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spk02: Good day and welcome to the InnoData third quarter 2021 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Amy Agras. Please go ahead.
spk00: Thank you, Shelby. Good morning, everyone. Thank you for joining us today. Our speakers today are Jack Applehoff, CEO of InnoData, and Mark Spelker, our CFO. We'll hear from Jack first, who will provide perspective about the business, and then Mark will follow with a review of our results for the third quarter. We'll then take your questions. First, let me qualify the forward-looking statements that are made during the call. These statements are being made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 as amended and Section 27A of the Securities Act of 1933 as amended. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements. These statements are based on management's current expectations, assumptions, and estimates, and are subject to a number of risks and uncertainties, including without limitation, the expected or potential effects of the novel coronavirus, COVID-19 pandemic, and the responses of governments, the general population, our clients, and the company thereto, that contracts may be terminated by clients, projected or committed volumes of work may not materialize, acceptance of our new capabilities, continuing digital data solution segment reliance on project-based work in the primarily at-will nature of such contracts, and the ability of these clients to reduce, delay, or cancel projects, the likelihood of continued development of the market, particularly new and emerging markets that our services and solutions support, continuing digital data solution segment revenue concentration in the limited number of clients, potential inability to replace projects that are completed, canceled, or reduced, our dependency on content providers in our agility segment, a continued downturn in or depressed market conditions, whether as a result of the COVID-19 pandemic or otherwise, changes in external market factors, the ability and willingness of our clients and prospective clients to execute business plans that give rise to requirements for our services and solutions, difficulty in integrating and deriving synergies from acquisitions, joint ventures, and strategic investments, potential undiscovered liabilities of companies and businesses that we may acquire, potential impairments of the carrying value of goodwill and other acquired intangible assets of companies and businesses that we acquire, changes in our business or growth strategy, the emergence of new or growth in existing competitors, our use of and reliance on information technology systems, including potential security breaches, cyber attacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, client, employee or company information or service interruptions. and 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, including our most recent reports on Form 10-K, 10-Q, and 8-K, and any amendments thereto. We undertake no obligation to update forward-looking information or to announce revisions to any forward-looking statements. Acceptance required by the federal securities laws and actual results could differ materially from our current expectations. Thank you. I will now turn the call over to Jack.
spk04: Thanks, Amy. Good morning, everyone. We're very happy to be here today with you this morning, and I thank you for joining us. Today, we're pleased to announce that we achieved 20% revenue growth in Q3, and more importantly, we anticipate this growth to accelerate in Q4 as well as next year. Our confidence stems from the new deals we're signing, the traction we're getting in the market with both existing and new capabilities, the productivity ramp up we're anticipating from our expanding sales force, and current expansions and anticipated further expansion of several of our new key customer relationships. Q3 represented our fifth straight quarter of year-over-year growth. Our incremental revenue growth has been highly profitable. Seventy-one percent of our incremental revenue in Q4 flowed through directly to our gross margins thanks to strong operating leverage on fixed costs and effective cost control. We're essentially funneling this incremental gross margin as investment back into the business in some very exciting ways that we believe will accelerate growth while at the same time we're carefully managing free cash flow. I liken our business to a flywheel. A flywheel starts with a bunch of small turns, but as it gains momentum, the flywheel builds on itself and produces more and more positive results. We believe that's the effect we're seeing in our business. We believe one of the best investments for internally generated cash is organic growth in our business. We anticipate that the growth expenditures will continue to be funded through internally generated cash flow and internal resources. It's worth pointing out that even with significant growth expenditures, our cash has increased to almost 21 million at the close of Q3, up from 17.6 million at the end of last year. On our Q2 earnings call, we said that we anticipated announcing important new wins and important new capabilities. Indeed, we announced a five-year data and SaaS software subscription deal that we anticipate will yield 11 million of revenue with one of the world's largest banks. who's our charter customer for a new SAS software product. We also announced a 3.8 million win with a new customer supporting its AI predictive model development around medical information. We're seeing opportunities to expand both of these relationships further over the next several months. These deals represent both important new wins and important new capabilities. On top of these wins, We announced that we are now firmly engaged with the second large Silicon Valley tech company, having quickly won engagements that we anticipate will yield approximately 1.8 million of revenue around content moderation, intelligent document understanding, computer vision, and health records management, again, with opportunities for expansion. We