Good morning and welcome to the Innodata Fourth Quarter and Fiscal Year 2016 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Amy Agress. Please go ahead, ma’am.

Thank you, Eric. 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 will hear from O’Neil first, who will provide a detailed review of our results for both the first quarter and the 12 months ended December 31, 2016 and then Jack will follow with additional perspective about the business. We will 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 maybe terminated by clients; projected or committed volumes of work may not materialize; our Innodata Advanced Data Solutions segment is a venture 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 contracts with our Digital Data Solutions clients and the ability of these clients to reduce, delay or cancel projects; continuing Digital Data Solutions 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 of our services; difficulty in integrating and deriving synergies from acquisitions, joint ventures and strategic investments; potential undiscovered liabilities of companies and businesses 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 2016. I will start with a full year 2016 performance and then review the quarterly performance. Later, Jack will provide additional perspectives of the business. Our revenues were $63.1 million in 2016 compared to $58.5 million in the prior year. In both years, we incurred certain one-time costs and charges that are set out in today’s press release. In 2016, these one-time costs and charges amounted to $3.2 million, which were allocated $2.6 million to our Digital Data Solutions segment and $600,000 to our Media Intelligence segment. In 2015, one-time costs and charges amounted to $400,000, which were all allocated to our Digital Data Solutions segment. In 2016, our adjusted EBITDA was benefited by a $250,000 one-time revenue pickup in Media Intelligence. Excluding the impact of these one-time charges and benefits, our adjusted EBITDA was $2.5 million in 2016 compared to $2.3 million in the prior period. Our $2.5 million adjusted EBITDA was the net result of $4.4 million adjusted EBITDA in DDS offset by EBITDA losses of $1.8 million in IADS and $70,000 in Media Intelligence. Taking into account all one-time charges and benefits, our pre-tax loss was $4.8 million in 2016 compared to $2.2 million in 2015. Net losses, after taxes, were $5.5 million in 2016 compared to $2.8 million in 2015. I will now review the segmental performance for the year after excluding the impact of one-time charges and benefits, unless I indicate otherwise. Digital Data Solutions revenues were $50.6 million in 2016 compared to $1.7 million in 2015. Gross margins in DDS were 26% and operating margins were 2% or $800,000 in 2016 compared to gross margins of 29% and operating…

Thank you, O’Neil. Good morning, everyone. Thank you for joining us today. I will now share some additional insights on our segments and the progress we are making to transform our business with higher value data products and services that drive recurring revenue. I will start with our Digital Data Solutions segment. Our 2016 results reflect the elements of unpredictability in this business. A key client faced budgetary constraints leading to a combination of reduced volumes and pricing concessions on certain projects. Another client, a key eBook customer, progressively reduced its requirements for our eBook services throughout 2016 with an unexpected higher decrease in Q3 and Q4 when it was forced to pull back from its Chinese language program. Our eBook services business as a whole declined in 2016. It accounted for 9% of our total revenue compared to 12% last year. The decline in revenues from these two key clients, a total of $2.8 million of decline, was partially offset by incremental revenue from existing accounts and new accounts that required a combination of advanced technologies for data extraction and enrichment as well as foreign language abilities. One account is a venture funded firm that is bringing Big Data in combination with cutting edge search, analytics and visualization tools to legal sector. Another new account selected us to help them build the new regulatory and compliance workflow platform. These new wins, combined with work on the large European projects that we previously announced added $2.1 million in incremental revenues in 2016. The unpredictability of this business is a challenge, but it can also provide unexpectedly good results in good years. To sustain and expand the DDS business; we are relying increasingly on newer technologies in data extraction and data categorization that we are building, utilizing our expertise in artificial…

Thank you. [Operator Instructions] And we will take our first question from Ben Klieve with Noble Capital Markets.

