Innodata(US:INOD)2025-07-31 21:30Part I – Financial Information Financial Statements The company's financial position strengthened significantly as of June 30, 2025, with total assets increasing to $132.6 million from $113.4 million at year-end 2024, driven by a rise in cash and accounts receivable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $59,792 | $46,897 | +$12,895 | | Accounts receivable, net | $34,124 | $28,013 | +$6,111 | | Total current assets | $100,689 | $81,000 | +$19,689 | | Total assets | $132,623 | $113,449 | +$19,174 | | Total current liabilities | $35,122 | $39,506 | -$4,384 | | Total liabilities | $45,981 | $50,060 | -$4,079 | | Total Stockholders' equity | $86,642 | $63,389 | +$23,253 | Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $58,393 | $32,553 | $116,737 | $59,057 | | Net Income (loss) | $7,219 | $(14) | $15,006 | $975 | | Diluted EPS | $0.20 | $(0.00) | $0.43 | $0.03 | Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $15,102 | $6,313 | | Net cash used in investing activities | $(4,058) | $(4,067) | | Net cash provided by financing activities | $1,239 | $392 | | Net increase in cash and cash equivalents | $12,895 | $2,703 | Notes to Condensed Consolidated Financial Statements Key accounting policies remain consistent with the 2024 annual report, with valuation allowances released for deferred tax assets in Canadian and German subsidiaries due to improved profitability outlooks, and a single customer in the DDS segment accounting for a significant portion of revenue - In Q1 and Q2 2025, the company released valuation allowances on deferred tax assets for its Canadian and German subsidiaries, respectively, due to expectations of future profitability5657 - The DOJ and SEC have concluded their investigations related to the securities class action and do not intend to recommend enforcement actions against the company65 Segment Revenue (in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | YTD 2025 Revenue | YTD 2024 Revenue | | :--- | :--- | :--- | :--- | :--- | | DDS | $50,576 | $25,410 | $101,406 | $45,116 | | Synodex | $2,065 | $1,986 | $4,079 | $3,857 | | Agility | $5,752 | $5,157 | $11,252 | $10,084 | - A single customer in the DDS segment accounted for 58% of total revenue in Q2 2025 and 59% in H1 2025, also representing 60% of accounts receivable as of June 30, 2025929394 - The company has a secured revolving line of credit for up to $30.0 million, with an available borrowing base of approximately $25.2 million as of June 30, 2025, and the facility was not used during the first six months of 2025105 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the significant 97% year-over-year revenue growth for the first six months of 2025 primarily to increased volume from a single large customer in the Digital Data Solutions (DDS) segment, which focuses on AI data services, driving gross margin up to 40% from 32% in the prior year period and strengthening liquidity Business Overview Innodata is a data engineering company focused on providing high-quality data for AI applications, with core offerings in AI Data Preparation, AI Model Deployment and Integration, and AI-Enabled Industry Platforms, operating through its DDS, Synodex, and Agility segments - The company's mission is to provide high-quality data engineering for AI, honed over 35+ years114116 - Core offerings include AI Data Preparation, AI Model Deployment and Integration, and AI-Enabled Industry Platforms119 - The company's three reporting segments are Digital Data Solutions (DDS), Synodex, and Agility130 Results of Operations For Q2 2025, revenue increased 79% YoY to $58.4 million, driven by a 99% increase in the DDS segment from a large existing customer, leading to gross profit growth to $23.0 million from $9.3 million and gross margin expansion from 29% to 39%, with six-month net income reaching $15.0 million and Non-GAAP Adjusted EBITDA surging to $25.9 million Revenue by Segment - Three Months Ended June 30 (in millions) | Segment | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | DDS | $50.5 | $25.4 | +99% | | Synodex | $2.1 | $2.0 | +5% | | Agility | $5.8 | $5.2 | +12% | | Total | $58.4 | $32.6 | +79% | - The primary driver for the DDS segment's revenue growth was higher volume from an existing customer, which accounted for 58% of total company revenue in Q2 2025147150 Gross Profit & Margin - Three Months Ended June 30 (in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Gross Profit | $23.0 | $9.3 | | Gross Margin | 39% | 29% | Adjusted EBITDA Reconciliation - Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $15,006 | $975 | | Adjustments (Taxes, Interest, D&A, etc.) | $10,943 | $5,594 | | Adjusted EBITDA | $25,949 | $6,569 | Liquidity and Capital Resources The company's liquidity position improved significantly, with cash and cash equivalents reaching $59.8 million at June 30, 2025, up from $46.9 million at year-end 2024, and working capital increasing to $65.6 million, supported by $15.1 million in net cash from operating activities for the first six months of 2025 Key Liquidity Metrics (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $59,792 | $46,897 | | Working capital | $65,567 | $41,494 | - Net cash provided by operating activities was $15.1 million for the first six months of 2025, compared to $6.3 million for the same period in 2024222223 - Anticipated capital expenditures for the next 12 months are approximately $11.0 million, primarily for software and technology upgrades225 Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company is a smaller reporting company - Disclosure is not required for smaller reporting companies231 Controls and Procedures Management, including the CEO and interim CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective233 - No material changes were made to internal control over financial reporting during the six months ended June 30, 2025234 Part II – Other Information Legal Proceedings The company is involved in a putative securities class action filed in February 2024, alleging false statements about its AI technology, but the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have both closed their related investigations without recommending enforcement actions - A putative class action lawsuit was filed against the company in February 2024 regarding alleged false and misleading statements about its AI technology, and the company filed a motion to dismiss, which is pending64 - On June 12, 2025, the DOJ notified the company it has closed its investigation, and the SEC has also notified the company that it has concluded its investigation and does not intend to recommend an enforcement action65 Risk Factors There are no new risk factors presented in this report, with the company referring to the Risk Factors section in its Annual Report on Form 10-K for the year ended December 31, 2024 - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024237 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no sales of unregistered equity securities or repurchases of its equity securities during the second quarter of 2025 - There were no sales of unregistered equity securities or repurchases of equity securities during the three months ended June 30, 2025238 Other Information During the quarter ended June 30, 2025, no directors or officers of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarter241 Exhibits The report lists the exhibits filed, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and XBRL data files - Exhibits filed include Sarbanes-Oxley Act certifications (31.1, 31.2, 32.1, 32.2) and XBRL financial data (101, 104)243