believe these large tech companies often spend tens of millions of dollars, some even over $100 million on AI initiatives, So getting our foot in the door opens up significant opportunities for expansion. Lastly, we announced that Agility, our AI-driven SaaS industry platform for corporate communications professionals, had been named Momentum Leader in the 4.5 billion PR software market, and we launched an exciting new Agility release that features several innovative AI-enabled workflows. I have never seen this kind of momentum in our business. AI is increasingly seen as strategic by companies across verticals, and as a result, our services are increasingly relevant. Here's the key. Every AI initiative begins and ends with data. AI applications are trained with large quantities of data, not programmed in the traditional sense. So when they perform well, it's because they were trained with high quality data. So whether we're creating high-quality AI training data for data sciences teams at large Silicon Valley tech companies or building and managing AI algorithms for financial services companies or offering AI-enabled SaaS platforms to subscribers, the core ingredient, the sine qua non, if you will, is high-quality data, which is what we've built a 30-year reputation on. To capitalize on the significant opportunity, we're focusing our investments on Salesforce expansion and new product development. This year, we've been executing a plan to expand our Salesforce from 19 sales execs at the beginning of the year to 110 at the end of the year. This is close to a 6x expansion. As of October 1, we were at 82 sales execs, so we're well on our way. Even though it's a tight labor market, we're finding some very high-quality people out there. Of the 91 heads we've added or are planning to add to the sales force, 85 are to be assigned to sell our agility platform, the SaaS platform built with AI and data at its core, which, as I mentioned a moment ago, is now ranked as momentum leader in the 4.5 billion PR software market. We have about 12 million of agility annual recurring subscription revenue presently. and a 94% net retention that we believe is likely to improve. We go to market with both direct sales as well as channel sales. Our channel partners consume our data feed within their products, white label our product, or resell our product. We anticipate aggressive growth from our sales force as it ramps up. Additionally, we're focusing growth from our channels, both from existing channel partners and new channel partners we're bringing in. You can expect to hear news from us about new channel partners within the next few months. Our Agility SaaS platform has allowed us to build a core capability in SaaS sales and marketing, as well as the SaaS enterprise software development and product management. To capitalize on this expertise, we plan to launch four additional SaaS platforms in the market, all our own IP, all built on our proprietary GoldenGate AI technology, and all designed to yield high-quality recurring revenue. We announced just this week the general availability of one of these new platforms, our new data annotation SaaS platform, which we believe will serve needs we've identified in today's marketplace. In addition, we're developing a SaaS platform to help companies deploy and productionize AI models. We expect general availability of this platform in the first half of 2022. Taken together, we believe these two new subscription platforms, one for AI data annotation and one for AI model management and deployment, will extend and complement our fast-growing AI managed services. Apart from these two new platforms, we're also building a SaaS industry platform that will initially serve the financial services industry. In September, we announced a large win with a multinational bank that had become a paying customer for this new platform. Tentatively, we're planning general release of this platform late in the second half of 2022. The fourth new SaaS platform currently in development is an industry platform designed around medical data analytics. We're targeting general release of this platform in the second half of next year as well. We believe these four new platforms will significantly expand our core value proposition of accelerating and simplifying the adoption of AI and will help to further diversify and differentiate our products and services that are designed to help companies obtain the benefits of AI. Of this quarter's 17.4 million of quarterly revenue, we regard about 15.8 million or 91% as recurring revenue with significant lifetime customer value. We believe we will be able to grow our recurring revenue as a result of expanding relationships with the large technology companies we're signing, landing new customers for AI services and solutions, growing our agility SaaS platform direct and indirect subscriber bases, and over time, growing subscribers to our new SaaS platforms. Our pipeline is robust, and it's growing. We're working with an expanded assortment of large enterprises as well as early stage companies with many opportunities in late stages. It is also worth mentioning that on top of the two large Silicon Valley tech companies we've announced, we're getting off the ground with a third. Once we build a bit more momentum with this third company, which we are expecting to do, we'll get a formal announcement out. In addition, we have discussions continuing with a couple of other large techs as well. When we reflect upon the AI work that a data is doing with its customers, it becomes clear that AI is destined to be in everything that we do and everything that we use. We're working on AI implementations designed to help organizations modernize or streamline processes, AI implementations that deliver deeper, more insightful analytics, and AI implementations that promise fundamentally new experiences. It is also interesting to observe that many of these initiatives are harnessing the technology to address current macro events, such as labor shortage and supply chain challenges. I'll now turn the call over to Mark, our CFO.