Alright, thank you. Good morning, gentlemen. Jack, I have a quick question regarding one of your last comments, correct me if I am wrong, I think I heard that you said that in the IADS segment, EBITDA breakeven is expected to occur at $5 million of revenue as opposed to a prior estimate of $7 million to $8 million. Did I hear that correctly?

You did, yes.

Okay. So when I am looking to the press release here, we have got – that segment was $4.3 million this year with a loss of about $1.8 million. And so I am trying to figure out here what gives you confidence at that $5 million level and also kind of what the catalyst was to reduce that breakeven level from $7 million to $8 million down to $5 million?

Great questions. Thank you, Ben. What gives us confidence is we measure and monitor our production statistics very, very carefully and we are able to project based on our existing cost structure. How much revenue we are able to process for what cost. So we are actually carrying right now a bunch of costs that will enable us to take on the next several engagements with very little, if any, additional cost. Now, what enabled us to get there, importantly, is innovation. We have talked about Synodex 4.0. And 4.0 brought certain benefits to our customer base in terms of making the product more attractive, but it also brought great benefits in terms of our productivities. So we are using our 4.0 platform, we are able to process data much more efficiently and that has enabled us to reduce costs.

Okay. Okay, thank you. And I guess would that then be – that maybe the answer to my next question here. I am wondering kind of what gives you the – sorry, stumbling on my words here, the confidence in EBITDA breakeven across all segments then next year, is that a reasonable target? And if so, would that be kind of derived from that same logic?

It would. In fact, we are aggressively pursuing EBITDA across all the segments. It’s a goal that we have and we are hopeful that we will not have to wait till the end of the year to achieve it. We think we are there in terms of MIS. We think we are very close to being there in Synodex based on what our pipeline looks like as a result of the cost efficiencies that we have now built in through innovation. So, we are hopeful about that. In terms of DDS, we know the problem in DDS. It’s predictability. But we are very pleased with the fact that we brought in a very large potentially new client late in the year. We wish that the Apple revenue would have continued for very long time, but we know that, that was never intended to be the case. But this new client is very exciting. So we are feeling very good about the year.

Okay. And with regard to the e-book visibility, I guess I am curious what timeframe are you able to look forward and have a relatively – and be relatively confident in the revenues that you are going to be able to derive from that? I mean, are you able to look 6 months out and say we realistically can see x dollars of revenue coming in. Is it beyond 6 months or is it not quite that long kind of what’s the timeframe there that you are able to really accurately project?

And your question is in respect of the e-book business, is that right?

Correct.

Okay. So, on the e-book business we have got our clearest visibility probably rolling 3 months out. We have got some visibility 6 months out, much less when we get past that envelope.

Okay, perfect. And then with regards to the internal investigation that you indicated has been completed. A couple of questions. First of all, can you provide just a little bit of commentary regarding the outcome of that investigation? And then specifically, you said there is no more expenses that are expected to be bled into next year? I am wondering if that is the case both from a cash perspective and from income statement perspective?

Sure. So, from – I will answer the second question first. We are not expecting to incur anymore expenses relative to the investigation. We believe that, that’s over. And in terms of an update both the Department of Justice and the SEC have closed their inquiry into the matter officially. So, we believe that, that’s behind us.

Okay, perfect. That does it for me. Thank you much guys.

Next will be Tim Clarkson with Van Clemens.

Hi, Jack and O'Neil.

Hey, Tim.

Hey, just wanted to get some more color on this new combination of MediaMiser and Agility, what do you call that combination again?

We are calling it Agility PR Solutions. We decided to go with the Agility name because Agility has well over 1,000 customers right now and had a great name in the market. So there was some good residual brand recognition there. So we have brought together all the product offerings. They fit together very, very well. And we are marketing it as Agility PR Solutions.

Okay. And in terms of – you got this new joint venture partner, is it Business Wire that you are working with to help sell the product?

That’s correct.

How is that going so far?

