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What changed in INNODATA INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of INNODATA INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+236 added−246 removedSource: 10-K (2025-02-24) vs 10-K (2024-03-04)

Top changes in INNODATA INC's 2024 10-K

236 paragraphs added · 246 removed · 199 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

53 edited+6 added−8 removed63 unchanged
Biggest changeWe are presently working with five of the largest technology companies, and several of the world’s leading brands spanning multiple verticals, to enable, accelerate or enrich the services they deliver to end users around generative AI foundation models and other AI that supports chatbot assistance, facial recognition, social networking, gaming, drones, medical diagnostics and robotics, to name a few. ​ The AI data training market is estimated to be $2.57 billion in 2024, projected to grow at a CAGR of 18% to reach $13.45 billion by 2034, 2 essentially proxying the enormous growth expected in AI system spending overall ($154 billion in 2023, $300 billion in 2026, a 27% CAGR). 3 Similarly, the global data annotation tools market was valued at $1.8 billion in 2022, projected to reach $25 billion by 2032, which is a CAGR of 25%. 4 ​ AI Model Deployment and Integration We believe that over the next decade, almost all industries will be fundamentally reinvented through the advent of high-performing AI models.
Biggest changeThe AI data training market is estimated to be $12.7 billion in 2024, projected to grow at a CAGR of 22% to reach $92.4 billion by 2034, 2 essentially proxying the enormous growth expected in AI system spending overall ($632 billion by 2028, a 29% CAGR over the 2024-2028 forecast period). 3 Similarly, the global data annotation tools market was valued at $2.02 billion in 2023, and is projected to reach $23.11 billion by 2032, which is a CAGR of 31.1%. 4 AI Model Deployment and Integration We believe that over the next decade, almost all industries will be fundamentally reinvented through the advent of high-performing AI models.
We encrypt all sensitive information, both at rest and in transit, to the Advanced Encryption Standard (AES) 256 or similar standard, and we employ a range of security features, including industry-leading managed firewalls and intrusion detection and prevention services.
We encrypt all sensitive information, both at rest and in transit, to the Advanced Encryption Standard (AES) 256 or similar standard, and we employ a range of security features, including industry-leading managed firewalls, intrusion detection and prevention services.
Moreover, developing high-quality data takes up 80% of the time for most AI and ML projects. 1 1 Data Preparation & Labeling for AI 2020 , Cognilytica Research (Jan. 31, 2020) ​ 4 Table of Contents Data sciences teams seek partners that can perform these data preparation functions for them at large-scale and at high quality, while using automated tools to minimize cost.
Moreover, developing high-quality data takes up 80% of the time for most AI and ML projects. 1 1 Data Preparation & Labeling for AI 2020 , Cognilytica Research (Jan. 2020) ​ 4 Table of Contents Data sciences teams seek partners that can perform these data preparation functions for them at large-scale and at high quality, while using automated tools to minimize cost.
It serves up low-code AI with transfer learning, orchestrating generative LLMs and deep learning-based sequence labeling models we have developed over the past eight years of deploying industrial deep neural networks as well as third-party foundation models. It integrates both with our internal systems and customer environments through application programming interfaces (“APIs”).
It serves up low-code AI with transfer learning, orchestrating generative LLMs and deep learning-based sequence labeling models we have developed over the past nine years of deploying industrial deep neural networks as well as third-party foundation models. It integrates both with our internal systems and customer environments through application programming interfaces (“APIs”).
The human output is fed back into the AI networks, which, as a result, “learn” and become “smarter” over time, achieving progressively greater levels of automation while maintaining the highest levels of quality. ( See “Our Technology”, below. ) Our 4,000+ experts have deep domain knowledge in a wide diversity of data domains.
The human output is fed back into the AI networks, which, as a result, “learn” and become “smarter” over time, achieving progressively greater levels of automation while maintaining the highest levels of quality. ( See “Our Technology”, below. ) Our 6,000+ experts have deep domain knowledge in a wide diversity of data domains.
Our Global Delivery Framework We have over 4,000 employees and associates across 31 countries. Many of them have data domain expertise in various fields, including law, sciences, health, finance, and technology and hold advanced degrees. We also have access to a large population of remote staff and freelancers that we maintain in our databases.
Our Global Delivery Framework We have over 6,000 employees and associates across 31 countries. Many of them have data domain expertise in various fields, including law, sciences, health, finance, and technology and hold advanced degrees. We also have access to a large population of remote staff and freelancers that we maintain in our databases.
Unlike many of our data annotation competitors – that are essentially staffing companies – as a full-service data engineering company we are able to address these attendant requirements. Our Legacy We developed our capabilities and honed our approaches progressively over the last 30 years creating high-quality data for many of the world’s most demanding information companies.
Unlike many of our data annotation competitors – that are essentially staffing companies – as a full-service data engineering company we are able to address these attendant requirements. Our Legacy We developed our capabilities and honed our approaches progressively over the last 35 years creating high-quality data for many of the world’s most demanding information companies.
In AI, the software writes itself by learning from large amounts of data. Nowhere does the phrase “garbage in, garbage out” apply better. A data-centric approach for collection and annotation of consistent, high-quality data will separate the winners from the losers. Our strategy for growth is to leverage our 30+ year experience creating high quality data.
In AI, the software writes itself by learning from large amounts of data. Nowhere does the phrase “garbage in, garbage out” apply better. A data-centric approach for collection and annotation of consistent, high-quality data will separate the winners from the losers. Our strategy for growth is to leverage our 35+ year experience creating high quality data.
Our Culture We have developed a strong customer- and quality-centric culture over 30 years serving many of the world’s most successful companies that trust us with their data needs. We believe in communicating honestly, transparently and broadly. We are optimistic in the promise of technology to augmenting human initiative and talent.
Our Culture We have developed a strong customer- and quality-centric culture over 35 years serving many of the world’s most successful companies that trust us with their data needs. We believe in communicating honestly, transparently and broadly. We are optimistic in the promise of technology to augmenting human initiative and talent.
In 2023, we expanded existing relationships and forged new relationships with several of the world’s large technology companies to support their efforts at building generative AI foundation models. For these companies, we are now providing or are poised to provide a range of scaled data solutions and services.
In 2024, we expanded existing relationships and forged new relationships with several of the world’s large technology companies to support their efforts at building generative AI foundation models. For these companies, we are now providing or are poised to provide a range of scaled data solutions and services.
For the past eight years, we have been designing and refining our approach for combining human experts and AI to produce large-scale, highly accurate data. In our approach, AI networks automatically perform much of the required processing and human experts perform processing that the AI cannot perform at a high level of confidence.
For the past nine years, we have been designing and refining our approach for combining human experts and AI to produce large-scale, highly accurate data. In our approach, AI networks automatically perform much of the required processing and human experts perform processing that the AI cannot perform at a high level of confidence.
Our Technology Over the past eight years, we have built a technology infrastructure that automates complex data annotation and other data engineering tasks. Our technology infrastructure combines advanced dataflow, orchestration and cognitive processing, and purpose-built applications used by human experts, which we refer to as “workbenches”.
Our Technology Over the past nine years, we have built a technology infrastructure that automates complex data annotation and other data engineering tasks. Our technology infrastructure combines advanced dataflow, orchestration and cognitive processing, and purpose-built applications used by human experts, which we refer to as “workbenches”.
Approximately eight years ago, we formed Innodata Labs, a research and development center, to research, develop and apply machine learning and emerging AI to our large-scale, human-intensive data operations.
Approximately nine years ago, we formed Innodata Labs, a research and development center, to research, develop and apply machine learning and emerging AI to our large-scale, human-intensive data operations.
Our solutions and platforms leverage the technology, human resources, and culture of fanaticism for data quality that we have developed over the past 30 years, as well as the AI/ML research and development we have invested in over the past eight years. 9 Table of Contents Key elements of our growth strategy include: Driving New Customer Acquisition We believe we are still in the early stages of penetrating our addressable markets.
Our solutions and platforms leverage the technology, human resources, and culture of fanaticism for data quality that we have developed over the past 35 years, as well as the AI/ML research and development we have invested in over the past nine years. 9 Table of Contents Key elements of our growth strategy include: Driving New Customer Acquisition We believe we are still in the early stages of penetrating our addressable markets.
We believe that we can contribute meaningfully by harnessing our capabilities, honed over 30 years, in collecting and annotating data at scale with consistency and high accuracy.
We believe that we can contribute meaningfully by harnessing our capabilities, honed over 35 years, in collecting and annotating data at scale with consistency and high accuracy.
Our data operations are linked by multiple redundant network connections. Our Wide Area Network – along with our Local Area Networks, Storage Area Networks, Network Attached Storage and data centers – are configured with industry standard redundancy, often with more than one backup to establish 24x7 availability. In 2023, our Wide Area Network had 99.98% uptime excluding scheduled maintenance.
Our data operations are linked by multiple redundant network connections. Our Wide Area Network – along with our Local Area Networks, Storage Area Networks, Network Attached Storage and data centers – are configured with industry standard redundancy, often with more than one backup to establish 24x7 availability. In 2024, our Wide Area Network had 99.90% uptime excluding scheduled maintenance.
Further, in the years ended December 31, 2023 and 2022, revenues from non-U.S. customers accounted for 37% and 38%, respectively, of the Company’s revenues. We have long-standing relationships with many of our customers. Our track record of delivering high-quality services helps us to solidify customer relationships.
Further, in the years ended December 31, 2024 and 2023, revenues from non-U.S. customers accounted for 21% and 37%, respectively, of the Company’s revenues . We have long-standing relationships with many of our customers. Our track record of delivering high-quality services helps us to solidify customer relationships.
Our platform encapsulates many of the innovations we have conceived of in the course of our 30-year history of creating high-quality data.
Our platform encapsulates many of the innovations we have conceived of in the course of our 35-year history of creating high-quality data.
Competition Major competitors across industry verticals include Amazon Sagemaker Ground Truth, Appen, CloudFactory, Defined Crowd, Deepen.ai, Telus, Samasource, and Scale AI, several of which are large firms with established customer bases, as well as technology service providers such as Cognizant Technology Solutions, ExlService Holdings, Inc., Genpact Limited, Infosys, and Tata Consultancy Services. 11 Table of Contents We compete by offering high-quality, competitively-priced solutions that leverage our technical platforms, IT infrastructure, offshore domain experts and economies of scale.
Competition Major competitors across industry verticals include Appen, CloudFactory, Surge AI, Invisible Technologies, Turing Defined Crowd, Deepen.ai, Telus, Samasource, and Scale AI, several of which are large firms with established customer bases, as well as technology service providers such as Cognizant Technology Solutions, ExlService Holdings, Inc., Genpact Limited, Infosys, and Tata Consultancy Services. 11 Table of Contents We compete by offering high-quality, competitively-priced solutions that leverage our technical platforms, IT infrastructure, offshore domain experts and economies of scale.
There we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with, or furnish it to, the SEC.
There we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with, or furnish it to, the Securities and Exchange Commission (“SEC”).
One customer in the DDS segment generated approximately 10% of the Company’s total revenues in the fiscal year ended December 31, 2023. Another customer in the DDS segment generated approximately 11% of the Company’s total revenues in the fiscal year ended December 31, 2022. No other customer accounted for 10% or more of total revenues during these periods.
One customer in the DDS segment generated approximately 48% of the Company’s total revenues in the fiscal year ended December 31, 2024. Another customer in the DDS segment generated approximately 10% of the Company’s total revenues in the fiscal year ended December 31, 2023. No other customer accounted for 10% or more of total revenues during these periods.
We also help businesses fine-tune their own custom versions of our proprietary models and third-party foundation models (including LLMs) to address domain-specific and customer-specific use cases. 2 Data Labeling Solution and Services Market , FactMR (Nov. 2023) 3 Worldwide Artificial Intelligence Systems Spending Guide, IDC (Mar. 2023) 4 Data Annotation Tools Market, Global Market Insights , (Apr. 2023) ​ 5 Table of Contents The current pace of AI innovation is accelerating.
We also help businesses fine-tune their own custom versions of our proprietary models and third-party foundation models (including LLMs) to address domain-specific and customer-specific use cases. 2 Data Labeling Solution and Services Market, FactMR (Apr. 2024) 3 Worldwide Artificial Intelligence Systems Spending Guide, IDC (Aug. 2024) 4 Data Annotation Tools Market, Astute Analytica, (Nov. 2024) 5 Table of Contents The current pace of AI innovation is accelerating.
Our Synodex industry platform transforms medical records into useable digital data organized in accordance with our proprietary data models or customer data models. At the end of 2023, we had 13 customers utilizing our Synodex platform.
Our Synodex industry platform transforms medical records into useable digital data organized in accordance with our proprietary data models or customer data models. At the end of 2024, we had 15 customers utilizing our Synodex platform.
Our SEC reports can be obtained through the Investor Relations section of our website or from the Securities and Exchange Commission at www.sec.gov . ​ ​ 14 Table of Contents
Our SEC reports can be obtained through the Investor Relations section of our website or from the SEC at www.sec.gov. ​ ​ 14 Table of Contents
For text annotation, we use our proprietary data annotation platform that incorporates AI to reduce cost while improving consistency and quality of output. Our proprietary data annotation platform features auto-tagging capabilities that apply to both classical and generative AI tasks.
We utilize a variety of leading third-party tools, proprietary tools and customer tools. For text annotation, we use our proprietary data annotation platform that incorporates AI to reduce cost while improving consistency and quality of output. Our proprietary data annotation platform features auto-tagging capabilities that apply to both classical and generative AI tasks.
The global artificial intelligence (AI) in healthcare market is forecast to reach a market size of $148.4 billion by 2029, up from $20.9 billion in 2024, with a CAGR of 48.1%. 7 Our Agility industry platform provides marketing communications and public relations professionals with the ability to target and distribute content to journalists and social media influencers world-wide and to monitor and analyze global news (print, web, radio and TV) and social media.
The global artificial intelligence (AI) in healthcare market is forecast to reach a market size of $173.55 billion by 2029, up from $16.3 billion in 2022, a CAGR of 40.2%. 7 Our Agility industry platform provides marketing communications and public relations professionals with the ability to target and distribute content to journalists and social media influencers world-wide and to monitor and analyze global news (print, web, radio and TV) and social media.
We cannot assure that these arrangements will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. Information Security Our operations facilities in Asia and our data centers are certified to information security management standard - ISO27001:2013.