spk08: Thank you, Jack. Good morning, everyone. Revenue for the quarter ended September 30th, 2021, was $17.5 million, up 20% year over year. Net loss for the quarter ended September 30th, 2021 was 0.8 million or 3 cents per basic and diluted share versus a net income of 0.2 million or 1 cent per basic and diluted share in the year-ago quarter. Revenue for the nine months of 2021 was 50.5 million, up 18% from the year-ago period. Net loss for the first nine months of 2021 was $0.5 million, or $0.02 per basic and diluted share, versus a net loss of $0.6 million, also $0.02 per basic and diluted share, in the year-ago period. Cash and cash equivalents were $20.9 million at September 30, 2021, up from $17.6 million at December 31, 2020. Thank you. And operator, we are now ready for questions.
spk02: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. We'll pause for just a few moments to allow everyone an opportunity to signal for questions.
spk01: Our first question comes from Dana Busca with FELTL.
spk06: Hi, Jack. Good morning, Dana.
spk05: Congratulations on your wonderful quarter. Thank you so much. Oh, you're very welcome. It seems to me that you had a very nice cadence of new contracts coming in this quarter. And I was wondering if with these new contracts, is it a strategy of landing and expanding with these contracts?
spk04: Great question, Dana. Absolutely, that's the strategy. And with a couple of these contracts, you're seeing something that's even going beyond that. A couple of these contracts are essentially charter customer contracts with new capabilities and new platforms. And the idea is we hone what we're doing, we perfect it, we make sure we're tightly aligned to the customer's requirements, we send our product managers out to verify that the market requirements are reflective of the customer requirements, and then we throw sales and marketing behind it. That's the formula we're working on. You know, I was thrilled that we got a, you know, with, you know, essentially new requirements and new capabilities to two very large contracts in the market that we announced. And, you know, I'm really looking forward to, you know, productionizing those and scaling those and, you know, getting ourselves a marketing team working on
spk05: Excellent. That sounds just wonderful. I have another question, and this one has to do with your new data annotation platform that you announced. Could you talk a little bit about how you anticipate marketing this? And are you anticipating this to be its own profit center? And I know you talked about other SaaS applications. Are they going to be also like their own profit center assigned with like product management and all the capacity around that.
spk04: Yeah, so let me start with the last thing you said in terms of product management. I think that's a very critical part. And each of these products will, in fact, have a product manager assigned to it. And the product manager's job is to make sure that what we're building is not a product of our own pure invention, but is reflective of market problems. you know, identifying, you know, white spaces in the market where, you know, we can build product and fulfill those needs. Now, you know, historically, we've been primarily a managed services company. Agility was our first foray into, you know, something a bit different there. But what we're seeing is as we go along, especially in this much larger market that we're addressing, is there are gaps. There are things that, you know, despite the number of people building tools and platforms for this market, there are some significant gaps. And we've got the technologies that we use in our managed service to encapsulate in new products and bring those to market. We've got now new capabilities for scaling sales and marketing around SaaS platforms. We've got new capabilities for product management and product engineering of new SaaS platforms. So this, to me, represents a very exciting new chapter in our growth trajectory.
spk05: That sounds wonderful, too.
spk06: Thank you. That's all I have. Thank you.
spk02: Our next question comes from Tim Clarkson with Van Clemens Capital.
spk07: Hey, Jack. Hey, Mark. Great quarter. I'll get a real big picture question first, and then we'll go into a few details. I noticed that you haven't sold any shares, and I was talking with Nick, the chairman. He hasn't sold any shares. I'm in the same situation. I own a lot of shares. The way I look at it is we're maybe starting the second inning with this AI stuff. Maybe you might want to talk about you know, where we are and, you know, the, you know, the potential, you know, going into the fourth quarter next year and, and, um, you know, what, what should develop?
spk06: Sure, Tim.
