Investors might want to bet on Innodata Inc. (INOD) , as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.The power of a changing ...

Valuation and Market Position - INOD shares are trading at a premium valuation with a 12-month price/sales (P/S) ratio of 5.01X, higher than its median of 3.41X and the industry's 1.92X [1] - The premium valuation is justified by the company's strong growth prospects and strategic positioning in the generative AI (GenAI) space, particularly as a key partner for data engineering in training advanced AI models [2] Big Tech's GenAI Investments - Morgan Stanley projects combined capital expenditures of $300 billion in 2025 and $337 billion in 2026 for Amazon, Alphabet, Meta Platforms, and Microsoft on GenAI and large language model (LLM) advancements [3] - Amazon is focusing on hyperscaler initiatives, Alphabet on AI-driven innovations in Search and YouTube, Meta on efficiency and monetization via Instagram Reels, and Microsoft on public cloud adoption and AI-driven commercial growth [6][7] INOD's Growth and Performance - INOD shares have surged 291.8% in the trailing 12-month period, outperforming the Zacks Computer and Technology sector's 28.9% and the industry's 10.5% [8] - The company is capitalizing on its expertise in instruction-tuning data and Reinforcement Learning from Human Feedback (RLHF), addressing concerns over IP issues and model collapse risks [10] Product and Market Expansion - INOD's Agility platform, designed for generative AI workflows, is experiencing growing demand, with new AI platforms addressing LLM safety and evaluation needs [11] - The company is expanding its footprint into the federal government market, supporting media monitoring and news briefing for government agencies, reducing dependency on private sector clients [13] Financial Projections - The Zacks Consensus Estimate for INOD's 2025 revenues is $221.30 million, indicating a 34.6% year-over-year growth [13] - The consensus mark for INOD's 2025 earnings is 82 cents per share, reflecting a 5.1% year-over-year growth [14] Strategic Positioning and Investment Appeal - INOD's strategic alignment with the growing GenAI market, expanding client base, and diverse portfolio, including the public sector, position it as a pivotal player in the AI ecosystem [17] - The company's Zacks Rank 1 (Strong Buy) and Growth Score of A highlight its strong investment potential [18]

Innodata and Serve Robotics could eclipse the underdog AI software maker.BigBear.ai's (BBAI -5.54%) stock price has rallied about 120% over the past 12 months, but it's still trading nearly 70% below its all-time high from April 2022. The AI software developer bounced back as its revenue growth stabilized and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved.Many of its investors initially fled when its revenue growth flatlined in 2023 as it struggled with macroe ...

Investment Strategy - Michael Wiggins De Oliveira is an inflection investor, focusing on buying cheap companies when their narrative is changing and profitability is expected to significantly improve over the next year [1] - The investment strategy is concentrated, with a portfolio of approximately 15 to 20 stocks and an average holding period of 18 months [1] - The focus is on tech and "the Great Energy Transition," including uranium [1] Professional Background - Michael has over 10 years of experience analyzing companies, with expertise in tech and energy sectors [2] - He has a following of over 40K on Seeking Alpha and leads the investing group "Deep Value Returns" [2] Deep Value Returns Features - The group provides insights through a concentrated portfolio of value stocks [2] - It offers timely updates on stock picks and a weekly webinar for live advice [2] - The group supports both new and experienced investors with "hand-holding" as needed [2] - It has an active, vibrant, and kind community accessible via chat [2] Affiliation - Seeking FCF is an associate of Michael Wiggins De Oliveira [3]

Group 1 - Innodata (NASDAQ: INOD) reported Q3 results that exceeded estimates and raised its FY24 guidance [1] - The company is focused on long-term investment strategies, typically with a 5-10 year horizon [1] Group 2 - The article emphasizes the importance of a diversified portfolio consisting of growth, value, and dividend-paying stocks, with a tendency to seek value [1]