We cannot assure that these arrangements will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. Information Security Our operations facilities in Asia and our New Jersey, USA facility are certified to information security management standard - ISO 27001:2022.
Agility is now ranked by software review site G2 Crowd as meeting the requirements of customers better than its two largest competitors that have combined revenues of over $1 billion. 8 Agility operates in the $9.2 billion media intelligence and PR software market. 9 5 Document Analytics Global Market Report 2024, Research and Markets (Dec. 2023) 6 Enterprise Artificial Intelligence (AI) Market, Precedence Research (Aug. 2023) 7 Artificial Intelligence In Healthcare Market, Markets and Markets Research Private Ltd.
Agility is now ranked by software review site G2 Crowd as meeting the requirements of customers better than its two largest competitors that have combined revenues of over $1 billion. 8 Agility operates in the $10.57 billion media intelligence and PR software market. 9 5 Document Analysis Market Report Overview, Business Research Insights (Feb. 2025) 6 Enterprise Artificial Intelligence (AI) Market, Precedence Research (Nov. 2024) 7 Artificial Intelligence In Healthcare Market, Binariks .
No employees are currently represented by a labor union, and we believe that our relations with our employees are satisfactory. Corporate Offices Our principal executive offices are located at 55 Challenger Road, Ridgefield Park, New Jersey 07660, just outside New York City, and our telephone number is (201) 371-8000. We were founded in 1988.
Corporate Offices Our principal executive offices are located at 55 Challenger Road, Ridgefield Park, New Jersey 07660, just outside New York City, and our telephone number is (201) 371-8000. We were founded in 1988.
Goldengate serves as the foundational technology for the AI projects we perform for customers, as well as the AI-under-the-hood that powers our data annotation platform and our industry platforms.
Today, Goldengate serves as the foundational technology for certain of the AI projects we perform for customers, as well as the AI-under-the-hood that powers our data annotation, document intelligence and regulatory change management platforms.
We comply with the requirements of the United States Health Insurance Portability and Accountability Act of 1996 as amended (including by the Health Information Technology for Economic and Clinical Health Data (HITECH)) (HIPAA), the United Kingdom’s General Data Protection Regulation as tailored by the Data Protection Act 2018, the EU General Data Protection Regulation, and local laws regulating data privacy, as applicable.
We comply with the requirements of the United States Health Insurance Portability and Accountability Act of 1996 as amended (including by the Health Information Technology for Economic and Clinical Health Data (HITECH)) (HIPAA), the United Kingdom’s General Data Protection Regulation as tailored by the Data Protection Act 2018, the EU General Data Protection Regulation, and local laws regulating data privacy, as applicable. 12 Table of Contents Research and Development Our Innodata Labs researches and develops AI-based technologies that we utilize in our operations and with our customers.
The document analytics market - a subset of the overall AI market - is expected to grow at a CAGR of 48.9% from $2.38 billion in 2023 to $17.4 billion by 2028. 5 Meanwhile, overall enterprise AI spend is projected to reach $270.06 billion by 2032, up from $7.02 billion in 2022, registering a CAGR of 44.1%. 6 AI-Enabled Industry Platforms Our AI-enabled industry platforms address specific, niche market requirements that we believe we can innovate with AI/ML technologies.
The document analytics market - a subset of the overall AI market - is expected to grow at a CAGR of 43.1% from $1.99 billion in 2024 to $49.95 billion by 2033. 5 Meanwhile, overall enterprise AI spend is projected to reach $560.74 billion by 2034, up from $14.53 billion in 2024, registering a CAGR of 44.1%. 6 AI-Enabled Industry Platforms Our AI-enabled industry platforms address specific, niche market requirements that we believe we can innovate with AI/ML technologies.
We embrace diversity (and began doing so long before it was in vogue). We prize empathy and respect in our relationships with customers and colleagues alike while at the same time honing direct communication that best promotes optimal business outcomes for our customers.
We embrace diversity and prize empathy and respect in our relationships with customers and colleagues alike, while at the same time, honing direct communication that best promotes optimal business outcomes for our customers. We believe our culture helps us best serve our customers and helps us attract and retain top people.
We intend to pursue new long-term, strategic customer relationships, especially with customers with large and growing commitments to AI innovation, where we can deliver a wide range of our capabilities and have meaningful impact. Beginning in 2021, we substantially scaled our sales organization, most notably the sales organization supporting our Agility PR solutions product.
We intend to pursue new long-term, strategic customer relationships, especially with customers with large and growing commitments to AI innovation, where we can deliver a wide range of our capabilities and have meaningful impact. We are focused on hiring and retaining sales talent and in building a data-driven sales organization.
In mid-2022, we formed an Advisory Board dedicated to helping drive growth through innovation initiatives and advancing dialogue related to ethical AI and the future of AI technologies. The advisory board is currently comprised by a Chief Data Officer for Microsoft and the director of University of Michigan’s Artificial Intelligence Laboratory.
In mid-2022, we formed an Advisory Board dedicated to helping drive growth through innovation initiatives and advancing dialogue related to ethical AI and the future of AI technologies. A Chief Data Officer for Microsoft currently serves as our only Advisory Board member. We will likely consider adding additional members to our advisory board from time to time.
(Jan. 2024) 8 https://www.agilitypr.com/wp-content/uploads/2024/02/G2-Comparison-Agility-2024.pdf 9 Media Intelligence and PR Software Market Size, Global Research Market, (Jan. 2024) ​ 6 Table of Contents The Company’s operations are presently classified and reported in three reporting segments: Digital Data Solutions (DDS), Synodex and Agility.
(Aug. 2024) 8 https://469676.fs1.hubspotusercontent-na1.net/hubfs/469676/Agility%20PR%20Solutions/G2/AgilityPRSolutions-G2Comparison-Feb-21-2025-1.pdf 9 Media Intelligence and PR Software Market Size and Forecast, Verified Market Research , (Mar. 2024) ​ 6 Table of Contents The Company’s operations are presently classified and reported in three reporting segments: Digital Data Solutions (DDS), Synodex and Agility.
Major competitors for our Synodex industry platform are Risk Righter, eNoah, Parameds and a few BPO companies, several of which are large firms with established customer bases. We also compete with in-house personnel at existing or prospective customers who may attempt to duplicate our services in-house or use alternative approaches to fulfill their needs.
We also compete with in-house personnel at existing or prospective customers who may attempt to duplicate our services in-house or use alternative approaches to fulfill their needs Our Agility industry platform competes with Meltwater, Cision, Muck Rack, Onclusive, and Intrado, several of which are large firms with established customer bases, as well as PR firms that provide media monitoring and analysis services and journalist and influencer databases.
We rely on a combination of trade secret, license, nondisclosure and other contractual agreements and copyright and trademark laws to protect our intellectual property rights. We enter into confidentiality agreements with our employees, contractors and customers, and limit access to and distribution of our proprietary information and that of our customers.
We enter into confidentiality agreements with our employees, contractors and customers, and limit access to and distribution of our proprietary information and that of our customers.
When we are processing personally identifiable information covered by HIPAA, we utilize U.S.-based, co-located data centers or HIPAA compliant cloud computing services with advanced data encryption (AES 256 or comparable) applied to data at rest and in motion.
For handling personally identifiable information covered by HIPAA, we utilize U.S.-based, co-located data centers or HIPAA-compliant cloud infrastructure that incorporate AES-256 encryption (or equivalent) to secure data at rest and in transit. Our security posture is audited annually.
The Innodata Labs team is comprised of data scientists, including data scientists who have published leading papers on discrete topics in data science and have earned PhD degrees in fields such as data entity extraction. 12 Table of Contents Our product engineering teams also engage in research and development efforts focused on enhancing the functionality and utility of our AI industry platforms, addressing new use cases and developing additional innovative technologies.
The Innodata Labs team is comprised of data scientists, including data scientists who have published leading papers on discrete topics in data science and have earned PhD degrees in fields such as data entity extraction.
In 2021 we further AI-enabled Synodex, Agility and our data annotation platform using Goldengate; in 2022, we commercialized it further as both a customer-facing technology and as the engine under other potential industry solutions. To support our Agility industry platform, we have built a fully scalable, cloud-based infrastructure that powers a SaaS experience for global customers on a 24/7 basis.
To support our Agility industry platform, we have built a fully scalable, cloud-based infrastructure that powers a SaaS experience for global customers on a 24/7 basis.
We are proud to report that we attained our goal in the third quarter of 2023, with one of our operating subsidiaries handing over a smart classroom, an ideation room, and an open library (with over 80,000 books) to a publicly-funded higher education institution in the Philippines.
As a part of this initiative, one of our operating subsidiaries handed over a smart classroom, an ideation room, and an open library (with over 80,000 books) to a publicly-funded higher education institution in the Philippines. Since 2016 we have contributed over 3,700 person-days to this and other Corporate Social Responsibility (CSR) programs.
Environmental Stewardship We are also committed to conducting our business in a manner that manages environmental issues responsibly and contributes to global efforts to curb carbon emissions.
Environmental Stewardship We are also committed to conducting our business in an environmentally responsible manner that supports global efforts to mitigate climate change.
We will likely consider adding additional members to our advisory board from time to time. Environmental, Social, and Governance We have built a robust corporate ESG program focused on social responsibility; improving how we perform as a steward of the environment; and sustainability.
Environmental, Social, and Governance We have built a robust corporate ESG program focused on social responsibility; improving how we perform as a steward of the environment; and sustainability. Social Responsibility We are inspired by the vision of fostering a future of broadly distributed, sustainable prosperity that can result from ethical AI and broad access to the benefits of AI.
We also provide reinforcement learning and reward modeling, services which are critical to provide the guardrails against toxic, bias and harmful responses, and model evaluation services.
We also provide reinforcement learning and reward modeling, services which are critical to provide the guardrails against toxic, bias and harmful responses, and model evaluation services. For social media companies, financial services companies, and many others, we collect or create training data, annotate training data, and train AI algorithms for working with images, text, video, audio, code and sensor data.
Our program has practices in place to ensure that the saplings will receive proper care and attention during their initial growth phase, which is crucial for their long-term survival. Sustainability Our sustainability program is based on the following core elements: health and safety, business continuity management, information security, labor standards, anti-bribery and corruption, and management engagement and social impact.
Sustainability Our sustainability program is based on the following core elements: health and safety, business continuity management, information security, labor standards, anti-bribery and corruption, management engagement and social impact. Our sustainability program is backed by ISO 27001:2022 (information security) certification, policies, and employee training for these core areas.
Intellectual Property We depend, in part, upon our proprietary technologies and methodologies, including our Goldengate AI platform, various applications of our platforms, our proprietary data models and other intellectual property rights. We have a patent and several patent applications pending and believe that the duration of these patents is adequate relative to the expected lives of their applications.
Our competitors also include social media listening companies and start-ups offering platforms to amplify messages by targeting social media influencers. Intellectual Property We depend, in part, upon our proprietary technologies and methodologies, including our Goldengate AI platform, various applications of our platforms, our proprietary data models and other intellectual property rights.
Social Responsibility We are driven by the vision of ushering in an era of broadly distributed, sustainable prosperity that can result from ethical AI and broad access to the benefits of AI. We launched our i-Hope Program in 2016 to help children in marginalized or economically-disadvantaged communities face the challenges of an increasingly AI-driven world.
We launched our i-Hope Program in 2016 to help children in marginalized or economically disadvantaged communities face the challenges of an increasingly AI-driven world. Our goal of delivering the gift of computer literacy to 25,000 children by 2025 was achieved ahead of schedule in the third quarter of 2023.
Our sustainability program is backed by ISO 27001:2013 (information security) certification, policies, and employee training for these core areas. Employees As of December 31, 2023, we employed 4,325 employees, 4,296 of which were full-time. Many of our employees hold advanced degrees in specialized fields such as law, business, technology, medicine, and social sciences.
Employees As of December 31, 2024, we employed 6,648 employees, 6,597 of which were full-time. Many of our employees hold advanced degrees in specialized fields such as law, business, technology, medicine, and social sciences. No employees are currently represented by a labor union, and we believe that our relations with our employees are satisfactory.
We track and share with customers our emissions data for scopes 1, 2, and 3. Across all our global operations, we recycle e-waste and paper.
This data-driven approach has enabled us to improve our sustainability initiatives and share emissions data (Scopes 1, 2, and 3) with our customers. Across all our global operations, we recycle e-waste and paper. In India, the Philippines, and Sri Lanka, we actively support grass-roots environmental conservation initiatives in the communities in which we operate.
From 2016 to 2023, our employees contributed over 2,900 person days to the program, building 22 fully-functional computer labs and smart classrooms across India, the Philippines, and Sri Lanka. As a result of i-Hope, we believe approximately 40,400 children in these communities are now more technology proficient and better prepared to participate in opportunities that AI presents.
We have built and made operational 24 fully functional computer labs and smart classrooms across India, Sri Lanka, and the Philippines. As a result, approximately 42,500 children have become more technology-proficient and better equipped to seize opportunities in the AI era. Our contributions have been well-recognized.
We have deployed multi-layered security consisting of a wide range of security controls and measures such as two-factor authentication, patch management, full disk encryption system, anti-virus with firewall and IDS/IPS capability, redundant next generation firewalls with intrusion detection and prevention feature sets, and we utilize appropriately certified cloud resources.
We maintain a multi-layered security approach, implementing a wide range of security controls, including, but not limited to, two-factor authentication for enhanced access security, centralized patch management for timely software updates and security fixes, full-disk encryption for mobile and sensitive endpoints, advanced anti-virus protection with integrated firewall and IDS/IPS capabilities, and next-generation firewalls with intrusion detection and prevention systems (IDS/IPS) at the perimeter network layer to protect information assets and monitor network traffic.
Our contributions have been well-recognized. In 2023 we (through our operating subsidiaries) received, for the third time in four years, the Circle of Excellence Award for CSR Company of the Year at the Asia CEO Awards-2023.
Examples of award recognition received in 2024 through our operating subsidiaries include: for the fourth time, the Circle of Excellence Award for CSR Company of the Year at the Asia CEO Awards-2024; the Best Environmental Responsibility Initiative; Innovation in CSR Practices; Women Empowerment Initiative from National CSR Leadership Congress & Awards; and Sustainable Diversity, Equality, and Inclusion award from the World Sustainability Congress.
