case from the Department of Justice?

Sure. So that we are expecting that one is down and complete, that's why we are able to give you some comfort that what we expect additional spend to be. In terms of a template, we can't really say now until the investigation is complete but we are hoping that will be complete in the near term.

Thank you. We'll take our next question from the side of Tim Clarkson. Please go ahead. Your line is open.

Hey, Jack and O'Neil. Just a couple questions. Now on this MediaMiser, Agility merger, of course I also have a superficial understanding of these things but my understanding is that MediaMiser skill set is more in getting the data and while Agility is more of an advisor and telling people what to do with the information. Is it more complicated than that?

Sure, Tim. Well, I can certainly understand where it's up for the uninitiated to this; it takes a little while to fully understanding the business. You can think of Agility as a product that earlier adopters can -- not early adopters but people who are just starting to recognize the need to bring monitoring and distribution tools into their businesses can easily adopt. The average price per customer is lower, it's essentially a staff solution and then it also comes with a tool that enables you to find really who are the people that are the bloggers and the journalists and the folks that you have to get your message out. So it's very good for medium and small enterprises. MediaMiser is a software tool as well but often times the large Fortune 1000 clients, many, several whom are our client, they are looking for a lot of services wrapped around that. And that's really where MediaMiser fits in. So it's software as well as a very robust compliment of services wrapped around that. Now the good thing is that the large companies are seeing the need thanks to Facebook and Twitter and blogging and all the activity going on social media, they are seeing the need to pay more attention to what we call earned publicity. It can't just send down a press release and hope that everything filters down. They are being proactive, they are building those relationships. So they have the need for the database side that Agility brings. At the same time, what we are seeing that among Agility's clients many of whom are small and medium enterprises who stuck their tail in the water, moving this technologies, they are saying that do yourself tool aren't enough for to the sophisticated social listening and media monitoring. And they need more service; they need more robust tools built around that. So we've got a lot of functionality, lot of capability in the tools that we currently provide to customers, the MediaMiser tools that we are going to be bringing to the Agility customers. We are really excited about that. And we've also got a robust set of professional services that are available very economically that we believe they will also benefit from. So they really fit together like two pieces in jigsaw puzzle and aligned very well to where the market is going and where the demand is both among small and medium mid size enterprises as well as large enterprises.

Okay, great. The next question is directed towards O'Neil. At what point your gross margin, at what level of revenue, I know this is theoretical but what level of revenue based on the combination of services we are doing right now to gross margins start to get back up to say 35% or so. Are we -- do we have to get the $20 million or $18 million or what point to gross margins start to move up again?

Tim, that's a good question. In an understanding how our gross margins will increase, it's best to look at the business in segments. So if you start with Digital Data Solutions, the current gross margin for this quarter is 27%-28%. And the growth that -- our target is probably in the region of about 32% to 35%. It's really a function of top line growth. At this stage, most of the incremental revenues tend to go down through the bottom line. And to the gross margin expansion. So it's really the function of top line growth when we are at $13 million of revenue per quarter. In the IADS business, on a marginal basis the profitability of the business is far higher than in the Digital Data Solutions, for the simple reason there is a very high level of predictability. So right now the costs of good sold also include an element of fixed expenditure because we carrying certain unused capacity. So it's a really function of top line growth that will help us to leverage the fixed cost. And once we get to a breakeven point which is say now we've said annualized revenues of $8 million per year, you will start seeing gross margins probably in the 35% range as revenues keep going up. In the media intelligence business, the gross margins are 50% and as the business continues to expand it will probably in that same percentage. So it really is a function of top line growth in our two Digital Data Solutions and IADS business that will get us to the 35%. I'd say if you ask me back of the envelop, once we get to the $20 million range total, yes, we should be in that 35% range.

But overall for the whole company?

That is right, on quarterly basis.

Based on how things are going that's not goal five years out.

No, five year is too far. We are working hard to -- each one of the businesses we are working hard to grow their revenues and it's difficult to predict the exact time but the timeframe is much shorter than that.

[Operator Instructions] And at this time, I'd like to turn it back over to the speakers for closing comments.

Thank you, operator. We are very pleased as I already said that now. Said again we are very pleased, we are welcoming the Agility team to Innodata. We think in Agility we made a great acquisition. In two years time we've gone from a business with the zero subscription revenue to having approximately 10 million subscription revenue. And we are proud of that. In our Synodex business, we signed a new important client. One of the top ten US insurers and we completed product customization for another of largest life insurers in the United States we signed late last year. Everything we are doing is about harnessing the power of digital data to enable businesses to make better decisions to spot trends earlier to operate more efficiently and to operate more effectively. And the new businesses are built on the global platform and technologies that we built over time in our core business. We are going to continue innovate the core business also with the prospect of growing it as well, aligning with the needs of broader markets who see the benefits of digital data. So thank you everyone for joining us on today's call. We will look forward to sharing with you our continued progress through 2016.

Today's conference is available for replay by dialing 719-457-0820 or 888-203-1112 pass code 1449286. Again the numbers are 719-457-0820 or 888-203-1112 pass code 7598892. That concludes today's conference. You may now disconnect.