Q3 2021 Innodata Inc Earnings Call

[music].

Good day and welcome to the N O data third quarter 2021 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Amy address. Please go ahead.

Thank you Shelby good morning, everyone. Thank you for joining us today, our speakers today are Jack Apple CEO of enough data and Mark <unk>, Our CFO, we'll hear from Jack first who will provide perspective about the pace.

And then Mark will follow with a review of our results for the third quarter will then take your questions.

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 21 E of the Securities Exchange Act of 1934 as amended and section 20 stuff in a 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.

Haitian the expected or potential effects of the novel Coronavirus, COVID-19, pandemic and the responses of government. The general population, our clients and our company there too that contracts may be terminated by clients projected or committed volumes of work may not materialize acceptance up on.

New capabilities, continuing digital data solutions 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 markets, particularly new and emerging markets. The other surfaces.

And solution support.

Can you any digital data solutions segment revenue concentration in a 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 a depressed market conditions weather as a reason.

Felt that 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.

Nicholas T 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 are you stuff and reliance on information technology systems, including potential security breaches and cyber attacks privacy breaches or data breaches that resolved any unauthorized disclosure of concern.

Sundar client employee or company information our service interruption.

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 forms 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 statement, except as required by federal securities laws and actual results could differ materially from our current expectations. Thank you I will now turn the call over to Jack.

Thanks, Amy and good morning, everyone. We are 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 are signing the traction we're getting in the market with both new with both existing and new capabilities.

The productivity ramp up we're anticipating from our expanding sales force.

And current expansions and anticipated and 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 71% 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 investments back into the business and some very exciting ways that we believe will accelerate growth. Both at the same time, we're carefully managing free cash flow.

I like in our business to a flywheel flywheel starts with a bunch of small churns, but as it gains momentum a 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 our 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 wins in important new capabilities. Indeed, we announced a five year data and SaaS software subscription deal that we anticipate will yield of $11 million of revenue with one of the world's largest banks who's our charter customer for new software product.

We also announced the $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.

Deals represent both important new wins and important new capabilities on.

On top of these wins, we announced that we are now firmly engaged with a second large silicon Valley Tech company.

Having quickly one 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 and 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 and release that features several innovative AI enabled workflows.

I have never seen this kind of momentum in our business.

It is increasingly seen as strategic buy companies across verticals and as a result, our services are increasingly relevant.

Here's the key every AI initiatives begins and ends with data.

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 the data sciences teams at large Silicon Valley Tech companies or building and managing AI algorithms for financial services companies are offering AI AI enabled SaaS platforms to subscribers the core ingredient the cynic whatnot, if you will.

This high quality data.

Which is what we've built a 30 year reputation one.

To capitalize on the significant opportunity, we're focusing our investments in sales force expansion and new product development.

This year, we've been executing a plan to expand our sales force from 19 sales execs at the beginning of the year to 110 at the end of the year.

This is close to a six X expansion.

As of October one 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 or 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 later 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 it is likely to improve.

We go to market with both direct sales as well as channel cells or.

Our channel partners consume our data feed within their products White label, our product, where we sell our product we.

We anticipate aggressive growth from our sales force as it ramps up.

Additionally were focusing growth from our channels both from existing channel partners, a new channel partners were bringing in.

You can expect to hear news from us about new channel partners within the next few months.

Our agility SaaS platform that has allowed us to build a core capability and SaaS sales and marketing.

As well as SaaS enterprise software development and product management.

To capitalize on this expertise we plan to launch four additional SaaS platforms in the market all of our own IP all built on our proprietary Golden Gate 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 or new data annotation SaaS platform, which we believe will serve needs we've identified in today's marketplace.

In addition, we are developing a SaaS platform to help companies deploy and production is 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 are planning generally general release of this platform late in the second half of 2022.

The fourth new SaaS platform currently in development as an industry platform designed around medical data analytics, we're targeting general 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 is accelerating and simplifying the adoption of AI.

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% is 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 were signing.

Lending new customers for our AI services and solutions growing our agility SaaS platform direct and indirect subscriber basis 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's 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 will get a formal announcement out.

In addition, we have discussions continuing with a couple of other large text as well.

Okay.