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For social media companies, robotics companies, financial services companies, and many others, we collect or create training data, annotate training data, and train AI algorithms for working with images, text, video, audio, code and sensor data. We utilize a variety of leading third-party tools, proprietary tools and customer tools.
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We are presently working with five of the largest technology companies, and several of the world’s leading brands spanning multiple verticals, to enable, accelerate or enrich the services they deliver to end users around generative AI foundation models and other AI that supports chatbot assistance, facial recognition, social networking, podcasts, legal research and medical diagnostics, to name a few.
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We believe our culture helps us best serve our customers and helps us attract and retain top people.
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Major competitors for our Synodex industry platform are Risk Righter, eNoah, Digital Owl, Human API, EIS, Release Point, Claretto, Parameds and a few BPO companies, several of which are large firms with established customer bases.
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In late 2021 and early 2022, we experienced challenges in retaining sales hires primarily in our Austin, Texas sales office. We have since closed that sales office, have focused on hiring and retaining sales talent in other locations and in building a data-driven sales organization.
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We have a patent and believe that the duration of this patent is adequate relative to the expected life of its application. We rely on a combination of trade secret, license, nondisclosure and other contractual agreements and copyright and trademark laws to protect our intellectual property rights.
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Our Agility industry platform competes with Meltwater, Cision, Kantar, and Intrado, several of which are large firms with established customer bases, as well as PR firms that provide media monitoring and analysis services and journalist and influencer databases. Our competitors also include social media listening companies and start-ups offering platforms to amplify messages by targeting social media influencers.
Added
Our product engineering teams also engage in research and development efforts focused on enhancing the functionality and utility of our AI industry platforms, addressing new use cases and developing additional innovative technologies.
Removed
Research and Development Our Innodata Labs researches and develops AI-based technologies that we utilize in our operations and with our customers.
Added
By implementing practices that minimize our carbon footprint, conserve resources, and promote sustainability, we aim to be a positive force for the environment. 13 Table of Contents We monitor and target reductions in greenhouse gas emissions, energy consumption, and water usage for our production facilities.
Removed
Our goal was to provide the gift of computer literacy to 25,000 children by 2025.
Added
In 2024, we planted over 5,800 saplings and seedlings in nature reserves, bringing our cumulative total to over 11,800 since 2018. This initiative includes follow-up practices to ensure the saplings receive proper care during the critical early growth phases, improving the saplings’ long-term survival rates.
Removed
We fulfill this commitment by our efforts to conduct operations in an environmentally-sound manner. ​ 13 Table of Contents We have set metrics to monitor and target the reduction of greenhouse gas emissions, energy usage, and water usage. We believe that this monitoring has enabled us to improve our sustainability program continuously.
Removed
In India, the Philippines, and Sri Lanka, we sponsor grass-roots efforts designed to preserve the environment in the communities in which we operate and we have planted over 3,800 saplings in nature reserves in 2023, for a total of over 6,000 saplings since 2018.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

42 edited+10 added−14 removed127 unchanged
Biggest changeIf we do not accurately estimate the costs and timing for completing projects, our contracts could prove unprofitable for us or yield lower profit margins than anticipated. 23 Table of Contents We may not be able to obtain price or volume increases that are necessary to offset the effect of wage inflation and other government mandated cost increases.
Biggest changeWe may not be able to obtain price or volume increases that are necessary to offset the effect of wage inflation and other government mandated cost increases. We have experienced wage inflation and other government mandated cost increases in the Asian countries where we have the majority of our operations.
The potential payment amount aggregates to approximately $5.9 million, plus legal interest that accrued at 12% per annum from August 13, 2008 to June 30, 2013, and thereafter accrued and continues to accrue at 6% per annum. The potential payment amount as expressed in U.S. dollars varies with the Philippine peso to U.S. dollar exchange rate.
The potential payment amount aggregates to approximately $5.6 million, plus legal interest that accrued at 12% per annum from August 13, 2008 to June 30, 2013, and thereafter accrued and continues to accrue at 6% per annum. The potential payment amount as expressed in U.S. dollars varies with the Philippine peso to U.S. dollar exchange rate.
While we believe that we have adequate reserves for those losses that we believe are probable and can be reasonably estimated, the ultimate results of legal proceedings and claims cannot be predicted with certainty.
While we believe that we have adequate reserves for the losses that we believe are probable and can be reasonably estimated, the ultimate results of legal proceedings and claims cannot be predicted with certainty.
Substantial recovery against us in the above- referenced Philippines action could have a material adverse impact on us, and unfavorable rulings or recoveries in the other proceedings could have a material adverse impact on the consolidated operating results of the period in which the ruling or recovery occurs.
Substantial recovery against us in the above-referenced Philippines action could have a material adverse impact on us, and unfavorable rulings or recoveries in the putative class action or other proceedings could have a material adverse impact on the consolidated operating results of the period in which the ruling or recovery occurs.
We may not be able to maintain active voice and data communications between our various facilities and our customers’ sites at all times due to disruptions in these networks, system failures, data corruption or virus attacks.
We may not be able to maintain active voice and data communication between our various facilities and our customers’ sites at all times due to disruptions in these networks, system failures, data corruption or virus attacks.
We performed an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023 and concluded that our disclosure controls and procedures were effective as of December 31, 2023.
We performed an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024 and concluded that our disclosure controls and procedures were effective as of December 31, 2024.
If such earnings are repatriated in the future, or are no longer deemed to be indefinitely reinvested, the Company would have to accrue as a liability the applicable amount of foreign jurisdiction withholding taxes associated with such remittances. 25 Table of Contents It is unlikely that we will pay dividends.
If such earnings are repatriated in the future, or are no longer deemed to be indefinitely reinvested, the Company would have to accrue as a liability the applicable amount of foreign jurisdiction withholding taxes associated with such remittances. It is unlikely that we will pay dividends.
Although we are committed to maintaining high standards of corporate governance and public disclosure, and complying with evolving laws, regulations and standards, if we fail to comply with new or changed laws, regulations or standards of corporate governance, our business and reputation may be harmed. Item 1B. Unresolved Staff Comments. None. 27 Table of Contents
Although we are committed to maintaining high standards of corporate governance and public disclosure, and complying with evolving laws, regulations and standards, if we fail to comply with new or changed laws, regulations or standards of corporate governance, our business and reputation may be harmed. Item 1B. Unresolved Staff Comments. None.
These and other factors may contribute to fluctuations in our results of operations from quarter to quarter. 22 Table of Contents A high percentage of our operating expenses, particularly personnel and rent, are relatively fixed in advance of any particular quarter.
These and other factors may contribute to fluctuations in our results of operations from quarter to quarter. A high percentage of our operating expenses, particularly personnel and rent, are relatively fixed in advance of any particular quarter.
Additionally, our profitability could suffer if our controls and procedures were to fail or impair our customers’ ability to comply with their own internal control requirements. 20 Table of Contents In the past we have determined that our disclosure controls and procedures were not effective.
Additionally, our profitability could suffer if our controls and procedures were to fail or impair our customers’ ability to comply with their own internal control requirements. In the past we have determined that our disclosure controls and procedures were not effective.
We have historically relied on a limited number of customers that have accounted for a significant portion of our revenues. One customer in the DDS segment generated approximately 10% of the Company’s total revenues in the fiscal year ended December 31, 2023.
We have historically relied on a limited number of customers that have accounted for a significant portion of our revenues. One customer in the DDS segment generated approximately 48% of the Company’s total revenues in the fiscal year ended December 31, 2024.
While the October 2023 Hamas attack against Israel and the ensuing conflict has not to date negatively impacted our operations in Israel, continued or escalating conflict in the region could disrupt our operations in Israel and could have a broader impact that extends into other markets where we do business.
While the October 2023 Hamas attack against Israel and the ensuing conflict and increased hostilities between Hezbollah and Israel and Iran and Israel has not to date negatively impacted our operations in Israel, continued or escalating conflict in the region could disrupt our operations in Israel and could have a broader impact that extends into other markets where we do business.
Another customer in the DDS segment generated approximately 11% of the Company’s total revenues in the fiscal year ended December 31, 2022. No other customer accounted for 10% or more of total revenues during these periods. Further, in the years ended December 31, 2023 and 2022, revenues from non-U.S. customers accounted for 37% and 38%, respectively, of the Company’s revenues.
Another customer in the DDS segment generated approximately 10% of the Company’s total revenues in the fiscal year ended December 31, 2023. No other customer accounted for 10% or more of total revenues during these periods. Further, in the years ended December 31, 2024 and 2023, revenues from non-U.S. customers accounted for 21% and 37%, respectively, of the Company’s revenues.
Despite our access to the overseas earnings and the resulting toll charge, we intend to indefinitely reinvest the foreign earnings in our foreign subsidiaries on account of the foreign jurisdiction withholding tax that the Company has to incur on the actual remittances. Unremitted earnings of foreign subsidiaries amounted to approximately $50.4 million at December 31, 2023.
Despite our access to the overseas earnings and the resulting toll charge, we intend to indefinitely reinvest the foreign earnings in our foreign subsidiaries on account of the foreign jurisdiction withholding tax that the Company has to incur on the actual remittances. Unremitted earnings of foreign subsidiaries amounted to approximately $53.9 million at December 31, 2024.
Widespread outbreaks of a pandemic, such as the COVID-19 pandemic, have created significant global economic downturn, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets.
Widespread outbreaks of a pandemic have created significant global economic downturn, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets.
For example, the Revolving Credit Facility contains a financial covenant that required us, on a consolidated basis, to maintain a fixed charge coverage ratio of not less than 1.10 to 1.00 by December 31, 2023.
For example, the Revolving Credit Facility contains a financial covenant that requires us, on a consolidated basis, to maintain a fixed charge coverage ratio of not less than 1.10 to 1.00.
If we are unable to timely collect from our customers, our cash flows could be adversely affected. Quarterly fluctuations in our revenues and results of operations could make financial forecasting difficult and could negatively affect our stock price. We have experienced, and expect to continue to experience, significant fluctuations in our quarterly revenues and results of operations.
If we are unable to timely collect from our customers, our cash flows could be adversely affected. 21 Table of Contents Quarterly fluctuations in our revenues and results of operations could make financial forecasting difficult and could negatively affect our stock price.
The amounts we are able to recover for our services, platforms and solutions are affected by a number of factors, including competition, volume fluctuations, productivity of employees and processes, the value our customer derives from our services, platforms and solutions and general economic and political conditions.
The amounts we are able to recover for our services, platforms and solutions are affected by a number of factors, including competition, volume fluctuations, productivity of employees and processes, the value our customer derives from our services, platforms and solutions and general economic and political conditions. 22 Table of Contents Furthermore, we provide services and solutions either on a time-and-materials basis or on a fixed-price basis.
Our business model also depends on the relationships our account teams develop with our customers so that we can understand our customers’ needs and deliver solutions and services that are tailored to those needs.
Our business model depends in large part on our ability to attract additional work from our base of existing customers. Our business model also depends on the relationships our account teams develop with our customers so that we can understand our customers’ needs and deliver solutions and services that are tailored to those needs.
Our business, results of operations and financial condition may be materially adversely affected if legislative or administrative changes to immigration or visa laws and regulations impair our ability to staff projects with our professionals who are not citizens of the country where the work is to be performed.
Our business, results of operations and financial condition may be materially adversely affected if legislative or administrative changes to immigration or visa laws and regulations impair our ability to staff projects with our professionals who are not citizens of the country where the work is to be performed. 26 Table of Contents New and changing corporate governance and public disclosure requirements add uncertainty to our compliance policies and increase our costs of compliance.
All of the foregoing could have a material adverse effect on our financial condition and operating results. 26 Table of Contents The legal and regulatory landscape applicable to artificial intelligence (AI) is evolving and changes to existing laws and regulations or new laws and regulations could adversely affect our business, financial condition and results of operations.
The legal and regulatory landscape applicable to artificial intelligence (AI) is evolving and changes to existing laws and regulations or new laws and regulations could adversely affect our business, financial condition and results of operations.
In such event, we could be exposed to civil penalties, criminal penalties and other sanctions, including fines or other unintended punitive actions, and we could incur substantial legal fees and related expenses. In addition, such violations could damage our business and/or our reputation.
In such event, we could be exposed to civil penalties, criminal penalties and other sanctions, including fines or other unintended punitive actions, and we could incur substantial legal fees and related expenses. In addition, such violations could damage our business and/or our reputation. All of the foregoing could have a material adverse effect on our financial condition and operating results.
If any of these customers were unable, or refused, for any reason, to pay our accounts receivable, our financial condition and results of operations could be materially adversely affected. As of December 31, 2023, 53% or $7.5 million of our accounts receivable was due from three customers.
If this customer was unable, or refused, for any reason, to pay our accounts receivable, our financial condition and results of operations could be materially adversely affected. As of December 31, 2024, 61% or $16.6 million of our accounts receivable was due from two customers.
In addition, our estimate of the potential impact on our consolidated financial position or overall consolidated results of operations for the above - referenced legal proceedings could change in the future. See “Legal Proceedings”.
In addition, our estimate of the potential impact on our consolidated financial position or overall consolidated results of operations for the above-referenced legal proceedings could change in the future. See “Legal Proceedings”. Risks Related to Laws and Regulations Governmental and customer focus on data security could increase our costs of operations.
If large numbers of existing subscription customers do not renew these agreements or renew these agreements on terms less favorable to us, and if we cannot replace or supplement those non-renewals with new subscription agreements generating the same or greater levels of revenue, our revenues and results of operations will be adversely affected.
If large numbers of existing subscription customers do not renew these agreements or renew these agreements on terms less favorable to us, and if we cannot replace or supplement those non-renewals with new subscription agreements generating the same or greater levels of revenue, our revenues and results of operations will be adversely affected. 20 Table of Contents If our customers are not satisfied with our services, they may terminate our contracts with them or our services and we may suffer reputational damage, which could have an adverse impact on our business.
If customer confidential information is inappropriately disclosed due to a breach of our computer systems, system failures or otherwise, or if any person, including any of our employees, negligently disregards or intentionally breaches controls or procedures with which we are responsible for complying with respect to such data or otherwise mismanages or misappropriates that data, we may have substantial liabilities to our customers.