Going great, we are really just exited the gate on it. We have been doing a lot of sales enablement work, training their sales staff and they have got over 80 salespeople around the world, training them on how to represent the product, how the product can help their customers in a very significant and important way. And we are very grateful that Business Wire top management has taken an active interest in this alliance. So we think there is a lot of potential to do a lot of good for a lot of their customers.

What’s the combined gross margin on that division when you blend them together?

O’Neil do you have? O’Neil Nalavadi: It’s about 55%, but I would suggest that one should look at range of between 50% to 55% because within the Agility business, there are different products. There is the media contact database that kind of carries a higher gross margin and the media monitoring and analysis carries a little bit, so take a range of between 50% to 55%.

Okay. And – what’s the belief that the industry is growing out on average, besides you guys, is this an industry that’s growing at 10%, 20%, 30%, what’s kind of growth rate is normal in that industry?

We are seeing a smaller growth rate in the monitoring aspect, the traditional monitoring, higher growth rate in social media monitoring.

Okay.

And what we are also seeing is that companies generally are allocating more of their marketing budgets to figuring out how to identify their influencers, amplify messages and then monitor and measure those impacts. Everything that’s going is there has been a lot of consolidation within this industry and a lot of customers are not necessarily happy about that. So it’s giving us a great opportunity to provide very intimate, attentive customer support to provide a lower cost solution in many respects and at the same time to provide some innovation that the markets haven’t seen. So we think we are hitting it on three very important fronts at a good time.

If I need a expectation that that division was going to grow 20% to 30%, would I be overly optimistic or is that a reasonable goal, obviously you got to do it?

It’s certainly the kind of growth that we are striving for. That said, there are some important things that we are putting in place now. The Business Wire alliance is one of them. Other things include the kind of marketing program that’s required to grow this type of business. There are some things we are working out in terms of scalability with the goal of achieving those kinds of growth rates.

Getting back to traditional business, can you comment on just kind of the backdrop in terms of I know Trump getting elected, is it a better backdrop to get projects now than it was six months to nine months ago, what in general is the order flow there?

I don’t know that I would attribute things – the most important things we are seeing in the market to the political environment. I think what we are seeing importantly is that we have always had a somewhat of the smallish niche market for digital data solutions and products in that market was the information companies, people that we have always talked about the Wolters-Kluwer, Thomson Reuters, Reed Elsevier of the world. What we are seeing now though is because there is so much digital data out there that people can grab for themselves, whether it’s private data, public data, license data, people are seeing that as a source from which they can gain insights that give them real competitive advantages in their markets. So some of the new customers that we are talking to and one of the most important new customers that we brought in the fourth quarter is not an information company, they are a private side company that has some really big ambitions in terms of what it wants to do with digital data. So we are seeing that as a real significant driver and a lot of what we are doing in that business is to align to that larger market and figure out exactly how we fit in and win some new big business.

Okay, great. Thanks. I am done.

Thanks Tim

And our next question comes from Richard McKee [ph] with First Associates.

Good morning. I had a question about your IADS business, you have been saying for many quarters now that you had multiple companies interested in evaluating your IADS product, but sales seem to only be around $1 million, why do you think more of these companies aren’t moving forward, I guess you characterized the pipeline is slow moving, this morning, so it’s same thing, but why is that?

Yes. I think that we have seen growth this year. We talked about the growth that we have seen. What I see in the market is a couple of things. First, as excited as the companies were, they were prioritizing certain things in terms of their overall digital strategies. They were prioritizing some things that directly touched revenue, whereas our solution influences costs and profitability more than revenue at this point. So a bunch of the companies in our pipeline were saying, after they did some soul searching of what their internal resources look like, they were saying you know what, we are going to first prioritize our ability to build websites that people can use to – healthy individuals can use to subscribe to life insurance immediately. We want to capture that revenue. They refer to that as simplified issue solutions. So they were spending a lot of time on that. Now several of our large customers have completed those initiatives and now they are turning to other aspects of their overall digital strategies. So that was one thing. I think more generally, they do move slowly. They are very risk adverse, as you might expect an insurance company would be. And they like to see other people go first. They like to dip the toe in the water. So what we do think is important is that, as we mentioned, 5 of the top 25 customers have utilized us, several for a toe in the water and the results have been good. It’s a small industry. It’s very fraternal and collegiate. They have a lot of conferences. They talk to each other. And we feel good that the word is getting out there. We also feel good that the – some of these other programs that were prioritized above our program have been or are being now completed. So those are the things that are giving us a belief that we are going to be able to expand the business very good this year.

