Innodata Inc 10-Q for FY2022 Q2

Innodata Inc (INOD)

10-Q 2022-08-12 For: 2022-06-30

Added on April 06, 2026

About this 10-Q

Innodata Inc filed this 10-Q on August 12, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $19.99M; up 17.2% from $17.05M a year earlier
Net loss: $3.83M; compared with a net loss of $103K a year earlier
Diluted EPS: -$0.14; compared with $0.00 a year earlier

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☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2022

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ________________ to ________________

Delaware	13-3475943
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

55 Challenger Road	07660
Ridgefield Park, New Jersey	(Zip Code)
(Address of principal executive offices)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	INOD	The NASDAQ Stock Market LLC

	Part I – Financial Information
		Page No.
Item 1.	Financial Statements
	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended June 30, 2022 and 2021	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the six months ended June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

	Part II – Other Information

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37


	June 30,		December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	10,481	$	18,902
Accounts receivable, net of allowance for doubtful accounts of $730 for each of these periods		10,956		11,379
Prepaid expenses and other current assets		3,786		3,681
Total current assets		25,223		33,962
Property and equipment, net		2,899		2,947
Right-of-use-asset, net		4,395		5,621
Other assets		2,005		2,247
Deferred income taxes, net		1,667		1,950
Intangibles, net		11,658		10,347
Goodwill		2,076		2,143
Total assets	$	49,923	$	59,217

LIABILITIES, NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,054	$	1,823
Accrued expenses and other		6,205		7,564
Accrued salaries, wages and related benefits		6,404		6,391
Income and other taxes		3,387		3,213
Long-term obligations - current portion		700		1,279
Operating lease liability - current portion		776		1,034
Total current liabilities		19,526		21,304
Deferred income taxes, net		20		15
Long-term obligations, net of current portion		5,998		6,217
Operating lease liability, net of current portion		4,087		5,276
Total liabilities		29,631		32,812

Commitments and contingencies
Non-controlling interests		(730)		(3,522)

STOCKHOLDERS’ EQUITY:
Serial preferred stock; 4,998,000 shares authorized, none outstanding		-		-
Common stock, $.01 par value; 75,000,000 shares authorized; 30,487,000 shares issued and 27,303,000 outstanding at June 30, 2022 and 30,347,000 shares issued and 27,163,000 outstanding at December 31, 2021		305		303
Additional paid-in capital		33,946		35,121
Retained earnings (deficit)		(3,488)		3,160
Accumulated other comprehensive loss		(3,276)		(2,192)
		27,487		36,392
Less: treasury stock, 3,184,000 shares at June 30, 2022 and December 31, 2021 at cost		(6,465)		(6,465)
Total stockholders’ equity		21,022		29,927
Total liabilities, non-controlling interests and stockholders’ equity	$	49,923	$	59,217


	Three Months Ended
	June 30,
	2022		2021
Revenues	$	19,987	$	17,049
Operating costs and expenses:
Direct operating costs		12,992		10,409
Selling and administrative expenses		10,277		6,980
Interest expense, net		(1)		4
		23,268		17,393
Loss from operations		(3,281)		(344)
Gain from loan forgiveness		-		580
Income (loss) before provision for income taxes		(3,281)		236
Provision for income taxes		550		366

Consolidated net loss		(3,831)		(130)

Income (loss) attributable to non-controlling interests		2		(27)

Net loss attributable to Innodata Inc. and Subsidiaries	$	(3,833)	$	(103)

Loss per share attributable to Innodata Inc. and Subsidiaries:
Basic and Diluted	$	(0.14)	$	(0.00)

Weighted average shares outstanding:
Basic and Diluted		27,226		26,522

Comprehensive Loss:
Consolidated Net loss	$	(3,831)	$	(130)
Pension liability adjustment, net of taxes		38		11
Change in fair value of derivatives, net of taxes		(541)		(267)
Foreign currency translation adjustment		(600)		135
Other comprehensive loss		(1,103)		(121)
Total Comprehensive loss		(4,934)		(251)
Less: Comprehensive income (loss) attributable to non-controlling interest		2		(27)
Comprehensive Loss attributable to Innodata Inc. and Subsidiaries	$	(4,936)	$	(224)


	Six Months Ended
	June 30,
	2022		2021
Revenues	$	41,179	$	33,016
Operating costs and expenses:
Direct operating costs		26,406		20,505
Selling and administrative expenses		20,467		12,505
Interest expense, net		2		14
		46,875		33,024
Loss from operations		(5,696)		(8)
Gain from loan forgiveness		-		580
Income (loss) before provision for income taxes		(5,696)		572

Provision for income taxes		1,025		293

Consolidated net income (loss)		(6,721)		279

Loss attributable to non-controlling interests		(73)		(16)

Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	(6,648)	$	295

Income (loss) per share attributable to Innodata Inc. and Subsidiaries:
Basic	$	(0.24)	$	0.01
Diluted	$	(0.24)	$	0.01

Weighted average shares outstanding:
Basic		27,192		26,199
Diluted		27,192		29,194

Comprehensive income (loss):
Consolidated net income (loss)	$	(6,721)	$	279
Pension liability adjustment, net of taxes		78		22
Foreign currency translation adjustment, net of taxes		(626)		114
Change in fair value of derivatives, net of taxes		(536)		(267)
Other comprehensive loss		(1,084)		(131)
Total Comprehensive income (loss)		(7,805)		148
Less: Comprehensive loss attributable to non-controlling interests		(73)		(16)
Comprehensive income (loss) attributable to Innodata Inc. and Subsidiaries	$	(7,732)	$	164


								Accumulated
				Additional				Other
	Common Stock			Paid-in		Retained		Comprehensive		Treasury Stock
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Total
January 1, 2022	30,347	$	303	$	35,121	$	3,160	$	(2,192)	3,184	$	(6,465)	$	29,927
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(2,815)		-	-		-		(2,815)
Stock-based compensation	-		-		537		-		-	-		-		537
Stock option exercises	23		1		26		-		-	-		-		27
Shares withheld for exercise settlement and taxes	(7)		-		(53)		-		-	-		-		(53)
Redemption of non-controlling interest	-		-		(2,864)		-		-	-		-		(2,864)
Pension liability adjustments, net of taxes	-		-		-		-		40	-		-		40
Foreign currency translation adjustment	-		-		-		-		(26)	-		-		(26)
Change in fair value of derivatives, net of taxes	-		-		-		-		5	-		-		5
March 31, 2022	30,363	$	304	$	32,767	$	345	$	(2,173)	3,184	$	(6,465)	$	24,778
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(3,833)		-	-		-		(3,833)
Stock-based compensation	-		-		1,028		-		-	-		-		1,028
Stock option exercises	124		1		152		-		-	-		-		153
Redemption of non-controlling interest	-		-		(1)		-		-	-		-		(1)
Pension liability adjustments, net of taxes	-		-		-		-		38	-		-		38
Foreign currency translation adjustment	-		-		-		-		(600)	-		-		(600)
Change in fair value of derivatives, net of taxes	-		-		-		-		(541)	-		-		(541)
June 30, 2022	30,487	$	305	$	33,946	$	(3,488)	$	(3,276)	3,184	$	(6,465)	$	21,022

January 1, 2021	28,984	$	289	$	31,921	$	4,833	$	(938)	3,184	$	(6,465)	$	29,640
Net income attributable to Innodata Inc. and subsidiaries	-		-		-		398		-	-		-		398
Stock-based compensation	-		-		278		-		-	-		-		278
Exercise of stock options	690		4		605		-		-	-		-		609
Shares withheld for exercise settlement and taxes	(193)		1		(764)		-		-	-		-		(763)
Pension liability adjustments, net of taxes	-		-		-		-		11	-		-		11
Foreign currency translation adjustment	-		-		-		-		(21)	-		-		(21)
Change in fair value of derivatives, net of taxes	-		-		-		-		-	-		-		-
March 31, 2021	29,481	$	294	$	32,040	$	5,231	$	(948)	3,184	$	(6,465)	$	30,152
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(103)		-	-		-		(103)
Stock-based compensation	-		-		336		-		-	-		-		336
Exercise of stock options	556		5		1,136		-		-	-		-		1,141
Pension liability adjustments, net of taxes	-		-		-		-		11	-		-		11
Foreign currency translation adjustment	-		-		-		-		135	-		-		135
Change in fair value of derivatives, net of taxes	-		-		-		-		(267)	-		-		(267)
June 30, 2021	30,037	$	299	$	33,512	$	5,128	$	(1,069)	3,184	$	(6,465)	$	31,405


Balance as of January 1, 2022	$	2,143
Foreign currency translation adjustment		(67)
Balance as of June 30, 2022	$	2,076


	Company Acquired Intangible Assets										Capitalized Developed Software
													Capitalized
					Trademarks				Media		Capitalized		Developed
	Developed		Customer		and				Contact		Developed		Software - in
	technology		relationships		tradenames		Patents		Database		Software		Progress		Total
Gross carrying amounts:
Balance as of January 1, 2022	$	3,169	$	2,228	$	880	$	45	$	3,648	$	8,576	$	635	$	19,181
Additions		-		-		-		-		-		-		2,770		2,770
Transfers		-		-		-		-		-		1,475		(1,475)		-
Foreign currency translation		(76)		(34)		(17)		-		(156)		(128)		(9)		(420)
Balance as of June 30, 2022	$	3,093	$	2,194	$	863	$	45	$	3,492	$	9,923	$	1,921	$	21,531

