RCS - Innodata Inc. - Innodata Reports Q2 Results; 66% Revenue Growth
09/08/2024 08:15
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RNS Number : 8158Z Innodata Inc. 08 August 2024
Innodata Reports Second Quarter 2024 Results; Record 66% Revenue Growth
Year-Over-Year
NEW YORK, NY / ACCESSWIRE / August 8, 2024 / INNODATA INC. (Nasdaq:INOD)
today reported results for the second quarter ended June 30, 2024.
· Revenue of $32.6 million, an increase of 66% year-over-year.
· Earnings per basic and diluted share of $0.00, which includes the
impact of recruitment costs of $3.6 million, compared to a net loss of $(0.8)
million, or $(0.03) per basic and diluted share, in the same period last year.
· Adjusted EBITDA of $2.8 million, an increase of 76%
year-over-year.*
· Won new Large Language Model (LLM) development programs and
expansions for a Big Tech customer valued at approximately $87.5 million in
annualized run rate revenue.
· Notable new customer wins and expectations of others.
· Raise guidance to 60% or more revenue growth in 2024.
(* Adjusted EBITDA is defined below.)
Jack Abuhoff, CEO, said, "Innodata delivered another outstanding quarter,
highlighted by record revenue growth of 66% year-over-year. During the
quarter, we significantly expanded our partnership with a Big Tech customer
while also gaining traction with others. We take great pride in the foundation
we have built to establish Innodata as a leading partner of choice to deliver
reliable, complex generative AI training data. We believe we are uniquely
positioned to capture the enormous market opportunity and drive value for
shareholders. Given the strong organic growth we are seeing, we are raising
our 2024 full-year revenue growth guidance to 60% or more.
"Our gross margin and Adjusted EBITDA margin were down sequentially as a
result of incurring $3.6 million of recruiting agency fees we incurred in the
quarter to scale our operations in anticipation of significant 2H revenue
growth. We recorded these costs as direct operating expenses in Q2. However,
we expect that our recruiting costs will reduce to approximately $300,000 in
Q3. As a result of significantly lower recruiting costs, together with
expected operating leverage from growth, we expect Adjusted EBITDA in Q3 to be
approximately triple Q2 Adjusted EBITDA."
Big Tech Customer Program Expansions
On June 3, 2024, Innodata announced it was awarded two new LLM development
programs by one of its existing "Magnificent Seven" Big Tech customers. These
programs are expected to deliver approximately $44 million of annualized run
rate revenue and represents the single largest customer win in Innodata's
history. These awards are in addition to the new programs and program
expansion with this customer announced on April 24, 2024, and May 7, 2024. In
the one year that Innodata has been working with this customer, Innodata has
landed new programs and program expansions that bring the total value of the
account to approximately $110.5 million of annualized run rate revenue.
Innodata aspires to replicate this success across the six other Big Tech
customers already contracted for generative AI development and to land
additional Big Tech accounts.
Growing Customer Base
In addition, the Company won several new engagements in the second quarter and
expects to land several others in the near future. Some notables include a Big
Tech company that would be a new customer - it is one of the most valuable
companies in the world and one of the companies most often talked about in
connection with generative AI. Another is with an existing Big Tech customer.
In connection with this opportunity Innodata would aim to become certified to
work on their premises. Being collocated with their engineering and operations
teams would potentially enable Innodata to access new attractive
opportunities. Innodata also expects to shortly sign a prominent social media
platform that is building its own generative AI models and would be a new
customer for Innodata.
Another noteworthy win was with a clinical provider in the healthcare market.
While the Company's Synodex platform has historically been used as a tool for
supporting insurance underwriting, the Company has developed new technology
that enables the platform to be utilized for certain clinical use cases.
Innodata was also recently awarded a deal to provide news briefs and media
monitoring to a federal government agency that will be leveraging the new
generative AI capabilities built into Innodata's Agility platform. Innodata is
seeking to expand into the public sector, so it considers this a strategic
win.