Okay. Are there competing products that they are also evaluating or is it pretty much a question of going with you or just nothing?

Well, there are competing products. The other products offer different value propositions essentially. We know that some of these are very large companies and their procurement departments require that they evaluate not just our product in isolation but the products that prefer to compete with us. What we have observed and I believe each case where there was a procurement initiative like that, is we came out on top and we were told by clients that it wasn’t even a close call. So what have we got, we have got a product that has been kind of passed a litmus test at some of the leading providers. We are aligned to their overall digital strategies. They know they need to change the way they are working. They are very interested in digital data and big data and automation. And unfortunately, we are in an industry that does take its time and resolving, but we think that the innovation we have done this year that has enabled us to both improve the product and reduce our costs simultaneously is good. It’s giving us a little bit more breathing room to let things play out. And we are hopeful that this year we will be seeing further expansion in the business.

Okay. You mentioned the products being improved, I mean my understanding was that the 4.0 version was indeed not only improved, but done with the input from your customers and would be customers and hopefully would pickup the acceleration in demand for it, I mean are you seeing any indications that that’s the case?

Absolutely, when I look at our pipeline, we have got a couple of things in the works, which were – frankly, we are hoping will be Q1 closes even with customers who very specifically had shared with us their requirements and what they would want be able to accomplish with the 4.0 release. They took their time, they tested it, they have evaluated it and we think they will be moving forward.

Great, alright. Thank you.

[Operator Instructions] And we will go next to Chris Beach [ph] with Hawksbill Holdings.

Good morning. Since we are on the subject of IADS, I just want to make sure I caught it correctly, so Synodex specifically did not grow from third quarter to fourth quarter on the top line, is that correct?

Chris hi. Synodex was consistent at about $1 million in Q3 and Q4, that’s right.

Okay. And did I also hear correctly that you said that there is one customer Jack, who is currently in negotiations to I suppose renew some kind of contract as it relates to Synodex and during that period they are not using the service, is that what I heard?

That’s right.

Okay. I guess what I would like to understand a little bit better is that previously you characterized this business as a service that works its way into the workflow of your customers and that once it gets there, it’s kind of indispensable and therefore it’s a recurring predictable revenue stream, so I am not sure I understand why a pricing negotiation or a contract negotiation would cause them to turn off the switch, so to speak?

It’s a great question, Chris and very perceptive things. Thanks for asking it. So if we look at the entire customer base, everything that we talk about, when we talk about that $4 million run rate, is exactly that is operationalized, it’s within their operations. They become reliant upon it. They are utilizing it and it provides that great recurring revenue. This client we got into them a little bit differently. And with this client that we are now referring to, they had an urgency and they were not able to process the amount of work they had for a period of time late last year. And that gave us an opening to come in and say well, if you want to protect that business, if you don’t want to just let it fall off the table, you can utilize our solution and we will enable you to automate, we will enable you to do things much more efficiently. And they said, well, we will try it. So they tried it and they liked. And that’s giving rise now to an opportunity to negotiate a long-term deal with us.

Okay. So but their revenue was a part of the consolidated Synodex revenue for 2015 and so if you – so you have to get that revenue back for 2017, we have to re-sign that revenue for 2017 in order to not have to fight that uphill battle from a revenue growth standpoint, is that correct?