When we reflect upon the AI work in the 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 are working on AI implementations designed to help organizations modernize our streamline processes AI implementations that deliver deeper more insightful analytics and AI.

Limitations 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.

Thank you Jack good morning, everyone.

Revenue for the quarter ended September 32021 was $17 5 million up 20% year over year.

Net loss for the quarter ended September 32021 was <unk> 8 million or <unk> <unk> per basic and diluted share versus a net income of <unk> 2 million or <unk> <unk> per basic and diluted share in the year ago quarter.

Revenue for the nine months of 2021 was $55 million.

Up 18% from the year ago period.

Net loss for the first nine months of 2021 was <unk> 5 million or <unk> <unk> per basic and diluted share versus a net loss of <unk> 6 million.

Also <unk> <unk> per basic and diluted share in the year ago period.

Cash and cash equivalents were $20 9 million at September 32021 up from $17 6 million at December 31, 2020.

Thank you and operator, we are now ready for questions.

Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

If youre using a speaker phone. Please make sure your mute function is turned off.

Allow your signal to reach our equipment.

Again, Please press star one to ask a question.

Pause for just a few moments to allow everyone an opportunity to signal for questions.

Our first question comes from Dana <unk> with C. L T O.

Hi, Jack.

Good morning Dana.

Congratulations on your a wonderful quarter.

It seems to me that you have.

Oh, you're very welcome.

It seems to me that you had a very nice cadence of a.

New contracts coming in this quarter.

And I was wondering if with these new contracts do you have but is it a strategy of landing and expanding with these contracts.

So great question Dana absolutely that's.

That's the strategy and with a couple of these contracts.

You are seeing something that seafood going beyond that.

A couple of these contracts are essentially charter customer contracts with new capabilities and new platforms and the idea is we own what we're doing we perfected.

We make sure we're tightly aligned to the customers' requirements.

We send our product managers out to verify that the market requirements are reflective of the customer requirements and then we.

And then we throw you know sales and marketing behind it.

<unk> Formula we're working on.

I was thrilled that we got.

With.

Newer essentially new requirements and new capabilities.

Two very large contracts in the market.

We announced and.

I'm really looking forward to production rising those and scaling those and.

Getting ourselves in marketing team working on.

Excellent that sounds just wonderful I I have another question and this one has to do with your new data annotation platform that you announced.

Yes could you talk a little bit about how you anticipate marking that marketing this.

And are you anticipating this to be at its own profit center.

And I know you've talked about other SaaS applications are they are they are gonna be also like they're all on profit center assigned with like product management, and so and all of that capacity around that.

Yes, So let me start with the.

The last thing you said in terms of product management I think that's a very critical part in each of these products will in fact have a product manager assigned to it.

And the product managers 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.

Identifying.

White spaces in the market, where we can build product and fulfill those needs.

Historically, we've been primarily a managed services company agility was our first foray into 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.

As there are gaps there are things that.

Despite the number of people building tools and platforms for this market there are some significant gaps.

We've got the technologies that we use in our managed service to encapsulate in new products and bring those to market.

Now new capabilities for.

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.

Very exciting new chapter in our growth trajectory.

That sounds wonderful too.

That's all I have.

Thank you.

Our next question comes from Tim Clarkson with Van Clemens capital.

Hey, Jack Hey, Mark Great Great quarter.

I guess that you know.

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 net chairman he hasnt falling shares.

And I'm in the same situation I'm on a lot of share. So the way I look at it as we're kind of maybe starting in the second inning with this AI stuff.

You might want to talk about.

Where we are and you know the you know the potential going into fourth quarter next year end.

You know what.

Should develop.

Sure Tim.

I think we.

The real important thing that.

Motivates us so significantly.

Is this thing is a really big deal.

And we're in very early innings of this game.

We're working with customers now who.

<unk> been working with the technologies for several years and were finding that were.

We're relevant to them, we're finding that we can be helpful and helps them struggled with some things. We're help help them avoid struggling with some things that have 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, what do they need to they have data sciences teams and new training data do.

Do they lack data sciences teams and what they need is model management and deployment.

Or are they looking for a fully packaged solution one of our industry solutions that can encapsulate the AI into an application that they can immediately start using.

So we think we are 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 happen we struggled with our market size as a result of what's going on in our market is wide open to us.