Financial Data and Key Metrics - Revenue for Q3 2024 reached $52.2 million, reflecting a year-over-year increase of 136% and 83% on a year-to-date basis [33] - Adjusted EBITDA for Q3 was $13.9 million, or 27% of revenue, up from $3.2 million year-over-year and approximately 5x last quarter's adjusted EBITDA [35] - Net income was $17.4 million in Q3, up from $371,000 in the same period last year and $0 last quarter [35] - Cash reserves increased to $26.4 million, up by $10 million from last quarter [6] - Adjusted gross margin for Q3 was 44%, reflecting a sequential increase from 33% in Q2 [33] Business Line Data and Key Metrics - Generated $30.6 million of revenue from one Big Tech customer in Q3, exceeding the estimated $27.6 million quarterly revenue once fully ramped [7][8] - Seven other Big Tech customers are expected to become a significant part of the revenue makeup next year, with one prominent social media platform signed in Q3 [9][10] - Agility platform saw 26% year-over-year growth in Q3 and acceleration in new bookings [28] - Second win with the federal government in Q3, providing news briefs and media monitoring to a second federal agency [15] Market Data and Key Metrics - Big Tech companies are investing aggressively in generative AI, with several signaling increased investments in 2025 [18][19] - Morgan Stanley estimates Amazon, Google, Meta, and Microsoft combined CapEx to reach approximately $300 billion in 2025 and $337 billion in 2026 [19] - The company is focusing on providing supervised fine-tuning data for Big Techs, which is critical for training large language models [20][21] Company Strategy and Industry Competition - The company's strategy encompasses both services and platforms, aiming to be a go-to partner for Big Techs building generative AI frontier models and enterprises adopting generative AI technologies [16][17] - The company is leveraging its B2B industry platforms and enterprise platforms for niche use cases, with Agility being a key application [17][28] - The company is focusing on expanding into the public sector, with federal sector wins validating this strategy [15] Management Commentary on Operating Environment and Future Outlook - The company is raising its 2024 full-year revenue guidance, anticipating revenues between $52 million and $55 million in Q4, translating to 88%-92% year-over-year growth [6][38] - Management believes generative AI is still in its early innings and that high-quality training data will be critical for high-performing frontier models [68] - The company is optimistic about the momentum with Big Tech customers and expects them to become a significant part of the revenue makeup in 2025 [43] Other Important Information - The company has made significant progress in building a strong talent base and workplace culture, with several senior-level hires and multiple workplace awards [29][30][31][32] - The company has demonstrated a prototype of its new platform to three Big Tech customers and several enterprises, which has been well-received [25][26] Q&A Session Summary Question: Composition of Q4 revenue growth - The company expects continued momentum with its largest customer and sees potential for growth and expansion in 2025 [42][43] Question: Role of data engineering in AI model training - The company confirmed that supervised fine-tuning data is critical for building high-performance AI models and creating new use cases [44][45] Question: Recruiting costs and operating leverage - Recruiting costs decreased to $500,000 in Q3, and the company expects to manage these costs effectively while maintaining operating leverage [49][50][52] Question: Quality assurance in data engineering - The company emphasized the importance of data quality and agility in maintaining strong relationships with Big Tech customers [57][58] Question: Agility platform growth and initiatives - The company is all-in on generative AI for the Agility platform, which has seen increased win rates and market share [59][60] Question: Federal wins and enterprise opportunities - Federal wins are seen as a sharp edge of the wedge for bringing immediate value, with potential for future growth beyond 2025 [62][63] Question: Scaling with other Big Tech customers - The company is optimistic about scaling with other Big Tech customers, leveraging the same playbooks and capabilities used with the largest customer [65][66]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------|-------|--------|-------|-------|-------|-------|-------|-------|------------|-------|------------|---------|-------|-------|---------------|------ ...

Revenue Growth - Revenue for Q3 2024 reached $52.2 million, reflecting a 136% year-over-year increase and a 60% sequential increase from Q2 2024 revenue of $32.6 million[1][9] - The company raised its full-year 2024 revenue growth guidance to between 88% and 92% year-over-year[3] - The company's revenue for the nine months ended September 30, 2024, was $111.3 million, compared to $60.7 million in the same period last year[21] - DDS segment revenue grew to $89,810K for the nine months ended September 2024, up from $41,929K in the same period of 2023, reflecting strong performance in this segment[28] - Agility segment revenue increased to $15,679K for the nine months ended September 2024, compared to $13,029K in the same period of 2023, indicating steady growth[28] - Total consolidated revenue for the nine months ended September 2024 was $111,281K, a substantial increase from $60,663K in the same period of 2023[28] Net Income and Profitability - Net income for Q3 2024 was $17.4 million, or $0.60 per basic share and $0.51 per diluted share, compared to $0.4 million in the same period last year, including a $5.6 million benefit from recognizing a deferred tax asset[2] - Adjusted EBITDA for Q3 2024 was $13.9 million, a 337% increase from $3.2 million in the same period last year[2] - Adjusted EBITDA for the consolidated company reached $20,427K for the nine months ended September 2024, a significant increase from $5,587K in the same period of 2023[25] - Adjusted EBITDA for the DDS segment reached $15,540K for the nine months ended September 2024, up from $3,695K in the same period of 2023[26] - Adjusted EBITDA for the Agility segment was $3,372K for the nine months ended September 2024, compared to $1,249K in the same period of 2023[27] Cash and Liquidity - Cash, cash equivalents, and short-term investments totaled $26.4 million as of September 30, 2024, up from $13.8 million at December 31, 2023[2] - The company's cash balances increased by approximately $10 million from Q2 2024 to Q3 2024, reaching $26.4 million[9] - Cash and cash equivalents at the end of September 2024 stood at $26,364K, up from $14,812K at the end of September 2023, reflecting improved liquidity[24] - Net cash provided by operating activities rose to $17,684K in September 2024, up from $5,789K in September 2023, primarily due to higher consolidated net income ($18,372K vs. -$2,545K)[24] Customer and Market Expansion - The company secured its eighth Big Tech customer, a prominent social media company, in Q3 2024, adding to its roster of five of the Magnificent Seven and a leading AI research and development company[5][6] - The company also secured its second federal government agency win, leveraging the generative AI capabilities of its Agility platform[7] - The company's Big Tech customer base is expected to become a significant part of its revenue makeup next year, driven by investments in generative AI development initiatives[5] Financial Position and Liabilities - Total current liabilities increased to $29,793K from $22,935K year-over-year, driven by higher accounts payable and accrued expenses ($7,692K vs. $5,722K) and deferred revenues ($6,500K vs. $3,523K)[23] - Stockholders' equity increased to $47,709K as of September 2024, up from $25,703K in September 2023, indicating stronger financial position[23]