Any failure on our part to comply with these laws and regulations can result in negative publicity and diversion of management’s time and effort and may subject us to significant liabilities and other penalties. 25 Table of Contents If customer confidential information is inappropriately disclosed due to a breach of our computer systems, system failures or otherwise, or if any person, including any of our employees, negligently disregards or intentionally breaches controls or procedures with which we are responsible for complying with respect to such data or otherwise mismanages or misappropriates that data, we may have substantial liabilities to our customers.
We have not paid any cash dividends since our inception and do not anticipate paying any cash dividends in the foreseeable future. We expect that our earnings, if any, will be used to finance our growth. Risks Related to Laws and Regulations Governmental and customer focus on data security could increase our costs of operations.
We have not paid any cash dividends since our inception and do not anticipate paying any cash dividends in the foreseeable future. We expect that our earnings, if any, will be used to finance our growth.
A large portion of our accounts receivable are payable by a limited number of customers; the inability of any of these customers to pay its obligations could adversely affect our results of operations. Several significant customers account for a large percentage of our accounts receivable.
A large portion of our accounts receivable is payable by one customer; the inability of this customer to pay its obligations could adversely affect our results of operations. One customer accounts for a large percentage of our accounts receivable.
In addition, negative publicity related to our customer services or relationships, regardless of its accuracy, may further damage our business by affecting our reputation and our ability to compete for new contracts with current and prospective customers. 21 Table of Contents Risks Related to Financial Performance or General Economic Conditions Debt under our Revolving Credit Facility has a variable rate of interest that is based on SOFR which may have consequences for us that cannot be reasonably predicted and may increase our cost of borrowing in the future.
Risks Related to Financial Performance or General Economic Conditions Debt under our Revolving Credit Facility has a variable rate of interest that is based on SOFR which may have consequences for us that cannot be reasonably predicted and may increase our cost of borrowing in the future.
Our reputation could be damaged, or our profitability could suffer if we do not meet the controls and procedures in respect of the services, platforms and solutions we provide to our customers, or if we contribute to our customers’ internal control deficiencies.
Such activities could interfere with our ability to execute our strategic plan, be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees. 19 Table of Contents Our reputation could be damaged, or our profitability could suffer if we do not meet the controls and procedures in respect of the services, platforms and solutions we provide to our customers, or if we contribute to our customers’ internal control deficiencies.
The expiration or termination of our preferential tax rate incentives could adversely affect our results of operations. Two of our foreign subsidiaries are subject to preferential tax rates. This tax incentive provides that we pay reduced income taxes with respect to those jurisdictions for a fixed period of time.
This tax incentive provides that we pay reduced income taxes with respect to those jurisdictions for a fixed period of time. An expiration or termination of these incentives could increase our worldwide effective tax rate, or increase our tax expense, thereby decreasing our net income and adversely affecting our results of operations.
We may face various risks associated with shareholder activists or shareholder demands for better performance . There is no assurance that we will not be subject to shareholder activism or demands.
There is no assurance that we will not be subject to shareholder activism or demands.
We have experienced wage inflation and other government mandated cost increases in the Asian countries where we have the majority of our operations. In addition, we may experience adverse fluctuations in foreign currency exchange rates. These global events have put pressure on our profitability and our margins.
In addition, we may experience adverse fluctuations in foreign currency exchange rates. These global events have put pressure on our profitability and our margins.
While we experienced limited operational disruption and decline in customer demand for services as a result of the COVID-19 pandemic, a public health crisis or an outbreak of a pandemic in one or more of the geographic areas in which we operate could affect our ability to provide services to our customers and adversely affect our results of operations and financial condition.
A widespread public health crisis or an outbreak of a pandemic in one or more of the geographic areas in which we operate could affect our ability to provide services to our customers and adversely affect our results of operations and financial condition. We may face various risks associated with shareholder activists or shareholder demands for better performance .
Tax authorities in some of these jurisdictions have from time to time challenged the manner in which we allocate our profits among our subsidiaries, and we may not prevail in any future challenge of this type. If such a challenge were successful, our worldwide effective tax rate could increase, thereby decreasing our profitability.
A significant portion of the services we provide to our customers are provided by our Asian subsidiaries located in different jurisdictions. Tax authorities in some of these jurisdictions have from time to time challenged the manner in which we allocate our profits among our subsidiaries, and we may not prevail in any future challenge of this type.
OS-AJ-0015-2001, In Re: Labor Dispute at Innodata Philippines, Inc.). The U.S. District Court action is Civil Action No.: 2:17-cv-13268-SDW-LDW Innodata Inc. v. Myrna C. Augustin-Simon; et al. We are also subject to various other legal proceedings and claims that have arisen in the ordinary course of business.
OS-AJ-0015-2001, In Re: Labor Dispute at Innodata Philippines, Inc.). The U.S. District Court action is Civil Action No.: 2:17-cv-13268-SDW-LDW Innodata Inc. v. Myrna C. Augustin-Simon; et al. 24 Table of Contents In February 2024, David D’Agostino filed a putative class action captioned D’Agostino v.
These laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time, as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of revisions to such corporate governance standards.
Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including SEC regulations and the Nasdaq Stock Market rules, create uncertainty for companies like ours. These laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time, as new guidance is provided by regulatory and governing bodies.
If additional taxes are assessed, it could have an adverse impact on our financial results.
If additional taxes are assessed, it could have an adverse impact on our financial results. In addition, changes in the tax rates, tax laws or the interpretation of tax laws in the jurisdictions where we operate, could affect our future results of operations.
Furthermore, we provide services and solutions either on a time-and-materials basis or on a fixed-price basis. Our pricing is highly dependent on our internal forecasts and predictions about our projects, which might be based on limited data and could turn out to be inaccurate.
Our pricing is highly dependent on our internal forecasts and predictions about our projects, which might be based on limited data and could turn out to be inaccurate. If we do not accurately estimate the costs and timing for completing projects, our contracts could prove unprofitable for us or yield lower profit margins than anticipated.
During the past eight quarters, our net income (loss) ranged from net income of approximately $1.7 million in the fourth quarter of 2023 to a loss of approximately $3.8 million in the second quarter of 2022.
We have experienced, and expect to continue to experience, significant fluctuations in our quarterly revenues and results of operations. During the past eight quarters, our net income (loss) ranged from net income of approximately $17.4 million in the third quarter of 2024 to a loss of approximately $2.1 million in the first quarter of 2023.
If tax authorities in any of the jurisdictions in which we operate contest the manner in which we allocate our profits, our net loss could be higher. A significant portion of the services we provide to our customers are provided by our Asian subsidiaries located in different jurisdictions.
Unfavorable rulings or recoveries in tax examinations could have a material impact on the consolidated operating results of the period in which the rulings or recovery occurs. 23 Table of Contents If tax authorities in any of the jurisdictions in which we operate contest the manner in which we allocate our profits, our net loss could be higher.
An expiration or termination of these incentives could increase our worldwide effective tax rate, or increase our tax expense, thereby decreasing our net income and adversely affecting our results of operations.
If such a challenge were successful, our worldwide effective tax rate could increase, thereby decreasing our profitability. The expiration or termination of our preferential tax rate incentives could adversely affect our results of operations. Two of our foreign subsidiaries are subject to preferential tax rates.
Removed
Such activities could interfere with our ability to execute our strategic plan, be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees. 19 Table of Contents We are the subject of continuing litigation, including litigation by certain of our former employees.
Added
In addition, negative publicity related to our customer services or relationships, regardless of its accuracy, may further damage our business by affecting our reputation and our ability to compete for new contracts with current and prospective customers.
Removed
If our customers are not satisfied with our services, they may terminate our contracts with them or our services and we may suffer reputational damage, which could have an adverse impact on our business. Our business model depends in large part on our ability to attract additional work from our base of existing customers.
Added
Risks Related to Litigation and Regulatory Matters We are the subject of continuing litigation, including litigation by certain of our former employees and a putative class action. We are also subject to regulatory investigations.
Removed
In addition, changes in the tax rates, tax laws or the interpretation of tax laws in the jurisdictions where we operate, could affect our future results of operations. 24 Table of Contents In September 2015, the Company’s Indian subsidiary was subject to an inquiry by the Service Tax Department in India regarding the classification of services provided by this subsidiary, asserting that the services provided by this subsidiary fall under the category of online information and database access or retrieval services (“OID Services”), and not under the category of business support services (“BS Services”) that are exempt from service tax as historically indicated in the subsidiary’s service tax filings.
Added
Innodata Inc., et al., in the United States District Court for the District of New Jersey against the Company and certain of its current and former officers (the “Securities Class Action”). In October 2024, the presiding judge in the Securities Class Action appointed a lead plaintiff and approved the lead plaintiff’s choice of counsel.
Removed
Our management disagrees with the Service Tax Department’s position. In November 2019, the Commissioner of Central Tax, GST & Central Excise issued an order confirming the Service Tax Department’s position.
Added
In January 2025, an amended Securities Class Action complaint was filed in the Securities Class Action.
Removed
The Company contested this order in an appeal to the Customs, Excise and Service Tax Appellate Tribunal and in January 2024 the Customs, Excise and Service Tax Appellate Tribunal ruled in the Company’s favor.
Added
The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, and it alleges, among other things, that the defendants made false and misleading statements regarding the Company’s artificial intelligence (“AI”) technology and services. The plaintiff seeks unspecified damages, fees, interest, and costs.
Removed
In the event the Service Tax Department appeals this ruling and is ultimately successful in proving that the services fall under the category of OID Services, the revenues earned by the Company’s Indian subsidiary for the period July 2012 through November 2016 would be subject to a service tax of between 12.36% and 15%, and this subsidiary may also be liable to pay interest and penalties.
Added
The Company intends to defend itself vigorously, but the Company cannot predict the outcome of the action at this time and can give no assurance that the asserted claims will not have a material adverse effect on its financial position or results of operations.
Removed
The revenue of our Indian subsidiary during this period was approximately $56.0 million. In accordance with new rules promulgated by the Service Tax Department, as of December 1, 2016 service tax is no longer applicable to OID or BS Services.
Added
Subsequently, in March 2024, the Company received a letter from the staff of the SEC, Division of Enforcement, requesting the Company preserve certain documents and data; in August 2024 the Company received a grand jury subpoena from the U.S.
Removed
Based on the Company’s assessment, in consultation with our tax counsel, the Company has not recorded any tax liability for this case.
Added
Department of Justice (“DOJ”) requesting the Company to produce certain documents; and in September 2024 the Company received a subpoena from the SEC requesting certain information. The Company believes that the SEC and DOJ requests are related to the conduct alleged in the Securities Class Action, and is cooperating with these investigations.
Removed
In a separate action relating to service tax refunds, in October 2016, the Company’s Indian subsidiary received notices from the Indian Service Tax Department in India seeking to reverse service tax refunds of approximately $121,000 previously granted to our Indian subsidiary for three quarters in 2014, asserting that the services provided by this subsidiary fall under the category of OID Services and not BS Services.
Added
The Company is unable to predict when these matters will be resolved or what further action, if any, the SEC or DOJ may take in connection with it. We are also subject to various other legal proceedings and claims that have arisen in the ordinary course of business.
Removed
The appeal was determined in favor of the Service Tax Department. Management disagrees with the basis of this decision and is contesting it. The Company expects delays in its Indian subsidiary receiving further service tax refunds until this matter is adjudicated with finality, and currently has service tax credits of approximately $0.8 million recorded as receivable.
Added
This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of revisions to such corporate governance standards.
Removed
Based on the Company’s assessment, in consultation with our tax counsel, the Company has not recorded any tax liability for this case.
Removed
Substantial recovery against us in the above-referenced 2015 Service Tax Department case could have a material adverse impact on us, and unfavorable rulings or recoveries in other tax proceedings could have a material impact on the consolidated operating results of the period in which the rulings or recovery occurs.
Removed
Any failure on our part to comply with these laws and regulations can result in negative publicity and diversion of management’s time and effort and may subject us to significant liabilities and other penalties.
Removed
New and changing corporate governance and public disclosure requirements add uncertainty to our compliance policies and increase our costs of compliance. Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including SEC regulations and the Nasdaq Stock Market rules, create uncertainty for companies like ours.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+0 added−1 removed14 unchanged
Biggest changeAs of the fiscal year ending December 31, 2023, there have been no identified cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. 28 Table of Contents Engagement of Third Parties Recognizing the complexity and evolving nature of cybersecurity threats, we have engaged a third-party consultant to assist with evaluating and testing our risk management approach.
Biggest changeAs of the fiscal year ending December 31, 2024, there have been no identified cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
We are ISO/IEC 27001:2013 certified and the ISO Information Security Risk Management Standard is used as a reference guide for our risk management approach. We have a designated Chief Information Security Officer (CISO) who has primary responsibility for managing our cybersecurity risks.
We are ISO/IEC 27001:2022 certified and the ISO Information Security Risk Management Standard is used as a reference guide for our risk management approach. We have a designated Chief Information Security Officer (CISO) who has primary responsibility for managing our cybersecurity risks.
The Audit Committee monitors management’s compliance, and reports to the Board of Directors. The CISO, who is responsible for developing our cybersecurity strategy and managing our cybersecurity risks, reports directly to the Audit Committee on these matters. Management’s Role Our cybersecurity governance framework incorporates policies, procedures, regular meetings, and controls to manage and mitigate cybersecurity risks.
The Audit Committee monitors management’s compliance, and reports to the Board of Directors. The CISO, who is responsible for developing our cybersecurity strategy and managing our cybersecurity risks, reports directly to the Audit Committee on these matters. 28 Table of Contents Management’s Role Our cybersecurity governance framework incorporates policies, procedures, regular meetings, and controls to manage and mitigate cybersecurity risks.
Our risk assessment guidelines define risk measurement and prioritization, and consider factors such as likelihood, impact, and potential harm. Mitigation strategies are planned, covering technical and procedural measures, including incident response plans. Incident Response We maintain a comprehensive incident response plan.
Our risk assessment guidelines define risk measurement and prioritization, and consider factors such as likelihood, impact, and potential harm. Mitigation strategies are planned, covering technical and procedural measures, including incident response plans. 27 Table of Contents Incident Response We maintain a comprehensive incident response plan.
Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. See Item 1A.
Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. See Item 1A. “Risk Factors” for a discussion of cybersecurity risks.
This enables us to leverage specialized knowledge and insights in connection with our cybersecurity strategies and processes.
Engagement of Third Parties Recognizing the complexity and evolving nature of cybersecurity threats, we have engaged a third-party consultant to assist with evaluating and testing our risk management approach. This enables us to leverage specialized knowledge and insights in connection with our cybersecurity strategies and processes.