It's very exciting indeed.

Right, Okay, a couple more specifics here.

Hum.

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 <unk>.

<unk> generated to be used.

Useful to Ana data.

Yes so.

Really good question.

Answer to that is that it.

Pins on the.

The business that we're we're.

We're looking at.

So in terms of.

Our our solutions and services business, the salespeople carry much higher quotas and managed services and platform business, where the average revenue per customer is significantly smaller the salespeople carry smaller quotas.

They're kind of a different.

Style of it's a different style of cells.

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 services solutions and have them be equally impactful.

In addition next year we.

<unk> to add more salespeople to the services solutions piece and then.

As I discussed with Dana I'm, starting to build sales capabilities around these new platforms as well.

Right now I noticed in terms of maybe mark can respond to that your gross margins.

For this quarter were almost 50% versus last year of 40%.

How high can these margins go on a forward basis.

I think it's going to depend on the mix of the business.

When we look at contribution margins in the SaaS businesses, you can be talking about.

Over 80% contribution margins quite clearly.

Service and solutions, it's a bit lower than that so depending upon the mix.

And that will determine the gross margins. We do think there is room to continue expanding the gross margins for sure.

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.

Higher margins.

And.

A more significant portion of our revenue dropping right to the gross profit line.

Right right now.

Just a quick and dirty analysis on my part, but I'm thinking that.

Somewhere.

Above $20 million $22 million that you start to become profitable and maybe $25 million you start netting 10% and $30 million start netting 20% without holding you to anything I mean are those reasonable kinds of ideas in terms of understanding what <unk> future profitability can be.

Right now were.

We're deep into planning 2022, and we're making decisions about investment.

We think the opportunities for the company are so compelling that where we are.

Sure.

Aggressively investing in new capabilities as you see we 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 into SaaS.

And we're doing this with.

Through deploying.

Incremental.

Incremental gross margins and supporting it with our balance sheet, but at the same time, we are maintaining that balance sheet.

So we think that that's a great strategy, we think it protects equity real well, we think it will.

It will it will do great for us.

And two 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.

<unk> of our revenue dollars flow into 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.

Sure sure.

When you when you talked earlier on your in your comments you talked about quality of data.

I mean do you mean by quality of data that data is a lot more accurate I mean, I know thats, a big part of it but or is there more to it than just being more accurate.

So there is more to it than accuracy.

When you are talking about trading AI models, it's a very complex space. It involves.

Lots of mathematics, looking at not just the quality of data, but looking at edge.

Cases, being able to identify edge cases, being able to address edge cases, sometimes.

With synthetic data capabilities like we've discussed.

It's a complex.

Area, but at its core is.

Quality, whether you're measuring that quality in terms of accuracy or ability to identify.

Problematic data 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 former 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 in pod 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.

I've always believed that well with the new customer you get your foot in the door and you take on a small amount of work and then you scale.

One of the contracts that we announced.

In the last several weeks with the new customer.

Close to $4 million of commitment there and as I said in my prepared remarks, I think that thats going to expand within the next couple of months. So.

Something's going real well and I think what it is that we've got the chops to address the market challenges that are significant now.

Right now in terms of what you would perceive as your competitive advantage is it more about the experience and skills of the people or is it more of the some of the AI tools that you use to augment that.

I think it's a combination.

I don't like to deprecate people, so even when it is the technology and our technology is operating very very well well into 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.

<unk>.

I think the work that they do collectively in the technologies that they are developing.

Are proving themselves out in the market.

Sure. One last question I mean at what capacity or what level of revenue was $25 million or $30 million you have to hire more people to be able to just do the volume of work.

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, Theres, a complete disconnect there isn't a labor component.

Required to invest on the increment.

I hope that helps.

That is helpful. I am done thanks, I thought it was a solid quarter and obviously, we're looking for Marc Thanks Bye.

Thank you.

And again, if you would like to ask a question. Please press star one again.

Again that is star one if you would like to ask a question.

We will take our next question from Tim <unk> with White Pine capital.

Nice quarter guys.

Couple of questions here one is.

Maybe you could talk just a little bit about <unk>.

So do you have on the sales force now bringing on people online.

Sure Tim we'd be happy to is there a specific question you have got.