spk04: I think the, you know, the real important thing that, you know, motivates us so significantly is, you know, this AI thing is a really big deal. Um, and we're in the very early innings of this game. We're working with customers now who have been working with the technologies for several years, and we're finding that we're relevant to them. We're finding that we can be helpful and help them struggle with some things or help them avoid struggling with some things they've been struggling with. And then equally importantly, we're working with companies and very large companies who are now just starting to figure out their strategies to figure out, well, you know, what do they need? Do they have data sciences teams who need training data? Do they lack data sciences teams and what they need is model management and deployment? Or, you know, are they looking for a fully packaged solution, one of our industry solutions that can, you know, encapsulate the AI into an application that they can immediately start using? So we think we're addressing this early-inning market in a very comprehensive way, and we're very excited about that. Fundamentally, we're about data, and we always have been. We struggled with our market size. As a result of what's going on in AI, our market is wide open to us, and it's very exciting indeed.
spk07: Right. Okay, a couple more specifics here. Do you have any expectations in general in terms of revenue per salesman on a forward basis? I mean, how much do they need to generate to be useful to InnoData?
spk06: Yeah, so really good question.
spk04: The answer to that is that it depends on the business that we're looking at. So, you know, in terms of our solutions and services business, the salespeople carry much higher quotas in managed services. In platform business where the, you know, average revenue per customer is significantly smaller, the salespeople carry smaller quotas. They're kind of a different style of sales. and a lot of the ramp-up we're doing this year is around that business. We can be hiring in much smaller numbers salespeople for the service and solutions and have them be equally impactful. In addition, next year we plan to add more salespeople to the service and solutions piece, and then, as I discussed with Dana, I'm starting to build sales capabilities around these new platforms as well.
spk07: Right. Now, I noticed in terms of, maybe Mark can respond to this too, that your gross margins for this quarter were almost 50% versus last year, 40%. How high can these margins go on a forward basis?
spk04: I think it's going to depend on the mix of the business. When we look at contribution margins in SaaS businesses, you can be talking about you know, over 80% contribution margins, quite clearly. In service and solutions, it's a bit lower than that. So depending upon the mix, you know, that will determine the gross margins. We do think that there is room to, you know, continue expanding the gross margins for sure.
spk08: And I think as our revenue hopefully continues to increase with certain levels of fixed costs, as Jack mentioned in his comments, we will leverage those fixed costs, and that will result in, you know, higher margins and a more significant portion of our revenue dropping right to the gross profit line. Right, right.
spk07: Now, you know, this is just a quick and dirty analysis on my part, but I'm thinking that, you know, somewhere, you know, above $20 million, $22 million that you start to become profitable and maybe $25 million you start netting 10% and $30 million you start netting 20% without holding new to anything? I mean, are those reasonable kinds of ideas in terms of understanding what InnoData's future profitability can be?
spk04: Yeah, you know, right now we're deep into planning 2022 and we're making decisions about investment. You know, we think the opportunities for the company are so compelling that we're, you know, we're aggressively investing in new capabilities, as you see. You know, we've You see the kinds of new contracts we're landing with new capabilities. You see the ambition that we've got to make a bigger foray into SaaS. And we're doing this with, you know, through deploying incremental, you know, the incremental gross margins and supporting it with our balance sheet. But at the same time, we're maintaining that balance sheet. So we think that that's a great strategy. We think it protects equity real well. We think it'll do great for us. And to help investors understand the profitability of the business and the increased profitability of the business, we're going to keep looking at that gross margin line. We're going to keep looking at What is the incremental available contribution on that gross margin? How much of our revenue dollars are flowing to gross margin? We're going to continue, I believe, to see an acceleration in that. What we do with the money, where we deploy it, well, I think the best way to deploy it now is in the investments that we're now talking about.
spk07: Sure, sure. Now, when you talked earlier in your comments, you talked about quality of data I mean, do you mean by quality of data that metadata is a lot more accurate? I mean, I know that's a big part of it, but or is there more to it than just being more accurate?