Strong Balance Sheet to Support Growth
Innodata continues to maintain a healthy balance sheet and remains in a solid
financial position. As of June 30, 2024, cash balances were $16.5 million, up
from $13.8 million at the end of 2023.
As Innodata continues to invest in growth, the Company has increased its
receivables-based credit facility with Wells Fargo from $10 million to $30
million, subject to a borrowing base limitation, with an accordion feature
that enables it to expand to up to $50 million subject to the approval of
Wells Fargo. Innodata has also filed a registration statement with the
Securities and Exchange Commission ("SEC") to establish a universal shelf
which, once declared effective by the SEC, would allow Innodata to sell up to
an aggregate of $50 million of securities in registered offerings. Innodata
believes this will preserve the flexibility to raise capital from time to
time, if needed. The Company has no specific plans to raise money, and the
uses of net proceeds from any such offering would be set forth in a prospectus
supplement.
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:
1-877-545-0523 (Domestic)
+1 973-528-0016 (International)
Participant Access Code 508227
1-877-481-4010 (Domestic Replay)
+1 919-882-2331 (International Replay)
Replay Passcode 50908
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/1375) . 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 (https://pr.report/1375) . 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; the potential effects of U.S.
monetary policy, including the interest rate policies of the Federal Reserve;
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 Six Months Ended
June 30, June 30,
2024 2023 2024 2023
Revenues $ 32,553 $ 19,655 $ 59,057 $ 38,494
Direct operating costs 23,202 12,715 40,071 25,589
Selling and administrative expenses 9,020 7,574 17,325 15,371
Interest (income) expense, net 55 (7 ) (29 ) 56
32,277 20,282 57,367 41,016
Income (loss) before provision for income taxes 276 (627 ) 1,690 (2,522 )
Provision for income taxes 285 188 709 406
Consolidated net income (loss) (9 ) (815 ) 981 (2,928 )
Income attributable to non-controlling interests 5 - 6 3
Net Income (loss) attributable to Innodata Inc. and Subsidiaries $ (14 ) $ (815 ) $ 975 $ (2,931 )
Income (loss) per share attributable to Innodata Inc. and Subsidiaries:
Basic $ (0.00 ) $ (0.03 ) $ 0.03 $ (0.11 )
Diluted $ (0.00 ) $ (0.03 ) $ 0.03 $ (0.11 )
Weighted average shares outstanding:
Basic 28,878 27,860 28,819 27,661
Diluted 28,878 27,860 32,691 27,661
INNODATA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
June 30, December 31, 2023
2024
ASSETS
Current assets:
Cash and cash equivalents $ 16,509 $ 13,806
Short term investments - other 14 14
Accounts receivable, net 18,162 14,288
Prepaid expenses and other current assets 3,652 3,969
Total current assets 38,337 32,077
Property and equipment, net 3,271 2,281
Right-of-use-asset, net 4,627 5,054
Other assets 2,048 2,445
Deferred income taxes, net 1,736 1,741
Intangibles, net 13,910 13,758
Goodwill 2,044 2,075
Total assets $ 65,973 $ 59,431
LIABILITIES, NON-CONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 9,079 $ 5,722
Accrued salaries, wages and related benefits 6,642 7,799
Deferred revenues 4,770 3,523
Income and other taxes 3,906 3,848
Long-term obligations - current portion 1,149 1,261
Operating lease liability - current portion 828 782
Total current liabilities 26,374 22,935
Deferred income taxes, net 86 22
Long-term obligations, net of current portion 6,995 6,778
Operating lease liability, net of current portion 4,247 4,701
Total liabilities 37,702 34,436
Non-controlling interests (702 ) (708 )