Accumulated amortization:
Balance as of January 1, 2022	$	2,158	$	1,377	$	685	$	34	$	2,005	$	2,575	$	-	$	8,834
Amortization expense		158		93		28		2		180		799		-		1,260
Foreign currency translation		(51)		(23)		(11)		(1)		(90)		(45)		-		(221)
Balance as of June 30, 2022	$	2,265	$	1,447	$	702	$	35	$	2,095	$	3,329	$	-	$	9,873

Net carrying values - June 30, 2022	$	828	$	747	$	161	$	10	$	1,397	$	6,594	$	1,921	$	11,658


Year	Amortization
2022	$	627
2023	$	1,641
2024	$	1,540
2025	$	1,277
2026	$	437
Thereafter	$	6,136
	$	11,658


	For the Six Months
	Ended June 30,
	2022		2021
Federal income tax expense at statutory rate	(21.0)	%	21.0	%
Effect of:
Change in valuation allowance	40.3		101.1
Foreign operations permanent difference - foreign exchange gains and losses	2.1		9.1
Return to provision true up	2.0		3.2
Tax effects of foreign operations	1.2		35.4
Increase (decrease) in unrecognized tax benefits (ASC 740)	1.2		(64.4)
State income tax net of federal benefit	0.2		1.5
Change in tax rates	-		20.6
Withholding tax	-		-
Effect of stock based compensation	(1.0)		(62.1)
Foreign rate differential	(6.3)		(19.6)
Other	(0.7)		5.4
Effective tax rate	18.0	%	51.2	%


	Unrecognized
	tax benefits
Balance - January 1, 2022	$	1,753
Increase for current period tax positions		58
Decrease for prior period tax positions		(29)
Interest accrual		52
Foreign currency remeasurement		(100)
Balance - June 30, 2022	$	1,734


		Weighted -		Weighted-Average
	Number of	Average Exercise		Remaining Contractual	Aggregate
	Options	Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2021	5,906,884	$	1.61
Granted	360,000		6.40
Exercised	(1,245,182)		2.12
Forfeited/Expired	(20,000)		1.38
Outstanding at June 30, 2021	5,001,702	$	1.83	7.60	$	25,837,675

Exercisable at June 30, 2021	3,425,983	$	1.62	7.12	$	18,426,406

Vested and Expected to Vest at June 30, 2021	5,001,702	$	1.83	7.60	$	25,837,675


				Weighted-Average
	Number of	Weighted - Average		Remaining Contractual	Aggregate
	Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2022	5,536,896	$	2.66
Granted	1,479,558		5.21
Exercised	(146,705)		1.22
Forfeited/Expired	(36,000)		5.13
Outstanding at June 30, 2022	6,833,749	$	3.24	7.62	$	13,923,020

Exercisable at June 30, 2022	3,578,045	$	1.81	6.40	$	11,195,079

Vested and Expected to Vest at June 30, 2022	6,833,749	$	3.24	7.62	$	13,923,020


	For the Six Months Ended June 30,
	2022		2021
Weighted average fair value of options granted	$	3.10	$	3.33
Risk-free interest rate		1.94%-2.75%		0.22%-0.82%
Expected term (years)		3.0-6.42		3-6
Expected volatility factor		62% - 76.48%		59.62%
Expected dividends		-		-


	Number of	Weighted-Average
	Restricted Stock	Grant Date
	Units	Fair Value
Unvested at January 1, 2022	-	$	-
Granted*	700,000		5.59
Vested	-		-
Forfeited/Expired	-
Unvested at June 30, 2022	700,000	$	5.59


Weighted-average lease term remaining	48 months
Weighted-average discount rate	8.68	%


	June 30,		December 31,
	2022		2021
Pension obligations - accrued pension liability	$	6,547	$	6,839
Settlement agreement		151		272
Microsoft licenses		-		385
		6,698		7,496
Less: Current portion of long-term obligations		700		1,279
Totals	$	5,998	$	6,217


	Number of Restricted	Weighted-Average Grant
	Stock Awards	Date Fair Value
Unvested at January 1, 2022	25,000	$	1.38
Granted	-		-
Vested	(25,000)		1.38
Forfeited/Expired	-		-
Unvested at June 30, 2022	-	$	-


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Direct operating costs	$	56	$	37	$	107	$	75
Selling and administrative expenses		972		299		1,458		539
Total stock-based compensation	$	1,028	$	336	$	1,565	$	614