spk04: So there is more to it than accuracy. When you're talking about training AI models, it's a very complex space. It involves lots of mathematics looking at not just the quality of data, but looking at you know, edge cases, being able to identify edge cases, being able to address edge cases, sometimes, you know, with synthetic data capabilities like we've discussed. It's a complex, you know, area, but, you know, at its core is quality, whether you're measuring that quality in terms of accuracy or ability to identify problematic data, ability to address confidence level issues, ability to build technologies that automate much of that. And all of the things that we're doing now, all of those challenges are things that in some form or fashion we've addressed for many, many years. This is a new use case. It's a bit different than the old use cases for sure. But it's built upon it. It stands on the shoulders of that. And that's what gives us a significant competitive advantage that is being recognized by the customers that we're winning. You know, I've always believed that, well, you know, with a new customer, you get your foot in the door and you take on a small amount of work and then you scale. You know, one of the contracts that we announced, you know, in the last several weeks was with a new customer, you know, close to $4 million of commitment there. And as I said in my prepared remarks, I think that that's going to expand within the next couple of months. So, you know, something's going real well, and I think what it is is that we've got the chops to address the market challenges that are significant now.
spk07: Right. Now, in terms of what you would perceive as your competitive advantage, is it more about the experience and skill of the people, or is it more some of the AI tools that you use to augment that?
spk04: You know, I think it's a combination. You know, I don't like to deprecate people. So even when it is the technology, and our technology is operating very, very well, The technology came from somewhere. It's proprietary to us. It came from our people. We've got a really great team right now. We've got a team that's firing on all cylinders. And I think that the work that they do collectively and the technologies that they're developing are proving themselves out in the market.
spk07: Sure. One last question. I mean, at what capacity, at what level of revenues, $25 million or $30 million, do you have to hire more people to be able to just do the volume of work?
spk04: So it depends on the business. There are aspects of our business that are more dependent upon and linear with labor, and there are aspects of it that are not at all. I think generally speaking, we're seeing less dependency on labor. We're seeing more criticality, more importance given to automation and the kinds of technology automation that we can bring to the table. And then in SaaS platforms, of course, there's a complete disconnect. There isn't a labor component that's required to invest on the increment. So I hope that helps.
spk07: Yeah, that is helpful. I'm done. Thanks. I thought it was a solid quarter, and obviously we're looking for more. Thanks. Bye. Thank you.
spk02: And again, if you would like to ask a question, please press star 1. Again, that is star 1 if you would like to ask a question. We'll take our next question from Tim Maddy with White Pine Capital.
spk03: Nice quarter, guys. A couple questions here. One is... Maybe you could talk just a little bit about the capacity you have in the Salesforce now, bringing on people online. Sure. Tim would be happy to.
spk06: Is there a specific question you've got?
spk03: Well, yes. I'm thinking about you've hired a number of new sales reps, and you've done it well while still being cash flow positive. But I'm thinking about the the potential and the ramp of those sales reps and over what period of time they reach quota. And as I think about it, maybe in an aggregate on average, where they are in that progression now.
spk06: Great question.
spk04: So let me think about that relative to where we're going as opposed to where we are. I mentioned to you that we're at 82 now. Our plan calls for 110 by the end of the year. I think we're going to fall probably a little bit short of that plan, but if we do, we'll catch up within the next few weeks, like two to three weeks after the close of the year. So we're in good shape there. So what does that mean? Well, when we take the solutions and services business You know, there we're going from, you know, what was about nine people at the start of the year to 15 people at the end of the year. Those people carry quotas depending upon, you know, who they are and exactly what business they're assigned and what accounts they're assigned to, but that's probably about a million and a half of quota carrying, you know, potential that represents. We're planning on scaling that part of the sales force aggressively next year, by the way. Most of the headcount that we've hired is in our agility business. It's a SaaS subscription business. A lot of the 95 people that we're scheduled to have by the end of the year are in enablement roles, are in channel roles, are sales managers, sales directors. So we've got some headcount there. There are some account managers who carry quota as well. There are some BDR people who are lead gen folks. Of the 95, probably about 50 of them are account executives. And our account executives in that business carry quotas of probably around about $450,000 each. Okay. Let me just get the last part of that. In terms of ramp-up, we target an eight-month ramp-up, and that includes about a month and a half of heads-down training and then mentorship during which they ramp up and become progressively more capable, more productive. They're closing more deals per month. Mm-hmm. you know, we're bringing people in and we've accelerated, you know, bringing people in just in the last couple of months. So that ramp up is going to continue into next year. The good news is that we're seeing that people are, you know, tracking pretty well to their ramp ups, meaning, you know, the ramp up that we modeled against, you know, they're not disappointing us particularly. They seem to be tracking well to that. And we built our overall models for the business around that. So, you know, that's the good news. You know, we think we have to just continue to execute very, very well. Tom Prochinski, our chief sales officer, is doing a wonderful job at this. He's scaled sales, SaaS organizations before, you know, successfully. He knows what he's doing. You know, we're just watching those numbers really, really carefully and making sure that as we, you know, grow this aggressively at an individual level, they're tracking to, you know, that normative ramp up that we've built our models around.