That’s right. And it wasn’t a huge amount of revenue, because again, they were utilizing us in a fairly contained way and they viewed it as a point solution to a very specific problem and an opportunity to evaluate the service. So if you look at our revenue third quarter to fourth quarter, a bunch of this revenue came out in the fourth quarter. They have started using us a little bit late in the third quarter. And we are not forecasting any revenue from them as we project first quarter. We do believe, however, that there is a very good chance that we are going to be re-signing them and when we re-sign them, we will be part of their operational flow.

Okay. Moving on to MIS, so I understand that you have grown that business inorganically this year, I am curious that maybe you can help us better understand what kind of organic growth you got out of that business and I guess specifically I am talking about MediaMiser, did that business grow, shrink or stay the same in 2016?

Hi, Chris, again a great question. So organically, the business – MediaMiser business grew in terms of constant currency at about 6%. But in understanding the overall growth, which grew 67%, there is an important fact to note, which is when we acquired Agility, Agility came with a great product and a great platform and the technology team and the research team. However, we did not get the entire sales team, which was the PR Newswire unified sales team that was selling Agility. So midway through the year, we had to reorganize our sales resources, efforts and marketing efforts now to sell all the products, which is the Agility products and including the MediaMiser enterprise products, which we now call Agility Enterprise. So you could take that and the fact that we have added customers, in Q4 for Agility and we also added customers in MediaMiser for the enterprise, take that into totality to see that – in terms of both the growth and the impact on the bottom line.

Okay. I understand there may have been some sales force disruption as it relates to the Agility acquisition, perhaps maybe it’s better to just ask the question, in the first half of ‘16 was MediaMiser growing at the 20% rate that you sort of had laid out for us when you first acquired the business, whenever that was?

The entire growth in the enterprise platform really came in the first half of the year. And the second half we added some customers. We also had some customers whose priorities changed. Particularly there was one customer who was using the product for a risk – not for monitoring PR, but for risk evaluation and some of that, their priorities changed as a result of corporate reorganization. So that impact was felt in the second half of the year.

Okay. And so I guess I have a similar question and as it relates to MIS that I had versus IADS, is that business truly a visible recurring business as previously stated or is it a little bit more volatile than maybe you have historically qualified it as?

Sure. So I think that the way to think about the business is that it’s predictable, stable and very high quality revenue as a business. So the Agility customer base we are looking at in a normalized period of time anywhere from 75% to 80% renewals. And in the MediaMiser business, we are looking at 90% and higher annual renewals. So when you do a DCF forecast on the profitability of those deals, it’s very, very high. It’s a multiple of revenue, given the combined long-term nature of the deals, factored by the high gross margins or project margins of the deals, so very, very good business, very high quality revenue. Now on the Agility side, this year we think that we need to work through a renewal cycle with the business to really get a good feel for what those customers would like, how solid is each one of those deals, what are any issues that we need to identify and work through. We have been doing that, as you might have imagine very aggressively. In the first year, might renewals not be as high as we are projecting them to be in the ordinary course, it’s possible. But we are going to do everything that we can in order to accelerate that. Beyond that, we think that the net new opportunity is significant. There is a lot of consolidation in the market. A lot of people are not that happy with the incumbent consolidated providers in terms of the service and the platform. And beyond that, the Business Wire opportunity and some other partnerships that we are also putting in place present a great opportunity for us. So, I think net is that this year is going to be an interesting year. I think we are going to do the work that we need to do to solidify the existing customer base, know for sure what we have got there, get to the point where we have got a reliable, predictable 75% to 80% or more renewal rate in that business, continue to fortify and to build on the 90% plus renewal rate that we have got in the MediaMiser business – enterprise business, put in place marketing programs and put in place alliance enablement structure to be able to grow net new.

Got it. Okay. And on DDS, O’Neil, I didn’t get all of the details of this customer that you are doing business with, pending some kind of financing. Can you go through that one more time and then maybe just that the end of it, both of you can talk about why you are doing business with customers who don’t have viable financials?