	Pension Liability		Fair Value of		Foreign Currency		Accumulated Other
	Adjustment		Derivatives		Translation Adjustment		Comprehensive Loss
Balance at April 1, 2022	$	(818)	$	(348)	$	(1,007)	$	(2,173)
Other comprehensive loss before reclassifications, net of taxes		-		(744)		(600)		(1,344)
Total other comprehensive loss before reclassifications, net of taxes		(818)		(1,092)		(1,607)		(3,517)
Net amount reclassified to earnings		38		203		-		241
Balance at June 30, 2022	$	(780)	$	(889)	$	(1,607)	$	(3,276)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
DDS	$	14,181	$	12,997	$	30,092	$	24,760
Synodex		1,945		886		3,614		1,905
Agility		3,861		3,166		7,473		6,351
Total Consolidated	$	19,987	$	17,049	$	41,179	$	33,016

Income (loss) before provision for income taxes⁽¹⁾:
DDS	$	(72)	$	1,726	$	1,381	$	2,379
Synodex		(831)		(329)		(1,819)		(221)
Agility		(2,378)		(1,161)		(5,258)		(1,586)
Total Consolidated	$	(3,281)	$	236	$	(5,696)	$	572

Income (loss) before provision for income taxes⁽²⁾:
DDS	$	(250)	$	1,646	$	1,046	$	2,230
Synodex		(680)		(278)		(1,540)		(126)
Agility		(2,351)		(1,132)		(5,202)		(1,532)
Total Consolidated	$	(3,281)	$	236	$	(5,696)	$	572


	June 30, 2022		December 31, 2021
Total assets:
DDS	$	29,723	$	40,100
Synodex		2,702		1,753
Agility		17,498		17,364
Total Consolidated	$	49,923	$	59,217


	June 30, 2022		December 31, 2021
Goodwill:
Agility	$	2,076	$	2,143
Total	$	2,076	$	2,143


	Balance Sheet Location	Fair Value
		2022		2021
Derivatives designated as hedging instruments:

Foreign currency forward contracts	Accrued expenses	$	889	$	353


	Three Months Ended June 30,				Six Months Ended June 30,
Consolidated	2022		2021		2022		2021
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	(3,833)	$	(103)	$	(6,648)	$	295
Provision for income taxes		550		366		1,025		293
Interest expense, net		(1)		4		2		14
Gain on loan forgiveness		-		(580)		-		(580)
Depreciation and amortization		951		673		1,824		1,370
Stock-based compensation		1,028		335		1,565		614
Non-controlling interests		2		(27)		(73)		(16)
Adjusted EBITDA / (loss) - Consolidated	$	(1,303)	$	668	$	(2,305)	$	1,990


	Three Months Ended June 30,				Six Months Ended June 30,
DDS Segment	2022		2021		2022		2021
Net income (loss) attributable to DDS Segment	$	(651)	$	1,307	$	112	$	1,987
Provision for income taxes		399		342		932		246
Interest expense, net		(1)		4		2		13
Gain on loan forgiveness		-		(580)		-		(580)
Depreciation and amortization		57		159		281		319
Stock-based compensation		796		242		1,168		459
Non-controlling interests		2		(2)		1		(3)
Adjusted EBITDA - DDS Segment	$	602	$	1,472	$	2,496	$	2,441


	Three Months Ended June 30,				Six Months Ended June 30,
Synodex Segment	2022		2021		2022		2021
Net loss attributable to Synodex Segment	$	(680)	$	(254)	$	(1,465)	$	(113)
Depreciation and amortization	$	271		2	$	312	$	2
Stock-based compensation		50		7		99		14
Non-controlling interests		-		(25)		(74)		(13)
Adjusted EBITDA (loss) - Synodex Segment	$	(359)	$	(270)	$	(1,128)	$	(110)


	Three Months Ended June 30,				Six Months Ended June 30,
Agility Segment	2022		2021		2022		2021
Net loss attributable to Agility Segment	$	(2,502)	$	(1,156)	$	(5,295)	$	(1,579)
Provision for income taxes		151		24		93		47
Interest expense, net		-		-		-		1
Depreciation and amortization		623		512		1,231		1,049
Stock-based compensation		182		86		298		141
Adjusted EBITDA (loss) - Agility Segment	$	(1,546)	$	(534)	$	(3,673)	$	(341)

Exhibit No.		Description

10.1		Innodata Inc. 2021 Equity Compensation Plan, amended and restated effective as of April 11, 2022 (incorporated herein by reference to Annex A to the Company’s Definitive Proxy Statement, filed with the Securities and Exchange Commission on April 26, 2022).

31.1*		Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from Innodata Inc.’s Quarterly Report on Form 10-Q for the three months ended June 30, 2022, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021; (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and 2021; (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021; (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021; (v) Notes to Condensed Consolidated Financial Statements (unaudited).

104		Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.


Date:	August 12, 2022	/s/ Jack S. Abuhoff
		Jack S. Abuhoff
		Chief Executive Officer and President

Date:	August 12, 2022	/s/ Marissa B. Espineli
		Marissa B. Espineli
		Interim Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Dated: August 12, 2022
	/s/ Jack S. Abuhoff
	Jack S. Abuhoff
	Chief Executive Officer and President