STOCKHOLDERS' EQUITY: 28,973 25,703
Total liabilities, non-controlling interests and stockholders' equity $ 65,973 $ 59,431
INNODATA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 30,
2024 2023
Cash flows from operating activities:
Consolidated net income (loss) $ 981 $ (2,928 )
Adjustments to reconcile consolidated net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,684 2,242
Stock-based compensation 2,026 1,981
Deferred income taxes 41 (142 )
Pension cost 395 538
Changes in operating assets and liabilities:
Accounts receivable (3,976 ) 1,270
Prepaid expenses and other current assets 246 634
Other assets 396 45
Accounts payable and accrued expenses 3,348 (526 )
Deferred revenues 1,247 (1,330 )
Accrued salaries, wages and related benefits (1,149 ) 658
Income and other taxes 74 1,741
Net cash provided by operating activities 6,313 4,183
Cash flows from investing activities:
Capital expenditures (4,067 ) (3,012 )
Proceeds from sale of short term investments - others - 493
Net cash used in investing activities (4,067 ) (2,519 )
Cash flows from financing activities:
Proceeds from exercise of stock options 783 2,179
Withholding taxes on net settlement of restricted stock units (97 ) -
Payment of long-term obligations (294 ) (192 )
Net cash provided by financing activities 392 1,987
Effect of exchange rate changes on cash and cash equivalents 65 209
Net increase in cash and cash equivalents 2,703 3,860
Cash and cash equivalents, beginning of period 13,806 9,792
Cash and cash equivalents, end of period $ 16,509 $ 13,652
INNODATA INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
Three Months Ended June 30, Six Months Ended June 30,
Consolidated 2024 2023 2024 2023
Net income (loss) attributable to Innodata Inc. and Subsidiaries $ (14 ) $ (815 ) $ 975 $ (2,931 )
Provision for income taxes 285 188 709 406
Interest expense 101 40 169 132
Depreciation and amortization 1,418 1,151 2,684 2,242
Severance** - - - 580
Stock-based compensation 992 1,019 2,026 1,981
Non-controlling interests 5 - 6 3
Adjusted EBITDA - Consolidated $ 2,787 $ 1,583 $ 6,569 $ 2,413
Three Months Ended June 30, Six Months Ended June 30,
DDS Segment 2024 2023 2024 2023
Net loss attributable to DDS Segment $ (460 ) $ (554 ) $ (34 ) $ (1,195 )
Provision for income taxes 283 186 704 400
Interest expense 100 38 167 130
Depreciation and amortization 479 257 843 483
Severance** - - - 33
Stock-based compensation 868 865 1,763 1,670
Non-controlling interests 5 - 6 3
Adjusted EBITDA - DDS Segment $ 1,275 $ 792 $ 3,449 $ 1,524
Three Months Ended June 30, Six Months Ended June 30,
Synodex Segment 2024 2023 2024 2023
Net income attributable to Synodex Segment $ 316 $ 121 $ 592 $ 135
Depreciation and amortization 157 162 294 324
Severance** - - - 6
Stock-based compensation 49 59 98 117
Adjusted EBITDA - Synodex Segment $ 522 $ 342 $ 984 $ 582
Three Months Ended June 30, Six Months Ended June 30,
Agility Segment 2024 2023 2024 2023
Net income (loss) attributable to Agility Segment $ 130 $ (382 ) $ 417 $ (1,871 )
Provision for income taxes 2 2 5 6
Interest expense 1 2 2 2
Depreciation and amortization 782 732 1,547 1,435
Severance** - - - 541
Stock-based compensation 75 95 165 194
Adjusted EBITDA - Agility Segment $ 990 $ 449 $ 2,136 $ 307
**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)
For the Three Months Ended June 30, For the Six Months Ended June 30,
2024 2023 2024 2023
Revenues:
DDS $ 25,410 $ 13,180 $ 45,116 $ 25,927
Synodex 1,986 2,112 3,857 3,976
Agility 5,157 4,363 10,084 8,591
Total Consolidated $ 32,553 $ 19,655 $ 59,057 $ 38,494
SOURCE: Innodata Inc.
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