Innodata (INOD) shares have appreciated 131% year to date (YTD), outperforming the broader Zacks Computer and Technology sector's appreciation of 27.3%. INOD shares have also outperformed the Zacks Computer – Services industry and peers, including PDF Solutions (PDFS) , CSG Systems International (CSGS) , and Forian (FORA) . Over the same timeframe, shares of PDFS, CSGS, and FORA have declined 7.4%, 8.4%, and 27.9%, respectively. The industry has appreciated 18.2% YTD. INOD shares' outperformance can be attr ...

Financial Data and Key Metrics Changes - Innodata reported record revenue growth of 66% year-over-year, with Q2 2024 revenue reaching $32.6 million, up from $26.5 million in Q1 2024, reflecting a sequential increase of 23% [5][22] - Adjusted gross margin for Q2 2024 was 32%, down from 41% in Q1 2024, primarily due to $3.6 million in recruiting costs; without these costs, the adjusted gross margin would have been approximately 44% [22] - Adjusted EBITDA for Q2 2024 was $2.8 million, a decrease from $3.8 million in Q1 2024; excluding recruiting costs, adjusted EBITDA would have been $6.4 million, or 20% of revenue [22] Business Line Data and Key Metrics Changes - Agility revenue crossed the $5 million mark for the first time, with a demo to deal win rate of 36%, significantly higher than the sub-20% win rates prior to integration [11][12] - The company has seen substantial growth in its partnerships with Big Tech customers, with a total value of approximately $110.5 million in expected annual run-rate revenue from one major customer [9][10] Market Data and Key Metrics Changes - The Big Tech companies are increasing capital expenditures, with a 63% year-over-year rise, primarily driven by generative AI spending [12][13] - The generative AI market is expected to see $1 trillion in capital expenditures over the next several years, indicating a significant opportunity for Innodata [14] Company Strategy and Development Direction - Innodata is focused on becoming a leading partner in delivering complex generative AI training data, capitalizing on the growing demand from Big Tech companies [5][6] - The company aims to replicate its success across other Big Tech customers and expand into new markets, including healthcare and public sector [10][11] - A universal shelf registration statement was filed to maintain flexibility in raising capital as needed for anticipated growth [8][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capture significant market opportunities, with expectations of strong organic growth and a raised full-year revenue guidance to 60% or more [6][7] - The management highlighted the importance of high-quality data for training models, emphasizing that the complexity of future models will require even more specialized data [16][17] Other Important Information - The company incurred $3.6 million in recruiting costs to support workforce expansion, which is expected to normalize in the upcoming quarters [6][22] - The cash position at the end of Q2 was approximately $16.5 million, up from $13.8 million at year-end 2023 [23] Q&A Session Summary Question: Clarification on large language model development programs - The contracts mentioned were indeed the ones announced during Q2, reflecting the total value of $110.5 million [30][31] Question: Future contributions from new contracts - All seven Big Tech customers contracted for generative AI work hold significant opportunities for expansion, with expectations of growth across all accounts [32][33] Question: Guidance and unannounced contracts - Revenue from unannounced contracts is expected to contribute to Q3 and Q4, with guidance considered conservative [34] Question: Recruiting costs and efficiency - The company is confident in its ability to recruit effectively, with a new internal recruiting engine expected to lower future costs [35][36] Question: Agility and PR CoPilot integration - The PR CoPilot aims to enhance PR workflows using generative AI, with significant improvements expected as integration progresses [38] Question: Clinical application of Synodex - The new engagement with a clinical provider marks the first application of Synodex in a clinical use case, expanding market opportunities [39] Question: Operating leverage and expense growth - The company anticipates operating expenses to grow at a lower rate than revenue, indicating strong operating leverage [41] Question: Liquidity and customer payment terms - The company is not experiencing extended payment terms from customers, maintaining a healthy cash flow [45]