Removed
“Risk Factors” for a discussion of cybersecurity risks. 29 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeItem 2. Properties. We maintain leased property in Ridgefield Park, New Jersey, which is our headquarters, and in the Philippines, India, Sri Lanka, Israel and Germany. The square footage of all our leased properties totals approximately 181,000.
Biggest changeItem 2. Properties. We maintain leased property in Ridgefield Park, New Jersey, which is our headquarters, and in the Philippines, India, Sri Lanka, Israel and Germany. The square footage of all our leased properties totals approximately 192,000.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−3 removed0 unchanged
Biggest changeItem 3. Legal Proceedings. Reference is made to Note 8, “Commitments and Contingencies - Litigation,” to the consolidated financial statements in Item 8 of this Report, which is incorporated by reference herein. In addition, On February 21, 2024, a putative class action lawsuit was filed in the U.S.
Biggest changeItem 3. Legal Proceedings. Reference is made to Note 7, “Commitments and Contingencies - Litigation,” to the consolidated financial statements in Item 8 of this Report, which is incorporated by reference herein. Item 4. Mine Safety Disclosures. Not applicable. ​ 29 Table of Contents PART II
Removed
District Court for the District of New Jersey against the Company and certain of its current and former officers (D’Agostino v. Innodata Inc., et al., Case Number 2:24-CV-00971 (the “D’Agostino Complaint”).
Removed
The D’Agostino Complaint asserts claims against all defendants for alleged violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act. The D’Agostino Complaint alleges that defendants made materially false and misleading statements related to its AI business and development and related financial results, growth, and prospects.
Removed
The D’Agostino Complaint seeks unspecified compensatory and punitive damages, costs, attorneys’ fees, and other unspecified relief. The Company intends to defend against the D’Agostino Complaint vigorously. Item 4. Mine Safety Disclosures. Not applicable. ​ 30 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 30 ​ Part II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item6. [Reserved] 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32
Biggest changeItem 4. Mine Safety Disclosures 29 ​ Part II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 30 Item6. [Reserved] 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The following table sets forth the aggregate information for the Company’s equity compensation plans in effect as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Securities ​ ​ Number of Securities ​ ​ to be Issued Upon ​ Weighted-Average ​ Remaining Available ​ ​ Exercise of ​ Exercise Price of ​ for Future Issuance ​ ​ Outstanding Options, ​ Outstanding Options, ​ Under Equity Plan Category ​ Warrants and Rights ​ Warrants and Rights (3) ​ Compensation Plans ​ (a) ​ (b) (c) Equity compensation plans approved by security holders (1) ​ 5,567,966 ​ $ 3.22 ​ - Equity compensation plans approved by security holders (2) 1,444,523 ​ $ 3.41 1,981,406 Equity compensation plans not approved by security holders - ​ - - Total 7,012,489 ​ ​ ​ 1,981,406 ​ (1) 2013 Stock Plan, approved by the stockholders, see Note 12, “Stock Options”, to the consolidated financial statements.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The following table sets forth the aggregate information for the Company’s equity compensation plans in effect as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Securities ​ ​ Number of Securities ​ ​ to be Issued Upon ​ Weighted-Average ​ Remaining Available ​ ​ Exercise of ​ Exercise Price of ​ for Future Issuance ​ ​ Outstanding Options, ​ Outstanding Options, ​ Under Equity Plan Category ​ Warrants and Rights ​ Warrants and Rights (3) ​ Compensation Plans ​ (a) ​ (b) (c) Equity compensation plans approved by security holders (1) ​ 3,365,193 ​ $ 3.67 ​ - Equity compensation plans approved by security holders (2) 1,891,350 ​ $ 15.86 902,824 Equity compensation plans not approved by security holders - ​ - - Total 5,256,543 ​ ​ ​ 902,824 ​ (1) 2013 Stock Plan, approved by the stockholders, see Note 11, “Stock Options”, to the consolidated financial statements.
(2) 2021 Equity Compensation Plan, approved by stockholders, see Note 12, “Stock Options”, to the consolidated financial statements. (3) Restricted stock units were excluded when determining the weighted-average exercise price of outstanding options, warrants and rights. Purchase or Unregistered Sales of Equity Securities We did not purchase any shares of our common stock during the year ended December 31, 2023.
(2) 2021 Equity Compensation Plan, approved by stockholders, see Note 11, “Stock Options”, to the consolidated financial statements. (3) Restricted stock units were excluded when determining the weighted-average exercise price of outstanding options, warrants and rights. Purchase or Unregistered Sales of Equity Securities We did not purchase any shares of our common stock during the year ended December 31, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Innodata Inc. (the “Company”) Common Stock is quoted on The Nasdaq Stock Market LLC under the symbol “INOD”. On February 7, 2024, there were 54 stockholders of record of the Company’s Common Stock based on information provided by the Company’s transfer agent.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Innodata Inc. (the “Company”) Common Stock is quoted on The Nasdaq Stock Market LLC under the symbol “INOD”. On February 7, 2025, there were 50 stockholders of record of the Company’s Common Stock based on information provided by the Company’s transfer agent.
We did not have any sales of unregistered equity securities during the year ended December 31, 2023. ​
We did not have any sales of unregistered equity securities during the year ended December 31, 2024. ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table contains a reconciliation of GAAP net income (loss) attributable to Innodata Inc. and its subsidiaries to Adjusted EBITDA (loss) for the years ended December 31, 2023 and 2022 (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Consolidated ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ ​ Net loss attributable to Innodata Inc. and Subsidiaries ​ $ (908) ​ $ (11,935) ​ Provision for income taxes ​ 1,028 ​ 1,522 ​ Interest expense ​ 400 ​ 11 ​ Depreciation and amortization ​ 4,716 ​ 3,889 ​ Severance** ​ ​ 580 ​ ​ - ​ Stock-based compensation ​ 4,027 ​ 3,283 ​ Non-controlling interests ​ 19 ​ (70) ​ Adjusted EBITDA (loss) - Consolidated ​ $ 9,862 ​ $ (3,300) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, DDS Segment 2023 2022 ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to DDS Segment ​ $ 223 ​ $ (711) ​ Provision for income taxes ​ 1,018 ​ 1,423 ​ Interest expense ​ 395 ​ 10 ​ Depreciation and amortization ​ 1,161 ​ 694 ​ Severance** ​ ​ 33 ​ ​ - ​ Stock-based compensation ​ 3,511 ​ 2,690 ​ Non-controlling interests ​ 19 ​ 4 ​ Adjusted EBITDA - DDS Segment ​ $ 6,360 ​ $ 4,110 ​ ​ 34 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Synodex Segment ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to Synodex Segment ​ $ 219 ​ $ (2,525) Depreciation and amortization ​ ​ 623 ​ 656 Severance** ​ ​ 6 ​ ​ - Stock-based compensation ​ 167 ​ 258 Non-controlling interests ​ - ​ (74) Adjusted EBITDA (loss) - Synodex Segment ​ $ 1,015 ​ $ (1,685) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Agility Segment ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Net loss attributable to Agility Segment ​ $ (1,350) ​ $ (8,699) Provision for income taxes ​ 10 ​ 99 Interest expense ​ 5 ​ 1 Depreciation and amortization ​ 2,932 ​ 2,539 Severance** ​ ​ 541 ​ ​ - Stock-based compensation ​ 349 ​ 335 Adjusted EBITDA (loss) - Agility Segment ​ $ 2,487 ​ $ (5,725) ​ ** Represents non-recurring severance incurred for a reduction in headcount in connection with the re-alignment of the Company’s cost structure.
Biggest changeThe following table contains a reconciliation of GAAP net income (loss) attributable to Innodata Inc. and its subsidiaries to Adjusted EBITDA for the years ended December 31, 2024 and 2023 (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Consolidated ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to Innodata Inc. and Subsidiaries ​ $ 28,660 ​ $ (908) Provision for income taxes ​ (4,190) ​ 1,028 Interest expense ​ 287 ​ 400 Depreciation and amortization ​ 5,796 ​ 4,716 Severance** ​ ​ - ​ ​ 580 Stock-based compensation ​ 3,998 ​ 4,027 Non-controlling interests ​ 15 ​ 19 Adjusted EBITDA - Consolidated ​ $ 34,566 ​ $ 9,862 ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, DDS Segment 2024 2023 ​ ​ ​ ​ ​ ​ ​ Net income attributable to DDS Segment ​ $ 25,446 ​ $ 223 Provision for income taxes ​ (4,081) ​ 1,018 Interest expense ​ 283 ​ 395 Depreciation and amortization ​ 2,224 ​ 1,161 Severance** ​ ​ - ​ ​ 33 Stock-based compensation ​ 3,896 ​ 3,511 Non-controlling interests ​ 15 ​ 19 Adjusted EBITDA - DDS Segment ​ $ 27,783 ​ $ 6,360 ​ 33 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Synodex Segment ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Net income attributable to Synodex Segment ​ $ 1,908 ​ $ 219 Depreciation and amortization ​ ​ 503 ​ 623 Severance** ​ ​ - ​ ​ 6 Stock-based compensation* ​ (99) ​ 167 Non-controlling interests ​ - ​ - Adjusted EBITDA - Synodex Segment ​ $ 2,312 ​ $ 1,015 ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Agility Segment ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to Agility Segment ​ $ 1,306 ​ $ (1,350) Provision for income taxes ​ (109) ​ 10 Interest expense ​ 4 ​ 5 Depreciation and amortization ​ 3,069 ​ 2,932 Severance** ​ ​ - ​ ​ 541 Stock-based compensation ​ 201 ​ 349 Adjusted EBITDA - Agility Segment ​ $ 4,471 ​ $ 2,487 ​ * Included in stock-based compensation is an adjustment for the reversal of expense relating to performance based restricted stock units in the current year. ** Represents non-recurring severance incurred for a reduction in headcount in connection with the re-alignment of the Company’s cost structure.
In addition, as some of our Asian facilities are closed during holidays in the fourth quarter, we typically incur higher wages, due to overtime, that reduce our margins. Our Synodex subsidiary experiences seasonal fluctuations in revenues. Typically, revenue is lowest in the third quarter of the calendar year and highest in the fourth quarter of the calendar year.
In addition, as some of our Asian facilities are closed during holidays in the fourth quarter, we typically incur higher wages, due to overtime, that reduces our margins. Our Synodex subsidiary experiences seasonal fluctuations in revenues. Typically, revenue is lowest in the third quarter of the calendar year and highest in the fourth quarter of the calendar year.
The income approach uses a discounted cash flow (“DCF”) method that utilizes the present value of cash flows to estimate the segment’s fair value. The future cash flows of the segment were projected based on the Company’s estimates of future revenues, operating income, and other factors such as working capital and capital expenditures.
The income approach uses a discounted cash flow (“DCF”) method that utilizes the present value of cash flows to estimate the segment’s fair value. The future cash flows of the segment were projected based on the Company’s estimates of future revenues, operating income, and other factors such as working capital and capital expenditure.
As part of the DCF analysis, the Company projected revenue and operating profit and assumed long-term revenue growth rates in the terminal year. The market approach utilizes multiples of revenues and earnings before interest expense, taxes, depreciation, and amortization (“EBITDA”) to estimate the segment’s fair value.
As part of the DCF analysis, the Company projected revenue and operating profits and assumed long-term revenue growth rates in the terminal year. The market approach utilizes multiples of revenues and earnings before interest expense, taxes, depreciation, and amortization (“EBITDA”) to estimate the segment’s fair value.
GAAP, plus depreciation and amortization of intangible assets, stock-based compensation, non-recurring severance and other one-time costs. 32 Table of Contents We define Adjusted Gross Margin by dividing Adjusted Gross Profit over total U.S. GAAP revenues.
GAAP, plus depreciation and amortization of intangible assets, stock-based compensation, non-recurring severance and other one-time costs. 31 Table of Contents We define Adjusted Gross Margin by dividing Adjusted Gross Profit over total U.S. GAAP revenues.
Net Cash Used in Financing Activities Cash provided by financing activities for the year ended December 31, 2023 was $2.9 million primarily from proceeds of stock option exercises of $3.3 million, offset in part by payment of long-term obligations of $0.4 million.
Cash provided by financing activities for the year ended December 31, 2023 was $2.9 million primarily from proceeds of stock option exercises of $3.3 million, offset in part by payment of long-term obligations of $0.4 million.
The increase in the adjusted gross margin for the Agility segment as a percentage of revenues was primarily due to higher revenues, offset in part by higher direct operating costs. Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure.
The increase in the adjusted gross margin for the Agility segment as a percentage of revenues was primarily due to higher revenues, offset in part by higher direct operating costs in the current fiscal year. Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure.
Further, in the years ended December 31, 2023 and 2022, revenues from non-U.S. customers accounted for 37% and 38%, respectively, of the Company’s revenues. 35 Table of Contents Direct Operating Costs Direct operating costs consist of direct and indirect labor costs, occupancy costs, data center hosting fees, cloud services, content acquisition costs, depreciation and amortization, travel, telecommunications, computer services and supplies, realized (gain) loss on forward contracts, foreign currency revaluation (gain) loss, and other direct expenses that are incurred in providing services to our customers.
Further, in the years ended December 31, 2024 and 2023, revenues from non-U.S. customers accounted for 21% and 37%, respectively, of the Company’s revenues. 34 Table of Contents Direct Operating Costs Direct operating costs consist of direct and indirect labor costs, occupancy costs, data center hosting fees, cloud services, content acquisition costs, depreciation and amortization, travel, telecommunications, computer services and supplies, realized (gain) loss on forward contracts, foreign currency revaluation (gain) loss, and other direct expenses that are incurred in providing services to our customers.
Selling and Administrative Expenses Selling and administrative expenses consist of payroll and related costs including commissions, bonuses, and stock-based compensation; marketing, advertising, trade conferences and related expenses; new services research and related software development expenses, software subscriptions, professional and consultant fees, provision for doubtful accounts and other administrative overhead expenses.
Selling and Administrative Expenses Selling and administrative expenses consist of payroll and related costs including commissions, bonuses, and stock-based compensation; marketing, advertising, trade conferences and related expenses; new services research and related software development expenses, software subscriptions, professional and consultant fees, provision for credit losses and other administrative overhead expenses.