spk03: I appreciate the color. Thanks. I'm just thinking about another comment you made about 15.8 million of your revenue you consider recurring. I can see the nice growth on the agility line as well as the DDS line, you know, north of probably 20%. If you could help us with the margin structures maybe of your recurring revenue component versus your non-recurring revenue perhaps, and am I right about that growth rate?
spk06: So let me try to parse that question.
spk04: I may have lost a piece of it somewhere. I think you were asking about whether margins, you know, at an engagement level are different for recurring versus non-recurring work. The answer to that is they are not. They're approximately, they're similar. I mean margins can differ one project or one engagement to another, but we don't see a correlation between whether it's recurring or non-recurring and margins. There is, of course, a correlation relative to business models. We're selling fast software. Incremental margins are higher than they are if you're selling managed services. That's the truth. You mentioned that we're seeing good growth in DDS and agility. You know, that's certainly true. On the Synodex side, I just want to mention, too, that we're projecting very, very solid, very exciting growth coming from that platform as well for next year. In fact, we already have enough business booked kind of in the bag to probably close to triple that revenue in Q1. So, you know, very good things going on there. That's not to be dismissed by any measure.
spk03: On the agility product line, is there a – you've mentioned four new products that you're introducing. What is the product that's driving the growth now?
spk04: So the product that's driving agility growth now is the agility PR platform. And that's the platform, of course, that's been recognized as a – a market leader, which is super cool and very exciting for us. The other platforms are, you know, in various stages of development with charter customers. They will most likely not be, you know, revenue from those will not be reported in the agility segment most likely.
spk03: And is it, how would you characterize if you look at agility alone, that margin structure?
spk04: So that margin structure is, you know, there's essentially no cost to deploying an additional subscription in Agility. The cost that you incur is, you know, sales-related and marketing-related costs. So as a result, the incremental margins are very, very high. They're what you would expect from, you know, a SaaS business.
spk03: Great, and I think you've answered this in a number of different ways, but I was wondering if you could just summarize or unpack a little more your flywheel comment, you know, from a technology perspective as well as maybe a sales momentum perspective. Thank you.
spk04: Yes, we think it's a really good metaphor because there's a lot to it. It's like, you know... On the one hand, you know, there's kind of confidence and enthusiasm, and that confidence and enthusiasm builds on itself. And we see that when we, you know, when we penetrate a new customer and we do good work and we win, you know, we tend to win new business. We tend to expand well, and that's because we performed well on one thing, so there are two more things that they want to talk to us about. And, well, you know, you do those two, and then there's four. So a lot of it's that. But it goes into other areas as well. You know, when I look at the people that we're bringing into the business, people we're hiring now, well, you know, why are they joining us? Why am I getting, you know, regularly solicited by very senior executives from very serious companies who want to come and work at Intoday? Well, I think the answer is they see what we're doing. They see how successful we are, and they want to be part of driving that success even further. So I think the metaphor is kind of a perfect one. It's that, you know, we Gaining that initial, overcoming the initial inertia was very, very tough. A lot of years of investment went into this to get to where we are. And well now, as that flywheel is turning, if you will, it can progressively turn faster because we're penetrating more clients. We're addressing several large market requirements. We're finding new people who want to be part of our journey and help propel us forward. And all of that just has that accelerating effect.
spk03: I've often heard the flywheel characterization synonymous with the AI technology itself, too. Could you elaborate on that a bit?
