Tuesday, August 9, 2016

10 Key Quotes from IDI's Earnings Call

IDI (ticker: IDI) reported earnings results and hosted its first earnings call yesterday. Here are some key quotes from CEO Derek Dubner and CFO Dan MacLachlan:

Shareholder Value
"we will remain intensely focused on shareholder value"
Raising Capital
"At present, we have no intention of raising capital. But we have been transparent all along that we will continue to invest in the Company for the long-term by investing in technology, more data assets, products, and people. We will continue to be mindful, as I've stated, of shareholder value, but we will do what is best for building the Company for the long-term."
Stock Based Compensation
"You shouldn't expect anything but ordinary course of business grants"
"So we don't give any forward-looking guidance, but what I can say is based on the remarks and what we've talked about during this, on the performance side traditionally second and third quarter you see some retraction. 
Coming out of the second quarter, we have seen some great trending on our performance marketing side. Our information service side is really starting to see some strong trending as well. We are looking forward to the second half of the year and are very excited about what we'll be able to do over the next two quarters."
"...we are focused on building this Company organically, and on delivering shareholder value. That said, we are always seeking to identify potential acquisitions that serve to either advance our roadmap in serving our three addressable markets of risk management, consumer marketing, and custom analytics. 
As well, we'll look to acquisitions if it advances our technology, if it expands upon our products or our customer-base or cross-selling opportunities or if it on-boards talented thought leadership. But again, let me restate, however, we will remain intensely focused on shareholder value."
Current Management's Previous Exits
"Our management team has built several leading companies in the data fusion industry over the past 15 years or so...the previous companies we created were acquired by two very large organizations. And those two large organizations have a lot of data and they are very well funded, very profitable companies. And when they desire to gain their entree into this market, they acquired for it. They didn't build it."
Key Product: idiCORE
"We are hearing customers that are, first, very excited to have a new entrant to the market… 
To many customers, we're the new entrant. They're very excited that this team has built the previous companies had been so involved in those companies. They recognize our ability and our willingness to listen to them. We are very vocal with our customers. We want to know what they want to see in the product. We like to comment - or I like to say that together we're going to build a revolutionary product. 
What we're hearing a lot of is the speed, the fusion of the data that we have in the system today, the linkages look more intelligent, the design of the interface being that much more user friendly and that's really important in a workflow from a large organization. It's about efficiency. It's about maximizing the time of anyone's job. And so, that efficiency in using our interface and our platform and as we roll more data in and create those linkages, we're very excited that this only gets better. 
It does help, as I mentioned, that due to how we built this in the cloud-based construct and the data contracts that we've been building and other datasets we've obtained, that we believe we're going to deliver solutions at a far more cost effective price point than the competitors, and they know that. And I hate to use an expression, but that's music to anyone's ears if you can deliver that better product at a better price point. So we're very focused on that..."
Growth Phase
"I guess we're done with the first phase. I say that because we have built an unbelievable platform in 14 months. We are onboarding customers at a frequent pace and we're hearing great things. 
We are getting insight from those customers for expressing dissatisfaction in the industry and the willingness to want to stay with us while we develop the product. So if that, in your mind, constitutes satisfying the first phase, then yes, we've done that. But as you astutely stated, this platform will evolve for years and its intelligence the product, idiCORE, generated off of that platform will evolve for years in the amount of data that we bring in
I don't want to tip my hand to competitors on the types of those datasets, but I'd love to give you examples, but I just can't. But we have a roadmap of datasets that we believe are just key assets in determining fraud and abuse and insider trading and other anomalies to be detected. So yes, again, to restate I think we're past that first inning, but we have a lot more to go and everyone is very enthusiastic over here to execute."
 Barriers to Entry
"there is a massive financial hurdle in getting into this market; you need security and the infrastructure to be able to contract for the data, where it's available to be contracted for I might add. You have to know what other sources are out there where it might be public record and available and the significance of that data. 
...You have to have the know-how and the intelligence, the skill sets to acquire the relevant data and to fuse that data together to create a comprehensive view, again, that's insightful. 
Sure, a party can contract for a dataset; there aren't many parties that can contract for the number of datasets that we contract for and that the leading competitors contract for, and there are even less companies that know what to do with that data, assuming of course they have the technology that was built by Ole Poulsen and his teams over the last 15 years. 
So again, I would state there's a very high level to enter this market."
New Hire: Harry Jordan (Press Release)
"As far as Harry joining the team, we are all extremely excited about this addition. We had been spending some time in looking for the right fit for a COO role. We are running fast, we're building an incredibly dynamic Company, and with that, we need incredibly dynamic people. We need talented individuals and we were fortunate enough to make Harry's acquaintance. Harry, as you correctly stated, led the due diligence teams for Reed Elsevier's LexisNexis in acquiring Seisint and as well in acquiring ChoicePoint. 
He built out the healthcare vertical, as you mentioned, LexisNexis, as well as Government Solutions, which we were very excited about. And those are verticals that we are jumping in with both feet. Our timing was perfect with Harry; it just completely made sense. We knew it when we met him as we did when we met our Fluent team. And as we continue to explore it with Harry, he realized, I believe, and I'll take the liberty of speaking for him as he said in the press release, he realized that this is a very differentiated Company than those in the past. This is a multidimensional data and analytics Company that we're building, and he was as passionate about joining us as we were of him joining us."
TransUnion Litigation
"For those on the call that are unaware of our TransUnion litigation, this is litigation regarding a dispute over ownership of certain intellectual property currently being used by TransUnion to power a competitive product. 
The IP in dispute, which we maintained as owned by our Company, IDI, was created by our Chief Science Officer, Ole Poulsen, as a founder of that previous Company of which certain assets were acquired by TransUnion in 2013. 
This litigation has been ongoing for quite some time and it finally went to trial in June. We are awaiting the Court's ruling
To be clear, our primary focus remains on serving our customers with our newly developed proprietary technology, idiCORE, and we do not foresee any disruption in our ability to serve customers in the event of an adverse ruling
If such adverse ruling, we will explore our options, including an appeal. 
If we prevail, we will, among other remedies available to us, seek substantial damages
We have, of course, incurred significantly legal fees over the course of this litigation, which Dan just referenced. We expect the legal fees post-ruling to be significantly less than those fees leading up the trial."
Full transcript HERE.

More IDI analysis HERE.

Disclosure: Long