RCS - Innodata Inc. - Innodata Reports Q1 Results, Raises Guidance
08/05/2024 08:15
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RNS Number : 5097N Innodata Inc. 07 May 2024
Innodata Reports Record First Quarter 2024 Results; Raises Guidance to at
Least 40% Organic Revenue Growth in 2024
INNODATA INC. (NASDAQ:INOD) today reported results for the first quarter ended
March 31, 2024.
· Revenue was $26.5 million, up 41% from $18.8 million in the same
period last year.
· Net income was $1.0 million, or $0.03 per basic and diluted
share, compared to a net loss of $(2.1) million, or $(0.08) per basic and
diluted share, in the same period last year.
· Adjusted EBITDA was $3.8 million compared to Adjusted EBITDA of
$0.8 million in the same period last year.*
· Cash, cash equivalents and short-term investments were $19.0
million at March 31, 2024 and $13.8 million at December 31, 2023.
· New program expansion valued at approximately $23.5 million in
annualized run rate revenue announced today. This is in addition to new
programs announced on April 24, 2024 valued at approximately $20 million in
annualized run rate revenue.
· Raises guidance to at least 40% organic revenue growth in 2024.
* Adjusted EBITDA is defined below.
Jack Abuhoff, CEO, said, "We are pleased to announce record revenues of $26.5
million for the first quarter, representing 41% year-over-year growth. Our
growth in the quarter was driven by the value we are bringing to help the
world's largest tech companies build AI large language models, or LLMs. We're
equally excited to share that, as a result of accelerating business momentum,
we are raising our 2024 revenue guidance to an expected organic revenue growth
of at least 40% year-over-year. This is double the growth rate we guided to
last quarter."
Significant Program Expansion
Innodata is announcing today that it has been awarded an expansion of one of
its large language model (LLM) development programs by one of its existing
"Magnificent Seven" Big Tech customers. Innodata anticipates that the
expansion will result in approximately $23.5 million of additional annualized
run rate revenue once implemented. This is in addition to the $20 million in
new programs with this customer Innodata announced on April 24, 2024. Innodata
expects that these programs will ramp up over the next two months. While our
customer agreements typically contain early-termination-upon-notice
provisions, Innodata believes this customer is committed to a significant,
multi-year LLM strategy from which Innodata stands to benefit.
Abuhoff remarked, "This significant customer expansion demonstrates the
incredible results we are creating for our customers. One of our large Big
Tech customers has stated that the quality of instruction data sets, one of a
broad range of services Innodata provides to support generative AI programs,
has an outsized influence on the performance of their LLM models and some of
their biggest improvements in model quality are due to carefully crafted
instruction data sets."
Two New Big Tech Customer Wins
Innodata is announcing today that it has signed two new Big Tech customers -
one a large, prominent generative AI company and the other a large, prominent
consumer-facing independent software vendor (ISV) investing substantially in
generative AI foundation models.
Abuhoff continued, "We entered the year with agreements in place with five of
the Magnificent Seven companies to provide support in LLM data engineering.
With these two additional new signings, we now have agreements in place to
support seven Big Tech customers on their generative AI initiatives. We look
forward to growing these customer relationships throughout 2024."
Strong Balance Sheet
The Company has a healthy balance sheet and remains in a solid financial
position. At the end of Q1, Innodata's cash balances were $19 million, up from
$13.8 million at the end of Q4 2023 driven by positive cash flow from
operations and tight working capital management.
Abuhoff added, "We believe we can drive best-in-class growth over the next
several years and maintain our early leadership position in generative AI
services. We believe we can accomplish this without the need to raise equity,
to incur debt, or to burn cash. This year, based on our current growth
forecast, we intend to invest approximately $3.5 million in recruiting costs
to scale our business and approximately another $3 million in new sales,
marketing, and product development talent. The recruiting costs relate to the
significant increase in revenues we expect this year and will not be incurred
next year to support that revenue going forward. The investments in sales,
marketing and product development are incurred to continue our growth momentum
and we anticipate that they will yield revenue and profitability benefits
primarily next year and beyond. We anticipate approximately 70% of the
recruiting costs to be incurred in Q2 and most of the opex investment to be
incurred in the second half of the year. We are making these investments while
simultaneously driving year-over-year growth in Adjusted EBITDA and building
cash on our balance sheet."