You take the first part. I will take that the second part. Chris, this is a venture-funded firm. Like all venture funded firm, they go through milestones. And we considered and evaluated that risk. Obviously, we have got paid toward the year for the services we provided and it’s been a great relationship and also the ability to make a real impact. Now, the product is well-respected. We are going through a financing event, which is very typical with venture funded firm as they reach certain milestones. Now all that said, what does it really mean? I mean, that’s business, but from an accounting perspective unfortunately, the rules are more stringent in terms of the way the exposure gets measured and because our – the payment is dependent on them completing the financing the AR needs to be accounted on a purely contingency basis. If you were to ask Jack and me, what’s our level of confidence, we would say the level of confidence is pretty high. But that’s a judgment call that we have. Now all that said we earned revenues from them. We got paid for the revenues in 2016.

Right, right. And just to refresh our memories, so what were the amounts that were deferred in the third quarter and the fourth quarter and what was it reserved for?

Right. There are three components. So, the first component is the amount of the AR that’s in the books in respect of this client. So that’s about $150,000. So because it’s an AR exposure, we had to create a reserve for doubtful debt that went in as an SG&A expense. However, the accounting rules really tell us that when you have a – when you create a doubtful – reserve for doubtful accounts, you cannot recognize any revenues in respect of that client. So, the revenues that we had to defer in respect of this particular client, was $600,000 in Q4 and $150,000 in Q3. So now let’s assume for a minute that they complete their financing and they pay us whether that was in Q1 or Q2, effectively what you will see is a reversal of $750,000 and an accounting of revenue on the top line of $750,000 and a reversal of the reserve of $150,000 in the SG&A level. So, the net impact would be about $900,000.

Right. And just so I understand it sequentially, you recognized a $150,000 of revenue in the third quarter from this customer which you then reserved for in the fourth quarter through a receivables write-off and then you have deferred another $650,000, is that right?

Right. There was an outstanding AR in the books in respect of that for the prior period, which was…

Right. The prior period in the third quarter, in which you actually recognized the $150,000?

Yes. I think the confusion is from the following. These $250,000 amounts are different amounts.

That’s a different amount.

It’s not the same $150,000.

Okay. That’s what I didn’t get. Okay, I got it.

Yes, yes. So, O’Neil, just do it one more time, but paint the picture of how the 250s are different pieces.

Right. So, a little bit more history, but I will have to go at a little bit more, throw more color on it and that really is that in Q3, they came to us and they suggested that they would pay certain percentage of the work that they do and they asked us to defer the rest. So, as a part of those negotiations, there was a deferral of $150,000 that was to be done on a purely cash accounting basis. But at the same time, there was an exposure in the books of $150,000. However, because of the financing event, they are evaluating different options for financing and they needed more time. We were really hoping that the entire financing event gets completed either towards the end of Q4 or at the beginning of Q1, but they needed more time to evaluate the different options that they have. And because it’s got delayed, we had to just reverse the entire revenues until the event actually took place and also create a reserve for the doubtful debts. It’s – I am saying a lot of things. It’s a spreadsheet clarification rather than a...

Did that help, Chris?

Yes. Now, I understand why it’s $900,000 plus potential reversal in the future. Okay, I got it.

Okay. I will just say one additional comment because you asked it, the compound question. This will address the first part of the question. If you look at the last decade even of Innodata’s history, we have done a lot of business with early stage companies. We have done some very big businesses with early stage companies. Way back in our history, we did tens of millions of dollars with a company called Questia. That was an early stage company. So we like early stage companies. Obviously, our terms in terms of credit and exposure are different with early stage companies. We negotiate different kinds of deals with them, but we are in the business of helping create digital data products and there are a lot of companies that are upstarts who have designs on new kinds of products. So, we think it’s appropriate that we figure out how to work with them. If you look at revenue write-offs that we have had to do, over the course of again our last decade, it’s practically zero. So, from an accounting perspective, sometimes things move here and there and you just got to do what the accounts tell you, but we have had a great track record in terms of choosing who we do business with.