Well, yes, I'm thinking about you've hired.

Number of new sales reps and you've done it well, while still being cash flow positive, but I'm thinking about that.

The potential in the ramp of those sales reps and for what period of time they.

They reached quota.

As I think about it maybe in an aggregate on average where they are in that progression now.

Yeah.

Great question, So let me.

Let me let me let me.

Think about that relative to where we're going as opposed to where we are.

Mentioned to you that were at 82 now our plan calls for 110 by the end of the year.

I think we're going to 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.

<unk>.

So what does that mean, when we take the solutions and services business.

There were going from what was about nine people at the start of the year.

215 people at the end of the year.

Those people carry quota depending upon.

They are and exactly what business, they're signed and what accounts, they're assigned to but its probably about million and a.

Half of quota carrying.

Potential that represents.

We're planning on scaling that part of the sales force.

Aggressively next year by the way.

The head count that we acquired is in our agility.

Business, its a SaaS subscription business.

A lot of the 95 people that were scheduled to have by the end of the year.

Our enablement rolls are in channel.

<unk> our sales manager sales director. So we've got some head count there Theres some account managers, who carry a quota as well.

Some BD are people, who are Legion folks.

Of the.

95, probably about 50 of them our account executives.

And our account executives in that business carry quotas from probably around about $450000 each.

Okay.

Let me, let me just get less part of that.

In terms of ramp up.

We target a 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 can become progressively more.

More capable.

More productive they're closing more deals per month.

We're bringing people in and we've accelerated bringing people in just in the last couple of months for that ramp up is going to continue into next year.

The good news is that we're seeing that people are tracking pretty well to their ramp ups, meaning.

The ramp up that we.

Modeled against.

Theyre not theyre not disappointing us, particularly there seem to be tracking well to that and we built our our overall model for the business around that so that's the good news.

We think we have to just continue to execute very very well.

Temperature ski our chief sales officer is doing a wonderful job at <unk>.

Scaled sales assess organizations before successfully he knows what he's doing.

We're just watching those numbers really really carefully and making sure that as we can.

This aggressively.

At the individual level, they're tracking to that normative ramp up that we need.

We've rebuilt our models around.

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 quarter on the agility in line as well as the GDS line north of probably 20%.

What if you could help us with.

The margin structures, maybe of your recurring revenue component versus nonrecurring revenue perhaps in.

Am I right about that growth rate.

So let me try to parts of the question I may have lost a piece of it somewhere.

I think you were asking about weather.

Margins at a engagement level are different for recurring versus nonrecurring work.

Answer to that is they are not they are approximately.

There are similar.

Margins can differ one project or one engagement to another but we don't see a correlation between whether it's recurring or nonrecurring and margins.

There is of course, a correlation relative to business model. If we're selling SaaS software incremental margins are higher than they are if you're selling managed services.

That's the truth.

You.

<unk> that we're seeing good growth in <unk>.

DDS and agility.

That's certainly true.

On the <unk> side I, just wanted to mention to that.

We are projecting very very solid very exciting growth coming from that platform as well for next year. In fact, we already have enough business book kind.

Kind of in the bag to probably close to triple that revenue.

Q1.

So very good things going on there that is not to be dismissed by any measure.

On the agility product line.

Is there a.

You've mentioned.

For new products that Youre, introducing is what is the product thats driving the growth now.

So the product fits driving agility growth now is the agility PR platform.

And Thats the platform of course Thats been recognized as a.

A market leader.

Which is super cool and very exciting for us.

Other platforms are.

Chris stages development with charter customers. They will most likely not be revenue from those will not be reported segment.

Segment most likely.

And is it.

How would you characterize if you look at our agility alone that margin structure.

So that margin structure is.

There is essentially no cost to deploy to deploying an additional subscription in agility.

The cost that you incur as sales related and marketing related costs.

So as a result, the incremental margins are very very high there what you would expect from from.

SaaS business.

Great.

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.

From a technology perspective, as well as maybe sales momentum perspective. Thank you.

Yes.

We think it's a really good metaphor because theres a theres a lot to it it's like.

On the one hand, theres kind of confidence and enthusiasm in that confidence and enthusiasm builds on itself and we see that when we.

When we penetrate a new customer and we do good work.