spk04: Yeah, absolutely. Excellent point. So the way the... neural networks work that are, you know, are fundamental to AI is they learn by examples. So if you showed them a few examples, they learn something. If you show them more examples, they learn more. And the more examples that you're feeding into them, the higher they perform. That's a gross simplification of how it works, but I think it's good enough for this discussion. So the result of that is that as you're training your algorithms and as the AI is performing progressively better, the number of different use cases that you can address with those algorithms increases. So there may be things that you can do where, you know, it performs, you know, so-so, maybe it's like 80% accurate, but then you can put some rules-based technologies on top of that and it's good enough for, you know, some analytics. But then you keep going, and you're feeding more data into it, and you're training it with more data, and you're training it more closely, and you're engineering it progressively better and better. And then it's performing at 90% or 95%. And, well, with 95% accurate data, then there are other use cases that you can address. So what's very exciting to us is a couple of things. First, we've created a – AI platform that we've trained with a lot of data. We're a data company. We've got a lot of data, so we've trained our algorithms to perform very, very well. We're building those algorithms. We're embedding them into many of our platforms, all of our new platforms for sure. We're deploying those as accelerators for many of our existing clients, enabling them to get better results and more accurate results. And just like you say, as we keep going down that journey, our performance only gets better. And as it gets better, our customers like us more. As they like us more, they give us new work to do. As the algorithms perform better, more use cases become presentable and become actionable. And that creates more market opportunity.
spk03: That's almost like a flywheel. I keep coming up with more questions. Just two more questions, if you wouldn't mind. One is I'm thinking about your second Silicon Valley win, and I think you mentioned content modulation and health record work, all with the same customer. Is that correct?
spk04: Yes, that's correct.
spk03: And what did you mean by content modulation?
spk04: Content moderation. Moderation. Identify. Moderation. So identifying content that violates terms of service, identifying toxic content and things that a platform doesn't tolerate presented within its platform.
spk03: Right. But then on the health record side, how would the client use the product there?
spk04: On the health record side, so we've got a number of different initiatives there. what's common in all of the initiatives is people are looking at vast volumes of information, looking to make very quick clinical assessments, or looking to perform analytics around risk that pertains to health.
spk03: Okay. And are there any details you can share, or perhaps you did, on the length and size of that scope of that contract?
spk04: Yeah, I think on the one that we announced, we talked about it being a $3 million contract with another piece to it, which would be $800,000 recurring. So the $3 million piece would likely be one time. The $800,000 piece would be recurring. And then in today's remarks, I talked about how there's likely going to be some expansion within that as well.
spk03: Last question, I promise. Channel partners. What types of channel partners would you use to resell a product?
spk04: So we're using other companies that are competitive with us in geographies that we don't do work. That's one big one. And there's some level of incestuousness, too. We're also looking at certain kinds of channel relationships with people who are somewhat competitive with us. There are several varieties. There's one where we're providing a data feed. One of the components of our Agility Service is a very large database that's probably the most pristine database of influencers out there. We've put a lot into keeping that very, very accurate. That becomes an interesting channel relationship. We can port that to other people on a white-labeled basis. The other thing that we're doing is we're doing a pure white labeling. We take our product and we put someone's logo on it and we let them go sell it in other jurisdictions. And then we all, you know, in addition, we have resellers. We have people who can have complementary businesses. They have complementary, you know, client bases. And they don't have a product that does what ours does. They can resell our product.
spk03: Well, thank you for the time today. I appreciate it. Thank you for your interest and being with us today.
spk04: Appreciate it.
spk02: That concludes today's question and answer session. At this time, I'll turn the conference back over to Jack for any additional or closing remarks.
spk04: Thanks, operator. So, yeah, so to quickly recap, you know, we're planning for accelerating growth in Q4 as well as next year. Our expanding sales force will become progressively more productive. We're going to close late-stage deals. We're planning on expanding programs with new customers, and all of that's going to help drive that acceleration. We remain very optimistic about our ability to penetrate a very substantial opportunity over the long term. We talked about our SAS initiatives. We're very enthusiastic. about the new SAS data annotation platform, and about the other platforms that are now in the works. And we see this truly as heralding a new chapter in our history, in our story. I really don't think InnoData has ever had better execution, a stronger management team, greater momentum, and fundamentally a more entrepreneurial spirit. So thank you for joining us. Thank you for your interest. I look forward to being with you next time.
spk02: Today's conference is available for replay from 2 o'clock p.m. Eastern Time today to December 4th, 2021 at 2 o'clock p.m. Eastern Time. You may access the recording by dialing 719-457-0820 or 1-888-203-1112 using passcode 510-2285. Again, the numbers are 719-457-0820 or 1-888-203-1112, passcode 510-2285. This concludes today's conference. You may now disconnect.
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