And just, Chris, to add a little bit more to that. I mean, we obviously do a due diligence on these items and on these opportunities before we get into a relationship. And on this particular case, this is a very, very high-quality management team, very smart people, backed by good venture capitalists and some really great logos in there. Now it’s very classic venture funded lifecycle. They go through milestones and at every milestone they need to raise capital.

Right. Maybe you can just clarify few things, if possible. One is, how much revenue did they generate in 2016 that actually received on a cash basis? Number one. And number two, maybe you can tell us, if the business is going to be an up or a down-round financing life for them?

Great. I mean, we don’t get into specific clients, but I can tell you that this has been over to $1 million in revenue and paid for – and that’s over $1 million in 2015.

And as far as up or down.

I think in terms of whether it’s up or down round, that’s not information that we are privy to and if we were, we would be under NDA and we would be reluctant to talk about it, but in this situation, we don’t know.

Fair enough. Last question is I think I caught O’Neil saying that the partial – one of the partial reasons for the decline in cash was a program to reduce payables. Tell me if I heard that correctly, and if so, what exactly is the program for reduced payables and what was the reason for it? O’Neil Nalavadi: It’s not really a program to reduce payables. It’s – what I said was that our cash and investment balances declined by approximately $3 million and the reduction primarily reflects the reduction of payables of $2.2 million and that’s normally the seasonal thing. Towards the end of the year, the payables – we clear some of the payables. And it normally happens in either Q4 or Q1. And that’s the reason.

Okay. I have to look at that. I don’t remember it being this large a magnitude. Thanks very much. O’Neil Nalavadi: Thanks Chris.

And the next question is from Edward Fowler.

Good morning Jack and O’Neil. No its afternoon. O’Neil Nalavadi: Correct good afternoon.

I have a series of questions, but I’ll start with easy ones. Did you buy back any stock in 2016? O’Neil Nalavadi: Yes I had. We bought about approximately 57,000 shares.

Okay. O’Neil Nalavadi: I think the average purchase price is $2.30, thereabouts, about $2.3 per share.

Okay. Could you give me an idea of the pricing in each segment from DDS to MediaMiser to Synodex. Have you been able to raise Agility, have you been able to raise prices or you are having to discount prices in each of those segments. O’Neil Nalavadi: In the Agility part of the business, we have been able to hold on to the prices and we have been very disciplined about it, in terms of the pricing discipline. And we don’t really see a pricing pressure there though the competitors tend to discount in the market to win business. And that does not mean that we don’t discount. I mean there is always in all negotiations if you keep a certain leeway, we maintain a certain amount of discipline as well to win the business.

So it’s pretty much the same in Agility after you bought it. How about IADS? Is it getting better for you because you are looking at new clients?

On the IADS side, these tend to be larger deals and what we are finding is the amount companies are willing to pay is very much a function of the value that they are intending to get out of it. And we are not seeing pricing pressure as such and from clients who our clients and are using it, they are getting great value. So I hope that’s helpful.

Yes. Do you see IADS getting to $5 million in 2017 and your breakeven expected level?

I do, yes.

You do? That’s a good sign. How do you feel about the content DDS business? Is that going to continue to decline or do you see any pickup in the cycle there?