Selling and administrative expenses for the Synodex segment as a percentage of Synodex segment revenues were approximately 8% and 24% for the years ended December 31, 2023 and 2022, respectively. The decrease in selling and administrative expenses of the Synodex segment as a percentage of Synodex segment revenues was primarily attributable to lower selling and administrative expenses and higher revenues.
Selling and administrative expenses for the Synodex segment as a percentage of Synodex segment revenues were approximately 3% and 8% for the years ended December 31, 2024 and 2023, respectively. The decrease in selling and administrative expenses of the Synodex segment as a percentage of Synodex segment revenues was primarily attributable to higher revenues and lower selling and administrative expenses.
One customer in the DDS segment generated approximately 10% of the Company’s total revenues in the fiscal year ended December 31, 2023. Another customer in the DDS segment generated approximately 11% of the Company’s total revenues in the fiscal year ended December 31, 2022. No other customer accounted for 10% or more of total revenues during these periods.
One customer in the DDS segment generated approximately 48% of the Company’s total revenues in the fiscal year ended December 31, 2024. Another customer in the DDS segment generated approximately 10% of the Company’s total revenues in the fiscal year ended December 31, 2023. No other customer accounted for 10% or more of total revenues during these periods.
Except as set forth in the Credit Agreement, borrowings under the Revolving Credit Facility bear interest at a rate equal to the daily simple secured overnight financing rate (“SOFR”) plus 2.25%. We did not utilize the Revolving Credit Facility during the year ended December 31, 2023 and through the date of filing of this Report.
Except as set forth in the Credit Agreement, borrowings under the Revolving Credit Facility bear interest at a rate equal to the daily simple secured overnight financing rate (“SOFR”) plus 2.25%. We did not utilize the Revolving Credit Facility during the year ended December 31, 2024 or during the subsequent period through the filing date of this Report.
The Philippines and India have at times experienced high rates of inflation as well as major fluctuations in the exchange rate between the Philippine peso and the U.S. dollar and the Indian rupee and the U.S. dollar.
The Philippines and India have at times experienced high rates of inflation as well as major fluctuations in the exchange rate between the Philippine peso and the U.S. dollar and the Indian rupee and the U.S. dollar. Canada has also experienced fluctuations in the exchange rate between the Canadian dollar and U.S. dollar.
Unremitted foreign earnings and profits amounted to approximately $50.4 million at December 31, 2023. If such foreign earnings and profits are repatriated in the future, or are no longer deemed to be indefinitely reinvested, we would have to accrue the applicable amount of foreign jurisdiction withholding taxes associated with such remittances.
Unremitted foreign earnings and profits amounted to approximately $53.9 million at December 31, 2024. If such foreign earnings and profits are repatriated in the future, or are no longer deemed to be indefinitely reinvested, we would have to accrue the applicable amount of foreign jurisdiction withholding taxes associated with such remittances.
Revenues from the Synodex segment were $7.5 million and $7.1 million for the years ended December 31, 2023 and 2022, respectively, an increase of $0.4 million or approximately 6%. The increase was primarily due to higher volume from existing customers.
Revenues from the Synodex segment were $7.9 million and $7.5 million for the years ended December 31, 2024 and 2023, respectively, an increase of $0.4 million or approximately 5%. The increase was primarily due to higher volume from existing customers.
Selling and administrative expenses for the DDS segment as a percentage of DDS segment revenues were approximately 33% and 37% for the years ended December 31, 2023 and 2022, respectively.
Selling and administrative expenses for the DDS segment as a percentage of DDS segment revenues were approximately 22% and 33% for the years ended December 31, 2024 and 2023, respectively.
For a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, please see the description of “Non-GAAP Financial Measures – Adjusted EBITDA” above. Adjusted EBITDA was $9.9 million and a loss of $3.3 million for the years ended December 31, 2023 and 2022, respectively.
For a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, please see the description of “Non-GAAP Financial Measures – Adjusted EBITDA” above. Adjusted EBITDA was $34.6 million and $9.9 million for the years ended December 31, 2024 and 2023, respectively.
Net Cash Provided by Operating Activities Cash provided by our operating activities for the year ended December 31, 2023 was $5.9 million resulting from our net loss of $0.9 million, adjusted for non-cash expenses of $9.9 million and a decrease in working capital of $3.1 million. Refer to the Consolidated Statements of Cash Flows for further details.
Cash provided by our operating activities for the year ended December 31, 2023 was $5.9 million resulting from our net loss of $0.9 million, adjusted for non-cash expenses of $9.9 million and a decrease in working capital of $3.1 million.
Adjusted gross margin for the DDS segment was 37% and 39% for the years ended December 31, 2023 and 2022, respectively. The decrease in the adjusted gross margin for the DDS segment as a percentage of revenues was primarily due to higher direct operating costs offset in part by higher revenues.
Adjusted gross margin for the DDS segment was 39% and 37% for the years ended December 31, 2024 and 2023, respectively. The increase in the adjusted gross margin for the DDS segment as a percentage of revenues was primarily due to higher revenues, offset in part by higher direct operating costs in the current fiscal year.
Gross margin for the Agility segment was 51% and 46% for the years ended December 31, 2023 and 2022, respectively. The increase in gross margin for the Agility segment as a percentage of revenues was primarily due to higher revenues, offset in part by higher direct operating costs.
Gross margin for the Agility segment was 56% and 51% for the years ended December 31, 2024 and 2023, respectively. The increase in gross margin for the Agility segment as a percentage of revenues was primarily due to higher revenues, offset in part by higher direct operating costs in the current fiscal year.
Effective income tax rates are disproportionate primarily due to the minimal pre-tax income and valuation allowance recorded on the deferred taxes of the U.S., Canadian, German and the United Kingdom subsidiaries, tax effects of foreign operations, IRS section 162 (m) adjustments, offset in part by the effect of stock-based compensation.
The effective income tax rates for the year ended December 31, 2023 are disproportionate primarily due to the minimal pre-tax income and valuation allowance recorded on the deferred taxes of the U.S., Canadian, German and the U.K. subsidiaries, tax effects of foreign operations, IRS section 162 (m) adjustments, offset in part by the effect of stock-based compensation.
Gross margin for the Synodex segment was 11% and (12)% for the years ended December 31, 2023 and 2022, respectively. The increase in gross margin for the Synodex segment as a percentage of revenues was primarily due to lower direct operating costs and higher revenues.
Gross margin for the Synodex segment was 27% and 11% for the years ended December 31, 2024 and 2023, respectively. The increase in gross margin for the Synodex segment as a percentage of revenues was primarily due to lower direct operating costs and higher revenues in the current fiscal year.
Gross profit for the Agility segment was $9.0 million and $7.0 million for the years ended December 31, 2023 and 2022, respectively. The $2.0 million increase in gross profit for the Agility segment was primarily due to higher revenues, offset in part by higher direct operating costs.
Gross profit for the Agility segment was $12.1 million and $9.0 million for the years ended December 31, 2024 and 2023, respectively. The $3.1 million increase in gross profit for the Agility segment was primarily due to higher revenues, offset in part by higher direct operating costs.
See Note 6, “Income Taxes” of the notes to the consolidated financial statements for additional information. 38 Table of Contents The reconciliation of the U.S. statutory rate with the Company’s effective tax rate for the years ended December 31, 2023 and 2022 are summarized in the table below: ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Federal income tax expense (benefit) at statutory rate 21.0 % (21.0) % Effect of: ​ Change in valuation allowance 578.6 36.9 ​ Tax effects of foreign operations 562.6 2.5 ​ Section 162 (m) 452.0 - ​ Return to provision true up 264.4 0.3 ​ Increase in unrecognized tax benefits (ASC 740) 199.6 0.7 ​ Withholding tax ​ 106.6 ​ - ​ Foreign operations permanent differences - foreign exchange gains and losses 76.9 1.1 ​ State income tax net of federal benefit 0.1 0.2 ​ Research and development credit ​ (67.3) ​ - ​ Foreign rate differential (102.5) (4.7) ​ Deemed interest (149.2) (1.9) ​ Tax effect of intercompany settlement ​ (234.0) ​ - ​ Effect of stock-based compensation (961.6) (0.3) ​ Other (7.6) 0.7 ​ Effective tax rate 739.6 % 14.5 % ​ Despite access to overseas earnings and the resulting toll charge, we intend to indefinitely reinvest earnings and profits in our foreign subsidiaries on account of the foreign jurisdiction withholding taxes that we would have to incur on the actual remittances.
The reconciliation of the U.S. statutory rate with the Company’s effective tax rate for the years ended December 31, 2024 and 2023 are summarized in the table below: ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Federal income tax expense at statutory rate 21.0 % 21.0 % Effect of: ​ Section 162 (m) 57.6 452.0 ​ Global Intangible Low-Taxed Income (GILTI) 3.1 0.0 ​ Tax effects of foreign operations 1.5 562.6 ​ Return to provision true up 0.8 264.4 ​ Foreign operations permanent differences - foreign exchange gains and losses 0.6 76.9 ​ Withholding tax ​ 0.5 ​ 106.6 ​ Research and development credit - (67.3) ​ Tax effect of intercompany settlement - (234.0) ​ Deemed interest (0.6) (149.2) ​ Foreign rate differential ​ (0.9) ​ (102.5) ​ State income tax net of federal benefit (1.8) 0.1 ​ Increase (decrease) in unrecognized tax benefits (ASC 740) (3.8) 199.6 ​ Change in valuation allowance ​ (30.7) ​ 578.6 ​ Effect of stock-based compensation (64.8) (961.6) ​ Other 0.4 (7.6) ​ Effective tax rate (17.1) % 739.6 % ​ Despite access to overseas earnings and the resulting toll charge, we intend to indefinitely reinvest earnings and profits in our foreign subsidiaries on account of the foreign jurisdiction withholding taxes that we would have to incur on the actual remittances.
These capital expenditures were principally for the purchase of technology equipment including servers, network infrastructure and workstations, and expenditures for capitalized developed software. Capital expenditures for the year ended December 31, 2023 amounting to $5.6 million consisted of $2.9 million for the DDS segment, $1.8 million for the Agility segment and $0.9 million for the Synodex segment.
These capital expenditures were principally for the purchase of technology equipment including servers, network infrastructure and workstations, and expenditures for capitalized developed software. Capital expenditures for the year ended December 31, 2024 consisted of $4.6 million for the DDS segment, $2.1 million for the Agility segment and $1.0 million for the Synodex segment.
Adjusted gross margin for the Synodex segment was 19% and (3)% for the years ended December 31, 2023 and 2022, respectively.
Adjusted gross margin for the Synodex segment was 33% and 19% for the years ended December 31, 2024 and 2023, respectively.
Gross profit for the DDS segment was $21.5 million and $21.3 million for the years ended December 31, 2023 and 2022, respectively. The $0.2 million increase in gross profit for the DDS segment was primarily due to higher revenues offset in part by higher direct operating costs.
Gross profit for the DDS segment was $52.9 million and $21.5 million for the years ended December 31, 2024 and 2023, respectively. The $31.4 million increase in gross profit for the DDS segment was primarily due to higher revenues, offset in part by higher direct operating costs.
The increase in the adjusted gross margin for the Synodex segment as a percentage of revenues was primarily due to lower direct operating costs and higher revenues. 40 Table of Contents Adjusted gross profit for the Agility segment was $12.2 million and $9.6 million for the years ended December 31, 2023 and 2022, respectively.
The increase in the adjusted gross margin for the Synodex segment as a percentage of revenues was primarily due to lower direct operating costs and higher revenues in the current fiscal year. 39 Table of Contents Adjusted gross profit for the Agility segment was $15.2 million and $12.2 million for the years ended December 31, 2024 and 2023, respectively.
The $3.8 million increase in gross profit was primarily due to higher revenues in all segments, offset in part by higher direct operating costs in the DDS and Agility segments. Gross margin was 36% and 35% for the years ended December 31, 2023 and 2022, respectively.
Gross profit was $67.1 million and $31.3 million for the years ended December 31, 2024 and 2023, respectively. The $35.8 million increase in gross profit was primarily due to higher revenues in all segments and lower direct operating costs for the Synodex segment, offset in part by higher direct operating costs in the DDS and Agility segments.
Revenues from the Agility segment were $17.7 million and $15.4 million for the years ended December 31, 2023 and 2022 respectively, an increase of $2.3 million or approximately 15%. The increase was primarily attributable to higher volumes from subscriptions to our Agility AI-enabled industry platform and newswire product.
Revenues from the Agility segment were $21.5 million and $17.7 million for the years ended December 31, 2024 and 2023 respectively, an increase of $3.8 million or approximately 21%. The increase was primarily attributable to higher volumes from subscriptions to our Agility AI-enabled industry platform.
Gross margin for the DDS segment was 35% and 38% for the years ended December 31, 2023 and 2022, respectively. The decrease in gross margin for the DDS segment as a percentage of revenues was primarily due to higher direct operating costs offset in part by higher revenues.
Gross margin for the DDS segment was 37% and 35% for the years ended December 31, 2024 and 2023, respectively. The increase in gross margin for the DDS segment as a percentage of revenues was primarily due to higher revenues, offset in part by higher direct operating costs in the current fiscal year.
The decrease in selling and administrative expenses of the Agility segment as a percentage of Agility segment revenues was primarily due to lower selling and administrative expenses and higher revenues. Goodwill Impairment As of September 30, 2023, the Company performed its annual goodwill impairment analysis on the Agility segment.
The decrease in selling and administrative expenses of the Agility segment as a percentage of Agility segment revenues was primarily due to higher revenues, offset in part by higher selling and administrative expenses. Goodwill Impairment As of September 30, 2024, the Company performed its annual goodwill impairment analysis on its reporting unit with goodwill, the Agility segment.
There can be no assurance that we will be able to recover cost increases through increases in the prices that we charge for our services to our customers. Our quarterly operating results are subject to certain fluctuations.
We must adequately anticipate wage increases, particularly on our fixed-price contracts. There can be no assurance that we will be able to recover cost increases through increases in the prices that we charge for our services to our customers. Our quarterly operating results are subject to certain fluctuations.
