Jack Abuhoff: Thank you, Tim.
Operator: Thank you. The next question will be from Dana Buska from Feltl. Dana, your line is live.
Dana Buska: Hi, Jack.
Jack Abuhoff: Hey, Dana.
Dana Buska: Congratulations on a wonderful quarter. I have just a couple questions for you. You talked a little bit about the demand for training on enterprise data. Can you talk a little bit more about that? And are you seeing more enterprises look to train their own models?
Jack Abuhoff: I think we’re going to see more enterprises training their own models when the cost of doing so comes down, which we believe is inevitable. For the most part, what enterprises are looking to do now is to use their own data as context within RAG implementations. And even with that, we see a lot of opportunities that are now being piloted and POCs very early days in terms of getting things into development or past development into implementation. We think we’re going to be there in order to help accomplish that. Again, quality of data that feeds those models and the kinds of integrations that become possible, especially with large context windows, is going to improve the results of those models and what can be achieved with them. We’re very well positioned to help enterprises move things from POCs into development, and we’re doing that now, today.
Dana Buska: Okay, great. And along those lines, I seem to read or come across articles about how companies are coming up with tools and software to speed up fine-tuning and doing trust and safety, could you talk a little bit about how that may affect your business? And do you consider that to be a threat?
Jack Abuhoff: No, we consider that to be an opportunity. The more success we have and the world has it, moving things from POC into development, the more acceleration we will see in the technology and in the opportunities that we have. We are among the companies, who is developing capabilities around trust and safety. We are very excited about that. Again, it is a data-driven initiative and a data-driven approach that we are taking that we believe will help companies along in that path.
Dana Buska: Okay, excellent. That sounds exciting. And when you’re looking at hiring these new recruiting costs, could you talk a little bit about hiring the new people? Could you talk a little bit about what type of positions you’re looking to hire?
Jack Abuhoff: So we’re hiring very broadly. We’re hiring people who have the ability to help us build the kinds of data sets that we require to train these models. A lot of the people that we’re hiring are language experts, or they’re domain experts, they’re linguists, they’re people with backgrounds that enable them to appreciate nuance and language. As we think about these models, it’s language that is used to program them. And the more fine-tuning we can do around the nuance of those language, the better performing the models are.
Dana Buska: Okay, great. And then one question about agility. It looked like it grew about 20% last quarter. Is that a growth rate that you are targeting for this year, or is that growth rate that you think is sustainable?
Jack Abuhoff: So, I think it was about 15%, if I’m not mistaken…
Aneesh Pendharkar: Dana was 17%.
Jack Abuhoff: 17%, yes. So, I think 15% to 20% is certainly what we would aspire to. We could do a lot more with more reinvestment in it, and that’s something that we would probably be considering at some point. But right now, we’re very focused on capital allocation relative to the service opportunities we have with large tech companies.
Dana Buska: Okay, excellent. It sounds very exciting, and thank you for taking my questions.
Jack Abuhoff: Thank you.
Operator: Thank you. The next question is coming from Bruce Galloway from Galloway Capital. Bruce, your line is live.
Bruce Galloway: Hey, Jack, congratulations. It seems like you’re gaining a lot of traction. Just to quantify the size of these contracts and some of the new additions. You mentioned the $23.5 million add on to the $20 million hyperscaler that you announced in April. I guess that was the one that was doing $23 million a year, that extended it for three years. So that alone is a $43.5 million add-on from the $23 million, which on a base of $86 million last year, that’s over 50% growth rate just from one customer. Can you give us some quantification on some of these other contracts, how big they could be and how much they can scale to?
Jack Abuhoff: Sure. So, as I mentioned, we’re now working with seven Big Tech companies, and we believe when we look across that portfolio, that they are all spending significantly, as significantly as the company that you referred to on these technologies. And we believe we have an opportunity to scale with all of them. Now, will all of them become as big as this one? That would be wonderful if it were to happen. I don’t know that it will, but we believe we’re certainly very well positioned. We brought in another two customers this quarter, which are very significant players and appear to be very eager to work with us. And in terms of when you start adding up the numbers and adding up what’s possible, we believe that the 40% growth target, which doubles what we provided last quarter, is still a reasonably conservative target.
We have lots of opportunity in flight. We’re taking conservative view of our pipeline in order to support our growth guidance, and it’s a very exciting time in our business right now.
Bruce Galloway: So, looking at your current infrastructure, your personnel and your installed base, I mean, do you have the capability? I mean, adding $3 million in personnel and $3 million in CapEx seems a very modest amount for the scalability and the upside that you have with all these huge contracts coming through.
Jack Abuhoff: So the investments that I spoke about were investments in the recruiting costs associated with adding the headcount that is required for the near term contracts to get to that 40% growth and other investments that we’re making in sales, marketing and product development. I’m not including in those numbers the costs that we would be incurring to as cost of goods. But again, from a cost of goods perspective, I think you should look at it as an opportunity to drive in the services area, probably about 37% adjusted gross margin. And that would subsume the costs of producing the revenue.
Bruce Galloway: Okay. And also, as far as the cash generation, you generated, like $5.2 million in cash. Is that mostly from receivables? Or is it pure cash from operations or combination thereof?
Jack Abuhoff: Yes, I mean, it’s cash from operations that include receivables. So as we build, we then collect.
Bruce Galloway: Okay, great, thanks. Excellent job. Thanks.
Jack Abuhoff: Thank you.
Operator: Thank you. And that does conclude today’s Q&A session. I will now hand the call back to Jack Abuhoff for closing remarks.