Raised Guidance
Innodata raised its 2024 revenue guidance to an expected organic revenue
growth of at least 40% year-over-year, up from the 20% year-over-year growth
it forecasted last quarter. It anticipates a substantial sequential revenue
increase in the second quarter of 2024, as well.
Abuhoff concluded, "We are seeing accelerated business momentum and believe we
have an incredible opportunity in front of us. We believe we have the talent,
capabilities, and scalability to support the world's leading companies'
efforts to build AI models and services and help enterprises advance AI and
generative AI technologies."
Amounts in this press release have been rounded. All percentages have been
calculated using unrounded amounts.
Timing of Conference Call with Q&A
Innodata will conduct an earnings conference call, including a
question-and-answer period, at 5:00 PM eastern time today. You can participate
in this call by dialing the following call-in numbers:
The call-in numbers for the conference call are:
1-888-506-0062 (Domestic)
+1 973-528-0011 (International)
Participant Access Code 786182
1-877-481-4010 (Domestic Replay)
+1 919-882-2331 (International Replay)
Replay Passcode 50493
It is recommended that participants dial in approximately 10 minutes prior to
the start of the call. Investors are also invited to access a live Webcast of
the conference call at the Investor Relations section of www.innodata.com
(https://pr.report/dVxoKS46) . Please note that the Webcast feature will be in
listen-only mode.
Call-in or Webcast replay will be available for 30 days following the
conference call.
About Innodata
Innodata (Nasdaq: INOD) is a global data engineering company delivering the
promise of AI to many of the world's most prestigious companies. We provide
AI-enabled software platforms and managed services for AI data
collection/annotation, AI digital transformation, and industry-specific
business processes. Our low-code Innodata AI technology platform is at the
core of our offerings. In every relationship, we honor our 30+ year legacy
delivering the highest quality data and outstanding service to our customers.
Visit www.innodata.com to learn more.
Forward-Looking Statements
This press release may contain certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. These forward-looking
statements include, without limitation, statements concerning our operations,
economic performance, financial condition, developmental program expansion and
position in the generative AI services market. Words such as "project,"
"believe," "expect," "can," "continue," "could," "intend," "may," "should,"
"will," "anticipate," "indicate," "predict," "likely," "estimate," "plan,"
"potential," "possible," "promises," or the negatives thereof, and other
similar expressions generally identify forward-looking statements.
These forward-looking statements are based on management's current
expectations, assumptions and estimates and are subject to a number of risks
and uncertainties, including, without limitation, impacts resulting from
ongoing geopolitical conflicts, including between Russia and the Ukraine,
Hamas' attack against Israel and the ensuing conflict and increased
hostilities between Iran and Israel; investments in large language models;
that contracts may be terminated by customers; projected or committed volumes
of work may not materialize; pipeline opportunities and customer discussions
which may not materialize into work or expected volumes of work; the
likelihood of continued development of the markets, particularly new and
emerging markets, that our services support; the ability and willingness of
our customers and prospective customers to execute business plans that give
rise to requirements for our services; continuing reliance on project-based
work in the Digital Data Solutions (DDS) segment and the primarily at-will
nature of such contracts and the ability of these customers to reduce, delay
or cancel projects; potential inability to replace projects that are
completed, canceled or reduced; our DDS segment's revenue concentration in a
limited number of customers; our dependency on content providers in our
Agility segment; the Company's ability to achieve revenue and growth targets;
difficulty in integrating and deriving synergies from acquisitions, joint
ventures and strategic investments; potential undiscovered liabilities of
companies and businesses that we may acquire; potential impairment of the
carrying value of goodwill and other acquired intangible assets of companies
and businesses that we acquire; a continued downturn in or depressed market
conditions; changes in external market factors; changes in our business or
growth strategy; the emergence of new, or growth in existing competitors;
various other competitive and technological factors; our use of and reliance
on information technology systems, including potential security breaches,
cyber-attacks, privacy breaches or data breaches that result in the
unauthorized disclosure of consumer, customer, employee or Company
information, or service interruptions; and other risks and uncertainties
indicated from time to time in our filings with the Securities and Exchange
Commission.