The following table sets forth certain financial data for the two years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in millions) ​ ​ Years Ended December 31, ​ 2023 % of revenue 2022 % of revenue Revenues ​ $ 86.8 100.0 % $ 79.0 100.0 % Direct operating costs ​ 55.5 63.9 % 51.5 65.1 % Gross Profit ​ $ 31.3 36.1 % $ 27.5 34.9 % Selling and administrative expenses ​ ​ 31.0 ​ 35.7 % ​ 37.9 ​ 48.2 % Income (loss) from operations ​ 0.3 0.4 % (10.5) (13.3) % Interest expense ​ 0.2 ​ - ​ Income (loss) before provision for income taxes ​ 0.1 ​ (10.5) ​ Provision for income taxes ​ 1.0 ​ ​ 1.5 ​ Net Loss ​ $ (0.9) ​ $ (12.0) ​ ​ For a summary of our Critical Accounting Estimates and Policies, please refer to Note 1 of the Notes to our Consolidated Financial Statements, which are included elsewhere in this Report.
The following table sets forth certain financial data for the two years ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in millions) ​ ​ Years Ended December 31, ​ 2024 % of revenue 2023 % of revenue Revenues ​ $ 170.5 100.0 % $ 86.8 100.0 % Direct operating costs ​ 103.4 60.7 % 55.5 63.9 % Gross Profit ​ $ 67.1 39.4 % $ 31.3 36.1 % Selling and administrative expenses ​ ​ 42.7 ​ 25.0 % ​ 31.0 ​ 35.7 % Income from operations ​ 24.4 14.3 % 0.3 0.4 % Interest (income) expense ​ (0.1) ​ 0.2 ​ Income before provision for income taxes ​ 24.5 ​ 0.1 ​ Provision for income taxes ​ (4.2) ​ ​ 1.0 ​ Net Income (loss) ​ $ 28.7 ​ $ (0.9) ​ ​ For a summary of our Significant Accounting Estimates and Policies, please refer to Note 1 of the Notes to our Consolidated Financial Statements, which are included elsewhere in this Report.
Cash used in our investing activities for the year ended December 31, 2022 was $7.0 million consisting of capital expenditures of $6.5 million and the purchase of short-term investments of $0.5 million. These capital expenditures were principally for the purchase of technology equipment including servers, network infrastructure and workstations, and expenditures for capitalized developed software.
Cash used in our investing activities for the year ended December 31, 2023 was $5.1 million consisting of capital expenditures of $5.6 million offset in part by proceeds from sale of investments of $0.5 million. These capital expenditures were principally for the purchase of technology equipment including servers, network infrastructure and workstations, and expenditures for capitalized developed software.
Cash used by our operating activities for the year ended December 31, 2022 was $1.2 million resulting from our net loss of $12.0 million, adjusted for non-cash expenses of $8.9 million and an increase in working capital of $1.9 million. Refer to the Consolidated Statements of Cash Flows for further details.
Net Cash Provided by Operating Activities Cash provided by our operating activities for the year ended December 31, 2024 was $35.0 million resulting from our net income of $28.7 million, adjusted for non-cash expenses of $6.2 million and an increase in working capital of $0.1 million. Refer to the Consolidated Statements of Cash Flows for further details.
Net income for the Synodex segment was $0.2 million and a loss of $2.6 million for the years ended December 31, 2023 and 2022, respectively. The $2.8 million change was primarily due to lower direct operating costs and selling and administrative expenses, and higher revenues in the current fiscal year.
Net income for the Synodex segment was $1.9 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively. The $1.7 million increase was primarily due to lower direct operating costs and selling and administrative expenses and higher revenues in the current fiscal year.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Revenues Total revenues were $86.8 million and $79.0 million for the years ended December 31, 2023 and 2022, respectively, an increase of $7.8 million or approximately 10%.
Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Revenues Total revenues were $170.5 million and $86.8 million for the years ended December 31, 2024 and 2023, respectively, an increase of $83.7 million or approximately 96%.
We did not have any material commitments for capital expenditures as of December 31, 2023. We believe that our existing cash and cash equivalents and cash flows from operations will provide sufficient sources of liquidity to satisfy our financial needs for at least 12 months from the date of issuance of these financial statements.
We believe that our existing cash and cash equivalents and cash flows from operations will provide sufficient sources of liquidity to satisfy our financial needs for at least 12 months from the date of issuance of these financial statements.
The increase in direct operating costs includes a net increase of $2.3 million from direct and indirect labor related costs primarily on account of labor costs for new hires, and higher incentives and salary increases; higher recruitment fees of $0.9 million for new hires; an unfavorable impact of exchange rate fluctuations of $0.8 million; higher depreciation and amortization of capitalized developed software of $0.5 million and other direct operating costs of $0.5 million.
The increase in direct operating costs includes a net increase of $42.2 million from direct and indirect labor related costs primarily on account of new hires and higher incentives; higher recruitment fees of $3.5 million; higher depreciation and amortization of capitalized developed software of $1.1 million; higher content costs of $0.8 million; higher cloud service subscriptions of $0.8 million and an increase in other direct operating costs of $0.3 million; offset in part by a favorable impact of foreign exchange rate fluctuations of $0.8 million.
Direct operating costs for the Agility segment as a percentage of Agility segment revenues were approximately 49% and 55% for the years ended December 31, 2023 and 2022, respectively. The decrease in direct operating costs of the Agility segment as a percentage of Agility segment revenues was due to higher revenues, offset in part by higher direct operating costs.
Direct operating costs for the DDS segment as a percentage of DDS segment revenues were approximately 63% and 65% for the years ended December 31, 2024 and 2023, respectively. The decrease in direct operating costs of the DDS segment as a percentage of DDS segment revenues was primarily attributable to higher revenues, offset in part by higher direct operating costs.
Gross profit for the Synodex segment was $0.8 million and a loss of $0.9 million for the years ended December 31, 2023 and 2022, respectively. The $1.7 million change in gross profit for the Synodex segment was primarily due to lower direct operating costs and higher revenues.
Gross profit for the Synodex segment was $2.1 million and $0.8 million for the years ended December 31, 2024 and 2023, respectively. The $1.3 million increase in gross profit for the Synodex segment was primarily due to lower direct operating costs and higher revenues.
Direct operating costs for the DDS segment as a percentage of DDS segment revenues were approximately 65% and 62% for the years ended December 31, 2023 and 2022, respectively.
Direct operating costs for the Agility segment as a percentage of Agility segment revenues were approximately 44% and 49% for the years ended December 31, 2024 and 2023, respectively.
The $2.3 million increase in Adjusted EBITDA was due to higher net income in the DDS segment, higher stock-based compensation, depreciation and amortization and interest expense, offset in part by a lower tax provision. Adjusted EBITDA for the Synodex segment was $1.0 million and a loss of $1.7 million for the years ended December 31, 2023 and 2022, respectively.
Adjusted EBITDA for the Synodex segment was $2.3 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively. The $1.3 million increase in Adjusted EBITDA in the Synodex segment was due to higher net income, offset in part by lower stock-based compensation and depreciation and amortization in the current fiscal year.
Direct operating costs were $55.5 million and $51.5 million for the years ended December 31, 2023 and 2022, respectively, an increase of $4.0 million or approximately 8%.
Direct operating costs for the Agility segment were approximately $9.4 million and $8.7 million for the years ended December 31, 2024 and 2023, respectively, an increase of $0.7 million or approximately 8%.
The decrease was due to lower direct labor costs of $1.3 million. Direct operating costs for the Synodex segment as a percentage of segment revenues were approximately 89% and 113% for the years ended December 31, 2023 and 2022, respectively.
Direct operating costs for the Synodex segment as a percentage of segment revenues were approximately 73% and 89% for the years ended December 31, 2024 and 2023, respectively. The decrease in direct operating costs of the Synodex segment as a percentage of Synodex segment revenues was due to a decrease in direct operating costs and higher revenues.
Liquidity and Capital Resources Selected measures of liquidity and capital resources, expressed in thousands, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Cash and cash equivalents ​ $ 13,806 ​ $ 9,792 Short term investments - other ​ ​ 14 ​ ​ 507 Working capital ​ 9,142 ​ 2,869 ​ On December 31, 2023, we had cash and cash equivalents of $13.8 million, of which $6.5 million was held by our foreign subsidiaries and $7.3 million was held in the United States.
Liquidity and Capital Resources Selected measures of liquidity and capital resources, expressed in thousands, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 2023 Cash and cash equivalents ​ $ 46,883 ​ $ 13,806 Short term investments - other ​ ​ 14 ​ ​ 14 Working capital ​ 41,494 ​ 9,142 ​ On December 31, 2024, we had cash and cash equivalents of $46.9 million, of which $17.9 million was held by our foreign subsidiaries and $29.0 million was held in the United States.
The Credit Agreement contains a financial covenant that requires the Borrowers, on a consolidated basis, to maintain a fixed charge coverage ratio of not less than 1.10 to 1.00 by December 31, 2023.
As of December 31, 2024, such borrowing base calculation equaled approximately $22.3 million. The Credit Agreement contains a financial covenant that requires the Borrowers, on a consolidated basis, to maintain a fixed charge coverage ratio of not less than 1.10 to 1.00.
Our most significant costs are the salaries and related benefits of our employees in Asia. We are exposed to high inflation in wage rates in the countries in which we operate. We generally perform work for our customers under project-specific contracts, requirements-based contracts or long-term contracts. We must adequately anticipate wage increases, particularly on our fixed-price contracts.
We do not currently intend to hedge these assets. 42 Table of Contents Our most significant costs are the salaries and related benefits of our employees. We are exposed to high inflation in wage rates in the countries in which we operate. We generally perform work for our customers under project-specific contracts, requirements-based contracts or long-term contracts.
GAAP attributable to Innodata Inc. and its subsidiaries to Adjusted Gross Profit and Adjusted Gross Margin for the years ended December 31, 2023 and 2022 (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Consolidated ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit attributable to Innodata Inc. and Subsidiaries ​ $ 31,293 ​ $ 27,468 ​ Depreciation and amortization ​ 4,608 ​ 3,774 Severance** ​ 327 ​ - Stock-based compensation ​ 294 ​ 214 Adjusted Gross Profit ​ $ 36,522 ​ $ 31,456 ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin ​ 36 % 35 % Adjusted Gross Margin ​ 42 % 40 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ DDS Segment ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit attributable to DDS Segment ​ $ 21,519 ​ $ 21,347 ​ Depreciation and amortization ​ 1,053 ​ ​ 579 Severance** ​ 28 ​ ​ - Stock-based compensation ​ 261 ​ ​ 178 Adjusted Gross Profit ​ $ 22,861 ​ $ 22,104 ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin ​ ​ 35 % 38 % Adjusted Gross Margin ​ 37 % 39 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Synodex Segment ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit/(Loss) attributable to Synodex Segment ​ $ 799 ​ $ (874) ​ Depreciation and amortization ​ 623 ​ 656 Severance** ​ - ​ - Stock-based compensation ​ 1 ​ - Adjusted Gross Profit/(Loss) ​ $ 1,423 ​ $ (218) ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin ​ 11 % (12) % Adjusted Gross Margin ​ 19 % (3) % ​ 33 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Agility Segment ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit attributable to Agility Segment ​ $ 8,975 ​ $ 6,995 ​ Depreciation and amortization ​ 2,932 ​ 2,539 Severance** ​ 299 ​ - Stock-based compensation ​ 32 ​ 36 Adjusted Gross Profit ​ $ 12,238 ​ $ 9,570 ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin ​ 51 % 46 % Adjusted Gross Margin ​ 69 % 62 % ​ ** Represents non-recurring severance incurred for a reduction in headcount in connection with the re-alignment of the Company’s cost structure.
GAAP attributable to Innodata Inc. and its subsidiaries to Adjusted Gross Profit and Adjusted Gross Margin for the years ended December 31, 2024 and 2023 (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Consolidated ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit attributable to Innodata Inc. and Subsidiaries ​ $ 67,074 ​ $ 31,293 ​ Depreciation and amortization ​ 5,705 ​ 4,608 Severance** ​ - ​ 327 Stock-based compensation ​ 281 ​ 294 Adjusted Gross Profit ​ $ 73,060 ​ $ 36,522 ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin ​ 39 % 36 % Adjusted Gross Margin ​ 43 % 42 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ DDS Segment ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit attributable to DDS Segment ​ $ 52,912 ​ $ 21,519 ​ Depreciation and amortization ​ 2,133 ​ ​ 1,053 Severance** ​ - ​ ​ 28 Stock-based compensation ​ 252 ​ ​ 261 Adjusted Gross Profit ​ $ 55,297 ​ $ 22,861 ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin ​ ​ 37 % 35 % Adjusted Gross Margin ​ 39 % 37 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Synodex Segment ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit attributable to Synodex Segment ​ $ 2,101 ​ $ 799 ​ Depreciation and amortization ​ 503 ​ 623 Stock-based compensation ​ 2 ​ 1 Adjusted Gross Profit ​ $ 2,606 ​ $ 1,423 ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin ​ 27 % 11 % Adjusted Gross Margin ​ 33 % 19 % ​ 32 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Agility Segment ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit attributable to Agility Segment ​ $ 12,061 ​ $ 8,975 ​ Depreciation and amortization ​ 3,069 ​ 2,932 Severance** ​ - ​ 299 Stock-based compensation ​ 27 ​ 32 Adjusted Gross Profit ​ $ 15,157 ​ $ 12,238 ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin ​ 56 % 51 % Adjusted Gross Margin ​ 71 % 69 % ​ ** Represents non-recurring severance incurred for a reduction in headcount in connection with the re-alignment of the Company’s cost structure.
Adjusted gross profit for the Synodex segment was $1.4 million and a loss of $0.2 million for the years ended December 31, 2023 and 2022, respectively. The $1.6 million change in adjusted gross profit in the Synodex segment was due to higher gross profit.
Adjusted gross profit for the Synodex segment was $2.6 million and $1.4 million for the years ended December 31, 2024 and 2023, respectively. The $1.2 million increase in adjusted gross profit in the Synodex segment was due to lower direct operating costs and higher revenues.
As of December 31, 2023, the aggregate notional amount of our hedges was $10.5 million consisting of approximately $4.3 million against the Indian rupee, and $6.2 million against the Philippine peso. Fluctuations in exchange rates also affect the value of funds held by our foreign subsidiaries. We do not currently intend to hedge these assets.
As of December 31, 2024, the aggregate notional amount of our hedges was $22.5 million consisting of approximately $10.7 million against the Canadian dollar, $6.7 million against the Philippine peso and $5.1 million against the Indian rupee. Fluctuations in exchange rates also affect the value of funds held by our foreign subsidiaries.