We tend to win new business, we tend to expand well and thats, because we performed well and one thing. So there are two more things that they want to talk to us about what you do those two and then Theres four.

So a lot of it's that.

But it goes into other areas as well when I look at the people that we're bringing into the business people, we're hiring that well why are they joining us wired.

Why am I getting regularly solicited by a very senior executives from very serious companies, who want to come and work at <unk> 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.

I think the metaphor is kind of a perfect what it's fit.

Gaining that initial overcoming the initial inertia was very very tough.

Years of investment went into this to get to where we are and we will now as that flywheel is turning if you will.

It can progressively turned faster because we're penetrating more clients, where we're addressing a large 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.

I've often heard the flywheel characterization.

Synonymous with with the AI technology itself too.

Could you elaborate on that a bit.

Yes, absolutely.

One point.

So.

The way the.

Neural networks work that are.

Fundamental to AI.

They've learned by examples so if you show them a few examples they learn something if you show the more examples they learn more and the more examples that you are feeding into them to hire they perform.

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 SCA is performing progressively better.

The number of different use cases that you can address those algorithms increases. So there may be things that you can do where it performs.

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 some analytics.

But then you keep going and you are feeding more data into it and Youre training it with more data and you are trading at more closely in your engineering, it progressively better and better.

And then it's performing at 90% or 95% and 95% accurate data then there are other use cases that you can address.

It'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.

Embedding them into many of our platforms all of our new platforms for sure.

Where 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 and more use cases become presentable and become actionable and that creates more market opportunity.

That's almost like a flywheel keeps coming up with more questions.

Just two more questions. If you wouldn't mind, one is I'm thinking about.

Your second Silicon Valley, when and I think you mentioned content modulation and health record work.

All with the same customer is that correct.

Yes, Thats correct.

And what did you mean by content modulation.

Content moderation, so alteration identified moderation, so identifying content that violates terms of surface identifying toxic content.

Things that AA.

A platform doesn't.

Tolerate.

Presented within its platform.

Right and but then on the health record side, how we how would the clients use the products there.

The health record side, so we've got a number of different initiatives there.

What's common in all of the initiatives as 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.

Okay and.

What are the are there any details you can share or perhaps you did.

On the length and size of that scope of that contract.

Yes, I think we on the one that we announced we talked about as being.

$3 million contract.

With another.

<unk> to it which would be $800000 recurring so the $3 million piece would likely be one time, the $800000 piece would be recurring.

And then in today's remarks, I talked about how there is likely going to be some expansion within that as well.

Okay.

Last question I promise.

Channel partners.

Types of channel partners would you use.

We sell the product.

So we're using.

Other companies that are competitive with us in.

Geographies that we don't.

We don't do work, that's one big one and there is some level of incestuous in this too. We're also looking at <unk>.

Certain kinds of channel relationships with people, who are somewhat competitive with us.

<unk>.

There are several varieties.

There is.

One where we're providing a data feed.

One of the components of our.

Agility served as a.

A very large database thats, probably the most pristine database.

Influencers out there.

Sure.

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 label basis.

The other thing that we're doing is we're doing a pure white labeling where 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 and <unk>.

We have resellers, we have people who can have complementary businesses they are complementary.

Client basis, and they don't have a product that does what ours does they can resell our product.

Well. Thank you for the time today I appreciate it.

Thank you for your interest and being with US today I appreciate it.

That concludes today's question and answer session. At this time I will turn the conference back over to Jack for any additional or closing remarks.

Thanks, operator.

Yes, so ill quickly recap, 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 SaaS initiatives, we're very enthusiastic about.

About the new SaaS 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 and our story.

I really don't think of the data has ever had better execution stronger management team greater momentum in.

Fundamentally a more entrepreneurial spirit.

Thank you for joining us. Thank you for your interest and look forward to being with you next time.

Todays conference is available for replay from two o'clock PM Eastern time today to December 4th 2021 at two o'clock PM Eastern time, you may access the recording by dialing 719457.

0820.

1888 <unk>.

31112, using pass code 510.

Eight five.

Again, the numbers are 719.

Five seven.

0820 or 1888.

There are 31112 passcode 510 to 285. This concludes today's conference you may now disconnect.

Okay.

Okay.

Okay.

Okay.

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