I think that the business is going to change. And what we are going to work hard on is shepherding it through those changes. And the change that I am expecting is that the market is going to become broader and bigger and that will require that we do some of the same things for the new bigger markets different things as well but it will require that we do some different things as well. The big difference is that in the past companies required a publishing company or an information company to serve them digital information. They subscribed to it, they log on, they signed in, they did a search, they got the answers that they needed. I think in the world that is emerging and the world that we are forecasting, we see and we are experiencing now, companies are just we have got so much of our own digital information and we license API feeds to additional digital information. And then there is free digital information that we can scrape from government websites and different places like that. We want to do our own things our own way with that information. And we see that as a very significant opportunity for us. If you Google Big Data, machine learning, any of these things, there is a whole new world being invented around us. Some people are describing the digital data revolution as the next great industrial revolution of our time. So what’s important to us is that we execute basically on 2 strategies: One is the productization strategy, which is the Agility, the Synodex. We are creating digital data solutions that have the characteristics of very high-quality revenue. The other strategy within the DDS segment is to align ourselves with this big megatrend, this new industrial revolution,…

Okay. Jack, do you have any more payments on the MediaMiser supplement purchase agreements?

Yes we do have a payment – we kind of discussed on the 8-K. There is under the renegotiated supplemental agreement which was really as a result of the Agility acquisition and bringing the two teams together. We had to reset the clock. We have $1 million payment which is due at the end of March and another $1 million payment at the end of March 2018.

And my final question, which I always ask, the European publishers. I have been on calls with you before and you said, “Well, the fourth quarter is going to be great.” What amount of revenue was derived from the European publisher in Q4? And how is that progressing and are you making any profit with this customer yet? O’Neil Nalavadi: Ed, in Q4, there was a significant growth in the revenue from those European projects that we announced. It went up to $1.4 million and understanding that ramp-up, keep in mind that Q4 tends to be seasonally good because of the kind of products we handle for them and that may come down in Q1 because of the seasonality. But in terms of ramp-up, we are continuing to ramp up and the customer is also happy. In terms of the understanding the overall opportunity though, the size of the overall opportunity has shrunk of mainly because of the fact that the currencies that we are exposed to for these contracts were all originally in euro and the value of the contract was based on €1.3 to $1 and today the dollar and euro are almost kissing each other, so.

So you are not making a profit with that client yet?

We made a small profit in Q4. The level of profitability is less than our traditional projects in DDS and the reason to understand that is this is the first time we have ventured into doing very complex foreign language projects. Now, complexity should be understood in two respects is, the more complex it is, it creates more barriers for other vendors to enter into that. So the fact that we ventured into it, we have made the investments. And obviously, there was learning along the way. And the profitability is lower, but it’s far more durable. We have far more deeply entrenched with this customer. What we need to know, obviously, is to improve the profitability.

It just seems to me that this European customer was going to be a lot bigger in the fourth quarter than it turned out, and do you see that improvement in the first quarter?

Hey. I will pitch in also. Yes, we see that there is going to be continued growth in this customer for 2017. As O’Neil was saying, we shouldn’t underestimate in that business, maybe you are looking for 30% or so on a good day – you are looking for the 30% margin on business, when you take a 30% haircut on currency, there goes your profitability. So where does that leave us, well, it leaves us on these new projects kind of breakeven-ish. We have growth potential that we are forecasting in 2017 as well as some new initiatives we are taking to decrease costs.

Okay.

Well, we will see you in June.

Thanks for the questions.

You’re welcome.

At this point, I would like to turn the conference back to Mr. Abuhoff for any additional remarks.

Thank you. So I guess quickly recap a couple of things we talked about. We ended the year with $63 million in revenue, that was up 8% from the year prior. And the entire increase was attributable to our IADS and our MIS businesses, both of which enjoy high operating leverage. We acquired Agility in July, 2016. We are excited with the progress we have made to-date, both in terms of integrating the businesses and bringing some new capabilities to the market. We have re-branded those businesses as Agility PR Solutions. We are getting good traction with that brand. On the Synodex side, our pipeline remains strong, although slow moving. We have lowered our breakeven point very substantially through innovation. We are also exploring the development of several new products within the division that further leverage our capabilities with digital data and respond to some of the customer needs that we are seeing. So again, thank you, everybody for joining today’s call. Look forward to continuing to update you as we make progress on our 2017 plans.

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