The decrease in selling and administrative expenses of the DDS segment as a percentage of DDS segment revenues was primarily attributable to higher revenues and lower selling and administrative expenses. 37 Table of Contents Selling and administrative expenses for the Synodex segment were $0.6 million and $1.7 million for the years ended December 31, 2023 and 2022 respectively, a decrease of $1.1 million or approximately 65%.
The decrease in selling and administrative expenses as a percentage of total revenues was primarily attributable to higher revenues in all segments and lower selling and administrative expenses in the Synodex segment, offset in part by higher selling and administrative expenses in the DDS and Agility segments. 36 Table of Contents Selling and administrative expenses for the DDS segment were approximately $31.6 million and $20.1 million for the years ended December 31, 2024 and 2023 respectively, an increase of $11.5 million or 57%.
Quantitative and Qualitative Disclosures About Market Risk. Not applicable to smaller reporting companies. Item 8. Financial Statements and Supplementary Data. See Financial Statement Index and Financial Statements commencing on page F-1, which are incorporated by reference herein. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
The seasonality is directly linked to the number of life insurance applications received by the insurance companies. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable to smaller reporting companies. Item 8. Financial Statements and Supplementary Data. See Financial Statement Index and Financial Statements commencing on page F-1, which are incorporated by reference herein. Item 9.
The increase in direct operating costs includes a net increase of $0.7 million from direct and indirect labor related costs primarily on account of labor costs for new hires and salary increases, offset in part by reductions in headcount in line with cost optimization efforts in the first half of 2023; higher recruitment fees of $0.9 million for new hires; higher depreciation and amortization of capitalized developed software of $0.8 million; an unfavorable impact of exchange rate fluctuations of $0.8 million; higher content costs of $0.3 million, and other direct operating costs of $0.5 million.
The increase in direct operating costs includes a net increase of $43.3 million from direct and indirect labor related costs primarily on account of new hires and higher incentives; higher recruitment fees of $3.5 million; higher depreciation and amortization of capitalized developed software of $1.0 million; higher cloud service subscriptions of $0.7 million and an increase in other direct operating costs of $0.3 million; offset in part by a favorable impact of foreign exchange rate fluctuations of $0.7 million.
Direct operating costs for the DDS segment were $40.1 million and $35.1 million for the years ended December 31, 2023 and 2022, respectively, an increase of $5.0 million or approximately 14%. The increase in direct operating costs was primarily due to higher revenues from two existing and one new customer.
Direct operating costs for the DDS segment were $88.2 million and $40.1 million for the years ended December 31, 2024 and 2023, respectively, an increase of $48.1 million or approximately 120%. The cost increase was primarily due to increased headcount to support higher volumes from an existing customer.
Revenues from the DDS segment were $61.6 million and $56.5 million for the years ended December 31, 2023 and 2022, respectively, an increase of $5.1 million or approximately 9%.
Revenues from the DDS segment were $141.1 million and $61.6 million for the years ended December 31, 2024 and 2023, respectively, an increase of $79.5 million or approximately 129%. The net increase was primarily attributable to higher volume from an existing customer.
Selling and administrative expenses as a percentage of total revenues were approximately 36% and 48% for the years ended December 31, 2023 and 2022, respectively. The decrease in selling and administrative expenses as a percentage of total revenues was primarily attributable to higher revenues and lower selling and administrative expenses in all segments.
Selling and administrative expenses as a percentage of total revenues were approximately 25% and 36% for the years ended December 31, 2024 and 2023, respectively.
The market multiples used for the segment were based on a group of comparable companies’ market multiples applied to the Company’s revenue. The Company concluded that there is no impairment of goodwill. Income Taxes We recorded a provision for income taxes of approximately $1.0 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively.
The market multiples used for the segment were based on a group of comparable companies’ market multiples applied to the Company’s revenue. The Company concluded that there is no impairment of goodwill.
The decrease in selling and administrative expenses includes lower labor and related expenses of $3.4 million primarily on account of headcount reductions, offset in part by salary increases and higher commissions; lower marketing related expenses of $1.8 million; lower recruitment and professional fees of $1.2 million; lease termination expense of $0.2 million; a favorable impact of foreign exchange rate fluctuations of $0.2 million and a decrease in other selling and administrative expenses of $0.2 million.
The increase in selling and administrative expenses includes higher selling and administrative payroll and related expenses of $0.4 million, primarily on account of new hires, salary increases, incentives and bonuses awarded; offset in part by lower severance costs; an increase in marketing related activities of $0.3 million; higher professional fees of $0.2 million, and an unfavorable impact of foreign exchange rate fluctuations of $0.1 million, offset in part by lower provision for credit losses of $0.2 million and a decrease in other selling and administrative expenses of $0.2 million.
The increase in direct operating costs of the DDS segment as a percentage of DDS segment revenues during the year was primarily due to an increase in direct operating costs, offset in part by an increase in revenues.
The decrease in direct operating cost as a percentage of total revenues was primarily due to higher revenues in all segments and lower direct operating costs in the Synodex segment, offset in part by higher direct operating costs in the DDS and Agility segments.
Then we divide the total number of days within the period reported by the accounts receivable turnover to yield DSO expressed in number of days.
Then we divide the total number of days within the period reported by the accounts receivable turnover to yield DSO expressed in number of days. Net Cash Used in Investing Activities Cash used in our investing activities for the year ended December 31, 2024 was $7.7 million.
These lower selling and administrative expenses were offset in part by a higher provision for doubtful accounts of $0.2 million. Selling and administrative expenses for the Agility segment as a percentage of Agility segment revenues were approximately 58% and 101% for the years ended December 31, 2023 and 2022, respectively.
Selling and administrative expenses for the Agility segment as a percentage of Agility segment revenues were approximately 51% and 58% for the years ended December 31, 2024 and 2023, respectively.
Adjusted gross profit for the DDS segment was $22.9 million and $22.1 million for the years ended December 31, 2023 and 2022, respectively. The $0.8 million increase in adjusted gross profit for the DDS Segment was due to higher depreciation and amortization and higher gross profit.
Adjusted gross profit for the DDS segment was $55.3 million and $22.9 million for the years ended December 31, 2024 and 2023, respectively. The $32.4 million increase in adjusted gross profit for the DDS segment was due to higher revenues, offset in part by higher direct operating costs.
Cash used in financing activities for the year ended December 31, 2022 was primarily for payments of long-term obligation of $0.6 million, reduced in part by proceeds from stock option exercises of $0.3 million.
Net Cash Used in Financing Activities Cash provided by financing activities for the year ended December 31, 2024 was $6.1 million, primarily from proceeds of stock option exercises of $6.7 million, offset in part by payment of long-term obligations of $0.5 million and withholding taxes on net settlement of restricted stock awards of $0.1 million.
Direct operating costs as a percentage of total revenues were approximately 64% and 65% for the years ended December 31, 2023 and 2022, respectively. The decrease in direct operating costs as a percentage of revenues during the year was primarily due to an increase in revenues, offset in part by an increase in direct operating costs.
Direct operating costs as a percentage of total revenues were approximately 61% and 64% for the years ended December 31, 2024 and 2023, respectively.
Capital expenditures for the year ended December 31, 2022 amounting to $6.5 million consisted of $3.1 million for the DDS segment, $2.0 million for the Agility segment, and $1.4 million for the Synodex segment. 42 Table of Contents For calendar year 2024, we anticipate that capital expenditures for ongoing technology, equipment, new platform development, and infrastructure upgrades will approximate to $6.0 million, a portion of which we may finance.
For calendar year 2025, we anticipate that capital expenditures for ongoing technology, equipment, new platform development, and infrastructure upgrades will approximate to $11.0 million, a portion of which we may finance.
The $2.7 million change in Adjusted EBITDA was due to a lower net loss in the Synodex segment. Adjusted EBITDA for the Agility segment was $2.5 million and a loss of $5.7 million for the years ended December 31, 2023 and 2022, respectively.
Adjusted EBITDA for the Agility segment was $4.5 million and $2.5 million for the years ended December 31, 2024 and 2023, respectively.
The decrease in direct operating costs of the Synodex segment as a percentage of Synodex segment revenues was due to lower direct operating costs and higher revenues. Direct operating costs for the Agility segment were approximately $8.7 million and $8.4 million for the years ended December 31, 2023 and 2022, respectively, an increase of $0.3 million or approximately 4%.
Direct operating costs for the Synodex segment were approximately $5.8 million and $6.7 million for the years ended December 31, 2024 and 2023, respectively, a decrease of $0.9 million or approximately 13%.
Selling and administrative expenses were approximately $31.0 million and $38.0 million for the years ended December 31, 2023 and 2022, respectively, a decrease of $7.0 million or approximately 18%. The decrease in selling and administrative expenses was primarily due to the cost optimization efforts aimed at improving operational efficiency.
Selling and administrative expenses were approximately $42.7 million and $31.0 million for the years ended December 31, 2024 and 2023, respectively, an increase of $11.7 million or approximately 38%. The increase in selling and administrative expenses was primarily due to higher expenses associated with the increase in revenues.
Selling and administrative expenses for the Agility segment were $10.3 million and $15.6 million for the years ended December 31, 2023 and 2022, respectively, a decrease of $5.3 million or approximately 34%. The decrease in selling and administrative expenses was primarily due to the cost optimization efforts aimed at improving operational efficiency.
Selling and administrative expenses for the Agility segment were $10.9 million and $10.3 million for the years ended December 31, 2024 and 2023, respectively, an increase of $0.6 million or approximately 6%. The increase in selling and administrative expenses was primarily due to higher expenses associated with the increase in revenues.
Selling and administrative expenses for the DDS segment were approximately $20.1 million and $20.7 million for the years ended December 31, 2023 and 2022 respectively, a decrease of $0.6 million or approximately 3%. The decrease in selling and administrative expenses was primarily due to the cost optimization efforts aimed at improving operational efficiency.
Selling and administrative expenses for the Synodex segment were $0.2 million and $0.6 million for the years ended December 31, 2024 and 2023 respectively, a decrease of $0.4 million or approximately 67%. The decrease in selling and administrative expenses was primarily attributable to lower selling and administrative payroll costs of $0.3 million and lower professional fees of $0.1 million.
The $2.6 million increase in adjusted gross profit for the Agility segment was due to higher gross profit, higher depreciation and amortization, and non-recurring severance. Adjusted gross margin for the Agility segment was 69% and 62% for the years ended December 31, 2023 and 2022, respectively.
The $3.0 million increase in adjusted gross profit for the Agility segment was due to higher revenues, offset in part by higher direct operating costs. Adjusted gross margin for the Agility segment was 71% and 69% for the years ended December 31, 2024 and 2023, respectively.
Despite the passage of the new tax law under which we may repatriate funds from overseas after paying the toll charge, it is our intent, as of December 31, 2023, to indefinitely reinvest the overseas funds in our foreign subsidiaries due to the withholding tax that we would have to incur on the actual remittances.
Despite the passage of the new tax law under which we may repatriate funds from overseas after paying the toll charge, it is our intent, as of December 31, 2024, to indefinitely reinvest the overseas funds in our foreign subsidiaries due to the withholding tax that we would have to incur on the actual remittances. 40 Table of Contents We have used, and plan to use, our cash and cash equivalents for (i) capital investments; (ii) the expansion of our operations; (iii) technology innovation; (iv) product management and strategic marketing; (v) general corporate purposes, including working capital; and (vi) possible business acquisitions.
Net loss for the Agility segment was $1.3 million and a net loss of $8.7 million for the years ended December 31, 2023 and 2022, respectively. The $7.4 million change was primarily due to lower selling and administrative expenses and higher revenues, offset in part by higher direct operating costs in the current fiscal year.
Gross margin was 39% and 36% for the years ended December 31, 2024 and 2023, respectively. The increase in gross margin was primarily due to higher revenues in all segments and lower direct operating costs for the Synodex segment, offset in part by higher direct operating costs in the DDS and Agility segments in the current fiscal year.
The decrease in selling and administrative expenses includes lower labor and related expenses of $3.5 million primarily on account of headcount reductions offset in part by higher commissions; lower marketing related expenses of $1.3 million; a favorable impact of foreign exchange rate fluctuations of $0.2 million; lease termination expense of $0.2 million; lower professional fees of $0.1 million and a decrease in other selling and administrative expenses of $0.2 million.
The increase in selling and administrative expenses includes higher selling and administrative payroll and related expenses of $7.3 million, primarily on account of new hires, salary increases, incentives and bonuses and offset in part by lower severance costs; higher professional fees of $3.3 million; higher expenses for marketing related activities of $0.6 million; higher subscriptions of $0.2 million; an unfavorable impact of foreign exchange rate fluctuations of $0.1 million; and an increase in other selling and administrative expenses of $0.2 million.
The $8.2 million change in Adjusted EBITDA was due to a lower net loss in the Agility segment, non-recurring severance, higher depreciation and amortization, offset in part by lower tax provision.
The $2.0 million increase in Adjusted EBITDA in the Agility segment was due to the net income in the current period compared to the net loss in the comparative period, higher depreciation and amortization, offset in part by lower non-recurring severance, lower stock-based compensation and a change in income tax provision for the period resulting from the release of the valuation allowance on our United Kingdom deferred tax assets in the current fiscal year.
Our Canadian subsidiaries also have research and development credits available to reduce taxable income in future years, which may be carried forward indefinitely. The potential benefits from these balances have not been recognized for financial statement purposes.
We have a remaining valuation allowance on all the deferred tax assets of our Canadian and German subsidiaries. Our Canadian subsidiaries also have research and development credits available to reduce taxable income in future years, which may be carried forward indefinitely.
Net Income (Loss) We had a net loss of $0.9 million and $12.0 million during the years ended December 31, 2023 and 2022, respectively.
Net income for the Agility segment was $1.3 million and a net loss of $1.3 million for the years ended December 31, 2024 and 2023, respectively.
The $11.1 million change was due to higher revenues, lower selling and administrative expenses in all segments and lower income tax, offset in part by higher direct operating costs in the DDS and Agility segments in the current fiscal year.
The $2.6 million change was due to higher revenues offset in part by higher direct operating costs and selling and administrative expenses of $2.5 million and a change in income tax provision resulting from the release of the valuation allowance on our United Kingdom subsidiary’s deferred tax assets of $0.1 million in the current fiscal year.

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