Our actual results could differ materially from the results referred to in any
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, the risks discussed in Part I,
Item 1A. "Risk Factors," Part II, Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and other parts of
our Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on March 4, 2024, as updated or amended by our other filings that
we may make with the Securities and Exchange Commission. In light of these
risks and uncertainties, there can be no assurance that the results referred
to in the forward-looking statements will occur, and you should not place
undue reliance on these forward-looking statements. These forward-looking
statements speak only as of the date hereof.
We undertake no obligation to update or review any guidance or other
forward-looking statements, whether as a result of new information, future
developments or otherwise, except as may be required by the U.S. federal
securities laws.
Company Contact
Marcia Novero
Innodata Inc.
Mnovero@innodata.com (mailto:Mnovero@innodata.com)
(201) 371-8015
Non-GAAP Financial Measures
In addition to the financial information prepared in conformity with U.S. GAAP
("GAAP"), we provide certain non-GAAP financial information. We believe that
these non-GAAP financial measures assist investors in making comparisons of
period-to-period operating results. In some respects, management believes
non-GAAP financial measures are more indicative of our ongoing core operating
performance than their GAAP equivalents by making adjustments that management
believes are reflective of the ongoing performance of the business.
We believe that the presentation of this non-GAAP financial information
provides investors with greater transparency by providing investors a more
complete understanding of our financial performance, competitive position, and
prospects for the future, particularly by providing the same information that
management and our Board of Directors use to evaluate our performance and
manage the business. However, the non-GAAP financial measures presented in
this press release have certain limitations in that they do not reflect all of
the costs associated with the operations of our business as determined in
accordance with GAAP. Therefore, investors should consider non-GAAP financial
measures in addition to, and not as a substitute for, or as superior to,
measures of financial performance prepared in accordance with GAAP. Further,
the non-GAAP financial measures that we present may differ from similar
non-GAAP financial measures used by other companies.
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss) attributable to Innodata Inc.
and its subsidiaries in accordance with U.S. GAAP before interest expense,
income taxes, depreciation and amortization of intangible assets (which
derives EBITDA), plus additional adjustments for loss on impairment of
intangible assets and goodwill, stock-based compensation, income (loss)
attributable to non-controlling interests, non-recurring severance, and other
one-time costs.
We use Adjusted EBITDA to evaluate core results of operations and trends
between fiscal periods and believe that these measures are important
components of our internal performance measurement process.
A reconciliation of Adjusted EBITDA to the most directly comparable GAAP
measure is included in the tables that accompany this release.
INNODATA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per-share amounts)
Three Months Ended
March 31,
2024 2023
Revenues $ 26,504 $ 18,839
Direct operating costs 16,869 12,874
Selling and administrative expenses 8,305 7,797
Interest (income) expense, net (84 ) 63
25,090 20,734
Income (loss) before provision for income taxes 1,414 (1,895 )
Provision for income taxes 424 218
Consolidated net income (loss) 990 (2,113 )
Income attributable to non-controlling interests 1 3
Net Income (loss) attributable to Innodata Inc. and Subsidiaries $ 989 $ (2,116 )
Income (loss) per share attributable to Innodata Inc. and Subsidiaries:
Basic $ 0.03 $ (0.08 )
Diluted $ 0.03 $ (0.08 )
Weighted average shares outstanding:
Basic 28,753 27,460
Diluted 32,239 27,460
INNODATA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 31, December 31, 2023
2024
ASSETS
Current assets:
Cash and cash equivalents $ 18,975 $ 13,806
Short term investments - other 14 14
Accounts receivable, net 14,064 14,288
Prepaid expenses and other current assets 3,820 3,969
Total current assets 36,873 32,077
Property and equipment, net 2,137 2,281
Right-of-use-asset, net 4,815 5,054
Other assets 2,018 2,445
Deferred income taxes, net 1,848 1,741
Intangibles, net 13,825 13,758
Goodwill 2,056 2,075
Total assets $ 63,572 $ 59,431
LIABILITIES, NON-CONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,276 $ 5,722
Accrued salaries, wages and related benefits 7,302 7,799
Deferred revenues 6,668 3,523
Income and other taxes 4,056 3,848
Long-term obligations - current portion 1,160 1,261
Operating lease liability - current portion 804 782
Total current liabilities 25,266 22,935
Deferred income taxes, net 84 22
Long-term obligations, net of current portion 6,899 6,778
Operating lease liability, net of current portion 4,469 4,701
Total liabilities 36,718 34,436
Non-controlling interests (707 ) (708 )
STOCKHOLDERS' EQUITY: 27,561 25,703
Total liabilities, non-controlling interests and stockholders' equity $ 63,572 $ 59,431
INNODATA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31,
2024 2023
Cash flows from operating activities:
Consolidated net income (loss) $ 990 $ (2,113 )
Adjustments to reconcile consolidated net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,266 1,091
Stock-based compensation 1,034 962
Deferred income taxes (54 ) (94 )
Pension cost 309 253
Changes in operating assets and liabilities:
Accounts receivable 137 1,149
Prepaid expenses and other current assets 86 158
Other assets 426 21
Accounts payable and accrued expenses (307 ) (431 )
Deferred revenues 3,145 (177 )
Accrued salaries, wages and related benefits (490 ) 627
Income and other taxes 225 338
Net cash provided by operating activities 6,767 1,784
Cash flows from investing activities:
Capital expenditures (1,339 ) (1,702 )
Purchase of short term investments - others - (5 )
Net cash used in investing activities (1,339 ) (1,707 )
Cash flows from financing activities:
Proceeds from exercise of stock options - 321
Payment of long-term obligations (291 ) (70 )
Net cash provided by (used in) financing activities (291 ) 251
Effect of exchange rate changes on cash and cash equivalents 32 210
Net increase in cash and cash equivalents 5,169 538
Cash and cash equivalents, beginning of period 13,806 9,792
Cash and cash equivalents, end of period $ 18,975 $ 10,330
INNODATA INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
Three Months Ended March 31,
Consolidated 2024 2023
Net income (loss) attributable to Innodata Inc. and Subsidiaries $ 989 $ (2,116 )
Provision for income taxes 424 218
Interest expense 68 63
Depreciation and amortization 1,266 1,091
Severance** - 580
Stock-based compensation 1,034 962
Non-controlling interests 1 3
Adjusted EBITDA - Consolidated $ 3,782 $ 801
Three Months Ended March 31,
DDS Segment 2024 2023
Net income (loss) attributable to DDS Segment $ 426 $ (641 )
Provision for income taxes 421 215
Interest expense 67 62
Depreciation and amortization 364 225
Severance** - 33
Stock-based compensation 895 806
Non-controlling interests 1 3
Adjusted EBITDA - DDS Segment $ 2,174 $ 703
Three Months Ended March 31,
Synodex Segment 2024 2023
Net income attributable to Synodex Segment $ 276 $ 14
Depreciation and amortization 137 162
Severance** - 6
Stock-based compensation 49 58
Adjusted EBITDA - Synodex Segment $ 462 $ 240
Three Months Ended March 31,
Agility Segment 2024 2023
Net income (loss) attributable to Agility Segment $ 287 $ (1,489 )
Provision for income taxes 3 3
Interest expense 1 1
Depreciation and amortization 765 704
Severance** - 541
Stock-based compensation 90 98
Adjusted EBITDA (loss) - Agility Segment $ 1,146 $ (142 )
**Represents non-recurring severance incurred for a reduction in headcount in
connection with the re-alignment of the Company's cost structure.
INNODATA INC. AND SUBSIDIARIES
CONSOLIDATED REVENUE BY SEGMENT
(Unaudited)
(In thousands)
Three Months Ended March 31,
2024 2023
Revenues:
DDS $ 19,705 $ 12,746
Synodex 1,871 1,865
Agility 4,928 4,228
Total Consolidated $ 26,504 $ 18,839
SOURCE: Innodata Inc.
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